UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ______________
Commission File Number: 1-11675
TRITON ENERGY LIMITED
(Exact name of registrant as specified in its charter)
CAYMAN ISLANDS NONE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
CALEDONIAN HOUSE
JENNETT STREET, P.O. BOX 1043
GEORGE TOWN
GRAND CAYMAN, CAYMAN ISLANDS NONE
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 345-949-0050
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
---------------------- -------------------
Ordinary Shares, $.01 par value 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 FILERS PURSUANT TO ITEM
405 OF REGULATION S-K (SECTION 229.405 OF THIS CHAPTER) 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. [ ]
---------
THE AGGREGATE MARKET VALUE OF THE OUTSTANDING ORDINARY SHARES HELD BY
NON-AFFILIATES OF THE REGISTRANT AT MARCH 7, 2000 (FOR SUCH PURPOSES ONLY, ALL
DIRECTORS AND EXECUTIVE OFFICERS ARE PRESUMED TO BE AFFILIATES) WAS
APPROXIMATELY $1.0 BILLION, BASED ON THE CLOSING SALES PRICE OF $30.25 ON THE
NEW YORK STOCK EXCHANGE.
AS OF MARCH 7, 2000, 35,944,174 ORDINARY SHARES OF THE REGISTRANT WERE
OUTSTANDING.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE PROXY STATEMENT PERTAINING TO THE 2000 ANNUAL MEETING OF
SHAREHOLDERS OF TRITON ENERGY LIMITED ARE INCORPORATED BY REFERENCE INTO PART
III HEREOF.
TRITON ENERGY LIMITED
TABLE OF CONTENTS
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Form 10-K Item Page
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PART I
ITEMS 1. and 2. Business and Properties 2
ITEM 3. Legal Proceedings 20
ITEM 4. Submission of Matters to a Vote of Security Holders 22
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters 23
ITEM 6. Selected Financial Data 29
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 30
ITEM 7.A. Quantitative and Qualitative Disclosures about Market Risk 43
ITEM 8. Financial Statements and Supplementary Data 46
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 46
PART III
ITEM 10. Directors and Executive Officers of the Registrant 47
ITEM 11. Executive Compensation 47
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 47
ITEM 13. Certain Relationships and Related Transactions 47
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 48
</TABLE>
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
GENERAL
Triton Energy Limited is an international oil and gas exploration and
production company. The Company's principal properties, operations, and oil and
gas reserves are located in Colombia, Malaysia-Thailand and Equatorial Guinea.
The Company is exploring for oil and gas in these areas, as well as in southern
Europe, Africa and the Middle East.
The Company conducts substantially all of its exploration and production
operations outside the United States. All of the Company's sales are currently
derived from oil and gas production in Colombia. For a discussion of certain
political, economic and other uncertainties associated with operations in
foreign countries, particularly in the oil and gas business, see note 19 of
Notes to Consolidated Financial Statements.
Triton Energy Limited was incorporated in the Cayman Islands in 1995 to
become the parent holding company of Triton Energy Corporation, a corporation
formed in Texas in 1962 and reincorporated in Delaware in 1995. The terms
"Company" and "Triton" when used in this report mean Triton Energy Limited and
its subsidiaries and other affiliates through which Triton conducts its
business, unless the context otherwise implies. The Company's principal
executive offices are located at Caledonian House, Jennett Street, George Town,
Grand Cayman, Cayman Islands, and its telephone number is (345) 949-0050.
Information regarding the Company can be obtained by contacting the Company's
Investor Relations department at Triton Energy, 6688 North Central Expressway,
Suite 1400, Dallas, Texas 75206, telephone number (214) 691-5200, or at the
Company's web site, www.tritonenergy.com.
OIL AND GAS PROPERTIES
Through various subsidiaries and affiliates, the Company has participating
interests in exploration licenses in Latin America, Southeast Asia, Africa,
Europe and the Middle East. The following is intended to describe the Company's
interests in these licenses and recent operations over these licenses.
Colombia
- --------
Santiago de Las Atalayas, Tauramena and Rio Chitamena Contract Areas
The Company holds a 12% interest in the Santiago de Las Atalayas ("SDLA"),
Tauramena and Rio Chitamena contract areas, covering approximately 66,000,
36,300 and 6,700 acres, respectively, where an active development program is
being carried out in the Cusiana and Cupiagua fields. The area is located
approximately 160 kilometers (100 miles) northeast of Bogota in the Andean
foothills of the Llanos Basin area in eastern Colombia. Triton's partners in
these areas are Empresa Colombiana De Petroleos ("Ecopetrol"), the Colombian
national oil company, with a 50% interest, and subsidiaries of BP/Amoco ("BP")
and TotalFina SA ("TOTAL"), each with a 19% interest. BP is the operator.
Triton's interest is 12%, and its net revenue interest is approximately 9.6%
after governmental royalties. Triton's net revenue is reduced by up to 0.36%
pursuant to an agreement with an original co-investor, subject to Triton being
reimbursed for a proportionate share of related expenditures.
Contract Terms. The Company and its private partners have secured the right
---------------
to produce oil and gas from the SDLA and Tauramena contract areas through the
years 2010 and 2016, respectively, and from the Rio Chitamena contract area
through 2015 or 2019, depending on contract interpretation. In July 1994,
Triton, BP, TOTAL and Ecopetrol entered into an Integral Plan for the Unified
Exploitation of the Cusiana Oil Structure in the SDLA, Tauramena and Rio
Chitamena Association Contract Areas to develop the Cusiana oil structure in a
technically efficient and cooperative manner. The plan contemplates that the
parties' interests will be determined over three consecutive periods of time.
Until the expiration of the SDLA contract in 2010, petroleum produced from the
unified area will be owned by the parties according to their interests in each
contract area.
In the first quarter of 2005, the parties will engage an independent party
to determine the original barrels of oil equivalent ("BOE") of petroleum in
place under the unified area and under each contract area. Then a "tract factor"
will be calculated for each contract area. Each tract factor will be the amount
of original BOEs of petroleum in place under the particular contract area as a
percentage of the total original BOEs under the unified area. Each party's
unified area interest during the second period (commencing from the expiration
of the SDLA contract in 2010) and during the final period (commencing from the
termination of the second contract to termination) will be the aggregate of that
party's interest in each remaining contract area multiplied by the tract factor
for each such contract area.
Recent Operating Activity. In the Cusiana field, during 1999, Triton and
---------------------------
its working interest partners completed an additional six wells, bringing the
total completions to 43 producing wells, 13 gas injection wells and four water
injection wells. The gas injection wells recycle to the Mirador formation most
of the gas that is associated with the oil production to increase the oil
recoverable during the life of the field. The water injection wells inject the
field's produced water into the Barco and Guadalupe formations for disposal and
pressure maintenance. There are currently four drilling rigs operating in the
Cusiana field to drill production, water and gas injection wells. The Company
expects that five wells will be completed during 2000.
During 1999, in the Cupiagua field, including the Cupiagua South extension
of the field discovered in January 1998, Triton and its working interest
partners completed an additional eight wells, bringing the total completions to
24 producing wells and seven gas injection wells. There are currently three
drilling rigs operating in the Cupiagua field on the SDLA contract area to drill
production, water and gas injection wells. The Company expects that nine wells
will be completed during 2000.
Recetor Contract Area
In 1999, the Company acquired a 20% interest in the Recetor contract area,
covering approximately 70,215 acres. The area is located adjacent to and north
of the SDLA contract area and includes an extension of the Cupiagua field.
Triton's partners in these areas are BP, with a 63.3% interest, and,
Inaquimicas, with a 16.7% interest. BP is the operator. The Company's interest
is subject to certain government royalties and the right of Ecopetrol to acquire
up to a 50% interest in the contract upon declaration of commerciality. The
contract provides the Company and its private partners the right to produce oil
and gas from the Recetor contract area through the year 2017.
In January 2000, Triton and its working interest partners completed the
Liria YD-2 well on the extension of the Cupiagua field in the Recetor contract
area. The well reached total depth of 16,953 feet and will be tested into the
Cupiagua Central Processing Facility (CPF). The Company expects that Ecopetrol
will grant commerciality and the well will be put on production into the
Cupiagua CPF provided the working interest partners reach agreement with the
SDLA working interest partners. There is currently one drilling rig operating in
the Recetor contract area. The Company expects that at least one additional well
will be drilled in the Recetor contract area in 2000.
Production Facilities and Pipelines
The production facilities in the Cusiana and Cupiagua fields have been
completed. The components of the Cusiana CPF consist of a long term test
facility, four early production units, and two 80,000 barrels of oil per day
("BOPD") production trains, which brought the production capacity of the Cusiana
CPF to approximately 320,000 BOPD. Currently, the production of the Cusiana
field is limited by the gas handling capacity of the Cusiana CPF of about 1,400
million cubic feet of gas per day.
The components of the Cupiagua CPF consist of two 100,000 BOPD production
trains, which process the condensate and gas production from the Cupiagua
producing wells. The gas handling capacity of the Cupiagua CPF is approximately
1,300 million cubic feet of gas per day.
Crude oil and condensate produced from the Cusiana and Cupiagua fields, as
well as crude oil from other third parties, are transported to the Caribbean
port of Covenas through the 832-kilometer (520-mile) pipeline system operated by
Oleoducto Central S. A. ("OCENSA"). OCENSA is a Colombian company formed by
Triton Pipeline Colombia, Inc., a wholly owned subsidiary of the Company until
its sale in February 1998, Ecopetrol, BP Colombia Pipelines Ltd., Total Pipeline
Colombie, S.A., IPL Enterprises (Colombia) Inc. and TCPL International
Investments Inc.
Gross production from the Cusiana and Cupiagua fields has reached over 500
million barrels of oil since production commenced, and averaged approximately
430,000 BOPD during 1999. Based on estimates of the operator of the Cusiana and
Cupiagua fields, the Company believes that combined Cusiana and Cupiagua oil
production will be approximately 8% to 11% lower in 2000 than in 1999, although
there can be no assurance that actual production will equal that amount.
Other Contract Areas in Colombia
Triton owns a 100% interest (before certain royalties and government
participation) in the El Pinal license, which covers approximately 36,000 acres
approximately 330 kilometers (205 miles) north of Bogota. In the southern part
of El Pinal, Triton discovered and confirmed the Liebre field with two wells
(the Liebre-1 and -2). Liebre-1 ceased production in June 1998 while Liebre-2
continues to produce approximately 160 BOPD.
During 1999, in the Guayabo A and B licenses, the Company drilled an
unsuccessful exploratory well and conducted a surface geology program in
satisfaction of its commitments. The Company has relinquished its interest in
these areas.
Malaysia-Thailand
-----------------
In Block A-18 of the Malaysia-Thailand Joint Development Area in the Gulf
of Thailand, the Company and its partners have discovered eight natural gas
fields - known as the Bulan, Bumi, Bumi East, Cakerawala, Samudra, Senja,
Suriya, and Wira fields. The Company owns its interest through a company owned
one half by Triton and one half by a subsidiary of Atlantic Richfield Company
("ARCO"). The operator is Carigali-Triton Operating Company Sdn. Bhd. ("CTOC"),
a company owned by Triton and ARCO, through their jointly owned company, and
Petronas Carigali (JDA) Sdn. Bhd. ("Carigali"), a subsidiary of the Malaysian
national oil company.
Block A-18 is located in the Gulf of Thailand in an area known as the
Malaysia-Thailand Joint Development Area. The contract area in the Gulf of
Thailand, which encompasses approximately 731,000 acres, had been the subject of
overlapping claims between Malaysia and Thailand. The two countries established
the Malaysia-Thailand Joint Authority (the "MTJA") to administer the development
of the Joint Development Area. In April 1994, Triton entered into a
production-sharing contract with the MTJA and Carigali. Triton previously held a
license from Thailand that covered part of the Joint Development Area.
Contract Terms
The term of the production-sharing contract is 35 years, subject to
possible relinquishment of certain areas and subject to the treaty between
Malaysia and Thailand creating the MTJA remaining in effect. Triton and its
partners have the right to explore for oil and gas for the first eight years of
the contract. The contract provides that if there is a discovery of natural gas
(not associated with crude oil), the contractors will submit to the MTJA a
development plan for the field. If the MTJA accepts the plan, the contractors
would have the right to hold that gas field without production for an additional
five-year period, but not beyond the tenth anniversary of the contract. The
contractors would then have a five-year period to develop the field, and have
the right to produce gas from the field for 20 years plus a number of years
equal to the number of years, if any, prior to the end of the holding period
that gas production commenced (or until the termination of the contract, if
earlier). The contract requires the contractors to drill two exploratory wells
before April 2002.
For a discovery of an oil field, the contract grants to the operators the
right to produce oil from the field for 25 years (or until the termination of
the contract, if earlier). Any areas not developed and producing within the
periods provided will be relinquished.
As oil and gas are produced, the MTJA is entitled to a 10% royalty. A
portion of each unit of production is considered "cost oil" or "cost gas" and
will be allocated to the contractors to the extent of their recoverable costs,
with the balance considered "profit oil" or "profit gas" to be divided 50% to
the MTJA and 50% to the contractors (i.e., 25% to Carigali and 25% to the
company jointly owned with ARCO). The portion that will be considered "cost gas"
for production from the Cakerawala and Bulan fields is a maximum of 60%. The
Cakerawala and Bulan fields are the fields planned for first-phase development.
The portion that will be considered "cost gas" for production from the other
fields is a maximum of 50%. There is an additional royalty attributable to
Triton's and ARCO's joint interest equal to 0.75% of Block A-18 production. Tax
rates imposed by the MTJA on behalf of the governments of Malaysia and Thailand
are 0% for the first eight years of production, 10% for the next seven years of
production and 20% for any remaining production.
The Company's agreements with ARCO require ARCO to pay the future
exploration and development costs attributable to the Company's and ARCO's
collective interest in Block A-18, up to $377 million or until first production
from a gas field, after which the Company and ARCO would each pay 50% of such
costs. The agreements provide that the Company will recover its investment in
recoverable costs in the project, approximately $100 million, and that ARCO will
recover its investment in recoverable costs, on a first-in, first-out basis from
the cost recovery portion of future production. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
note 2 of Notes to Consolidated Financial Statements.
Gas Sales Agreement
In October 1999, the Company and the other parties to the
production-sharing contract for Block A-18 executed a gas sales agreement
providing for the sale of the first phase of gas. The sales agreement provides
for gas deliveries over a term concurrent with the production-sharing contract
and contemplates initial deliveries of 195 million cubic feet of gas (MMCF) per
day for the first six months of the agreement, and 390 MMCF per day for a period
of twenty years. The sales agreement includes a take-or-pay provision that
specifies that the buyers must take a minimum of 90% of the annual daily
contract quantity and the sellers must be able to deliver a maximum of 110% of
the daily contract quantity. Delivery is made at the offshore production
platform.
The price for gas will be adjusted annually for changes in the US Consumer
Price Index, the Producer Price Index for Oil Field and Gas Field Machinery and
Tools, and medium fuel oil (180 CST) in Singapore. The price is calculated
annually and will apply to sales over the succeeding twelve months. All
calculations and payments are in U.S. dollars. The base price is $2.30 per
mmbtu. To give the buyers incentive to accelerate the timing of the delivery of
the gas, the sales agreement gives the buyers a discount of 5% after 500 billion
cubic feet has been delivered and a discount of 10% after an aggregate of 1.3
trillion cubic feet has been delivered.
The sales agreement provides that the initial delivery date will be a date
to be agreed upon by the sellers and the buyers between April 1, 2002 and June
30, 2002. If the parties do not agree on a date for initial delivery, the
agreement provides that the date will be deemed to be June 30, 2002.
By the first delivery date, the sellers will be required to have completed
the facilities necessary to meet its delivery obligations. The MTJA had
previously approved the field development plan for the Cakerawala field in
December 1997. CTOC has begun field development work and has awarded several
contracts for long lead-time equipment, including CO2 removal, structural steel,
refrigeration, power generation and gas compression. In March 2000, CTOC
awarded the contract for engineering, procurement and construction (EPC) of
three wellhead platforms, a production platform with living quarters platform, a
riser platform and a floating storage and off-loading vessel for oil and
condensate. The initial development plan calls for 35 development wells.
The buyers currently do not have in place facilities necessary to transport
and process the gas. While it is not a requirement of the sales agreement, the
buyers anticipate constructing pipeline and processing facilities onshore
Thailand to accept deliveries of the gas. The sales agreement does recognize
that the buyers' downstream facilities will require that certain environmental
approvals be obtained before the buyers' facilities can be constructed. The
agreement provides that, if a delay in obtaining the necessary environmental
approvals results in a delay of the completion of the buyers' downstream
facilities, this will be treated as a force majeure event and will excuse the
buyers from their take or pay obligations for the length of the delay. The
Company can give no assurance as to when the environmental approvals will be
obtained, and a lengthy approval process, or significant opposition to the
project, could delay construction and the commencement of gas sales.
Notwithstanding a possible future delay in the buyers' environmental
approvals process, in order to meet the June 30, 2002 deadline, the sellers are
committed to, or will be required to commit to, significant expenditures,
including the EPC contract. Although ARCO is committed to pay all development
costs associated with Block A-18 up to $377 million, the Company has agreed to
provide some compensation to ARCO in the event that gas sales are delayed by
agreeing to pay to ARCO $1.25 million per month for each month, if applicable,
that first gas sales are delayed beyond 30 months following commitment to the
EPC contract. The Company's obligation is capped at 24 months of these payments.
Equatorial Guinea
------------------
The Company signed production-sharing contracts in March 1997 covering two
contiguous blocks (Blocks F and G) with the Republic of Equatorial Guinea. The
contracts became effective in April 1997. During 1999, the Company announced an
oil discovery, the Ceiba field, in Block G, and confirmed the significance of
the discovery with the Ceiba-2 appraisal well.
The contracts give the Company the right to explore and develop an area
covering approximately 1.3 million acres located offshore and southwest of the
town of Bata in water depths of up to 5,200 feet. The Company is the operator
and Energy Africa Equatorial Guinea Limited is the Company's partner. Currently,
the Company's contract interest is 85% and Energy Africa's contract interest is
15%, but these interests are subject to the renegotiation of the contracts as
discussed below.
Contract Terms
Currently, the Company's commitments under the production-sharing contracts
for the contract year ending April 2001 are to drill at least one exploration
well, and a second exploration well contingent upon the Company identifying an
additional structure it believes is a drillable prospect. The Company can extend
the exploration period of each contract for three additional one-year periods if
it agrees to certain operational commitments for those periods, including the
drilling of at least one exploration well, and a second exploration well
contingent upon the Company identifying an additional structure it believes is a
drillable prospect. The Company is required to relinquish 30% of each contract's
original area by April 2000, and an additional 20% of the remaining contract
area by the end of April, provided that the Company will not be required to
surrender an area that includes a commercial field or a discovery that has not
then been declared commercial. The area or areas to be surrendered is to be
designated by the Company, provided that, where possible, each area is of
sufficient size and convenient shape to permit petroleum operations.
The contracts provide that if there is a commercial discovery of an oil or
gas field on a block, the contract will remain in existence as to that field for
a period of 30 years, in the case of oil, or 40 years, in the case of gas, from
the date the Ministry of Mines and Energy approves the discovery as commercial.
Any further discoveries of formations that underlie or overlie that field, or
other deposits found within the extension of that field, will be included with
that field and be subject to the original 30 or 40 year term, as applicable. The
Ministry approved the Ceiba field as commercial in December 1999.
Under the current terms of the Company's production-sharing contracts, the
Republic of Equatorial Guinea is entitled to a royalty as to each field. The
royalty is 10% for up to the first 100 million barrels of oil produced, 12.5%
for greater than 100 million barrels of oil up to 300 million barrels of oil
produced, and 15% for greater than 300 million barrels of oil produced. After
making the royalty payments, the Company is entitled to receive the production
until it recovers its costs, such capital costs to be depreciated and recovered
over a four year period. After the Company recovers its costs, the Republic of
Equatorial Guinea is entitled to receive a share of production based on the rate
of return realized by the Company under the contract. The contracts provide that
the government's share of production will vary from 0%, where the Company's rate
of return is less than 18%, to 55% where the Company's rate of return is greater
than or equal to 40%.
At the request of the Republic of Equatorial Guinea, the Company and its
partner are negotiating amendments to certain terms of the contracts with the
government. The parties have signed a memorandum of understanding reflecting the
revised terms, and negotiations of definitive amendments are continuing. The
memorandum of understanding provides that the government would receive a 5%
carried participating interest, and its royalty would vary based on average
daily production, ranging from 11% to 16%. After making the royalty payments,
the contractors would be entitled to receive up to 70% of the production until
they recover their costs. Production not allocated to the contractors for cost
recovery would be allocated between the contractors and the government based on
cumulative production, with the government's share ranging from 20% to 60%, to
the extent production exceeds certain levels. This share of production is in
addition to the share the government would receive through its 5% carried
participating interest. The implementation of the revised terms of the contract
is subject to the negotiation and execution of definitive amendments, but there
can be no assurance as to whether, or when, such definitive amendments will be
executed.
Recent Operating Activity
During 1999, the Company announced an oil discovery, the Ceiba field, in
Block G, and confirmed the significance of the discovery with the Ceiba-2
appraisal well. On test, the Ceiba-1 well flowed 12,401 barrels of oil per day
(BOPD) of 30 degree oil from one zone over an interval of 160 feet with a
flowing tubing pressure of 897 pounds per square inch. Test results were
constrained by the capacity of surface testing equipment. Analysis of wireline
logs and core data indicates a gross oil column of 742 feet in the well with net
oil-bearing pay of 314 feet in four zones. The Ceiba-1 well was drilled to a
total depth of approximately 9,700 feet in approximately 2,200 feet of water,
located 22 miles off the continental coast.
The Ceiba-2 well was drilled approximately one mile to the southwest and
342 feet down-dip of the Ceiba-1 discovery well. The well encountered net
oil-bearing pay of 300 feet in a single, continuous column. In addition, the
well confirmed the oil-water contact found in Ceiba-1, and demonstrated lateral
reservoir continuity and connectivity. The well is located 22 miles off the
continental coast and was drilled to a total depth of 8,744 feet in 2,347 feet
of water. The Company elected not to flow test the well based on wireline logs,
extensive coring and pressure data, as well as Ceiba-1 flow-test results.
The Company intends to maintain both the Ceiba-1 and Ceiba-2 wells as
potential future producers.
The Company has acquired a 1,025,000-acre (4,200 square kilometer) 3D
seismic survey, out of the total 1.3 million acres, to assist in delineating the
extent of the Ceiba field, identify drilling locations for the
appraisal/production wells, and better define other exploration prospects on the
blocks. The Company is in the process of evaluating the data.
The Company intends to accelerate its exploration, appraisal and
development drilling activities through implementation of a two-rig drilling
program. The drilling program provides for up to ten wells: four firm well
commitments and six optional wells. The rigs will be used to:
- - Complete the Ceiba-1 and -2 wells as oil producers.
- - Drill and complete two Ceiba field appraisal/production wells, Ceiba-3 and
Ceiba-4.
- - Drill two exploration wells, one each on Blocks F and G.
- - At the option of the Company, drill a combination of up to six additional
development, appraisal and/or exploration wells.
Plan of Development
In January 2000, the Company received notice from the Ministry of Mines and
Energy of the Republic of Equatorial Guinea that the Ministry had approved
Triton's plan of development for the Ceiba field. The plan of development
provides for initial or phase one production of 52,000 BOPD utilizing a floating
production storage and offloading (FPSO) system, although there can be no
assurance that actual production will be at this level. Selection of a
FPSO-based development concept was designed to allow for accelerated development
of the Ceiba field. Specifications call for the FPSO vessel to provide storage
for two million barrels of oil and initial processing capacity of up to 60,000
barrels of oil per day. The FPSO vessel can also be expanded cost effectively
through the addition of incremental processing capacity, to accommodate up to
240,000 barrels of oil per day.
As part of this initial phase of development, four sub-sea production wells
are scheduled to be completed and connected through flow lines to the FPSO,
including the Ceiba-1 and Ceiba-2 wells.
Based on discussions held to date with development contractors, the Company
is targeting first oil production to occur by year end, although the Company can
give no assurance that it will meet this target. The Company believes that due
to transportation and preliminary assays of the quality of the crude oil, the
oil from the Ceiba field will sell at a discount to Brent crude.
Greece
------
The Company has signed two leases with Hellenic Petroleum, the national oil
company of Greece, with the Company having an 88% interest in each lease and
Hellenic Petroleum the remaining 12% interest. The Gulf of Patraikos contract
area covers approximately 402,000 acres (after a contractually-required
relinquishment in 1999) located offshore between the western coast of Greece and
the offshore Ionian islands of Lefkas, Kefalonia and Zakynthos in water depths
of up to 1,700 feet. The lease provides a primary exploration term expiring in
September 2001 with a commitment of 1,000 kilometers (625 miles) of new 2D
seismic and the drilling of one exploratory well for a total expenditure of not
less than $13.5 million. The Company has reprocessed approximately 3,000
kilometers (1,900 miles) of existing 2D seismic and acquired approximately 1,000
kilometers (625 miles) of 2D seismic and gravity in January 2000.
The Aitoloakarnania contract area covers approximately 658,000 acres (after
a contractually-required relinquishment in 1999) located onshore in western
Greece. The lease provides a primary exploration term expiring in June 2000 with
a commitment of 200 kilometers of 2D seismic and the drilling of two exploratory
wells for a total expenditure of not less than $13.25 million. The Company has
reprocessed approximately 660 kilometers (410 miles) of existing 2D seismic and
acquired approximately 200 kilometers (125 miles) of new 2D seismic. The Company
plans to drill the commitment wells this year although the Company may attempt
to negotiate amendments to these commitments.
Italy
-----
The Company holds interests in six licenses in Italy comprising three
offshore blocks in the Adriatic Sea and three onshore blocks in the Southern
Apennines.
The Company has a 47% interest in each of the contiguous DR71 and DR72
licenses covering approximately 369,400 acres (after a contractually required
relinquishment in 1999) in the Adriatic Sea located 45 kilometers (28 miles)
offshore the city of Brindisi. Triton's partner in these licenses is Enterprise
Oil Italiana, S.p.A. ("Enterprise"), the operator, with a 53% interest. During
1998, the Company and its working interest partners drilled the Giove-1 well.
The well was drilled to a total depth of 3,458 feet but was prematurely
abandoned due to a gas blowout and mechanical failure. A replacement well,
Giove-2, was drilled to a total depth of 4,285 feet and encountered oil and gas.
Additional work is required to evaluate the commercial potential of the
licenses. During 1999, a subsidiary of ExxonMobil withdrew from its interest in
the licenses and the Company and Enterprise each received its proportionate
share of ExxonMobil's interest.
In 1998, Triton acquired a 20% interest in the FR33AG offshore license. The
license covers approximately 71,600 acres and is adjacent to the DR71 and DR72
licenses. Eni S.p.A. is operator, with a 50% interest, and Enterprise holds the
remaining 30% interest. The license provides a primary exploration term expiring
in September 2004 with a commitment of 250 kilometers (156 miles) of new 2D
seismic and the drilling of one exploratory well.
In the southern Apennine Mountains, the Company has an interest in three
contiguous licenses, Fosso del Lupo, Valsinni and Masseria de Sole, covering
approximately 58,000 acres in the Matera province. The Company is the operator,
with a 50% interest, and a subsidiary of ARCO holds the remaining 50% interest.
The licenses provide a primary exploration term expiring in August 2002 and
were amended in 1999 to provide a combined work commitment of approximately 50
kilometers (31 miles) of new 2D seismic and the drilling of one exploratory
well. In connection with the amendment, the Company relinquished approximately
40% of the acreage. The Company acquired the 50 kilometers of seismic data over
the license area in 1999.
Oman
----
In 1998, the Company signed a production-sharing contract for Block 40,
covering approximately 1.3 million acres located offshore in the Straits of
Hormuz. The contract provides an exploration term expiring in June 2001 with a
commitment of the drilling of one exploratory well. The Company is the operator
with a 50% contract interest and Atlantis Holding Norway AS is the Company's
partner with a 50% interest.
Triton has completed the reprocessing and interpretation of 4,083
kilometers (2,546 miles) of existing 2D seismic, and completed the acquisition
of a 620 square kilometer 3D seismic survey in January 2000. The Company expects
that it will process and interpret this data during 2000 and drill an
exploratory well in early 2001.
Madagascar
----------
The Company has signed a production-sharing contract with the Office of
National Mines and Strategic Industries in Madagascar for the Ambilobe Block,
covering approximately 4.3 million acres. The block is located directly offshore
from Ambilobe in water depths of up to 11,500 feet. The Company has acquired
approximately 3,000 kilometers (1,875 miles) of 2D seismic.
Ecuador
-------
In 1999, the Company assigned its 55% interest in Block 19 in the Oriente
Basin to Vintage Petroleum Ecuador, Inc. The assignment is subject to approval
of the Ministry of Energy and Mines.
<PAGE>
RESERVES
The following table sets forth a summary of the Company's estimated proved
oil and gas reserves at December 31, 1999, and is based on separate estimates of
the Company's net proved reserves prepared by:
- - the independent petroleum engineers, DeGolyer and MacNaughton, with respect
to the proved reserves in the Cusiana and Cupiagua fields in
Colombia,
- - the independent petroleum engineers, Netherland, Sewell & Associates, Inc.,
with respect to the proved reserves in the Ceiba field in Equatorial
Guinea,
- - the internal petroleum engineers of the operating company, Carigali-Triton
Operating Company (CTOC) with respect to the proved reserves in
Malaysia-Thailand on Block A-18 in the Gulf of Thailand, and
- - the Company's internal petroleum engineers with respect to the proved
reserves in the Liebre field in Colombia.
For additional information regarding the Company's reserves, including the
standardized measure of future net cash flows, see note 23 of Notes to
Consolidated Financial Statements. Oil reserves data include natural gas liquids
and condensate.
Net proved reserves at December 31, 1999, were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PROVED PROVED TOTAL
DEVELOPED UNDEVELOPED PROVED
------------------- ---------------------- ------------------
OIL GAS OIL GAS OIL GAS
(MBBLS) (MMCF) (MBBLS) (MMCF) (MBBLS) (MMCF)
---------- ------- ------------ -------- -------- --------
Colombia (1) 91,859 11,566 33,712 --- 125,571 11,566
Malaysia-Thailand (2) --- --- 13,223 553,862 13,223 553,862
Equatorial Guinea --- --- 32,033 --- 32,033 ---
---------- ------- ------------ -------- -------- --------
Total 91,859 11,566 78,968 553,862 170,827 565,428
========== ======= ============ ======== ======== ========
</TABLE>
____________________
(1) Includes liquids to be recovered from Ecopetrol as reimbursement for
precommerciality expenditures.
(2) As of December 31, 1999, gas sales had not yet commenced. The proved gas
reserves are calculated using the base price in the gas sales agreement of
$2.30. The base price is subject to annual adjustments based on various indices.
There can be no assurance as to what the actual price will be when gas sales
commence. See "Item 1. Business and Properties - Malaysia-Thailand."
<PAGE>
Reserve quantities are estimates and there are a number of uncertainties.
Reserve estimates are approximate and may be expected to change as
additional information becomes available. In addition there are inherent
uncertainties in making reserve estimates, such as the following:
- - the Company, and if applicable the independent engineers, must make certain
assumptions and projections based on engineering data;
- - there are uncertainties inherent in interpreting engineering data;
- - the Company, and if applicable the independent engineers, must project
future rates of production and the timing of development expenditures;
- - reservoir engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact way; and
- - the accuracy of reserve estimates is a function of the quality of available
data and of engineering and geological interpretation and judgment.
Accordingly, the Company cannot give any assurance that the Company will
ultimately produce the quantity of reserves set forth in the table, and the
Company cannot give any assurance that the proved undeveloped reserves will be
developed within the periods anticipated.
The Company has not filed any estimates of total proved net oil or gas
reserves with, or included estimates of total proved net oil or gas reserves in
any report to, any United States authority or agency since the beginning of the
Company's last fiscal year.
OIL AND GAS OPERATIONS
Production and Sales
----------------------
During 1999, 1998 and 1997, the Company produced and sold oil and gas only
from its property in Colombia. More details regarding the Company's revenues,
assets and certain other data by geographical area is contained in note 21 of
Notes to Consolidated Financial Statements.
The following table sets forth the net quantities of oil and gas the Company
produced during 1999, 1998 and 1997.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
OIL PRODUCTION (1) GAS PRODUCTION
--------------------------- --------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
, --------------------------- --------------------------
1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------
(Mbbls) (MMcf)
Colombia (2) 12,469 9,979 5,776 459 503 802
</TABLE>
____________________
(1) Includes natural gas liquids and condensate.
(2) Includes Ecopetrol reimbursement barrels and excludes 3.1 million, 3.1
million and 2.5 million barrels of oil produced and delivered for the years
ended December 31, 1999, 1998 and 1997, respectively, in connection with the
Company's forward oil sale in May 1995. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations" and note 8 of Notes to Consolidated Financial Statements.
The following tables summarize for 1999, 1998 and 1997: (i) the average
sales price per barrel of oil and per Mcf of natural gas; (ii) the average sales
price per equivalent barrel of production; (iii) the depletion cost per
equivalent barrel of production; and (iv) the production cost per equivalent
barrel of production:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
AVERAGE SALES PRICE AVERAGE SALES PRICE
PER BARREL OF OIL (1) PER MCF OF GAS
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------- ------------------------
1999 1998 1997 1999 1998 1997
------- ------ ------ ----- ----- -----
Colombia (4) $ 15.95 $12.31 $17.54 $0.88 $0.99 $1.15
</TABLE>
<TABLE>
<CAPTION>
PER EQUIVALENT BARREL (2)
----------------------------------------------------------------------------
<S> <C> <C>
AVERAGE SALES PRICE DEPLETION (3) PRODUCTION COST
------------------------- ------------------------ -----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------- ------------------------ -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------ ------ ------ ------
Colombia (4) $15.89 $12.27 $17.37 $ 3.80 $ 4.07 $ 3.67 $ 4.77 $ 5.97 $ 6.47
</TABLE>
____________________
(1) Includes natural gas liquids and condensate.
(2) Natural gas has been converted into equivalent barrels of oil based on
six Mcf of natural gas per barrel of oil.
(3) Includes depreciation calculated on the unit of production method for
support equipment and facilities.
(4) Includes barrels delivered under the forward oil sale which are recorded
at $11.56 per barrel upon delivery. Excludes the full cost ceiling
limitation writedown in 1998 totaling $241 million.
Competition
-----------
The Company encounters strong competition from major oil companies
(including government-owned companies), independent operators and other
companies for favorable oil and gas concessions, licenses, production-sharing
contracts and leases, drilling rights and markets. Additionally, the governments
of certain countries in which the Company operates may, from time to time, give
preferential treatment to their nationals. The oil and gas industry as a whole
also competes with other industries in supplying the energy and fuel
requirements of industrial, commercial and individual consumers. The Company
believes that the principal means of competition in the sale of oil and gas are
product availability, price and quality.
Markets
-------
Crude oil, natural gas, condensate and other oil and gas products generally
are sold to other oil and gas companies, government agencies and other
industries. The Company does not believe that the loss of any single customer or
contract pursuant to which oil and gas are sold would have a long-term material,
adverse effect on the revenues from the Company's oil and gas operations.
In Colombia, crude oil is exported through the Caribbean port of Covenas
where it is sold at prices based on United States prices, adjusted for quality
and transportation. The oil produced from the Cusiana and Cupiagua fields is
transported to the export terminal by pipeline.
For a discussion of certain factors regarding the Company's markets and
potential markets that could affect future operations, see note 19 of Notes to
Consolidated Financial Statements.
ACREAGE
The following table shows the total gross and net developed and undeveloped
oil and gas acreage held by Triton at December 31, 1999. "Gross" refers to the
total number of acres in an area in which the Company holds an interest without
adjustment to reflect the actual percentage interest held therein by the
Company. "Net" refers to the gross acreage as adjusted for working interests
owned by parties other than the Company.
"Developed" acreage is acreage spaced or assignable to productive wells.
"Undeveloped" acreage is acreage on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and gas, regardless of whether such acreage contains proved reserves.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DEVELOPED UNDEVELOPED
ACREAGE ACREAGE (1)
----------- --------------
GROSS NET GROSS NET
----- ----- ------- -----
(In thousands)
Colombia 109 13 106 50
Malaysia-Thailand --- --- 731 183
Greece --- --- 1,060 933
Italy --- --- 499 217
Oman --- --- 1,322 661
Equatorial Guinea (2) --- --- 1,306 1,110
Madagascar --- --- 4,300 4,300
----- ----- ------- -----
Total 109 13 9,324 7,454
===== ===== ======= =====
____________________
</TABLE>
(1) Triton's interests in certain of this acreage may expire if not
developed at various times in the future pursuant to the terms and provisions of
the leases, licenses, concessions, contracts, permits or other agreements under
which it was acquired.
(2) The acreage listed does not take into account the 5% carried
participating interest the Company expects to assign to the government of
Equatorial Guinea in connection with the renegotiation of the production-sharing
contract.
PRODUCTIVE WELLS AND DRILLING ACTIVITY
In this section, "gross" wells refers to the total number of wells drilled
in an area in which the Company holds any interest without adjustment to reflect
the actual ownership interest held. "Net" refers to the gross number of wells
drilled adjusted for working interests owned by parties other than the Company.
At December 31, 1999, in Colombia, Triton held gross and net working
interests in 93 and 12.92 productive wells, respectively, which include 20 gross
(2.4 net) gas-injection wells and four gross (.48 net) water-injection wells.
The following tables set forth the results of the oil and gas well drilling
activity on a gross basis for wells in which the Company held an interest during
1999, 1998 and 1997.
<TABLE>
<CAPTION>
GROSS EXPLORATORY WELLS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRODUCTIVE (1) DRY TOTAL
------------------------ ----------------------- -----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ ----------------------- -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------ ------ ------ ------
Colombia --- 1 1 1 --- 1 1 1 2
Malaysia-Thailand --- 2 5 --- --- --- --- 2 5
Equatorial Guinea 2 --- --- --- --- --- 2 --- ---
Italy --- --- --- --- 2 --- --- 2 ---
Guatemala --- --- --- --- --- 1 --- --- 1
China --- --- --- --- 1 --- --- 1 ---
Ecuador --- --- --- --- --- 1 --- --- 1
Tunisia --- --- --- --- 1 --- --- 1 ---
------ ------ ------ ------ ------ ------ ------ ------ ------
Total 2 3 6 1 4 3 3 7 9
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
GROSS DEVELOPMENT WELLS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRODUCTIVE (1) DRY TOTAL
------------------------ ----------------------- -----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ ----------------------- -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------ ------ ------ ------ ------ ------ ------ ------ ------
Colombia 14 13 18 --- --- --- 14 13 18
Malaysia-Thailand --- --- --- --- --- --- --- --- ---
Equatorial Guinea --- --- --- --- --- --- --- --- ---
------ ------ ------ ------ ------ ------ ------ ------ ------
Total 14 13 18 --- --- --- 14 13 18
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
___________________
(1) A productive well is producing or capable of producing oil and/or gas in
commercial quantities. Multiple completions have been counted as one well. Any
well in which one of the multiple completions is an oil completion is classified
as an oil well.
The following tables set forth the results of drilling activity on a net
basis for wells in which the Company held an interest during 1999, 1998 and 1997
(those wells acquired or disposed of since January 1, 1997, are reflected in the
following tables only since or up to the effective dates of their respective
acquisitions or sales, as the case may be):
NET EXPLORATORY WELLS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRODUCTIVE (1) DRY TOTAL
------------------------ ----------------------- -----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ ----------------------- -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----- ----- ----- ----- ----- ----- ----- ----- -----
Colombia (2) --- 0.12 0.12 0.50 --- 0.50 0.50 0.12 0.62
Malaysia-Thailand (3) --- 1.00 2.50 --- --- --- --- 1.00 2.50
Equatorial Guinea 1.70 --- --- --- --- --- 1.70 --- ---
Italy --- --- --- --- 0.80 --- --- 0.80 ---
Guatemala --- --- --- --- --- 0.60 --- --- 0.60
China --- --- --- --- 0.50 --- --- 0.50 ---
Ecuador --- --- --- --- --- 0.55 --- --- 0.55
Tunisia --- --- --- --- 0.50 --- --- 0.50 ---
----- ----- ----- ----- ----- ----- ----- ----- -----
Total 1.70 1.12 2.62 0.50 1.80 1.65 2.20 2.92 4.27
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
NET DEVELOPMENT WELLS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PRODUCTIVE (1) DRY TOTAL
------------------------ ----------------------- -----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------ ----------------------- -----------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
----- ----- ----- ----- ----- ----- ----- ----- -----
Colombia (2) 1.68 1.56 2.16 --- --- --- 1.68 1.56 2.16
Malaysia-Thailand --- --- --- --- --- --- --- --- ---
Equatorial Guinea --- --- --- --- --- --- --- --- ---
----- ----- ----- ----- ----- ----- ----- ----- -----
Total 1.68 1.56 2.16 --- --- --- 1.68 1.56 2.16
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
__________________
(1) A productive well is producing or capable of producing oil and/or gas in
commercial quantities. Multiple completions have been counted as one well. Any
well in which one of the multiple completions is an oil completion is classified
as an oil well.
(2) Adjusted to reflect the national oil company participation at
commerciality for the Cusiana and Cupiagua fields.
(3) The interest in the wells drilled in 1998 was not reduced to take into
account the sale of the Company's interest in Block A-18 to ARCO because such
sale occurred after the drilling of the wells.
OTHER PROPERTIES
The Company leases or owns office space and other properties for its
operations in various parts of the world. For additional information on the
Company's leases, including its office leases, see note 20 of Notes to
Consolidated Financial Statements.
FORWARD-LOOKING INFORMATION
Certain information contained in this report, as well as written and oral
statements made or incorporated by reference from time to time by the Company
and its representatives in other reports, filings with the Securities and
Exchange Commission, press releases, conferences, teleconferences or otherwise,
may be deemed to be "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934 and are subject to the "Safe Harbor"
provisions of that section. Forward-looking statements include statements
concerning the Company's and management's plans, objectives, goals, strategies
and future operations and performance and the assumptions underlying such
forward-looking statements. When used in this document, the words "anticipates,"
"estimates," "expects," "believes," "intends," "plans" and similar expressions
are intended to identify such forward-looking statements. These statements
include information regarding:
- - drilling schedules;
- - expected or planned production capacity;
- - future production of the Cusiana and Cupiagua fields in Colombia, including
from the Recetor license;
- - the completion of development and commencement of production in
Malaysia-Thailand;
- - future production of the Ceiba field in Equatorial Guinea, including volumes
and timing of first production;
- - the acceleration of the Company's exploration, appraisal and development
activities in Equatorial Guinea;
- - the Company's capital budget and future capital requirements;
- - the Company's meeting its future capital needs;
- - the Company's utilization of net operating loss carryforwards and realization
of its deferred tax asset;
- - the level of future expenditures for environmental costs;
- - the outcome of regulatory and litigation matters;
- - the estimated fair value of derivative instruments, including the equity
swap; and
- - proven oil and gas reserves and discounted future net cash flows therefrom.
These statements are based on current expectations and involve a number of
risks and uncertainties, including those described in the context of such
forward-looking statements and in notes 19 and 20 of Notes to Consolidated
Financial Statements. Actual results and developments could differ materially
from those expressed in or implied by such statements due to these and other
factors.
EMPLOYEES
At March 6, 2000, the Company employed approximately 126 full-time
employees.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding the executive
officers of the Company at March 6, 2000:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
SERVED WITH
-----------
THE COMPANY
-----------
NAME AGE POSITION WITH THE COMPANY SINCE
- ------------------ --- ---------------------------------- -----------
James C. Musselman 52 President and Chief Executive
Officer 1998
A.E. Turner, III 51 Senior Vice President and
Chief Operating Officer 1994
W. Greg Dunlevy 44 Vice President, Investor Relations
and Treasurer 1993
Marvin Garrett 44 Vice President, Production 1994
Brian Maxted 42 Vice President, Exploration 1994
</TABLE>
Mr. Musselman was elected director of the Company in May 1998, and was
elected Chief Executive Officer in October 1998. Mr. Musselman has served as
Chairman, President and Chief Executive Officer of Avia Energy Development, LLC,
a private company engaged in gas processing and drilling, since September
1994. From June 1991 to September 1994, Mr. Musselman was the President and
Chief Executive Officer of Lone Star Jockey Club, LLC, a company formed to
organize a horse racetrack facility in Texas.
Mr. Turner was elected Senior Vice President and Chief Operating Officer in
March 1999, and prior to that served as Senior Vice President, Operations, of
the Company since March 1994. From 1988 to February 1994, Mr. Turner served in
various positions with British Gas Exploration & Production, Inc., including
Vice President and General Manager of operations in Africa and the Western
Hemisphere from October 1993.
Mr. Dunlevy has served as Vice President, Investor Relations, of the
Company since April 1993 and was elected Treasurer in July 1998.
Mr. Garrett has served as Vice President, Production, of the Company since
December 1999, and prior to that served in various capacities within the
Company's Operations Department since August 1994, including most recently as
Director, Operations. Prior to joining the Company in August 1994, Mr. Garrett
served in various positions with British Gas Exploration and Production, Inc.,
including General Manager and Managing Director of Zaafarana Joint Operating
Company in Cairo, Egypt.
Mr. Maxted has served as Vice President, Exploration, of the Company since
January 1998, and prior to that served as Exploration Manager of CTOC since June
1994. From 1979 to 1994, Mr. Maxted was employed by British Petroleum in various
capacities, including Exploration Manager, Colombia from 1990 to 1992 and
License Manager, Norway from 1992 to 1994.
All executive officers of the Company are elected annually by the Board of
Directors of the Company to serve in such capacities until removed or their
successors are duly elected and qualified. There are no family relationships
among the executive officers of the Company.
ITEM 3. LEGAL PROCEEDINGS
LITIGATION
In July through October 1998, eight lawsuits were filed against the Company
and Thomas G. Finck and Peter Rugg, in their capacities as Chairman and Chief
Executive Officer and Chief Financial Officer, respectively. The lawsuits were
filed in the United States District Court for the Eastern District of Texas,
Texarkana Division, and have been consolidated and are styled In re: Triton
Energy Limited Securities Litigation. In November 1999, the plaintiffs filed a
consolidated complaint. It alleges violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated
thereunder, in connection with disclosures concerning the Company's properties,
operations, and value relating to a prospective sale of the Company or of all or
a part of its assets. The lawsuits seek recovery of an unspecified amount of
compensatory damages, fees and costs. In the consolidated complaint, the
plaintiffs abandoned a claim for negligent misrepresentation and punitive
damages that had previously been asserted in one of the eight individual suits.
In September 1999, the court granted the plaintiffs' motion for appointment
as lead plaintiffs and for approval of selection of lead counsel. In October
1999, the defendants filed a motion to dismiss the claims alleged in the eight
individual suits, and in December 1999, the defendants filed a supplement to
their motion to dismiss to address the plaintiffs' consolidated complaint. The
Company's motion, as supplemented, is currently pending.
The Company believes its disclosures have been accurate and intends to
vigorously defend these actions. There can be no assurance that the litigation
will be resolved in the Company's favor. An adverse result could have a material
adverse effect on the Company's financial position or results of operations.
In November 1999, a lawsuit was filed against the Company, one of its
subsidiaries and Thomas G. Finck, Peter Rugg and Robert B. Holland, III, in
their capacities as officers of the Company, in the District Court of the State
of Texas for Dallas County. The lawsuit is styled Aaron Sherman, et al. vs.
Triton Energy Corporation et al. and seeks an unspecified amount of compensatory
and punitive damages and interest. The lawsuit alleges as causes of action fraud
and negligent misrepresentation in connection with disclosures concerning the
prospective sale by the Company of all or a substantial part of its assets
announced in March 1998. The Company's date to answer has not yet run. Its
subsidiary has filed various motions to dispose of the lawsuit on the grounds
that the plaintiffs do not have standing. The Court has ordered the plaintiffs
to replead and has stayed discovery pending its further orders.
In August 1997, the Company was sued in the Superior Court of the State of
California for the County of Los Angeles, by David A. Hite, Nordell
International Resources Ltd., and International Veronex Resources, Ltd. The
action has since been removed to the United States District Court for the
Central District of California. The Company and the plaintiffs were adversaries
in a 1990 arbitration proceeding in which the interest of Nordell International
Resources Ltd. in the Enim oil field in Indonesia was awarded to the Company
(subject to a 5% net profits interest for Nordell) and Nordell was ordered to
pay the Company nearly $1 million. The arbitration award was followed by a
series of legal actions by the parties in which the validity of the award and
its enforcement were at issue. As a result of these proceedings, the award was
ultimately upheld and enforced. The current suit alleges that the plaintiffs
were damaged in amounts aggregating $13 million primarily because of the
Company's prosecution of various claims against the plaintiffs as well as its
alleged misrepresentations, infliction of emotional distress, and improper
accounting practices. The suit seeks specific performance of the arbitration
award, damages for alleged fraud and misrepresentation in accounting for Enim
field operating results, an accounting for Nordell's 5% net profit interest, and
damages for emotional distress and various other alleged torts. The suit seeks
interest, punitive damages and attorneys fees in addition to the alleged actual
damages. In August 1998, the district court dismissed all claims asserted by the
plaintiffs other than claims for malicious prosecution and abuse of the legal
process, which the court held could not be subject to a motion to dismiss. The
abuse of process claim was later withdrawn, and the damages sought were reduced
to approximately $700,000 (not including punitive damages). The lawsuit was
tried and the jury found in favor of the plaintiffs and assessed compensatory
damages against the Company in the amount of approximately $700,000 and punitive
damages in the amount of approximately $11 million. The Company believes it has
acted appropriately and intends to appeal the verdict.
During the quarter ended September 30, 1995, the United States
Environmental Protection Agency (the "EPA") and Justice Department advised the
Company that one of its domestic oil and gas subsidiaries, as a potentially
responsible party for the clean-up of the Monterey Park, California, Superfund
site operated by Operating Industries, Inc., could agree to contribute
approximately $2.8 million to settle its alleged liability for certain remedial
tasks at the site. The offer did not address responsibility for any groundwater
remediation. The subsidiary was advised that if it did not accept the settlement
offer, it, together with other potentially responsible parties, may be ordered
to perform or pay for various remedial tasks. After considering the cost of
possible remedial tasks, its legal position relative to potentially responsible
parties and insurers, possible legal defenses and other factors, the subsidiary
declined to accept the offer. In October 1997, the EPA advised the Company that
the estimated cost of the clean-up of the site would be approximately $217
million to be allocated among the 280 known operators. The subsidiary's share
would be approximately $1 million based upon a volumetric allocation, but there
can be no assurance that any allocation of liability to the subsidiary would be
made on a volumetric basis. No proceeding has been brought in any court against
the Company or the subsidiary in this matter.
The Company is also subject to litigation that is incidental to its
business.
CERTAIN FACTORS
None of the legal matters described above is expected to have a material
adverse effect on the Company's consolidated financial position. However, this
statement of the Company's expectation is a forward-looking statement that is
dependent on certain events and uncertainties that may be outside of the
Company's control. Actual results and developments could differ materially from
the Company's expectation, for example, due to such uncertainties as jury
verdicts, the application of laws to various factual situations, the actions
that may or may not be taken by other parties and the availability of insurance.
In addition, in certain situations, such as environmental claims, one defendant
may be responsible for the liabilities of other parties. Moreover, circumstances
could arise under which the Company may elect to settle claims at amounts that
exceed the Company's expected liability for such claims in an attempt to avoid
costly litigation. Judgments or settlements could, therefore, exceed any
reserves.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted by the Company during the fourth quarter of the
year ended December 31, 1999, to security holders, through the solicitation of
proxies or otherwise.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Ordinary Shares
- ----------------
Triton's ordinary shares are listed on the New York Stock Exchange and are
traded under the symbol OIL. Set forth below are the high and low sales prices
of Triton's ordinary shares as reported on the New York Stock Exchange Composite
Tape for the periods indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
CALENDAR PERIODS HIGH LOW
- -------------------- ----- -----
2000:
First Quarter* 29.56 19.19
1999:
Fourth Quarter 27.50 13.50
Third Quarter 14.69 10.00
Second Quarter 16.00 6.94
First Quarter 8.88 5.19
1998:
Fourth Quarter 12.63 7.13
Third Quarter 37.75 9.75
Second Quarter 43.38 32.44
First Quarter 38.13 25.56
_____________
*Through March 6, 2000.
</TABLE>
Triton has not declared any cash dividends on its ordinary shares since
fiscal 1990. The holders of ordinary shares are entitled to receive such
dividends as are declared by the Board of Directors. Under applicable corporate
law, the Company may pay dividends or make other distributions to its
shareholders in such amounts as appear to the directors to be justified by the
profits of the Company or out of the Company's share premium account if the
Company has the ability to pay its debts as they come due.
The Company's current intent is to retain earnings for use in the Company's
business and the financing of its capital requirements. The payment of any
future cash dividends on the ordinary shares is necessarily dependent upon the
earnings and financial needs of the Company, along with applicable legal and
contractual restrictions. Triton is prohibited from paying cash dividends on the
ordinary shares under its revolving credit facility. In addition, the
Shareholders Agreement between the Company and HM4 Triton, L.P. provides that
for so long as HM4 Triton, L.P. and its affiliates own a certain number of
shares, Triton cannot pay a dividend on the ordinary shares without HM4 Triton,
L.P.'s consent. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and note 12 of Notes to Consolidated
Financial Statements. Finally, the terms of the 8% Convertible Preference
Shares and the 5% Convertible Preference Shares prohibit the payment of
dividends on the ordinary shares unless full cumulative dividends on all such
outstanding preference shares have been paid in full or set aside for payment.
There is no tax treaty between the United States and the Cayman Islands.
At March 6, 2000, there were 4,061 record holders of the Company's ordinary
shares.
Preference Shares
- -----------------
The Company has two series of preference shares outstanding, the 8%
Convertible Preference Shares and the 5% Convertible Preference Shares. The
following summary of certain provisions of the resolutions establishing the
terms of the outstanding preference shares is not complete. Copies of the
resolutions are filed as exhibits to this report.
8% Convertible Preference Shares
As of March 6, 2000, the Company had outstanding 5,189,758 8% Convertible
Preference Shares.
Dividends. The Company is required to pay dividends on the 8% Convertible
---------
Preference Shares semi-annually at the rate of 8% per year of the stated value
per share (initially $70) for each semi-annual dividend period ending on June 30
and December 31 of each year. Dividends on the 8% Convertible Preference Shares
are cumulative. The Company can choose to pay dividends in cash or in additional
8% Convertible Preference Shares. If the Company pays a dividend in additional
shares, the number of additional shares to be issued will be determined by
dividing the amount of the dividend by $70, with amounts in respect of any
fractional shares to be paid in cash.
The Company may not pay a dividend or other distribution on any ordinary
shares or other shares ranking equal or junior to the 8% Convertible Preference
Shares unless all dividends on the 8% Convertible Preference Shares have been
paid. The Company may pay a partial dividend on shares ranking equal to the 8%
Convertible Preference Shares as to dividends if the Company pays a partial to
the holders of both the 8% Convertible Preference Shares and the equally-ranked
shares in proportion to the accrued and unpaid dividends on each share.
So long as the 8% Convertible Preference Shares are outstanding, the
Company may not redeem or purchase any ordinary shares or any Triton shares
ranking junior as to dividends to the 8% Convertible Preference Shares or any
other Triton shares ranking junior to the 8% Convertible Preference Shares as to
liquidation rights unless (1) full dividends on all outstanding 8% Convertible
Preference Shares and any other shares ranking equal as to dividends to the 8%
Convertible Preference Shares have been, or contemporaneously are, paid and (2)
the Company pays or sets aside cash (or additional shares of 8% Convertible
Preference Shares) in amounts sufficient to pay the dividend for the current
dividend period. In any event, the Company may purchase or acquire such junior
shares either (1) pursuant to any employee or director incentive or benefit plan
or arrangement or (2) in exchange solely for junior shares.
Conversion. Holders of 8% Convertible Preference Shares generally have the
----------
right to convert their 8% Convertible Preference Shares into ordinary shares at
any time before redemption at the conversion price in effect at the time of
conversion. The current conversion price is $17.50 per ordinary share so that
each 8% Convertible Preference Share is convertible into four ordinary shares.
The conversion price is subject to adjustment under certain circumstances. Upon
the conversion of 8% Convertible Preference Shares, the holder is also entitled
to receive an amount in cash equal to all accumulated and unpaid dividends on
the 8% Convertible Preference Shares converted through the effective date of
conversion.
Redemption. The Company cannot redeem the 8% Convertible Preference Shares
----------
before September 30, 2001. Beginning September 30, 2001, the Company can redeem
all, but not less than all, of the outstanding 8% Convertible Preference Shares
at any time if the average market value of the ordinary shares is above certain
prices. The redemption price is $70 per share, plus an amount equal to all
accumulated but unpaid dividends, and is payable in cash.
The average market value is determined by averaging the closing price of
the ordinary shares for the 20 trading days preceding the notice of redemption.
The Company may only redeem the 8% Convertible Preference Shares if this
average price in a particular six-month period exceeds the price set forth
below:
<TABLE>
<CAPTION>
<S> <C>
REDEMPTION NOTICE GIVEN ON THE SIX MONTHS ENDING: AVERAGE PRICE
- ------------------------------------------------- --------------
March 31, 2002 $ 28.54
September 30, 2002 31.14
March 31, 2003 34.20
September 30, 2003 37.58
March 31, 2004 32.57
September 30, 2004 34.97
March 31, 2005 37.60
</TABLE>
Beginning April 1, 2005, the minimum average price will be increased every
six months to reflect an internal rate of return of 20% for a holder purchasing
8% Convertible Preference Shares as of the date the first 8% Convertible
Preference Share was issued. The minimum average prices set forth above will be
adjusted in the event of any combination, subdivision or reclassification of
ordinary shares, or any similar event.
Liquidation Rights. The liquidation preference of the 8% Convertible
-------------------
Preference Shares is $70 per share, plus accumulated and unpaid dividends.
Voting Rights. The holders of the 8% Convertible Preference Shares
--------------
generally vote with the holders of the ordinary shares on all matters brought
before the Company's shareholders. In addition, a class vote of the 8%
Convertible Preference Shares is required in certain limited circumstances. The
holders of the 8% Convertible Preference Shares will also be entitled to elect
two directors if the Company does not pay dividends on the 8% Convertible
Preference Shares under certain circumstances. When voting with the holders of
the ordinary shares, the holders of the 8% Convertible Preference Shares have
the number of votes for each share that they would have if they had converted
their shares into ordinary shares on the related record date. When voting as a
class, the holders of the 8% Convertible Preference Shares have one vote per
share.
The Shareholders Agreement between the Company and HM4 Triton, L.P.
provides that, in general, for so long as the entire Board of Directors consists
of ten members, HM4 Triton, L.P. (and its designated transferees, collectively)
may designate four nominees for election to the Board of Directors. The right of
HM4 Triton, L.P. (and its designated transferees) to designate nominees for
election to the Board of Directors will be reduced if the number of ordinary
shares held by HM4 Triton, L.P. and its affiliates (assuming conversion of 8%
Convertible Preference Shares into ordinary shares) represents less than certain
specified percentages of the number of ordinary shares (assuming conversion of
8% Convertible Preference Shares into ordinary shares) purchased by HM4 Triton,
L.P. under the Stock Purchase Agreement between Triton and HM4 Triton, L.P.
In the Shareholders Agreement, the Company also agreed that it would not
take certain fundamental corporate actions without the consent of HM4 Triton,
L.P. Some of the actions that would require HM4 Triton, L.P.'s consent are
listed below:
- - entering into a merger or similar business combination transaction, or
effecting a reorganization, recapitalization or other transaction pursuant to
which a majority of the outstanding ordinary shares or any 8% Convertible
Preference Shares are exchanged for securities, cash or other property;
- - authorizing, creating or modifying the terms of any securities that would
rank equal to or senior to the 8% Convertible Preference Shares;
- - selling assets comprising more than 50% of the market value of the Company;
- - paying dividends on the Company's ordinary shares;
- - incurring certain levels of debt; and
- - commencing a tender offer or exchange offer for any of the Company's ordinary
shares.
5% Convertible Preference Shares
As of March 6, 2000, the Company had outstanding 209,558 5% Convertible
Preference Shares.
Dividends. The Company is required to pay dividends on the 5% Convertible
---------
Preference Shares semi-annually at the rate of 5% per year of the redemption
price per share (initially $34.41) for each semi-annual dividend period on
September 30 and March 30 of each year. Dividends on the 5% Convertible
Preference Shares are cumulative.
The Company may not pay a dividend (other than dividends payable solely in
shares ranking junior to the 5% Convertible Preference Shares) or other
distribution on any ordinary shares or other shares ranking junior to the 5%
Convertible Preference Shares unless all dividends on the 5% Convertible
Preference Shares have been paid. The Company may not pay dividends on any class
or series of shares ranking equal to the 5% Convertible Preference Shares unless
the Company has paid, or concurrently pays, all accrued and unpaid dividends for
all prior periods on the 5% Convertible Preference Shares. If any accrued
dividends are not paid in full on the 5% Convertible Preference Shares and any
shares ranking equal to the 5% Convertible Preference Shares as to dividends,
the Company must pay any dividends on the 5% Convertible Preference Shares and
such equally-ranked shares so that the amount of dividends declared per share on
the 5% Convertible Preference Shares and such equally-ranked shares will bear
the same ratio that accrued and unpaid dividends per share on the 5% Convertible
Preference Shares and such equally-ranked shares bear to each other.
Conversion. Holders of 5% Convertible Preference Shares generally have the
----------
right to convert their 5% Convertible Preference Shares into ordinary shares at
any time before redemption. Currently, each 5% Convertible Preference Share is
convertible into one ordinary share. The conversion price is subject to
adjustment under certain circumstances. No payment or adjustment will be made in
respect of accrued or unpaid dividends on the 5% Convertible Preference Shares
upon conversion of 5% Convertible Preference Shares except as set forth below.
Redemption. The Company can redeem the 5% Convertible Preference Shares at
----------
any time in whole or in part. The redemption price is $34.41 per share, plus an
amount equal to all accumulated but unpaid dividends, and is payable in cash.
If any 5% Convertible Preference Shares are outstanding on March 30, 2004,
the Company is required to redeem the 5% Convertible Preference Shares. In this
event, the Company may redeem the 5% Convertible Preference Shares by
(1) paying cash at the $34.41 redemption price plus any accrued and unpaid
dividends to the redemption date;
(2) issuing to the holder a number of ordinary shares with a market value
equal to the $34.41 redemption price plus any accrued and unpaid dividends to
the redemption date; or
(3) a combination of cash or ordinary shares equal to the $34.41 redemption
price plus any accrued and unpaid dividends to the redemption date.
Liquidation Rights. The liquidation preference of the 5% Convertible
-------------------
Preference Shares is $34.41 per share, plus accumulated and unpaid dividends.
Voting Rights. The holders of the 5% Convertible Preference Shares
--------------
generally have no voting rights except as required under Cayman Islands law. So
long as any 5% Convertible Preference Shares are outstanding, the consent of the
holders of at least two-thirds of the outstanding 5% Convertible Preference
Shares is required if the Company issues, other than wholly for cash
consideration, any shares of any class of shares that would rank senior to the
5% Convertible Preference Shares in dividend or liquidation rights, or if the
Company proposes to amend its articles of association in a manner adversely
affecting the rights of the holders of the 5% Convertible Preference Shares. The
Company's articles of association may be amended to increase the number of
authorized preference shares without the vote of the holders of the outstanding
5% Convertible Preference Shares. When voting as a class, the holders of the 5%
Convertible Preference Shares have one vote per share.
Shareholder Rights Plan
- -------------------------
The Company has adopted a Shareholder Rights Plan pursuant to which
preference share rights attach to all ordinary shares at the rate of one right
for each ordinary share. Each right entitles the registered holder to purchase
from the Company one one-thousandth of a Series A Junior Participating
Preference Share, par value $.01 per share ("Junior Preference Shares"), of the
Company at a price of $120 per one one-thousandth of a share of such Junior
Preference Shares, subject to adjustment. Generally, the rights only become
distributable 10 days following public announcement that a person has acquired
beneficial ownership of 15% or more of Triton's ordinary shares or 10 business
days following commencement of a tender offer or exchange offer for 15% or more
of the outstanding ordinary shares; provided that, pursuant to the terms of the
plan, any acquisition of Triton shares by HM4 Triton, L.P. or its affiliates,
including Hicks, Muse, Tate & Furst, Incorporated, will not result in the
distribution of rights unless and until HM4 Triton, L.P.'s ownership of Triton
shares is reduced below certain levels.
If, among other events, any person becomes the beneficial owner of 15% or
more of Triton's ordinary shares (except as provided with respect to HM4 Triton,
L.P.), each right not owned by such person generally becomes the right to
purchase a number of ordinary shares of the Company equal to the number obtained
by dividing the right's exercise price (currently $120) by 50% of the market
price of the ordinary shares on the date of the first occurrence. In addition,
if the Company is subsequently merged or certain other extraordinary business
transactions are consummated, each right generally becomes a right to purchase a
number of shares of common stock of the acquiring person equal to the number
obtained by dividing the right's exercise price by 50% of the market price of
the common stock on the date of the first occurrence.
Under certain circumstances, the Company's directors may determine that a
tender offer or merger is fair to all shareholders and prevent the rights from
being exercised. At any time after a person or group acquires 15% or more of the
ordinary shares outstanding (other than with respect to HM4 Triton, L.P.) and
prior to the acquisition by such person or group of 50% or more of the
outstanding ordinary shares or the occurrence of an event described in the prior
paragraph, the Board of Directors of the Company may exchange the rights (other
than rights owned by such person or group which will become void), in whole or
in part, at an exchange ratio of one ordinary share, or one one-thousandth of a
Junior Preference Share, per right (subject to adjustment). The Company has the
ability to amend the rights (except the redemption price) in any manner prior to
the public announcement that a 15% position has been acquired or a tender offer
has been commenced. The Company will be entitled to redeem the rights at $0.01 a
right at any time prior to the time that a 15% position has been acquired. The
rights will expire on May 22, 2005, unless earlier redeemed by the Company.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain financial and oil and gas data on a
historical basis.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
AS OF OR FOR YEAR ENDED
DECEMBER 31,
-----------------------------------------------------
1999 1998 1997 1996 1995
-------- ---------- ----------- -------- --------
OPERATING DATA (IN THOUSANDS, EXCEPT PER
SHARE DATA):
Oil and gas sales $247,878 $ 160,881 $ 145,419 $129,795 $106,844
Sales and other operating revenues 247,878 228,618 149,496 133,977 107,472
Earnings (loss) from continuing operations 47,557 (187,504) 5,595 23,805 6,541
Earnings (loss) before extraordinary items 47,557 (187,504) 5,595 23,805 2,720
Net earnings (loss) 47,557 (187,504) (8,896) 22,609 2,720
Average ordinary shares outstanding 36,135 36,609 36,471 35,929 35,147
Basic earnings (loss) per ordinary share:
Continuing operations $ 0.52 $ (5.21) $ 0.14 $ 0.64 $ 0.16
Before extraordinary item 0.52 (5.21) 0.14 0.64 0.05
Net earnings (loss) 0.52 (5.21) (0.26) 0.61 0.05
Diluted earnings (loss) per ordinary share:
Continuing operations $ 0.52 $ (5.21) $ 0.14 $ 0.62 $ 0.16
Before extraordinary item 0.52 (5.21) 0.14 0.62 0.05
Net earnings (loss) 0.52 (5.21) (0.25) 0.59 0.05
BALANCE SHEET DATA (IN THOUSANDS):
Net property and equipment $524,152 $ 470,907 $ 835,506 $676,833 $524,381
Total assets 974,475 754,280 1,098,039 914,524 824,167
Long-term debt, including current maturities (1) 413,487 427,492 573,687 416,630 402,503
Shareholders' equity 463,052 223,807 296,620 300,644 246,025
CERTAIN OIL AND GAS DATA (2) :
Production
Sales volumes (Mbbls) (3) 12,469 9,979 5,776 5,987 6,303
Forward oil sale deliveries (Mbbls) 3,050 3,050 2,462 701 409
-------- ---------- ----------- -------- --------
Total revenue barrels (Mbbls) 15,519 13,029 8,238 6,688 6,712
======== ========== =========== ======== ========
Gas (MMcf) 459 503 802 2,517 5,312
Average sales price
Oil (per bbl) (4) $ 15.95 $ 12.31 $ 17.54 $ 19.61 $ 16.60
Gas (per Mcf) $ 0.88 $ 0.99 $ 1.15 $ 1.69 $ 1.64
</TABLE>
__________________________
(1) Includes current maturities totaling $9.0 million, $14.0 million, $130.4
million, $199.6 million, and $1.3 million at December 31, 1999, 1998, 1997,
1996, and 1995, respectively.
(2) Information presented includes the 49.9% equity investment in Crusader
Limited until its sale in 1996.
(3) Includes natural gas liquids and condensate.
(4) Includes barrels delivered under the forward oil sale, which are recognized
in oil and gas sales at $11.56 per barrel upon delivery.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL REQUIREMENTS
----------------------------------
Cash and equivalents totaled $186.3 million and $18.8 million at December
31, 1999 and 1998, respectively, and working capital (deficit) was $161.3
million and ($21.6 million) at December 31, 1999 and 1998, respectively.
The following summary table reflects cash flows of the Company for the
years ended December 31, 1999, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1999 1998 1997
---------- --------- ----------
Net cash provided (used) by operating activities $ 116,522 $ 1,466 $ (97,416)
Net cash provided (used) by investing activities $(118,530) $ 84,191 $(212,700)
Net cash provided (used) by financing activities $ 170,143 $(80,071) $ 313,368
</TABLE>
Operating Activities
- --------------------
Cash flows provided by operating activities for the year ended
December 31, 1999, benefited from increased production from the Cusiana and
Cupiagua fields in Colombia, and higher oil prices. Gross production from the
Cusiana and Cupiagua fields averaged approximately 430,000 BOPD during 1999
compared with 350,000 BOPD during 1998 and 220,000 BOPD during 1997. During
1999, 1998 and 1997, the Company's average realized oil price was $15.95, $12.31
and $17.54, respectively. See "Results of Operations - Oil and Gas Sales"
below. Based on estimates of the operator of the Cusiana and Cupiagua fields,
the Company believes that combined Cusiana and Cupiagua oil production will be
approximately 8% to 11% lower in 2000 than in 1999, although there can be no
assurance that actual production will equal that amount.
During 1999, the Company received substantially all of the
remaining proceeds (approximately $31.9 million) from a forward oil sale in May
1995. Starting with the second quarter of 2000, 254,136 barrels per month, the
amount currently delivered under the forward oil sale, will become available for
sale.
The Company's reported cash flows from operating activities for
the year ended December 31, 1997, were reduced by $124.8 million, which was
attributable to interest accreted with respect to the Company's Senior
Subordinated Discount Notes due November 1, 1997 (the "1997 Notes"), and the
9 3/4% Senior Subordinated Discount Notes due December 31, 2000
(the "9 3/4% Notes"), through the dates of retirement in the second
quarter of 1997.
Investing Activities
- ---------------------
The Company's capital expenditures and other capital investments were
$121.5 million, $180.2 million and $219.2 million during the years ended
December 31, 1999, 1998 and 1997, respectively, primarily for exploration and
development of the Cusiana and Cupiagua fields in Colombia, and for exploration
within the Company's licenses in Equatorial Guinea, the Malaysia-Thailand Joint
Development Area in the Gulf of Thailand and in other areas. Restructuring
activities undertaken in 1998 contributed to lower capital spending in 1999.
Proceeds from asset sales were $2.4 million, $267 million and $5.9 million
during 1999, 1998 and 1997, respectively. See "Results of Operations" below and
note 2 of Notes to Consolidated Financial Statements.
Financing Activities
- ---------------------
In August 1998, the Company and HM4 Triton, L.P., an affiliate of
Hicks, Muse, Tate & Furst Incorporated ("Hicks Muse"), entered into a stock
purchase agreement (the "Stock Purchase Agreement") that provided for a $350
million equity investment in the Company. The investment was effected in two
stages. At the closing of the first stage in September 1998 (the "First
Closing"), the Company issued to HM4 Triton, L.P. 1,822,500 shares of 8%
Convertible Preference Shares for $70 per share (for proceeds of $116.8 million,
net of transaction costs). Pursuant to the Stock Purchase Agreement, the second
stage was effected through a rights offering for 3,177,500 shares of 8%
Convertible Preference Shares at $70 per share, with HM4 Triton L.P. being
obligated to purchase any shares not subscribed. At the closing of the second
stage, which occurred on January 4, 1999 (the "Second Closing"), the Company
issued an additional 3,177,500 8% Convertible Preference Shares for proceeds
totaling $217.8 million, net of closing costs (of which, HM4 Triton L.P.
purchased 3,114,863 shares).
In April 1999, the Company's Board of Directors authorized a share
repurchase program enabling the Company to repurchase up to ten percent of the
Company's then outstanding 36.7 million ordinary shares. Purchases of ordinary
shares by the Company began in April and may be made from time to time in the
open market or through privately negotiated transactions at prevailing market
prices depending on market conditions. The Company has no obligation to
repurchase any of its outstanding shares and may discontinue the share
repurchase program at management's discretion. As of December 31, 1999, the
Company had purchased 948,300 ordinary shares for $11.3 million. Because of
anticipated capital needs in Equatorial Guinea, the Company did not include in
its capital budget for 2000 any amounts for share repurchases under the program.
In addition, the Company's revolving credit facility, entered into in February
2000, generally does not permit the Company to repurchase its ordinary shares
without the banks' consent.
During 1999, the Company repaid borrowings totaling $19 million,
including $10 million under unsecured credit facilities that were outstanding at
December 31, 1998. By December 31, 1999, all of the Company's unsecured
revolving credit facilities that were outstanding at December 31, 1998 had
expired. In addition, the Company paid cash preference dividends totaling $17.6
million in 1999.
During 1998, the Company borrowed $162.5 million and repaid $360.1
million under revolving lines of credit, notes payable and long-term debt. The
Company terminated a $125 million revolving credit facility during 1998 upon the
repayment of the amounts then outstanding.
In April 1997, the Company issued $400 million aggregate face value of
senior indebtedness to refinance other indebtedness. The senior indebtedness
consisted of $200 million face amount of 8 3/4% Senior Notes due April 15,
2002 (the "2002 Notes"), at 99.942% of the principal amount
(resulting in $199.9 million aggregate net proceeds) and $200 million face
amount of 9 1/4% Senior Notes due April 15, 2005 (the "2005 Notes" and,
together with the 2002 Notes, the "Senior Notes"), at 100% of the principal
amount for total aggregate net proceeds of $399.9 million before deducting
transaction costs of approximately $1 million.
In May and June 1997, the Company offered to purchase all of its
outstanding 1997 Notes and 9 3/4% Notes, which resulted in the retirement of
the 1997 Notes and substantially all of the 9 3/4% Notes. The remainder of
the 9 3/4% Notes were retired in 1998. During the year ended December
31, 1997, the Company borrowed $630 million and repaid $321.5 million under
revolving lines of credit, notes payable and long-term debt (including
the Senior Notes).
FUTURE CAPITAL NEEDS
The Company intends to implement an accelerated appraisal and
development program to enable early production from the Ceiba field, with a
target of first production by the end of 2000, and has contracted for a floating
production storage and offloading (FPSO) system that is expected to provide
storage for two million barrels of oil and initial processing capacity of up to
60,000 barrels of oil per day from a single production unit. Capacity can be
cost-effectively increased through the addition of up to three similar units.
In addition, the Company intends to accelerate its exploration, appraisal and
development drilling activities through implementation of a two-rig drilling
program that is intended to enable the Company to complete the Ceiba-1 and -2
wells as production wells, to drill and complete two additional
appraisal/production wells in the Ceiba field, to drill two exploration wells
and to provide the Company the option to drill up to six additional wells.
The Company expects that its accelerated appraisal and development
program for Equatorial Guinea will require significant capital outlays
commencing in the year 2000. For internal planning purposes, the Company's
capital spending program for the year ending December 31, 2000, is approximately
$191 million, excluding capitalized interest and acquisitions, of which
approximately $122 million relates to exploration and development activities in
Equatorial Guinea, $58 million relates to the Cusiana and Cupiagua fields in
Colombia, and $11 million relates to the Company's exploration activities in
other parts of the world. The 2000 capital spending program does not include
the six optional wells in Equatorial Guinea.
In conjunction with the sale of Triton Pipeline Colombia, Inc. ("TPC")
to an unrelated third party (the "Purchaser") in February 1998, the Company
entered into a five year equity swap with a creditworthy financial institution
(the "Counterparty"). The issuance to HM4 Triton, L.P. of the 8% Convertible
Preference Shares resulted in the right of the Counterparty to terminate the
equity swap prior to the end of its five year term. In January 1999, the
Counterparty exercised its right and designated April 2000 as the termination
date of the equity swap. Upon the expiration of the equity swap in April 2000,
the Company expects that the Purchaser will sell the TPC shares. Under the terms
of the equity swap with the Counterparty, upon any sale by the Purchaser of the
TPC shares, the Company will receive from the Counterparty, or pay to the
Counterparty, an amount equal to the excess or deficiency, as applicable, of the
difference between 97% of the net proceeds from the Purchaser's sale of the TPC
shares and the notional amount of $97 million. For example, if the Purchaser
sold the TPC shares for an amount equal to the value the Company has estimated
for purposes of preparing its balance sheet as of December 31, 1999, the Company
would have to make a payment to the Counterparty under the equity swap of
approximately $8.4 million. There can be no assurance that the value the
Purchaser may realize in any sale of the TPC shares will equal the value of the
shares estimated by the Company for purposes of valuing the equity swap. The
Company has no right or obligation to repurchase the TPC shares at any time, but
the Company is not prohibited from offering to purchase the shares if the
Purchaser offers to sell them. The Company expects to make a bid for the
acquisition of the TPC shares because the Company's pipeline tariffs can be
lowered by electing to cancel the dividend to the holder of the OCENSA shares.
See "Results of Operations - Other Income and Expenses" below, note 2 of Notes
to Consolidated Financial Statements, and "Quantitative and Qualitative
Disclosures about Market Risk" below.
In February 2000, the Company entered into an unsecured two-year
revolving credit facility with a group of banks, which matures in February 2002.
The credit facility gives the Company the right to borrow from time to time up
to the amount of the borrowing base determined by the banks, not to exceed $150
million. As of February 2000, the borrowing base was $150 million. The credit
facility contains various restrictive covenants, including covenants that
require the Company to maintain a ratio of earnings before interest,
depreciation, depletion, amortization and income taxes to net interest expense
of at least 2.5 to 1, and that prohibit the Company from permitting net debt to
exceed the product of 3.75 times the Company's earnings before interest,
depreciation, depletion, amortization and income taxes, in each case, on a
trailing four quarters basis. As of March 6, 2000, the Company had not made a
borrowing under the facility.
The Company expects to fund 2000 capital spending with a combination of
some or all of the following: cash flow from operations, cash, the Company's
committed bank credit facility, and the issuance of debt or equity securities.
To facilitate a possible future securities issuance or issuances, the Company
has on file with the Securities and Exchange Commission ("SEC") a shelf
registration statement under which the Company could issue up to an aggregate of
$250 million debt or equity securities.
At December 31, 1999, the Company had guaranteed the performance of a total
of $16.4 million in future exploration expenditures to be incurred through
September 2001 in various countries. A total of approximately $6 million of the
exploration expenditures are included in the 2000 capital spending program
related to a commitment for two onshore exploratory wells in Greece. These
commitments are backed primarily by unsecured letters of credit. The Company
also had guaranteed loans of approximately $1.4 million, which expire September
2000, for a Colombian pipeline company, Oleoducto de Colombia S.A., in which the
Company has an ownership interest.
On October 30, 1999, the Company and the other parties to the
production-sharing contract for Block A-18 executed a gas sales agreement
providing for the sale of the first phase of gas. Under the terms of the gas
sales agreement, delivery of gas is scheduled to begin by the end of the second
quarter of 2002, following timely completion and approval of an environmental
impact assessment associated with the buyers' pipeline and processing
facilities. No assurance can be given as to when such approval will be obtained.
In connection with the sale to ARCO of one-half of the shares through which the
Company owned its interest in Block A-18, ARCO agreed to pay the future
exploration and development costs attributable to the Company's and ARCO's
collective interest in Block A-18, up to $377 million or until first production
from a gas field. There can be no assurance that the Company's and ARCO's
collective share of the cost of developing the project will not exceed $377
million. See "Certain Factors Relating to Malaysia-Thailand" in note 19 of Notes
to Consolidated Financial Statements.
RESULTS OF OPERATIONS
---------------------
YEAR ENDED DECEMBER 31, 1999,
COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Oil and Gas Sales
--------------------
Oil and gas sales in 1999 totaled $247.9 million, a 54% increase from
1998, due to higher average realized oil prices and higher production. The
average realized oil price was $15.95 and $12.31 in 1999 and 1998, respectively,
an increase of 30% for 1999, resulting in higher revenues of $56.4 million
compared to 1998. Total revenue barrels, including production related to barrels
delivered under the forward oil sale, totaled 15.5 million barrels in 1999, an
increase of 19%, compared to the prior year, resulting in an increase in
revenues of $30.7 million. The increased production was primarily due to the
start-up during the second half of 1998 of two new 100,000 BOPD oil-production
units at the Cupiagua central processing facility.
As a result of financial and commodity market transactions settled
during the year ended December 31, 1999, the Company's risk management program
resulted in lower oil sales of approximately $19.8 million than if the Company
had not entered into such transactions. Additionally, the Company has hedged
its WTI price on a portion of its projected 2000 oil production. See
"Quantitative and Qualitative Disclosures about Market Risk" below.
The delivery requirement under the forward oil sale will be completed
in March 2000. Starting with the second quarter of 2000, 254,136 barrels per
month, the amount currently delivered under the forward oil sale and recognized
in revenues at $11.56 per barrel, will become available for sale.
Gain on Sale of Oil and Gas Assets
-----------------------------------------
In August 1998, the Company sold to a subsidiary of ARCO for $150
million, one-half of the shares of the subsidiary through which the Company
owned its 50% share of Block A-18 in the Malaysia-Thailand Joint Development
Area. The sale resulted in a gain of $63.2 million. In December 1998, the
Company sold its Bangladesh subsidiary for $4.5 million and recorded a gain of
the same amount.
Operating Expenses
-------------------
Operating expenses, which include field operating expenses, pipeline
tariffs and production taxes, decreased $5.4 million in 1999. On an oil
equivalent-barrel basis, operating expenses were $4.50 and $5.97 in 1999 and
1998, respectively. The Company pays lifting costs, production taxes and
transportation costs to the Colombian port of Covenas for barrels to be
delivered under the forward oil sale. Operating expenses on a per
equivalent-barrel basis were lower primarily due to higher production volumes.
OCENSA pipeline tariffs totaled $42.1 million and $49.9 million in 1999 and
1998, respectively. Pipeline tariffs for 1999 were lower primarily due to a
non-recurring credit issued by OCENSA in February 2000 totaling $4.2 million.
The credit resulted from OCENSA's compliance with a Colombian government decree
in December 1999 that reduced its 1999 noncash expenses. OCENSA imposes a
tariff on shippers from the Cusiana and Cupiagua fields (the "Initial
Shippers"), which is estimated to recoup: the total capital cost of the project
over a 15-year period; its operating expenses, which include all Colombian
taxes; interest expense; and the dividend to be paid by OCENSA to its
shareholders. Any shippers of crude oil who are not Initial Shippers are
assessed a premium tariff on a per-barrel basis, and OCENSA will use revenues
from such tariffs to reduce the Initial Shippers' tariff.
Depreciation, Depletion and Amortization
-------------------------------------------
Depreciation, depletion and amortization increased $2.5 million,
primarily due to higher production volumes, including barrels delivered under
the forward oil sale. Off-setting the effect of higher production, full cost
ceiling test writedowns taken during 1998 reduced the per barrel depletion in
1999.
General and Administrative Expenses
--------------------------------------
General and administrative expense before capitalization decreased
$16.6 million from $47.2 million in 1998 to $30.6 million in 1999, while
capitalized general and administrative costs were $6.9 million and $20.6 million
in 1999 and 1998, respectively. General and administrative expenses, and the
portion capitalized, decreased as a result of restructuring activities
undertaken during the second half of 1998 and in March 1999.
Writedown of Assets
---------------------
In June and December 1998, the carrying amount of the Company's evaluated
oil and gas properties in Colombia was written down by $105.4 million ($68.5
million, net of tax) and $135.6 million ($115.9 million, net of tax),
respectively, through application of the full cost ceiling limitation as
prescribed by the SEC, principally as a result of a decline in oil prices. No
adjustments were made to the Company's reserves in Colombia as a result of the
decline in prices. The SEC ceiling test was calculated using the June 30, and
December 31, 1998, WTI oil prices of $14.18 per barrel and $12.05 per barrel,
respectively, that, after a differential for Cusiana crude delivered at the port
of Covenas in Colombia, resulted in a net price of approximately $13 per barrel
and $11 per barrel, respectively.
During 1998, the Company evaluated the recoverability of its approximate
6.6% investment in a Colombian pipeline company, Oleoducto de Colombia S.A.
("ODC"), which is accounted for under the cost method. Based on an analysis of
the future cash flows expected to be received from ODC, the Company expensed the
carrying value of its investment totaling $10.3 million.
In July 1998, the Company commenced a plan to restructure the Company's
operations, reduce overhead costs and substantially scale back
exploration-related expenditures. The plan contemplated the closing of foreign
offices in four countries, the elimination of approximately 105 positions, or
41% of the worldwide workforce, and the relinquishment or other disposal of
several exploration licenses.
In conjunction with the plan to restructure operations and scale back
exploration-related expenditures in 1998, the Company assessed its investments
in exploration licenses and determined that certain investments were impaired.
As a result, unevaluated oil and gas properties and other assets totaling $77.3
million ($72.6 million, net of tax) were expensed. The writedown included $27.2
million and $22.5 million related to exploration activity in Guatemala and
China, respectively. The remaining writedowns related to the Company's
exploration projects in certain other areas of the world.
Special Charges
----------------
As a result of the restructuring, the Company recognized special
charges of $15 million during the third quarter of 1998 and $3.3 million during
the fourth quarter of 1998 for a total of $18.3 million. Of the $18.3 million
in special charges, $14.5 million related to the reduction in workforce, and
represented the estimated costs for severance, benefit continuation and
outplacement costs, which will be paid over a period of up to two years
according to the severance formula. Since July 1998, the Company has paid $13.1
million in severance, benefit continuation and outplacement costs. A total of
$2.1 million of special charges related to the closing of foreign offices, and
represented the estimated costs of terminating office leases and the write-off
of related assets. The remaining special charges of $1.7 million primarily
related to the write-off of other surplus fixed assets resulting from the
reduction in workforce. At December 31, 1999, all of the positions had been
eliminated, all designated foreign offices had closed and all licenses had been
relinquished, sold, or their commitments renegotiated. During the fourth quarter
of 1999, the Company reversed $.7 million of the accrual associated with the
completion of restructuring activities. The remaining liability related to the
restructuring activities undertaken in 1998 was $1 million at December 31, 1999.
In March 1999, the Company accrued special charges of $1.2 million
related to an additional 15% reduction in the number of employees resulting from
the Company's continuing efforts to reduce costs. The special charges consisted
of $1 million for severance, benefit continuation and outplacement costs and $.2
million related to the write-off of surplus fixed assets. Since March 1999, the
Company has paid $.9 million in severance, benefit continuation and outplacement
costs. At December 31, 1999, the remaining liability related to the
restructuring activities undertaken in 1999 was $.1 million.
In September 1999, the Company recognized special charges totaling $2.4
million related to the transfer of its working interest in Ecuador to a third
party.
Gain on Sale of Triton Pipeline Colombia
----------------------------------------------
In February 1998, the Company sold TPC, a wholly owned subsidiary that
held the Company's 9.6% equity interest in the Colombian pipeline company,
OCENSA, to an unrelated third party (the "Purchaser") for $100 million. Net
proceeds were approximately $97.7 million. The sale resulted in a gain of $50.2
million.
Interest Expense
-----------------
Gross interest expense for 1999 and 1998 totaled $37.2 million and
$46.4 million, respectively, while capitalized interest for 1999 decreased $8.7
million to $14.5 million. The decrease in capitalized interest is primarily due
to the writedown of unevaluated oil and gas properties in June 1998 and a sale
of 50% of the Company's Block A-18 project in August 1998.
Other Income (Expense), Net
------------------------------
Other income (expense), net, included a foreign exchange gain (loss)
of ($2.7 million) and $2.1 million in 1999 and 1998, respectively. During 1999
and 1998, the Company recorded gains of $6.2 million and $.4 million,
respectively, representing the change in the fair value of the call options
purchased in anticipation of a forward oil sale. In addition, during 1999 and
1998, the Company recorded an expense of $6.9 million and $3.3 million,
respectively, in other income (expense), net, related to the net payments made
under and the change in the fair value of the equity swap entered into in
conjunction with the sale of TPC. Net payments made (or received) under the
equity swap, and any fluctuations in the fair values of the call options and the
equity swap, in future periods will affect other income (expense), net in such
periods. See "Quantitative and Qualitative Disclosures About Market Risk"
below. In 1999 and 1998, the Company recorded loss provisions of $2.3 million
and $.8 million, respectively, for certain legal matters. In 1998, the Company
recognized gains of $7.6 million on the sale of corporate assets in addition to
the ARCO and TPC transactions.
Income Taxes
-------------
Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes," requires that the Company make projections about
the timing and scope of certain future business transactions in order to
estimate recoverability of deferred tax assets primarily resulting from the
expected utilization of net operating loss carryforwards ("NOLs"). Changes in
the timing or nature of actual or anticipated business transactions, projections
and income tax laws can give rise to significant adjustments to the Company's
deferred tax expense or benefit that may be reported from time to time. For
these and other reasons, compliance with SFAS 109 may result in significant
differences between tax expense for income statement purposes and taxes actually
paid.
Current taxes related to the Company's Colombian operations were $20.8
million and $4.4 million in 1999 and 1998, respectively. The income tax
provision for 1999 included a foreign deferred tax expense totaling $9.2 million
compared with a foreign deferred tax benefit of $57 million in 1998. The
benefit recognized in 1998 primarily resulted from the writedown of oil and gas
properties. Additionally, the income tax provision included a deferred tax
benefit in the United States totaling $1.4 million, compared with an expense of
$1.5 million in 1998.
At December 31, 1999, the Company had U.S. NOLs of approximately
$450.2 million compared with NOLs of approximately $415.6 million at December
31, 1998. The NOLs expire from 2000 to 2020. See note 10 of Notes to
Consolidated Financial Statements. At December 31, 1999, the Company's
Colombian operations and other foreign operations had NOLs and other credit
carryforwards totaling $57.4 million and $40.7 million, respectively, that will
expire between 2001 and 2004.
During 1999, the Company acquired the Colombian entity of its former
partner in the El Pinal field. In addition to the working interest in the El
Pinal field, the acquired entity has tax basis and NOLs totaling approximately
$40 million, included in total foreign NOLs above, which the Company
expects to utilize in 2000. At December 31, 1999, the tax affected amount of
the tax basis and NOLs ($14.2 million) has been included in current assets as
a deferred tax asset. In addition, the Company recorded deferred income of
$10.6 million, representing the difference between the value of the deferred
tax asset and the purchase price. During 2000, the deferred tax asset and
the deferred income will be reduced as the tax basis and NOLs are
utilized.
The Company recorded a U.S. deferred tax asset of $88.2 million, net
of a valuation allowance of $72.9 million, at December 31, 1999. The valuation
allowance was primarily attributable to management's assessment of the
utilization of NOLs in the U.S., the expectation that other tax credits will
expire without being utilized, and certain temporary differences will reverse
without a benefit to the Company. The minimum amount of future taxable income
necessary to realize the U.S. deferred tax asset is approximately $252 million.
Although there can be no assurance the Company will achieve such levels of
income, management believes the deferred tax asset will be realized through
income from its operations.
YEAR ENDED DECEMBER 31, 1998,
COMPARED WITH YEAR ENDED DECEMBER 31, 1997
Oil and Gas Sales
--------------------
Oil and gas sales in 1998 totaled $160.9 million, an 11% increase from
1997, due to higher production, which was partially offset by significantly
lower average realized oil prices. Total revenue barrels, including production
related to barrels delivered under the forward oil sale, totaled 13 million
barrels in 1998, an increase of 58%, compared to the prior year, resulting in an
increase in revenues of $84.2 million. The increased production was primarily
due to the start-up in late 1997 of two new 80,000 BOPD oil-production units at
the Cusiana central processing facility. In addition, two 100,000 BOPD
oil-production units at the Cupiagua central processing facility began
production during the second half of 1998. The average realized oil price was
$12.31 and $17.54 in 1998 and 1997, respectively, a decrease of 30% for 1998,
resulting in lower revenues of $68.3 million compared to 1997. The lower
average realized oil price resulted from a significant decrease in the 1998
average WTI oil price.
Gain on Sale of Oil and Gas Assets
-----------------------------------------
In August 1998, the Company sold to a subsidiary of ARCO for $150
million, one-half of the shares of the subsidiary through which the Company
owned its 50% share of Block A-18 in the Malaysia-Thailand Joint Development
Area. The sale resulted in a gain of $63.2 million. In December 1998, the
Company sold its Bangladesh subsidiary for $4.5 million and recorded a gain of
the same amount.
In June 1997, the Company sold its Argentine subsidiary for cash
proceeds of $4.1 million and recognized a gain of $4.1 million.
Operating Expenses and Depreciation, Depletion and Amortization
---------------------------------------------------------------------
Operating expenses increased $22.2 million in 1998, and depreciation,
depletion and amortization increased $22 million, primarily due to higher
production volumes, including barrels delivered under the forward oil sale. The
Company's operating costs per oil equivalent-barrel were $5.97 and $6.47 in 1998
and 1997, respectively. Operating expenses on a per equivalent-barrel basis were
lower primarily due to higher production volumes and a decrease in production
taxes of $7.8 million. Beginning in 1998, no production taxes were assessed on
production from the Cusiana field. These improvements to operating costs were
partially offset by an increase in OCENSA pipeline tariffs which totaled $49.9
million or $4.08 per barrel, and $28.7 million or $3.69 per barrel, in 1998 and
1997, respectively. The OCENSA pipeline expansion was completed at the end of
1997. At such time, the full cost of the pipeline was included in the tariff
computation, which was the primary contributor to the higher 1998 tariffs.
General and Administrative Expenses
--------------------------------------
General and administrative expense before capitalization decreased
$13.8 million to $47.2 million in 1998, while capitalized general and
administrative costs were $20.6 million and $32.4 million in 1998 and 1997,
respectively. General and administrative expenses, and the portion capitalized,
decreased as a result of restructuring activities undertaken in the third
quarter of 1998 to reduce overhead costs and exploration expenses.
Interest Expense
-----------------
Gross interest expense for 1998 and 1997 totaled $46.4 million and
$49.7 million, respectively, while capitalized interest for 1998 decreased $2.6
million to $23.2 million. The decrease in capitalized interest is primarily due
to the writedown of unevaluated property totaling $73.9 million in June 1998 and
a sale of 50% of the Company's Block A-18 project in August 1998.
Other Income (Expense), Net
------------------------------
Other income (expense), net, included foreign exchange gains of $2.1
million and $9.5 million in 1998 and 1997, respectively, primarily related to
noncash adjustments to deferred tax liabilities in Colombia associated with
devaluation of the Colombian peso versus the U.S. dollar. In 1998 and 1997, the
Company recognized gains of $7.6 million and $1.4 million, respectively, on the
sale of corporate assets. During 1998 and 1997, the Company recorded a gain
(loss) of $.4 million and ($9.7 million), respectively, representing the change
in the fair value of the call options purchased in anticipation of a forward oil
sale. In addition, during 1998, the Company recorded an expense of $3.3 million
in other income (expense), net, related to the net payments made under and the
change in the fair value of the equity swap entered into in conjunction with the
sale of TPC.
<PAGE>
Income Taxes
-------------
The income tax provision for 1998 included a foreign deferred tax
benefit totaling $57 million compared with a foreign deferred tax expense of $16
million in 1997. The benefit recognized in 1998 primarily resulted from the
writedown of oil and gas properties. Additionally, the income tax provision
included deferred tax expense in the United States totaling $1.5 million,
compared with a benefit of $7.9 million in 1997. Current taxes related to the
Company's Colombian operations were $4.4 million and $3.4 million in 1998 and
1997, respectively.
Extraordinary Item
-------------------
In May and June 1997, the Company completed a tender offer and consent
solicitation with respect to its 1997 Notes and 9 3/4% Notes that resulted in
the retirement of the 1997 Notes and substantially all of the 9 3/4%
Notes. The Company's results of operations for 1997 included an
extraordinary expense of $14.5 million, net of a $7.8 million tax
benefit, associated with the extinguishment of the 1997 Notes and
9 3/4% Notes. The remainder of the 9 3/4% Notes were retired in 1998.
EXPLORATION OPERATIONS
-----------------------
Costs related to acquisition, holding and initial exploration of
licenses in countries with no proved reserves are initially capitalized,
including internal costs directly identified with acquisition, exploration and
development activities. The Company's exploration licenses are periodically
assessed for impairment on a country-by-country basis. If the Company's
investment in exploration licenses within a country where no proved reserves are
assigned is deemed to be impaired, the licenses are written down to estimated
recoverable value. If the Company abandons all exploration efforts in a country
where no proved reserves are assigned, all acquisition and exploration costs
associated with the country are expensed. The Company's assessments of whether
its investment within a country is impaired and whether exploration activities
within a country will be abandoned are made from time to time based on its
review and assessment of drilling results, seismic data and other information it
deems relevant. Due to the unpredictable nature of exploration drilling
activities, the amount and timing of impairment expense are difficult to predict
with any certainty. For example, in the second quarter of 1998, the Company
recorded a $77.3 million ($72.6 million, net of tax) writedown of unevaluated
oil and gas properties relating to the Company's operations in China, Ecuador,
Guatemala and other countries. There can be no assurance that, in the future,
the Company will not incur writedowns or expense with respect to its exploration
licenses. Financial information concerning the Company's assets at December 31,
1999, including capitalized costs by geographic area, is in note 21 of Notes to
Consolidated Financial Statements.
ENVIRONMENTAL MATTERS
---------------------
The Company is subject to extensive environmental laws and
regulations. These laws regulate the discharge of oil, gas or other materials
into the environment and may require the Company to remove or mitigate the
environmental effects of the disposal or release of such materials at various
sites. The Company believes that the level of future expenditures for
environmental matters, including clean-up obligations, is impractical to
determine with a precise and reliable degree of accuracy. Management believes
that such costs, when finally determined, will not have a material adverse
effect on the Company's operations or consolidated financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and
Hedging Activities." SFAS 133 establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires enterprises
to recognize all derivatives as either assets or liabilities in the balance
sheet and measure those instruments at fair value. The requisite accounting for
changes in the fair value of a derivative will depend on the intended use of the
derivative and the resulting designation. The Company must adopt SFAS 133
effective January 1, 2001. Based on the Company's outstanding derivatives
contracts, the Company believes that the impact of adopting this standard would
not have a material adverse effect on the Company's operations or consolidated
financial condition. However, no assurances can be given with regard to the
level of the Company's derivatives activities at the time SFAS 133 is adopted or
the resulting effect on the Company's operations or consolidated financial
condition.
YEAR 2000 UPDATE
----------------
In 1998, the Company began a formal process to prepare the Company's
internal computerized systems for the Year 2000. From inception through
December 31, 1999, the Company spent approximately $250,000 related to the Year
2000 readiness issue. These costs included external consultants, professional
advisors, and software and hardware. No further material expenses are
anticipated. To date, the Company has not experienced any significant problems
related to Year 2000 compliance. Although the Company has not suffered any
significant Year 2000 issues or related disruptions as a result of the roll over
from 1999 to 2000, including through third parties with whom the Company has a
business relationship, it is possible that certain Year 2000 issues may exist
but have not yet materialized. While the Company believes that any future Year
2000 issues are of a much lower risk, there can be no assurance that these
issues will not have a material effect on the Company's operations.
CERTAIN FACTORS THAT COULD AFFECT FUTURE OPERATIONS
---------------------------------------------------
Certain information contained in this report, as well as written and
oral statements made or incorporated by reference from time to time by the
Company and its representatives in other reports, filings with the Securities
and Exchange Commission, press releases, conferences, teleconferences or
otherwise, may be deemed to be "forward-looking statements" within the meaning
of Section 21E of the Securities Exchange Act of 1934 and are subject to the
"Safe Harbor" provisions of that section. Forward-looking statements include
statements concerning the Company's and management's plans, objectives, goals,
strategies and future operations and performance and the assumptions underlying
such forward-looking statements. When used in this document, the words
"anticipates," "estimates," "expects," "believes," "intends," "plans" and
similar expressions are intended to identify such forward-looking statements.
These statements include information regarding:
- - drilling schedules;
- - expected or planned production capacity;
- - future production from the Cusiana and Cupiagua fields in Colombia, including
from the Recetor license;
- - the completion of development and commencement of production in
Malaysia-Thailand;
- - future production of the Ceiba field in Equatorial Guinea, including volumes
and timing of first production;
- - the acceleration of the Company's exploration, appraisal and development
activities in Equatorial Guinea;
- - the Company's capital budget and future capital requirements;
- - the Company's meeting its future capital needs;
- - the Company's utilization of net operating loss carryforwards and realization
of its deferred tax asset;
- - the level of future expenditures for environmental costs;
- - the outcome of regulatory and litigation matters;
- - the estimated fair value of derivative instruments, including the equity
swap; and
- - proven oil and gas reserves and discounted future net cash flows therefrom.
These statements are based on current expectations and involve a
number of risks and uncertainties, including those described in the context of
such forward-looking statements, and in notes 19 and 20 of Notes to Consolidated
Financial Statements. Actual results and developments could differ materially
from those expressed in or implied by such statements due to these and other
factors.
ITEM 7. A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
Commodity Risk
- --------------
The Company's primary commodity market risk exposure is to changes in the
pricing applicable to its oil production, which is normally priced with
reference to a defined benchmark, such as light, sweet crude oil traded on the
New York Mercantile Exchange (WTI). Actual prices received vary from the
benchmark depending on quality and location differentials. The markets for
crude oil historically have been volatile and are likely to continue to be
volatile in the future. During the three year period ended December 31, 1999,
WTI oil prices fluctuated between a low price of $11.37 per barrel and a high
price of $27.07 per barrel.
From time to time, it is the Company's policy to use financial market
transactions, including swaps, collars and options, with creditworthy
counterparties, primarily to reduce the risk associated with the pricing of a
portion of the oil and natural gas that it sells. The policy is structured to
underpin the Company's planned revenues and results of operations. The Company
does not enter into financial market transactions for trading purposes.
During the years ended December 31, 1999 and 1997, markets provided the
Company the opportunity to realize WTI benchmark oil prices on average $6.37 per
barrel and $2.35 per barrel, respectively, above the WTI benchmark oil price the
Company set as part of its annual plan for the period. During the year ended
December 31, 1998, the Company did not have any outstanding financial market
transactions to hedge against oil price fluctuations. As a result of financial
and commodity market transactions settled during the years ended December 31,
1999 and 1997, the Company's risk management program resulted in an average net
realization of approximately $1.65 per barrel and $.11 per barrel, respectively,
lower than if the Company had not entered into such transactions. Realized gains
or losses from the Company's price risk management activities are recognized in
oil and gas sales at the time of settlement of the underlying hedged
transaction.
With respect to the sale of oil to be produced by the Company, the Company has
entered into oil price collars with creditworthy counterparties to establish a
weighted average minimum WTI benchmark price of $18.92 per barrel and a maximum
of $24.45 per barrel on an aggregate of 3.6 million barrels of production during
the period from January through June 2000. As a result, to the extent the
average monthly WTI price exceeds $24.45, the Company will pay the
counterparties the difference between the average monthly WTI price and $24.45,
and to the extent that the average monthly WTI price is below $18.92, the
counterparties will pay the Company the difference between the average monthly
WTI price and $18.92. In addition, the Company has entered into option
contracts for an aggregate of 300,000 barrels of production during the period
from July through September 2000. As a result, to the extent the monthly
average WTI exceeds $28.43 per barrel, the Company will pay the counterparty the
difference between the average WTI and $28.43, and to the extent WTI is at or
below $22.00, the counterparty will pay the Company $2.00 per barrel. The
Company used a sensitivity analysis technique to evaluate the hypothetical
effect that changes in WTI oil prices may have on the fair value of these
contracts. At December 31, 1999, the potential decrease in future earnings,
assuming a ten percent movement in WTI oil prices, would not have a material
adverse effect on the Company's consolidated financial position or results of
operations.
In anticipation of entering into the forward oil sale, in 1995 the Company
purchased WTI benchmark call options to retain the ability to benefit from WTI
price increases above a weighted average price of $20.42 per barrel. The
volumes and expiration dates on the call options coincide with the volumes and
delivery dates of the forward oil sale, which will be completed in March 2000.
During the years ended December 31, 1999, 1998 and 1997, the Company recorded a
gain (loss) of $6.1 million, $.4 million, and ($9.7 million), respectively, in
other income (expense), net, related to the change in the fair market value of
the call options. In November 1999, the Company sold WTI benchmark call options
with the same notional quantities, strike price and contract period as the
remaining call option contracts outstanding for a premium of $4.4 million for
the purpose of realizing the fair value of the purchased call options. As a
result, the Company has eliminated its exposure to future changes in value of
the call options caused by fluctuating oil prices.
Interest Rate Risk
- --------------------
Equity Swap
------------
In conjunction with the sale of TPC, the Company entered into an
equity swap with a creditworthy financial institution (the "Counterparty"). The
equity swap has a notional amount of $97 million and requires the Company to
make quarterly floating LIBOR-based payments on the notional amount to the
Counterparty. In exchange, the Counterparty is required to make payments to the
Company equivalent to 97% of the dividends TPC receives in respect of its equity
interest in OCENSA. The Company's LIBOR-based payments commenced in March 1998,
and OCENSA commenced paying dividends in September 1998. OCENSA's first
dividend was attributable to the four month period ending June 1998. During the
years ended December 31, 1999 and 1998, the Company made payments to the
Counterparty totaling $6.2 million and $5.9 million, respectively, and received
payments from the Counterparty totaling $7.8 million and $2.6 million,
respectively.
The equity swap is carried in the Company's financial statements at fair
value during its term, which, as amended, will expire April 14, 2000. The value
of the equity swap in the Company's financial statements is equal to 97% of the
estimated fair value of the shares of OCENSA owned by TPC. Because there is no
public market for the shares of OCENSA, the Company estimates their value using
a discounted cash flow model applied to the distributions expected to be paid in
respect of the OCENSA shares. The discount rate applied to the estimated cash
flows from the OCENSA shares is based on a combination of current market rates
of interest, a credit spread for OCENSA's debt, and a spread to reflect the
preferred stock nature of the OCENSA shares. During the years ended December 31,
1999 and 1998, the Company recorded an expense of $6.9 million and $3.3 million
in other income (expense), net, related to the net payments made under and the
change in the fair market value of the equity swap. The Company also evaluated
the potential effect that near-term changes in interest rates could have on the
fair value of the equity swap. Based upon an analysis utilizing the actual
discount rate in effect as of December 31, 1999, and assuming a ten percent
adverse movement in the discount rate, the potential decrease in the fair value
of the equity swap at December 31, 1999, would be approximately $6.3 million.
Net payments made (or received) under the equity swap, and any fluctuations in
the fair value of the equity swap, in future periods, will affect other income
(expense), net in such periods. There can be no assurance that changes in
interest rates, or in other factors that affect the value of the OCENSA shares
and/or the equity swap, will not have a material adverse effect on the carrying
value of the equity swap.
Upon the expiration of the equity swap in April 2000, the Company
expects that the Purchaser will sell the TPC shares. Under the terms of the
equity swap with the Counterparty, upon any sale by the Purchaser of the TPC
shares, the Company will receive from the Counterparty, or pay to the
Counterparty, an amount equal to the excess or deficiency, as applicable, of the
difference between 97% of the net proceeds from the Purchaser's sale of the TPC
shares and the notional amount of $97 million. For example if the Purchaser
sold the TPC shares for an amount equal to the value the Company has estimated
for purposes of preparing its balance sheet as of December 31, 1999, the Company
would have to make a payment to the Counterparty under the equity swap of
approximately $8.4 million. There can be no assurance that the value the
Purchaser may realize in any sale of the TPC shares will equal the value of the
shares estimated by the Company for purposes of valuing the equity swap. The
Company has no right or obligation to repurchase the TPC shares at any time, but
the Company is not prohibited from offering to purchase the shares if the
Purchaser offers to sell them. The Company expects to make a bid for the
acquisition of the TPC shares because the Company's pipeline tariffs can be
lowered by electing to cancel the dividend to the holder of the OCENSA shares.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations - Other Income and Expenses" and note 2 of
Notes to Consolidated Financial Statements.
Indebtedness of the Company
------------------------------
The Company believes its interest rate exposure on debt is not
significant since only $13.5 million out of total debt of $413.5 million at
December 31, 1999, has floating interest rate obligations.
Foreign Currency Risk
- -----------------------
The Company derives substantially all of its consolidated revenues
from international operations. A risk inherent in international operations is
the possibility of realizing economic currency-exchange losses when transactions
are completed in currencies other than U.S. dollars. The Company's risk of
realizing currency-exchange losses currently is largely mitigated because the
Company receives U.S. dollars for sales of its petroleum products in Colombia.
With respect to expenditures denominated in currencies other than the U.S.
dollar, the Company generally converts U.S. dollars to the local currency near
the applicable payment dates to minimize exposure to losses caused by holding
foreign currency deposits. During the three-year period ended December 31,
1999, the Company did not realize any material foreign exchange losses from its
international operations.
The Company evaluated the potential effect that reasonably possible
near-term changes in foreign exchange rates may have on the fair value of
foreign currency denominated assets. Based on analysis utilizing the actual
foreign currency exchange rates at December 31, 1999, and assuming a ten percent
adverse movement in exchange rates, the potential decrease in fair value of
foreign currency denominated assets does not have a material adverse effect on
the Company's consolidated financial position or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item begin at page F-1 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information relating to the Company's directors and nominees for
election as directors of the Company is incorporated herein by reference from
the Proxy Statement for the 2000 Annual Meeting of Shareholders of the Company
(the "Proxy Statement"), specifically the discussion under the heading "Election
of Directors." The Company expects that the Proxy Statement will be publicly
available and mailed in April 2000. Certain information as to executive officers
is included herein under Items 1 and 2, "Business and Properties - Executive
Officers." The discussion under "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The discussion under "Management Compensation" in the Proxy Statement
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The discussion under "Security Ownership of Management and Certain
Shareholders" in the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The discussion under "Management Compensation - Compensation Committee
Interlocks and Insider Participation and Certain Transactions" in the Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K:
1. Financial Statements: The financial statements filed as part of
this report are listed in the "Index to Financial Statements and Schedules" on
page F-1 hereof.
2. Financial Statement Schedules: The financial statement schedules
filed as part of this report are listed in the "Index to Financial Statements
and Schedules" on page F-1 hereof.
3. Exhibits required to be filed by Item 601 of Regulation S-K. (Where
the amount of securities authorized to be issued under any of Triton Energy
Limited's and any of its subsidiaries' long-term debt agreements does not exceed
10% of the Company's assets, pursuant to paragraph (b)(4) of Item 601 of
Regulation S-K, in lieu of filing such as exhibits, the Company hereby agrees to
furnish to the Commission upon request a copy of any agreement with respect to
such long-term debt.)
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3.1 Memorandum of Association (previously filed as an exhibit to the Company's
Registration Statement on Form S-3 (No 333-08005) and incorporated herein by
reference)
3.2 Articles of Association (previously filed as an exhibit to the Company's
Registration Statement on Form S-3 (No 333-08005) and incorporated herein by
reference)
4.1 Specimen Share Certificate of Ordinary Shares, $.01 par value, of the Company
(previously filed as an exhibit to the Company's Registration Statement on Form 8-A
dated March 25, 1996, and incorporated herein by reference)
4.2 Rights Agreement dated as of March 25, 1996, between Triton and The Chase
Manhattan Bank, as Rights Agent, including, as Exhibit A thereto, Resolutions
establishing the Junior Preference Shares (previously filed as an exhibit to the
Company's Registration Statement on Form S-3 (No 333-08005) and incorporated herein
by reference)
4.3 Resolutions Authorizing the Company's 5% Convertible Preference Shares (previously
filed as an exhibit to the Company's and Triton Energy Corporation's Registration
Statement on Form S-4 (No. 333-923) and incorporated herein by reference)
4.4 Amendment No. 1 to Rights Agreement dated as of August 2, 1996, between Triton
Energy Limited and The Chase Manhattan Bank, as Rights Agent (previously filed as an
exhibit to the Company's Registration Statement on Form 8-A/A (Amendment No. 1)
dated August 14, 1996, and incorporated herein by reference)
4.5 Amendment No. 2 to Rights Agreement dated as of August 30, 1998, between Triton
Energy Limited and The Chase Manhattan Bank, as Rights Agent (previously filed
as an exhibit to the Company's Registration Statement on Form 8-A/A (Amendment No.
2) dated October 2, 1998, and incorporated herein by reference)
4.6 Unanimous Written Consent of the Board of Directors authorizing a Series of
Preference Shares (previously filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, and
incorporated herein by reference.)
4.7 Amendment No. 3 to Rights Agreement dated as of January 5, 1999, between Triton
Energy Limited and The Chase Manhattan Bank, as Rights Agent (previously filed
as an exhibit to the Company's Registration Statement on Form 8-A/A (Amendment No.
3) dated January 31, 1999, and incorporated herein by reference)
10.1 Amended and Restated Retirement Income Plan (previously filed as an exhibit
to Triton Energy Corporation's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993, and incorporated by reference) (1)
10.2 Amendment to the Retirement Income Plan dated August 1, 1998. (previously filed
as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998, and incorporated herein by reference.) (1)
10.3 Amendment to Amended and Restated Retirement Income Plan dated
December 31, 1996 (previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998, and incorporated herein by
reference) (1)
10.4 Amended and Restated Supplemental Executive Retirement Income Plan. (previously
filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, and incorporated herein by reference.) (1)
10.5 1981 Employee Non-Qualified Stock Option Plan. (previously filed as an exhibit to
Triton Energy Corporation's Annual Report on Form 10-K for the fiscal year ended May
31, 1992 ,and incorporated herein by reference.) (1)
10.6 Amendment No. 1 to the 1981 Employee Non-Qualified Stock Option Plan. (previously
filed as an exhibit to Triton Energy Corporation's Annual Report on Form 10-K for
the fiscal year ended May 31, 1989, and incorporated herein by reference.) (1)
10.7 Amendment No. 2 to the 1981 Employee Non-Qualified Stock Option Plan. (previously
filed as an exhibit to Triton Energy Corporation's Annual Report on Form 10-K for the
fiscal year ended May 31, 1992, and incorporated herein by reference.) (1)
10.8 Amendment No. 3 to the 1981 Employee Non-Qualified Stock Option Plan. (previously
filed as an exhibit to Triton Energy Corporation's Quarterly Report on Form 10-Q for
the quarter ended November 30, 1993, and incorporated by reference.) (1)
10.9 1985 Stock Option Plan. (previously filed as an exhibit to Triton Energy Corporation's
Annual Report on Form 10-K for the fiscal year ended May 31, 1990, and incorporated
herein by reference.) (1)
10.10 Amendment No. 1 to the 1985 Stock Option Plan. (previously filed as an exhibit to
Triton Energy Corporation's Annual Report on Form 10-K for the fiscal year ended
May 31, 1992, and incorporated herein by reference)
10.11 Amendment No. 2 to the 1985 Stock Option Plan. (previously filed as an exhibit to
Triton Energy Corporation's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993, and incorporated by reference.) (1)
10.12 Amended and Restated 1986 Convertible Debenture Plan. (previously filed as an exhibit
to Triton Energy Corporation's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993, and incorporated herein by reference.) (1)
10.13 1988 Stock Appreciation Rights Plan. (previously filed as an exhibit to Triton Energy
Corporation's Annual Report on Form 10-K for the fiscal year ended May 31, 1993,
and incorporated by reference herein.) (1)
10.14 1989 Stock Option Plan. (previously filed as an exhibit to Triton Energy Corporation's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1988, and
incorporated herein by reference.) (1)
10.15 Amendment No. 1 to 1989 Stock Option Plan. (previously filed as an exhibit to
Triton Energy Corporation's Annual Report on Form 10-K for the fiscal year ended
May 31, 1992, and incorporated herein by reference.) (1)
10.16 Amendment No. 2 to 1989 Stock Option Plan. (previously filed as an exhibit to
Triton Energy Corporation's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993, and incorporated herein by reference.) (1)
10.17 Second Amended and Restated 1992 Stock Option Plan.(previously filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, and incorporated herein by reference.) (1)
10.18 Form of Amended and Restated Employment Agreement with Triton Energy Limited
and certain officers, including Messrs. Dunlevy, Garrett and Maxted (previously filed as
an exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, and incorporated herein by reference.) (1)
10.19 Amended and Restated Employment Agreement among Triton Energy Limited, Triton
Exploration Services, Inc. and Robert B. Holland, III. (previously filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, and incorporated herein by reference.) (1)
10.20 Form of Amended and Restated Employment Agreement among Triton Energy Limited,
Triton Exploration Services, Inc. and each of Peter Rugg and Al E. Turner. (previously
filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998, and incorporated herein by reference.) (1)
10.21 Letter Agreement among Triton Energy Limited, Triton Exploration Services, Inc.
and Robert B. Holland, III dated December 17, 1998. (previously filed as an exhibit to
the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference.) (1)
10.22 Letter Agreement among Triton Energy Limited, Triton Exploration Services, Inc.
and Peter Rugg dated December 10, 1998. (previously filed as an exhibit to the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 and
incorporated herein by reference.) (1)
10.23 Form of Bonus Agreement between Triton Exploration Services, Inc. and each of
Al E. Turner, Robert B. Holland, III, and Peter Rugg dated July 15, 1998. (previously
filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31,
1998 and incorporated herein by reference.) (1)
10.24 Amended and Restated 1985 Restricted Stock Plan. (previously filed as an exhibit
to Triton Energy Corporation's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1993, and incorporated herein by reference.) (1)
10.25 First Amendment to Amended and Restated 1985 Restricted Stock Plan. (previously
filed as an exhibit to Triton Energy Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995, and incorporated herein by reference.) (1)
10.26 Second Amendment to Amended and Restated 1985 Restricted Stock Plan. (previously
filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996, and incorporated herein by reference.) (1)
10.27 Executive Life Insurance Plan. (previously filed as an exhibit to Triton Energy
Corporation's Annual Report on Form 10-K for the fiscal year ended May 31, 1991,
and incorporated herein by reference.) (1)
10.28 Long Term Disability Income Plan. (previously filed as an exhibit to Triton Energy
Corporation's Annual Report on Form 10-K for the fiscal year ended May 31, 1991,
and incorporated herein by reference.) (1)
10.29 Amended and Restated Retirement Plan for Directors. (previously filed as an exhibit
to Triton Energy Corporation's Annual Report on Form 10-K for the fiscal year ended
May 31, 1990, and incorporated herein by reference.) (1)
10.30 Contract for Exploration and Exploitation for Santiago de Atalayas I with an effective
date of July 1, 1982, between Triton Colombia, Inc., and Empresa Colombiana
De Petroleos. (previously filed as an exhibit to Triton Energy Corporation's Annual
Report on Form 10-K for the fiscal year ended May 31, 1990, and incorporated
herein by reference.)
10.31 Contract for Exploration and Exploitation for Tauramena with an effective date of July
4, 1988, between Triton Colombia, Inc., and Empresa Colombiana De Petroleos.
(previously filed as an exhibit to Triton Energy Corporation's Annual Report on Form
10-K for the fiscal year ended May 31, 1990, and incorporated herein by reference.)
10.32 Summary of Assignment legalized by Public Instrument No. 1255 dated September 15,
1987 (Assignment is in Spanish language). (previously filed as an exhibit to Triton
Energy Corporation's Annual Report on Form 10-K for the fiscal year ended May 31,
1993, and incorporated herein by reference.)
10.33 Summary of Assignment legalized by Public Instrument No. 1602 dated June 11, 1990
(Assignment is in Spanish language). (previously filed as an exhibit to Triton
Energy Corporation's Annual Report on Form 10-K for the fiscal year ended May 31,
1993, and incorporated herein by reference.)
10.34 Summary of Assignment legalized by Public Instrument No. 2586 dated September 9,
1992 (Assignment is in Spanish language). (previously filed as an exhibit to Triton
Energy Corporation's Annual Report on Form 10-K for the fiscal year ended May 31,
1993, and incorporated herein by reference.)
10.35 401(K) Savings Plan. (previously filed as an exhibit to Triton Energy Corporation's
Quarterly Report on Form 10-Q for the quarter ended November 30, 1993, and
incorporated herein by reference.) (1)
10.36 Amendment to the 401(k) Savings Plan dated August 1, 1998. (previously filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998, and incorporated herein by reference.) (1)
10.37 Amendment to 401(k) Savings Plan dated December 31, 1996. (previously filed as an
exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, and incorporated herein by reference.) (1)
10.38 Contract between Malaysia-Thailand Joint Authority and Petronas Carigali
SDN.BHD. and Triton Oil Company of Thailand relating to Exploration and Production
of Petroleum for Malaysia-Thailand Joint Development Area Block A-18. (previously
filed as an exhibit to Triton Energy Corporation's Current Report on Form 8-K dated
April 21, 1994, and incorporated herein by reference.)
10.39 Triton Crude Purchase Agreement between Triton Colombia, Inc. and Oil Co., LTD.
dated May 25, 1995. (previously filed as an exhibit to Triton Energy Corporation's
Current Report on Form 8-K dated May 26, 1995, and incorporated herein by reference.)
10.40 Credit Agreement among Triton Colombia, Inc., Triton Energy Corporation,
NationsBank, N.A. (Carolinas) and Export-Import Bank of the United States
(previously filed as an exhibit to Triton Energy Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1995, and incorporated herein by
reference.)
10.41 Amendment No. 1 to Credit Agreement among Triton Colombia, Inc., Triton Energy
Corporation, NationsBank, N.A. (Carolinas) and Export-Import Bank of the United
States. (previously filed as an exhibit to Triton Energy Corporation's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995, and incorporated herein
by reference.)
10.42 Amendment No. 2 to Credit Agreement among Triton Colombia, Inc., Triton Energy
Corporation, NationsBank, N.A. (Carolinas) and Export-Import Bank of the United
States. (previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, and incorporated herein by reference)
10.43 Amendment No. 3 to Credit Agreement among Triton Colombia, Inc., Triton Energy
Corporation, NationsBank, N.A. (Carolinas) and Export-Import Bank of the United
States. (previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998, and incorporated herein by reference)
10.44 Form of Indemnity Agreement entered into with each director and officer of the
Company. (previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998, and incorporated herein by reference)
10.45 Description of Performance Goals for Executive Bonus Compensation. (previously
filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, and incorporated herein by reference) (1)
10.46 Stock Purchase Agreement dated September 2, 1997, between The Strategic
Transaction Company and Triton International Petroleum, Inc. (previously filed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, and incorporated herein by reference)
10.47 Fourth Amendment to Stock Purchase Agreement dated February 2, 1998, between
The Strategic Transaction Company and Triton International Petroleum, Inc. (previously
filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, and incorporated herein by reference)
10.48 Amended and Restated 1997 Share Compensation Plan. (previously filed as an
exhibit to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, and incorporated herein by reference) (1)
10.49 First Amendment to Amended and Restated Retirement Plan for Directors. (previously
filed as an exhibit to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, and incorporated herein by reference) (1)
10.50 First Amendment to Second Amended and Restated 1992 Stock Option Plan. (previously
filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997, and incorporated herein by reference) (1)
10.51 Second Amendment to Second Amended and Restated 1992 Stock Option Plan.
(previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, and incorporated herein by reference) (1)
10.52 Amended and Restated Indenture dated July 25, 1997, between Triton Energy
Limited and The Chase Manhattan Bank. (previously filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, and
incorporated herein by reference)
10.53 Amended and Restated First Supplemental Indenture dated July 25, 1997,
between Triton Energy Limited and The Chase Manhattan Bank relating
to the 8 3/4% Senior Notes due 2002. (previously filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, and
incorporated herein by reference)
10.54 Amended and Restated Second Supplemental Indenture dated July 25, 1997,
between Triton Energy Limited and The Chase Manhattan Bank relating
to the 9 1/4% Senior Notes due 2005. (previously filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, and
incorporated herein by reference)
10.55 Share Purchase Agreement dated July 17, 1998, among Triton Energy Limited, Triton
Asia Holdings, Inc., Atlantic Richfield Company and ARCO JDA Limited.
(previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by reference)
10.56 Shareholders Agreement dated August 3, 1998, among Triton Energy Limited, Triton
Asia Holdings, Inc., Atlantic Richfield Company, and ARCO JDA Limited.
(previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by reference)
10.57 Stock Purchase Agreement dated as of August 31, 1998, between Triton Energy
Limited and HM4 Triton, L.P. (previously filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, and
incorporated herein by reference)
10.58 Shareholders Agreement dated as of September 30, 1998, between Triton Energy
Limited and HM4 Triton, L.P. (previously filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998, and
incorporated herein by reference)
10.59 Financial Advisory Agreement dated as of September 30, 1998, between Triton Energy
Limited and Hicks, Muse & Co. Partners, L.P. (previously filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998,
and incorporated herein by reference)
10.60 Monitoring and Oversight Agreement dated as of September 30, 1998, between Triton
Energy Limited and Hicks, Muse & Co. Partners, L.P. (previously filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, and incorporated herein by reference)
10.61 Severance Agreement dated as of July 15, 1998, between Thomas G. Finck and Triton
Energy Limited. (previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1998, and incorporated herein by
reference) (1)
10.62 Severance Agreement dated April 9, 1999, made and entered into by and among Triton
Energy Limited, Triton Exploration Services, Inc. and Peter Rugg. (previously filed as
an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, and incorporated herein by reference) (1)
10.63 Consulting and Non-Compete Agreement dated April 9, 1999, made and entered into
by and between Triton Exploration Services, Inc. and Peter Rugg. (previously filed as
an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, and incorporated herein by reference) (1)
10.64 Third Amendment to Amended and Restated 1985 Restricted Stock Plan (previously
filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1999, and incorporated herein by reference) (1)
10.65 Amendment to Triton Exploration Services, Inc. Retirement Income Plan. (previously
filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999, and incorporated herein by reference) (1)
10.66 Amendment to the Triton Exploration Services, Inc. Supplemental Executive
Retirement Plan. (previously filed as an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by
reference) (1)
10.67 Third Amendment to the Second Amended and Restated 1992 Stock Option Plan
(previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, and incorporated herein by reference) (1)
10.68 First Amendment to the Amended and Restated 1997 Share Compensation Plan
(previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, and incorporated herein by reference) (1)
10.69 Amendment dated May 11, 1999, to Amended and Restated Employment Agreement
dated July 15, 1998 among Triton Exploration Services, Inc., Triton Energy Limited
and A.E. Turner, III.(previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by
reference) (1)
10.70 Form of Amendment dated May 11, 1999, to Employment Agreement
among Triton Exploration Services, Inc., Triton Energy Limited and certain officers,
including Messrs. Dunlevy, Garrett and Maxted (previously filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999,
and incorporated herein by reference) (1)
10.71 Second Amendment to Retirement Plan for Directors. (previously filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999,
and incorporated herein by reference) (1)
10.72 Amendment to Triton Exploration Services, Inc. 401 (k) Savings Plan. (previously filed
as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999, and incorporated herein by reference) (1)
10.73 Amendment No. 1 to Shareholders Agreement between Triton Energy Limited
and HM4 Triton, L.P. (previously filed as an exhibit to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1999, and incorporated herein by
reference) (1)
10.74 Amendment No. 4 to the 1981 Employee Nonqualified Stock Option Plan. (previously
filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999, and incorporated herein by reference) (1)
10.75 Amendment No. 3 to the 1985 Stock Option Plan. (previously filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, and
incorporated herein by reference) (1)
10.76 Amendment No. 3 to the 1989 Stock Option Plan. (previously filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, and
incorporated herein by reference) (1)
10.77 Supplemental Letter Agreement dated October 28, 1999, among Triton Energy
Limited, Triton Asia Holdings, Inc., Atlantic Richfield Company, and ARCO JDA
Limited (previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, and incorporated herein by reference)
10.78 Gas Sales Agreement dated October 30, 1999 among the Malaysia-Thailand Joint
Authority, and Petronas Carigali (JDA) Sdn Bhd, Triton Oil Company of Thailand,
Triton Oil Company of Thailand (JDA) Limited, as Sellers, and with Petroleum
Authority of Thailand and Petroliam Nasional Berhad, as Buyers. (previously filed
as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999, and incorporated herein by reference)
10.79* Form of Stock Option Agreement between Triton Energy Limited and its
non-employee directors. (1)
10.80* Form of Stock Option Agreement between Triton Energy Limited and its employees,
including its executive officers. (1)
10.81* Amendment to Stock Options dated as of January 3, 2000, between Triton Energy Limited and A.E. Turner. (1)
10.82* Form of Amendment to Stock Options dated as of January 3, 2000, between Triton
Energy Limited and its non-employee directors. (1)
10.83* Production Sharing Contract between the Republic of Equatorial Guinea
and Triton Equatorial Guinea, Inc. for Block F.
10.84* Production Sharing Contract between the Republic of Equatorial Guinea and Triton
Equatorial Guinea, Inc. for Block G.
10.85* Supplementary Contract (No. 1) to the Production Sharing Contract for Block A-18
dated 21 April 1994 between Malaysia-Thailand Joint Authority and Petronas
Carigali (JDA) SDN.BHD., Triton Oil Company of Thailand and Triton Oil Company
of Thailand (JDA) Limited.
10.86* Supplementary Contract (No. 2) to the Production Sharing Contract for Block A-18
dated 21 April 1994 between Malaysia-Thailand Joint Authority and Petronas Carigali
(JDA) SDN.BHD., Triton Oil Company of Thailand and Triton Oil Company of
Thailand (JDA) Limited.
10.87* Credit Agreement dated as of February 29, 2000, among Triton Energy Limited,
the Lenders party thereto and The Chase Manhattan bank, as Administrative Agent
12.1* Computation of Ratio of Earnings to Fixed Charges.
12.2* Computation of Ratio of Earnings to Combined Fixed Charges and Preference
Dividends.
21.1* Subsidiaries of the Company.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of DeGolyer and MacNaughton.
23.3* Consent of Netherland, Sewell & Associates, Inc.
24.1* The power of attorney of officers and directors of the Company (set forth on the
signature page hereof).
27.1* Financial Data Schedule.
99.1 Rio Chitamena Association Contract. (previously filed as an exhibit to Triton Energy
Corporation's Current Report on Form 8-K/A dated July 15, 1994, and incorporated
herein by reference)
99.2 Rio Chitamena Purchase and Sale Agreement. (previously filed as an exhibit to Triton
Energy Corporation's Current Report on Form 8-K/A dated July 15, 1994, and
incorporated herein by reference)
99.3 Integral Plan - Cusiana Oil Structure. (previously filed as an exhibit to Triton Energy
Corporation's Current Report on Form 8-K/A dated July 15, 1994, and incorporated
herein by reference)
99.4 Letter Agreements with co-investor in Colombia. (previously filed as an exhibit to
Triton Energy Corporation's Current Report on Form 8-K/A dated July 15, 1994, and
incorporated herein by reference)
99.5 Amended and Restated Oleoducto Central S.A. Agreement dated as of March 31,
1995. (previously filed as an exhibit to Triton Energy Corporation's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995, and incorporated herein by
reference)
- -------------------------
* Filed herewith.
</TABLE>
(1) Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed by the undersigned thereunto duly authorized on the 7th day of
March, 2000.
TRITON ENERGY LIMITED
By:/s/ James C. Musselman
-------------------------------------
James C. Musselman
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of Triton Energy Limited (the "Company") hereby constitutes and
appoints James C. Musselman, A. E. Turner, III, W. Greg Dunlevy and Kevin
Wilcox, or any of them (with full power to each of them to act alone), his true
and lawful attorney-in-fact and agent, with full power of substitution, for him
and on his behalf and in his name, place and stead, in any and all capacities,
to sign, execute, and file any and all documents relating to the Company's
Annual Report on Form 10-K for the year ended December 31, 1999, including any
and all amendments and supplements thereto, with any regulatory authority,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as he himself might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities indicated on the 7th day of
March, 2000.
Signatures Title
---------- -----
/s/W. Greg Dunlevy Vice President
- -----------------------
W. Greg Dunlevy (Principal Financial Officer)
/s/Kevin B. Wilcox Controller
- ----------------------
Kevin B. Wilcox
/s/Thomas O. Hicks Chairman of the Board
- ----------------------
Thomas O. Hicks
/s/James C. Musselman President and Chief Executive Officer
- ---------------------- (Principal Executive Officer)
James C. Musselman
/s/Sheldon R. Erikson Director
- ----------------------
Sheldon R. Erikson
/s/Jack D. Furst Director
- ----------------------
Jack D. Furst
/s/Fitzgerald S. Hudson Director
- ----------------------
Fitzgerald Hudson
/s/John R. Huff Director
- ----------------------
John R. Huff
/s/Michael E. McMahon Director
- ----------------------
Michael E. McMahon
/s/C. Lamar Norsworthy Director
- ----------------------
C. Lamar Norsworthy
/s/C. Richard Vermillion Director
- ----------------------
C. Richard Vermillion
/s/J. Otis Winters Director
- ----------------------
J. Otis Winters
TRITON ENERGY LIMITED AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
PAGE
-----
TRITON ENERGY LIMITED AND SUBSIDIARIES:
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations - Years ended December 31, 1999, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Balance Sheets - December 31, 1999 and 1998 . . . . . . . . . . . . F-4
Consolidated Statements of Cash Flows - Years ended December 31, 1999, 1998
and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Shareholders' Equity - Years ended December 31, 1999,
1998 and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . F-7
SCHEDULE:
II - Valuation and Qualifying Accounts - Years ended December 31, 1999,
1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-52
</TABLE>
All other schedules are omitted as the required information is inapplicable or
presented in the consolidated financial statements or related notes.
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholders of
Triton Energy Limited
In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Triton
Energy Limited and its subsidiaries at December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards generally
accepted in the United States 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.
PricewaterhouseCoopers LLP
Dallas, Texas
February 23, 2000
TRITON ENERGY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
--------- ---------- ---------
SALES AND OTHER OPERATING REVENUES:
Oil and gas sales $247,878 $ 160,881 $145,419
Gain on sale of oil and gas assets --- 67,737 4,077
--------- ---------- ---------
247,878 228,618 149,496
--------- ---------- ---------
COSTS AND EXPENSES:
Operating 68,130 73,546 51,357
General and administrative 23,636 26,653 28,607
Depreciation, depletion and amortization 61,343 58,811 36,828
Writedown of assets --- 328,630 ---
Special charges 2,909 18,324 ---
--------- ---------- ---------
156,018 505,964 116,792
--------- ---------- ---------
OPERATING INCOME (LOSS) 91,860 (277,346) 32,704
Gain on sale of Triton Pipeline Colombia --- 50,227 ---
Interest income 10,579 3,258 5,178
Interest expense, net (22,648) (23,228) (23,858)
Other income (expense), net (3,614) 8,480 2,872
--------- ---------- ---------
(15,683) 38,737 (15,808)
--------- ---------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 76,177 (238,609) 16,896
Income tax expense (benefit) 28,620 (51,105) 11,301
--------- ---------- ---------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM 47,557 (187,504) 5,595
Extraordinary item - extinguishment of debt --- --- (14,491)
--------- ---------- ---------
NET EARNINGS (LOSS) 47,557 (187,504) (8,896)
DIVIDENDS ON PREFERENCE SHARES 28,671 3,061 400
--------- ---------- ---------
EARNINGS (LOSS) APPLICABLE TO ORDINARY SHARES $ 18,886 $(190,565) $ (9,296)
========= ========== =========
Average ordinary shares outstanding 36,135 36,609 36,471
========= ========== =========
BASIC EARNINGS (LOSS) PER ORDINARY SHARE:
Earnings (loss) before extraordinary item $ 0.52 $ (5.21) $ 0.14
Extraordinary item - extinguishment of debt --- --- (0.40)
--------- ---------- ---------
BASIC EARNINGS (LOSS) $ 0.52 $ (5.21) $ (0.26)
========= ========== =========
DILUTED EARNINGS (LOSS) PER ORDINARY SHARE:
Earnings (loss) before extraordinary item $ 0.52 $ (5.21) $ 0.14
Extraordinary item - extinguishment of debt --- --- (0.39)
--------- ---------- ---------
DILUTED EARNINGS (LOSS) $ 0.52 $ (5.21) $ (0.25)
========= ========== =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
TRITON ENERGY LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS DECEMBER 31,
---------------------
1999 1998
---------- ---------
CURRENT ASSETS:
Cash and equivalents $ 186,323 $ 18,757
Trade receivables, net 17,246 9,514
Other receivables 23,814 47,756
Deferred income taxes 20,090 ---
Inventories, prepaid expenses and other 7,806 1,639
---------- ---------
TOTAL CURRENT ASSETS 255,279 77,666
Property and equipment, at cost, net 524,152 470,907
Investment in affiliate 93,188 84,735
Deferred income taxes 88,228 100,916
Other assets 13,628 20,056
---------- ---------
$ 974,475 $754,280
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 9,027 $ 14,027
Short-term borrowings --- 5,000
Accounts payable and accrued liabilities 62,576 44,973
Deferred income and other 22,347 35,254
---------- ---------
TOTAL CURRENT LIABILITIES 93,950 99,254
Long-term debt, excluding current maturities 404,460 413,465
Deferred income taxes 6,677 3,235
Other liabilities 6,336 14,519
SHAREHOLDERS' EQUITY:
5% preference shares, par value $.01; authorized 420,000
shares; issued 209,639 shares at December 31, 1999 and
1998, respectively, stated value $34.41 7,214 7,214
8% preference shares, par value $.01; authorized 11,000,000
shares; issued 5,193,643 and 1,822,500 shares at
December 31, 1999 and 1998, respectively, stated value $70 363,555 127,575
Ordinary shares, par value $.01; authorized 200,000,000
shares; issued 35,763,728 and 36,643,478 shares at
December 31, 1999 and 1998, respectively 358 366
Additional paid-in capital 531,904 575,863
Accumulated deficit (437,528) (485,085)
Accumulated other non-owner changes in shareholders' equity (2,451) (2,126)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY 463,052 223,807
Commitments and contingencies (note 20) --- ---
---------- ---------
$ 974,475 $754,280
========== =========
</TABLE>
The Company uses the full cost method to account for its oil- and gas-producing
activities.
See accompanying Notes to Consolidated Financial Statements.
TRITON ENERGY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 47,557 $(187,504) $ (8,896)
Adjustments to reconcile net earnings to net cash provided (used)
by operating activities:
Depreciation, depletion and amortization 61,343 58,811 36,828
Proceeds from forward oil sale 31,932 1,770 830
Amortization of deferred income (35,254) (35,254) (28,467)
Gain on sale of oil and gas assets --- (67,737) (4,077)
Gain on sale of Triton Pipeline Colombia --- (50,227) ---
Writedown of assets --- 328,630 ---
Payment of accreted interest on extinguishment of debt --- --- (124,794)
Extraordinary loss on extinguishment of debt, net of tax --- --- 14,491
Amortization of debt discount --- --- 7,949
Deferred income taxes 7,827 (55,592) 8,078
Gain on sale of other assets (677) (7,590) (1,409)
Other, net 8,921 3,962 6,100
Changes in working capital:
Trade and other receivables (16,131) 6,300 (3,238)
Inventories, prepaid expenses and other (3,577) 918 1,794
Accounts payable and accrued liabilities 14,581 4,979 (2,605)
---------- ---------- ----------
Net cash provided (used) by operating activities 116,522 1,466 (97,416)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and investments (121,483) (180,215) (219,216)
Proceeds from sale of oil and gas assets --- 147,027 4,077
Proceeds from sale of Triton Pipeline Colombia --- 97,656 ---
Proceeds from sales of other assets 2,353 22,353 1,822
Other 600 (2,630) 617
---------- ---------- ----------
Net cash provided (used) by investing activities (118,530) 84,191 (212,700)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving lines of credit and long-term debt --- 162,530 620,413
Payments on revolving lines of credit and long-term debt (19,028) (350,511) (321,515)
Short-term notes payable, net --- (9,600) 9,600
Issuance of 8% preference shares, net 217,805 115,329 ---
Issuances of ordinary shares 419 2,544 5,260
Repurchase of ordinary shares (11,285) --- ---
Dividends paid on preference shares (17,617) (368) (400)
Other (151) 5 10
---------- ---------- ----------
Net cash provided (used) by financing activities 170,143 (80,071) 313,368
---------- ---------- ----------
Effect of exchange rate changes on cash and equivalents (569) (280) (849)
---------- ---------- ----------
Net increase in cash and equivalents 167,566 5,306 2,403
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 18,757 13,451 11,048
---------- ---------- ----------
CASH AND EQUIVALENTS AT END OF YEAR $ 186,323 $ 18,757 $ 13,451
========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
TRITON ENERGY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997
-------------------- ---------------------- --------------------
OWNER SOURCES OF SHAREHOLDERS' EQUITY:
5% PREFERENCE SHARES:
Balance at beginning of period $ 7,214 $ 7,511 $ 8,515
Conversion of 5% preference shares --- (297) (1,004)
---------- ---------- ----------
Balance at end of period 7,214 7,214 7,511
---------- ---------- ----------
8% PREFERENCE SHARES:
Balance at beginning of period 127,575 --- ---
Issuances of 8% preference shares at $70 per share 222,425 127,575 ---
Conversion of 8% preference shares (192) --- ---
Stock dividends, 8% preference shares 13,747 --- ---
---------- ---------- ----------
Balance at end of period 363,555 127,575 ---
---------- ---------- ----------
ORDINARY SHARES:
Balance at beginning of period 366 365 363
Stock repurchase (9) --- ---
Exercise of employee stock options and debentures 1 1 2
---------- ---------- ----------
Balance at end of period 358 366 365
---------- ---------- ----------
ADDITIONAL PAID-IN CAPITAL:
Balance at beginning of period 575,863 588,454 582,581
Dividends, 5% preference shares (361) (368) (400)
Dividends, 8% preference shares (28,310) (2,693) ---
Exercise of employee stock options and debentures 418 2,548 3,831
Conversion of 5% preference shares --- 297 1,004
Conversion of 8% preference shares 192 --- ---
Transaction costs for issuance of
8% preference shares (4,620) (12,370) ---
Stock repurchase (11,276) --- ---
Other, net (2) (5) 1,438
---------- ---------- ----------
Balance at end of period 531,904 575,863 588,454
---------- ---------- ----------
TREASURY SHARES:
Balance at beginning of period --- (3) (2)
Retirement and other, net --- 3 (1)
---------- ---------- ----------
Balance at end of period --- --- (3)
---------- ---------- ----------
TOTAL OWNER SOURCES OF SHAREHOLDERS' EQUITY 903,031 711,018 596,327
---------- ---------- ----------
NON-OWNER SOURCES OF SHAREHOLDERS' EQUITY:
ACCUMULATED DEFICIT:
Balance at beginning of period (485,085) (297,581) (288,685)
Net earnings (loss) 47,557 $47,557 (187,504) $(187,504) (8,896) $(8,896)
---------- ---------- ----------
Balance at end of period (437,528) (485,085) (297,581)
---------- ---------- ----------
ACCUMULATED OTHER NON-OWNER CHANGES IN
SHAREHOLDERS' EQUITY:
Balance at beginning of period (2,126) (2,126) (2,128)
Valuation reserve on marketable securities --- --- 2
Adjustment for minimum pension liability (325) --- ---
-------- ---------- --------
Other non-owner changes in shareholders' equity (325) (325) --- --- 2 2
---------- -------- ---------- ---------- ---------- --------
Non-owner changes in shareholders' equity $47,232 $(187,504) $(8,894)
======== ========== ========
Balance at end of period (2,451) (2,126) (2,126)
---------- ---------- ----------
TOTAL NON-OWNER SOURCES OF
SHAREHOLDERS' EQUITY (439,979) (487,211) (299,707)
---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY $ 463,052 $ 223,807 $ 296,620
========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
TRITON ENERGY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN TABLES IN THOUSANDS, EXCEPT FOR SHARE, PER SHARE AND PER BARREL
DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Triton Energy Limited ("Triton") is an international oil and gas exploration and
production company. The term "Company" when used herein means Triton and its
subsidiaries and other affiliates through which the Company conducts its
business. The Company's principal properties, operations, and oil and gas
reserves are located in Colombia, Malaysia-Thailand and Equatorial Guinea. The
Company is exploring for oil and gas in these areas, as well as in southern
Europe, Africa, and the Middle East. All sales are currently derived from oil
and gas production in Colombia.
Triton, a Cayman Islands company, was incorporated in 1995 to become the parent
holding company of Triton Energy Corporation, a Delaware corporation ("TEC").
On March 25, 1996, the stockholders of TEC approved the merger of a wholly owned
subsidiary of Triton with and into TEC (the "Reorganization"). Pursuant to the
Reorganization, Triton became the parent holding company of TEC and each share
of common stock, par value $1.00, and 5% preferred stock of TEC outstanding on
March 25, 1996, was converted into one Triton ordinary share, par value $.01,
and one 5% Triton preference share, respectively. The Reorganization has been
accounted for as a combination of entities under common control.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Triton and its
majority-owned subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation. Investments in 20%- to 50%-owned affiliates
which the Company exercises significant influence over operating and financial
policies are accounted for using the equity method. Investments in less than
20%-owned affiliates are accounted for using the cost method.
CASH EQUIVALENTS
Cash equivalents are highly liquid investments purchased with an original
maturity of three months or less.
INVENTORIES
Inventories consist principally of oil produced but not sold, stated at market
value, and materials and supplies, stated at the lower of cost or market.
PROPERTY AND EQUIPMENT
The Company follows the full cost method of accounting for exploration and
development of oil and gas reserves, whereby all acquisition, exploration and
development costs are capitalized. Individual countries are designated as
separate cost centers. All capitalized costs plus the undiscounted estimated
future development costs of proved reserves are depleted using the
unit-of-production method based on total proved reserves applicable to each
country. A gain or loss is recognized on sales of oil and gas properties only
when the sale involves significant reserves.
Costs related to acquisition, holding and initial exploration of licenses in
countries with no proved reserves are initially capitalized, including internal
costs directly identified with acquisition, exploration and development
activities. Costs related to production, general overhead or similar activities
are expensed. The Company's exploration licenses are periodically assessed for
impairment on a country-by-country basis. If the Company's investment in
exploration licenses within a country where no proved reserves are assigned is
deemed to be impaired, the licenses are written down to estimated recoverable
value. If the Company abandons all exploration efforts in a country where no
proved reserves are assigned, all acquisition and exploration costs associated
with the country are expensed. Due to the unpredictable nature of exploration
drilling activities, the amount and timing of impairment expense are difficult
to predict with any certainty.
The net capitalized costs of oil and gas properties for each cost center, less
related deferred income taxes, cannot exceed the sum of (i) the estimated future
net revenues from the properties, discounted at 10%; (ii) unevaluated costs not
being amortized; and (iii) the lower of cost or estimated fair value of unproved
properties being amortized; less (iv) income tax effects related to differences
between the financial statement basis and tax basis of oil and gas properties.
The estimated costs, net of salvage value, of dismantling facilities or projects
with limited lives or facilities that are required to be dismantled by contract,
regulation or law, and the estimated costs of restoration and reclamation
associated with oil and gas operations are included in estimated future
development costs as part of the amortizable base.
Support equipment and facilities are depreciated using the unit-of-production
method based on total reserves of the field related to the support equipment and
facilities. Other property and equipment, which includes furniture and
fixtures, vehicles and leasehold improvements, are depreciated principally on a
straight-line basis over estimated useful lives ranging from 3 to 20 years.
Repairs and maintenance are expensed as incurred, and renewals and improvements
are capitalized.
ENVIRONMENTAL MATTERS
Environmental costs are expensed or capitalized depending on their future
economic benefit. Costs that relate to an existing condition caused by past
operations and have no future economic benefit are expensed. Liabilities for
future expenditures of a noncapital nature are recorded when future
environmental expenditures and/or remediation is deemed probable, and the costs
can be reasonably estimated. Costs of future expenditures for environmental
remediation obligations are not discounted to their present value.
INCOME TAXES
Deferred tax liabilities or assets are recognized for the anticipated future tax
effects of temporary differences between the financial statement basis and the
tax basis of the Company's assets and liabilities using the enacted tax rates in
effect at year end. A valuation allowance for deferred tax assets is recorded
when it is more likely than not that the benefit from the deferred tax asset
will not be realized.
REVENUE RECOGNITION
Cost reimbursements arising from carried interests granted by the Company are
revenues to the extent the reimbursements are contingent upon and derived from
production. Obligations arising from net profit interest conveyances are
recorded as operating expenses when the obligation is incurred.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is the designated functional currency for all of the Company's
foreign operations. The cumulative translation adjustment represents the
cumulative effect of translating the balance sheet accounts of Triton Colombia,
Inc. from the functional currency into U.S. dollars during the period when the
Colombian peso was the functional currency.
RISK MANAGEMENT
Oil and natural gas sold by the Company are normally priced with reference to a
defined benchmark, such as light, sweet crude oil traded on the New York
Merchantile Exchange (West Texas Intermediate or "WTI"). Actual prices received
vary from the benchmark depending on quality and location differentials. From
time to time, it is the Company's policy to use financial market transactions,
including swaps, collars and options, with creditworthy counterparties,
primarily to reduce risk associated with the pricing of a portion of the oil and
natural gas that it sells. The Company does not enter into financial market
transactions for trading purposes.
Gains or losses on financial market transactions that qualify for hedge
accounting are recognized in oil and gas sales at the time of settlement of the
underlying hedged transactions. Premiums paid for financial market contracts
are capitalized and amortized as operating expenses over the contract period.
Changes in the fair market value of financial market transactions that do not
qualify for hedge accounting are reflected as noncash adjustments to other
income (expense), net in the period the change occurs. Realized gains or losses
on financial market transactions that do not qualify for hedge accounting are
recorded in oil and gas sales.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation," encourages, but does not require, the adoption of
a fair value-based method of accounting for employee stock-based compensation
transactions. The Company has elected to apply the provisions of Accounting
Principles Board Opinion No. 25 ("Opinion 25"), "Accounting for Stock Issued to
Employees," and related interpretations, in accounting for its stock-based
compensation plans. Under Opinion 25, compensation cost is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant above the amount an employee must pay to acquire the stock.
EARNINGS PER ORDINARY SHARE
Basic earnings (loss) per ordinary share amounts were computed by dividing net
earnings (loss) after deduction of dividends on preference shares by the
weighted average number of ordinary shares outstanding during the period.
Diluted earnings (loss) per ordinary share assumes the conversion of all
securities that are exercisable or convertible into ordinary shares that would
dilute the basic earnings per ordinary share during the period.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," established standards for the reporting and display of comprehensive
income and its components, specifically net income and all other changes in
shareholders' equity except those resulting from investments by and
distributions to shareholders. The Company, which adopted the standard
beginning January 1, 1998, has elected to display comprehensive income (or
non-owner changes in shareholders' equity) in the Consolidated Statement of
Shareholders' Equity.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities."
SFAS 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires enterprises to recognize
all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The requisite accounting for changes in the
fair value of a derivative will depend on the intended use of the derivative and
the resulting designation. The Company must adopt SFAS 133 effective January 1,
2001. Based on the Company's outstanding derivatives contracts, the Company
believes that the impact of adopting this standard would not have a material
adverse effect on the Company's operations or consolidated financial condition.
However, no assurances can be given with regard to the level of the Company's
derivatives activities at the time SFAS 133 is adopted or the resulting effect
on the Company's operations or consolidated financial condition.
THE USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
RECLASSIFICATIONS
Certain previously reported financial information has been reclassified to
conform to the current period's presentation.
2. ASSET DISPOSITIONS
In December 1998, the Company sold its Bangladesh subsidiary for cash proceeds
of $4.5 million and recognized a gain of $4.5 million in gain on sale of oil and
gas assets.
In July 1998, the Company and Atlantic Richfield Company ("ARCO") signed an
agreement providing financing for the development of the Company's gas reserves
on Block A-18 of the Malaysia-Thailand Joint Development Area. Under terms of
the agreement, consummated in August 1998, the Company sold to a subsidiary of
ARCO for $150 million one-half of the shares of the subsidiary through which the
Company owned its 50% share of Block A-18. The Company received net proceeds of
$142 million and recorded a gain of $63.2 million in gain on the sale of oil and
gas assets. After the sale, which resulted in a 50% ownership in the previously
wholly owned subsidiary, the Company's remaining ownership is accounted for
using the equity method. This investment in Block A-18 is presented in
investment in affiliate at December 31, 1999 and 1998.
The agreements also require ARCO to pay the future exploration and development
costs attributable to the Company's and ARCO's collective interest in Block
A-18, up to $377 million or until first production from a gas field, after which
the Company and ARCO would each pay 50% of such costs. There can be no
assurance that the Company's and ARCO's collective share of the cost of
developing the project will not exceed $377 million. Additionally, the
agreements require ARCO to pay the Company an additional $65 million each at
July 1, 2002, and July 1, 2005, if certain specific development objectives are
met by such dates, or $40 million each if the objectives are met within one year
thereafter. There can be no assurance that the Company will receive any
incentive payments. The agreements provide that the Company will recover its
investment in recoverable costs in the project, approximately $100 million, and
that ARCO will recover its investment in recoverable costs, on a first-in,
first-out basis from the cost-recovery portion of future production.
In February 1998, the Company sold Triton Pipeline Colombia, Inc. ("TPC"), a
wholly owned subsidiary that held the Company's 9.6% equity interest in the
Colombian pipeline company, Oleoducto Central S.A. ("OCENSA"), to an unrelated
third party (the "Purchaser") for $100 million. Net proceeds were approximately
$97.7 million. The sale resulted in a gain of $50.2 million.
In conjunction with the sale of TPC, the Company entered into an equity swap
with a creditworthy financial institution (the "Counterparty"). The equity swap
has a notional amount of $97 million and requires the Company to make quarterly
floating LIBOR-based payments on the notional amount to the Counterparty. In
exchange, the Counterparty is required to make payments to the Company
equivalent to 97% of the dividends TPC receives in respect of its equity
interest in OCENSA. The equity swap is carried in the Company's financial
statements at fair value during its term, which, as amended, will expire April
14, 2000. The value of the equity swap in the Company's financial statements is
equal to 97% of the estimated fair value of the shares of OCENSA owned by TPC.
Because there is no public market for the shares of OCENSA, the Company
estimates their value using a discounted cash flow model applied to the
distributions expected to be paid in respect of the OCENSA shares. The discount
rate applied to the estimated cash flows from the OCENSA shares is based on a
combination of current market rates of interest, a credit spread for OCENSA's
debt, and a spread to reflect the preferred stock nature of the OCENSA shares.
During the years ended December 31, 1999 and 1998, the Company recorded an
expense of $6.9 million and $3.3 million, respectively, in other income
(expense), net, related to the net payments made under the equity swap and its
change in fair value. Net payments made (or received) under the equity swap, and
any fluctuations in the fair value of the equity swap, in future periods, will
affect other income in such periods. There can be no assurance that changes in
interest rates, or in other factors that affect the value of the OCENSA shares
and/or the equity swap, will not have a material adverse effect on the carrying
value of the equity swap.
Upon the expiration of the equity swap in April 2000, the Company expects that
the Purchaser will sell the TPC shares. Under the terms of the equity swap with
the Counterparty, upon any sale by the Purchaser of the TPC shares, the Company
will receive from the Counterparty, or pay to the Counterparty, an amount equal
to the excess or deficiency, as applicable, of the difference between 97% of the
net proceeds from the Purchaser's sale of the TPC shares and the notional amount
of $97 million. For example, if the Purchaser sold the TPC shares for an amount
equal to the value the Company has estimated for purposes of preparing its
balance sheet as of December 31, 1999, the Company would have to make a payment
to the Counterparty under the equity swap of approximately $8.4 million. There
can be no assurance that the value the Purchaser may realize in any sale of the
TPC shares will equal the value of the shares estimated by the Company for
purposes of valuing the equity swap. The Company has no right or obligation to
repurchase the TPC shares at any time, but the Company is not prohibited from
offering to purchase the shares if the Purchaser offers to sell them.
In June 1997, the Company sold its Argentine subsidiary for cash proceeds of
$4.1 million and recognized a gain of $4.1 million in gain on sale of oil and
gas assets.
3. WRITEDOWN OF ASSETS
Writedown of assets in 1998 is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
YEAR ENDED
DECEMBER 31,
1998
-----------
Evaluated oil and gas properties (SEC ceiling test) $ 241,005
Unevaluated oil and gas properties 73,890
Other assets 13,735
-----------
$ 328,630
===========
</TABLE>
In June and December 1998, the carrying amount of the Company's evaluated oil
and gas properties in Colombia was written down by $105.4 million ($68.5
million, net of tax) and $135.6 million ($115.9 million, net of tax),
respectively, through application of the full cost ceiling limitation as
prescribed by the Securities and Exchange Commission ("SEC"), principally as a
result of a decline in oil prices. No adjustments were made to the Company's
reserves in Colombia as a result of the decline in prices. The SEC ceiling test
was calculated using the June 30, and December 31, 1998, WTI oil prices of
$14.18 per barrel and $12.05 per barrel, respectively, that, after a
differential for Cusiana crude delivered at the port of Covenas in Colombia,
resulted in a net price of approximately $13 per barrel and $11 per barrel,
respectively.
In conjunction with the plan to restructure operations and scale back
exploration-related expenditures, the Company assessed its investments in
exploration licenses and determined that certain investments were impaired. As
a result, unevaluated oil and gas properties and other assets totaling $77.3
million ($72.6 million, net of tax) were expensed in June 1998. The writedown
included $27.2 million and $22.5 million related to exploration activity in
Guatemala and China, respectively. The remaining writedowns related to the
Company's exploration projects in certain other areas of the world.
During 1998, the Company evaluated the recoverability of its approximate 6.6%
investment in a Colombian pipeline company, Oleoducto de Colombia S.A. ("ODC"),
which is accounted for under the cost method. Based on an analysis of the
future cash flows expected to be received from ODC, the Company expensed the
carrying value of its investment totaling $10.3 million.
4. SPECIAL CHARGES
In September 1999, the Company recognized special charges totaling $2.4 million
related to the transfer of its working interest in Ecuador to a third party.
In July 1998, the Company commenced a plan to restructure the Company's
operations, reduce overhead costs and substantially scale back
exploration-related expenditures. The plan contemplated the closing of foreign
offices in four countries, the elimination of approximately 105 positions, or
41% of the worldwide workforce, and the relinquishment or other disposal of
several exploration licenses. As a result of the restructuring, the Company
recognized special charges of $15 million during the third quarter of 1998 and
$3.3 million during the fourth quarter of 1998 for a total of $18.3 million. Of
the $18.3 million in special charges, $14.5 million related to the reduction in
workforce, and represented the estimated costs for severance, benefit
continuation and outplacement costs, which will be paid over a period of up to
two years according to the severance formula. Since July 1998, the Company has
paid $13.1 million in severance, benefit continuation and outplacement costs. A
total of $2.1 million of special charges related to the closing of foreign
offices, and represented the estimated costs of terminating office leases and
the write-off of related assets. The remaining special charges of $1.7 million
primarily related to the write-off of other surplus fixed assets resulting from
the reduction in workforce. At December 31, 1999, all of the positions had been
eliminated, all designated foreign offices had closed and all licenses had been
relinquished, sold or their commitments renegotiated. During the fourth quarter
of 1999, the Company reversed $.7 million of the accrual associated with the
completion of restructuring activities. The remaining liability related to the
restructuring activities undertaken in 1998 was $1 million at December 31, 1999.
In March 1999, the Company accrued special charges of $1.2 million related to an
additional 15% reduction in the number of employees resulting from the
Company's continuing efforts to reduce costs. The special charges consisted of
$1 million for severance, benefit continuation and outplacement costs and $.2
million related to the write-off of surplus fixed assets. Since March 1999, the
Company has paid $.9 million in severance, benefit continuation and outplacement
costs. At December 31, 1999, the remaining liability related to the
restructuring activities undertaken in 1999 was $.1 million.
5. OTHER RECEIVABLES
Other receivables consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31,
----------------
1999 1998
------- -------
Receivables from and advances to partners and others $10,684 $ 2,007
Receivable from financial market transactions 4,861 180
Receivable from insurance 2,300 7,800
Receivable from the forward oil sale 1,081 31,932
Other 4,888 5,837
------- -------
$23,814 $47,756
======= =======
</TABLE>
<PAGE>
6. PROPERTY AND EQUIPMENT
Property and equipment, at cost, are summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31,
------------------
1999 1998
-------- --------
Oil and gas properties, full cost method:
Evaluated $560,240 $543,514
Unevaluated 78,527 70,836
Support equipment and facilities 303,953 289,659
Other 17,535 18,790
-------- --------
960,255 922,799
Less accumulated depreciation and depletion 436,103 451,892
-------- --------
$524,152 $470,907
======== ========
</TABLE>
The Company capitalized general and administrative expenses related to
exploration and development activities of $6.9 million, $20.6 million and $32.4
million in the years ended December 31, 1999, 1998 and 1997, respectively.
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31,
----------------
1999 1998
------- -------
Colombian income taxes $14,471 $ ---
Accrued exploration and development 9,762 3,774
Equity swap 8,435 ---
Accrued interest payable 7,864 8,160
Taxes other than income 7,713 2,970
Litigation and environmental matters 3,872 2,064
Accrued special charges 1,246 7,869
Accounts payable, principally trade 1,242 9,136
Dividends payable --- 2,693
Other 7,971 8,307
------- -------
$62,576 $44,973
======= =======
</TABLE>
8. DEFERRED INCOME AND OTHER
In May 1995, the Company sold 10.4 million barrels of oil from the Cusiana and
Cupiagua fields in Colombia in a forward oil sale. Under the terms of the sale,
the Company received approximately $87 million of the approximately $124 million
net proceeds. In 1999, the Company received substantially all of the remaining
proceeds totaling approximately $31.9 million. The Company has recorded the net
proceeds as deferred income and recognizes such revenue when the barrels of oil
are delivered during the five-year period that began in June 1995. Under the
terms of the agreement, the Company must deliver to the buyer 58,425 barrels per
month through March 1997 and 254,136 barrels per month from April 1997 to March
2000. At December 31, 1999 and 1998, $8.8 million and $35.3 million,
respectively, were recorded as deferred income and included in current
liabilities.
During 1999, the Company acquired the Colombian entity of its former partner in
the El Pinal field. In addition to the working interest in the El Pinal field,
the acquired entity has tax basis and net operating loss carryforwards ("NOLs")
totaling approximately $40 million, which the Company expects to utilize in
2000. At December 31, 1999, the tax affected amount of the tax basis and NOLs
($14.2 million) was included in current assets as a deferred tax asset. In
addition, the Company recorded deferred income of $10.6 million, representing
the difference between the value of the deferred tax asset and the purchase
price. During 2000, the deferred tax asset and the deferred income will be
reduced as the tax basis and NOLs are utilized.
9. DEBT
A summary of long-term debt follows:
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31,
------------------
1999 1998
-------- --------
Senior Notes due 2005 $200,000 $200,000
Senior Notes due 2002 199,947 199,924
Term credit facility maturing 2001 13,540 22,568
Revolving credit facility maturing 1999 --- 5,000
-------- --------
413,487 427,492
Less current maturities 9,027 14,027
-------- --------
$404,460 $413,465
======== ========
</TABLE>
In April 1997, the Company issued $400 million aggregate face value of senior
indebtedness to refinance other indebtedness. The senior indebtedness consisted
of $200 million face amount of 8 3/4% Senior Notes due April 15, 2002 (the
"2002 Notes"), at 99.942% of the principal amount (resulting in $199.9
million aggregate net proceeds) and $200 million face amount of 9 1/4% Senior
Notes dueApril 15, 2005 (the "2005 Notes" and, together with the 2002 Notes,
the "SeniorNotes"), at 100% of the principal amount, for total aggregate net
proceeds of$399.9 million before deducting transaction costs of approximately
$1 million.
Interest on the Senior Notes is payable semi-annually on April 15 and October
15. The Senior Notes are redeemable at any time at the option of the Company,
in whole or in part, and contain certain covenants limiting the incurrence of
certain liens, sale/leaseback transactions, and mergers and consolidations.
In November 1995, a subsidiary signed an unsecured term credit facility with a
bank supported by a guarantee issued by the Export-Import Bank of the United
States ("EXIM") for $45 million, which matures in January 2001. Principal and
interest payments are due semi-annually on January 15 and July 15 and borrowings
bear interest at LIBOR plus .25%, adjusted on a semi-annual basis. At December
31, 1999, the Company had outstanding borrowings of $13.5 million under the
facility.
In February 2000, the Company entered into an unsecured two-year revolving
credit facility with a group of banks, which matures in February 2002. The
credit facility gives the Company the right to borrow from time to time up to
the amount of the borrowing base determined by the banks, not to exceed $150
million. As of February 2000, the borrowing base was $150 million. The credit
facility contains various restrictive covenants, including covenants that
require the Company to maintain a ratio of earnings before interest,
depreciation, depletion, amortization and income taxes to net interest expense
of at least 2.5 to 1, and that prohibit the Company from permitting net debt to
exceed the product of 3.75 times the Company's earnings before interest,
depreciation, depletion, amortization and income taxes, in each case, on a
trailing four quarters basis.
The Company capitalizes interest on qualifying assets, principally unevaluated
oil and gas properties, major development projects in progress and investments
accounted for by the equity method while the investee has activities in progress
necessary to commence its principle operations. Capitalized interest amounted
to $14.5 million, $23.2 million and $25.8 million in the years ended December
31, 1999, 1998 and 1997, respectively.
The Company amortizes debt issue costs over the life of the borrowing using the
interest method. Amortization related to the Company's debt issue costs was $.5
million, $2.9 million and $2 million in the years ended December 31, 1999, 1998
and 1997, respectively. The aggregate maturities of long-term debt for the five
years during the period ending December 31, 2004, are as follows: 2000 -- $9
million; 2001 -- $4.5 million; 2002 -- $199.9 million; 2003 -- nil; and 2004 --
nil.
<PAGE>
10. INCOME TAXES
The components of earnings (loss) from continuing operations before income taxes
and extraordinary item were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1999 1998 1997
--------- ---------- ---------
Cayman Islands $(35,907) $ 82,995 $(12,969)
United States (7,810) (24,003) (31,694)
Foreign - other 119,894 (297,601) 61,559
--------- ---------- ---------
$ 76,177 $(238,609) $ 16,896
========= ========== =========
</TABLE>
Pursuant to the Reorganization in March 1996, Triton, a Cayman Islands company,
became the parent holding company of TEC, a Delaware corporation. As a result,
the Company's corporate domicile became the Cayman Islands.
The components of the provision for income taxes on continuing operations were
as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
-------- --------- --------
Current:
Cayman Islands $ --- $ --- $ ---
United States --- --- (7)
Foreign - other 20,793 4,487 3,230
-------- --------- --------
Total current 20,793 4,487 3,223
-------- --------- --------
Deferred:
Cayman Islands --- --- ---
United States (1,410) 1,457 (7,929)
Foreign - other 9,237 (57,049) 16,007
-------- --------- --------
Total deferred 7,827 (55,592) 8,078
-------- --------- --------
Total $28,620 $(51,105) $11,301
======== ========= ========
</TABLE>
<PAGE>
A reconciliation of the differences between the Company's applicable statutory
tax rate and the Company's effective income tax rate follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
---------------------------
1999 1998 1997
------- ------- ---------
Tax provision at statutory tax rate 0.0 % 0.0 % 0.0 %
Increase (decrease) resulting from:
Net change in valuation allowance (15.7)% 3.9 % 263.0 %
Foreign items without tax benefit 18.9 % (34.9)% 77.8 %
Income subject to tax in excess of statutory rate 36.6 % 32.6 % 36.9 %
Current year change in NOL/credit carryforwards (7.6)% (4.8)% (356.7)%
Temporary differences:
Oil and gas basis adjustments 3.3 % 25.7 % 32.5 %
Reimbursement of pre-commerciality costs 2.3 % (1.1)% 13.2 %
Other (0.2)% --- % 0.2 %
------- ------- --------
37.6% 21.4 % 66.9 %
======= ======= =========
</TABLE>
The components of the net deferred tax asset and liability were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1999 DECEMBER 31, 1998
------------------------------ -------------------------------
OTHER OTHER
U.S. COLOMBIA FOREIGN U.S. COLOMBIA FOREIGN
--------- -------- --------- --------- --------- ---------
Deferred tax asset:
Net operating loss carryforwards $157,558 $20,090 $ 9,832 $145,475 $ 7,992 $ 7,219
Depreciable/depletable property 1,748 8,778 --- 1,252 27,730 ---
Credit carryforwards 2,048 --- --- 1,731 6,813 ---
Reserves 819 --- --- 2,502 --- ---
Other 176 --- --- 1,505 --- ---
--------- -------- --------- --------- --------- ---------
Gross deferred tax asset 162,349 28,868 9,832 152,465 42,535 7,219
Valuation allowances (72,908) (8,778) --- (65,881) (27,730) ---
--------- -------- --------- --------- --------- ---------
Net deferred tax asset 89,441 20,090 9,832 86,584 14,805 7,219
--------- -------- --------- --------- --------- ---------
Deferred tax liability:
Depreciable/depletable property --- --- (16,509) --- --- (10,454)
Other (1,213) --- --- (473) --- ---
--------- -------- --------- --------- --------- ---------
Net deferred tax asset (liability) 88,228 20,090 (6,677) 86,111 14,805 (3,235)
Less current deferred tax asset (liability) --- 20,090 --- --- --- ---
--------- -------- --------- --------- --------- ---------
Noncurrent deferred tax asset (liability) $ 88,228 $ --- $ (6,677) $ 86,111 $ 14,805 $ (3,235)
========= ======== ========= ========= ========= =========
</TABLE>
At December 31, 1999, the Company had NOLs and depletion carryforwards for U.S.
tax purposes of $450.2 million and $20.3 million, respectively. The U.S. NOLs
expire from 2000 through 2020 as follows:
<TABLE>
<CAPTION>
<S> <C>
NOLS
EXPIRING
BY YEAR
---------
May 2000 $ 19,571
May 2001 30,389
May 2002 22,702
May 2003 20,566
May 2004 8,263
May 2005 - May 2020 348,675
---------
$ 450,166
=========
</TABLE>
At December 31, 1999, the Company's Colombian operations and other foreign
operations had NOLs and other credit carryforwards totaling $57.4 million and
$40.7 million, respectively. The NOLs expire from 2001 through 2004.
The deferred tax valuation allowance of $81.7 million at December 31, 1999, is
primarily attributable to management's assessment of the utilization of NOLs in
the U.S., the expectation that other tax credits will expire without being
utilized, and certain temporary differences will reverse without a benefit to
the Company. The minimum amount of future taxable income necessary to realize
the deferred tax asset is approximately $252 million and $57 million in the U.S.
and Colombia, respectively. Although there can be no assurance the Company will
achieve such levels of income, management believes the deferred tax asset will
be realized through income from its operations.
If certain changes in the Company's ownership should occur, there would be an
annual limitation on the amount of U.S. NOLs that can be utilized. To the
extent a change in ownership does occur, the limitation is not expected to
materially impact the utilization of such carryforwards.
11. EMPLOYEE BENEFITS
PENSION PLANS
The Company has a defined benefit pension plan covering substantially all
employees in the United States. The benefits are based on years of service and
the employee's final average monthly compensation. Contributions are intended
to provide for benefits attributed to past and future services. The Company
also has a Supplemental Executive Retirement Plan ("SERP") that is unfunded and
provides supplemental pension benefits to a select group of management and key
employees.
The funding status of the plans follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
DECEMBER 31,
----------------------------------------
1999 1998
------------------- -------------------
DEFINED DEFINED
BENEFIT SERP BENEFIT SERP
PLAN PLAN PLAN PLAN
--------- -------- --------- --------
Change in benefit obligation:
Benefit obligation at beginning of year $ 6,435 $ 6,579 $ 6,008 $ 6,621
Service cost 392 537 560 799
Interest cost 421 435 438 607
Amendments --- --- --- 434
Actuarial loss/(gain) (750) 1,465 472 913
Benefits paid (531) (1,385) (377) (1,617)
Curtailment gain --- --- (666) (1,178)
--------- -------- --------- --------
Benefit obligation at end of year 5,967 7,631 6,435 6,579
--------- -------- --------- --------
Change in plan assets:
Fair value of plan assets at beginning of year 7,068 --- 5,531 ---
Actual return on plan assets 1,971 --- 1,446 ---
Company contribution 480 1,385 468 1,617
Benefits paid (531) (1,385) (377) (1,617)
--------- -------- --------- --------
Fair value of plan assets at end of year 8,988 --- 7,068 ---
--------- -------- --------- --------
Reconciliation:
Funded status 3,021 (7,631) 633 (6,579)
Unrecognized actuarial (gain)/loss (2,999) 1,945 (908) 480
Unrecognized transition (asset)/obligation (6) 527 (8) 695
Unrecognized prior service cost 317 226 373 253
--------- -------- --------- --------
Prepaid/(accrued) pension cost 333 (4,933) 90 (5,151)
--------- -------- --------- --------
Adjustment for minimum liability --- (1,255) --- ---
--------- -------- --------- --------
Adjusted prepaid/(accrued) pension cost $ 333 $(6,188) $ 90 $(5,151)
========= ======== ========= ========
</TABLE>
The adjustment required to recognize the minimum liability for the SERP plan at
December 31, 1999, resulted in the recognition of $.8 million as an intangible
asset and $.5 million ($.3 million, net of tax) as a charge to accumulated
other non-owner changes in shareholder's equity.
<PAGE>
A summary of the components of pension expense follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
-------------------------
1999 1998 1997
------- ------- -------
Components of net periodic pension cost:
Service cost $ 929 $1,359 $ 832
Interest cost 856 1,045 783
Expected return on plan assets (618) (481) (416)
Recognized net actuarial loss/(gain) (12) --- ---
Amortization of transition obligation 166 591 166
Amortization of prior service cost 83 538 67
------- ------- -------
Net periodic pension cost $1,404 $3,052 $1,432
======= ======= =======
</TABLE>
The projected benefit obligations at December 31, 1999 and 1998, assume a
discount rate of 7.75% and 6.75%, respectively, and a rate of increase in
compensation expense of 5%. The expected long-term rate of return on assets is
9% for the defined benefit plan. During 1998, work-force reductions resulted in
the recognition of additional prior service cost of $.2 million each for the
defined benefit plan and the SERP plan and additional transition obligation of
$.4 million for the SERP plan.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective January 1, 1994, the Company amended and restated the employee stock
ownership plan to form a 401(k) plan (the "Plan"). The Company recognizes
expense based on actual amounts contributed to the Plan. The cost recognized
for the Plan was $.2 million, $.6 million and $.6 million for the years ended
December 31, 1999, 1998 and 1997, respectively.
12. SHAREHOLDERS' EQUITY
5% CONVERTIBLE PREFERENCE SHARES
In connection with the acquisition of the minority interest in Triton Europe in
1994, the Company designated a series of 550,000 preferred shares (522,460
shares issued) as 5% Preferred Stock, no par value, with a stated value of
$34.41 per share. Pursuant to the Reorganization, Triton converted each share
of 5% Preferred Stock into one 5% Convertible Preference Share, par value $.01.
Each share of the Company's 5% Convertible Preference Shares is convertible into
one Triton ordinary share and bears a cash dividend, which has priority over
dividends on Triton's ordinary shares, equal to 5% per annum on the redemption
price of $34.41 per share, payable semi-annually on March 30 and September 30 of
each year. The 5% Convertible Preference Shares have priority over Triton
ordinary shares upon liquidation, and may be redeemed at Triton's option at any
time on or after March 30, 1998, for cash equal to the redemption price. Any
shares that remain outstanding on March 30, 2004, must be redeemed at the
redemption price, either for cash or, at the Company's option, for Triton
ordinary shares. At December 31, 1999 and 1998, there were 209,639 5%
Convertible Preference Shares outstanding and at December 31, 1997, there were
218,285 shares outstanding.
8% CONVERTIBLE PREFERENCE SHARES
In August 1998, the Company and HM4 Triton, L.P., an affiliate of Hicks, Muse,
Tate & Furst Incorporated ("Hicks Muse"), entered into a stock purchase
agreement (the "Stock Purchase Agreement") that provided for a $350 million
equity investment in the Company. The investment was effected in two stages. At
the closing of the first stage in September 1998 (the "First Closing"), the
Company issued to HM4 Triton, L.P. 1,822,500 shares of 8% Convertible Preference
Shares for $70 per share (for proceeds of $116.8 million, net of transaction
costs). Pursuant to the Stock Purchase Agreement, the second stage was effected
through a rights offering for 3,177,500 shares of 8% Convertible Preference
Shares at $70 per share, with HM4 Triton, L.P. being obligated to purchase any
shares not subscribed. At the closing of the second stage, which occurred on
January 4, 1999 (the "Second Closing"), the Company issued an additional
3,177,500 8% Convertible Preference Shares for proceeds totaling $217.8 million,
net of closing costs (of which, HM4 Triton, L.P. purchased 3,114,863 shares).
Each 8% Convertible Preference Share is convertible at any time at the option of
the holder into four ordinary shares of the Company (subject to certain
antidilution protections). Holders of 8% Convertible Preference Shares are
entitled to receive, when and if declared by the Board of Directors, cumulative
dividends at a rate per annum equal to 8% of the liquidation preference of $70
per share, payable for each semi-annual period ending June 30 and December 30 of
each year. At the Company's option, dividends may be paid in cash or by the
issuance of additional whole shares of 8% Convertible Preference Shares. If a
dividend is to be paid in additional shares, the number of additional shares to
be issued in payment of the dividend will be determined by dividing the amount
of the dividend by $70, with amounts in respect of any fractional shares to be
paid in cash. The first dividend period was the period from January 4, 1999, to
June 30, 1999. The Company's Board of Directors elected to pay the dividend for
that period in additional shares resulting in the issuance of 196,388 8%
Convertible Preference Shares. The dividend for the period July 1, 1999 to
December 31, 1999 was paid in cash. The declaration of a dividend in cash or
additional shares for any period should not be considered an indication as to
whether the Board will declare dividends in cash or additional shares in future
periods. Holders of 8% Convertible Preference Shares are entitled to vote with
the holders of ordinary shares on all matters submitted to the shareholders of
the Company for a vote, with each 8% Convertible Preference Share entitling its
holder to a number of votes equal to the number of ordinary shares into which it
could be converted at that time. At December 31, 1999 and 1998, 5,193,643 and
1,822,500 8% Convertible Preference Shares were outstanding, respectively.
<PAGE>
ORDINARY SHARES
Changes in issued ordinary shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
----------- ----------- ----------
Balance at beginning of year 36,643,478 36,541,064 36,342,181
Share repurchase (948,300) --- ---
Issuances under stock plans 49,367 46,648 35,961
Conversion of 8% preference shares 10,980 --- ---
Exercise of employee stock options 8,213 47,238 83,736
Conversion of 5% preference shares --- 8,646 29,184
Other, net (10) (118) 50,002
----------- ----------- ----------
Balance at end of year 35,763,728 36,643,478 36,541,064
=========== =========== ==========
</TABLE>
Changes in ordinary shares held in treasury were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997
------ ------
Balance at beginning of year 73 40
Purchase of treasury shares 64 33
Retirement of treasury shares (137) ---
----- ---
Balance at end of year --- 73
====== ======
</TABLE>
SHARE REPURCHASE
In April 1999, the Company's Board of Directors authorized a share repurchase
program enabling the Company to repurchase up to ten percent of the Company's
then outstanding 36.7 million ordinary shares. Purchases of ordinary shares by
the Company began in April and may be made from time to time in the open market
or through privately negotiated transactions at prevailing market prices
depending on market conditions. The Company has no obligation to repurchase any
of its outstanding shares and may discontinue the share repurchase program at
management's discretion. As of December 31, 1999, the Company had purchased
948,300 ordinary shares for $11.3 million. The Company canceled and returned
the repurchased ordinary shares to the status of authorized but unissued shares.
The Company's revolving credit facility entered into in February 2000, generally
does not permit the Company to repurchase its ordinary shares without the bank's
consent.
<PAGE>
SHAREHOLDER RIGHTS PLAN
The Company has adopted a Shareholder Rights Plan pursuant to which preference
share rights attach to all ordinary shares at the rate of one right for each
ordinary share. Each right entitles the registered holder to purchase from the
Company one one-thousandth of a Series A Junior Participating Preference Share,
par value $.01 per share ("Junior Preference Shares"), of the Company at a price
of $120 per one one-thousandth of a share of such Junior Preference Shares,
subject to adjustment. Generally, the rights only become distributable 10 days
following public announcement that a person has acquired beneficial ownership of
15% or more of Triton's ordinary shares or 10 business days following
commencement of a tender offer or exchange offer for 15% or more of the
outstanding ordinary shares; provided that, pursuant to the terms of the plan,
any acquisition of Triton shares by HM4 Triton, L.P. or its affiliates,
including Hicks, Muse, Tate & Furst Incorporated, will not result in the
distribution of rights unless and until HM4 Triton, L.P.'s ownership of Triton
shares is reduced below certain levels.
If, among other events, any person becomes the beneficial owner of 15% or more
of Triton's ordinary shares (except as provided with respect to HM4 Triton,
L.P.), each right not owned by such person generally becomes the right to
purchase a number of ordinary shares of the Company equal to the number obtained
by dividing the right's exercise price (currently $120) by 50% of the market
price of the ordinary shares on the date of the first occurrence. In addition,
if the Company is subsequently merged or certain other extraordinary business
transactions are consummated, each right generally becomes a right to purchase a
number of shares of common stock of the acquiring person equal to the number
obtained by dividing the right's exercise price by 50% of the market price of
the common stock on the date of the first occurrence.
Under certain circumstances, the Company's directors may determine that a tender
offer or merger is fair to all shareholders and prevent the rights from being
exercised. At any time after a person or group acquires 15% or more of the
ordinary shares outstanding (other than with respect to HM4 Triton, L.P.) and
prior to the acquisition by such person or group of 50% or more of the
outstanding ordinary shares or the occurrence of an event described in the prior
paragraph, the Board of Directors of the Company may exchange the rights (other
than rights owned by such person or group which will become void), in whole or
in part, at an exchange ratio of one ordinary share, or one one-thousandth of a
Junior Preference Share, per right (subject to adjustment). The Company has the
ability to amend the rights (except the redemption price) in any manner prior to
the public announcement that a 15% position has been acquired or a tender offer
has been commenced. The Company will be entitled to redeem the rights at $0.01 a
right at any time prior to the time that a 15% position has been acquired. The
rights will expire on May 22, 2005, unless earlier redeemed by the Company.
<PAGE>
13. STOCK COMPENSATION PLANS
STOCK OPTION PLANS
Options to purchase ordinary shares of the Company may be granted to officers
and employees under various stock option plans. The exercise price of each
option is equal to or greater than the market price of the Company's ordinary
shares on the date of grant. Grants generally become exercisable in 25% or 33%
cumulative annual increments beginning one year from the date of issuance and
generally expire during a period from 5 to 10 years after the date of grant,
depending on terms of the grant. In addition, each non-employee director
receives an option to purchase 15,000 shares each year. These grants become
exercisable at the date of the grant and expire at the end of 10 years. At
December 31, 1999 and 1998, shares available for grant were 1,019,021 and
2,521,133, respectively.
A summary of the status of the Company's stock option plans is presented below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
-------------------- --------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- ------- ------------ ------- ---------- -------
Outstanding at beginning of year 4,057,207 $26.51 4,449,435 $39.05 3,854,046 $38.81
Granted 2,150,000 14.03 2,894,603 20.56 744,250 39.99
Exercised (8,213) 10.57 (47,238) 29.30 (83,736) 30.76
Canceled (351,138) 29.24 (3,239,593) 38.39 (65,125) 46.09
----------- ------------ -----------
Outstanding at end of year 5,847,856 21.78 4,057,207 26.51 4,449,435 39.05
=========== ============ ===========
Options exercisable at year-end 3,121,601 2,804,584 2,728,254
Weighted average fair value of options:
Granted at market prices $ 2.71 $ 6.12 $ 16.37
Granted at greater than market prices 4.93 2.84 ---
</TABLE>
On December 2, 1998, the Compensation Committee approved the grant of new stock
options totaling 440,103 shares with an exercise price of $14.50 to
substantially all of its employees. Each participating employee was granted
options in an amount equal to one-half of any options then held by the employees
with an exercise price greater than $30.00 per share and the options with an
exercise price greater than $30.00 per share expired.
<PAGE>
The following table summarizes information about stock options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -------------------------
WEIGHTED
RANGE AVERAGE WEIGHTED WEIGHTED
OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING AT CONTRACTUAL EXERCISE EXERCISABLE AT EXERCISE
PRICES DEC. 31, 1999 LIFE PRICE DEC. 31, 1999 PRICE
- -------------- -------------- ----------- --------- -------------- ---------
$ 6.94 - 14.50 2,904,852 4.9 years $ 14.10 657,773 $ 12.75
16.81 - 29.50 1,607,932 3.9 years 20.52 1,150,006 21.64
31.75 - 39.63 667,072 2.4 years 34.10 667,072 34.10
40.25 - 52.25 668,000 3.6 years 45.86 646,750 46.04
-------------- --------------
5,847,856 3,121,601
============== ==============
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan that provides for the award of
ordinary shares to officers and employees. Under the terms of the plan,
employees can choose each semi-annual period to have up to 15% of their annual
gross or base compensation withheld to purchase the Company's ordinary shares.
The purchase price of the stock is 85% of the lower of its beginning of period
or end of period market price. Under the plan, the Company sold 49,367 shares
and 46,648 shares to employees for the years ended December 31, 1999 and 1998,
respectively.
FAIR VALUE OF STOCK COMPENSATION
The Company applies Opinion 25 in accounting for its plans. Accordingly, no
compensation cost has been recognized for its fixed stock option plans and stock
purchase plan. Had the Company elected to recognize compensation expense
consistent with the fair value-based methodology in SFAS 123, the Company's net
income (loss) and earnings (loss) per share would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------- ---------- ---------
Net earnings (loss) applicable to ordinary shares:
As reported $18,886 $(190,565) $ (9,296)
Pro forma 12,579 (200,147) (16,802)
Basic earnings (loss) per ordinary share:
As reported $ 0.52 $ (5.21) $ (0.26)
Pro forma 0.35 (5.47) (0.46)
Diluted earnings (loss) per ordinary share:
As reported $ 0.52 $ (5.21) $ (0.25)
Pro forma 0.35 (5.47) (0.46)
</TABLE>
The fair value of each option granted was estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1999, 1998 and 1997: dividend yield of 0%;
expected volatility of approximately 54%, 40% and 26%, respectively; risk-free
interest rates of approximately 6%, 5% and 6%, respectively; and an expected
life of approximately three to seven years.
STOCK APPRECIATION RIGHTS PLAN
The Company had a stock appreciation rights ("SARs") plan which granted SARs to
non-employee directors of the Company. Upon exercise, SARs allow the holder to
receive the difference between the SARs' exercise price and the fair market
value of the ordinary shares covered by SARs on the exercise date and expire at
the earlier of 10 years or a date based on the termination of the holder's
membership on the board of directors. At December 31, 1999, SARs covering
20,000 ordinary shares, with an exercise price of $8.00 per share, were
outstanding.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS, RISK MANAGEMENT
AND CREDIT RISK CONCENTRATIONS
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1999 and 1998, the Company's financial instruments included cash
and equivalents, short-term receivables, long-term receivables, short-term and
long-term debt, and financial market transactions. The fair value of cash, cash
equivalents, short-term receivables and short-term debt approximated carrying
values because of the short maturities of these instruments. The fair values of
the Company's long-term receivables and financial market transactions, based on
broker quotes and discounted cash flows, approximated the carrying values. The
estimated fair value of long-term debt, based on quoted market prices and market
data for similar instruments, was $416 million (carrying value - $413 million)
and $397 million (carrying value - $428 million) at December 31, 1999 and 1998,
respectively.
RISK MANAGEMENT
Oil and natural gas sold by the Company are normally priced with reference to a
defined benchmark, such as light, sweet crude oil traded on the New York
Mercantile Exchange (WTI). Actual prices received vary from the benchmark
depending on quality and location differentials. From time to time, it is the
Company's policy to use financial market transactions, including swaps, collars
and options, with creditworthy counterparties primarily to reduce risk
associated with the pricing of a portion of the oil and natural gas that it
sells. The policy is structured to underpin the Company's planned revenues and
results of operations. The Company does not enter into financial market
transactions for trading purposes. There can be no assurance that the use of
financial market transactions will not result in losses.
During the years ended December 31, 1999 and 1997, markets provided the Company
the opportunity to realize WTI benchmark oil prices on average $6.37 per barrel
and $2.35 per barrel, respectively, above the WTI benchmark oil price the
Company set as part of its annual plan for the period. During the year ended
December 31, 1998, the Company did not have any outstanding financial market
transactions to hedge against oil price fluctuations. As a result of financial
and commodity market transactions settled during the years ended December 31,
1999 and 1997, the Company's risk management program resulted in an average net
realization of approximately $1.65 per barrel and $.11 per barrel, respectively,
lower than if the Company had not entered into such transactions.
In anticipation of entering into the forward oil sale, in 1995 the Company
purchased WTI benchmark call options to retain the ability to benefit from WTI
price increases above a weighted average price of $20.42 per barrel. The
volumes and expiration dates on the call options coincide with the volumes and
delivery dates of the forward oil sale which will be completed in March 2000.
During the years ended December 31, 1999, 1998 and 1997, the Company recorded a
gain (loss) of $6.1 million, $.4 million, and ($9.7 million), respectively, in
other income (expense), net, related to the change in the fair market value of
the call options. In November 1999, the Company sold WTI benchmark call options
with the same notional quantities, strike price and contract period as the
remaining call option contracts outstanding for a premium of $4.4 million for
the purpose of realizing the fair value of the purchased call options. As a
result, the Company has eliminated its exposure to future changes in value of
the call options caused by fluctuations in oil prices.
CONCENTRATION OF CREDIT RISK
Financial instruments that are potentially subject to concentrations of credit
risk consist of cash equivalents, receivables and financial market transactions.
The Company places its cash equivalents and financial market transactions with
high credit-quality financial institutions. The Company believes the risk of
incurring losses related to credit risk is remote.
The Company sells its crude oil production from the Cusiana and Cupiagua fields
through an agreement with a third party to approximately 10 to 15 buyers located
primarily in the United States. The Company does not believe that the loss of
any single customer or a termination of the agreement with the third party would
have a long-term material, adverse effect on its operations.
<PAGE>
15. OTHER INCOME (EXPENSE), NET
Other income (expense), net is summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
----------------------------
1999 1998 1997
-------- -------- --------
Equity swap $(6,858) $(3,283) $---
Change in fair market value of WTI
benchmark call options 6,150 366 (9,689)
Foreign exchange gain (loss) (2,674) 2,113 9,549
Loss provisions (2,250) (750) ---
Gain on sale of corporate assets 443 7,593 1,414
Other 1,575 2,441 1,598
-------- -------- --------
$(3,614) $ 8,480 $ 2,872
======== ======== ========
</TABLE>
In 1999, 1998 and 1997, the Company recognized a net foreign exchange gain
(loss) of ($2.7 million), $2.1 million and $9.5 million, respectively,
consisting primarily of noncash adjustments related to deferred taxes in
Colombia associated with devaluation of the Colombian peso versus the U.S.
dollar.
16. EARNINGS PER ORDINARY SHARE
The following table reconciles the numerators and denominators of the basic and
diluted earnings per ordinary share computation for earnings from continuing
operations for the years ended December 31, 1999 and 1997.
<TABLE>
<CAPTION>
<S> <C> <C>
<C>
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------ ------------
YEAR ENDED DECEMBER 31, 1999:
Net earnings $ 47,557
Less: Preference share dividends (28,671)
------------
Earnings available to ordinary shareholders 18,886
Basic earnings per ordinary share 36,135 $ 0.52
============
Effect of dilutive securities
Stock options --- 62
------------ ------------
Earnings available to ordinary shareholders and
assumed conversions $ 18,886
============
Diluted earnings per ordinary share 36,197 $ 0.52
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
YEAR ENDED DECEMBER 31, 1997:
Earnings before extraordinary item $ 5,595
Less: Preference share dividends (400)
-----------
Earnings available to ordinary shareholders 5,195
Basic earnings per ordinary share 36,471 $ 0.14
=============
Effect of dilutive securities
Stock options --- 457
Convertible debentures --- 80
----------- -------------
Earnings available to ordinary shareholders and
assumed conversions $ 5,195
===========
Diluted earnings per ordinary share 37,008 $ 0.14
============= =========
</TABLE>
For the year ended December 31, 1998, the computation of diluted net loss per
ordinary share was antidilutive, and therefore, the amounts reported for basic
and diluted net loss per ordinary share were the same.
At December 31, 1999, 5,193,643 shares of 8% Convertible Preference Shares and
209,639 shares of 5% Convertible Preference Shares were outstanding. Each 8%
Convertible Preference Share is convertible any time into four ordinary shares,
subject to adjustment in certain events. Each 5% Convertible Preference Share is
convertible any time into one ordinary share, subject to adjustment in certain
events. The 8% Convertible Preference Shares and 5% Convertible Preference
Shares were not included in the computation of diluted earnings per ordinary
share because the effect of assuming conversion was antidilutive.
17. STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash payments and noncash investing and financing
activities follow:
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR ENDED DECEMBER 31,
---------------------------
1999 1998 1997
-------- ------- --------
Cash paid during the year for:
Interest (net of amount capitalized) $22,810 $24,517 $133,265
Income taxes 5,564 4,339 4,666
Noncash financing activities:
8% Convertible preference shares issued
in lieu of cash dividend $13,747 $ --- $ ---
Conversion of preference shares into
ordinary shares 192 297 1,004
</TABLE>
Cash paid for interest in 1997 included $124.8 million of interest accreted with
respect to the Senior Subordinated Discount Notes due November 1, 1997 and the
9 3/4% Senior Subordinated Discount Notes due September 15, 2000 through the
dates of retirement.
18. RELATED PARTY TRANSACTIONS
Pursuant to a financial advisory agreement (the "Financial Advisory Agreement")
between Triton and Hicks, Muse & Co. Partners L.P. ("Hicks Muse Partners"), an
affiliate of Hicks Muse, the Company paid Hicks Muse Partners transaction fees
aggregating approximately $9.6 million and $4.4 million for services as
financial advisor to the Company in connection with the First Closing and Second
Closing, respectively, contemplated by the Stock Purchase Agreement. In
accordance with the terms of the Financial Advisory Agreement, the Company has
retained Hicks Muse Partners as its exclusive financial advisor in connection
with any Sale Transaction (defined below) unless Hicks Muse Partners and the
Company agree to retain an additional financial advisor in connection with any
particular Sale Transaction. The Financial Advisory Agreement requires the
Company to pay a fee to Hicks Muse Partners in connection with any Sale
Transaction (unless the Chief Executive Officer of the Company elects not to
retain a financial advisor) in an amount equal to the lesser of (i) the amount
of fees then charged by first-tier investment banking firms for similar advisory
services rendered in similar transactions or (ii) 1.5% of the Transaction Value
(as defined in the Financial Advisory Agreement); provided that such fee will be
divided equally between Hicks Muse Partners and any additional financial advisor
which the Company and Hicks Muse Partners agree will be retained by the Company
with respect to any such transaction. A "Sale Transaction" is defined as any
merger, sale of securities representing a majority of the combined voting power
of the Company, sale of assets of the Company representing more than 50% of the
total market value of the assets of the Company and its subsidiaries or other
similar transaction. The Company is also required to reimburse Hicks Muse
Partners for reasonable disbursements and out-of-pocket expenses of Hicks Muse
Partners incurred in connection with its advisory services.
Pursuant to a monitoring agreement (the "Monitoring Agreement") between Triton
and Hicks Muse Partners, Hicks Muse Partners will provide financial oversight
and monitoring services as requested by the Company and the Company will pay to
Hicks Muse Partners an annual fee of $.5 million. In addition, the Company will
reimburse Hicks Muse Partners for reasonable disbursements and out-of-pocket
expenses incurred by Hicks Muse Partners or its affiliates for the account of
the Company or in connection with the performance of its services. During the
years ended December 31, 1999 and 1998, the Company paid Hicks Muse Partners $.6
million and $.1 million, respectively, under the terms of the Monitoring
Agreement.
The Financial Advisory Agreement and the Monitoring Agreement will remain in
effect until the earlier of (i) September 30, 2008, or (ii) the date on which
HM4 Triton, L.P. and its affiliates cease to own beneficially, directly or
indirectly, at least 5% of the Company's outstanding Ordinary Shares (determined
after giving effect to the conversion of all 8% Convertible Preference Shares
held by HM4 Triton, L.P. and its affiliates). The Company has agreed to
indemnify Hicks Muse Partners with respect to liabilities incurred as a result
of Hicks Muse Partners' performance of services for the Company pursuant to the
Financial Advisory Agreement and the Monitoring Agreement.
In 1999, the Company sold its hunting lease and related facilities to HMTF
Operating, L.P., an affiliate of Hicks Muse, for proceeds of $.9 million and
recognized a gain of $.4 million in other income (expense), net.
19. CERTAIN FACTORS THAT COULD AFFECT FUTURE OPERATIONS
Certain information contained in this report, as well as written and oral
statements made or incorporated by reference from time to time by the Company
and its representatives in other reports, filings with the Securities and
Exchange Commission, press releases, conferences, teleconferences, or otherwise,
may be deemed to be "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934 and are subject to the "Safe Harbor"
provisions of that section. Forward-looking statements include statements
concerning the Company's and management's plans, objectives, goals, strategies
and future operations and performance and the assumptions underlying such
forward-looking statements. When used in this document, the words
"anticipates," "estimates," "expects," "believes," "intends," "plans," and
similar expressions are intended to identify such forward-looking statements.
These statements include information regarding:
- - drilling schedules;
- - expected or planned production capacity;
- - future production from the Cusiana and Cupiagua fields in Colombia, including
from the Recetor license;
- - the completion of development and commencement of production in
Malaysia-Thailand;
- - future production of the Ceiba field in Equatorial Guinea, including volumes
and timing of first production;
- - the acceleration of the Company's exploration, appraisal and development
activities in Equatorial Guinea;
- - the Company's capital budget and future capital requirements;
- - the Company's meeting its future capital needs;
- - the Company's utilization of net operating loss carryforwards and realization
of its deferred tax asset;
- - the level of future expenditures for environmental costs;
- - the outcome of regulatory and litigation matters;
- - the estimated fair value of derivative instruments, including the equity
swap; and
- - proven oil and gas reserves and discounted future net cash flows therefrom.
These statements are based on current expectations and involve a number of risks
and uncertainties, including those described in the context of such
forward-looking statements, as well as those presented below. Actual results
and developments could differ materially from those expressed in or implied by
such statements due to these and other factors.
CERTAIN FACTORS RELATING TO THE OIL AND GAS INDUSTRY
The markets for oil and natural gas historically have been volatile and are
likely to continue to be volatile in the future. Oil and natural gas prices
have been subject to significant fluctuations during the past several decades in
response to relatively minor changes in the supply of and demand for oil and
natural gas, market uncertainty and a variety of additional factors that are
beyond the control of the Company. These factors include the level of consumer
product demand, weather conditions, domestic and foreign government regulations,
political conditions in the Middle East and other production areas, the foreign
supply of oil and natural gas, the price and availability of alternative fuels,
and overall economic conditions. It is impossible to predict future oil and gas
price movements with any certainty.
The Company follows the full cost method of accounting for exploration and
development of oil and gas reserves, whereby all acquisition, exploration and
development costs are capitalized. Costs related to acquisition, holding and
initial exploration of licenses in countries with no proved reserves are
initially capitalized, including internal costs directly identified with
acquisition, exploration and development activities. The Company's exploration
licenses are periodically assessed for impairment on a country-by-country basis.
If the Company's investment in exploration licenses within a country where no
proved reserves are assigned is deemed to be impaired, the licenses are written
down to estimated recoverable value. If the Company abandons all exploration
efforts in a country where no proved reserves are assigned, all acquisition and
exploration costs associated with the country are expensed. The Company's
assessments of whether its investment within a country is impaired and whether
exploration activities within a country will be abandoned are made from time to
time based on its review and assessment of drilling results, seismic data and
other information it deems relevant. Due to the unpredictable nature of
exploration drilling activities, the amount and timing of impairment expense are
difficult to predict with any certainty. Financial information concerning the
Company's assets at December 31, 1999, including capitalized costs by geographic
area, is set forth in note 21.
The Company's oil and gas business is also subject to all of the operating risks
normally associated with the exploration for and production of oil and gas,
including, without limitation, blowouts, explosion, uncontrollable flows of oil,
gas or well fluids, pollution, earthquakes, formations with abnormal pressures,
labor disruptions and fires, each of which could result in substantial losses to
the Company due to injury or loss of life and damage to or destruction of oil
and gas wells, formations, production facilities or other properties. In
accordance with customary industry practices, the Company maintains insurance
coverage limiting financial loss resulting from certain of these operating
hazards. Losses and liabilities arising from uninsured or underinsured events
would reduce revenues and increase costs to the Company. There can be no
assurance that any insurance will be adequate to cover losses or liabilities.
The Company cannot predict the continued availability of insurance, or its
availability at premium levels that justify its purchase.
The Company's oil and gas business is also subject to laws, rules and
regulations in the countries where it operates, which generally pertain to
production control, taxation, environmental and pricing concerns, and other
matters relating to the petroleum industry. Many jurisdictions have at various
times imposed limitations on the production of natural gas and oil by
restricting the rate of flow for oil and natural gas wells below their actual
capacity. There can be no assurance that present or future regulation will not
adversely affect the operations of the Company.
The Company is subject to extensive environmental laws and regulations. These
laws regulate the discharge of oil, gas or other materials into the environment
and may require the Company to remove or mitigate the environmental effects of
the disposal or release of such materials at various sites. In addition, the
Company could be held liable for environmental damages caused by previous owners
of its properties or its predecessors. The Company does not believe that its
environmental risks are materially different from those of comparable companies
in the oil and gas industry. Nevertheless, no assurance can be given that
environmental laws and regulations will not, in the future, adversely affect the
Company's consolidated results of operations, cash flows or financial position.
Pollution and similar environmental risks generally are not fully insurable.
CERTAIN FACTORS RELATING TO INTERNATIONAL OPERATIONS
The Company derives substantially all of its consolidated revenues from
international operations. Risks inherent in international operations include
risk of expropriation, nationalization, war, revolution, border disputes,
renegotiation or modification of existing contracts, import, export and
transportation regulations and tariffs; taxation policies, including royalty and
tax increases and retroactive tax claims; exchange controls, currency
fluctuations and other uncertainties arising out of foreign government
sovereignty over the Company's international operations; laws and policies of
the United States affecting foreign trade, taxation and investment; and the
possibility of having to be subject to the exclusive jurisdiction of foreign
courts in connection with legal disputes and the possible inability to subject
foreign persons to the jurisdiction of courts in the United States. To date,
the Company's international operations have not been materially affected by
these risks.
CERTAIN FACTORS RELATING TO COLOMBIA
The Company is a participant in significant oil and gas discoveries in the
Cusiana and Cupiagua fields, located approximately 160 kilometers (100 miles)
northeast of Bogota, Colombia. Development of reserves in the Cusiana and
Cupiagua fields is ongoing and will require additional drilling. Pipelines
connect the major producing fields in Colombia to export facilities and to
refineries.
From time to time, guerrilla activity in Colombia has disrupted the operation of
oil and gas projects. Such activity increased over the last year and appears to
be increasing as political negotiations among government and various rebel
groups proceed. In one recent case, a bomb planted near the pipeline caused
OCENSA to halt shipments, which in turn caused the operator of the fields to
curtail production for approximately two days. Although the Colombian
government, the Company and its partners have taken steps to maintain security
and favorable relations with the local population, there can be no assurance
that attempts to reduce or prevent guerrilla activity will be successful or that
guerrilla activity will not disrupt operations in the future.
Colombia is among several nations whose progress in stemming the production and
transit of illegal drugs is subject to annual certification by the President of
the United States. Although the President granted Colombia certification in
1999, Colombia was denied certification the last two years and only received a
national interest waiver for one of those years. There can be no assurance
that, in the future, Colombia will receive certification or a national interest
waiver. The consequences of the failure to receive certification or a national
interest waiver generally include the following: all bilateral aid, except
anti-narcotics and humanitarian aid, would be suspended; the Export-Import Bank
of the United States and the Overseas Private Investment Corporation would not
approve financing for new projects in Colombia; U.S. representatives at
multilateral lending institutions would be required to vote against all loan
requests from Colombia, although such votes would not constitute vetoes; and the
President of the United States and Congress would retain the right to apply
future trade sanctions. Each of these consequences could result in adverse
economic consequences in Colombia and could further heighten the political and
economic risks associated with the Company's operations in Colombia. Any
changes in the holders of significant government offices could have adverse
consequences on the Company's relationship with the Colombian national oil
company and the Colombian government's ability to control guerrilla activities
and could exacerbate the factors relating to foreign operations discussed above.
CERTAIN FACTORS RELATING TO MALAYSIA-THAILAND
The Company is a partner in a significant gas exploration project located in the
Gulf of Thailand approximately 450 kilometers (280 miles) northeast of Kuala
Lumpur and 750 kilometers (470 miles) south of Bangkok as a contractor under a
production-sharing contract covering Block A-18 of the Malaysia-Thailand Joint
Development Area. On October 30, 1999, the Company and the other parties to the
production-sharing contract for Block A-18 executed a gas sales agreement
providing for the sale of the first phase of gas. Under terms of the gas sales
agreement, delivery of gas is scheduled to begin by the end of the second
quarter of 2002, following timely completion and approval of an environmental
impact assessment associated with the buyers' pipeline and processing
facilities. No assurance can be given as to when such approval will be obtained.
A lengthy approval process, or significant opposition to the project, could
delay construction and the commencement of gas sales.
In connection with the sale to ARCO of one-half of the shares through which the
Company owned its interest in Block A-18, ARCO agreed to pay the future
exploration and development costs attributable to the Company's and ARCO's
collective interest in Block A-18, up to $377 million or until first production
from a gas field, after which the Company and ARCO would each pay 50% of such
costs. There can be no assurance that the Company's and ARCO's collective share
of the cost of developing the project will not exceed $377 million. ARCO also
agreed to pay the Company certain incentive payments if certain criteria were
met. The first $65 million in incentive payments is conditioned upon having the
production facilities for the sale of gas from Block A-18 completed by June 30,
2002. If the facilities are completed after June 30, 2002 but before June 30,
2003, the incentive payment would be reduced to $40 million. A lengthy
environmental approval process, or unanticipated delays in construction of the
facilities, could result in the Company's receiving a reduced incentive payment
or possibly the complete loss of the first incentive payment. In addition, the
Company has agreed to share with ARCO some of the risk that the environmental
approval might be delayed by agreeing to pay to ARCO $1.25 million per month for
each month, if applicable, that first gas sales are delayed beyond 30 months
following the commitment to an engineering, procurement and construction
contract for the project. The Company's obligation is capped at 24 months of
these payments.
INFLUENCE OF HICKS MUSE
In connection with the issuance of 8% Convertible Preference Shares to HM4
Triton, L.P., the Company and HM4 Triton, L.P. entered into a shareholders
agreement (the "Shareholders Agreement") pursuant to which, among other things,
the size of the Company's Board of Directors was set at ten, and HM4 Triton,
L.P. exercised its right to designate four out of such ten directors. The
Shareholders Agreement provides that, in general, for so long as the entire
Board of Directors consists of ten members, HM4 Triton, L.P. (and its designated
transferees, collectively) may designate four nominees for election to the Board
of Directors. The right of HM4 Triton, L.P. (and its designated transferees) to
designate nominees for election to the Board will be reduced if the number of
ordinary shares held by HM4 Triton, L.P. and its affiliates (assuming conversion
of 8% Convertible Preference Shares into ordinary shares) represents less than
certain specified percentages of the number of ordinary shares (assuming
conversion of 8% Convertible Preference Shares into ordinary shares) purchased
by HM4 Triton, L.P. pursuant to the Stock Purchase Agreement.
The Shareholders Agreement provides that, for so long as HM4 Triton, L.P. and
its affiliates continue to hold a certain minimum number of ordinary shares
(assuming conversion of 8% Convertible Preference Shares into ordinary shares),
the Company may not take certain actions without the consent of HM4 Triton,
L.P., including (i) amending its Articles of Association or the terms of the 8%
Convertible Preference Shares with respect to the voting powers, rights or
preferences of the holders of 8% Convertible Preference Shares, (ii) entering
into a merger or similar business combination transaction, or effecting a
reorganization, recapitalization or other transaction pursuant to which a
majority of the outstanding ordinary shares or any 8% Convertible Preference
Shares are exchanged for securities, cash or other property, (iii) authorizing,
creating or modifying the terms of any series of securities that would rank
equal to or senior to the 8% Convertible Preference Shares, (iv) selling or
otherwise disposing of assets comprising in excess of 50% of the market value of
the Company, (v) paying dividends on ordinary shares or other shares ranking
junior to the 8% Convertible Preference Shares, other than regular dividends on
the Company's 5% Convertible Preference Shares, (vi) incurring or guaranteeing
indebtedness (other than certain permitted indebtedness), or issuing preference
shares, unless the Company's leverage ratio at the time, after giving pro forma
effect to such incurrence or issuance and to the use of the proceeds, is less
than 2.5 to 1, (vii) issuing additional shares of 8% Convertible Preference
Shares, other than in payment of accumulated dividends on the outstanding 8%
Convertible Preference Shares, (viii) issuing any shares of a class ranking
equal or senior to the 8% Convertible Preference Shares, (ix) commencing a
tender offer or exchange offer for all or any portion of the ordinary shares or
(x) decreasing the number of shares designated as 8% Convertible Preference
Shares.
As a result of HM4 Triton, L.P.'s ownership of 8% Convertible Preference Shares
and ordinary shares and the rights conferred upon HM4 Triton, L.P. and its
designees pursuant to the Shareholder Agreement, HM4 Triton, L.P. has
significant influence over the actions of the Company and will be able to
influence, and in some cases determine, the outcome of matters submitted for
approval of the shareholders. The existence of HM4 Triton, L.P. as a
shareholder of the Company may make it more difficult for a third party to
acquire, or discourage a third party from seeking to acquire, a majority of the
outstanding ordinary shares. A third party would be required to negotiate any
such transaction with HM4 Triton, L.P. and the interests of HM4 Triton, L.P. as
a shareholder may be different from the interests of the other shareholders of
the Company.
POSSIBLE FUTURE ACQUISITIONS
The Company's strategy includes the possible acquisition of additional reserves,
including through possible future business combination transactions. There can
be no assurance as to the terms upon which any such acquisitions would be
consummated or as to the affect any such transactions would have on the
Company's financial condition or results of operations. Such acquisitions, if
any, could involve the use of the Company's cash, or the issuance of the
Company's debt or equity securities, which could have a dilutive effect on the
current shareholders.
COMPETITION
The Company encounters strong competition from major oil companies (including
government-owned companies), independent operators and other companies for
favorable oil and gas concessions, licenses, production-sharing contracts and
leases, drilling rights and markets. Additionally, the governments of certain
countries in which the Company operates may, from time to time, give
preferential treatment to their nationals. The oil and gas industry as a whole
also competes with other industries in supplying the energy and fuel
requirements of industrial, commercial and individual consumers. The Company
believes that the principal means of competition in the sale of oil and gas are
product availability, price and quality.
MARKETS
Crude oil, natural gas, condensate, and other oil and gas products generally are
sold to other oil and gas companies, government agencies and other industries.
The availability of ready markets for oil and gas that might be discovered by
the Company and the prices obtained for such oil and gas depend on many factors
beyond the Company's control, including the extent of local production and
imports of oil and gas, the proximity and capacity of pipelines and other
transportation facilities, fluctuating demands for oil and gas, the marketing of
competitive fuels, and the effects of governmental regulation of oil and gas
production and sales. Pipeline facilities do not exist in certain areas of
exploration and, therefore, any actual sales of discovered oil or gas might be
delayed for extended periods until such facilities are constructed.
LITIGATION
The outcome of litigation and its impact on the Company are difficult to predict
due to many uncertainties, such as jury verdicts, the application of laws to
various factual situations, the actions that may or may not be taken by other
parties and the availability of insurance. In addition, in certain situations,
such as environmental claims, one defendant may be responsible for the
liabilities of other parties. Moreover, circumstances could arise under which
the Company may elect to settle claims at amounts that exceed the Company's
expected liability for such claims in an attempt to avoid costly litigation.
Judgments or settlements could, therefore, exceed any reserves.
20. COMMITMENTS AND CONTINGENCIES
For internal planning purposes, the Company's capital spending program for the
year ending December 31, 2000, is approximately $191 million, excluding
capitalized interest and acquisitions, of which approximately $122 million
relates to exploration and development activities in Equatorial Guinea, $58
million relates to the Cusiana and Cupiagua fields in Colombia and $11 million
relates to the Company's exploration activities in other parts of the world.
During the normal course of business, the Company is subject to the terms of
various operating agreements and capital commitments associated with the
exploration and development of its oil and gas properties. It is management's
belief that such commitments, including the capital requirements in Colombia,
Equatorial Guinea and other parts of the world discussed above, will be met
without any material adverse effect on the Company's operations or consolidated
financial condition.
The Company leases office space, other facilities and equipment under various
operating leases expiring through 2005. Total rental expense was $1.3 million,
$2.1 million and $2 million for the years ended December 31, 1999, 1998 and
1997, respectively. At December 31, 1999, the minimum payments required under
terms of the leases are as follows 2000 -- $1.5 million; 2001 -- $1.6 million;
2002 -- $1.6 million; 2003 -- $1.6 million; 2004 -- $1.6 million; and thereafter
$1 million.
GUARANTEES
At December 31, 1999, the Company had guaranteed the performance of a total of
$16.4 million in future exploration expenditures to be incurred through
September 2001 in various countries. A total of approximately $6 million of the
exploration expentitures are included in the 2000 capital spending program
related to a commitment for two onshore exploratory wells in Greece. These
commitments are backed primarily by unsecured letters of credit. The Company
also had guaranteed loans of approximately $1.4 million, which expire September
2000, for a Colombian pipeline company, ODC, in which the Company has an
ownership interest.
ENVIRONMENTAL MATTERS
The Company is subject to extensive environmental laws and regulations. These
laws regulate the discharge of oil, gas or other materials into the environment
and may require the Company to remove or mitigate the environmental effects of
the disposal or release of such materials at various sites. The Company believes
that the level of future expenditures for environmental matters, including
clean-up obligations, is impracticable to determine with a precise and reliable
degree of accuracy. Management believes that such costs, when finally
determined, will not have a material adverse effect on the Company's operations
or consolidated financial condition.
LITIGATION
In July through October 1998, eight lawsuits were filed against the Company and
Thomas G. Finck and Peter Rugg, in their capacities as Chairman and Chief
Executive Officer and Chief Financial Officer, respectively. The lawsuits were
filed in the United States District Court for the Eastern District of Texas,
Texarkana Division, and have been consolidated and are styled In re: Triton
Energy Limited Securities Litigation. In November 1999, the plaintiffs filed a
consolidated complaint. It alleges violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated
thereunder, in connection with disclosures concerning the Company's properties,
operations, and value relating to a prospective sale of the Company or of all or
a part of its assets. The lawsuits seek recovery of an unspecified amount of
compensatory damages, fees and costs. In the consolidated complaint, the
plaintiffs abandoned a claim for negligent misrepresentation and punitive
damages that had previously been asserted in one of the eight individual suits.
In September 1999, the court granted the plaintiffs' motion for appointment
as lead plaintiffs and for approval of selection of lead counsel. In October
1999, the defendants filed a motion to dismiss the claims alleged in the eight
individual suits, and in December 1999, the defendants filed a supplement to
their motion to dismiss to address the plaintiffs' consolidated complaint. The
Company's motion, as supplemented, is currently pending.
The Company believes its disclosures have been accurate and intends to
vigorously defend these actions. There can be no assurance that the litigation
will be resolved in the Company's favor. An adverse result could have a material
adverse effect on the Company's financial position or results of operations.
In November 1999, a lawsuit was filed against the Company, and one of its
subsidiaries and Thomas G. Finck, Peter Rugg and Robert B. Holland, III, in
their capacities as officers of the Company, in the District Court of the State
of Texas for Dallas County. The lawsuit is styled Aaron Sherman, et al. vs.
Triton Energy Corporation et al. and seeks an unspecified amount of compensatory
and punitive damages and interest. The lawsuit alleges as causes of action fraud
and negligent misrepresentation in connection with disclosures concerning the
prospective sale by the Company of all or a substantial part of its assets
announced in March 1998. The Company's date to answer has not yet run. Its
subsidiary has filed various motions to dispose of the lawsuit on the grounds
that the plantiffs do not have standing. The Court has ordered the plantiffs to
replead and has stayed discovery pending its further orders.
In August 1997, the Company was sued in the Superior Court of the State of
California for the County of Los Angeles, by David A. Hite, Nordell
International Resources Ltd., and International Veronex Resources, Ltd. The
action has since been removed to the United States District Court for the
Central District of California. The Company and the plaintiffs were adversaries
in a 1990 arbitration proceeding in which the interest of Nordell International
Resources Ltd. in the Enim oil field in Indonesia was awarded to the Company
(subject to a 5% net profits interest for Nordell) and Nordell was ordered to
pay the Company nearly $1 million. The arbitration award was followed by a
series of legal actions by the parties in which the validity of the award and
its enforcement were at issue. As a result of these proceedings, the award was
ultimately upheld and enforced. The current suit alleges that the plaintiffs
were damaged in amounts aggregating $13 million primarily because of the
Company's prosecution of various claims against the plaintiffs as well as its
alleged misrepresentations, infliction of emotional distress, and improper
accounting practices. The suit seeks specific performance of the arbitration
award, damages for alleged fraud and misrepresentation in accounting for Enim
field operating results, an accounting for Nordell's 5% net profit interest, and
damages for emotional distress and various other alleged torts. The suit seeks
interest, punitive damages and attorneys fees in addition to the alleged actual
damages. In August 1998, the district court dismissed all claims asserted by the
plaintiffs other than claims for malicious prosecution and abuse of the legal
process, which the court held could not be subject to a motion to dismiss. The
abuse of process claim was later withdrawn, and the damages sought were reduced
to approximately $700,000 (not including punitive damages). The lawsuit was
tried and the jury found in favor of the plaintiffs and assessed compensatory
damages against the Company in the amount of approximately $700,000 and punitive
damages in the amount of approximately $11 million. The Company believes it has
acted appropriately and intends to appeal the verdict.
The Company is subject to certain other litigation matters, none of which is
expected to have a material, adverse effect on the Company's operations or
consolidated financial condition.
21. GEOGRAPHIC INFORMATION
Triton's operations are primarily related to crude oil and natural gas
exploration and production. The Company's principal properties, operations and
oil and gas reserves are located in Colombia, Malaysia-Thailand and Equatorial
Guinea. The Company is exploring for oil and gas in these areas, as well as in
southern Europe, Africa and the Middle East. All sales are currently derived
from oil and gas production in Colombia. Financial information about the
Company's operations by geographic area is presented below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
CORPORATE
MALAYSIA- EQUATORIAL AND
COLOMBIA THAILAND GUINEA EXPLORATION OTHER TOTAL
--------- --------- ---------- ----------- --------- ----------
YEAR ENDED DECEMBER 31, 1999:
Sales and other operating revenues $ 247,878 $ --- $ --- $ --- $ --- $ 247,878
Operating income (loss) 115,877 --- (469) (7,214) (16,334) 91,860
Depreciation, depletion and amortization 59,728 --- 16 144 1,455 61,343
Capital expenditures and investments 79,889 8,453 19,968 12,419 754 121,483
Assets 476,543 93,188 37,229 85,250 282,265 974,475
YEAR ENDED DECEMBER 31, 1998:
Sales and other operating revenues $ 160,881 $ 63,237 $ --- $ 4,500 $ --- $ 228,618
Operating income (loss) (220,697) 62,538 (124) (79,703) (39,360) (277,346)
Depreciation, depletion and amortization 53,641 49 1 175 4,945 58,811
Writedown of assets 251,312 --- --- 76,664 654 328,630
Capital expenditures and investments 106,624 25,319 5,913 41,603 756 180,215
Assets 468,533 84,735 10,766 78,086 112,160 754,280
YEAR ENDED DECEMBER 31, 1997:
Sales and other operating revenues $ 145,419 $ --- $ --- $ 4,077 $ --- $ 149,496
Operating income (loss) 59,719 (536) (42) (6,270) (20,167) 32,704
Depreciation, depletion and amortization 31,186 60 --- 505 5,077 36,828
Capital expenditures and investments 129,589 37,328 4,471 43,371 4,457 219,216
Assets 712,512 148,780 4,841 105,720 126,186 1,098,039
</TABLE>
During 1998, the Company sold one-half of the shares of the subsidiary through
which the Company owned its 50% share of Block A-18 resulting in a gain of $63.2
million which is included in Malaysia-Thailand sales and other operating
revenues and operating income (loss). See note 2 - Asset Dispositions. After
the sale, which resulted in a 50% ownership in the previously wholly owned
subsidiary, the Company's remaining ownership is accounted for using the equity
method. This investment in Block A-18 is presented in Malaysia-Thailand assets
at December 31, 1999 and 1998.
Colombia operating income (loss) for the year ended December 31, 1998, included
a SEC full cost ceiling limitation writedown of $241 million. Additionally,
Exploration operating income (loss) included writedowns of oil and gas
properties and other assets totaling $76.7 million for the year ended December
31, 1998.
At December 31, 1999, corporate assets were principally cash and equivalents and
the U.S. deferred tax asset. Exploration assets included $41.6 million, $17.6
million, $16.5 million and $8.4 million in Italy, Greece, Oman and Madagascar,
respectively.
22. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
QUARTER
-------------------------------------------
FIRST SECOND THIRD FOURTH
--------- ---------- -------- ----------
YEAR ENDED DECEMBER 31, 1999:
Sales and other operating revenues $ 49,170 $ 59,622 $ 67,295 $ 71,791
Gross profit 14,823 25,151 32,349 46,082
Net earnings 1,887 10,883 11,762 23,025
Basic earnings (loss) per ordinary share 0.05 (0.08) 0.32 0.24
Diluted earnings (loss) per ordinary share 0.03 (0.08) 0.20 0.23
Investment in affiliate 86,704 88,179 91,008 93,188
YEAR ENDED DECEMBER 31, 1998:
Sales and other operating revenues $ 36,175 $ 36,378 $105,862 $ 50,203
Gross profit (loss) 8,409 (180,179) 73,751 (134,350)
Net earnings (loss) 42,912 (150,062) 47,208 (127,562)
Basic earnings (loss) per ordinary share 1.17 (4.10) 1.28 (3.55)
Diluted earnings (loss) per ordinary share 1.16 (4.10) 1.28 (3.55)
Investment in affiliate --- --- 82,511 84,735
</TABLE>
Gross profit (loss) is comprised of sales and other operating revenues less
operating expenses, depreciation, depletion and amortization, and writedowns
pertaining to operating assets. Gross profit for the fourth quarter of 1999
included a non-recurring credit issued by OCENSA in February 2000 totaling $4.2
million. The credit to pipeline tariffs resulted from OCENSA's compliance
with a Colombian government decree in December 1999 that reduced its 1999
noncash expenses.
23. OIL AND GAS DATA (UNAUDITED)
The following tables provide additional information about the Company's oil and
gas exploration and production activities. The oil and gas data reflect the
Company's proportionate interest in Block A-18 on an equity investment basis
since the sale of one-half of the subsidiary through which the Company owned its
50% share of Block A-18 in August 1998.
RESULTS OF OPERATIONS
The results of operations for oil- and gas-producing activities, considering
direct costs only, follow:
<TABLE>
<CAPTION>
<S> <C>
COLOMBIA
--------
YEAR ENDED DECEMBER 31, 1999:
Revenues $247,878
Costs:
Production costs 68,130
General operating expenses 3,954
Depletion 59,512
Income tax expense 42,083
--------
Results of operations $ 74,199
========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MALAYSIA- TOTAL
COLOMBIA THAILAND OTHER WORLDWIDE
--------- --------- --------- ---------
YEAR ENDED DECEMBER 31, 1998:
Revenues $ 160,881 $ 63,237 $ 4,500 $ 228,618
Costs:
Production costs 73,546 --- --- 73,546
General operating expenses 2,460 --- --- 2,460
Depletion 53,304 --- --- 53,304
Writedown of assets 251,312 --- 76,664 327,976
Income tax benefit (76,048) --- (22,527) (98,575)
---------- --------- ---------- ----------
Results of operations $(143,693) $ 63,237 $ (49,637) $(130,093)
========== ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL
COLOMBIA OTHER WORLDWIDE
-------- ------- ---------
YEAR ENDED DECEMBER 31, 1997:
Revenues $145,419 $ 4,077 $ 149,496
Costs:
Production costs 51,357 --- 51,357
General operating expenses 2,886 --- 2,886
Depletion 30,729 --- 30,729
Income tax expense 22,167 1,223 23,390
-------- ------- ---------
Results of operations $ 38,280 $ 2,854 $ 41,134
</TABLE> ======== ======= =========
Malaysia-Thailand revenues for the year ended December 31, 1998, included a gain
of $63.2 million from the sale of one-half of the shares of the subsidiary
through which the Company owned its 50% share of Block A-18. Other revenues for
the years ended December 31, 1998 and 1997, included gains of $4.5 million, and
$4.1 million from the sale of the Company's Bangladesh subsidiary and Argentine
subsidiary, respectively.
Depletion includes depreciation on support equipment and facilities calculated
on the unit-of-production method.
<PAGE>
COSTS INCURRED AND CAPITALIZED COSTS
The costs incurred in oil and gas acquisition, exploration and development
activities and related capitalized costs follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EQUATORIAL TOTAL
COLOMBIA GUINEA OTHER WORLDWIDE
-------- ------- ------ ---------
DECEMBER 31, 1999:
Costs incurred:
Property acquisition $ 6,400 $ --- $ 20 $ 6,420
Exploration 155 23,631 13,051 36,837
Development 80,782 --- --- 80,782
Depletion per equivalent
barrel of production 3.80 --- --- 3.80
Cost of properties at year-end:
Unevaluated $ --- $ 5,772 $72,755 $ 78,527
======== ======= ======= ========
Evaluated $530,947 $28,613 $ 680 $560,240
======== ======= ======= ========
Support equipment and
facilities $303,244 $ 709 $ --- $303,953
======== ======= ======= ========
Accumulated depletion and
depreciation at year-end $419,651 $ --- $ 680 $420,331
======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MALAYSIA- EQUATORIAL TOTAL
COLOMBIA THAILAND GUINEA OTHER WORLDWIDE
-------- --------- ---------- ------- ---------
DECEMBER 31, 1998:
Costs incurred:
Property acquisition $ --- $ --- $ --- $ 500 $ 500
Exploration 2,886 17,739 5,913 43,153 69,691
Development 83,088 1,026 --- --- 84,114
Depletion per equivalent
barrel of production 4.07 --- --- --- 4.07
Cost of properties at year-end:
Unevaluated $ --- $ --- $ 10,754 $60,082 $ 70,836
======== ========= ========== ======= ========
Evaluated $467,147 $ --- $ --- $76,367 $543,514
======== ========= ========== ======= ========
Support equipment and
facilities $289,659 $ --- $ --- $ --- $289,659
======== ========= ========== ======= ========
Accumulated depletion and
depreciation at year-end $360,324 $ --- $ --- $76,367 $436,691
======== ========= ========== ======= ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
MALAYSIA- EQUATORIAL TOTAL
COLOMBIA THAILAND GUINEA OTHER WORLDWIDE
-------- --------- ---------- ------ ---------
DECEMBER 31, 1997:
Costs incurred:
Property acquisition $ --- $ --- $ 1,500 $ 1,628 $ 3,128
Exploration 7,583 36,373 2,971 44,893 91,820
Development 62,251 187 --- --- 62,438
Depletion per equivalent
barrel of production 3.67 --- --- --- 3.67
Cost of properties at year-end:
Unevaluated $ 2,172 $ 30,327 $ 4,841 $93,286 $130,626
======== ========= ========== ======= ========
Evaluated $396,774 $ 114,243 $ --- $ 7,563 $518,580
======== ========= ========== ======= ========
Support equipment and
facilities $250,193 $ --- $ --- $ --- $250,193
======== ========= ========== ======= ========
Accumulated depletion and
depreciation at year-end $ 66,250 $ --- $ --- $ 7,563 $ 73,813
======== ========= ========== ======= ========
</TABLE>
A summary of costs excluded from depletion at December 31, 1999,
by year incurred follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
DECEMBER 31,
----------------------------------------
TOTAL 1999 1998 1997 1996 AND PRIOR
-------- ------- ------- ------- --------------
Property acquisition $ 2,820 $ 20 $ 500 $ 1,700 $ 600
Exploration 93,258 29,697 34,394 16,008 13,159
Capitalized interest 11,062 6,587 2,971 1,383 121
-------- ------- ------- ------- ------------
Total worldwide $107,140 $36,304 $37,865 $19,091 $ 13,880
======== ======= ======= ======= ============
</TABLE>
The Company excludes from its depletion computation property acquisition and
exploration costs of unevaluated properties and major development projects in
progress. The excluded costs include $34.4 million ($28.6 million and $5.8
million classified as evaluated and unevaluated, respectively) which relate
primarily to the Ceiba field in Equatorial Guinea that will become depletable
once production begins, currently estimated for year end 2000. Additionally,
excluded costs include exploration costs of $34.6 million, $16.8 million, $11.8
million and $8.4 million in Italy, Greece, Oman and Madagascar, respectively,
where there are no proved reserves at December 31, 1999. At this time, the
Company is unable to predict either the timing of the inclusion of these costs
and any related oil and gas reserves in its depletion computation or their
potential future impact on depletion rates. Drilling or other exploration
activities are being conducted in each of these cost centers.
The Company's share of costs incurred for Block A-18 were $8.2 million and $3.2
million for the years ended December 31, 1999 and 1998, respectively. Net
capitalized costs were $90.2 million and $85.2 million at December 31, 1999 and
1998, respectively.
<PAGE>
OIL AND GAS RESERVE DATA (OIL RESERVES ARE STATED IN THOUSANDS OF BARRELS AND
GAS RESERVES ARE STATED IN MILLIONS OF CUBIC FEET.)
The following tables present the Company's estimates of its proved oil and gas
reserves. The estimates for the proved reserves in the Cusiana and Cupiagua
fields in Colombia and the Ceiba field in Equatorial Guinea were prepared by the
Company's independent petroleum engineers, DeGolyer and MacNaughton and
Netherland, Sewell & Associates, Inc., respectively. The estimates for proved
reserves in Malaysia-Thailand were prepared by the internal petroleum engineers
of the operating company, Carigali-Triton Operating Company (CTOC). The
estimates for the proved reserves in the Liebre field in Colombia were prepared
by the Company's internal petroleum reservoir engineers. The Company emphasizes
that reserve estimates are approximate and are expected to change as additional
information becomes available. Reservoir engineering is a subjective process of
estimating underground accumulations of oil and gas that cannot be measured in
an exact way, and the accuracy of any reserve estimate is a function of the
quality of available data and of engineering and geological interpretation and
judgment. Accordingly, there can be no assurance that the reserves set forth
herein will ultimately be produced, and there can be no assurance that the
proved undeveloped reserves will be developed within the periods anticipated.
As of December 31, 1999, gas sales had not yet commenced from the Company's
interest in the Malaysia-Thailand Joint Development Area. In estimating its
reserves attributable to such interest, the Company assumed that production from
the interest would be sold at the base price in the gas sales agreement of
$2.30. The base price is subject to annual adjustments based on various
indices. There can be no assurance as to what the actual price will be when gas
sales commence.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INVESTMENT
COLOMBIA EQUATORIAL GUINEA TOTAL WORLDWIDE MALAYSIA-THAILAND
----------------- ----------------- ---------------- -----------------
OIL GAS OIL GAS OIL GAS OIL GAS
-------- ------- ------ ------- ------- ------ ------ ---------
PROVED DEVELOPED AND
UNDEVELOPED RESERVES AS OF
DECEMBER 31, 1998 135,327 12,284 --- --- 135,327 12,284 8,017 570,312
Revisions (567) (259) --- --- (567) (259) 5,206 (16,450)
Purchases 3,280 --- --- --- 3,280 --- --- ---
Extensions and discoveries --- --- 32,033 --- 32,033 --- --- ---
Production (12,469) (459) --- --- (12,469) (459) --- ---
-------- ------- ------ -------- -------- ------- ------ ---------
AS OF DECEMBER 31, 1999 125,571 11,566 32,033 --- 157,604 11,566 13,223 553,862
======== ======= ====== ======== ======== ======= ====== =========
PROVED DEVELOPED RESERVES AT
DECEMBER 31, 1999 91,859 11,566 --- --- 91,859 11,566 --- ---
======== ======= ====== ======== ======== ======= ====== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INVESTMENT
COLOMBIA MALAYSIA-THAILAND TOTAL WORLDWIDE MALAYSIA-THAILAND
----------------- -------------------- -------------------- -----------------
OIL GAS OIL GAS OIL GAS OIL GAS
-------- ------- -------- ---------- -------- ---------- ----- ----------
PROVED DEVELOPED AND
UNDEVELOPED RESERVES AS OF
DECEMBER 31, 1997 145,999 14,619 29,800 1,223,800 175,799 1,238,419 --- ---
Revisions (693) (1,832) (6,583) (41,588) (7,276) (43,420) --- ---
Sales --- --- (15,200) (625,400) (15,200) (625,400) --- ---
Equity investment --- --- (8,017) (570,312) (8,017) (570,312) 8,017 570,312
Extensions and discoveries --- --- --- 13,500 --- 13,500 --- ---
Production (9,979) (503) --- --- (9,979) (503) --- ---
-------- ------- -------- ---------- -------- ---------- ----- ---------
AS OF DECEMBER 31, 1998 135,327 12,284 --- --- 135,327 12,284 8,017 570,312
======== ======= ======== ========== ======== ========== ===== =========
PROVED DEVELOPED RESERVES AT
DECEMBER 31, 1998 86,039 12,284 --- --- 86,039 12,284 --- ---
======== ======= ======== ========== ======== ========== ===== =========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
COLOMBIA MALAYSIA-THAILAND TOTAL WORLDWIDE
----------------- ------------------- --------------------
OIL GAS OIL GAS OIL GAS
-------- ------- ------- ---------- -------- ----------
PROVED DEVELOPED AND
UNDEVELOPED RESERVES AS OF
DECEMBER 31, 1996 135,310 14,651 24,700 871,100 160,010 885,751
Revisions 14,157 770 (2,000) (7,600) 12,157 (6,830)
Extensions and discoveries 2,308 --- 7,100 360,300 9,408 360,300
Production (5,776) (802) --- --- (5,776) (802)
-------- ------- ------- ---------- -------- ----------
AS OF DECEMBER 31, 1997 145,999 14,619 29,800 1,223,800 175,799 1,238,419
======== ======= ======= ========== ======== ==========
PROVED DEVELOPED RESERVES AT
DECEMBER 31, 1997 81,931 14,619 --- --- 81,931 14,619
======== ======= ======= ========== ======== ==========
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH INFLOWS AND CHANGES THEREIN
The following table presents for the net quantities of proved oil and gas
reserves a standardized measure of discounted future net cash inflows discounted
at an annual rate of 10%. The future net cash inflows were calculated in
accordance with Securities and Exchange Commission guidelines. Future cash
inflows were computed by applying year-end prices of oil and gas relating to the
Company's proved reserves to the estimated year-end quantities of those
reserves. The future cash inflow estimates for 1999 attributable to oil
reserves were based on the year end WTI crude oil price of $25.60 per barrel for
the Company's reserves in Colombia and Malaysia-Thailand, and the year end Brent
crude oil price of $24.89 per barrel for the Company's reserves in Equatorial
Guinea, in each case before adjustments for oil quality and transportation
costs.
In 1999, the Company and the other parties to the production-sharing contract
for Block A-18 executed a gas sales agreement providing for the sale of the
first phase of gas. In estimating discounted future net cash inflows
attributable to such interest, the Company assumed that production from the
interest would be sold at the base price in the gas sales agreement of $2.30.
The base price is subject to annual adjustments based on various indices. There
can be no assurance as to what the actual price will be when gas sales commence.
Future production and development costs were computed by estimating those
expenditures expected to occur in developing and producing the proved oil and
gas reserves at the end of the year, based on year-end costs. The Company
emphasizes that the future net cash inflows should not be construed as
representative of the fair market value of the Company's proved reserves. The
meaningfulness of the estimates is highly dependent upon the accuracy of the
assumptions upon which they were based. Actual future cash inflows may vary
materially.
In connection with the sale to ARCO of one-half of the shares through which the
Company owned its interest in Block A-18, ARCO agreed to pay the Company an
additional $65 million each at July 1, 2002, and July 1, 2005, if certain
specific development objectives are met by such dates, or $40 million each if
the objectives are met within one year thereafter. For purposes of calculating
future cash inflows for Malaysia-Thailand at December 31, 1999, the Company
assumed that it would receive an incentive payment of $65 million in July 2002.
There can be no assurances that the Company will receive any incentive payments.
See note 19, "Certain Factors that Could Affect Future Operations - Certain
Factors Related to Malaysia-Thailand."
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EQUITY
INVESTMENT
EQUATORIAL TOTAL MALAYSIA-
COLOMBIA GUINEA WORLDWIDE THAILAND
---------- ---------- ---------- ----------
DECEMBER 31, 1999:
Future cash inflows $3,152,352 $1,078,275 $4,230,627 $1,649,881
Future production and
development costs 817,065 712,365 1,529,430 703,419
---------- ---------- ---------- ----------
Future net cash inflows before
income taxes $2,335,287 $ 365,910 $2,701,197 $ 946,462
========== ========== ========== ==========
Future net cash inflows before
income taxes discounted at 10%
per annum $1,414,433 $ 263,849 $1,678,282 $ 266,631
Future income taxes discounted at
10% per annum 391,796 57,589 449,385 15,845
---------- ---------- ---------- ----------
Standardized measure of discounted
future net cash inflows $1,022,637 $ 206,260 $1,228,897 $ 250,786
========== ========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
EQUITY
INVESTMENT
MALAYSIA-
COLOMBIA THAILAND
---------- ----------
DECEMBER 31, 1998:
Future cash inflows $1,481,065 $1,555,929
Future production and
development costs 734,025 695,575
---------- ----------
Future net cash inflows before
income taxes $ 747,040 $ 860,354
========== ==========
Future net cash inflows before
income taxes discounted at 10%
per annum $ 415,127 $ 253,535
Future income taxes discounted at
10% per annum 3,909 8,917
---------- ----------
Standardized measure of discounted
future net cash inflows $ 411,218 $ 244,618
========== ==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MALAYSIA- TOTAL
COLOMBIA THAILAND WORLDWIDE
---------- ---------- ----------
DECEMBER 31, 1997:
Future cash inflows $2,524,291 $4,078,609 $6,602,900
Future production and
development costs 1,142,382 1,883,881 3,026,263
---------- ---------- ----------
Future net cash inflows before
income taxes $1,381,909 $2,194,728 $3,576,637
========== ========== ==========
Future net cash inflows before
income taxes discounted at 10%
per annum $ 852,421 $ 427,463 $1,279,884
Future income taxes discounted at
10% per annum 173,785 36,756 210,541
---------- ---------- ----------
Standardized measure of discounted
future net cash inflows $ 678,636 $ 390,707 $1,069,343
========== ========== ==========
</TABLE>
Changes in the standardized measure of discounted future net cash inflows
follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DECEMBER 31,
-------------------------------------
1999 1998 1997
----------- ----------- -----------
Total worldwide:
Beginning of year $ 411,218 $1,069,343 $1,292,195
Sales, net of production costs (179,748) (87,335) (94,062)
Sales of reserves --- (70,543) ---
Equity investment --- (244,618) ---
Revisions of quantity estimates (6,546) (29,321) 75,253
Net change in prices and production costs 1,105,963 (579,212) (552,863)
Extensions, discoveries and improved recovery 206,260 6,516 42,918
Change in future development costs (61,728) (46,633) (5,936)
Purchases of reserves 6,400 --- ---
Development and facilities costs incurred 70,828 105,808 53,199
Accretion of discount 74,704 120,270 160,406
Changes in production rates and other (10,567) (30,772) (3,089)
Net change in income taxes (387,887) 197,715 101,322
----------- ----------- -----------
End of year $1,228,897 $ 411,218 $1,069,343
=========== =========== ===========
</TABLE>
SCHEDULE II
TRITON ENERGY LIMITED AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
ADDITIONS
---------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCE AT CHARGED TO BALANCE
BEGINNING CHARGED TO OTHER AT CLOSE
CLASSIFICATIONS OF YEAR EARNINGS ACCOUNTS DEDUCTIONS OF YEAR
- ------------------------- ----------- ------------ ----------- ------------ ---------
Year ended Dec. 31, 1997:
Allowance for doubtful
receivables $ 76 $ --- $ --- $ (35) $ 41
=========== ============ =========== ============ =========
Allowance for deferred
tax asset $ 30,657 $ 44,435 $ --- $ --- $ 75,092
=========== ============ =========== ============ =========
Year ended Dec. 31, 1998:
Allowance for doubtful
receivables $ 41 $ --- $ --- $ (41) $ ---
=========== ============ =========== ============ =========
Allowance for deferred
tax asset $ 75,092 $ 18,519 $ --- $ --- $ 93,611
=========== ============ =========== ============ =========
Year ended Dec. 31, 1999:
Allowance for deferred
tax asset $ 93,611 $ (11,925) $ --- $ --- $ 81,686
=========== ============ =========== ============ =========
</TABLE>
EXHIBIT 10.79
TRITON ENERGY LIMITED
---------------------
1997 SHARE COMPENSATION PLAN
----------------------------
NON-EMPLOYEE DIRECTOR'S NON-QUALIFIED
-------------------------------------
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. Pursuant to the Triton Energy Limited 1997 Share
-----------------
Compensation Plan (as restated and/or amended, the "Plan"), for employees and
directors of Triton Energy Limited, a Cayman Islands company (the "Company"), or
any of its Subsidiaries, the Company grants to
(Name of Option Holder)
an option to purchase from the Company a total of FIFTEEN THOUSAND (15,000) full
Ordinary Shares ("Optioned Shares"), $.01 par value ("Ordinary Shares"), of the
Company at $________ per share (being the fair market value per share of the
Ordinary Shares on this Date of Grant), in the amounts, during the periods and
upon the terms and conditions set forth in this Agreement. The Date of Grant of
this Stock Option is ___________________.
2. Time of Exercise. This Stock Option is fully exercisable as to 100%
-----------------
of the total optioned shares at any time on and after the Date of Grant. No
part of this Stock Option may be exercised after the expiration of ten (10)
years from the Date of Grant.
3. Subject to Plan. This Stock Option and its exercise are subject to
----------------
the terms and conditions of the Plan. The Option Holder acknowledges receipt of
a copy of the Plan and the Plan is incorporated herein by reference. The
defined terms used herein that are defined in the Plan shall have the same
meanings assigned to them in the Plan. In addition, this Stock Option is
subject to any rules promulgated pursuant to the Plan by the Board or the
Committee.
4. Term. Subject to Article VIII of the Plan (including regarding
----
termination for Cause), this Stock Option, or applicable portions thereof, will
terminate upon the earliest to occur of the following:
(a) 5 p.m., Dallas, Texas time, on ______________________; or
(b) 5 p.m., Dallas, Texas time, on the date which is five years
following the date that the Option Holder's service as a director of the Company
terminates for any reason other than Cause.
5. Who May Exercise. During the lifetime of the Option Holder, this
------------------
Stock Option may be exercised only by the Option Holder, or by the Option
Holder's guardian or by any permitted transferee. If the Option Holder's
service as a director of the Company terminates as a result of death, Disability
or Retirement prior to the termination date specified in Section 4(a) hereof and
the Option Holder has not exercised this Stock Option as to the percentage of
Optioned Shares set forth in Section 2 hereof as of the date of death,
Disability or Retirement, the following persons (in addition to any permitted
transferee) may exercise the exercisable portion of this Stock Option as set
forth in Section 2 hereof on behalf of the Option Holder at any time prior to
the earlier of the dates specified in Sections 4(a) and (b) hereof: (i) if the
Option Holder is disabled or has retired, the Option Holder or his guardian; or
(ii) if the Option Holder dies, the personal representative of his estate, or
the person who acquired the right to exercise this Stock Option by bequest or
inheritance or by reason of the death of the Option Holder; provided that this
Stock Option shall remain subject to the other terms of this Agreement, the
Plan, and applicable laws, rules, and regulations.
6. Restrictions on Exercise. This Stock Option may be exercised only
--------------------------
with respect to full shares, and no fractional share of stock shall be issued.
7. Manner of Exercise. Subject to such administrative regulations as
--------------------
the Board or the Committee may from time to time adopt, this Stock Option may be
exercised only upon written notice to the Company of the number of shares being
purchased accompanied by the following:
(a) Full payment of the option price for the shares of stock being
purchased; and
(b) Such other documents as the Company in its discretion deems
necessary to evidence the exercise, in whole or in part, of this Stock Option.
Full payment for shares purchased upon exercise of a Stock Option shall be
made either in (i) cash, (ii) by certified or cashier's check, (iii) by Ordinary
Shares, (iv) if permitted by the Committee, and if permitted under applicable
law, by cash or certified or cashier's check for the par value of the shares
plus a promissory note for the balance of the purchase price, which note shall
provide for full personal liability of the maker and shall contain such other
terms and provisions as the Committee may determine, including without
limitation the right to repay the note partially or wholly with Ordinary Shares,
(v) by delivery of a copy of irrevocable instructions from the Option Holder to
a broker or dealer, reasonably acceptable to the Company, to sell certain of the
shares purchased upon exercise of the Stock Option or to pledge them as
collateral for a loan and promptly deliver to the Company the amount of sale or
loan proceeds necessary to pay such purchase price or (vi) any combination of
the foregoing. If any portion of the purchase price or a note given at the time
of exercise is paid in Ordinary Shares, those shares shall be valued at the then
Fair Market Value.
8. Assignability. This Stock Option shall not be transferable by the
-------------
Option Holder, except (i) by will or by the laws of descent and distribution,
(ii) pursuant to the terms of a domestic relations order (as defined by the
Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder), or (iii) to
members of the Option Holder's immediate family (i.e., parents, children,
grandchildren or spouse), trusts for the benefit of such immediate family
members, and partnerships in which such immediate family members are partners;
provided that any such transfer shall be in accordance with all applicable laws,
rules and regulations; and provided further that the provisions of this Stock
Option Agreement and the Plan that are governed by the Option Holder's status as
an Employee or Director of the Company shall continue in effect notwithstanding
any such transfer.
9. Rights as Shareholder. The Option Holder will have no rights as a
-----------------------
shareholder with respect to any shares covered by this Stock Option until the
issuance of a certificate or certificates to the Option Holder for the shares.
Except as otherwise provided in Section 10 hereof, no adjustment shall be made
for dividends or other rights for which the record date is prior to the issuance
of such certificate or certificates.
10. Adjustment of Number of Shares and Related Matters. The Option
------------------------------------------------------
Holder understands that in the event of a Change of Control, merger,
consolidation, reorganization, recapitalization of the Company, or the
declaration of a stock dividend, the number of shares which may be purchased
upon exercise of this Stock Option granted hereunder, the time at which any
Stock Option may be exercisable, and the exercise price thereof may be adjusted
in accordance with the Plan.
11. Option Holder's Representations. Notwithstanding any of the
---------------------------------
provisions hereof, the Option Holder hereby agrees that he will not exercise the
Stock Option granted hereby, and that the Company will not be obligated to issue
any shares to the Option Holder hereunder, if the exercise thereof or the
issuance of such shares shall constitute a violation by the Option Holder or the
Company of any provision of any law or regulation of any governmental authority
or shall not be in compliance with the listing requirements of a stock exchange.
Any determination in this connection by the Board shall be final, binding, and
conclusive. The obligations of the Company and the rights of the Option Holder
are subject to all applicable laws, rules and regulations including, without
limitation, the 1934 Act, the Code, any successors thereto, and any other
applicable laws.
12. Investment Representation. Unless the Ordinary Shares are issued
--------------------------
to him in a transaction registered under applicable federal and State securities
laws, by his or her execution hereof, the Option Holder represents and warrants
to the Company that all Ordinary Shares which may be purchased hereunder will be
acquired by the Option Holder for investment purposes for his or her own account
and not with any intent for resale or distribution in violation of Federal or
state securities laws. Unless the Ordinary Shares are issued to him in a
transaction registered under applicable federal and State securities laws, all
certificates issued with respect to the Ordinary Shares shall bear an
appropriate restrictive investment legend.
13. Law Governing. This Agreement is intended to be performed in the
--------------
State of Texas and shall be construed and enforced in accordance with and
governed by the laws of Texas.
14. Invalidity of Provision. The invalidity or unenforceability of any
-----------------------
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction. If any provision of this Agreement shall be adjudged
unreasonable in any judicial or administrative proceeding, then the court or
administrative body shall have the power to reform such provision and, in its
changed form, such provision shall then be enforceable and shall be enforced.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Option Holder, to evidence his or her
consent and approval of all the terms hereof, has duly executed this Agreement,
as of the date specified in Section 1 hereof.
TRITON ENERGY LIMITED
By:___________________________________
OPTION HOLDER:
______________________________________
EXHIBIT 10.80
TRITON ENERGY LIMITED
---------------------
EMPLOYEE'S NON-QUALIFIED STOCK OPTION AGREEMENT
-----------------------------------------------
1. Grant of Option. Pursuant to the Triton Energy Limited
-----------------
_______________________ Plan (as amended, the "Plan"), for employees and
directors of Triton Energy Limited, a Cayman Islands company (the "Company"), or
any of its Subsidiaries, the Company grants to
_____________________________
(Name of Option Holder)
an option to purchase from the Company a total of _________ full Ordinary Shares
("Optioned Shares"), $.01 par value ("Ordinary Shares"), of the Company at
$__________ per share (being at least the fair market value per share of the
Ordinary Shares on this Date of Grant), in the amounts, during the periods and
upon the terms and conditions set forth in this Agreement. The Date of Grant of
this Stock Option is __________________.
2. Time of Exercise.
------------------
(a) Except only as specifically provided elsewhere in this Agreement,
this Stock Option is exercisable in the following cumulative installments:
First installment. Up to 33-1/3% of the total Optioned Shares at any time
------------------
on and after the first anniversary of the Date of Grant.
Second installment. Up to an additional 33 1/3% of the total Optioned
-------------------
Shares at any time on and after the second anniversary of the Date of
Grant.
Third installment. Up to an additional 33 1/3% of the total Optioned
------------------
Shares at any time on and after the third anniversary of the Date of Grant.
No part of this Stock Option may be exercised after 5:00 p.m., Dallas, Texas
time, on _______________________.
(b) Notwithstanding the foregoing paragraph (a), in the event of the
Option Holder's death while employed or termination of employment as a result of
Retirement or Disability, all unmatured installments of Stock Options
outstanding shall automatically be accelerated and exercisable in full by the
Option Holder or his representative as set forth in Section 5 hereof.
3. Subject to Plan. This Stock Option and its exercise are subject to
----------------
the terms and conditions of the Plan. The Option Holder acknowledges receipt of
a copy of the Plan and the Plan is incorporated herein by reference. The defined
terms used herein that are defined in the Plan shall have the same meanings
assigned to them in the Plan. In addition, this Stock Option is subject to any
rules promulgated pursuant to the Plan by the Board or the Committee and
communicated to the Option Holder in writing.
4. Term. Subject to Articles VII and VIII of the Plan (including
----
regarding termination for Cause), this Stock Option, or applicable portions
thereof, will terminate as follows:
(a) This Stock Option will terminate at 5:00 p.m., Dallas, Texas time,
on _______________.
(b) Notwithstanding the foregoing paragraph (a), this Stock Option
shall terminate at 5:00 p.m., Dallas, Texas time, on the date indicated below:
(i) the date which is twelve (12) months following the date that the
Option Holder's employment with the Company and its Subsidiaries terminates due
to Disability or Retirement;
(ii) the date which is three (3) months following the date that the
Option Holder's employment with the Company and its Subsidiaries terminates for
any reason other than death, Disability or Retirement; or
(iii) the date which is three (3) years following the date that
the Option Holder's employment with the Company and its Subsidiaries terminates
due to the Option Holder's death;
provided that in no event may this Stock Option be exercised after 5:00
p.m., Dallas, Texas time, on _______________________.
5. Who May Exercise. During the lifetime of the Option Holder, this
------------------
Stock Option may be exercised only by the Option Holder, or by the Option
Holder's guardian, or by any permitted transferee. If the Option Holder's
employment terminates as a result of death, Disability or Retirement prior to
the termination dates specified in Section 4(a) hereof and this Stock Option has
not theretofore been exercised as to the percentage of Optioned Shares set forth
in Section 2 hereof as of the date of death, Disability or Retirement, the
following persons may exercise the exercisable portion of this Stock Option as
set forth in Section 2 hereof on behalf of the Option Holder at any time prior
to the earlier of the dates specified in Sections 4(a) and (b) hereof: (i) if
the Option Holder is disabled or has retired, the Option Holder or his guardian;
or (ii) if the Option Holder dies, the personal representative of his estate, or
the person who acquired the right to exercise this Stock Option by bequest or
inheritance or by reason of the death of the Option Holder, or by permitted
assignment; provided that this Stock Option shall remain subject to the other
terms of this Agreement, the Plan, and applicable laws, rules, and regulations.
6. Restrictions on Exercise. This Stock Option may be exercised only
--------------------------
with respect to full shares, and no fractional share shall be issued.
7. Manner of Exercise. Subject to such administrative regulations as
--------------------
the Board or the Committee may from time to time adopt, this Stock Option may be
exercised only upon written notice to the Company of the number of shares being
purchased accompanied by the following:
(a) Full payment of the option price for the shares being
purchased;
(b) Such other documents as the Company in its discretion deems
necessary to evidence the exercise, in whole or in part, of this Stock Option.
Full payment for shares purchased upon exercise of a Stock Option shall be
made either in (i) cash, (ii) by certified or cashier's check, (iii) if
permitted by the Committee, by Ordinary Shares, (iv) if permitted by the
Committee, and if permitted under applicable law, by cash or certified or
cashier's check for the par value of the shares plus a promissory note for the
balance of the purchase price, which note shall provide for full personal
liability of the maker and shall contain such other terms and provisions as the
Committee may determine, including without limitation the right to repay the
note partially or wholly with Ordinary Shares, or (v) by delivery of a copy of
irrevocable instructions from the Option Holder to a broker or dealer,
reasonably acceptable to the Company, to sell certain of the shares purchased
upon exercise of the Stock Option or to pledge them as collateral for a loan and
promptly deliver to the Company the amount of sale or loan proceeds necessary to
pay such purchase price. If any portion of the purchase price or a note given
at the time of exercise is paid in Ordinary Shares, those shares shall be valued
at the then Fair Market Value.
8. Assignability. This Stock Option shall not be assignable or
-------------
transferable by the Option Holder, except (i) by will or by the laws of descent
and distribution, (ii) pursuant to the terms of a domestic relations order (as
defined by the Internal Revenue Code of 1986, as amended, or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder), or (iii) to members of the Option Holder's immediate family (i.e.,
parents, children, grandchildren or spouse), trusts for the benefit of such
immediate family members, and partnerships in which such immediate family
members are partners; provided that any such transfer shall be in accordance
with all applicable laws, rules and regulations; and provided further that the
provisions of this Stock Option Agreement and the Plan that are governed by the
Option Holder's employment status with the Company shall continue in effect
notwithstanding any such transfer.
9. Rights as Shareholder. The Option Holder will have no rights as a
-----------------------
shareholder with respect to any shares covered by this Stock Option until the
issuance of a certificate or certificates to the Option Holder for the shares.
Except as otherwise provided in Section 10 hereof, no adjustment shall be made
for dividends or other rights for which the record date is prior to the issuance
of such certificate or certificates.
10. Adjustment of Number of Shares and Related Matters. The Option
------------------------------------------------------
Holder understands that in the event of a Change of Control, merger,
consolidation, reorganization, recapitalization of the Company, or the
declaration of a stock dividend, the number of shares which may be purchased
upon exercise of this Stock Option granted hereunder, the time at which any
Stock Option may be exercisable, and the exercise price thereof may be adjusted
in accordance with the Plan.
11. Option Holder's Representations. Notwithstanding any of the
---------------------------------
provisions hereof, the Option Holder hereby agrees that he will not exercise the
Stock Option granted hereby, and that the Company will not be obligated to issue
any shares to the Option Holder hereunder, if the exercise thereof or the
issuance of such shares shall constitute a violation by the Option Holder or the
Company of any provision of any law or regulation of any governmental authority
or shall not be in compliance with the listing requirements of a stock exchange.
Any determination in this connection by the Board shall be final, binding, and
conclusive. The obligations of the Company and the rights of the Option Holder
are subject to all applicable laws, rules and regulations including, without
limitation, the 1934 Act, the Code, any successors thereto, and any other
applicable laws.
12. Investment Representation. Unless the Ordinary Shares are issued to
-------------------------
him in a transaction registered under applicable Federal and State securities
laws, by his or her execution hereof, the Option Holder represents and warrants
to the Company that all Ordinary Shares which may be purchased hereunder will be
acquired by the Option Holder for investment purposes for his or her own account
and not with any intent for resale or distribution in violation of Federal or
State securities laws. Unless the Ordinary Shares are issued to him in a
transaction registered under applicable Federal and State securities laws, all
certificates issued with respect to the Ordinary Shares shall bear an
appropriate restrictive investment legend.
13. Law Governing. This Agreement is intended to be performed in the
--------------
State of Texas and shall be construed and enforced in accordance with and
governed by the laws of Texas.
14. No Right to Continue Employment. Nothing in this Agreement confers
--------------------------------
upon the Option Holder the right to continue in the employ of the Company or any
Subsidiary or interferes with or restricts in any way the right of the Company
or any Subsidiary to discharge the Option Holder at any time (subject to any
contract rights of the Option Holder).
15. Invalidity of Provision. The invalidity or unenforceability of
-------------------------
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other jurisdiction. If any provision of this Agreement shall
be adjudged unreasonable in any judicial or administrative proceeding, then the
court or administrative body shall have the power to reform such provision and,
in its changed form, such provision shall then be enforceable and shall be
enforced.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Option Holder, to evidence his or her
consent and approval of all the terms hereof, has duly executed this Agreement,
as of the date specified in Section 1 hereof.
TRITON ENERGY LIMITED
By: ____________________________________
OPTION HOLDER:
__________________________________________
EXHIBIT 10.81
AMENDMENT TO STOCK OPTIONS
This agreement ("Agreement") is entered into as of January 3, 2000, between
Triton Energy Limited, a Cayman Islands company (the "Company"), and the
undersigned holder of stock options of the Company ("Holder").
WHEREAS, Holder and the Company are parties to that certain Stock Option
Agreement dated as of January 12, 1998 pursuant to which the Holder was granted
a stock option (the "Option") to purchase 75,000 ordinary shares of the Company
under the Company's 1997 Share Compensation Plan (as amended, the "Plan"), and
the Company and Holder desire that the Option should be amended in certain
respects;
NOW THEREFORE, in consideration of the mutual agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. The Option is hereby amended so that it shall terminate and cease to
be exercisable on January 12, 2005, subject to the remaining terms of the Plan.
2. This Agreement is intended to be performed in the State of Texas and
shall be construed and enforced in accordance with and governed by the laws of
Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
TRITON ENERGY LIMITED
By:____________________________________
James C. Musselman, President and Chief
Executive Officer
OPTION HOLDER:
__________________________________________
A. E. Turner, III
EXHIBIT 10.82
AMENDMENT TO STOCK OPTIONS
This agreement ("Agreement") is entered into as of January 3, 2000, between
Triton Energy Limited, a Cayman Islands company (the "Company"), and the
undersigned holder of stock options of the Company ("Holder").
WHEREAS, Holder and the Company are parties to that certain Stock Option
Agreement dated as of January 13, 1998 (the "Option Agreement") pursuant to
which the Holder was granted a stock option to purchase 15,000 ordinary shares
of the Company under the Company's 1997 Share Compensation Plan (as amended, the
"Plan"), and the Company and Holder desire that the Option Agreement should be
amended in certain respects;
NOW THEREFORE, in consideration of the mutual agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Section 4 of the Option Agreement is hereby amended to read n its
entirety as follows:
"4. Term. Subject to Article VIII of the Plan (including regarding
----
termination for Cause), this Stock Option, or applicable portions thereof, will
terminate upon the earliest to occur of the following:
(a) 5 p.m., Dallas, Texas time, on January 13, 2008; or
(b) 5 p.m., Dallas, Texas time, on the date which is five years
following the date that the Option Holder's service as a director of the Company
terminates for any reason other than Cause."
2. This Agreement is intended to be performed in the State of Texas and
shall be construed and enforced in accordance with and governed by the laws of
Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
TRITON ENERGY LIMITED
By:____________________________________
A. E. Turner, III, Senior Vice President and
Chief Operating Officer
OPTION HOLDER:
__________________________________________
EXHIBIT 10.83
PRODUCTION SHARING CONTRACT
BETWEEN
THE REPUBLIC OF EQUATORIAL GUINEA
AND
TRITON EQUATORIAL GUINEA, INC.
FOR BLOCK F
TABLE OF CONTENTS
-----------------
PAGE
SECTION I SCOPE AND DEFINITIONS 1
SECTION II TERM, TERMINATION, AND CANCELLATION 5
SECTION III SURRENDER OF AREAS 9
SECTION IV WORK PROGRAM AND EXPENDITURES 10
SECTION V CONDUCT OF PETROLEUM OPERATIONS BY CONTRACTOR 13
SECTION VI RIGHTS AND OBLIGATIONS OF THE PARTIES, DETERMINATION
OF PRODUCTION LEVELS 15
SECTION VII - RECOVERY OF PETROLEUM OPERATING COSTS, SHARING OF
PRODUCTION, AND DISTRIBUTION OF PRODUCTION 19
SECTION VIII VALUATION OF CRUDE OIL 23
SECTION IX BONUSES AND SURFACE RENTALS 25
SECTION X PAYMENTS 26
SECTION XI TITLE TO EQUIPMENT 26
SECTION XII UNITIZATION 26
SECTION XIII CONSULTATION AND ARBITRATION 27
SECTION XIV BOOKS AND ACCOUNTS AND AUDITS 28
SECTION XV ADDITIONAL PROVISIONS 30
SECTION XVI LAWS AND REGULATIONS 30
SECTION XVII FORCE MAJEURE 30
SECTION XVIII TEXT 31
SECTION XIX EFFECTIVENESS 31
ANNEX "A" MAP OF CONTRACT AREA
ANNEX "B" CONTRACT AREA COORDINATES
ANNEX "C" ACCOUNTING PROCEDURE
ANNEX "D" LETTER OF PERFORMANCE GUARANTY BY PARENT FOR CONTRACT
AREA F, THE REPUBLIC OF EQUATORIAL GUINEA
ANNEX "E" COORDINATES FOR THE 200M ISOBATH
PRODUCTION SHARING CONTRACT
BETWEEN
THE REPUBLIC OF EQUATORIAL GUINEA
AND
TRITON EQUATORIAL GUINEA, INC.
FOR BLOCK F
THIS CONTRACT, made and entered into on this ___th day of March, 199_ by
and between the REPUBLIC OF EQUATORIAL GUINEA (hereinafter referred to as the
"STATE"), represented for purposes of this Contract by the MINISTRY OF MINES AND
ENERGY of the REPUBLIC OF EQUATORIAL GUINEA (hereinafter referred to as the
"MINISTRY"), and TRITON EQUATORIAL GUINEA, INC., a corporation organized and
existing under the laws of the Cayman Islands (hereinafter referred to as
"CONTRACTOR"), represented for purposes of this Contract by Thomas F. Finck, its
President. STATE and CONTRACTOR hereinafter are referred to either individually
as "Party" or collectively as "Parties."
W I T N E S S E T H:
WHEREAS, all Hydrocarbons existing within the territory of the Republic of
Equatorial Guinea, including adjacent submerged lands, are national resources
owned by the Republic of Equatorial Guinea; and
WHEREAS, the STATE wishes to promote the development of hydrocarbon
deposits in and throughout the Contract Area and CONTRACTOR desires to join and
assist the STATE in accelerating the exploration and development of the
potential resources within the Contract Area; and
WHEREAS, CONTRACTOR, has the financial ability, technical competence and
professional skills necessary to carry out the Petroleum Operations hereinafter
described; and
WHEREAS, in accordance with the Hydrocarbons Law of the Republic of
Equatorial Guinea, agreements in the form of Production Sharing Contracts may be
entered into between the STATE and foreign investors;
THEREFORE, in consideration of the undertakings and covenants herein
contained, the Parties hereby agree as follows:
I. SCOPE AND DEFINITIONS
-----------------------
1.1 Scope
-----
This Contract is a Production Sharing Contract. In accordance with the
provisions herein contained, the MINISTRY shall be responsible for the
supervision of the Petroleum Operations contemplated in this Contract.
CONTRACTOR shall:
- ----------
(a) be responsible to the STATE for the execution of the Petroleum
Operations in accordance with the provisions of this Contract, and is hereby
appointed and constituted the exclusive company to conduct Petroleum Operations
in the Contract Area for the term hereof;
(b) provide all necessary capital, machinery, equipment, technology and
personnel necessary for the efficient conduct of Petroleum Operations;
(c) bear the risk of Petroleum Operations Expenditures required in carrying
out Petroleum Operations and shall therefore have an economic interest in the
rapid development of any commercial hydrocarbon deposits in the Contract Area.
Such costs shall be included in Petroleum Expenditures as recoverable or not
recoverable as provided in Section VII and Annex "C" of this Contract.
During the term of this Contract, the total production achieved in the conduct
of the Petroleum Operations shall be divided between the Parties in accordance
with the provisions of Section VII of this Contract.
1.2 DEFINITIONS
In this Contract, words importing the singular include the plural and vice
versa, and except where the context otherwise indicates, shall have the meanings
set forth in this Section. Words that are not defined herein, but are defined
in the Hydrocarbons Law, shall have the meanings set forth in the Hydrocarbons
Law.
(a) Person means any individual, corporation, partnership, joint venture,
------
association, trust, estate, unincorporated organization of government or any
agency or political subdivision thereof.
(b) Affiliated Company or Affiliate of any specified Person means any other
--------------------------------
Person directly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct, administer and dictate policies of such Person, through the ownership of
fifty percent (50%) or more of such Person's voting rights; and the terms
"control" and "controlled" have meanings correlative to the foregoing.
(c) Crude Oil - means Hydrocarbons which are produced at the wellhead in
----------
liquid state at atmospheric pressure and asphalt and ozokerites and the liquid
Hydrocarbons known as condensate obtained from Natural Gas by condensation or
extraction by means of field separation units.
(d) Natural Gas - means all Hydrocarbons that at atmospheric conditions of
------------
temperature and pressure are in a gaseous state. Included in this definition
are wet mineral gas, dry mineral gas, wet gas and residue gas remaining after
the extraction processing or separation of liquid Hydrocarbons from wet gas.
(e) Exploration Operations means works to include without limitation
-----------------------
geological studies; geophysical studies; aerial mapping; investigations relating
to the subsurface geology; stratigraphic test drilling; exploratory and
appraisal wells; and related activities such as drillsite preparation,
surveying, and all work necessarily connected therewith, that is conducted in
connection with exploration for and commercial assessment of Crude Oil and/or
Natural Gas.
(f) Development and Production Operations means all operations other than
----------------------------------------
Exploration Operations, including those to facilitate extraction, production,
local transportation and storage of Crude Oil and Natural Gas produced as part
of the offshore operations.
(g) Petroleum Operations means all Exploration Operations and Development
---------------------
and Production Operations.
(h) Exploration Expenditures means direct expenditures on Exploration
-------------------------
Operations and overhead expenses made in connection with exploration and
commercial assessment within the Contract Area. These expenditures shall be
determined in accordance with the Accounting Procedure attached hereto as Annex
"C," but expenditures made within the area of a Field after Commercial Discovery
has been declared shall be excluded.
(i) Development and Production Expenditures means direct expenditures on
------------------------------------------
Development and Production Operations and general expenses made in connection
with the development of a Field, excluding expenditures made within the area of
a Field before Commercial Discovery has been declared. These expenditures shall
be determined in accordance with the Accounting Procedure attached hereto as
Annex "C."
(j) Petroleum Operations Expenditures means expenditures made and
-----------------------------------
obligations incurred in carrying out Petroleum Operations hereunder, determined
--
in accordance with the Accounting Procedure attached hereto as Annex "C" and
made a part hereof.
(k) Barrel means a quantity or unit of Crude Oil equal to 158.9874 liters
------
(forty-two (42) United States gallons) at a temperature of 15.56 degrees
Centigrade (sixty (60) degrees Fahrenheit) under one atmosphere of pressure.
(l) Field means an area within the Contract Area, as determined in
-----
accordance with Section 2.6.
(m) Well means any opening in the ground or seabed made or being made by
----
drilling or boring, or in any other manner, for the purpose of discovering, and
delineating and/or producing Crude Oil or Natural Gas, or for the injection of
any fluid into an underground deposit, other than a seismic hole or a structure
test hole or stratigraphic test hole.
(n) Commercial Discovery means a discovery of Hydrocarbons that, in the
---------------------
judgment of CONTRACTOR, can be produced commercially, based on its consideration
of all pertinent operating and financial data.
(o) Work Program means an itemized statement of the Petroleum Operations to
-------------
be carried out in the Contract Area as set forth in Section IV.
(p) Budget of Petroleum Operations Expenditures means the estimate of the
----------------------------------------------
costs of all items included in the Work Program.
(q) Calendar Year or Years means a period of twelve (12) months commencing
------------------------
January 1 and ending on the following December 31, according to the Gregorian
Calendar.
(r) Contract Year means a period of twelve (12) consecutive months according
-------------
to the Gregorian Calendar, starting from the Effective Date of this Contract or
from the anniversary of such Effective Date.
(s) Gross Receipts means the sum of all sales proceeds and the monetary
---------------
equivalent value of other Hydrocarbons dispositions from the Contract Area in
any given calendar year.
(t) Income Tax means the tax levied on CONTRACTOR's net income pursuant to
-----------
the Tax Law of the Republic of Equatorial Guinea.
(u) Calendar Quarter means a period of three (3) consecutive months
-----------------
beginning January 1, April 1, July 1 or October 1 and ending March 31, June 30,
September 30 or December 31, respectively.
(v) Effective Date means the approval date of this Contract by the STATE in
---------------
accordance with the provisions of the Hydrocarbons Law as evidenced by
publication of this Contract in the Official Bulletin of the Republic of
Equatorial Guinea or in the national information media (whichever publication
occurs first), after approval of this Contract by the Supreme Court of Justice
of the Republic of Equatorial Guinea and ratification by the President of the
Republic of Equatorial Guinea.
(w) Foreign Exchange means currency acceptable to the Parties other than
-----------------
that of the Republic of Equatorial Guinea.
(x) Hydrocarbons Law means Decree-Law No. 7/1981 of 16 June, as amended.
----------------
(y) Contract Area means the geographic territory of the Republic of
--------------
Equatorial Guinea the subject of this Contract. Such Contract Area is described
in Annex "B" and delineated in Annex "A" attached hereto and incorporated
herein.
(z) Royalty means for each Field, the percentages listed below corresponding
-------
to the cumulative production of all the Crude Oil produced, saved and sold from
the said Field and not otherwise utilized in Petroleum Operations:
<PAGE>
CUMULATIVE FIELD PRODUCTION ROYALTY
-------
The first 100 million barrels 10%
Greater than 100 million barrels to 300
million barrels 12.5%
Greater than 300 million barrels 15%
and ten percent (10%) of all the Natural Gas produced, saved and sold from the
Contract Area and not otherwise utilized in Petroleum Operations.
(ab) Maximum Efficient Rate means the maximum rate of Hydrocarbons
------------------------
production in a Field, without excessive decline or loss of reservoir pressure,
and in accordance with the norms and practices of the petroleum industry and
Section 6.3 of this Contract.
(ab) Semester, as used in Section 7.8 means a period of six (6) consecutive
--------
months, commencing the first of January and the first of July of each Calendar
Year.
(ac) Hydrocarbons means all natural, organic substances composed of CARBON
------------
and HYDROGEN including crude oil and natural gas and all other mineral
substances, products, subproducts and by-products encountered in association
therewith.
(ad) Area of Provisional Discovery is defined in Section 2.4
--------------------------------
(ae) Tax Law means Decree Law No. 1/1986 of February 10, of the Republic of
--------
Equatorial Guinea, as amended prior to the Effective Date.
(af) Exploration Well means a Well that is not a development, evaluation or
-----------------
injection well, and its only objective is to determine the existence of
Hydrocarbons in a structure.
(ag) Evaluation Well means a Well drilled following a discovery of
----------------
Hydrocarbons to delineate and locate the reservoir and to estimate the quantity
of recoverable Hydrocarbons.
II. TERM, TERMINATION, AND CANCELLATION
--------------------------------------
2.1 CONTRACTOR is authorized to conduct Exploration Operations during an
initial exploration period of five (5) years, starting from the Effective Date.
When CONTRACTOR has fulfilled its obligations hereunder for the initial
exploration period, then upon application of CONTRACTOR made not later than
ninety (90) calendar days prior to the fifth, sixth, and seventh anniversary of
the Effective Date, as the case may be, the MINISTRY shall extend the period
when Petroleum Operations may be conducted as follows:
(a) after the fifth (5th) Contract Year for an additional period of one (1)
Contract Year during which year CONTRACTOR shall drill in areas covered by
waters less than two hundred (200) meters deep at least one (1) Exploration
Well;
(b) after the sixth (6th) Contract Year for an additional period of one (1)
Contract Year during which year CONTRACTOR shall drill in areas covered by
waters less than two hundred (200) meters deep at least one (1) Exploration
Well;
(c) if after the fifth (5th) Contract Year CONTRACTOR commits to drill at
least one (1) Exploration Well in an area covered by water deeper than two
hundred (200) meters, for an additional period of two (2) Contract Years; and
(d) if during the seventh (7th) Contract Year CONTRACTOR encounters a show
of Hydrocarbons that CONTRACTOR believes is sufficient to warrant further
evaluation drilling, for a period of one (1) Contract Year during which year
CONTRACTOR shall drill one (1) Evaluation Well in an area designated by mutual
agreement of MINISTRY and CONTRACTOR.
2.2 Notwithstanding anything contained herein, CONTRACTOR, at its sole
discretion, after fulfilling its minimum Work Program for the first two (2)
Contract Years pursuant to 4.3(a), may terminate this Contract in its entirety
without further obligation except with respect to any obligation under this
Contract due and owing at the time of said termination. Furthermore, CONTRACTOR
shall have the option to extend the exploration period and to conduct Petroleum
Operations beyond the first two (2) Contract Years as indicated below:
(a) After the second Contract Year, CONTRACTOR may elect to continue this
Contract for an additional period of one (1) year, during which year CONTRACTOR
will fulfill the minimum Work Program under Section 4.3(b)(i);
(b) After the third Contract Year, CONTRACTOR may elect to continue this
Contract for an additional period of one (1) year, during which year CONTRACTOR
will fulfill the minimum Work Program under Section 4.3(b)(ii);
(c) After the fourth Contract Year, CONTRACTOR, may elect to continue this
Contract for an additional period of one (1) year, during which year CONTRACTOR
will fulfill the minimum Work Program under Section 4.3(b)(iii);
After fulfilling the minimum Work Program for each of the extension periods
above, CONTRACTOR shall have the right to terminate this Contract in its
entirety without further obligation except with respect to any obligations under
this Contract due and owing at the time of said termination. CONTRACTOR shall
make its election, if any, to extend the exploration period as provided in
Sections 2.2(a), (b) and (c) above not later than ninety (90) calendar days
prior to the second, third and fourth anniversary of the Effective Date, as the
case may be.
2.3 If CONTRACTOR has not elected to terminate this Contract pursuant to
Section 2.2 and no Commercial Discovery has been made, and if CONTRACTOR does
elect to extend the Contract beyond the fifth (5th) Contract Year pursuant to
Section 2.1, then this Contract shall terminate automatically in its entirety
except with respect to Areas of Provisional Discovery, which shall remain part
of the Contract Area pending final determination by the CONTRACTOR as to whether
said Area of Provisional Discovery will be declared a Commercial Discovery.
However, an extension of one (1) year may be granted by the MINISTRY so
CONTRACTOR may finish drilling and testing any Well actually being drilled or
tested at the end of the fifth (5th), sixth (6th), seventh (7th) or eight (8th)
Contract Year.
2.4 Upon encountering indications of a substantial accumulation of
Hydrocarbons in the Contract Area, the CONTRACTOR as soon as possible will
notify the MINISTRY of this fact, indicating in the notice the particular
details of the location, nature and size of the accumulation. After giving such
notification to the MINISTRY, the CONTRACTOR as soon as practicable will submit
to the MINISTRY a report showing the results of any preliminary production tests
carried out, including, when necessary, the estimate of the oil or gas in place
and the recoverable reserves of the accumulation and the approximate extension
of said discovery in the Contract Area (hereinafter referred to as the "Area of
Provisional Discovery"). The decision to delineate the Area of Provisional
Discovery shall be at CONTRACTOR's discretion taking into account a reasonable
interpretation of the data and shall be in accordance with normal petroleum
industry practices.
2.5 Within each Area of Provisional Discovery CONTRACTOR shall carry out
evaluation work, including, as appropriate, seismic work and drilling. As soon
as possible, CONTRACTOR shall determine whether the discovery is a Commercial
Discovery. Provided that if there is insufficient time to properly evaluate the
discovery within the then current exploration period, upon CONTRACTOR's request,
the MINISTRY shall grant CONTRACTOR a reasonable extension to fully evaluate
such discovery.
2.6 When it is determined that the discovery of Hydrocarbons is a Commercial
Discovery in accordance with Section 2.5, CONTRACTOR shall notify the MINISTRY,
and CONTRACTOR shall submit to the MINISTRY, in writing, for its written
approval, which approval will not be unreasonably withheld the following:
(a) a report including a map showing the extension of the area of Commercial
Discovery within the Contract Area; the area when said report is accepted by
MINISTRY will constitute a Field;
(b) a Work Program for development of the Field, including an estimate of
the costs of Development and Production Expenditures necessary for the
development of the Field;
(c) the estimated Maximum Efficient Rate of production (that shall be
established in accordance with Section 6.3) that CONTRACTOR intends to produce
the Field; and
(d) the schedule of the most accelerated program consistent with good
international petroleum industry practice for implementation of CONTRACTOR's
Work Program.
Any report submitted by CONTRACTOR to the MINISTRY will be deemed accepted by
the MINISTRY ninety (90) calendar days after CONTRACTOR's submittal unless
CONTRACTOR is notified otherwise in such time period by the MINISTRY.
2.7 This Contract will continue in existence with respect to each Field for
a period of thirty (30) years with respect to Crude Oil and for forty (40) years
with respect to Natural Gas starting from the date CONTRACTOR, in accordance
with the provisions of Section 2.6, receives approval from the MINISTRY that the
discovery of Hydrocarbons in such Field is a Commercial Discovery. In case of
new Commercial Discoveries as a result of new exploratory drilling on formations
that underlie or overlie each other or other deposits found within the extension
of the area of the original Commercial Discovery, such formations will
constitute only one Field; and the Field will be defined or redefined as may be
necessary, to incorporate all of the underlying and overlying formations and all
deposits located within the extension of the area of the original Commercial
Discovery, and the provisions of Section 2.6 shall apply mutatis mutandis to any
------- --------
such new Commercial Discovery.
2.8 CONTRACTOR shall have the right to terminate this Contract totally or
partially;
(a) with respect to any part of the Contract Area other than a Field then
producing or that prior thereto had produced Crude Oil or Natural Gas upon
giving ninety (90) calendar days written notice of its intention to do so; and
(b) with respect to any field then producing or that prior thereto had
produced Crude Oil or Natural Gas, upon giving one hundred eighty (180) calendar
days written notice of its intention to do so.
2.9 Subject to Section 2.10, the STATE shall have the right to cancel this
Contract upon giving sixty (60) calendar days written notice of its intention to
do so, if CONTRACTOR:
(a) fails to make any monetary payment required by law or under this
Contract for a period of thirty (30) days after the due date for such payment;
(b) fails to comply with any other material obligation that it has assumed
under this Contract;
(c) fails to comply with any regulations issued in accordance with this
Contract by the MINISTRY, or any governmental department or agency of the
Republic of Equatorial Guinea materially affecting the Petroleum Operations or
the interests of the STATE referred to in this Contract;
(d) suspends its payments under this Contract, because of insolvency or
makes a settlement with its creditors; or
(e) has not commenced production from a Field within the period of time
specified in the development plan according to the terms and conditions
specified in Section 2.5 without reasonable justification;
provided that CONTRACTOR's actions or inactions, as the case may be, have a
material impact on the petroleum Operations and are not in accordance with
industry standards.
2.10 If the circumstance or circumstances that would otherwise result in
cancellation under Sections 2.9(a), (b), (c) or (d) are remedied by CONTRACTOR
or CONTRACTOR begins to remedy the circumstance and proceeds with such remedy
with due diligence within the sixty (60) calendar day period following the
notice of termination as aforesaid, then such termination shall not become
effective. If CONTRACTOR cannot completely rectify or remedy the cause or
causes within the sixty (60) day period, the CONTRACTOR may request from the
MINISTRY an extension or extensions to complete the remedies and the MINISTRY,
according to the criteria generally accepted in the industry, shall not
unreasonably withhold the approval of such extensions if CONTRACTOR is
diligently pursuing the remedies.
2.11 The termination or cancellation of this Contract, for whatever reason,
shall be without prejudice to the obligations incurred and not carried out by
the STATE or CONTRACTOR before the termination of this Contract.
2.12 In the event of cancellation pursuant to Section 2.9, the MINISTRY may
require CONTRACTOR to continue for the account of the STATE Crude Oil or Natural
Gas production activities until the right to continue such production has been
transferred by the MINISTRY to another Person. In this case, all provisions
relevant to CONTRACTOR's entitlement under this Contract will remain in force.
In no event shall CONTRACTOR have any obligations under this Section for more
than ninety (90) calendar days after such termination, unless otherwise agreed
to by the Parties.
2.13 Within ninety (90) calendar days after the termination of this
Contract, unless the MINISTRY has required an extension of this period,
CONTRACTOR shall have the obligation to take any reasonably necessary action as
directed by the MINISTRY, including the cessation or continuation of Petroleum
Operations to prevent pollution, environmental damage or a hazard to human life
or third party property.
III. SURRENDER OF AREAS
--------------------
3.1 Subject to Section 3.3, CONTRACTOR shall surrender thirty percent (30%)
of the original Contract Area no later than the end of the third Contract Year.
3.2 Subject to Section 3.3, if CONTRACTOR elects to extend the exploration
period pursuant to Section 2.1 above, CONTRACTOR shall surrender an additional
area equal to twenty percent (20%) of the remaining Contract Area no later than
the end of the fifth Contract Year.
3.3 CONTRACTOR shall not be obligated to surrender any portion of the
original Contract Area declared an Area of Provisional Discovery or a Field.
CONTRACTOR's surrender obligations under Sections 3.1 and 3.2 shall apply to the
area remaining after excluding from the original Contract Area areas declared to
be an Area of Provisional Discovery or a Field and areas previously surrendered
by CONTRACTOR.
3.4 After the mandatory surrenders as set forth in this Section III,
CONTRACTOR shall maintain a reasonable exploration effort with regard to the
remaining portion of the Contract Area.
3.5 Upon at least thirty (30) calendar days written notice to the MINISTRY
prior to the end of the first Contract Year and similarly prior to the end of
any succeeding Contract Year, CONTRACTOR may surrender any portion of the
Contract Area, and such portion shall then be credited against that portion of
the Contract Area CONTRACTOR is next required to surrender under the provisions
of Sections 3.1 and 3.2 hereof.
3.6 CONTRACTOR shall notify the MINISTRY sixty (60) calendar days prior to
the date of surrender, the description of the portion of the area to be
surrendered. The individual portions being surrendered, whenever possible,
shall be of sufficient size and convenient shape, taking into account contiguous
areas already relinquished and not the subject of a further contract, to enable
Petroleum Operations to be carried out thereon and the boundaries of such areas
shall be delineated in exact degrees, minutes and seconds of longitude and
latitude.
3.7 CONTRACTOR shall plug and abandon all Wells drilled by Contractor on the
area to be surrendered in accordance with generally accepted oilfield practices.
3.8 No surrender made in accordance with this Section III shall relieve
CONTRACTOR or its surety of the obligation to pay surface rentals accrued, or
making payments due and payable as a result of exploration and development
activities conducted through the date of surrender.
IV. WORK PROGRAM AND EXPENDITURES
--------------------------------
4.1 CONTRACTOR shall commence Petroleum Operations hereunder not later than
ninety (90) calendar days after the Effective Date.
4.2 CONTRACTOR shall be entitled to employ any person qualified, in the
judgment of CONTRACTOR, to undertake on its behalf such geological and
geophysical surveys, drillings or similar investigations as it may decide. Any
subcontractor retained by CONTRACTOR shall have the necessary professional
experience to perform the task assigned and shall be required, by written
agreement with CONTRACTOR, to abide by all relevant terms of this Contract and
all applicable laws and regulations of the Republic of Equatorial Guinea.
CONTRACTOR within thirty (30) calendar years and shall advise the MINISTRY of
the name and address of any subcontractor retained.
4.3 During the first five (5) Contract Years, CONTRACTOR agrees to perform
the following minimum Work Program:
(a) FIRST TWO CONTRACT YEARS:
---------------------------
(i) Reprocess approximately one-thousand eight-hundred (1,800) kilometers of
existing seismic data;
(ii) Acquire one-thousand (1,000) kilometers of new seismic data;
(iii) Drill one (1) Well contingent upon the identification of a structure
which, in CONTRACTOR's opinion, is a drillable prospect;
(b) THIRD, FOURTH AND FIFTH CONTRACT YEARS:
-------------------------------------------
CONTRACTOR shall perform the following work in the event it exercises the option
to extend pursuant to Sections 2.2(a), 2.2(b) or 2.2(c):
(i) Drill one (1) Well in third Contract Year and conduct additional
complementary work and associated analyses of technical data as CONTRACTOR deems
appropriate;
(ii) Drill one (1) Well in the fourth Contract Year contingent upon the
identification of a structure that, in CONTRACTOR's opinion, is a drillable
prospect, and conduct additional complementary work and associated analyses of
technical data as CONTRACTOR deems appropriate;
(iii) Drill one (1) Well in the fifth Contract Year and conduct additional
complementary work and associated analyses of technical data, as CONTRACTOR
deems appropriate.
4.4 In case the work completed by CONTRACTOR during any phase referred to in
Section 4.3 exceeds the minimum work for that phase, the excess work may be
carried forward and credited against the minimum work obligation in the next
succeeding phase.
4.5 As a condition precedent to the effectiveness of this Contract,
CONTRACTOR shall provide a security by means of a parent company performance
guarantee to the MINISTRY substantially in the form of the guaranty set forth in
ANNEX "D" and corresponding to Four Million United States Dollars (U.S.
$4,000,000) for each Well CONTRACTOR commits to drill and One Million United
States Dollars (U.S. $1,000,000) for other Petroleum Operations CONTRACTOR
commits to conduct during the first two (2) Contract Years. If CONTRACTOR
extends the period for Exploration Operations pursuant to Section 2.1 or 2.2,
then CONTRACTOR on or before the date any such extension becomes effective shall
provide an additional parent company performance guarantee as security
substantially in the form of the guaranty set forth in Annex "D" and
corresponding to an amount to be determined at the time of the extension by the
MINISTRY and CONTRACTOR for Petroleum Operations CONTRACTOR commits to conduct
during the period of any such extension. If at the end of the period of the
phases for Exploration Operations, including any extension thereof made pursuant
to Sections 2.1 and 2.2 hereof, or upon the date of termination of this
Contract, whichever first occurs, CONTRACTOR has not performed the obligations
described in the minimum Work Program, the balance of the security corresponding
to the minimum expenditures for Petroleum Operations and the entirety of the
security corresponding to the Well shall be paid automatically to the STATE in
accordance with the provisions of Annex "D."
4.6 One hundred twenty (120) calendar days prior to the beginning of each
Calendar Year or at such other time as otherwise mutually agreed by the parties,
CONTRACTOR shall prepare and submit for approval to the MINISTRY a Work Program
and Budget of Petroleum Operations Expenditures for the Contract Area setting
forth the Petroleum Operations CONTRACTOR proposes to carry out during the
ensuing Calendar Year. After thirty (30) calendar days and within a period of
ninety (90) calendar days of its submission, the MINISTRY may ask for
clarification of the Work Program and Budget of Petroleum Operations
Expenditures and/or submit proposals for consideration by the Contractor for the
revision of specific features thereof relating to the type and cost of the works
and operations. In the absence of such proposals or a request for
clarification, the Work Program and Budget of Petroleum Operations Expenditures
shall be deemed to have been approved by the Ministry. Approval by the MINISTRY
of the proposed Work Program and Budget of Petroleum Operations Expenditures
will not be unreasonably withheld or delayed. If the Parties cannot agree on
the Work Program and Budget of Petroleum Operations Expenditures, CONTRACTOR is
hereby authorized to begin work necessary to carry out its proposed Work Program
in a timely and practical manner until the Parties reach a mutually acceptable
Work Program and Budget of Petroleum Operations Expenditures. The MINISTRY
shall give a letter to CONTRACTOR authorizing in a provisional manner the
beginning of said provisional Work Program and Budget of Petroleum Operations
Expenditures until the MINISTRY approves the final Work Program and Budget of
Petroleum Operations Expenditures. The Parties shall meet within a period of
fifteen (15) days from date of issuance of the provisional Work Program and
Budget of Petroleum Operations Expenditures from the MINISTRY and use all
diligence to reach a mutually acceptable agreement.
4.7 It is recognized by the Parties that the details of a Work Program may
require changes in the light of unforeseen circumstances and nothing herein
contained shall limit the right of CONTRACTOR to make such changes, provided
such changes do not alter the general objectives of the Work Program.
4.8 The Parties further recognize that in the event of an emergency or
extraordinary circumstances requiring immediate action, either Party may take
actions it deems proper or advisable to protect its interests and those of its
employees and any costs so incurred by CONTRACTOR shall be included in the
Petroleum Operations Expenditures. Costs incurred by CONTRACTOR related to
measures of prevention and protection related to the environment shall be
included as costs of Petroleum Operations Expenditures as cost recoverable.
Costs incurred by CONTRACTOR related to cleaning up pollution or damage to the
environment caused by CONTRACTOR shall not be included in Petroleum Operations
Expenditures and shall not be cost recoverable except the first Two Hundred
Thousand United State Dollars (U.S. $200,000) per occurrence related to such
cleanup or damages per incident shall be included as costs of Petroleum
Operations Expenditures and shall be cost recoverable.
4.9 Within ninety (90) calendar days after the expiration of a Calendar
Year, CONTRACTOR shall submit to the MINISTRY detailed accounts showing the
Exploration and/or Development and Production Expenditures CONTRACTOR has
incurred during the past Calendar Year. The accounts shall be certified by an
independent outside accountant acceptable to both Parties. It is understood
that the MINISTRY retains the authority to review and audit occasionally
CONTRACTOR's books with respect to Petroleum Operations conducted hereunder.
Such audit right will terminate two (2) years after closure of the subject
year's accounts. Any exceptions to Contractor's accounts must be officially
communicated to the CONTRACTOR within three (3) years of the closure of the
subject year's accounts.
4.10 During the term of this Contract, CONTRACTOR in accordance with good
petroleum industry practice shall be responsible for carrying out all the
necessary work in connection with abandonment (which includes the removal,
proper disposal, alternative innovative recycling or salvage) of any Petroleum
Operations Facilities, including, but not limited to, platforms, artificial
structures, wellhead equipment, tubulars, and flowlines deemed by the MINISTRY
to be unusable or no longer required for future operations. CONTRACTOR shall
submit for the MINISTRY's approval detailed work plans for such removal,
disposal or salvage. All costs incurred by CONTRACTOR to remove, dispose or
salvage such facilities shall be cost recoverable. For the purpose of setting
up a financial mechanism to recover such costs earlier in the life of a Field,
CONTRACTOR and the MINISTRY shall agree on a mechanism and modality for setting
aside a reserve on CONTRACTOR's books as part of Petroleum Operations
Expenditures, subject to cost recovery, to be used for such removal, disposal or
salvage operations, no later than two years after commencement of the first
commercial production.
V. CONDUCT OF PETROLEUM OPERATIONS BY CONTRACTOR
--------------------------------------------------
5.1 CONTRACTOR shall conduct the Petroleum Operations diligently and in
accordance with generally accepted standards of the petroleum industry designed
to enable production at the Maximum Efficient Rate of Crude Oil and at the level
of production of Natural Gas specified in Section 6.3. CONTRACTOR shall ensure
that all equipment, plant and installations used by CONTRACTOR or its
subcontractors comply with generally accepted engineering norms and are of
proper and accepted construction and are kept in optimal working order.
5.2 CONTRACTOR shall in particular take all reasonable steps necessary in
accordance with generally accepted standards of the petroleum industry to:
(a) without prejudice to Section 5.3, ensure that Crude Oil or Natural Gas
discovered and produced within the Contract Area does not escape or is not in
any other way wasted;
(b) prevent damage to under or over Crude Oil or Natural Gas-bearing strata;
(c) prevent the nonintentional entrance of water through Wells to Crude Oil
or Natural Gas-bearing strata;
(d) Prevent damage to under or over water-bearing strata;
(e) Conduct all Petroleum Operations under this Contract in accordance with
applicable law and regulations and in a manner that does not conflict with
obligations imposed on the Republic of Equatorial Guinea by international law;
(f) Take necessary precautions for protection of navigation and fishing and
to prevent pollution of the sea or rivers;
(g) Indemnify, defend and save the STATE harmless against all claims, losses
and damage of any nature, whatever, including without limitation, claims for
loss or damage to property or injury to persons caused by, or resulting from,
any operation conducted by or on behalf of CONTRACTOR; provided that the
CONTRACTOR shall not be held responsible to the STATE under this subsection for
any loss, claim, damage, or injury caused by, or resulting from any negligent
action of personnel of the STATE including, but not limited to, subcontractors
of the STATE, other than CONTRACTOR, and employees of the State;
(h) Subject to Section 2.4, drill and produce a Field without regard to
CONTRACTOR's contractual interest, if any, in an adjacent contract area.
5.3 The Natural Gas CONTRACTOR does not utilize in its own operations in the
Contract Area, or sell, shall be reinjected into the subsurface structure. When
the existing technical and financial circumstances require the flaring of
Natural Gas, the MINISTRY may authorize such flaring. The MINISTRY shall,
nevertheless, authorize the flaring of Natural Gas for periods of relatively
short duration during production tests, and in cases when the flaring of
relatively small quantities of Natural Gas is a necessary part of Crude Oil
production and is in accordance with good practice within the petroleum
industry.
5.4 If any works or installations erected by CONTRACTOR or any operations
undertaken by CONTRACTOR endanger Persons or third-party property or cause
pollution or harm marine life to an unacceptable degree, the CONTRACTOR, in
consensus with the MINISTRY, shall take opportune remedial measures within a
reasonable period established by the MINISTRY and the CONTRACTOR to repair any
damage to the environment. CONTRACTOR shall, if required by the nature and
severity of the damage, suspend the Petroleum Operations in whole or in part,
until CONTRACTOR has taken such remedial measures or has repaired the damage.
5.5 To ensure that CONTRACTOR shall meet its obligations to third parties or
to government agencies that might arise in the event of damage or injury
(including environmental damage or injury ) caused by Petroleum Operations,
notwithstanding its accidental nature, CONTRACTOR shall maintain in force a
third party liability insurance policy covering its Petroleum Operations.
CONTRACTOR shall provide to the MINISTRY, within thirty (30) calendar days after
the Effective Date, documents that prove the effectiveness of CONTRACTOR's third
party liability insurance covering its Petroleum Operations. To the extent such
third party liability insurance is unavailable, or is not obtained, or does not
cover part or all of any claim or damage caused by or resulting from Petroleum
Operations, including damage to the environment as mentioned in Section 4.8,
CONTRACTOR shall remain wholly responsible and shall defend, indemnify and hold
harmless the MINISTRY and the State against all claims or loss, except for
claims arising from the negligence of the MINISTRY or STATE to their employees
or their subcontractors other than CONTRACTOR.
5.6 If, after the Effective Date of this Contract, others are granted
permits or licenses within the Contract Area for exploration/production of any
minerals other than Crude Oil or Natural Gas, CONTRACTOR shall use his best
efforts to avoid obstruction or interference with such licensees' operations
within the Contract Area. The MINISTRY shall use its best efforts to ensure
that operations of third parties do not obstruct CONTRACTOR's Petroleum
Operations within the Contract Area.
5.7 CONTRACTOR shall provide acceptable working conditions, living
accommodations on offshore installations, and access to medical attention and an
infirmary for all personnel employed by CONTRACTOR or its subcontractors in its
Petroleum Operations.
5.8 CONTRACTOR's Well design and drilling, including, but not limited to,
CONTRACTOR's casing, cementing and drilling programs shall be in accordance with
generally accepted industry practice.
5.9 Every Well shall be identified by a number, and shall be shown on maps,
plans and similar records CONTRACTOR is required to keep. The MINISTRY shall at
once be notified of any change on the identification numbers.
5.10 No Well shall be drilled through any vertical boundary of the Contract
Area. A directional Well drilled to an objective under the Contract Area from a
nearby surface location not covered by the Contract shall be deemed to have the
same effect for all purposes of the Contract as a Well drilled from a surface
location on the Contract Area. In such circumstances and for purposes of this
Contract, production of Crude Oil or Natural Gas from the Contract Area through
a directional Well surfaced nearby, or drilling or reworking of any such
directional Well, shall be considered production or drilling or reworking
operations (as the case may be) on the Contract Area for all purposes of this
Contract. Nothing contained in this paragraph is intended or shall be construed
as granting to the CONTRACTOR any leasehold interests, licenses, easements, or
other rights the CONTRACTOR may have to acquire lawfully under the Hydrocarbons
Law or from the MINISTRY or third parties.
5.11 Before commencing any work on drilling of any Well covered by a Work
Program and Budget of Operating Expenditures or recommencing work on any Well on
which work has been discontinued for more than six (6) months, CONTRACTOR shall
give the MINISTRY seven (7) calendar days written notice; however, if the
estimated amount to be spent on said work is less than One Hundred Thousand
United States Dollars (U.S. $100,000), notice shall not be required.
5.12 Before abandoning any Field, CONTRACTOR shall give ninety (90) calendar
days notice to the MINISTRY of its intention to abandon. Upon receipt of such
notice, the MINISTRY may elect to assume operation of the Well or Wells proposed
for abandonment; however, MINISTRY's operations shall not interfere with those
of CONTRACTOR. The MINISTRY's failure to so elect, by notice to the CONTRACTOR
in writing within the aforementioned ninety (90) day period, shall be deemed
approval of the CONTRACTOR's proposal to abandon.
5.13 CONTRACTOR shall securely plug any Well that it intends to abandon to
prevent pollution, damage to the environment, and possible damages to the
reservoir.
VI. RIGHTS AND OBLIGATIONS OF THE PARTIES, DETERMINATION OF PRODUCTION
------------------------------------------------------------------------
LEVELS
------
6.1 Subject to the provisions of paragraphs (e) and (f) of this Section 6.1,
CONTRACTOR shall have the following rights and obligations:
(a) advance all necessary funds and purchase or lease all material,
equipment and supplies required in connection with the Petroleum Operations;
(b) furnish all technical aid, including foreign personnel, required for the
performance of the Petroleum Operations;
(c) furnish all such other funds for the performance of the Petroleum
Operations as may be required, including payment to foreign entities performing
services as subcontractors;
(d) retain control to all leased property paid for with Foreign Exchange and
brought into the Republic of Equatorial Guinea under the rules of temporary
importation, and as such, shall have the right to freely export same from the
Republic of Equatorial Guinea in accordance with the Hydrocarbons Law;
(e) have the right prior notification to the Ministry to sell, assign,
transfer, convey or otherwise dispose of any part or all of the rights and
interests and obligations under this Contract to any Affiliated Company;
(f) have the right to sell, assign, transfer, convey or otherwise dispose of
all or any part of its rights and interests and obligations under this Contract
to parties other than Affiliated Companies with the prior written consent of the
MINISTRY, such consent shall not be unreasonably withheld, and shall be deemed
granted if the MINISTRY does not respond to CONTRACTOR within sixty (60)
calendar days of CONTRACTOR's written request for consent;
(g) have the right at all times to enter and exit the Contract Area and any
facilities used in the Petroleum Operations, wherever located;
(h) have the right to use and have access to all geological, geophysical,
drilling, Well, production and other information held by the MINISTRY or by any
other governmental agency or enterprise, or enterprise in which the STATE
participates, relating to the Contract Area, including Well location maps. The
MINISTRY must supply the same to the CONTRACTOR;
(i) submit in an appropriate form to the MINISTRY copies of all such
geological, geophysical, drilling, Well, production and other data, reports,
interpretations and maps, and cuttings of all samples that have been obtained or
compiled during the term hereof;
(j) include in the Work Program and Budget of Petroleum Operations
Expenditures the following sums to be spent on training personnel of the
MINISTRY and citizens of the Republic of Equatorial Guinea for professional,
skilled and technical jobs in CONTRACTOR's Petroleum Operations. In conjunction
with the preparation of the annual Budget of Petroleum Operations Expenditures,
CONTRACTOR and MINISTRY will jointly agree on a training program where these
sums will be expended. CONTRACTOR agrees to be responsible for the
implementation and direct funding of the referenced training programs, and the
expenditures will be included as cost recoverable in its Petroleum Operations
Expenditures:
(i) Fifty Thousand United States Dollars (U.S. $50,000) in each of the first
and second Contract Years;
(ii) Seventy-Five Thousand United States Dollars (U.S. $75,000) in the third
Contract Year and in every year thereafter until a Commercial Discovery is
determined in accordance with Section 2.5. For the year when Commercial
Discovery is determined, the training obligation to be spent under this Section
6.1(j)(ii) will be prorated from January 1 of that year through the date on
which Commercial Delivery is determined;
(iii) One Hundred Thousand United States Dollars (U.S. $100,000) per year
from the time of determination of Commercial Discovery to the date of first
commercial production. For the year when the training obligation under this
Section 6.1(j)(iii) takes effect, the amount to be spent will be prorated from
the date of determination of Commercial Discovery through December 31 of that
year; and
(iv) Two Hundred Thousand United States Dollars (U.S. $200,000) per year
from the time of first commercial production and for each year thereafter until
termination of the Contract. For the year when the training obligation under
this Section 6.1(j)(iv) takes effect, the amount to be spent will be prorated
from the date of first commercial production through December 31 of that year.
CONTRACTOR shall make all reasonable efforts to employ and train citizens of the
Republic of Equatorial Guinea in Petroleum Operations. CONTRACTOR may employ
non-citizens, if in the opinion of CONTRACTOR and not contested by the MINISTRY,
no Equatorial Guinean citizens can be found with sufficient skill and technical
qualifications. CONTRACTOR shall make similar requirements of any
subcontractor. At intervals of not more than one year CONTRACTOR shall submit
to the MINISTRY reports detailing the personnel employed and their residence
when employed. CONTRACTOR shall provide, as CONTRACTOR deems necessary,
on-the-job training for citizens of the Republic of Equatorial Guinea to
undertake skilled and technical jobs in the Petroleum Operations. Costs and
expenses of training citizens of Equatorial Guinea as well as costs and expenses
for a program of training for the MINISTRY's personnel, shall be included in
Petroleum Operation Expenditures;
(k) appoint an authorized representative for the Republic of Equatorial
Guinea with respect to this Contract, who shall have an office in Equatorial
Guinea;
(l) give preference to goods and services that are produced in the Republic
of Equatorial Guinea or rendered by citizens of the Republic of Equatorial
Guinea, provided such goods and services are offered at equally advantageous
conditions with regard to quality, price, and immediate availability in the
quantities and to the specifications required;
(m) pay to the STATE the corresponding taxes in accordance with the Tax Law;
(n) pay to the STATE the corresponding Royalty pursuant to the terms and
conditions of this Contract;
(o) except as provided in Section 7.10 hereof, have the right during the
term hereof to freely lift, dispose of and export its share of Crude Oil, and
retain abroad the Foreign Exchange proceeds obtained therefrom;
(p) notify the MINISTRY at least forty-eight (48) hours before the
abandonment of any Well.
6.2 THE MINISTRY SHALL:
--------------------
(a) except with respect to CONTRACTOR's obligations to pay the taxes set
forth at paragraph 6.1(m) of this Section VI, assume and discharge all other
taxes CONTRACTOR would otherwise be subject, including transfer tax, import and
export duties on materials, equipment and supplies brought into the Republic of
Equatorial Guinea by CONTRACTOR, its contractors and subcontractors; likewise,
it will comply with all taxes required with regard to property, capital, net
worth, operations, remittances or transactions (whether exacted directly or by
the requirement of stamp taxes on documents or the use of sealed paper),
including any tax or levy on or in connection with operations performed
hereunder by CONTRACTOR in accordance with this Contract. The MINISTRY shall
not be obligated to pay CONTRACTOR's Royalty, Income Tax, nor taxes on tobaccos,
liquor and personal income tax; nor shall it be obligated to pay the Income Tax
and other taxes not listed in the preceding sentence payable by contractors and
subcontractors. The obligations of the MINISTRY hereunder shall be deemed to
have been complied with by the delivery to CONTRACTOR within one hundred and
twenty (120) calendar days after the end of each Calendar Year, of documentary
proof in accordance with fiscal laws of the Republic of Equatorial Guinea that
liability for the above-mentioned taxes has been satisfied, except that with
respect to any of such liabilities that CONTRACTOR may be obligated to pay
directly, the MINISTRY shall reimburse it within sixty (60) calendar days after
receipt of invoice. The MINISTRY shall be consulted prior to payment of such
taxes by CONTRACTOR or by any other party on CONTRACTOR's behalf;
(b) otherwise assist and expedite CONTRACTOR's execution of the Work Program
by supplying or otherwise making available all necessary visas, work permits,
import licenses, and rights of way and easements as may be required by
CONTRACTOR or its subcontractors and made available from the resources under the
MINISTRY's control;
(c) have title to all original data resulting from the Petroleum Operations
including, but not limited to, geological, geophysical, petrophysical,
engineering, well logs and completion, status reports, samples and any other
data CONTRACTOR may compile or obtain during the term of this Contract;
provided, however, that CONTRACTOR may retain copies of such data and further
provided that such data shall not be disclosed to third parties by the MINISTRY
without the consent of CONTRACTOR while this Contract remains in effect.
However, for the purpose of obtaining new offers, the MINISTRY may show any
third party geophysical and geological data with respect to that part or parts
of the Contract Area acquired by CONTRACTOR and adjacent to the area of such new
offers, provided that no such data shall be disclosed that was in the possession
of the MINISTRY for less than eleven (11) months. Notwithstanding the
foregoing, the MINISTRY may show data to advisors and consultants of the
MINISTRY that agree to keep the data confidential;
(d) have the right at all reasonable times to inspect CONTRACTOR's Petroleum
Operations, Hydrocarbon measuring devices, logs, plans, maps, and records
relating to Petroleum Operations and surveys or investigations on or with regard
to the Contract Area. MINISTRY shall make every effort to coordinate inspection
activities to avoid interference with Petroleum Operations.
6.3 CONTRACTOR shall produce Crude Oil from the Contract Area at the Maximum
Efficient Rate. CONTRACTOR and MINISTRY shall conduct a review of CONTRACTOR's
production programs prior to the commencement of production from any Field and
establish at that time by agreement the Maximum Efficient Rate and the
production rate for Natural Gas and the dates the Maximum Efficient Rate and the
production rate for Natural Gas will be reviewed and established in the future.
In the case of Natural Gas, the production rate shall not be less than that
required to satisfy any contracts then in existence for the sale of Natural Gas.
6.4 Subject to Section 5.2(b), the Crude Oil production rate shall not be
less than that required to satisfy any contract in existence for the sale of
Crude Oil. In no case the production rate shall damage the reservoir or
reservoirs.
VII. RECOVERY OF PETROLEUM OPERATING COSTS, SHARING OF PRODUCTION, AND
-----------------------------------------------------------------------
DISTRIBUTION OF PRODUCTION
-----------------------
CRUDE OIL:
- ----------
7.1 The respective production shares of the STATE and the CONTRACTOR of
Crude Oil produced and saved shall be determined in accordance with the
definitions and procedures set forth in this Section VII.
7.2 After making Royalty payments to the STATE, CONTRACTOR shall be entitled
to recover all Petroleum Operations Expenditures out of the sales proceeds or
other disposition of Crude Oil produced and saved hereunder and not used in
Petroleum Operations. Any Crude Oil remaining after making the Royalty payments
to the STATE and after all Petroleum Operations Expenditures are recovered by
CONTRACTOR shall be referred hereinafter as "Net Crude Oil." Net Crude Oil
shall be shared between the STATE and the CONTRACTOR in accordance with the
procedures outlined below, designed to ensure total cost recovery by CONTRACTOR,
followed by an escalation of the STATE's share based on increases in the
CONTRACTOR's pre-tax rate of return:
<PAGE>
TOTAL TOTAL
CONTRACTOR'S PRE-TAX STATE SHARE CONTRACTOR SHARE
RATE OF RETURN (% OF NET CRUDE OIL) (% OF NET CRUDE OIL)
-------------- -------------------- --------------------
Less than 18% 0% 100%
Greater or equal to 18% and
less than 25% 10% 90%
Greater or equal to 25% and
less than 40% 35% 65%
Equal or Greater than 40% 55% 45%
7.3 To determine STATE's share of Net Crude Oil, it shall first be necessary
to calculate Net Cash Flow from Petroleum Operations ("Net Cash Flow"). Net
Cash Flow for any given Calendar Year shall be determined by subtracting Royalty
and Petroleum Operations Expenditures from Gross Receipts.
7.4 To calculate the STATE's Share of Net Crude Oil produced from the
Contract Area, there are hereby established three (3) accounts: First Share
Account ("FSA"); Second Share Account ("SSA"); and Third Share Account ("TSA").
7.4.1 First Share Account:
---------------------
a. For purposes of calculating the First Share Account, the following
formula shall be used:
FSA(Y) = FSA(Y-1)(1 + .18 + i) + NCF(Y)
Where: FSA = First Share Account
Y = the Calendar Year in question
NCF = Net Cash Flow
i = the percentage change for the calendar year
in question in the index of U.S. Consumer
prices as reported for the first time in the
monthly publication,"International Financial
Statistics" of the International Monetary Fund.
b. In any Calendar Year when FSA(Y) is negative, the STATE's share of Net
Crude Oil determined with reference to the First Share Account shall be zero.
c. In any Calendar Year when FSA(Y) becomes positive, the CONTRACTOR for
purposes of this section shall be deemed to have earned a pre-tax rate of return
that is equal to or greater than eighteen percent (18%), and the STATE's share
of Net Crude Oil determined with reference to the First Share Account shall be
valued at an amount of Net Crude Oil equal to ten percent (10%) of FSA(Y).
d. In any Calendar Year immediately subsequent to a Calendar Year when
FSA(Y) is positive, for purposes of applying the formula set forth in subsection
(a) of this Section 7.4.1, FSA(Y-1) shall be equal to zero.
7.4.2 Second Share Account
----------------------
a. For purposes of calculating the Second Share Account, the following
formula shall be used:
SSA(Y) = SSA(Y-1)(1 + .25 + i) + (NCF(Y) - GS I(Y))
Where: SSA = Second Share Account
Y = the Calendar Year in question
NCF = Net Cash Flow
GS I = STATE share of Net Crude Oil determined with
reference to the First Share Account
i = the percentage change for the Calendar
Year in question in the index of U.S.
consumer prices as reported for the first
time in the monthly publication
"International Financial Statistics" of
the International Monetary Fund.
b. In any Calendar Year when SSA(Y) is negative, the STATE's share of Net
Crude Oil determined with reference to the Second Share Account shall be zero.
c. In any Calendar Year when SSA(Y) becomes positive, the CONTRACTOR for
purposes of this section shall be deemed to have earned a pre-tax rate of return
that is equal to or greater than twenty-five percent (25%), and the STATE's
share of Net Crude Oil determined with reference to the Second Share Account
shall be valued at an amount of Net Crude Oil equal to twenty-seven and 778/1000
percent (27.778%) of SSA(Y).
d. In any Calendar Year immediately subsequent to a Calendar Year when
SSA(Y) is positive, for purposes of applying the formula set forth in subsection
(a) of this Section 7.4.2, SSA(Y-1) shall be equal to zero.
7.4.3 Third Share Account
- ----- ---------------------
a. For purposes of calculating the Third Share Account, the following
formula shall be used:
TSA(Y) = TSA(Y-1)(1 + .40 + i) + (NCF(Y) - GS I(A) - GS II(Y))
Where: TSA = Third Share Account
Y = the Calendar Year in question
NCF = Net Cash Flow
GS I = STATE share of Net Crude Oil determined with
reference to the First Share Account
GS II = STATE share of Net Crude Oil determined with
reference to the Second Share Account
i = the percentage change for the Calendar
Year in question in theindex of U.S.
consumer prices as reported for the first
time in the monthlypublication "International
Financial Statistics" of the International
Monetary Fund.
b. In any Calendar Year when TSA(Y) is negative, the STATE's share of Net
Crude Oil determined with reference to the Third Share Account shall be zero.
c. In any Calendar Year when TSA(Y) becomes positive, the CONTRACTOR for
purposes of this section shall be deemed to have earned a pre-tax rate of return
that is at least forty percent (40%), and the STATE's share of Net Crude Oil
determined with reference to the Third Share Account shall be valued at an
amount of Net Crude Oil equal to thirty and 769/1000 percent (30.769%) of
TSA(Y).
d. In any Calendar Year immediately subsequent to a Calendar Year when
TSA(Y) is positive, for purposes of applying the formula set forth in subsection
(a) of this Section 7.4.3, TSA(Y-1) shall be equal to zero.
7.4.4 Total STATE Share
-------------------
The total STATE Share of Net Crude Oil in any Calendar Year shall be the sum of
the STATE Share of Net Crude Oil determined with reference to the First Share
Account, the Second Share Account and the Third Share Account for such calendar
year.
7.5 CONTRACTOR, if so directed by the STATE, shall be obligated to market
all crude Oil produced and saved from the Contract Area subject to the
provisions hereinafter set forth.
7.6 Except as provided in paragraph 7.10, CONTRACTOR shall be entitled to
take and receive and freely export Crude Oil allocated for recovery of Petroleum
Operations Expenditures as well as its share of Net Crude Oil.
7.7 Title to the CONTRACTOR's share of Net Crude Oil under this Section VII,
as well as to that portion of Crude Oil exported and sold to recover Petroleum
Operations Expenditures, shall pass to CONTRACTOR at the wellhead.
7.8 If the MINISTRY elects to take any of the STATE's share of Net Crude Oil
in kind, it shall so notify CONTRACTOR in writing not less than ninety (90)
calendar days prior to the commencement of each Semester of each Calendar Year
specifying the quantity that it elects to take in kind, such notice to be
effective for the ensuing Semester of that Calendar Year (provided, however,
that such election shall not interfere with the proper performance of any Crude
Oil sales agreement for Crude Oil produced within the Contract Area that
CONTRACTOR has executed prior to the notice of such election). Failure to give
such notice shall be conclusively deemed to evidence the STATE elects not to
take in kind. Any sale of the STATE's portion of Net Crude Oil shall not be for
a term of more than one Calendar Year without the STATE's consent.
7.9 If the MINISTRY elects not to receive in kind the STATE's share of Crude
Oil, then the MINISTRY may direct the CONTRACTOR to market or buy the STATE's
share of production, whichever CONTRACTOR shall elect to do; provided, however,
the price paid to the MINISTRY for the STATE's share of production shall not be
less than the market price determined in accordance with Section VIII hereof.
CONTRACTOR shall pay the STATE for the STATE's share of the production produced
and saved for each Calendar Quarter; such payment shall be made within thirty
(30) calendar days after the end of the Calendar Quarter when the production
occurred.
7.10 In addition to the State's production share in accordance with the
terms of this Contract, CONTRACTOR is obligated to sell to the STATE at not less
than the market price in accordance with Section VIII hereof, if requested in
writing, a portion of CONTRACTOR's share of Crude Oil for the internal
consumption of the country in accordance with Section 15 of the Hydrocarbons
Law; provided that CONTRACTOR's obligation hereunder does not interfere with any
of CONTRACTOR's contracts with third parties.
7.11 Should the STATE and CONTRACTOR consider that the processing and
utilization of Natural Gas is economical and choose to participate in the
processing and utilization thereof, in addition to that used in secondary
recovery operations, then the construction and installation of facilities for
such processing and utilization shall be carried out pursuant to an approved
Work Program. The recovery of costs of operations, sharing of production, and
handling of production shall be effected according to the same general framework
as that utilized for Crude Oil.
7.12 In the event that CONTRACTOR considers the processing and utilization
of Natural Gas is not economical, the STATE may choose to take and utilize such
Natural Gas that would otherwise be flared in accordance with the provisions of
Section 5.3; all costs of taking and handling will be for the sole account and
risk of the STATE.
VIII. VALUATION OF CRUDE OIL
-------------------------
8.1 Crude Oil sold to third parties shall be valued as follows:
(a) All Crude Oil taken by CONTRACTOR including its share and the share for
the recovery of Petroleum Operations Expenditures, and sold to third parties
shall be valued at the net realized price received by CONTRACTOR for such Crude
Oil F.O.B. the Republic of Equatorial Guinea at the point Crude Oil passes
through the inlet flange of the export tanker.
(b) Except for the Royalty, all of the STATE's Crude Oil taken by CONTRACTOR
and sold to third parties shall be valued at the net realized price received by
CONTRACTOR for such Crude Oil F.O.B. the Republic of Equatorial Guinea at the
point Crude Oil passes through the inlet flange of the export tanker, less costs
incurred by CONTRACTOR related to the sale of STATE's Crude Oil.
(c) The MINISTRY shall be duly advised before the sales referred to in
paragraph (b) of this subsection are made.
(d) Subject to any existing Crude Oil sales agreement, if a more favorable
net realized price is available to the STATE for the Crude Oil referred to in
paragraph (b) of this subsection, then the MINISTRY shall so advise CONTRACTOR
in writing not less than ninety (90) calendar days prior to the commencement of
the deliveries under the State's proposed sales contract. Forty-five (45)
calendar days prior to the start of such deliveries, CONTRACTOR shall notify the
MINISTRY regarding CONTRACTOR's intention to meet the more favorable net
realized price in relation to the quantity and period of delivery pursuant to
said proposed sales contract. In the absence of such notice the STATE shall
market its Crude Oil.
(e) The STATE's marketing of such Crude Oil as referred to in paragraph (d)
of this subsection shall continue until forty-five (45) calendar days after the
STATE's net realized price on said Crude Oil becomes less favorable.
CONTRACTOR's obligation to market said Crude Oil shall not apply until after the
STATE has given CONTRACTOR at least sixty (60) calendar days advance notice that
the STATE does not desire to continue such sales. As long as the STATE is
marketing the Crude Oil referred to above, it shall notify CONTRACTOR of the
more favorable net realized price.
8.2 Crude Oil sold to other than third parties shall be valued as follows:
(a) By using the weighted average per unit price received by CONTRACTOR and
the STATE from sales to third parties F.O.B. at the point Crude Oil passes
through the inlet flange of the export tanker in the Republic of Equatorial
Guinea, net of commissions and brokerages paid in relation to such third party
sales, during the three (3) months preceding such sale, adjusted as necessary
for quality, grade and gravity, and taking into consideration any special
circumstances with respect to such sales;
(b) If no such third party sales have been made during such period of time,
then on the basis used to value Crude Oil of similar quality, grade and gravity
and taking into consideration any special circumstances with respect to sales of
such similar Crude Oil.
8.3 Third party sales referred to in this section shall mean sales by
CONTRACTOR to independent purchasers of CONTRACTOR, entered into in an arm's
length transaction between a willing seller and a willing purchaser on
commercial terms reflecting current international open market conditions.
8.4 Commissions or brokerages incurred in connection with sales to third
parties, if any, shall not exceed the customary and prevailing rate.
8.5 During any given Calendar Year, the handling of production (i.e., the
implementation of the provisions of Section VII hereof) and the proceeds thereof
shall be provisionally dealt with on the basis of the relevant Work Program and
Budget of Petroleum Operations Expenditures based upon estimates of quantities
of Crude Oil to be produced, of internal consumption in the Republic of
Equatorial Guinea, of marketing possibilities, of prices and other sale
conditions as well as of any other relevant factors. Within thirty (30)
calendar days after the end of said given Calendar Year and to comply with the
provisions of this Contract, adjustments and cash settlements between the
Parties shall be made on the basis of the actual quantities, amounts and prices
involved.
8.6 In the event the Petroleum Operations require the segregation of Crude
Oils of different quality and/or grade and if the Parties do not otherwise
mutually agree:
(a) any and all provisions of this Contract concerning valuation of Crude
Oil shall apply individually to each segregated Crude Oil;
(b) Crude Oil produced and segregated in a given year shall contribute to:
(i) the "required quantity" allotted in such year to the recovery of all
Petroleum Operations Expenditures pursuant to Section VII;
(ii) the "required quantity" of Crude Oil a Party is entitled in such Year
pursuant to Section VII.
with quantities that bear the same proportion to the respective "required
quantity" (referred to in (i) or (ii) above) as the quantity of such Crude Oil
produced and segregated in such given Year bears to the total quantity of Crude
Oil produced in such Year from the Contract Area.
IX. BONUSES AND SURFACE RENTALS
------------------------------
9.1 On the Effective Date, CONTRACTOR shall pay the STATE the sum of Seven
Hundred Fifty Thousand United States Dollars (U.S. $750,000) as a signature
bonus.
9.2 On the date CONTRACTOR notifies MINISTRY it has made a Commercial
Discovery, CONTRACTOR shall pay the STATE the sum of Seven Hundred Fifty
Thousand United States Dollars (U.S. $750,000).
9.3 CONTRACTOR shall pay the STATE a one-time payment of One Million Five
Hundred Thousand United States Dollars (U.S. $1,000,000) after daily production
from the Contract Area averages for the first time twenty thousand (20,000)
barrels per day for a period of sixty (60) calendar days; CONTRACTOR shall also
pay the STATE a one-time payment of Two Million Five Hundred Thousand United
States Dollars (U.S. $2,500,000) after daily production from the Contract Area
averages for the first time thirty thousand (30,000) barrels per day for a
period of sixty (60) calendar days. Such payments shall be made within thirty
(30) calendar days following the last day of the respective sixty (60) calendar
day period.
9.4 From the Effective Date and throughout the period CONTRACTOR is
conducting Exploration Operations, CONTRACTOR shall pay to STATE an annual
surface rental of One United States Dollar (U.S. $1.00) per hectare for all
parts of the Contract Area covered by less than two hundred (200) meters of
water and Fifty United States Cents (U.S. $.50) per hectare for all parts of the
Contract Area covered by two hundred (200) meters or more of water where
CONTRACTOR is authorized to conduct Exploration Operations. From the expiration
of the Exploration Operations until termination of this Contract, CONTRACTOR
shall pay to the STATE an annual surface rental of Two United States Dollars
(U.S.$2.00) per hectare for all parts of the remaining Contract Area. The
MINISTRY and CONTRACTOR agree that the coordinates shown in Annex "E" attached
hereto represent the boundary where the two hundred (200) meter depth occurs and
the basis for calculating the rental payments. For the year this Contract is
signed, the surface rentals shall be prorated from the Effective Date through
December 31 of that year, and shall be paid thirty (30) calendar days after the
Effective Date. For succeeding years the surface rentals shall be paid in
advance, thirty (30) calendar days before the beginning of each Calendar Year.
9.5 (a) The production bonus payments required by Section 9.3 hereof
shall be included in Petroleum Operations Expenditures as cost recoverable.
(b) The signature bonus, Commercial Discovery bonus and surface rentals
required by Sections 9.1, and 9.2, and 9.4 of this Contract shall not be
included as cost recoverable in Petroleum Operations Expenditures.
X. PAYMENTS
--------
10.1 All payments to be made by CONTRACTOR to the STATE pursuant to this
Contract shall be made to the Treasury of the STATE in United States currency,
or at CONTRACTOR's election, in other currency acceptable to the STATE.
10.2 All payments due CONTRACTOR shall be made in United States Dollars, or
at the STATE's election, in other currency acceptable to CONTRACTOR, at a bank
to be designated by CONTRACTOR.
10.3 Unless otherwise specifically provided herein, any payments required to
be made pursuant to this Contract shall be made within thirty (30) calendar days
following the end of the month when the obligation to make such payments occurs.
10.4 At the end of each accounting period any gain or loss on the
CONTRACTOR's books caused by variations in the exchange rates will be deducted
or added, as the case may be, from its costs and expenses for that period, in
case CONTRACTOR's accounting is done in FCFA (French Africa Confederation
Francs) or in any other currency agreed to by the Parties other than United
States Dollars.
XI. TITLE TO EQUIPMENT
--------------------
11.1 The equipment and fixed installations purchased by CONTRACTOR for use
in Development and Production Operations becomes the Property of the STATE when
the term of this Contract expires. Nevertheless, the equipment and fixed
installations amortized before the expiration of the Contract, could be used by
the STATE providing such use does not interfere with CONTRACTOR's activities.
11.2 The provisions of Section 11.1 of this Section XI shall not apply to
the equipment of CONTRACTOR or any of its subcontractors that constitute an
indispensable element in the production of Hydrocarbons; such equipment may be
freely exported from the Republic of Equatorial Guinea, if it has not been
amortized.
XII. UNITIZATION
-----------
12.1 If a Field is designated within the Contract Area and it extends to
other parts of the Republic of Equatorial Guinea where other parties have
obtained a Contract for exploration and production of Crude Oil or Natural Gas,
or where another Contract has been granted to the CONTRACTOR, the MINISTRY may
demand the production of Crude Oil and Natural Gas be carried out in
collaboration with the other contractors. The same rule shall be applicable if
deposits of Crude Oil or Natural Gas, within the Contract Area, not commercially
recoverable are deemed as commercially exploitable if the production includes
those parts of the deposits extending to areas controlled by other contractors.
12.2 If the MINISTRY so orders, CONTRACTOR shall collaborate with other
contractors in preparing a collective proposal for approval by the MINISTRY for
common production of the deposits of Crude Oil or Natural Gas.
12.3 If the proposal for common production has not been presented within the
time period established, or if the MINISTRY does not approve that proposal (such
approval shall not be unreasonably denied or delayed), the MINISTRY may prepare
or cause to be prepared for the account of the parties involved, a plan for
common production. If the MINISTRY adopts such plan, the CONTRACTOR shall
comply with all the conditions established in such plan.
12.4 This Section XII shall also be applicable to discoveries of deposits of
Crude Oil or Natural Gas within the Contract Area that extend to areas not
within the dominion of the Republic of Equatorial Guinea; provided that with
respect to the production of such deposits of Crude Oil or Natural Gas, the
MINISTRY is empowered to impose the special rules and conditions necessary to
satisfy obligations under agreements with international organizations or
adjacent states.
12.5 Within one hundred eighty (180) calendar days following a request by
the MINISTRY, CONTRACTOR shall agree and proceed to operate under any
cooperative or unitary plan for the development and operation of the area, Field
or pool, or a part of the same, including areas covered by this Contract, the
MINISTRY deems feasible and necessary or advisable for purposes of conservation.
If a clause of a cooperative or unitary development plan approved by the
MINISTRY that by its terms affects the Contract Area or a part of the same or
contradicts a clause of this Contract, the clause of the cooperative or unitary
plan shall prevail.
12.6 Notwithstanding Section 12.5, in the event of conflicting clauses
between the terms of the Contract and the cooperative or unitary plan,
CONTRACTOR shall retain the right to conciliation and arbitration under Section
XIII.
XI CONSULTATION AND ARBITRATION
------------------------------
13.1 The STATE and CONTRACTOR hereby consent to submit to the jurisdiction
of the International Centre for Settlement of Investment Disputes (hereinafter
the "Centre") for any dispute arising out of or relating to this Contract or
relating to any investment made under it, for settlement by conciliation
followed, if the dispute remains unresolved within three (3) months of the
communication of the report of the Conciliation Commission to the parties, by
arbitration, pursuant to the Convention of the Settlement of Investment Disputes
between States and Nationals of Other States (hereinafter the "Convention").
13.2 The MINISTRY is a governmental agency of the Republic of Equatorial
Guinea that has been designated to the Centre by the STATE pursuant to Articles
25(1) and 25(3) of the Convention and the Republic of Equatorial Guinea has
notified the Centre that the agreements executed by the MINISTRY do not require
approval (the Government has approved said Consent Agreement by decree
______________________________)
13.3 It is agreed by the Parties to this Contract that CONTRACTOR is a
citizen of the Cayman Islands.
13.4 It is hereby agree by the Parties that the consent to the Centre's
Jurisdiction stipulated above, shall equally bind any successor in interest to
the Government of Republic of Equatorial Guinea and CONTRACTOR to the extent
that Centre can assume jurisdiction over a dispute between the successor and the
other Party.
13.5 It is hereby agreed that the right of CONTRACTOR to request the
settlement of a dispute by the Centre or to take any step as a party to a
proceeding in accordance with this clause shall not be affected by CONTRACTOR
receiving partial compensation, conditional or absolute, from any Third Party
(whether a private person, a state, a government agency or an intentional
organization) with respect to any material loss or injury that is the subject of
the dispute; provided that the Republic of Equatorial Guinea may require
evidence that such third party agrees to the exercise of those rights by
CONTRACTOR.
13.6 Since the Republic of Equatorial Guinea is not a signatory to the
Convention, it is hereby agreed that Section XIII shall be in force on the
effective date of the convention as regards this STATE, and that date shall be
considered as the date the Parties consented to submit disputes to the Centre.
Until thirty (30) days after the ratification of the Convention by the Republic
of Equatorial Guinea of the procedures for settlement of disputes provided for
in this Section, all disputes shall be settled by procedures similar to those
applicable under the Convention, except that the proceedings shall be initiated
by direct communication between the Parties, and if the Tribunal is not
constituted within ninety (90) calendar days following the receipt of such
communication, either party may request the Centre's Secretary General to
appoint any arbitrators not yet appointed.
Any Tribunal constituted regarding a dispute submitted to the Centre pursuant to
this Section shall consist of one arbitrator appointed by each Party, and an
arbitrator appointed by the Centre's Chairman of the Administrative Council who
shall be President of the Tribunal.
13.7 Any Tribunal constituted pursuant to this Contract shall apply the law
of the Republic of Equatorial Guinea. Such Tribunal constituted pursuant to
this Contract shall have the power to decide a dispute ex aequo et bono.
13.8 Notwithstanding Section 13.6, if conciliation or arbitration under the
Convention are unavailable because the jurisdictional requirements ratione
personae of Article 25 of the Convention is unfulfilled at the time a proceeding
is instituted pursuant to this Section XIII, the Parties agree to conciliation
or arbitration, as the case may be pursuant to Section 13.1, in accordance with
the Arbitration (Additional Facility) Rules of the Centre.
13.9 The place of arbitration shall be Washington, D.C., United States of
America, and the arbitration shall be held at the seat of the Centre. The
language of the proceedings shall be Spanish.
XIV. BOOKS AND ACCOUNTS AND AUDITS
---------------------------------
14.1 BOOKS AND ACCOUNTS
--------------------
CONTRACTOR shall be responsible for keeping books and accounts reflecting all
Petroleum Operations Expenditures as well as revenue received from the sale of
Crude Oil and Natural Gas, consistent with modern petroleum industry practices
and proceedings as described in Annex "C" attached hereto. Such books and
accounts shall be maintained in United States Dollars. Should there be any
inconsistency between the provisions of this Contract and the provisions of
Annex "C," the provisions of this Contract shall prevail.
14.2 AUDITS
------
The STATE shall have the right to inspect and audit CONTRACTOR's books and
accounts relating to this Contract in accordance with Section 4.9 If
CONTRACTOR's books and accounts are not available for inspection in the Republic
of Equatorial Guinea, the STATE shall have the right to audit the CONTRACTOR's
books and accounts at the CONTRACTOR's headquarters; in this case, the expenses
of the audit shall be paid by the CONTRACTOR. Moreover, the STATE will require
CONTRACTOR to engage independent accountants to examine, in accordance with
generally accepted auditing standards, CONTRACTOR's books and accounts relating
to this Contract for any Calendar Year or perform auditing procedures as deemed
appropriate by the STATE. A copy of the independent accountant's report or any
exceptions shall be forwarded to the STATE within sixty (60) calendar days
following the completion of such audit. Any cost incurred by CONTRACTOR in
complying with this requirement by the STATE shall be included in Petroleum
Operations Expenditures and shall be cost recoverable. CONTRACTOR's books and
accounts shall be deemed accepted by the STATE twenty-four (24) months after the
end of the Calendar Year when the cost was incurred, unless the MINISTRY
notifies CONTRACTOR otherwise within such time.
XV. ADDITIONAL PROVISIONS
----------------------
15.1 NOTICES
-------
Any notices required or given by either Party to the other, shall be deemed to
have been delivered when properly acknowledged for receipt by the receiving
Party. All such notices shall be in Spanish and shall be addressed to :
<PAGE>
MINISTRY OF MINES AND ENERGY
--------------------------------
Malabo-Bioko Norte
Republica de Guinea Ecuatorial
Telephone: (240)-9-3567, -3405, -2086
Facsimile: (240)-9-3353
Telex: GBNOM 5405 EG
CONTRACTOR
----------
Triton Equatorial Guinea, Inc.
Wellington House, 5th Floor
125 Strand Street
London, WC2R 0AP
United Kingdom
Attn: Project Coordinator
Telephone: 44-171-533-7000
Facsimile: 44-171-533-9000
Telex: None
Either party may substitute or change such address on written notice thereof to
the other.
XVI. LAWS AND REGULATIONS
----------------------
16.1 For purposes of this Contract, the laws of the Republic of Equatorial
Guinea shall govern in accordance with generally accepted principals of
international law.
16.2 In the event of changes in the legislation regarding Petroleum
Operations, and if as a consequence of their implementation, said changes cause,
to the detriment of any of the Parties, the reduction of rights or an increase
in the economic obligations contained in this Contract, the Parties shall meet
and take the suitable measures to achieve the necessary economic balance at any
time during the Effectiveness of this Contract.
XVII. FORCE MAJEURE
--------------
17.1 Except as otherwise provided in this Subsection 17.1, each Party shall
be excused from complying with the terms of this Contract, except for the
payment of monies then due, if any, for so long as such compliance is hindered
or prevented by irresistible circumstances or beyond the reasonable control of
the Party concerned, including, but not limited to, change of government,
violent storms, cyclones, thunderstorms, navigation dangers, destruction of
machinery or whatever kind of installations, hostilities, blockades, embargoes,
criminal disturbances, national emergencies, the inability to obtain, import or
use any of the required materials, equipment or services, and the inability to
obtain the necessary rights of passage, riots, strikes, wars (declared or
undeclared), insurrections, rebellions, terrorist acts, civil disturbances,
dispositions or orders of governmental authority, whether such authority be
actual or assumed, acts of God, such circumstances being herein sometimes called
"Force Majeure"; provided, however, inability to obtain equipment, supplies or
fuel shall not be a cause of Force Majeure, unless caused by one of the factors
described in this Subsection 17.1. If any failure to comply is occasioned by a
governmental law, rule, regulation, disposition or order of the Government of
the Republic of Equatorial Guinea as aforesaid and the affected Party is
operating in accordance with good petroleum industry practice in the Contract
Area and is making reasonable efforts to comply with such law, rule, regulation,
disposition or order, the matter shall be deemed beyond the control of the
affected Party. In the event that either Party hereto is rendered unable,
wholly or in part, by any of these causes to carry out its obligations under
this Contract, it is agreed that such Party shall give notice and details of
Force Majeure in writing to the other Party within seven (7) calendar days after
its occurrence. In such cases, the obligations of the Party giving the notice
shall be suspended during the continuance of any inability so caused, and the
term of the Contract shall be extended to coincide with the duration of the
condition of Force Majeure. Both Parties shall do all within their power to
remove such cause.
XVIII. TEXT
----
18.1 This Contract is written in the Spanish and English languages. In the
event of a controversy between the two texts, the Spanish text shall prevail.
XIX. EFFECTIVENESS
-------------
19.1 This Contract shall come into effect on the Effective Date.
19.2 This Contract shall not be annulled, amended or modified in any
respect, except by the mutual consent in writing of the Parties or their
successors hereto. Nevertheless, the MINISTRY when requested by CONTRACTOR,
once all works described in Section 4.3(i)(ii) are completed, shall approve
within sixty (60) calendar days from said request an amendment authorizing
CONTRACTOR to transfer the minimum drilling obligation described in Section 4.3
from this Block to Block "G" including all the obligations and rights associated
with said drilling. CONTRACTOR shall be entitled to recover the costs
associated with drilling on the Block where the well is drilled. Any amendments
or modifications agreed to in writing by the Parties shall not require approval
by the Supreme Court of Justice of the Republic of Equatorial Guinea or
ratification by the President of the Republic of Equatorial Guinea.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Contract, in
triplicate and in the Spanish language, as of the day and year first above
written.
THE REPUBLIC OF EQUATORIAL GUINEA
REPRESENTED BY THE MINISTRY OF
MINES AND ENERGY OF THE REPUBLIC
OF EQUATORIAL GUINEA
By: ________________________________
Minister of Mines and Energy
TRITON EQUATORIAL GUINEA, INC.
By: ________________________________
Thomas G. Finck, President
ANNEX "B"
DESCRIPTION OF CONTRACT AREA
BLOCK F
CORNER POINTS LATITUDE NORTH LONGITUDE EAST
A 1 41' 05" 9 37' 34"
B 1 41' 07" 9 25' 37"
C 1 40' 15" 9 25' 37"
D 1 40' 15" 9 17' 41"
E 1 34' 38" 9 17' 41"
F 1 34' 34" 9 01' 56"
G 2 00' 00" 9 13' 39"
H 2 00' 00" 9 47' 41"
From corner point H the Block is defined by the coast in low tide until the
intersection with corner point A at latitude North 1 41' 05" and 9 37' 34"
longitude East
ANNEX "C"
ACCOUNTING PROCEDURE
Attached to and made an integral part of the Production Sharing Contract
(the "Contract") for Block F between the REPUBLIC OF EQUATORIAL GUINEA,
represented for purposes of this Contract by the Ministry of Mines and Energy,
and TRITON EQUATORIAL GUINEA, INC., CONTRACTOR, dated the 26th day of March,
1997.
Article I
General Provisions
1. Purpose. The accounting procedure herein provided and attached to the
-------
Contract is to be followed and observed in the performance of either Party's
obligations under the Contract.
2. Accounts and Statements. CONTRACTOR's accounting records and books will
------------------------
be kept in accordance with generally accepted and recognized accounting systems,
consistent with modern petroleum industry practices and procedures. Books and
reports will be maintained and prepared in accordance with methods established
by the MINISTRY. The chart of accounts and related account definitions will be
prescribed by the MINISTRY. Reports will be organized for the use of the
MINISTRY in carrying out its management responsibilities under the Contract.
Article II
Petroleum Operations Expenditures
1. Definition for Purposes of the Recovery of Costs and Calculation of
--------------------------------------------------------------------
the Income Taxes. For any year when commercial production occurs, Petroleum
- ------------------
Operations Expenditures shall consist of a) current year's non-capital costs, b)
current year's capital costs, and c) current year allowed recovery of prior
year's unrecovered Petroleum Operations Expenditures.
2. Non-Capital Expenditures. Non-capital expenditures means those
-------------------------
Petroleum Operations Expenditures, whether related to Crude Oil or Natural Gas.
or relating to current year's operations. Moreover, non-capital expenditures
shall also include the sums agreed and designated by the MINISTRY and CONTRACTOR
for the abandonment of the Petroleum Operations. In addition to costs relating
only to current operations, U.S. $93,000 spent by CONTRACTOR for data acquired
prior to the Effective Date shall be classified as non-capital expenditures
authorized in writing by the MINISTRY, and the costs of surveys and the
intangible costs of drilling exploratory and development wells, as described in
paragraph (c), (d) and (e) below, will be classified as non-capital costs.
Non-capital expenditures include, but are not limited to the following:
(a) Labor, materials and services used in day to day crude oil well
operations, crude oil field production facilities operations, secondary recovery
operations, natural gas well storage, handling, transportation, and delivery
operations, natural gas field production facilities operations, natural gas
transportation and delivery operations, natural gas processing auxiliaries and
utilities, cleaning up pollution or related damages as set forth in Section 4.8
of this Contract, and other operating activities, including maintenance, all of
which comprise Petroleum Operations.
(b) Office, services and general administration - General services including
overhead allocation, insurance premiums, technical and related services,
material services, transportation, rental of heavy engineering equipment, site
rentals and other rentals of services and property, personnel expenses, public
relations, and other expenses abroad.
(c) Development and production drilling - Labor, materials and services used
in drilling wells with the object of penetrating a proven reservoir, including
the drilling of delineation wells as well as redrilling, deepening or
recompleting wells, and access roads, if any, leading directly to wells.
(d) Exploratory drilling - Labor, materials and services used in the
drilling of wells with the object of finding unproven reservoirs of crude oil
and natural gas, and access roads, if any, leading directly to wells.
(e) Surveys - Labor, materials and services used in aerial, geological,
topographical, geophysical and seismic surveys, and core hole drilling.
(f) Other exploration expenditures - Auxiliary or temporary facilities
having useful lives of one year or less used in exploration and purchased
geological and geophysical information.
(f) The bonus payments payable in accordance with Section 9.3 of the
Contract. All payments made in accordance with Section 9 of the Contract shall
be deductible for purposes of calculation of Income Tax.
(h) Interest on loans shall be considered non-capital expenditures for tax
purposes; however, three percent (3%) shall be cost recoverable in accordance
with Article III.3 of this Annex "C".
3. Capital Expenditures. Capital expenditures means expenditures made for
---------------------
items that normally have a useful life beyond the year incurred. Capital
expenditures include, but are not limited to, the following:
(a) Construction utilities and auxiliaries - Work shops, power and water
facilities, warehouses, and field roads other than the access roads mentioned in
paragraphs 2(c) and 2(d) above. Cost of oil jetties and anchorages, treating
plants and equipment, secondary recovery systems, gas plant and steam systems.
(b) Construction housing and welfare - Housing, recreational facilities and
other tangible property incidental to construction.
(c) Production facilities - Offshore platforms (including the costs of
labor, fuel, hauling, and supplies for both the offsite fabrication and onsite
installation of platforms, and other construction costs in erecting platforms
and installing submarine pipelines), wellhead equipment, subsurface lifting
equipment, production tubing, sucker rods, surface pumps, flow lines, gathering
equipment, delivery lines and storage facilities.
(d) Movables - Surface and subsurface drilling and production tools,
equipment and instruments, barges, floating craft, automotive equipment,
aircraft, construction equipment, furniture and office equipment and
miscellaneous equipment.
<PAGE>
Article III
Accounting Methods To Be Used to Calculate Recovery
of Petroleum Operations Expenditures and Income Taxes
As indicated below, the following accounting methods shall be used to
calculate the recovery of Petroleum Operations Expenditures and Income Taxes.
1. Depreciation. Depreciation will be calculated from the year in which
------------
the asset is placed into service, with a full year's depreciation allowed the
initial year. Depreciation of Capital Costs, for purposes of Income Tax
calculation and cost recovery, will be calculated over a period of four (4)
years using the straight line method.
The lives to be used for items for which Capital Expenditures are incurred
shall be four (4) years. The undepreciated balance of assets taken out of
service will not be charged to Petroleum Operations Expenditures but will
continue to depreciate based upon the lives described above, except where such
assets have been subjected to unanticipated destruction, for example, by fire or
accident.
2. Overhead Allocation. General and administrative expenditures, other
-------------------
than direct charges, allocable to this operation should be determined by a
detailed study, and the method determined by such study shall be applied each
year consistently. The method selected must be approved by the MINISTRY. Either
the MINISTRY or CONTRACTOR may request by notification of the other Party that
the method selected be changed; provided, however that only one change to the
method be allowed in any given Calendar Year.
3. Interest Recovery. Interest on loans obtained by a Party from
------------------
Affiliated Companies, or parent companies, or from third parties non-affiliated
may not be recoverable as Petroleum Operations Expenditures, except for the
three percent (3%) interest, but the interest may be deductible from income for
the purposes of calculating CONTRACTOR's Income Tax. The interest on said loans
cannot be over the prevalent commercial rates for Petroleum Operations
investments. Details of any sums to be financed shall be included in each year's
Budget of Petroleum Operations Expenditures for the review of the MINISTRY.
Notwithstanding anything to the contrary contained herein or in any law
regulation rule order or decree of the STATE, non-resident lenders shall not be
subject to withholding tax or other income tax.
4. Natural Gas Costs. Petroleum Operations Expenditures directly
-------------------
associated with the production of Natural Gas will be directly chargeable
against Natural Gas revenues in the manner agreed by the Parties. Petroleum
Operations Expenditures incurred for production of both Natural Gas and Crude
Oil will be allocated to Natural Gas and Crude Oil as agreed by both Parties.
5. Inventory Accounting. The costs of non-capital items purchased for
--------------------
inventory will be recoverable in the year the items have been landed in the
Republic of Equatorial Guinea. The CONTRACTOR shall present two types of
inventories, one for non-capital assets or articles and another for capital
assets or articles.
6. Insurance and Claims. Petroleum Operations Expenditures shall
----------------------
include premiums paid for insurance normally required to be carried for the
operations relating to CONTRACTOR's obligations conducted under the Contract and
shall also include expenditures incurred and paid by CONTRACTOR in settlement of
any and all losses, claims, damages, judgments, and other expenses, including
monies relating to CONTRACTOR's obligations under the Contract. Any sums
CONTRACTOR receives for settlements from insurance carried for the benefit of
the Petroleum Operations shall be deducted from Petroleum Operations
Expenditures for the year any such settlement is received.
ANNEX "D"
LETTER OF PERFORMANCE GUARANTY BY PARENT
FOR CONTRACT AREA F, THE REPUBLIC OF EQUATORIAL GUINEA
WHEREAS, Triton Energy Limited, a company validly existing under the laws
of the Cayman Islands ("Parent"), with its principal place of business c/o
Caledonian House, Mary Street, Post Office Box 1043, Georgetown, Grand Cayman,
Cayman Islands; and
WHEREAS, Triton Equatorial Guinea, Inc., a company validly constituted
under the laws of the Cayman Islands ("Company"), is a wholly owned
subsidiary of the Parent; and
WHEREAS, Company has contemporaneously herewith entered into that
certain Production Sharing Contract (the "Contract") with the Republic of
Equatorial Guinea (the "STATE") for Contract Area F; and
WHEREAS, Company holds the participating interest as specified in the
Contract; and
WHEREAS, the STATE desires that the performance by Company under the
Contract be guaranteed; and
WHEREAS, the Parent accepts that it fully understands and assumes
the legal contractual undertakings of the Company under the Contract;
and
NOW THEREFORE, it is hereby agreed and stipulated as follows:
1. Parent shall be bound as Guarantor by virtue of this Letter of
Performance Guaranty by Parent (this "Guaranty") to the STATE for the
fulfillment of the obligations assumed by the Company in accordance with Section
4.3(a) of the Contract.
2. In accordance with Section 4.5 of the Contract, the amount of any
guaranty by Parent hereunder in the then Contract Year phase shall be discharged
of the minimum expenditure obligation for such Contract Year phase when the
minimum expenditure obligation for such phase has been satisfied. If at the end,
the Exploration Expenditures incurred by Company during the two (2) first years
of the Contract is less than the minimum expenditure obligation described in
Section 4.5 of the Contract, then Parent agrees it shall pay to the STATE on
first demand without proof or conditions the balance of the amounts not
incurred. The STATE's first demand shall be given within thirty (30) calendar
days from the end of the related initial exploration period. Failure by the
STATE to make a timely demand as provided above shall discharge Parent from its
liabilities under this Guaranty. Demand shall be made by an original written or
faxed statement from the Ministry of Energy and Mines of the Republic of
Equatorial Guinea ("Ministry") certifying that "Triton Equatorial Guinea, Inc.
did not comply with the work program in the Contract covering Block F." The
Ministry shall state specifically how Triton failed to comply with such work
commitment. The Minister shall deliver the demand to the Parent at 6688 N.
Central Expressway, Dallas, Texas, 75206 U,S.A.; or fax number 1-214-691-0198.
3. This Guaranty shall be governed by and construed in accordance with the
laws of Equatorial Guinea.
4. This Guaranty shall expire at the earlier of two (2) years and
thirty (30) consecutive days from the Effective Date of the Contract or the date
when Company and/or its permitted assignee has been recognized by the Ministry
of Mines and Energy of the Republic of Equatorial Guinea to have fulfilled its
minimum expenditure obligations for the initial exploration period pursuant to
the Contract.
5. Said act to be effective in the Republic of Equatorial Guinea shall
be previously elevated to a public deed by a notary or other competent authority
named by the Principal, and said public deed shall comply with all legal
requisites. The costs incurred for said process shall be the responsibility of
the Company, and shall not be recoverable.
IN WITNESS WHEREOF, Parent and Company have signed this Guaranty on ______
day of _______, 1997.
PARENT:
TRITON ENERGY LIMITED
By:_________________________
Name:____________________
Title:___________________
COMPANY
TRITON EQUATORIAL GUINEA, INC.
By:_________________________
Name:____________________
Title:___________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned Notary Public in and for the State of Texas, on
this day personally appeared _________________________, ____________________ of
TRITON ENERGY LIMITED, and acknowledged to me that he executed the foregoing
instrument for the purposes and consideration therein expressed, as the act and
deed of TRITON ENERGY LIMITED, and that he has the capacity to make such
authorization.
WITNESS MY HAND AND SEAL OF OFFICE this ____ day of ____________, 19___.
___________________________________________
Notary Public in and for the State of Texas
___________________________________________
Printed Name
My Commission Expires: _______________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned Notary Public in and for the State of Texas, on
this day personally appeared _________________________, ____________________ of
TRITON EQUATORIAL GUINEA, INC., and acknowledged to me that he executed the
foregoing instrument for the purposes and consideration therein expressed, as
the act and deed of TRITON EQUATORIAL GUINEA, Inc., and that he has the capacity
to make such authorization.
WITNESS MY HAND AND SEAL OF OFFICE this ____ day of ____________, 19___.
___________________________________________
Notary Public in and for the State of Texas
___________________________________________
Printed Name
My Commission Expires: _______________
EXHIBIT 10.84
PRODUCTION SHARING CONTRACT
BETWEEN
THE REPUBLIC OF EQUATORIAL GUINEA
AND
TRITON EQUATORIAL GUINEA, INC.
FOR BLOCK G
Translated by Diego Giordano
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION I. . . . . . . . . . . . . . . . . . SCOPE AND DEFINITIONS 1
SECTION II . . . . . . . . . . . . . . . . . TERM, TERMINATION, AND CANCELLATION 5
SECTION III. . . . . . . . . . . . . . . . . SURRENDER OF AREAS 9
SECTION IV . . . . . . . . . . . . . . . . . WORK PROGRAM AND EXPENDITURES 10
SECTION V. . . . . . . . . . . . . . . . . . CONDUCT OF PETROLEUM OPERATIONS BY CONTRACTOR 13
SECTION VI . . . . . . . . . . . . . . . . . RIGHTS AND OBLIGATIONS OF THE PARTIES,DETERMINATION OF
PRODUCTION LEVELS 15
SECTION VII -. . . . . . . . . . . . . . . . RECOVERY OF PETROLEUM OPERATING COSTS, SHARING OF
PRODUCTION, AND DISTRIBUTION OF PRODUCTION 19
SECTION VIII . . . . . . . . . . . . . . . . VALUATION OF CRUDE OIL 23
SECTION IX . . . . . . . . . . . . . . . . . BONUSES AND SURFACE RENTALS 25
SECTION X. . . . . . . . . . . . . . . . . . PAYMENTS 26
SECTION XI . . . . . . . . . . . . . . . . . TITLE TO EQUIPMENT 26
SECTION XII. . . . . . . . . . . . . . . . . UNITIZATION 26
SECTION XIII . . . . . . . . . . . . . . . . CONSULTATION AND ARBITRATION 27
SECTION XIV. . . . . . . . . . . . . . . . . BOOKS AND ACCOUNTS AND AUDITS 28
SECTION XV . . . . . . . . . . . . . . . . . ADDITIONAL PROVISIONS 30
SECTION XVI. . . . . . . . . . . . . . . . . LAWS AND REGULATIONS 30
SECTION XVII . . . . . . . . . . . . . . . . FORCE MAJEURE 30
SECTION XVIII. . . . . . . . . . . . . . . . TEXT 31
SECTION XIX. . . . . . . . . . . . . . . . . EFFECTIVENESS 31
ANNEX "A". . . . . . . . . . . . . . . . . . MAP OF CONTRACT AREA
ANNEX "B". . . . . . . . . . . . . . . . . . CONTRACT AREA COORDINATES
ANNEX "C". . . . . . . . . . . . . . . . . . ACCOUNTING PROCEDURE
ANNEX "D". . . . . . . . . . . . . . . . . . LETTER OF PERFORMANCE GUARANTY BY PARENT FOR CONTRACT
AREA G, THE REPUBLIC OF EQUATORIAL GUINEA
ANNEX "E". . . . . . . . . . . . . . . . . . COORDINATES FOR THE 200M ISOBATH
</TABLE>
PRODUCTION SHARING CONTRACT
BETWEEN
THE REPUBLIC OF EQUATORIAL GUINEA
AND
TRITON EQUATORIAL GUINEA, INC.
FOR BLOCK G
THIS CONTRACT, made and entered into on this ___th day of March, 199_ by
and between the REPUBLIC OF EQUATORIAL GUINEA (hereinafter referred to as the
"STATE"), represented for purposes of this Contract by the MINISTRY OF MINES AND
ENERGY of the REPUBLIC OF EQUATORIAL GUINEA (hereinafter referred to as the
"MINISTRY"), and TRITON EQUATORIAL GUINEA, INC., a corporation organized and
existing under the laws of the Cayman Islands (hereinafter referred to as
"CONTRACTOR"), represented for purposes of this Contract by Thomas G. Finck, its
President. STATE and CONTRACTOR hereinafter are referred to either individually
as "Party" or collectively as "Parties."
W I T N E S S E T H:
WHEREAS, all Hydrocarbons existing within the territory of the Republic of
Equatorial Guinea, including adjacent submerged lands, are national resources
owned by the Republic of Equatorial Guinea; and
WHEREAS, the STATE wishes to promote the development of hydrocarbon
deposits in and throughout the Contract Area and CONTRACTOR desires to join and
assist the STATE in accelerating the exploration and development of the
potential resources within the Contract Area; and
WHEREAS, CONTRACTOR, has the financial ability, technical competence and
professional skills necessary to carry out the Petroleum Operations hereinafter
described; and
WHEREAS, in accordance with the Hydrocarbons Law of the Republic of
Equatorial Guinea, agreements in the form of Production Sharing Contracts may be
entered into between the STATE and foreign investors;
THEREFORE, in consideration of the undertakings and covenants herein
contained, the Parties hereby agree as follows:
I. SCOPE AND DEFINITIONS
---------------------
1.1 Scope
-----
This Contract is a Production Sharing Contract. In accordance with the
provisions herein contained, the MINISTRY shall be responsible for the
supervision of the Petroleum Operations contemplated in this Contract.
CONTRACTOR shall:
----------
(a) be responsible to the STATE for the execution of the Petroleum
Operations in accordance with the provisions of this Contract, and is hereby
appointed and constituted the exclusive company to conduct Petroleum Operations
in the Contract Area for the term hereof;
(b) provide all necessary capital, machinery, equipment, technology and
personnel necessary for the efficient conduct of Petroleum Operations;
(c) bear the risk of Petroleum Operations Expenditures required in carrying
out Petroleum Operations and shall therefore have an economic interest in the
rapid development of any commercial hydrocarbon deposits in the Contract Area.
Such costs shall be included in Petroleum Expenditures as recoverable or not
recoverable as provided in Section VII and Annex "C" of this Contract.
During the term of this Contract, the total production achieved in the conduct
of the Petroleum Operations shall be divided between the Parties in accordance
with the provisions of Section VII of this Contract.
1.2 DEFINITIONS
In this Contract, words importing the singular include the plural and vice
versa, and except where the context otherwise indicates, shall have the meanings
set forth in this Section. Words that are not defined herein, but are defined
in the Hydrocarbons Law, shall have the meanings set forth in the Hydrocarbons
Law.
(a) Person means any individual, corporation, partnership, joint venture,
------
association, trust, estate, unincorporated organization of government or any
agency or political subdivision thereof.
(b) Affiliated Company or Affiliate of any specified Person means any other
--------------------------------
Person directly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct, administer and dictate policies of such Person, through the ownership of
fifty percent (50%) or more of such Person's voting rights; and the terms
"control" and "controlled" have meanings correlative to the foregoing.
(c) Crude Oil - means Hydrocarbons which are produced at the wellhead in
----------
liquid state at atmospheric pressure and asphalt and ozokerites and the liquid
Hydrocarbons known as condensate obtained from Natural Gas by condensation or
extraction by means of field separation units.
(d) Natural Gas - means all Hydrocarbons that at atmospheric conditions of
------------
temperature and pressure are in a gaseous state. Included in this definition
are wet mineral gas, dry mineral gas, wet gas and residue gas remaining after
the extraction processing or separation of liquid Hydrocarbons from wet gas.
(e) Exploration Operations means works to include without limitation
-----------------------
geological studies; geophysical studies; aerial mapping; investigations relating
to the subsurface geology; stratigraphic test drilling; exploratory and
appraisal wells; and related activities such as drillsite preparation,
surveying, and all work necessarily connected therewith, that is conducted in
connection with exploration for and commercial assessment of Crude Oil and/or
Natural Gas.
(f) Development and Production Operations means all operations other than
----------------------------------------
Exploration Operations, including those to facilitate extraction, production,
local transportation and storage of Crude Oil and Natural Gas produced as part
of the offshore operations.
(g) Petroleum Operations means all Exploration Operations and Development
---------------------
and Production Operations.
(h) Exploration Expenditures means direct expenditures on Exploration
-------------------------
Operations and overhead expenses made in connection with exploration and
commercial assessment within the Contract Area. These expenditures shall be
determined in accordance with the Accounting Procedure attached hereto as Annex
"C," but expenditures made within the area of a Field after Commercial Discovery
has been declared shall be excluded.
(i) Development and Production Expenditures means direct expenditures on
------------------------------------------
Development and Production Operations and general expenses made in connection
with the development of a Field, excluding expenditures made within the area of
a Field before Commercial Discovery has been declared. These expenditures shall
be determined in accordance with the Accounting Procedure attached hereto as
Annex "C."
(j) Petroleum Operations Expenditures means expenditures made and
-----------------------------------
obligations incurred in carrying out Petroleum Operations hereunder, determined
in accordance with the Accounting Procedure attached hereto as Annex "C" and
made a part hereof.
(k) Barrel means a quantity or unit of Crude Oil equal to 158.9874 liters
------
(forty-two (42) United States gallons) at a temperature of 15.56 degrees
Centigrade (sixty (60) degrees Fahrenheit) under one atmosphere of pressure.
(l) Field means an area within the Contract Area, as determined in
-----
accordance with Section 2.6.
(m) Well means any opening in the ground or seabed made or being made by
----
drilling or boring, or in any other manner, for the purpose of discovering, and
delineating and/or producing Crude Oil or Natural Gas, or for the injection of
any fluid into an underground deposit, other than a seismic hole or a structure
test hole or stratigraphic test hole.
(n) Commercial Discovery means a discovery of Hydrocarbons that, in the
---------------------
judgment of CONTRACTOR, can be produced commercially, based on its consideration
of all pertinent operating and financial data.
(o) Work Program means an itemized statement of the Petroleum Operations to
-------------
be carried out in the Contract Area as set forth in Section IV.
(p) Budget of Petroleum Operations Expenditures means the estimate of the
----------------------------------------------
costs of all items included in the Work Program.
(q) Calendar Year or Years means a period of twelve (12) months commencing
------------------------
January 1 and ending on the following December 31, according to the Gregorian
Calendar.
(r) Contract Year means a period of twelve (12) consecutive months according
-------------
to the Gregorian Calendar, starting from the Effective Date of this Contract or
from the anniversary of such Effective Date.
(s) Gross Receipts means the sum of all sales proceeds and the monetary
---------------
equivalent value of other Hydrocarbons dispositions from the Contract Area in
any given calendar year.
(t) Income Tax means the tax levied on CONTRACTOR's net income pursuant to
-----------
the Tax Law of the Republic of Equatorial Guinea.
(u) Calendar Quarter means a period of three (3) consecutive months
-----------------
beginning January 1, April 1, July 1 or October 1 and ending March 31, June 30,
September 30 or December 31, respectively.
(v) Effective Date means the approval date of this Contract by the STATE in
---------------
accordance with the provisions of the Hydrocarbons Law as evidenced by
publication of this Contract in the Official Bulletin of the Republic of
Equatorial Guinea or in the national information media (whichever publication
occurs first), after approval of this Contract by the Supreme Court of Justice
of the Republic of Equatorial Guinea and ratification by the President of the
Republic of Equatorial Guinea.
(w) Foreign Exchange means currency acceptable to the Parties other than that
----------------
of the Republic of Equatorial Guinea.
(x) Hydrocarbons Law means Decree-Law No. 7/1981 of 16 June, as amended.
----------------
(y) Contract Area means the geographic territory of the Republic of
--------------
Equatorial Guinea the subject of this Contract. Such Contract Area is described
in Annex "B" and delineated in Annex "A" attached hereto and incorporated
herein.
(z) Royalty means for each Field, the percentages listed below corresponding
-------
to the cumulative production of all the Crude Oil produced, saved and sold from
the said Field and not otherwise utilized in Petroleum Operations:
<PAGE>
- ------
<TABLE>
<CAPTION>
<S> <C>
CUMULATIVE FIELD PRODUCTION ROYALTY
The first 100 million barrels 10%
Greater than 100 million barrels to 300 million barrels 12.5%
Greater than 300 million barrels. 15%
</TABLE>
and ten percent (10%) of all the Natural Gas produced, saved and sold from the
Contract Area and not otherwise utilized in Petroleum Operations.
(ab) Maximum Efficient Rate means the maximum rate of Hydrocarbons
------------------------
production in a Field, without excessive decline or loss of reservoir pressure,
and in accordance with the norms and practices of the petroleum industry and
Section 6.3 of this Contract.
(ab) Semester, as used in Section 7.8 means a period of six (6) consecutive
--------
months, commencing the first of January and the first of July of each Calendar
Year.
(ac) Hydrocarbons means all natural, organic substances composed of CARBON
------------
and HYDROGEN including crude oil and natural gas and all other mineral
substances, products, subproducts and by-products encountered in association
therewith.
(ad) Area of Provisional Discovery is defined in Section 2.4
--------------------------------
(ae) Tax Law means Decree Law No. 1/1986 of February 10, of the Republic of
--------
Equatorial Guinea, as amended prior to the Effective Date.
(af) Exploration Well means a Well that is not a development, evaluation or
-----------------
injection well, and its only objective is to determine the existence of
Hydrocarbons in a structure.
(ag) Evaluation Well means a Well drilled following a discovery of
----------------
Hydrocarbons to delineate and locate the reservoir and to estimate the quantity
of recoverable Hydrocarbons.
II. TERM, TERMINATION, AND CANCELLATION
--------------------------------------
2.1 CONTRACTOR is authorized to conduct Exploration Operations during an
initial exploration period of five (5) years, starting from the Effective Date.
When CONTRACTOR has fulfilled its obligations hereunder for the initial
exploration period, then upon application of CONTRACTOR made not later than
ninety (90) calendar days prior to the fifth, sixth, and seventh anniversary of
the Effective Date, as the case may be, the MINISTRY shall extend the period
when Petroleum Operations may be conducted as follows:
(a) after the fifth (5th) Contract Year for an additional period of one (1)
Contract Year during which year CONTRACTOR shall drill in areas covered by
waters less than two hundred (200) meters deep at least one (1) Exploration
Well;
(b) after the sixth (6th) Contract Year for an additional period of one (1)
Contract Year during which year CONTRACTOR shall drill in areas covered by
waters less than two hundred (200) meters deep at least one (1) Exploration
Well;
(c) if after the fifth (5th) Contract Year CONTRACTOR commits to drill at
least one (1) Exploration Well in an area covered by water deeper than two
hundred (200) meters, for an additional period of two (2) Contract Years; and
(d) if during the seventh (7th) Contract Year CONTRACTOR encounters a show
of Hydrocarbons that CONTRACTOR believes is sufficient to warrant further
evaluation drilling, for a period of one (1) Contract Year during which year
CONTRACTOR shall drill one (1) Evaluation Well in an area designated by mutual
agreement of MINISTRY and CONTRACTOR.
2.2 Notwithstanding anything contained herein, CONTRACTOR, at its sole
discretion, after fulfilling its minimum Work Program for the first two (2)
Contract Years pursuant to 4.3(a), may terminate this Contract in its entirety
without further obligation except with respect to any obligation under this
Contract due and owing at the time of said termination. Furthermore, CONTRACTOR
shall have the option to extend the exploration period and to conduct Petroleum
Operations beyond the first two (2) Contract Years as indicated below:
(a) After the second Contract Year, CONTRACTOR may elect to continue this
Contract for an additional period of one (1) year, during which year CONTRACTOR
will fulfill the minimum Work Program under Section 4.3(b)(i);
(b) After the third Contract Year, CONTRACTOR may elect to continue this
Contract for an additional period of one (1) year, during which year CONTRACTOR
will fulfill the minimum Work Program under Section 4.3(b)(ii);
(c) After the fourth Contract Year, CONTRACTOR, may elect to continue this
Contract for an additional period of one (1) year, during which year CONTRACTOR
will fulfill the minimum Work Program under Section 4.3(b)(iii);
After fulfilling the minimum Work Program for each of the extension periods
above, CONTRACTOR shall have the right to terminate this Contract in its
entirety without further obligation except with respect to any obligations under
this Contract due and owing at the time of said termination. CONTRACTOR shall
make its election, if any, to extend the exploration period as provided in
Sections 2.2(a), (b) and (c) above not later than ninety (90) calendar days
prior to the second, third and fourth anniversary of the Effective Date, as the
case may be.
2.3 If CONTRACTOR has not elected to terminate this Contract pursuant to
Section 2.2 and no Commercial Discovery has been made, and if CONTRACTOR does
elect to extend the Contract beyond the fifth (5th) Contract Year pursuant to
Section 2.1, then this Contract shall terminate automatically in its entirety
except with respect to Areas of Provisional Discovery, which shall remain part
of the Contract Area pending final determination by the CONTRACTOR as to whether
said Area of Provisional Discovery will be declared a Commercial Discovery.
However, an extension of one (1) year may be granted by the MINISTRY so
CONTRACTOR may finish drilling and testing any Well actually being drilled or
tested at the end of the fifth (5th), sixth (6th), seventh (7th) or eight (8th)
Contract Year.
2.4 Upon encountering indications of a substantial accumulation of
Hydrocarbons in the Contract Area, the CONTRACTOR as soon as possible will
notify the MINISTRY of this fact, indicating in the notice the particular
details of the location, nature and size of the accumulation. After giving such
notification to the MINISTRY, the CONTRACTOR as soon as practicable will submit
to the MINISTRY a report showing the results of any preliminary production tests
carried out, including, when necessary, the estimate of the oil or gas in place
and the recoverable reserves of the accumulation and the approximate extension
of said discovery in the Contract Area (hereinafter referred to as the "Area of
Provisional Discovery"). The decision to delineate the Area of Provisional
Discovery shall be at CONTRACTOR's discretion taking into account a reasonable
interpretation of the data and shall be in accordance with normal petroleum
industry practices.
2.5 Within each Area of Provisional Discovery CONTRACTOR shall carry out
evaluation work, including, as appropriate, seismic work and drilling. As soon
as possible, CONTRACTOR shall determine whether the discovery is a Commercial
Discovery. Provided that if there is insufficient time to properly evaluate the
discovery within the then current exploration period, upon CONTRACTOR's request,
the MINISTRY shall grant CONTRACTOR a reasonable extension to fully evaluate
such discovery.
2.6 When it is determined that the discovery of Hydrocarbons is a Commercial
Discovery in accordance with Section 2.5, CONTRACTOR shall notify the MINISTRY,
and CONTRACTOR shall submit to the MINISTRY, in writing, for its written
approval, which approval will not be unreasonably withheld the following:
(a) a report including a map showing the extension of the area of Commercial
Discovery within the Contract Area; the area when said report is accepted by
MINISTRY will constitute a Field;
(b) a Work Program for development of the Field, including an estimate of
the costs of Development and Production Expenditures necessary for the
development of the Field;
(c) the estimated Maximum Efficient Rate of production (that shall be
established in accordance with Section 6.3) that CONTRACTOR intends to produce
the Field; and
(d) the schedule of the most accelerated program consistent with good
international petroleum industry practice for implementation of CONTRACTOR's
Work Program.
Any report submitted by CONTRACTOR to the MINISTRY will be deemed accepted by
the MINISTRY ninety (90) calendar days after CONTRACTOR's submittal unless
CONTRACTOR is notified otherwise in such time period by the MINISTRY.
2.7 This Contract will continue in existence with respect to each Field for
a period of thirty (30) years with respect to Crude Oil and for forty (40) years
with respect to Natural Gas starting from the date CONTRACTOR, in accordance
with the provisions of Section 2.6, receives approval from the MINISTRY that the
discovery of Hydrocarbons in such Field is a Commercial Discovery. In case of
new Commercial Discoveries as a result of new exploratory drilling on formations
that underlie or overlie each other or other deposits found within the extension
of the area of the original Commercial Discovery, such formations will
constitute only one Field; and the Field will be defined or redefined as may be
necessary, to incorporate all of the underlying and overlying formations and all
deposits located within the extension of the area of the original Commercial
Discovery, and the provisions of Section 2.6 shall apply mutatis mutandis to any
------- --------
such new Commercial Discovery.
2.8 CONTRACTOR shall have the right to terminate this Contract totally or
partially;
(a) with respect to any part of the Contract Area other than a Field then
producing or that prior thereto had produced Crude Oil or Natural Gas upon
giving ninety (90) calendar days written notice of its intention to do so; and
(b) with respect to any field then producing or that prior thereto had
produced Crude Oil or Natural Gas, upon giving one hundred eighty (180) calendar
days written notice of its intention to do so.
2.9 Subject to Section 2.10, the STATE shall have the right to cancel this
Contract upon giving sixty (60) calendar days written notice of its intention to
do so, if CONTRACTOR:
(a) fails to make any monetary payment required by law or under this
Contract for a period of thirty (30) days after the due date for such payment;
(b) fails to comply with any other material obligation that it has assumed
under this Contract;
(c) fails to comply with any regulations issued in accordance with this
Contract by the MINISTRY, or any governmental department or agency of the
Republic of Equatorial Guinea materially affecting the Petroleum Operations or
the interests of the STATE referred to in this Contract;
(d) suspends its payments under this Contract, because of insolvency or
makes a settlement with its creditors; or
(e) has not commenced production from a Field within the period of time
specified in the development plan according to the terms and conditions
specified in Section 2.5 without reasonable justification;
provided that CONTRACTOR's actions or inactions, as the case may be, have a
material impact on the petroleum Operations and are not in accordance with
industry standards.
2.10 If the circumstance or circumstances that would otherwise result in
cancellation under Sections 2.9(a), (b), (c) or (d) are remedied by CONTRACTOR
or CONTRACTOR begins to remedy the circumstance and proceeds with such remedy
with due diligence within the sixty (60) calendar day period following the
notice of termination as aforesaid, then such termination shall not become
effective. If CONTRACTOR cannot completely rectify or remedy the cause or
causes within the sixty (60) day period, the CONTRACTOR may request from the
MINISTRY an extension or extensions to complete the remedies and the MINISTRY,
according to the criteria generally accepted in the industry, shall not
unreasonably withhold the approval of such extensions if CONTRACTOR is
diligently pursuing the remedies.
2.11 The termination or cancellation of this Contract, for whatever reason,
shall be without prejudice to the obligations incurred and not carried out by
the STATE or CONTRACTOR before the termination of this Contract.
2.12 In the event of cancellation pursuant to Section 2.9, the MINISTRY may
require CONTRACTOR to continue for the account of the STATE Crude Oil or Natural
Gas production activities until the right to continue such production has been
transferred by the MINISTRY to another Person. In this case, all provisions
relevant to CONTRACTOR's entitlement under this Contract will remain in force.
In no event shall CONTRACTOR have any obligations under this Section for more
than ninety (90) calendar days after such termination, unless otherwise agreed
to by the Parties.
2.13 Within ninety (90) calendar days after the termination of this
Contract, unless the MINISTRY has required an extension of this period,
CONTRACTOR shall have the obligation to take any reasonably necessary action as
directed by the MINISTRY, including the cessation or continuation of Petroleum
Operations to prevent pollution, environmental damage or a hazard to human life
or third party property.
III. SURRENDER OF AREAS
--------------------
3.1 Subject to Section 3.3, CONTRACTOR shall surrender thirty percent (30%)
of the original Contract Area no later than the end of the third Contract Year.
3.2 Subject to Section 3.3, if CONTRACTOR elects to extend the exploration
period pursuant to Section 2.1 above, CONTRACTOR shall surrender an additional
area equal to twenty percent (20%) of the remaining Contract Area no later than
the end of the fifth Contract Year.
3.3 CONTRACTOR shall not be obligated to surrender any portion of the
original Contract Area declared an Area of Provisional Discovery or a Field.
CONTRACTOR's surrender obligations under Sections 3.1 and 3.2 shall apply to the
area remaining after excluding from the original Contract Area areas declared to
be an Area of Provisional Discovery or a Field and areas previously surrendered
by CONTRACTOR.
3.4 After the mandatory surrenders as set forth in this Section III,
CONTRACTOR shall maintain a reasonable exploration effort with regard to the
remaining portion of the Contract Area.
3.5 Upon at least thirty (30) calendar days written notice to the MINISTRY
prior to the end of the first Contract Year and similarly prior to the end of
any succeeding Contract Year, CONTRACTOR may surrender any portion of the
Contract Area, and such portion shall then be credited against that portion of
the Contract Area CONTRACTOR is next required to surrender under the provisions
of Sections 3.1 and 3.2 hereof.
3.6 CONTRACTOR shall notify the MINISTRY sixty (60) calendar days prior to
the date of surrender, the description of the portion of the area to be
surrendered. The individual portions being surrendered, whenever possible,
shall be of sufficient size and convenient shape, taking into account contiguous
areas already relinquished and not the subject of a further contract, to enable
Petroleum Operations to be carried out thereon and the boundaries of such areas
shall be delineated in exact degrees, minutes and seconds of longitude and
latitude.
3.7 CONTRACTOR shall plug and abandon all Wells drilled by Contractor on the
area to be surrendered in accordance with generally accepted oilfield practices.
3.8 No surrender made in accordance with this Section III shall relieve
CONTRACTOR or its surety of the obligation to pay surface rentals accrued, or
making payments due and payable as a result of exploration and development
activities conducted through the date of surrender.
IV. WORK PROGRAM AND EXPENDITURES
--------------------------------
4.1 CONTRACTOR shall commence Petroleum Operations hereunder not later than
ninety (90) calendar days after the Effective Date.
4.2 CONTRACTOR shall be entitled to employ any person qualified, in the
judgment of CONTRACTOR, to undertake on its behalf such geological and
geophysical surveys, drillings or similar investigations as it may decide. Any
subcontractor retained by CONTRACTOR shall have the necessary professional
experience to perform the task assigned and shall be required, by written
agreement with CONTRACTOR, to abide by all relevant terms of this Contract and
all applicable laws and regulations of the Republic of Equatorial Guinea.
CONTRACTOR within thirty (30) calendar years and shall advise the MINISTRY of
the name and address of any subcontractor retained.
4.3 During the first five (5) Contract Years, CONTRACTOR agrees to perform the
following minimum Work Program:
(a)FIRST TWO CONTRACT YEARS:
------------------------
(i) Reprocess approximately one-thousand eight-hundred (1,800) kilometers
of existing seismic data;
(ii) Acquire one-thousand (1,000) kilometers of new seismic data;
(iii) Drill one (1) Well; and
(iv) Prepare and submit an interpretive geologic study of the hydrocarbon
potential of the Rio Muni area.
(b)THIRD, FOURTH AND FIFTH CONTRACT YEARS:
--------------------------------------
CONTRACTOR shall perform the following work in the event it exercises the
option to extend pursuant to Sections 2.2(a), 2.2(b) or 2.2(c):
(i) Drill one (1) Well in third Contract Year contingent upon the
identification of a structure which, in CONTRACTOR's opinion, is a drillable
prospect, and conduct additional geological studies and associated analyses of
technical data as CONTRACTOR deems appropriate;
(ii) Drill one (1) Well in the fourth Contract Year and conduct additional
geological studies and associated analyses of technical data as CONTRACTOR deems
appropriate;
(iii) Drill one (1) Well in the fifth Contract Year contingent upon the
identification of a structure, which, in CONTRACTOR's opinion, is a drillable
prospect, and conduct additional geological studies and associated analyses of
technical data, as CONTRACTOR deems appropriate.
4.4 In case the work completed by CONTRACTOR during any phase referred to in
Section 4.3 exceeds the minimum work for that phase, the excess work may be
carried forward and credited against the minimum work obligation in the next
succeeding phase.
4.5 As a condition precedent to the effectiveness of this Contract,
CONTRACTOR shall provide a security by means of a parent company performance
guarantee to the MINISTRY substantially in the form of the guaranty set forth in
ANNEX "D" and corresponding to Four Million United States Dollars (U.S.
$4,000,000) for each Well CONTRACTOR commits to drill and One Million United
States Dollars (U.S. $1,000,000) for other Petroleum Operations CONTRACTOR
commits to conduct during the first two (2) Contract Years. If CONTRACTOR
extends the period for Exploration Operations pursuant to Section 2.1 or 2.2,
then CONTRACTOR on or before the date any such extension becomes effective shall
provide an additional parent company performance guarantee as security
substantially in the form of the guaranty set forth in Annex "D" and
corresponding to an amount to be determined at the time of the extension by the
MINISTRY and CONTRACTOR for Petroleum Operations CONTRACTOR commits to conduct
during the period of any such extension. If at the end of the period of the
phases for Exploration Operations, including any extension thereof made pursuant
to Sections 2.1 and 2.2 hereof, or upon the date of termination of this
Contract, whichever first occurs, CONTRACTOR has not performed the obligations
described in the minimum Work Program, the balance of the security corresponding
to the minimum expenditures for Petroleum Operations and the entirety of the
security corresponding to the Well shall be paid automatically to the STATE in
accordance with the provisions of Annex "D."
4.6 One hundred twenty (120) calendar days prior to the beginning of each
Calendar Year or at such other time as otherwise mutually agreed by the parties,
CONTRACTOR shall prepare and submit for approval to the MINISTRY a Work Program
and Budget of Petroleum Operations Expenditures for the Contract Area setting
forth the Petroleum Operations CONTRACTOR proposes to carry out during the
ensuing Calendar Year. After thirty (30) calendar days and within a period of
ninety (90) calendar days of its submission, the MINISTRY may ask for
clarification of the Work Program and Budget of Petroleum Operations
Expenditures and/or submit proposals for consideration by the Contractor for the
revision of specific features thereof relating to the type and cost of the works
and operations. In the absence of such proposals or a request for
clarification, the Work Program and Budget of Petroleum Operations Expenditures
shall be deemed to have been approved by the Ministry. Approval by the MINISTRY
of the proposed Work Program and Budget of Petroleum Operations Expenditures
will not be unreasonably withheld or delayed. If the Parties cannot agree on
the Work Program and Budget of Petroleum Operations Expenditures, CONTRACTOR is
hereby authorized to begin work necessary to carry out its proposed Work Program
in a timely and practical manner until the Parties reach a mutually acceptable
Work Program and Budget of Petroleum Operations Expenditures. The MINISTRY
shall give a letter to CONTRACTOR authorizing in a provisional manner the
beginning of said provisional Work Program and Budget of Petroleum Operations
Expenditures until the MINISTRY approves the final Work Program and Budget of
Petroleum Operations Expenditures. The Parties shall meet within a period of
fifteen (15) days from date of issuance of the provisional Work Program and
Budget of Petroleum Operations Expenditures from the MINISTRY and use all
diligence to reach a mutually acceptable agreement.
4.7 It is recognized by the Parties that the details of a Work Program may
require changes in the light of unforeseen circumstances and nothing herein
contained shall limit the right of CONTRACTOR to make such changes, provided
such changes do not alter the general objectives of the Work Program.
4.8 The Parties further recognize that in the event of an emergency or
extraordinary circumstances requiring immediate action, either Party may take
actions it deems proper or advisable to protect its interests and those of its
employees and any costs so incurred by CONTRACTOR shall be included in the
Petroleum Operations Expenditures. Costs incurred by CONTRACTOR related to
measures of prevention and protection related to the environment shall be
included as costs of Petroleum Operations Expenditures as cost recoverable.
Costs incurred by CONTRACTOR related to cleaning up pollution or damage to the
environment caused by CONTRACTOR shall not be included in Petroleum Operations
Expenditures and shall not be cost recoverable except the first Two Hundred
Thousand United State Dollars (U.S. $200,000) per occurrence related to such
cleanup or damages per incident shall be included as costs of Petroleum
Operations Expenditures and shall be cost recoverable.
4.9 Within ninety (90) calendar days after the expiration of a Calendar
Year, CONTRACTOR shall submit to the MINISTRY detailed accounts showing the
Exploration and/or Development and Production Expenditures CONTRACTOR has
incurred during the past Calendar Year. The accounts shall be certified by an
independent outside accountant acceptable to both Parties. It is understood
that the MINISTRY retains the authority to review and audit occasionally
CONTRACTOR's books with respect to Petroleum Operations conducted hereunder.
Such audit right will terminate two (2) years after closure of the subject
year's accounts. Any exceptions to Contractor's accounts must be officially
communicated to the CONTRACTOR within three (3) years of the closure of the
subject year's accounts.
4.10 During the term of this Contract, CONTRACTOR in accordance with good
petroleum industry practice shall be responsible for carrying out all the
necessary work in connection with abandonment (which includes the removal,
proper disposal, alternative innovative recycling or salvage) of any Petroleum
Operations Facilities, including, but not limited to, platforms, artificial
structures, wellhead equipment, tubulars, and flowlines deemed by the MINISTRY
to be unusable or no longer required for future operations. CONTRACTOR shall
submit for the MINISTRY's approval detailed work plans for such removal,
disposal or salvage. All costs incurred by CONTRACTOR to remove, dispose or
salvage such facilities shall be cost recoverable. For the purpose of setting
up a financial mechanism to recover such costs earlier in the life of a Field,
CONTRACTOR and the MINISTRY shall agree on a mechanism and modality for setting
aside a reserve on CONTRACTOR's books as part of Petroleum Operations
Expenditures, subject to cost recovery, to be used for such removal, disposal or
salvage operations, no later than two years after commencement of the first
commercial production.
V. CONDUCT OF PETROLEUM OPERATIONS BY CONTRACTOR
--------------------------------------------------
5.1 CONTRACTOR shall conduct the Petroleum Operations diligently and in
accordance with generally accepted standards of the petroleum industry designed
to enable production at the Maximum Efficient Rate of Crude Oil and at the level
of production of Natural Gas specified in Section 6.3. CONTRACTOR shall ensure
that all equipment, plant and installations used by CONTRACTOR or its
subcontractors comply with generally accepted engineering norms and are of
proper and accepted construction and are kept in optimal working order.
5.2 CONTRACTOR shall in particular take all reasonable steps necessary in
accordance with generally accepted standards of the petroleum industry to:
(a) without prejudice to Section 5.3, ensure that Crude Oil or Natural Gas
discovered and produced within the Contract Area does not escape or is not in
any other way wasted;
(b) prevent damage to under or over Crude Oil or Natural Gas-bearing strata;
(c) prevent the nonintentional entrance of water through Wells to Crude Oil
or Natural Gas-bearing strata;
(d) Prevent damage to under or over water-bearing strata;
(e) Conduct all Petroleum Operations under this Contract in accordance with
applicable law and regulations and in a manner that does not conflict with
obligations imposed on the Republic of Equatorial Guinea by international law;
(f) Take necessary precautions for protection of navigation and fishing and
to prevent pollution of the sea or rivers;
(g) Indemnify, defend and save the STATE harmless against all claims, losses
and damage of any nature, whatever, including without limitation, claims for
loss or damage to property or injury to persons caused by, or resulting from,
any operation conducted by or on behalf of CONTRACTOR; provided that the
CONTRACTOR shall not be held responsible to the STATE under this subsection for
any loss, claim, damage, or injury caused by, or resulting from any negligent
action of personnel of the STATE including, but not limited to, subcontractors
of the STATE, other than CONTRACTOR, and employees of the State;
(h) Subject to Section 2.4, drill and produce a Field without regard to
CONTRACTOR's contractual interest, if any, in an adjacent contract area.
5.3 The Natural Gas CONTRACTOR does not utilize in its own operations in the
Contract Area, or sell, shall be reinjected into the subsurface structure. When
the existing technical and financial circumstances require the flaring of
Natural Gas, the MINISTRY may authorize such flaring. The MINISTRY shall,
nevertheless, authorize the flaring of Natural Gas for periods of relatively
short duration during production tests, and in cases when the flaring of
relatively small quantities of Natural Gas is a necessary part of Crude Oil
production and is in accordance with good practice within the petroleum
industry.
5.4 If any works or installations erected by CONTRACTOR or any operations
undertaken by CONTRACTOR endanger Persons or third-party property or cause
pollution or harm marine life to an unacceptable degree, the CONTRACTOR, in
consensus with the MINISTRY, shall take opportune remedial measures within a
reasonable period established by the MINISTRY and the CONTRACTOR to repair any
damage to the environment. CONTRACTOR shall, if required by the nature and
severity of the damage, suspend the Petroleum Operations in whole or in part,
until CONTRACTOR has taken such remedial measures or has repaired the damage.
5.5 To ensure that CONTRACTOR shall meet its obligations to third parties or
to government agencies that might arise in the event of damage or injury
(including environmental damage or injury ) caused by Petroleum Operations,
notwithstanding its accidental nature, CONTRACTOR shall maintain in force a
third party liability insurance policy covering its Petroleum Operations.
CONTRACTOR shall provide to the MINISTRY, within thirty (30) calendar days after
the Effective Date, documents that prove the effectiveness of CONTRACTOR's third
party liability insurance covering its Petroleum Operations. To the extent such
third party liability insurance is unavailable, or is not obtained, or does not
cover part or all of any claim or damage caused by or resulting from Petroleum
Operations, including damage to the environment as mentioned in Section 4.8,
CONTRACTOR shall remain wholly responsible and shall defend, indemnify and hold
harmless the MINISTRY and the State against all claims or loss, except for
claims arising from the negligence of the MINISTRY or STATE to their employees
or their subcontractors other than CONTRACTOR.
5.6 If, after the Effective Date of this Contract, others are granted
permits or licenses within the Contract Area for exploration/production of any
minerals other than Crude Oil or Natural Gas, CONTRACTOR shall use his best
efforts to avoid obstruction or interference with such licensees' operations
within the Contract Area. The MINISTRY shall use its best efforts to ensure
that operations of third parties do not obstruct CONTRACTOR's Petroleum
Operations within the Contract Area.
5.7 CONTRACTOR shall provide acceptable working conditions, living
accommodations on offshore installations, and access to medical attention and an
infirmary for all personnel employed by CONTRACTOR or its subcontractors in its
Petroleum Operations.
5.8 CONTRACTOR's Well design and drilling, including, but not limited to,
CONTRACTOR's casing, cementing and drilling programs shall be in accordance with
generally accepted industry practice.
5.9 Every Well shall be identified by a number, and shall be shown on maps,
plans and similar records CONTRACTOR is required to keep. The MINISTRY shall at
once be notified of any change on the identification numbers.
5.10 No Well shall be drilled through any vertical boundary of the Contract
Area. A directional Well drilled to an objective under the Contract Area from a
nearby surface location not covered by the Contract shall be deemed to have the
same effect for all purposes of the Contract as a Well drilled from a surface
location on the Contract Area. In such circumstances and for purposes of this
Contract, production of Crude Oil or Natural Gas from the Contract Area through
a directional Well surfaced nearby, or drilling or reworking of any such
directional Well, shall be considered production or drilling or reworking
operations (as the case may be) on the Contract Area for all purposes of this
Contract. Nothing contained in this paragraph is intended or shall be construed
as granting to the CONTRACTOR any leasehold interests, licenses, easements, or
other rights the CONTRACTOR may have to acquire lawfully under the Hydrocarbons
Law or from the MINISTRY or third parties.
5.11 Before commencing any work on drilling of any Well covered by a Work
Program and Budget of Operating Expenditures or recommencing work on any Well on
which work has been discontinued for more than six (6) months, CONTRACTOR shall
give the MINISTRY seven (7) calendar days written notice; however, if the
estimated amount to be spent on said work is less than One Hundred Thousand
United States Dollars (U.S. $100,000), notice shall not be required.
5.12 Before abandoning any Field, CONTRACTOR shall give ninety (90) calendar
days notice to the MINISTRY of its intention to abandon. Upon receipt of such
notice, the MINISTRY may elect to assume operation of the Well or Wells proposed
for abandonment; however, MINISTRY's operations shall not interfere with those
of CONTRACTOR. The MINISTRY's failure to so elect, by notice to the CONTRACTOR
in writing within the aforementioned ninety (90) day period, shall be deemed
approval of the CONTRACTOR's proposal to abandon.
5.13 CONTRACTOR shall securely plug any Well that it intends to abandon to
prevent pollution, damage to the environment, and possible damages to the
reservoir.
VI. RIGHTS AND OBLIGATIONS OF THE PARTIES, DETERMINATION OF PRODUCTION
------------------------------------------------------------------------
LEVELS
------
6.1 Subject to the provisions of paragraphs (e) and (f) of this Section 6.1,
CONTRACTOR shall have the following rights and obligations:
(a) advance all necessary funds and purchase or lease all material,
equipment and supplies required in connection with the Petroleum Operations;
(b) furnish all technical aid, including foreign personnel, required for the
performance of the Petroleum Operations;
(c) furnish all such other funds for the performance of the Petroleum
Operations as may be required, including payment to foreign entities performing
services as subcontractors;
(d) retain control to all leased property paid for with Foreign Exchange and
brought into the Republic of Equatorial Guinea under the rules of temporary
importation, and as such, shall have the right to freely export same from the
Republic of Equatorial Guinea in accordance with the Hydrocarbons Law;
(e) have the right prior notification to the Ministry to sell, assign,
transfer, convey or otherwise dispose of any part or all of the rights and
interests and obligations under this Contract to any Affiliated Company;
(f) have the right to sell, assign, transfer, convey or otherwise dispose of
all or any part of its rights and interests and obligations under this Contract
to parties other than Affiliated Companies with the prior written consent of the
MINISTRY, such consent shall not be unreasonably withheld, and shall be deemed
granted if the MINISTRY does not respond to CONTRACTOR within sixty (60)
calendar days of CONTRACTOR's written request for consent;
(g) have the right at all times to enter and exit the Contract Area and any
facilities used in the Petroleum Operations, wherever located;
(h) have the right to use and have access to all geological, geophysical,
drilling, Well, production and other information held by the MINISTRY or by any
other governmental agency or enterprise, or enterprise in which the STATE
participates, relating to the Contract Area, including Well location maps. The
MINISTRY must supply the same to the CONTRACTOR;
(i) submit in an appropriate form to the MINISTRY copies of all such
geological, geophysical, drilling, Well, production and other data, reports,
interpretations and maps, and cuttings of all samples that have been obtained or
compiled during the term hereof;
(j) include in the Work Program and Budget of Petroleum Operations
Expenditures the following sums to be spent on training personnel of the
MINISTRY and citizens of the Republic of Equatorial Guinea for professional,
skilled and technical jobs in CONTRACTOR's Petroleum Operations. In conjunction
with the preparation of the annual Budget of Petroleum Operations Expenditures,
CONTRACTOR and MINISTRY will jointly agree on a training program where these
sums will be expended. CONTRACTOR agrees to be responsible for the
implementation and direct funding of the referenced training programs, and the
expenditures will be included as cost recoverable in its Petroleum Operations
Expenditures:
(i) Fifty Thousand United States Dollars (U.S. $50,000) in each of the first
and second Contract Years;
(ii) Seventy-Five Thousand United States Dollars (U.S. $75,000) in the third
Contract Year and in every year thereafter until a Commercial Discovery is
determined in accordance with Section 2.5. For the year when Commercial
Discovery is determined, the training obligation to be spent under this Section
6.1(j)(ii) will be prorated from January 1 of that year through the date on
which Commercial Delivery is determined;
(iii) One Hundred Thousand United States Dollars (U.S. $100,000) per year
from the time of determination of Commercial Discovery to the date of first
commercial production. For the year when the training obligation under this
Section 6.1(j)(iii) takes effect, the amount to be spent will be prorated from
the date of determination of Commercial Discovery through December 31 of that
year; and
(iv) Two Hundred Thousand United States Dollars (U.S. $200,000) per year
from the time of first commercial production and for each year thereafter until
termination of the Contract. For the year when the training obligation under
this Section 6.1(j)(iv) takes effect, the amount to be spent will be prorated
from the date of first commercial production through December 31 of that year.
CONTRACTOR shall make all reasonable efforts to employ and train citizens of the
Republic of Equatorial Guinea in Petroleum Operations. CONTRACTOR may employ
non-citizens, if in the opinion of CONTRACTOR and not contested by the MINISTRY,
no Equatorial Guinean citizens can be found with sufficient skill and technical
qualifications. CONTRACTOR shall make similar requirements of any
subcontractor. At intervals of not more than one year CONTRACTOR shall submit
to the MINISTRY reports detailing the personnel employed and their residence
when employed. CONTRACTOR shall provide, as CONTRACTOR deems necessary,
on-the-job training for citizens of the Republic of Equatorial Guinea to
undertake skilled and technical jobs in the Petroleum Operations. Costs and
expenses of training citizens of Equatorial Guinea as well as costs and expenses
for a program of training for the MINISTRY's personnel, shall be included in
Petroleum Operation Expenditures;
(k) appoint an authorized representative for the Republic of Equatorial
Guinea with respect to this Contract, who shall have an office in Equatorial
Guinea;
(l) give preference to goods and services that are produced in the Republic
of Equatorial Guinea or rendered by citizens of the Republic of Equatorial
Guinea, provided such goods and services are offered at equally advantageous
conditions with regard to quality, price, and immediate availability in the
quantities and to the specifications required;
(m) pay to the STATE the corresponding taxes in accordance with the Tax Law;
(n) pay to the STATE the corresponding Royalty pursuant to the terms and
conditions of this Contract;
(o) except as provided in Section 7.10 hereof, have the right during the
term hereof to freely lift, dispose of and export its share of Crude Oil, and
retain abroad the Foreign Exchange proceeds obtained therefrom;
(p) notify the MINISTRY at least forty-eight (48) hours before the abandonment
of any Well.
6.2. THE MINISTRY SHALL:
------------------
(a) except with respect to CONTRACTOR's obligations to pay the taxes set
forth at paragraph 6.1(m) of this Section VI, assume and discharge all other
taxes CONTRACTOR would otherwise be subject, including transfer tax, import and
export duties on materials, equipment and supplies brought into the Republic of
Equatorial Guinea by CONTRACTOR, its contractors and subcontractors; likewise,
it will comply with all taxes required with regard to property, capital, net
worth, operations, remittances or transactions (whether exacted directly or by
the requirement of stamp taxes on documents or the use of sealed paper),
including any tax or levy on or in connection with operations performed
hereunder by CONTRACTOR in accordance with this Contract. The MINISTRY shall
not be obligated to pay CONTRACTOR's Royalty, Income Tax, nor taxes on tobaccos,
liquor and personal income tax; nor shall it be obligated to pay the Income Tax
and other taxes not listed in the preceding sentence payable by contractors and
subcontractors. The obligations of the MINISTRY hereunder shall be deemed to
have been complied with by the delivery to CONTRACTOR within one hundred and
twenty (120) calendar days after the end of each Calendar Year, of documentary
proof in accordance with fiscal laws of the Republic of Equatorial Guinea that
liability for the above-mentioned taxes has been satisfied, except that with
respect to any of such liabilities that CONTRACTOR may be obligated to pay
directly, the MINISTRY shall reimburse it within sixty (60) calendar days after
receipt of invoice. The MINISTRY shall be consulted prior to payment of such
taxes by CONTRACTOR or by any other party on CONTRACTOR's behalf;
(b) otherwise assist and expedite CONTRACTOR's execution of the Work Program
by supplying or otherwise making available all necessary visas, work permits,
import licenses, and rights of way and easements as may be required by
CONTRACTOR or its subcontractors and made available from the resources under the
MINISTRY's control;
(c) have title to all original data resulting from the Petroleum Operations
including, but not limited to, geological, geophysical, petrophysical,
engineering, well logs and completion, status reports, samples and any other
data CONTRACTOR may compile or obtain during the term of this Contract;
provided, however, that CONTRACTOR may retain copies of such data and further
provided that such data shall not be disclosed to third parties by the MINISTRY
without the consent of CONTRACTOR while this Contract remains in effect.
However, for the purpose of obtaining new offers, the MINISTRY may show any
third party geophysical and geological data with respect to that part or parts
of the Contract Area acquired by CONTRACTOR and adjacent to the area of such new
offers, provided that no such data shall be disclosed that was in the possession
of the MINISTRY for less than eleven (11) months. Notwithstanding the
foregoing, the MINISTRY may show data to advisors and consultants of the
MINISTRY that agree to keep the data confidential;
(d) have the right at all reasonable times to inspect CONTRACTOR's Petroleum
Operations, Hydrocarbon measuring devices, logs, plans, maps, and records
relating to Petroleum Operations and surveys or investigations on or with regard
to the Contract Area. MINISTRY shall make every effort to coordinate inspection
activities to avoid interference with Petroleum Operations.
6.3 CONTRACTOR shall produce Crude Oil from the Contract Area at the Maximum
Efficient Rate. CONTRACTOR and MINISTRY shall conduct a review of CONTRACTOR's
production programs prior to the commencement of production from any Field and
establish at that time by agreement the Maximum Efficient Rate and the
production rate for Natural Gas and the dates the Maximum Efficient Rate and the
production rate for Natural Gas will be reviewed and established in the future.
In the case of Natural Gas, the production rate shall not be less than that
required to satisfy any contracts then in existence for the sale of Natural Gas.
6.4 Subject to Section 5.2(b), the Crude Oil production rate shall not be
less than that required to satisfy any contract in existence for the sale of
Crude Oil. In no case the production rate shall damage the reservoir or
reservoirs.
VII. RECOVERY OF PETROLEUM OPERATING COSTS, SHARING OF PRODUCTION, AND
-----------------------------------------------------------------------
DISTRIBUTION OF PRODUCTION
----------------------------
CRUDE OIL:
- ----------
7.1 The respective production shares of the STATE and the CONTRACTOR of
Crude Oil produced and saved shall be determined in accordance with the
definitions and procedures set forth in this Section VII.
7.2 After making Royalty payments to the STATE, CONTRACTOR shall be entitled
to recover all Petroleum Operations Expenditures out of the sales proceeds or
other disposition of Crude Oil produced and saved hereunder and not used in
Petroleum Operations. Any Crude Oil remaining after making the Royalty payments
to the STATE and after all Petroleum Operations Expenditures are recovered by
CONTRACTOR shall be referred hereinafter as "Net Crude Oil." Net Crude Oil
shall be shared between the STATE and the CONTRACTOR in accordance with the
procedures outlined below, designed to ensure total cost recovery by CONTRACTOR,
followed by an escalation of the STATE's share based on increases in the
CONTRACTOR's pre-tax rate of return:
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL TOTAL
CONTRACTOR'S PRE-TAX STATE SHARE CONTRACTOR SHARE
RATE OF RETURN (% OF NET CRUDE OIL) (% OF NET CRUDE OIL)
Less than 18% 0% 100%
Greater or equal to 18% and less than 25% 10% 90%
Greater or equal to 25% and less than 40% 35% 65%
Equal or Greater than 40% 55% 45%
</TABLE>
7.3 To determine STATE's share of Net Crude Oil, it shall first be necessary
to calculate Net Cash Flow from Petroleum Operations ("Net Cash Flow"). Net
Cash Flow for any given Calendar Year shall be determined by subtracting Royalty
and Petroleum Operations Expenditures from Gross Receipts.
7.4 To calculate the STATE's Share of Net Crude Oil produced from the
Contract Area, there are hereby established three (3) accounts: First Share
Account ("FSA"); Second Share Account ("SSA"); and Third Share Account ("TSA").
7.4.1 First Share Account:
-------------------
a. For purposes of calculating the First Share Account, the following
formula shall be used:
FSA(Y) = FSA(Y-1)(1 + .18 + i) + NCF(Y)
Where: FSA = First Share Account
Y = the Calendar Year in question
NCF = Net Cash Flow
i = the percentage change for the calendar year in
question in the index of U.S. Consumer prices as reported for the first
time in the monthly publication, "International Financial Statistics" of the
International Monetary Fund.
b. In any Calendar Year when FSA(Y) is negative, the STATE's share of Net
Crude Oil determined with reference to the First Share Account shall be zero.
c. In any Calendar Year when FSA(Y) becomes positive, the CONTRACTOR for
purposes of this section shall be deemed to have earned a pre-tax rate of return
that is equal to or greater than eighteen percent (18%), and the STATE's share
of Net Crude Oil determined with reference to the First Share Account shall be
valued at an amount of Net Crude Oil equal to ten percent (10%) of FSA(Y).
d. In any Calendar Year immediately subsequent to a Calendar Year when
FSA(Y) is positive, for purposes of applying the formula set forth in subsection
(a) of this Section 7.4.1, FSA(Y-1) shall be equal to zero.
7.4.2 Second Share Account
a. For purposes of calculating the Second Share Account, the following
formula shall be used:
SSA(Y) = SSA(Y-1)(1 + .25 + i) + (NCF(Y) - GS I(Y))
Where: SSA = Second Share Account
Y = the Calendar Year in question
NCF = Net Cash Flow
GS I = STATE share of Net Crude Oil determined with
reference to the First Share Account
i = the percentage change for the Calendar Year in
question in the index of U.S. consumer prices as reported for the first
time in the monthly publication "International Financial Statistics" of the
International Monetary Fund.
b. In any Calendar Year when SSA(Y) is negative, the STATE's share of Net
Crude Oil determined with reference to the Second Share Account shall be zero.
c. In any Calendar Year when SSA(Y) becomes positive, the CONTRACTOR for
purposes of this section shall be deemed to have earned a pre-tax rate of return
that is equal to or greater than twenty-five percent (25%), and the STATE's
share of Net Crude Oil determined with reference to the Second Share Account
shall be valued at an amount of Net Crude Oil equal to twenty-seven and 778/1000
percent (27.778%) of SSA(Y).
d. In any Calendar Year immediately subsequent to a Calendar Year when
SSA(Y) is positive, for purposes of applying the formula set forth in subsection
(a) of this Section 7.4.2, SSA(Y-1) shall be equal to zero.
7.4.3 Third Share Account
-------------------
a. For purposes of calculating the Third Share Account, the following
formula shall be used:
TSA(Y) = TSA(Y-1)(1 + .40 + i) + (NCF(Y) - GS I(A) - GS II(Y))
Where: TSA = Third Share Account
Y = the Calendar Year in question
NCF = Net Cash Flow
GS I = STATE share of Net Crude Oil determined with reference
to the First Share Account
GS II = STATE share of Net Crude Oil determined with reference
to the Second Share Account
i = the percentage change for the Calendar Year in
question in the index of U.S. consumer prices as reported for the first time
in the monthly publication "International Financial Statistics" of the
International Monetary Fund.
b. In any Calendar Year when TSA(Y) is negative, the STATE's share of Net
Crude Oil determined with reference to the Third Share Account shall be zero.
c. In any Calendar Year when TSA(Y) becomes positive, the CONTRACTOR for
purposes of this section shall be deemed to have earned a pre-tax rate of return
that is at least forty percent (40%), and the STATE's share of Net Crude Oil
determined with reference to the Third Share Account shall be valued at an
amount of Net Crude Oil equal to thirty and 769/1000 percent (30.769%) of
TSA(Y).
d. In any Calendar Year immediately subsequent to a Calendar Year when
TSA(Y) is positive, for purposes of applying the formula set forth in subsection
(a) of this Section 7.4.3, TSA(Y-1) shall be equal to zero.
7.4.4 Total STATE Share
-------------------
The total STATE Share of Net Crude Oil in any Calendar Year shall be the sum of
the STATE Share of Net Crude Oil determined with reference to the First Share
Account, the Second Share Account and the Third Share Account for such calendar
year.
7.5 CONTRACTOR, if so directed by the STATE, shall be obligated to market
all crude Oil produced and saved from the Contract Area subject to the
provisions hereinafter set forth.
7.6 Except as provided in paragraph 7.10, CONTRACTOR shall be entitled to
take and receive and freely export Crude Oil allocated for recovery of Petroleum
Operations Expenditures as well as its share of Net Crude Oil.
7.7 Title to the CONTRACTOR's share of Net Crude Oil under this Section VII,
as well as to that portion of Crude Oil exported and sold to recover Petroleum
Operations Expenditures, shall pass to CONTRACTOR at the wellhead.
7.8 If the MINISTRY elects to take any of the STATE's share of Net Crude Oil
in kind, it shall so notify CONTRACTOR in writing not less than ninety (90)
calendar days prior to the commencement of each Semester of each Calendar Year
specifying the quantity that it elects to take in kind, such notice to be
effective for the ensuing Semester of that Calendar Year (provided, however,
that such election shall not interfere with the proper performance of any Crude
Oil sales agreement for Crude Oil produced within the Contract Area that
CONTRACTOR has executed prior to the notice of such election). Failure to give
such notice shall be conclusively deemed to evidence the STATE elects not to
take in kind. Any sale of the STATE's portion of Net Crude Oil shall not be for
a term of more than one Calendar Year without the STATE's consent.
7.9 If the MINISTRY elects not to receive in kind the STATE's share of Crude
Oil, then the MINISTRY may direct the CONTRACTOR to market or buy the STATE's
share of production, whichever CONTRACTOR shall elect to do; provided, however,
the price paid to the MINISTRY for the STATE's share of production shall not be
less than the market price determined in accordance with Section VIII hereof.
CONTRACTOR shall pay the STATE for the STATE's share of the production produced
and saved for each Calendar Quarter; such payment shall be made within thirty
(30) calendar days after the end of the Calendar Quarter when the production
occurred.
7.10 In addition to the State's production share in accordance with the
terms of this Contract, CONTRACTOR is obligated to sell to the STATE at not less
than the market price in accordance with Section VIII hereof, if requested in
writing, a portion of CONTRACTOR's share of Crude Oil for the internal
consumption of the country in accordance with Section 15 of the Hydrocarbons
Law; provided that CONTRACTOR's obligation hereunder does not interfere with any
of CONTRACTOR's contracts with third parties.
7.11 Should the STATE and CONTRACTOR consider that the processing and
utilization of Natural Gas is economical and choose to participate in the
processing and utilization thereof, in addition to that used in secondary
recovery operations, then the construction and installation of facilities for
such processing and utilization shall be carried out pursuant to an approved
Work Program. The recovery of costs of operations, sharing of production, and
handling of production shall be effected according to the same general framework
as that utilized for Crude Oil.
7.12 In the event that CONTRACTOR considers the processing and utilization
of Natural Gas is not economical, the STATE may choose to take and utilize such
Natural Gas that would otherwise be flared in accordance with the provisions of
Section 5.3; all costs of taking and handling will be for the sole account and
risk of the STATE.
VIII. VALUATION OF CRUDE OIL
----------------------
8.1 Crude Oil sold to third parties shall be valued as follows:
(a) All Crude Oil taken by CONTRACTOR including its share and the share for
the recovery of Petroleum Operations Expenditures, and sold to third parties
shall be valued at the net realized price received by CONTRACTOR for such Crude
Oil F.O.B. the Republic of Equatorial Guinea at the point Crude Oil passes
through the inlet flange of the export tanker.
(b) Except for the Royalty, all of the STATE's Crude Oil taken by CONTRACTOR
and sold to third parties shall be valued at the net realized price received by
CONTRACTOR for such Crude Oil F.O.B. the Republic of Equatorial Guinea at the
point Crude Oil passes through the inlet flange of the export tanker, less costs
incurred by CONTRACTOR related to the sale of STATE's Crude Oil.
(c) The MINISTRY shall be duly advised before the sales referred to in
paragraph (b) of this subsection are made.
(d) Subject to any existing Crude Oil sales agreement, if a more favorable
net realized price is available to the STATE for the Crude Oil referred to in
paragraph (b) of this subsection, then the MINISTRY shall so advise CONTRACTOR
in writing not less than ninety (90) calendar days prior to the commencement of
the deliveries under the State's proposed sales contract. Forty-five (45)
calendar days prior to the start of such deliveries, CONTRACTOR shall notify the
MINISTRY regarding CONTRACTOR's intention to meet the more favorable net
realized price in relation to the quantity and period of delivery pursuant to
said proposed sales contract. In the absence of such notice the STATE shall
market its Crude Oil.
(e) The STATE's marketing of such Crude Oil as referred to in paragraph (d)
of this subsection shall continue until forty-five (45) calendar days after the
STATE's net realized price on said Crude Oil becomes less favorable.
CONTRACTOR's obligation to market said Crude Oil shall not apply until after the
STATE has given CONTRACTOR at least sixty (60) calendar days advance notice that
the STATE does not desire to continue such sales. As long as the STATE is
marketing the Crude Oil referred to above, it shall notify CONTRACTOR of the
more favorable net realized price.
8.2 Crude Oil sold to other than third parties shall be valued as follows:
(a) By using the weighted average per unit price received by CONTRACTOR and
the STATE from sales to third parties F.O.B. at the point Crude Oil passes
through the inlet flange of the export tanker in the Republic of Equatorial
Guinea, net of commissions and brokerages paid in relation to such third party
sales, during the three (3) months preceding such sale, adjusted as necessary
for quality, grade and gravity, and taking into consideration any special
circumstances with respect to such sales;
(b) If no such third party sales have been made during such period of time,
then on the basis used to value Crude Oil of similar quality, grade and gravity
and taking into consideration any special circumstances with respect to sales of
such similar Crude Oil.
8.3 Third party sales referred to in this section shall mean sales by
CONTRACTOR to independent purchasers of CONTRACTOR, entered into in an arm's
length transaction between a willing seller and a willing purchaser on
commercial terms reflecting current international open market conditions.
8.4 Commissions or brokerages incurred in connection with sales to third
parties, if any, shall not exceed the customary and prevailing rate.
8.5 During any given Calendar Year, the handling of production (i.e., the
implementation of the provisions of Section VII hereof) and the proceeds thereof
shall be provisionally dealt with on the basis of the relevant Work Program and
Budget of Petroleum Operations Expenditures based upon estimates of quantities
of Crude Oil to be produced, of internal consumption in the Republic of
Equatorial Guinea, of marketing possibilities, of prices and other sale
conditions as well as of any other relevant factors. Within thirty (30)
calendar days after the end of said given Calendar Year and to comply with the
provisions of this Contract, adjustments and cash settlements between the
Parties shall be made on the basis of the actual quantities, amounts and prices
involved.
8.6 In the event the Petroleum Operations require the segregation of Crude
Oils of different quality and/or grade and if the Parties do not otherwise
mutually agree:
(a) any and all provisions of this Contract concerning valuation of Crude
Oil shall apply individually to each segregated Crude Oil;
(b) Crude Oil produced and segregated in a given year shall contribute to:
(i) the "required quantity" allotted in such year to the recovery of all
Petroleum Operations Expenditures pursuant to Section VII;
(ii) the "required quantity" of Crude Oil a Party is entitled in such Year
pursuant to Section VII.
with quantities that bear the same proportion to the respective "required
quantity" (referred to in (i) or (ii) above) as the quantity of such Crude Oil
produced and segregated in such given Year bears to the total quantity of Crude
Oil produced in such Year from the Contract Area.
IX. BONUSES AND SURFACE RENTALS
------------------------------
9.1 On the Effective Date, CONTRACTOR shall pay the STATE the sum of Seven
Hundred Fifty Thousand United States Dollars (U.S. $750,000) as a signature
bonus.
9.2 On the date CONTRACTOR notifies MINISTRY it has made a Commercial
Discovery, CONTRACTOR shall pay the STATE the sum of Seven Hundred Fifty
Thousand United States Dollars (U.S. $750,000).
9.3 CONTRACTOR shall pay the STATE a one-time payment of One Million Five
Hundred Thousand United States Dollars (U.S. $1,000,000) after daily production
from the Contract Area averages for the first time twenty thousand (20,000)
barrels per day for a period of sixty (60) calendar days; CONTRACTOR shall also
pay the STATE a one-time payment of Two Million Five Hundred Thousand United
States Dollars (U.S. $2,500,000) after daily production from the Contract Area
averages for the first time thirty thousand (30,000) barrels per day for a
period of sixty (60) calendar days. Such payments shall be made within thirty
(30) calendar days following the last day of the respective sixty (60) calendar
day period.
9.4 From the Effective Date and throughout the period CONTRACTOR is
conducting Exploration Operations, CONTRACTOR shall pay to STATE an annual
surface rental of One United States Dollar (U.S. $1.00) per hectare for all
parts of the Contract Area covered by less than two hundred (200) meters of
water and Fifty United States Cents (U.S. $.50) per hectare for all parts of the
Contract Area covered by two hundred (200) meters or more of water where
CONTRACTOR is authorized to conduct Exploration Operations. From the expiration
of the Exploration Operations until termination of this Contract, CONTRACTOR
shall pay to the STATE an annual surface rental of Two United States Dollars
(U.S.$2.00) per hectare for all parts of the remaining Contract Area. The
MINISTRY and CONTRACTOR agree that the coordinates shown in Annex "E" attached
hereto represent the boundary where the two hundred (200) meter depth occurs and
the basis for calculating the rental payments. For the year this Contract is
signed, the surface rentals shall be prorated from the Effective Date through
December 31 of that year, and shall be paid thirty (30) calendar days after the
Effective Date. For succeeding years the surface rentals shall be paid in
advance, thirty (30) calendar days before the beginning of each Calendar Year.
9.5 (a) The production bonus payments required by Section 9.3 hereof
shall be included in Petroleum Operations Expenditures as cost recoverable.
(b) The signature bonus, Commercial Discovery bonus and surface rentals
required by Sections 9.1, and 9.2, and 9.4 of this Contract shall not be
included as cost recoverable in Petroleum Operations Expenditures.
X. PAYMENTS
--------
10.1 All payments to be made by CONTRACTOR to the STATE pursuant to this
Contract shall be made to the Treasury of the STATE in United States currency,
or at CONTRACTOR's election, in other currency acceptable to the STATE.
10.2 All payments due CONTRACTOR shall be made in United States Dollars, or
at the STATE's election, in other currency acceptable to CONTRACTOR, at a bank
to be designated by CONTRACTOR.
10.3 Unless otherwise specifically provided herein, any payments required to
be made pursuant to this Contract shall be made within thirty (30) calendar days
following the end of the month when the obligation to make such payments occurs.
10.4 At the end of each accounting period any gain or loss on the
CONTRACTOR's books caused by variations in the exchange rates will be deducted
or added, as the case may be, from its costs and expenses for that period, in
case CONTRACTOR's accounting is done in FCFA (French Africa Confederation
Francs) or in any other currency agreed to by the Parties other than United
States Dollars.
XI. TITLE TO EQUIPMENT
--------------------
11.1 The equipment and fixed installations purchased by CONTRACTOR for use
in Development and Production Operations becomes the Property of the STATE when
the term of this Contract expires. Nevertheless, the equipment and fixed
installations amortized before the expiration of the Contract, could be used by
the STATE providing such use does not interfere with CONTRACTOR's activities.
11.2 The provisions of Section 11.1 of this Section XI shall not apply to
the equipment of CONTRACTOR or any of its subcontractors that constitute an
indispensable element in the production of Hydrocarbons; such equipment may be
freely exported from the Republic of Equatorial Guinea, if it has not been
amortized.
XII. UNITIZATION
-----------
12.1 If a Field is designated within the Contract Area and it extends to
other parts of the Republic of Equatorial Guinea where other parties have
obtained a Contract for exploration and production of Crude Oil or Natural Gas,
or where another Contract has been granted to the CONTRACTOR, the MINISTRY may
demand the production of Crude Oil and Natural Gas be carried out in
collaboration with the other contractors. The same rule shall be applicable if
deposits of Crude Oil or Natural Gas, within the Contract Area, not commercially
recoverable are deemed as commercially exploitable if the production includes
those parts of the deposits extending to areas controlled by other contractors.
12.2 If the MINISTRY so orders, CONTRACTOR shall collaborate with other
contractors in preparing a collective proposal for approval by the MINISTRY for
common production of the deposits of Crude Oil or Natural Gas.
12.3 If the proposal for common production has not been presented within the
time period established, or if the MINISTRY does not approve that proposal (such
approval shall not be unreasonably denied or delayed), the MINISTRY may prepare
or cause to be prepared for the account of the parties involved, a plan for
common production. If the MINISTRY adopts such plan, the CONTRACTOR shall
comply with all the conditions established in such plan.
12.4 This Section XII shall also be applicable to discoveries of deposits of
Crude Oil or Natural Gas within the Contract Area that extend to areas not
within the dominion of the Republic of Equatorial Guinea; provided that with
respect to the production of such deposits of Crude Oil or Natural Gas, the
MINISTRY is empowered to impose the special rules and conditions necessary to
satisfy obligations under agreements with international organizations or
adjacent states.
12.5 Within one hundred eighty (180) calendar days following a request by
the MINISTRY, CONTRACTOR shall agree and proceed to operate under any
cooperative or unitary plan for the development and operation of the area, Field
or pool, or a part of the same, including areas covered by this Contract, the
MINISTRY deems feasible and necessary or advisable for purposes of conservation.
If a clause of a cooperative or unitary development plan approved by the
MINISTRY that by its terms affects the Contract Area or a part of the same or
contradicts a clause of this Contract, the clause of the cooperative or unitary
plan shall prevail.
12.6 Notwithstanding Section 12.5, in the event of conflicting clauses
between the terms of the Contract and the cooperative or unitary plan,
CONTRACTOR shall retain the right to conciliation and arbitration under Section
XIII.
XIII. CONSULTATION AND ARBITRATION
------------------------------
13.1 The STATE and CONTRACTOR hereby consent to submit to the jurisdiction
of the International Centre for Settlement of Investment Disputes (hereinafter
the "Centre") for any dispute arising out of or relating to this Contract or
relating to any investment made under it, for settlement by conciliation
followed, if the dispute remains unresolved within three (3) months of the
communication of the report of the Conciliation Commission to the parties, by
arbitration, pursuant to the Convention of the Settlement of Investment Disputes
between States and Nationals of Other States (hereinafter the "Convention").
13.2 The MINISTRY is a governmental agency of the Republic of Equatorial
Guinea that has been designated to the Centre by the STATE pursuant to Articles
25(1) and 25(3) of the Convention and the Republic of Equatorial Guinea has
notified the Centre that the agreements executed by the MINISTRY do not require
approval (the Government has approved said Consent Agreement by decree
______________________________)
13.3 It is agreed by the Parties to this Contract that CONTRACTOR is a
citizen of the Cayman Islands.
13.4 It is hereby agree by the Parties that the consent to the Centre's
Jurisdiction stipulated above, shall equally bind any successor in interest to
the Government of Republic of Equatorial Guinea and CONTRACTOR to the extent
that Centre can assume jurisdiction over a dispute between the successor and the
other Party.
13.5 It is hereby agreed that the right of CONTRACTOR to request the
settlement of a dispute by the Centre or to take any step as a party to a
proceeding in accordance with this clause shall not be affected by CONTRACTOR
receiving partial compensation, conditional or absolute, from any Third Party
(whether a private person, a state, a government agency or an intentional
organization) with respect to any material loss or injury that is the subject of
the dispute; provided that the Republic of Equatorial Guinea may require
evidence that such third party agrees to the exercise of those rights by
CONTRACTOR.
13.6 Since the Republic of Equatorial Guinea is not a signatory to the
Convention, it is hereby agreed that Section XIII shall be in force on the
effective date of the convention as regards this STATE, and that date shall be
considered as the date the Parties consented to submit disputes to the Centre.
Until thirty (30) days after the ratification of the Convention by the Republic
of Equatorial Guinea of the procedures for settlement of disputes provided for
in this Section, all disputes shall be settled by procedures similar to those
applicable under the Convention, except that the proceedings shall be initiated
by direct communication between the Parties, and if the Tribunal is not
constituted within ninety (90) calendar days following the receipt of such
communication, either party may request the Centre's Secretary General to
appoint any arbitrators not yet appointed.
Any Tribunal constituted regarding a dispute submitted to the Centre pursuant to
this Section shall consist of one arbitrator appointed by each Party, and an
arbitrator appointed by the Centre's Chairman of the Administrative Council who
shall be President of the Tribunal.
13.7 Any Tribunal constituted pursuant to this Contract shall apply the law
of the Republic of Equatorial Guinea. Such Tribunal constituted pursuant to
this Contract shall have the power to decide a dispute ex aequo et bono.
13.8 Notwithstanding Section 13.6, if conciliation or arbitration under the
Convention are unavailable because the jurisdictional requirements ratione
personae of Article 25 of the Convention is unfulfilled at the time a proceeding
is instituted pursuant to this Section XIII, the Parties agree to conciliation
or arbitration, as the case may be pursuant to Section 13.1, in accordance with
the Arbitration (Additional Facility) Rules of the Centre.
13.9 The place of arbitration shall be Washington, D.C., United States of
America, and the arbitration shall be held at the seat of the Centre. The
language of the proceedings shall be Spanish.
XIV. BOOKS AND ACCOUNTS AND AUDITS
-----------------------------
CONTRACTOR shall be responsible for keeping books and accounts reflecting all
Petroleum Operations Expenditures as well as revenue received from the sale of
Crude Oil and Natural Gas, consistent with modern petroleum industry practices
and proceedings as described in Annex "C" attached hereto. Such books and
accounts shall be maintained in United States Dollars. Should there be any
inconsistency between the provisions of this Contract and the provisions of
Annex "C," the provisions of this Contract shall prevail.
14.2 AUDITS
------
The STATE shall have the right to inspect and audit CONTRACTOR's books and
accounts relating to this Contract in accordance with Section 4.9 If
CONTRACTOR's books and accounts are not available for inspection in the Republic
of Equatorial Guinea, the STATE shall have the right to audit the CONTRACTOR's
books and accounts at the CONTRACTOR's headquarters; in this case, the expenses
of the audit shall be paid by the CONTRACTOR. Moreover, the STATE will require
CONTRACTOR to engage independent accountants to examine, in accordance with
generally accepted auditing standards, CONTRACTOR's books and accounts relating
to this Contract for any Calendar Year or perform auditing procedures as deemed
appropriate by the STATE. A copy of the independent accountant's report or any
exceptions shall be forwarded to the STATE within sixty (60) calendar days
following the completion of such audit. Any cost incurred by CONTRACTOR in
complying with this requirement by the STATE shall be included in Petroleum
Operations Expenditures and shall be cost recoverable. CONTRACTOR's books and
accounts shall be deemed accepted by the STATE twenty-four (24) months after the
end of the Calendar Year when the cost was incurred, unless the MINISTRY
notifies CONTRACTOR otherwise within such time.
XV. ADDITIONAL PROVISIONS
---------------------
15.1 NOTICES
-------
Any notices required or given by either Party to the other, shall be deemed to
have been delivered when properly acknowledged for receipt by the receiving
Party. All such notices shall be in Spanish and shall be addressed to :
MINISTRY OF MINES AND ENERGY
----------------------------
Malabo-Bioko Norte
Republica de Guinea Ecuatorial
Telephone: (240)-9-3567, -3405, -2086
Facsimile: (240)-9-3353
Telex: GBNOM 5405 EG
CONTRACTOR
----------
Triton Equatorial Guinea, Inc.
Wellington House, 5th Floor
125 Strand Street
London, WC2R 0AP
United Kingdom
Attn: Project Coordinator
Telephone: 44-171-533-7000
Facsimile: 44-171-533-9000
Telex: None
Either party may substitute or change such address on written notice thereof to
the other.
XVI LAWS AND REGULATIONS
--------------------
16.1 For purposes of this Contract, the laws of the Republic of
Equatorial Guinea shall govern in accordance with generally accepted principals
of international law.
16.2 In the event of changes in the legislation regarding Petroleum
Operations, and if as a consequence of their implementation, said changes cause,
to the detriment of any of the Parties, the reduction of rights or an increase
in the economic obligations contained in this Contract, the Parties shall meet
and take the suitable measures to achieve the necessary economic balance at any
time during the Effectiveness of this Contract.
XVII. FORCE MAJEURE
--------------
17.1 Except as otherwise provided in this Subsection 17.1, each Party shall
be excused from complying with the terms of this Contract, except for the
payment of monies then due, if any, for so long as such compliance is hindered
or prevented by irresistible circumstances or beyond the reasonable control of
the Party concerned, including, but not limited to, change of government,
violent storms, cyclones, thunderstorms, navigation dangers, destruction of
machinery or whatever kind of installations, hostilities, blockades, embargoes,
criminal disturbances, national emergencies, the inability to obtain, import or
use any of the required materials, equipment or services, and the inability to
obtain the necessary rights of passage, riots, strikes, wars (declared or
undeclared), insurrections, rebellions, terrorist acts, civil disturbances,
dispositions or orders of governmental authority, whether such authority be
actual or assumed, acts of God, such circumstances being herein sometimes called
"Force Majeure"; provided, however, inability to obtain equipment, supplies or
fuel shall not be a cause of Force Majeure, unless caused by one of the factors
described in this Subsection 17.1. If any failure to comply is occasioned by a
governmental law, rule, regulation, disposition or order of the Government of
the Republic of Equatorial Guinea as aforesaid and the affected Party is
operating in accordance with good petroleum industry practice in the Contract
Area and is making reasonable efforts to comply with such law, rule, regulation,
disposition or order, the matter shall be deemed beyond the control of the
affected Party. In the event that either Party hereto is rendered unable,
wholly or in part, by any of these causes to carry out its obligations under
this Contract, it is agreed that such Party shall give notice and details of
Force Majeure in writing to the other Party within seven (7) calendar days after
its occurrence. In such cases, the obligations of the Party giving the notice
shall be suspended during the continuance of any inability so caused, and the
term of the Contract shall be extended to coincide with the duration of the
condition of Force Majeure. Both Parties shall do all within their power to
remove such cause.
XVIII. TEXT
----
18.1 This Contract is written in the Spanish and English languages. In the
event of a controversy between the two texts, the Spanish text shall prevail.
XIX. EFFECTIVENESS
-------------
19.1 This Contract shall come into effect on the Effective Date.
19.2 This Contract shall not be annulled, amended or modified in any
respect, except by the mutual consent in writing of the Parties or their
successors hereto. Nevertheless, the MINISTRY when requested by CONTRACTOR,
once all works described in Section 4.3(i)(ii) are completed, shall approve
within sixty (60) calendar days from said request an amendment authorizing
CONTRACTOR to transfer the minimum drilling obligation described in Section 4.3
from this Block to Block "F" including all the obligations and rights associated
with said drilling. CONTRACTOR shall be entitled to recover the costs
associated with drilling on the Block where the well is drilled. Any amendments
or modifications agreed to in writing by the Parties shall not require approval
by the Supreme Court of Justice of the Republic of Equatorial Guinea or
ratification by the President of the Republic of Equatorial Guinea.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Contract, in
triplicate and in the Spanish language, as of the day and year first above
written.
THE REPUBLIC OF EQUATORIAL GUINEA
REPRESENTED BY THE MINISTRY OF
MINES AND ENERGY OF THE REPUBLIC
OF EQUATORIAL GUINEA
By:___________________________________
Minister of Mines and Energy
TRITON EQUATORIAL GUINEA, INC.
By:___________________________________
Thomas G. Finck, President
ANNEX "B"
DESCRIPTION OF CONTRACT AREA
BLOCK G
CORNER POINTS LATITUDE NORTH LONGITUDE EAST
A 1 41' 05" 9 37' 34"
B 1 41' 07" 9 25' 37"
C 1 40' 15" 9 25' 37"
D 1 40' 15" 9 17' 41"
E 1 34' 38" 9 17' 41"
F 1 34' 34" 9 00' 25"
G 1 15' 00" 8 51' 38"
H 1 15' 00" 9 23' 47"
From corner point H the Block is defined by the coast in low tide until the
intersection with corner point A at latitude North 1 41' 05" and 9 37' 34"
longitude East
ANNEX "C"
ACCOUNTING PROCEDURE
Attached to and made an integral part of the Production Sharing Contract
(the "Contract") for Block G between the REPUBLIC OF EQUATORIAL GUINEA,
represented for purposes of this Contract by the Ministry of Mines and Energy,
and TRITON EQUATORIAL GUINEA, INC., CONTRACTOR, dated the 26th day of March,
1997.
Article I
General Provisions
1. Purpose. The accounting procedure herein provided and attached to the
-------
Contract is to be followed and observed in the performance of either Party's
obligations under the Contract.
2. Accounts and Statements. CONTRACTOR's accounting records and books will
------------------------
be kept in accordance with generally accepted and recognized accounting systems,
consistent with modern petroleum industry practices and procedures. Books and
reports will be maintained and prepared in accordance with methods established
by the MINISTRY. The chart of accounts and related account definitions will be
prescribed by the MINISTRY. Reports will be organized for the use of the
MINISTRY in carrying out its management responsibilities under the Contract.
Article II
Petroleum Operations Expenditures
1. Definition for Purposes of the Recovery of Costs and Calculation of
--------------------------------------------------------------------
the Income Taxes. For any year when commercial production occurs, Petroleum
- ------------------
Operations Expenditures shall consist of a) current year's non-capital costs, b)
current year's capital costs, and c) current year allowed recovery of prior
year's unrecovered Petroleum Operations Expenditures.
2. Non-Capital Expenditures. Non-capital expenditures means those
-------------------------
Petroleum Operations Expenditures, whether related to Crude Oil or Natural Gas.
or relating to current year's operations. Moreover, non-capital expenditures
shall also include the sums agreed and designated by the MINISTRY and CONTRACTOR
for the abandonment of the Petroleum Operations. In addition to costs relating
only to current operations, U.S. $93,000 spent by CONTRACTOR for data acquired
prior to the Effective Date shall be classified as non-capital expenditures
authorized in writing by the MINISTRY, and the costs of surveys and the
intangible costs of drilling exploratory and development wells, as described in
paragraph (c), (d) and (e) below, will be classified as non-capital costs.
Non-capital expenditures include, but are not limited to the following:
(a) Labor, materials and services used in day to day crude oil well
operations, crude oil field production facilities operations, secondary recovery
operations, natural gas well storage, handling, transportation, and delivery
operations, natural gas field production facilities operations, natural gas
transportation and delivery operations, natural gas processing auxiliaries and
utilities, cleaning up pollution or related damages as set forth in Section 4.8
of this Contract, and other operating activities, including maintenance, all of
which comprise Petroleum Operations.
(b) Office, services and general administration - General services including
overhead allocation, insurance premiums, technical and related services,
material services, transportation, rental of heavy engineering equipment, site
rentals and other rentals of services and property, personnel expenses, public
relations, and other expenses abroad.
(c) Development and production drilling - Labor, materials and services used
in drilling wells with the object of penetrating a proven reservoir, including
the drilling of delineation wells as well as redrilling, deepening or
recompleting wells, and access roads, if any, leading directly to wells.
(d) Exploratory drilling - Labor, materials and services used in the
drilling of wells with the object of finding unproven reservoirs of crude oil
and natural gas, and access roads, if any, leading directly to wells.
(e) Surveys - Labor, materials and services used in aerial, geological,
topographical, geophysical and seismic surveys, and core hole drilling.
(f) Other exploration expenditures - Auxiliary or temporary facilities
having useful lives of one year or less used in exploration and purchased
geological and geophysical information.
(f) The bonus payments payable in accordance with Section 9.3 of the
Contract. All payments made in accordance with Section 9 of the Contract shall
be deductible for purposes of calculation of Income Tax.
(h) Interest on loans shall be considered non-capital expenditures for tax
purposes; however, three percent (3%) shall be cost recoverable in accordance
with Article III.3 of this Annex "C".
3. Capital Expenditures. Capital expenditures means expenditures made for
---------------------
items that normally have a useful life beyond the year incurred. Capital
expenditures include, but are not limited to, the following:
(a) Construction utilities and auxiliaries - Work shops, power and water
facilities, warehouses, and field roads other than the access roads mentioned in
paragraphs 2(c) and 2(d) above. Cost of oil jetties and anchorages, treating
plants and equipment, secondary recovery systems, gas plant and steam systems.
(b) Construction housing and welfare - Housing, recreational facilities and
other tangible property incidental to construction.
(c) Production facilities - Offshore platforms (including the costs of
labor, fuel, hauling, and supplies for both the offsite fabrication and onsite
installation of platforms, and other construction costs in erecting platforms
and installing submarine pipelines), wellhead equipment, subsurface lifting
equipment, production tubing, sucker rods, surface pumps, flow lines, gathering
equipment, delivery lines and storage facilities.
(d) Movables - Surface and subsurface drilling and production tools,
equipment and instruments, barges, floating craft, automotive equipment,
aircraft, construction equipment, furniture and office equipment and
miscellaneous equipment.
<PAGE>
Article III
Accounting Methods To Be Used to Calculate Recovery
of Petroleum Operations Expenditures and Income Taxes
As indicated below, the following accounting methods shall be used to
calculate the recovery of Petroleum Operations Expenditures and Income Taxes.
1. Depreciation. Depreciation will be calculated from the year in which
------------
the asset is placed into service, with a full year's depreciation allowed the
initial year. Depreciation of Capital Costs, for purposes of Income Tax
calculation and cost recovery, will be calculated over a period of four (4)
years using the straight line method.
The lives to be used for items for which Capital Expenditures are incurred
shall be four (4) years. The undepreciated balance of assets taken out of
service will not be charged to Petroleum Operations Expenditures but will
continue to depreciate based upon the lives described above, except where such
assets have been subjected to unanticipated destruction, for example, by fire or
accident.
2. Overhead Allocation. General and administrative expenditures, other
-------------------
than direct charges, allocable to this operation should be determined by a
detailed study, and the method determined by such study shall be applied each
year consistently. The method selected must be approved by the MINISTRY. Either
the MINISTRY or CONTRACTOR may request by notification of the other Party that
the method selected be changed; provided, however that only one change to the
method be allowed in any given Calendar Year.
3. Interest Recovery. Interest on loans obtained by a Party from
------------------
Affiliated Companies, or parent companies, or from third parties non-affiliated
may not be recoverable as Petroleum Operations Expenditures, except for the
three percent (3%) interest, but the interest may be deductible from income for
the purposes of calculating CONTRACTOR's Income Tax. The interest on said loans
cannot be over the prevalent commercial rates for Petroleum Operations
investments. Details of any sums to be financed shall be included in each year's
Budget of Petroleum Operations Expenditures for the review of the MINISTRY.
Notwithstanding anything to the contrary contained herein or in any law
regulation rule order or decree of the STATE, non-resident lenders shall not be
subject to withholding tax or other income tax.
4. Natural Gas Costs. Petroleum Operations Expenditures directly
-------------------
associated with the production of Natural Gas will be directly chargeable
against Natural Gas revenues in the manner agreed by the Parties. Petroleum
Operations Expenditures incurred for production of both Natural Gas and Crude
Oil will be allocated to Natural Gas and Crude Oil as agreed by both Parties.
5. Inventory Accounting. The costs of non-capital items purchased for
--------------------
inventory will be recoverable in the year the items have been landed in the
Republic of Equatorial Guinea. The CONTRACTOR shall present two types of
inventories, one for non-capital assets or articles and another for capital
assets or articles.
6. Insurance and Claims. Petroleum Operations Expenditures shall
----------------------
include premiums paid for insurance normally required to be carried for the
operations relating to CONTRACTOR's obligations conducted under the Contract and
shall also include expenditures incurred and paid by CONTRACTOR in settlement of
any and all losses, claims, damages, judgments, and other expenses, including
monies relating to CONTRACTOR's obligations under the Contract. Any sums
CONTRACTOR receives for settlements from insurance carried for the benefit of
the Petroleum Operations shall be deducted from Petroleum Operations
Expenditures for the year any such settlement is received.
ANNEX "D"
LETTER OF PERFORMANCE GUARANTY BY PARENT
FOR CONTRACT AREA G, THE REPUBLIC OF EQUATORIAL GUINEA
WHEREAS, Triton Energy Limited, a company validly existing under the laws
of the Cayman Islands ("Parent"), with its principal place of business c/o
Caledonian House, Mary Street, Post Office Box 1043, Georgetown, Grand Cayman,
Cayman Islands; and
WHEREAS, Triton Equatorial Guinea, Inc., a company validly constituted under
the laws of the Cayman Islands ("Company"), is a wholly owned subsidiary
of the Parent; and
WHEREAS, Company has contemporaneously herewith entered into that
certain Production Sharing Contract (the "Contract") with the Republic of
Equatorial Guinea (the "STATE") for Contract Area G; and
WHEREAS, Company holds the participating interest as specified in the
Contract; and
WHEREAS, the STATE desires that the performance by Company under the
Contract be guaranteed; and
WHEREAS, the Parent accepts that it fully understands and assumes
the legal contractual undertakings of the Company under the Contract;
and
NOW THEREFORE, it is hereby agreed and stipulated as follows:
1. Parent shall be bound as Guarantor by virtue of this Letter of
Performance Guaranty by Parent (this "Guaranty") to the STATE for the
fulfillment of the obligations assumed by the Company in accordance with Section
4.3(a) of the Contract.
2. In accordance with Section 4.5 of the Contract, the amount of any
guaranty by Parent hereunder in the then Contract Year phase shall be discharged
of the minimum expenditure obligation for such Contract Year phase when the
minimum expenditure obligation for such phase has been satisfied. If at the end,
the Exploration Expenditures incurred by Company during the two (2) first years
of the Contract is less than the minimum expenditure obligation described in
Section 4.5 of the Contract, then Parent agrees it shall pay to the STATE on
first demand without proof or conditions the balance of the amounts not
incurred. The STATE's first demand shall be given within thirty (30) calendar
days from the end of the related initial exploration period. Failure by the
STATE to make a timely demand as provided above shall discharge Parent from its
liabilities under this Guaranty. Demand shall be made by an original written or
faxed statement from the Ministry of Energy and Mines of the Republic of
Equatorial Guinea ("Ministry") certifying that "Triton Equatorial Guinea, Inc.
did not comply with the work program in the Contract covering Block G." The
Ministry shall state specifically how Triton failed to comply with such work
commitment. The Minister shall deliver the demand to the Parent at 6688 N.
Central Expressway, Dallas, Texas, 75206 U,S.A.; or fax number 1-214-691-0198.
3. This Guaranty shall be governed by and construed in accordance with the
laws of Equatorial Guinea.
4. This Guaranty shall expire at the earlier of two (2) years and
thirty (30) consecutive days from the Effective Date of the Contract or the date
when Company and/or its permitted assignee has been recognized by the Ministry
of Mines and Energy of the Republic of Equatorial Guinea to have fulfilled its
minimum expenditure obligations for the initial exploration period pursuant to
the Contract.
5. Said act to be effective in the Republic of Equatorial Guinea shall
be previously elevated to a public deed by a notary or other competent authority
named by the Principal, and said public deed shall comply with all legal
requisites. The costs incurred for said process shall be the responsibility of
the Company, and shall not be recoverable.
IN WITNESS WHEREOF, Parent and Company have signed this Guaranty on ______
day of _______, 1997.
PARENT:
TRITON ENERGY LIMITED
By:___________________________
Name:______________________
Title:_____________________
COMPANY
TRITON EQUATORIAL GUINEA, INC.
By:___________________________
Name:______________________
Title:_____________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned Notary Public in and for the State of Texas, on
this day personally appeared _________________________, ____________________ of
TRITON ENERGY LIMITED, and acknowledged to me that he executed the foregoing
instrument for the purposes and consideration therein expressed, as the act and
deed of TRITON ENERGY LIMITED, and that he has the capacity to make such
authorization.
WITNESS MY HAND AND SEAL OF OFFICE this ____ day of ____________, 19___.
___________________________________________
Notary Public in and for the State of Texas
___________________________________________
Printed Name
My Commission Expires: _______________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned Notary Public in and for the State of Texas, on
this day personally appeared _________________________, ____________________ of
TRITON EQUATORIAL GUINEA, INC., and acknowledged to me that he executed the
foregoing instrument for the purposes and consideration therein expressed, as
the act and deed of TRITON EQUATORIAL GUINEA, Inc., and that he has the capacity
to make such authorization.
WITNESS MY HAND AND SEAL OF OFFICE this ____ day of ____________, 19___.
___________________________________________
Notary Public in and for the State of Texas
___________________________________________
Printed Name
My Commission Expires: _______________
ANNEX "E"
COORDINATES FOR THE 200M ISOBATH
The MINISTRY and CONTRACTOR agree the following coordinates represent the
boundary for the 200 meter water depth for purposes of calculating the rental
payments due pursuant to Section 9.4 of the Contract.
Offshore Equatorial Guinea, Block G:
Coordinates for the 200m isobath
Latitude (Decimal deg.) Longitude (Decimal deg)
1.669636050000000 9.420002540000000
1.718255996704102 9.432461738586430
1.736657977104187 9.442479133605960
1.746453046798706 9.449187278747560
1.778007030487061 9.461318016052250
1.833732008934021 9.487948417663570
1.852141976356506 9.498534202575680
1.915503978729248 9.540432929992680
1.933310031890869 9.548749923706050
1.962574005126953 9.560340881347660
1.999791979789734 9.569559097290040
2.018069982528687 9.571042060852050
2.034588098526001 9.569132804870610
2.048221111297607 9.564983367919920
2.074255943298340 9.550439834594730
2.119595050811768 9.529401779174800
2.174201011657715 9.517924308776860
2.206674098968506 9.514681816101070
2.240891933441162 9.513693809509280
2.265940904617310 9.509973526000980
2.314485073089600 9.513362884521480
2.421205043792725 9.515472412109380
2.438366889953613 9.518675804138180
2.475511074066162 9.522773742675780
2.587642908096313 9.544161796569820
2.606426000595093 9.541087150573730
2.621166944503784 9.534647941589360
2.642630100250244 9.519592285156250
2.651741027832031 9.518342018127440
2.657460927963257 9.519410133361820
2.695396900177002 9.538861274719240
2.729363918304443 9.560067176818850
2.744920969009399 9.570688247680660
2.777837038040161 9.598164558410640
2.789410114288330 9.609403610229490
2.794575929641724 9.611616134643550
2.804290056228638 9.612635612487790
2.807696104049683 9.611455917358400
2.810491085052490 9.607439041137700
2.814825057983398 9.591453552246090
2.818197965621948 9.587999343872070
2.822141885757446 9.584536552429200
2.826673030853271 9.582205772399900
2.850533008575439 9.575085639953610
2.951327085494995 9.561904907226560
2.976335048675537 9.555339813232420
3.001311063766479 9.546500205993650
EXHIBIT 10.85
SUPPLEMENTARY CONTRACT (NO.1)
This Supplementary Contract (No. 1) to the Production Sharing Contract for Block
A-18 dated 21 April 1994 (hereinafter referred to as "the Principal Contract")
is made on the 21st day of April 1999 by and between the MALAYSIA-THAILAND
JOINT AUTHORITY (hereinafter referred to as "MTJA") an authority duly
established under the Malaysia-Thailand Joint Authority Act 1990 of Malaysia and
Thailand-Malaysia Joint Authority Act B.E. 2533 (1990) of the Kingdom of
Thailand and the Agreement between the Government of Malaysia, and the
Government of the Kingdom of Thailand on the Constitution and Other Matters
Relating to the Establishment of the Malaysia-Thailand Joint Authority, dated 30
May 1990, and having its office at 27th Floor, Empire Tower, City Square Centre,
182 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia, of the first part; and
PETRONAS CARIGALI (JDA) SDN. BHD., a company duly incorporated and existing
under the laws of Malaysia and having its registered office at Tower 1, PETRONAS
Twin Towers, Persiaran KLCC, 50450 Kuala Lumpur, Malaysia (hereinafter referred
to as "CARIGALI"), TRITON OIL COMPANY OF THAILAND, a company duly incorporated
and existing under the laws of the State of Texas, United States of America, and
having its registered office at 6688 North Central Expressway, Suite 1400,
Dallas, Texas, 75206, United States of America, and having its local branch
office at 7th Floor, Kin Gwan Building 1, 140 Wireless Road, Bangkok 10330,
Thailand, and Suite 13.01, 13th Floor, Menara Tan & Tan, 207 Jalan Tun Razak
50400 Kuala Lumpur, Malaysia (hereinafter referred to as "TRITON"), and TRITON
OIL COMPANY OF THAILAND (JDA) LIMITED, a company incorporated under the laws of
the Cayman Islands and having its statutory office in Dallas, Texas, United
States of America, and having its local registered branch office at Suite 13.01,
13th Floor, Menara Tan & Tan, 207 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia
(hereinafter referred to as "TRITON JDA"), of the second part. The parties of
the first and second part shall hereinafter be referred to individually as
"Party" and collectively as "Parties".
WHEREAS Article 2.4 Paragraph 4 of the Principal Contract provides that any Sub-
Block which is not defined as a Development Area and any area which is not a Gas
Field as defined in accordance with Article 8.1 at the end of five (5) years
from the Effective Date (hereinafter referred to as "the Unexplored Areas")
shall be deemed to be relinquished to MTJA and cease to be part of the Contract
Area;
AND WHEREAS CARIGALI, TRITON and TRITON JDA (hereinafter referred to as "the
Contractors") request MTJA's permission to retain the Unexplored Areas for an
additional three (3) years for further exploration after the end of the five (5)
years from the Effective Date;
AND WHEREAS MTJA agrees not to invoke the above-mentioned Article 2.4 Paragraph
4 and further agrees to the request of the Contractors to retain the Unexplored
Areas in consideration of additional work commitments to be undertaken by the
same.
NOW THEREFORE it is hereby stipulated and agreed as follows:-
1. The Contractors shall retain the Unexplored Areas for an additional three
(3) years commencing on the fifth anniversary of the Effective Date (hereinafter
referred to as "the Retention Period") for further exploration subject to the
following minimum work commitments and conditions:-
(i) The Contractors shall carry out subsurface studies to redefine and
reevaluate the hydrocarbon prospectivity in the Unexplored Areas and drill two
(2) Wildcat Wells at an aggregate drilled footage of not less than five thousand
(5,000) metres.
(ii) The amount to be expended by Contractors in carrying out their
exploration activities in the Unexplored Areas during the Retention Period shall
in the aggregate be not less than ten million four hundred sixty thousand United
States Dollars (USD10,460,000) which aggregate amount includes the MTJA training
bonus of seventy thousand United States Dollars (USD70,000) per year.
(iii) The Retention Period shall not affect the existing fixed term of
thirty-five (35) years of the Principal Contract set out in Article 2.1 thereof.
Any new discovery of a Gas Field within the Unexplored Areas during the
Retention Period will yield a shorter gas holding period commencing from the
date of agreement between the Parties on the extent of the Gas Field and its
reserve area as set out in Article 8.1 of the Principal Contract, and ending 20
April 2004. The periods for development and production of the Gas Field shall
remain the same.
(iv) When Crude Oil is discovered in a Commercial Quantity in any Sub-block
or Sub-blocks within the Unexplored Areas during the Retention Period, that
Sub-block or Sub-blocks shall be automatically converted into a Development Area
and the provisions of Article 2.4, Paragraph 1 of the Principal Contract shall
apply. If Contractors fail to produce Crude Oil commercially, directly or
indirectly, from such Sub-block or Sub-blocks prior to 20 April 2004, such
Sub-block or Sub-blocks shall be deemed to be relinquished to MTJA and cease to
be part of the Contract Area.
2. Except as expressly provided in this Supplementary Contract (No. 1), the
Principal Contract is not otherwise waived, amended and supplemented hereby and
the terms therein shall remain in full force and effect.
3. Any terms that are defined terms in the Principal Contract shall have the
same meaning when used in this Supplementary Contract (No. 1) unless herein
otherwise expressly provided.
IN WITNESS WHEREOF MTJA, CARIGALI, TRITON and TRITON JDA have by their
respective duly authorised officers executed this Supplementary Contract (No. 1)
on the day and year first herein above written.
Signed by : )
For and on behalf of )_____________________
MALAYSIA-THAILAND JOINT AUTHORITY )
In the presence of )
)
Signed by : )
For and on behalf of )_____________________
PETRONAS CARIGALI (JDA) SDN. BHD. )
In the presence of )
)
Signed by : )
For and on behalf of )_____________________
TRITON OIL COMPANY OF THAILAND )
In the presence of )
)
Signed by : )
For and on behalf of )______________________
TRITON OIL COMPANY OF THAILAND (JDA) )
LIMITED )
In the presence of )
)
EXHIBIT 10.86
SUPPLEMENTARY CONTRACT (NO.2)
This Supplementary Contract (No. 2) to the Production Sharing Contract for Block
A-18 dated 21 April 1994, as amended and supplemented, (hereinafter referred to
as "the Principal Contract") is made the 29 day of December 1999 by and
between the MALAYSIA-THAILAND JOINT AUTHORITY (hereinafter referred to as
"MTJA") an authority duly established under the Malaysia-Thailand Joint
Authority Act 1990 of Malaysia and Thailand-Malaysia Joint Authority Act B.E.
2533 (1990) of the Kingdom of Thailand and the Agreement between the Government
of Malaysia, and the Government of the Kingdom of Thailand on the Constitution
and Other Matters Relating to the Establishment of the Malaysia-Thailand Joint
Authority, dated 30 May 1990, and having its office at 27th Floor, Empire Tower,
City Square Centre, 182 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia, of the
first part; and PETRONAS CARIGALI (JDA) SDN. BHD., a company duly incorporated
and existing under the laws of Malaysia and having its registered office at
Tower 1, PETRONAS Twin Towers, Persiaran KLCC, 50450 Kuala Lumpur, Malaysia
(hereinafter referred to as "CARIGALI"), TRITON OIL COMPANY OF THAILAND, a
company duly incorporated and existing under the laws of the State of Texas,
United States of America, and having its registered office at 6688 North Central
Expressway, Suite 1400, Dallas, Texas, 75206, United States of America, and
having its local branch office at 33/95-96, 99-100 Wall Street Tower, Surawong
Road, Bangrak, Bangkok 10500 Thailand, (hereinafter referred to as "TRITON"),
and TRITON OIL COMPANY OF THAILAND (JDA) LIMITED, a company duly incorporated
and existing under the laws of the Cayman Islands and having its statutory
office in Dallas, Texas, United States of America, and having its local
registered branch office at Suite 13.01, 13th Floor, Menara Tan & Tan, 207 Jalan
Tun Razak, 50400 Kuala Lumpur, Malaysia (hereinafter referred to as "TRITON
JDA"), of the second part. The parties of the first and second part shall
hereinafter be referred to individually as "Party" and collectively as
"Parties".
WHEREAS Article 8.5(b) of the Principal Contract provides that recovery by
Contractors of allowable costs expended in a Quarter for the Contract Area in
relation to Petroleum Operations in respect of Natural Gas shall be allowed up
to a maximum of fifty per cent (50%) of such costs;
AND WHEREAS CARIGALI, TRITON AND TRITON JDA (hereinafter referred to as the
"Contractors") requested MTJA's agreement to an increase to sixty per cent (60%)
in the maximum allowable cost to be recovered under Article 8.5(b) of the
Principal Contract for certain costs, in relation to past cost for Petroleum
Operations in Block A-18 (sunk cost) and cost for development of the Cakerawala
Gas Field, expended by Contractors for the purpose of assisting the development
of the Cakerawala Gas Project;
AND WHEREAS MTJA agrees to the request of the Contractors to provide for such
increase in the maximum allowable cost to be recovered by Contractors to assist
in the development of the Cakerawala Gas Project and thereby to amend the
Principal Contract to provide for same.
NOW THEREFORE it is hereby stipulated and agreed as follows:
1. The Parties agree that Article 8.5(b) of the Principal Contract shall be
revised as follows :
"Up to a maximum of fifty per cent (50%) shall be applied in the manner herein
provided for the purpose of recovery by Contractors of allowable costs expended
in that Quarter for the Contract Area in relation to Petroleum Operations in
respect of Natural Gas, provided, however, that a maximum of sixty per cent
(60%) shall be applied only for the costs stipulated in (i) and (ii) below :
(i) All allowable costs expended by Contractors in relation to Petroleum
Operations in Block A-18 in respect of Natural Gas from the Effective Date
through 31 December 1997 as reported in the detailed audited accounts as of 31
December 1997, as may be amended, modified or supplemented, until such costs are
fully recovered by Contractors;
(ii) All allowable costs expended by Contractors from and after 1 January
1998 in relation to capital expenditures incurred for the development of the
Cakerawala Field including, without limitation, Cakerawala Booster Compression
and Cakerawala Platform D as detailed in the Cakerawala Field Development Plan
Update 1 approved by MTJA, as may be amended, modified or supplemented and
approved by MTJA until such costs are fully recovered by Contractors;
For the avoidance of doubt, it is agreed and understood that the said facilities
will not be installed simultaneously and such maximum allowable cost recovery of
sixty per cent (60%) shall apply from time to time;
(iii) All detailed accounts that are required to be provided under Article
11 shall identify the allowable costs permitted under (i) and (ii) above, so
that the accounts for which a maximum allowable cost recovery of sixty per cent
(60%) is allowed can be easily identified and distinguished from all other
allowable costs to be recovered by the Contractors for a maximum allowable cost
recovery of fifty per cent (50%) and can be audited in accordance with Article
11; and
(iv) All allowable costs pertaining to expenditures identified under (i) and
(ii) above shall be recovered first and shall be fully recovered prior to the
recovery of all other allowable costs which may be recovered by the Contractors
at a maximum allowable cost recovery of fifty per cent (50%) during any Quarter.
Contractors are entitled to recover all such allowable costs from the proceeds
of Natural Gas sold equal to the amount of all such allowable costs in the
Contract Area (but subject to Article 8.7).
If in any Quarter all such costs expended relating to Petroleum Operations in
respect of Natural Gas (including amounts accumulated or carried forward from
previous Quarters) exceed the maximum permitted value of fifty per cent (50%) or
sixty per cent (60%) as provided above, as the case may be, of such Natural Gas
sold from the Contract Area, the unrecovered excess may be carried forward to
the next succeeding Quarter and added to all such allowable costs expended
relating to Petroleum Operations in respect of Natural Gas for that Quarter, but
provided that such costs can only be recovered for any Quarter up to a maximum
of fifty per cent (50%) or sixty per cent (60%) , as the case may be, of such
Natural Gas sold."
2. Except as expressly provided in this Supplementary Contract (No. 2), the
Principal Contract is not otherwise waived, amended and supplemented hereby and
the terms therein shall remain in full force and effect.
3. Any terms that are defined terms in the Principal Contract shall have the
same meaning when used in this Supplementary Contract (No. 2) unless herein
otherwise expressly provided.
IN WITNESS WHEREOF MTJA, CARIGALI, TRITON and TRITON JDA have by their
respective duly authorised officers executed this Supplementary Contract (No. 2)
on the day and year first herein above written.
Signed by : )
For and on behalf of )_____________________
MALAYSIA-THAILAND JOINT AUTHORITY )
In the presence of )
)
Signed by : )
For and on behalf of )_____________________
PETRONAS CARIGALI (JDA) SDN. BHD. )
In the presence of )
)
Signed by : )
For and on behalf of )_____________________
TRITON OIL COMPANY OF THAILAND )
In the presence of )
)
Signed by : )
For and on behalf of )______________________
TRITON OIL COMPANY OF THAILAND (JDA) )
LIMITED )
In the presence of )
)
Exhibit 10.87
CREDIT AGREEMENT
dated as of
February 29, 2000
among
TRITON ENERGY LIMITED
The Lenders Party Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent.
___________________________
CHASE SECURITIES INC.,
as Lead Arranger
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. 1
SECTION 1.02. Classification of Loans and Borrowings. 14
SECTION 1.03. Terms Generally. 14
SECTION 1.04. Accounting Terms; GAAP 14
ARTICLE II
The Credits
SECTION 2.01. Commitments. 15
SECTION 2.02. Loans and Borrowings. 15
SECTION 2.03. Requests for Revolving Borrowings. 15
SECTION 2.04. Letters of Credit 16
SECTION 2.05. Funding of Borrowings. 19
SECTION 2.06. Interest Elections. 19
SECTION 2.07. Termination and Reduction of Commitments. 20
SECTION 2.08. Repayment of Loans; Evidence of Debt. 20
SECTION 2.09. Prepayment of Loans. 21
SECTION 2.10. Fees. 22
SECTION 2.11. Interest. 22
SECTION 2.12. Alternate Rate of Interest. 23
SECTION 2.13. Increased Costs. 23
SECTION 2.14. Break Funding Payments. 24
SECTION 2.15. Taxes. 24
SECTION 2.16. Payments Generally; Pro Rata Treatment;
Sharing of Set-offs. 25
SECTION 2.17. Mitigation Obligations; Replacement of Lenders. 26
SECTION 2.18. Borrowing Base 27
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization; Powers. 28
SECTION 3.02. Authorization; Enforceability. 28
SECTION 3.03. Governmental Approvals; No Conflicts. 28
SECTION 3.04. Financial Condition; No Material Adverse Change. 28
SECTION 3.05. Properties. 28
SECTION 3.06. Litigation and Environmental Matters. 29
SECTION 3.07. Compliance with Laws and Agreements. 29
SECTION 3.08. Investment and Holding Company Status. 29
SECTION 3.09. Taxes. 29
SECTION 3.10. ERISA. 29
SECTION 3.11. Disclosure. 29
SECTION 3.12. Year 2000. 30
SECTION 3.13. Regulation U 30
SECTION 3.14. Subsidiaries 30
SECTION 3.15. Outside Letters of Credit 30
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. 30
SECTION 4.02. Each Credit Event. 31
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements; Ratings Change and
Other Information. 31
SECTION 5.02. Notices of Material Events. 32
SECTION 5.03. Existence; Conduct of Business. 33
SECTION 5.04. Payment of Obligations. 33
SECTION 5.05. Maintenance of Properties; Insurance. 33
SECTION 5.06. Books and Records; Inspection Rights. 33
SECTION 5.07. Compliance with Laws. 33
SECTION 5.08. Use of Proceeds and Letters of Credit. 33
SECTION 5.09. Engineering Reports 33
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness. 34
SECTION 6.02. Liens. 35
SECTION 6.03. Fundamental Changes. 36
SECTION 6.04. Investments, Loans, Advances, Guarantees
and Acquisitions. 36
SECTION 6.05. Hedging Agreements. 37
SECTION 6.06. Restricted Payments. 37
SECTION 6.07. Transactions with Affiliates. 37
SECTION 6.08. Restrictive Agreements. 38
SECTION 6.09. Net Debt to EBITDA Ratio 38
SECTION 6.10. Ratio of EBITDA to Interest Expense 38
SECTION 6.11. Asset Disposition 38
ARTICLE VII
Events of Default
SECTION 7.01. Events of Default. 38
ARTICLE VIII
The Administrative Agent
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. 41
SECTION 9.02. Waivers; Amendments. 42
SECTION 9.03. Expenses; Indemnity; Damage Waiver. 42
SECTION 9.04. Successors and Assigns. 43
SECTION 9.05. Survival. 45
SECTION 9.06. Counterparts; Integration; Effectiveness. 45
SECTION 9.07. Severability. 45
SECTION 9.08. Right of Setoff. 45
SECTION 9.09. Governing Law; Jurisdiction; Consent to
Service of Process. 46
SECTION 9.10. WAIVER OF JURY TRIAL. 46
SECTION 9.11. Headings. 46
SECTION 9.12. Confidentiality. 46
SECTION 9.13. Interest Rate Limitation. 47
SECTION 9.14 U.S. Dollars of the Essence 47
SECTION 9.15 Waiver of Sovereign Immunity; Commercial Activity 47
SCHEDULES:
---------
Schedule 1.01A - Investments
Schedule 2.01 - Commitments
Schedule 3.06 - Disclosed Matters
Schedule 3.14 - Subsidiaries
Schedule 3.15 - Outside Letters of Credit
Schedule 6.01 - Existing Indebtedness
Schedule 6.02 - Existing Liens
Schedule 6.08 - Existing Restrictions
EXHIBITS:
- --------
Exhibit A - Form of Assignment and Acceptance
Exhibit B-1 - Form of Opinion of Borrower's Special Counsel
Exhibit B-2 - Form of Opinion of Borrower's Cayman Islands Counsel
Exhibit C - Form of Borrowing Request
Exhibit D - Form of Interest Election Request
<PAGE>
This CREDIT AGREEMENT (the "Agreement") is among Triton Energy
Limited, a Cayman Islands company (the "Borrower"), the lenders party hereto,
and THE CHASE MANHATTAN BANK, as Administrative Agent, for such lenders.
The parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Defined Terms. As used in this Agreement, the
---------------
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Additional Reports" has the meaning defined in Section 5.09.
-------------------
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
--------------------
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity
--------------------
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
-----------------------------
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
---------
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum equal to
---------------------
the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect
on such day plus of 1%. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender, the
----------------------
percentage of the total Commitments represented by such Lender's Commitment. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.
"Applicable Rate" means, for any day, with respect to any ABR
----------------
Revolving Loan or Eurodollar Revolving Loan, or with respect to the commitment
fees payable hereunder, or with respect to the Performance Letter of Credit Fees
or Financial Letter of Credit Fees, as the case may be, the applicable rate per
annum set forth below under the caption "ABR Spread", "Eurodollar Spread",
"Commitment Fee", "Performance Letter of Credit Fee" or "Financial Letter of
Credit Fee", as the case may be, based upon the Borrowing Base Utilization and
the ratings by Moody's and S&P, respectively, applicable on such date to the
Index Debt:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Equal to or greater
Borrowing Base than 33% but less
Utilization Less than 33% than or equal to 66% Greater than 66%
Eurodollar Spread Category Category Category Category Category Category
I II I II I II
2.25% 2.50% 2.50% 2.75% 2.75% 3.00%
ABR Spread 1.25% 1.50% 1.50% 1.75% 1.75% 2.00%
Commitment Fee 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
Performance Letter of Credit Fee 1.35% 1.50% 1.50% 1.65% 1.65% 1.80%
Financial Letter of Credit Fee 2.25% 2.50% 2.50% 2.75% 2.75% 3.00%
</TABLE>
Category I - Index Debt of the Borrower is rated BB+ or higher by S&P or Ba1or
higher by Moody's.
Category II - Index Debt of the Borrower is not rated BB+ or higher by S&P and
is not rated Ba1 or higher by Moody's.
Notwithstanding the foregoing, (i) if either Moody's or S&P shall not
have in effect a rating for the Index Debt (other than by reason of the
circumstances referred to in the last sentence of this definition), then such
rating agency shall be deemed to have established a rating in Category II; (ii)
if the ratings established or deemed to have been established by Moody's and S&P
for the Index Debt shall fall within different Categories, the Applicable Rate
shall be based on the higher of the two ratings unless one of the two ratings is
two or more lower than the other, in which case the Applicable Rate shall be
determined by reference to Category II; (iii) if the ratings established or
deemed to have been established by Moody's and S&P for the Index Debt shall be
changed (other than as a result of a change in the rating system of Moody's or
S&P), such change shall be effective as of the date on which it is first
announced by the applicable rating agency, irrespective of when notice of such
change shall have been furnished by the Borrower to the Agent and the Lenders
pursuant to Section 5.01(f) hereof or otherwise; and (iv) changes to Borrowing
Base Utilization are effective on the date of the change, whether as a result of
a change in the Borrowing Base or a change in the Revolving Credit Exposure.
Each change in the Applicable Rate shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change. If the rating system of Moody's or
S&P shall change, or if either such rating agency shall cease to be in the
business of rating corporate debt obligations, the Borrower and the Lenders
shall negotiate in good faith to amend this definition to reflect such changed
rating system or the unavailability of ratings from such rating agency and,
pending the effectiveness of any such amendment, the Applicable Rate shall be
determined by reference to the rating most recently in effect prior to such
change or cessation.
"Assessment Rate" means, for any day, the annual assessment rate in
----------------
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
--------
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent and the
Assignor and Assignee.
"Availability Period" means the period from and including the
--------------------
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitments.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
-------------
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" is defined in the first paragraph of this Agreement.
--------
"Borrowing" means Revolving Loans of the same Type, made, converted or
---------
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
"Borrowing Base" is defined in Section 2.18.
---------------
"Borrowing Base Utilization" means, as of any day, the fraction
----------------------------
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures plus Outside LC Exposure for all Lenders on such day, and the
denominator of which is the Borrowing Base in effect on such day.
"Borrowing Request" means a request by the Borrower for a Revolving
------------------
Borrowing in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other
-------------
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any Person means the obligations of
---------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means (a) the acquisition of ownership, directly
-------------------
or indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the Securities
and Exchange Commission thereunder as in effect on the date hereof), of shares
representing more than 15% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Borrower; (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated; or (c) the
acquisition of direct or indirect Control of the Borrower by any Person or group
other than by any Person or group possessing, as of the date of this Agreement,
more than 15% of the aggregate ordinary voting power represented by the issued
and outstanding capital stock of the Borrower.
"Change in Law" means (a) the adoption of any law, rule or regulation
--------------
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender (or, for
purposes of Section 2.13(b), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
"Commitment" means, with respect to each Lender, the commitment of
----------
such Lender to make Revolving Loans and to acquire participations in Letters of
Credit hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's Revolving Credit Exposure hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.07 or Section 7.01
and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial amount of each Lender's
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed all or part of its Commitment,
as applicable. The initial aggregate amount of the Lenders' Commitments is
$150,000,000.
"Completion Guaranty" shall mean, with respect to any Project
--------------------
Financing, any unsecured interim construction guaranty of completion of the
construction of the project which is financed with such Project Financing,
provided that in no event shall "Completion Guaranty" include any obligation of
- --------
the Borrower or any Subsidiary of the Borrower to pay money.
"Consolidated" refers to the consolidation of the accounts of the
------------
Borrower and its Subsidiaries (other than Project Finance Subsidiaries) in
accordance with GAAP.
"Consolidated Group" means the Borrower and its Consolidated
-------------------
Subsidiaries.
"Consolidated Net Interest Expense" means, for the Consolidated Group,
---------------------------------
for any period, the Consolidated interest expense included in a Consolidated
income statement (net of interest income) for such period, determined in
accordance with GAAP, in respect of such Consolidated Group, including, without
limitation or duplication (or, to the extent not so included, with the addition
of), to the extent allocable to such period, (i) the portion of any rental
obligation in respect of any Capital Lease Obligation allocable to interest
expense in accordance with GAAP; (ii) the amortization of original issue
discounts; (iii) any interest payments or fees with respect to bankers
acceptances or similar facilities, (iv) Restricted Preferred Interest dividends
or distributions payable during such period; and (v) any other interest
capitalized under GAAP.
"Consolidated Net Debt" means, for the Consolidated Group, (a) on a
-----------------------
Consolidated basis, all obligations (determined under GAAP) for borrowed money
or with respect to deposits or advances of any kind, all Capital Lease
Obligations and all obligations evidenced by bonds, debentures, notes or similar
instruments, plus (b) the OCENSA Swap Obligation, minus (c) cash and cash
equivalents and plus (d) the positive amount, if any, that accounts payable
exceed accounts receivable (determined under GAAP).
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
------------------
environmental matters disclosed in Schedule 3.06.
"dollars" or "$" refers to lawful money of the United States of
------- -
America.
"EBITDA" means, for the Consolidated Group, for any period, the sum of
------
(i) the Consolidated net income (or loss) for such period determined in
accordance with GAAP plus (ii) to the extent included in the determination of
----
such net income (or loss), the Consolidated charges for such period for
interest, depreciation, depletion and amortization plus (or, if there is a
----
benefit from income taxes, minus) (iii) to the extent included in the
-----
determination of such net income, the amount of the provision for or benefit
from income taxes; provided, however, that in determining such Consolidated net
-------- -------
income, such Consolidated charges and such provision for or benefit from income
taxes, there shall be excluded therefrom (to the extent otherwise included
therein) (a) the net income (or loss) of, charges for interest, depreciation,
depletion and amortization of, and such provision for or benefit from income
taxes of, any Person acquired by a member of the Consolidated Group in a
pooling-of-interest transaction for any period prior to the date of such
transaction, (b) the net income (but not loss) of, charges for interest,
depreciation, depletion and amortization of, and such provision for (but not
benefit from) income taxes of, any member of the Consolidated Group (other than
the Borrower) which is subject to any restriction which prevents the payment of
dividends or the making of distributions on the capital stock, partnership
interests or other ownership interests of such Person to the extent of such
restrictions, (c) pre-tax gains or losses on the sale, transfer or other
disposition of any Property by any member of the Consolidated Group, other than
assets sold in the ordinary course of business, (d) all extraordinary gains and
extraordinary losses, prior to applicable income taxes, and (e) any item
constituting the cumulative effect of a change in accounting principles, prior
to applicable income taxes and (f) all expenses from the writedown of
capitalized exploration costs and the writedown of capitalized costs through the
application of the full cost ceiling limitation as prescribed by the SEC.
"Effective Date" means the date on which the conditions specified in
---------------
Section 4.01 are satisfied (or waived in accordance with Section 9.02).
"Environmental Laws" means all laws, rules, regulations, codes,
-------------------
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
----------------
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
------------
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
------------------
VII.
"Excluded Taxes" means, with respect to the Administrative Agent, any
---------------
Lender or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder, (a) income or franchise taxes imposed on
(or measured by) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under
Section 2.17(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office) or is attributable to such Foreign Lender's
failure to comply with Section 2.15(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the
Borrower with respect to such withholding tax pursuant to Section 2.15(a).
"Federal Funds Effective Rate" means, for any day, the weighted
-------------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Letter of Credit" means a Letter of Credit qualifying as a
---------------------------
"financial guarantee-type letter of credit" under 12 CFR Part 3, Appendix A,
Section 3(b)(1)(i) or any successor U.S. Comptroller of the Currency regulation.
"Financial Officer" means the chief financial officer, principal
------------------
accounting officer, treasurer or controller of the Borrower.
"Foreign Lender" means any Lender that is organized under the laws of
---------------
a jurisdiction other than the United States of America, each State thereof and
the District of Columbia.
"FPSO Obligation" means obligations of the Borrower or any Subsidiary
----------------
under a charter lease agreement for a floating production, storage and
off-loading tanker facility for the purpose of developing Borrower's
Hydrocarbons in Equatorial Guinea if (a) payments thereunder do not exceed
$27,500,000 in any calendar year and (b) the Lease Term is less than 3 years.
"Lease Term" means any fixed term and any period or periods covered by an option
to renew at a sufficiently low rental or sufficiently high penalty that the
exercise of the option is reasonably assured, as amended, waived or modified,
unless such amendment, waiver or modification thereto materially changes the
amounts payable thereunder or its Lease Term as determined by the Administrative
Agent in its reasonable discretion.
"GAAP" means generally accepted accounting principles in the United
----
States of America.
"Governmental Authority" means the government of the United States of
-----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
--------- ---------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
----------------
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
--------
endorsements for collection or deposit in the ordinary course of business.
"Hazardous Materials" means all explosive or radioactive substances or
-------------------
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
------------------
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
------------
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"Hydrocarbon Interests" means rights, interests and properties
----------------------
pursuant to which a Person has the right to explore for, develop, produce and
sell Hydrocarbons and other minerals and to receive and retain the revenues and
other economic benefits resulting therefrom and regardless of whether such
rights, interests and property arise by contract, order, operation of law or
ownership of estates, titles, and interests in and to oil, gas, sulphur, or
other mineral leases and any mineral interests, royalty and overriding royalty
interest, production payment, net profits interests, mineral fee interests, and
other rights, including, without limitation, any reversionary or carried
interests relating to the foregoing, together with rights, titles, and interests
created by or arising under the terms of any unitization, communication, and
pooling agreements or arrangements.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit, (j) all obligations, contingent or otherwise, of
such Person in respect of bankers' acceptances and (k) Restricted Preferred
Stock. The Indebtedness of any Person shall include the Indebtedness of any
other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness provide that such Person is not liable
therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
------------------
"Index Debt" means senior, unsecured, long-term indebtedness for
-----------
borrowed money of the Borrower that is not guaranteed by any other Person or
subject to any other credit enhancement.
"Initial Reserve Report" means the Reserve Report prepared in
------------------------
accordance with Section 5.09.
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Revolving Borrowing in accordance with Section 2.06.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
-----------------------
last day of each March, June, September and December and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration,
as the case may be, after the first day of such Interest Period.
"Interest Period" means with respect to any Eurodollar Borrowing, the
----------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (i) if any Interest Period
--------
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest Period
pertaining to a Eurodollar Borrowing that commences on the last Business Day of
a calendar month (or on a day for which there is no numerically corresponding
day in the last calendar month of such Interest Period) shall end on the last
Business Day of the last calendar month of such Interest Period. For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and, in the case of a Revolving Borrowing, thereafter shall be
the effective date of the most recent conversion or continuation of such
Borrowing.
"Issuing Bank" means the Administrative Agent, or, with the consent of
------------
such Lender, any Lender, in its capacity as the issuer of Letters of Credit
hereunder. The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by Affiliates of the Issuing Bank, in which case
the term "Issuing Bank" shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
---------------
a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
-----------
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time. The LC Exposure of any Lender at any time shall
be its Applicable Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.01 and any other
-------
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant to this
-----------------
Agreement, including Performance Letters of Credit or Financial Letters of
Credit.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
----------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
---------
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
----
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, any Letters of Credit, each
---------------
Borrowing Request, each Interest Election Request, each other document delivered
in connection with this Agreement, and each extension, waiver, amendment or
modification of each of the foregoing.
"Loans" means the loans made by the Lenders to the Borrower pursuant
-----
to this Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
-------------------------
business, assets, operations or condition, financial or otherwise, of the
Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower
or any of its Subsidiaries to perform any of its obligations or (c) the rights
of or benefits available to the Lenders under this Agreement.
"Material Indebtedness" means Indebtedness (other than the Loans or
----------------------
the Letters of Credit), or obligations in respect of one or more Hedging
Agreements, of any one or more of the Borrower and its Subsidiaries in an
aggregate principal amount exceeding $10,000,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any Subsidiary in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that the
Borrower or such Subsidiary would be required to pay if such Hedging Agreement
were terminated at such time.
"Material Subsidiary" means any Subsidiary which (a) owns, directly or
-------------------
indirectly through one or more Subsidiaries, assets with book or fair market
value in excess of $5,000,000 or (b) owns any Hydrocarbons included in the most
recently delivered Reserve Report.
"Maturity Date" means February 28, 2002.
--------------
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan as defined in Section
-------------------
4001(a)(3) of ERISA.
"OCENSA" means Oleoducto Central S.A., a Colombian company.
------
"OCENSA Swap Obligation" means $100,000,000, until the Confirmation,
------------------------
dated February 2, 1998 between Triton International Finance, Inc., a Cayman
Islands company, and Morgan Guaranty Trust Company of New York, has been
terminated and all amounts owed thereunder have been paid, at which time the
"OCENSA Swap Obligation" shall be $0.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
-------------------------
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Outside LC Exposure" means the amount, if any that (a) the sum of (i)
-------------------
the aggregate undrawn amount of all Outside Letters of Credit plus (ii) all
payments made by issuers of Outside Letters of Credit made under such Outside
Letters of Credit for which such issuer has not been reimbursed by the Borrower
in accordance with the terms thereunder exceeds (b) before December 31, 2000,
$15,000,000, or on and after December 31, 2000, $10,000,000.
"Outside Letter of Credit" means all obligations of the Borrower and
--------------------------
its Subsidiaries, contingent or otherwise, as an account party in respect of
letters of credit and letters of guaranty, excluding the Letters of Credit
issued under Section 2.04.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Participant" has the meaning set forth in Section 9.04(e).
-----------
"Performance Letter of Credit" means a letter of credit qualifying as
-----------------------------
a "performance-based standby letter of credit" under 12 CFR Part 3, Appendix A,
Section 3(b)(2)(i) or any successor U.S. Comptroller of the Currency regulation.
"Permitted Encumbrances" means:
-----------------------
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.04;
(b) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations;
(c) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, performance bonds and other obligations of a like nature,
in each case in the ordinary course of business;
(d) judgment liens in respect of judgments that do not constitute an Event
of Default under Section 7.01(k);
(e) Liens in connection with workmen's compensation, unemployment insurance
or other social security, old age pension or public liability obligations not
yet due or which are being contested in compliance with Section 5.04 in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP;
(f) operator's, vendors', carriers', warehousemen's, repairmen's,
mechanics', workmen's, materialmen's, construction or other like Liens arising
by operation of law in the ordinary course of business or incident to the
exploration, development, operation and maintenance of Oil and Gas Properties or
statutory landlord's liens, each of which is in respect of obligations that have
not been outstanding more than 90 days or which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP;
(g) any Liens or contract rights reserved in agreements creating
Hydrocarbon Interests and for compliance with the terms of such agreements or
leases in the case of leasehold estates, to the extent that any such Lien
referred to in this clause does not materially impair the use of the Property
covered by such Lien for the purposes for which such Property is held by the
Borrower or materially impair the value of such Property subject thereto;
(h) encumbrances (other than to secure the payment of borrowed money or the
deferred purchase price of Property or services), easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations in any
rights of way or other Property of the Borrower for the purpose of roads,
pipelines, transmission lines, transportation lines, distribution lines for the
removal of gas, oil, coal or other minerals or timber, and other like purposes,
or for the joint or common use of real estate, rights of way, facilities and
equipment, and defects, irregularities, zoning restrictions and deficiencies in
title of any rights of way or other Property which in the aggregate do not
materially impair the use of such rights of way or other Property for the
purposes of which such rights of way and other Property are held by the Borrower
or materially impair the value of such Property subject thereto; and
(i) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations and other obligations of a like nature incurred in the
ordinary course of business.
provided that the term "Permitted Encumbrances" shall not include any Lien
- --------
securing Indebtedness.
"Permitted Investments" means:
----------------------
(a) direct obligations of, or obligations the principal of and interest
on which are unconditionally guaranteed by, the United States of America (or by
any agency thereof to the extent such obligations are backed by the full faith
and credit of the United States of America), in each case maturing within one
year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the highest
credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts issued
or offered by, any domestic office of any commercial bank organized under the
laws of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into with
a financial institution satisfying the criteria described in clause (c) above;
and
(e) investments described in Schedule 1.01A.
"Person" means any natural person, corporation, limited liability
------
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Preferred Interest" means, as applied to any Person, any capital
-------------------
stock, partnership interest or other ownership interest of such Person which is
entitled to preference or priority over any other capital stock, partnership
interest or other ownership interest of such Person in respect of either the
payment of dividends or distributions or the distribution of assets upon
liquidation.
"Preferred Stock" means (i) as applied to any partnership, partnership
---------------
interests in such partnership which shall be entitled to preference or priority
over any other partnership interest in such partnership in respect of any
distribution of cash, property or other assets, (ii) as applied to any
corporation, shares of such corporation which shall be entitled to preference or
priority over any other shares of such corporation in respect of either the
payment of dividends or the distribution of assets upon liquidation, and (iii)
as applied to any other entity, interests in such entity which shall be entitled
to preference or priority over any other interests in such entity in respect of
any distribution of cash, property or other assets.
"Prime Rate" means the rate of interest per annum publicly announced
-----------
from time to time by The Chase Manhattan Bank as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Project Financing" means Indebtedness incurred by a Project Financing
-----------------
Subsidiary to finance the acquisition (other than any acquisition from Borrower
or any of its Subsidiaries) or construction of a project which Indebtedness does
not permit or provide for recourse against the Borrower or any of its
Subsidiaries (other than the Project Financing Subsidiary that is to acquire or
construct such project and any Project Financing Subsidiary that owns a general
or limited partnership interest or similar interest in the Project Financing
Subsidiary that is to acquire or construct such project).
"Project Financing Subsidiary" means a Subsidiary of the Borrower (a)
-----------------------------
that is created to (i) construct or acquire (other than any acquisition from
Borrower or any of its Subsidiaries) a project that will be or is financed
solely with Project Financing for such project incurred by such Subsidiary and
related equity investments for such project, (ii) own a general or limited
partnership interest (or similar interest) in a Project Financing Subsidiary, or
(iii) own an interest in any such project, (b) whose assets are limited solely
to those assets being financed by such Project Financing or by the related
equity investments or a general or limited partnership interest (or similar
interest) in a Project Financing Subsidiary whose assets are limited solely to
those assets being financed by such Project Financing and any loans to, or
capital contributions in, such Project Financing Subsidiary that are Permitted
Investments, and (c) notice of which has been delivered to the Administrative
Agent and each Lender.
"Property" shall mean any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Redetermination Date" has the meaning set forth in Section 2.18(a).
---------------------
"Register" has the meaning set forth in Section 9.04.
--------
"Related Parties" means, with respect to any specified Person, such
----------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Reports" mean the Reserve Reports and Additional Reports.
-------
"Required Lenders" means, at any time, Lenders having Revolving Credit
----------------
Exposures and unused Commitments representing more than 66-2/3% of the sum of
the total Revolving Credit Exposures and unused Commitments at such time.
"Reserve Report" shall mean a report, in form and substance reasonably
--------------
satisfactory to the Administrative Agent, setting forth, as of January 1 (or
such other date specified in Section 4.01(f) for the Initial Reserve Report or,
in the event of an unscheduled redetermination, such other date specified in
Section 2.18(d)) the proved oil and gas reserves attributable to the
Consolidated Group's Oil and Gas Properties, together with a projection of the
rate of production and future net income, production, severance or similar
taxes, operating expenses and capital expenditures with respect thereto as of
such date, based upon the pricing assumptions consistent with SEC reporting
requirements at the time. Furthermore, such information shall be provided for
each individual well, unit or lease comprising the Consolidated Group's Oil and
Gas Properties and by category of the reserves contained in each well, unit or
lease including proved producing, proved non-producing and proved undeveloped.
Such report must also include a comparison of actual and projected production
volumes for the Consolidated Group's Oil and Gas Properties.
"Responsible Officer" shall mean as to any Person, the Chief Executive
-------------------
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer" shall include the Financial
Officers of such Person. Unless otherwise specified, all references to a
Responsible Officer herein shall mean a Responsible Officer of the Borrower.
"Restricted Payment" means any dividend or other distribution (whether
------------------
in cash, securities or other property) with respect to any shares of any class
of capital stock of the Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares of capital stock of the Borrower
or any option, warrant or other right to acquire any such shares of capital
stock of the Borrower.
"Restricted Preferred Interest" means any Preferred Interest which is
------------------------------
subject to retirement, purchase, redemption, other acquisition or conversion
(other than a conversion into common stock of the Borrower), in whole or in
part, at the option of the holder thereof.
"Restricted Preferred Stock" means any Preferred Stock that is subject
--------------------------
to required repayment (other than payment of dividends and distributions),
redemption, repurchase, retirement, exchange for debt or Restricted Preferred
Stock or conversion into debt or Restricted Preferred Stock, at the option of
the holder or any other Person or at a fixed or determinable date or dates,
whether by operation of a sinking fund or otherwise, or otherwise upon the
occurrence of a condition not within the control of the issuer.
"Revolving Credit Exposure" means, with respect to any Lender at any
---------------------------
time, the sum of (a) the outstanding principal amount of such Lender's Revolving
Loans and (b) its LC Exposure.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
---------------
"S&P" means Standard & Poor's.
---
"Scheduled Redetermination" has the meaning set forth in Section
--------------------------
2.18(d).
"Scheduled Redetermination Date" has the meaning set forth in Section
-------------------------------
2.18(d).
"SEC" shall mean the Securities and Exchange Commission or any
---
successor Governmental Authority.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
------------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to, three months,
in the case of the Base CD Rate, and (b) with respect to the Adjusted LIBO Rate,
for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those
imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"Subsidiary" means, with respect to any Person (the "parent") at any
---------- ------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent. If not otherwise
specified, "Subsidiary" means a Subsidiary of the Borrower.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Three-Month Secondary CD Rate" means, for any day, the secondary
--------------------------------
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day) or, if such rate is not so reported on such day or such
next preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 10:00 a.m., New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Transactions" means the execution, delivery and performance by the
------------
Borrower of this Agreement, the borrowing of Loans and the use of the proceeds
thereof and the obtaining by the Borrower of any Letters of Credit.
"Type", when used in reference to any Loan or Borrowing, refers to
----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate
Base Rate, and when used in reference to a Letter of Credit, refers to whether
the Letter of Credit is a Performance Letter of Credit or Financial Letter of
Credit.
"Unscheduled Redetermination" means an unscheduled redetermination
----------------------------
requested by the Borrower or the Required Banks under Section 2.18(d).
"Withdrawal Liability" means liability to a Multiemployer Plan as a
---------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans and Borrowings. For
-------------------------------------------
purposes of this Agreement, Loans may be classified and referred to by Class
(e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class
--- ---
and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be
---
classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type
---
(e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar
---- ---
Revolving Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein
-----------------
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.04. Accounting Terms; GAAP . Except as otherwise
------------------------
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
--------
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
-----------
SECTION 2.01. Commitments. Subject to the terms and conditions
------------
set forth herein, each Lender agrees to make Revolving Loans to the Borrower
from time to time during the Availability Period in an aggregate principal
amount that will not result in (a) such Lender's Revolving Credit Exposure plus
such Lender's Applicable Percentage of Outside LC Exposure exceeding the lesser
of (i) such Lender's Applicable Percentage of the Borrowing Base or (ii) such
Lender's Commitment or (b) the sum of the total Revolving Credit Exposures plus
Outside LC Exposure for all Lenders exceeding the lesser of (i) Borrowing Base
or (ii) the total Commitment of all Lenders. Within the foregoing limits and
subject to the terms and conditions set forth herein, the Borrower may borrow,
prepay and reborrow Revolving Loans.
SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan
-----------------------
shall be made as part of a Borrowing consisting of Revolving Loans made by the
Lenders ratably in accordance with their respective Commitments. The failure of
any Lender to make any Loan required to be made by it shall not relieve any
other Lender of its obligations hereunder; provided that the Commitments of the
--------
Lenders are several and no Lender shall be responsible for any other Lender's
failure to make Loans as required.
(b) Subject to Section 2.12, each Revolving Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
in accordance herewith. Each Lender at its option may make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided that any exercise of such option shall not affect the
--------
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Revolving Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $5,000,000. At the time that
each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate
amount that is an integral multiple of $500,000 and not less than $1,000,000;
provided that an ABR Revolving Borrowing may be in an aggregate amount that is
- --------
equal to the entire unused balance of the total Commitments or that is required
to finance the reimbursement of an LC Disbursement as contemplated by Section
2.04(e). Borrowings of more than one Type and Class may be outstanding at the
same time; provided that there shall not at any time be more than a total of 6
--------
Eurodollar Revolving Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Maturity Date.
SECTION 2.03. Requests for Revolving Borrowings. To request a
-----------------------------------
Revolving Borrowing, the Borrower shall notify the Administrative Agent of such
request ("Borrowing Request") by telephone (a) in the case of a Eurodollar
Borrowing, not later than 11:00 a.m., New York City time, three Business Days
before the date of the proposed Borrowing or (b) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before the date of the proposed Borrowing; provided that any such notice of an
ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as
contemplated by Section 2.04(e) may be given not later than 10:00 a.m., New York
City time on the date of the proposed Borrowing. Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in
substantially in the form attached hereto as Exhibit C and signed by the
Borrower. Each such telephonic and written Borrowing Request shall specify the
following information in compliance with Section 2.02:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business
Day;
(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial
Interest Period to be applicable thereto, which shall be a period contemplated
by the definition of the term "Interest Period";
(v) the location and number of the Borrower's account to
which funds are to be disbursed, which shall comply with the requirements of
Section 2.05;
(vi) the Borrowing Base Utilization on the date of such
Borrowing (after giving effect to such Borrowing); and
(vii) The amount of Outside LC Exposure on the Business Day
of the proposed Borrowing.
If no election as to the Type of Revolving Borrowing is specified, then the
requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month's
duration, in the case of a Eurodollar Borrowing. Promptly following receipt of
a Borrowing Request in accordance with this Section, the Administrative Agent
shall advise each Lender of the details thereof and of the amount of such
Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Letters of Credit . (a) General. Subject to the
------------------- --------
terms and conditions set forth herein, the Borrower may request the issuance of
Letters of Credit for its own account, in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the period from and including the Effective Date to but excluding the day
that is six days before the last day of the Availability Period. In the event
of any inconsistency between the terms and conditions of this Agreement and the
terms and conditions of any form of letter of credit application or other
agreement submitted by the Borrower to, or entered into by the Borrower with,
the Issuing Bank relating to any Letter of Credit, the terms and conditions of
this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
----------------------------------------------------------------
Conditions. To request the issuance of a Letter of Credit (or the amendment,
- ----------
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) to the Issuing
Bank and the Administrative Agent (reasonably in advance of the requested date
of issuance, amendment, renewal or extension) a written notice requesting the
issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, and specifying the date of issuance, amendment,
renewal or extension (which shall be a Business Day), the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of this
Section), the amount of such Letter of Credit, the name and address of the
beneficiary thereof, the Type of the Letter of Credit, and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank's standard form in connection
with any request for a Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $20,000,000 and (ii) the sum of
the total Revolving Credit Exposures plus Outside LC Exposure shall not exceed
the lesser of (A) the total Commitments and (B) the Borrowing Base.
(c) Expiration Date. Each Letter of Credit shall expire at or prior to
----------------
the close of business on the earlier of (i) the date one year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
---------------
amendment, renewal or extension of a Letter of Credit) and without any further
action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby
grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Bank, such Lender's Applicable Percentage of each
LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on
the date due as provided in paragraph (e) of this Section, or of any
reimbursement payment required to be refunded to the Borrower for any reason.
Each Lender acknowledges and agrees that its obligation to acquire
participations pursuant to this paragraph in respect of Letters of Credit is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including any amendment, renewal or extension of any Letter of
Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement
--------------
in respect of a Letter of Credit, the Borrower shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement which, unless (i) otherwise reimbursed by the Borrower by no later
than 12:00 noon, New York City Time or (ii) there is an Event of Default under
Section 7.01(i) or 7.01(h), shall be made by an ABR Revolving Borrowing in an
equivalent amount, the Borrowing Request for which shall be deemed to have been
delivered to the Administrative Agent on the day of such LC Disbursement.
Promptly following notice from the Administrate Agent, the Borrower shall
execute and deliver a Borrowing Request confirming such deemed delivery.
Promptly following such LC Disbursement the Administrative Agent shall notify
each Lender of such Lender's Applicable Percentage of such ABR Revolving
Borrowing. Promptly following receipt of such notice, each Lender shall pay to
the Administrative Agent its Applicable Percentage of such ABR Revolving
Borrowing in the same manner as provided in Section 2.05 with respect to Loans
made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the
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payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the Lenders.
Promptly following receipt by the Administrative Agent of any payment from the
Borrower pursuant to this paragraph, the Administrative Agent shall distribute
such payment to the Issuing Bank or, to the extent that Lenders have made
payments pursuant to this paragraph to reimburse the Issuing Bank, then to such
Lenders and the Issuing Bank as their interests may appear.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
---------------------
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder.
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
--------
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or wilful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
-------------------------
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the Borrower by telephone (confirmed by
telecopy) of such demand for payment and whether the Issuing Bank has made or
will make an LC Disbursement thereunder; provided that any failure to give or
--------
delay in giving such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Lenders with respect to any such LC
Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
------------------
Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Revolving Loans;
provided that, if the Borrower fails to reimburse such LC Disbursement when due
- --------
pursuant to paragraph (e) of this Section, then Section 2.11(c) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing
Bank shall be for the account of such Lender to the extent of such payment.
(i) Cash Collateralization. If any Event of Default shall occur and be
-----------------------
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph, the Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders, an amount in cash equal to the LC Exposure as of such date plus any
accrued and unpaid interest thereon; provided that the obligation to deposit
--------
such cash collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any kind,
upon the occurrence of any Event of Default with respect to the Borrower
described in clause (h) or (i) of Section 7.01. Such deposit shall be held by
the Administrative Agent as collateral for the payment and performance of the
obligations of the Borrower under this Agreement. The Administrative Agent
shall have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on the investment
of such deposits, which investments shall be made at the option and sole
discretion of the Administrative Agent and at the Borrower's risk and expense,
such deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall be
applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Lenders with LC Exposure
representing greater than 50% of the total LC Exposure), be applied to satisfy
other obligations of the Borrower under this Agreement. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
SECTION 2.05. Funding of Borrowings. (a) Each Lender shall make
----------------------
each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 1:00 p.m., New York City time, to the
account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to an account of the Borrower maintained with the Administrative Agent in
New York City and designated by the Borrower in the applicable Borrowing
Request; provided that ABR Revolving Loans made to finance the reimbursement of
an LC Disbursement as provided in Section 2.04(e) shall be remitted by the
Administrative Agent to the Issuing Bank .
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
SECTION 2.06. Interest Elections. (a) Each Revolving Borrowing
-------------------
initially shall be of the Type specified in the applicable Borrowing Request
and, in the case of a Eurodollar Revolving Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request. Thereafter, the
Borrower may elect to convert such Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurodollar Revolving Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.
(b) To make an election ("Interest Election Request") pursuant to this
Section, the Borrower shall notify the Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.03 if the Borrower were requesting a Revolving Borrowing of the Type resulting
from such election to be made on the effective date of such election. Each such
telephonic Interest Election Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Interest Election Request substantially in the form of Exhibit D attached hereto
and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify
the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request
applies and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to clauses
(iii) and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing;
(iv) if the resulting Borrowing is a Eurodollar Borrowing,
the Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the term
"Interest Period"; and
(v) the Borrowing Base Utilization on the effective date
of the election (after giving effect to any new Borrowings on such
date).
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request
with respect to a Eurodollar Revolving Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing and the Administrative
Agent, at the request of the Required Lenders, so notifies the Borrower, then,
so long as an Event of Default is continuing (i) no outstanding Revolving
Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii)
unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.
SECTION 2.07. Termination and Reduction of Commitments. (a)
---------------------------------------------
Unless previously terminated, the Commitments shall terminate on the Maturity
Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments; provided that (i) each reduction of the Commitments
--------
shall be in an amount that is an integral multiple of $5,000,000 and not less
than $10,000,000 and (ii) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.09, the sum of the Revolving Credit Exposures would
exceed the total Commitments.
(c) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (b) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section shall be irrevocable; provided that a notice of termination of
--------
the Commitments delivered by the Borrower may state that such notice is
conditioned upon the effectiveness of other credit facilities, in which case
such notice may be revoked, or the effective date postponed, by the Borrower (by
notice to the Administrative Agent on or prior to the specified effective date)
if such condition remains unsatisfied. Any termination or reduction of the
Commitments shall be permanent. Each reduction of the Commitments shall be made
ratably among the Lenders in accordance with their respective Commitments.
SECTION 2.08. Repayment of Loans; Evidence of Debt. (a) The
-----------------------------------------
Borrower hereby unconditionally promises to pay to the Administrative Agent for
the account of each Lender the then unpaid principal amount of each Revolving
Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent. Thereafter, the Loans evidenced by
such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 9.04) be represented by one or more promissory
notes in such form payable to the order of the payee named therein (or, if such
promissory note is a registered note, to such payee and its registered assigns).
SECTION 2.09. Prepayment of Loans. (a) The Borrower shall have
--------------------
the right at any time and from time to time to prepay any Borrowing in whole or
in part, subject to prior notice in accordance with paragraph (b) of this
Section.
(b) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Revolving Borrowing, not later than 11:00 a.m., New
York City time, three Business Days before the date of prepayment, (ii) in the
case of prepayment of an ABR Revolving Borrowing, not later than 11:00 a.m., New
York City time, one Business Day before the date of prepayment. Each such
notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Borrowing or portion thereof to be prepaid; provided
--------
that, if a notice of prepayment is given in connection with a conditional notice
of termination of the Commitments as contemplated by Section 2.07, then such
notice of prepayment may be revoked, or the effective date postponed, if such
notice of termination is revoked, or the effective date postponed, in accordance
with Section 2.07. Promptly following receipt of any such notice relating to a
Revolving Borrowing, the Administrative Agent shall advise the Lenders of the
contents thereof. Each partial prepayment of any Revolving Borrowing shall be
in an amount that would be permitted in the case of an advance of a Revolving
Borrowing of the same Type as provided in Section 2.02. Each prepayment of a
Revolving Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.11.
(c) Upon any redetermination of the amount of the Borrowing Base in
accordance with Section 2.18, if the redetermined Borrowing Base is less than
the aggregate Revolving Credit Exposure plus Outside LC Exposure (the "Borrowing
---------
Base Deficiency"), then (i) the Borrower shall, within ninety (90) days of
- ----------------
receipt of written notice of such redetermination, prepay the Loans in an
aggregate principal amount equal to or greater than 50% of the Borrowing Base
Deficiency together with interest on the principal amount paid accrued to the
date of such prepayment and (ii) the Borrower shall, within 180 days of receipt
of written notice of such redetermination, prepay the Loans in an aggregate
principal amount necessary to eliminate the Borrowing Base Deficiency together
with interest on the principal amount paid accrued to the date of such
prepayment.
(d) Upon any ABR Revolving Borrowing made pursuant to Section 2.04(e),
if the Borrowing Base is less than the aggregate Revolving Credit Exposure plus
Outside LC Exposure after giving effect to such ABR Revolving Borrowing, an
amount sufficient to reduce the aggregate Revolving Credit Exposure plus the
Outside LC Exposure to be equal to or less than the Borrowing Base shall be
immediately due and payable.
SECTION 2.10. Fees. (a) The Borrower agrees to pay to the
-----
Administrative Agent for the account of each Lender a commitment fee, which
shall accrue at the Applicable Rate on the daily amount by which such Lender's
Applicable Percentage of the lesser of the Borrowing Base or the Commitment of
such Lender exceeds the Revolving Credit Exposure of such Lender during the
period from and including February 29, 2000 to but excluding the date on which
such Commitment terminates. Accrued commitment fees shall be payable in arrears
on the last day of March, June, September and December of each year and on the
date on which the Commitments terminate, commencing on the first such date to
occur after the date hereof. All commitment fees shall be computed on the basis
of a year of 365 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
(b) The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations in
Letters of Credit, which shall accrue at the Applicable Rate for the Type of
such Letter of Credit on the average daily amount of such Lender's LC Exposure
for such Type of Letter of Credit (excluding any portion thereof attributable to
unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender's
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the
rate of 0.125% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date of termination of the Commitments and the date on which there
ceases to be any LC Exposure, as well as the Issuing Bank's standard fees with
respect to the issuance, amendment, renewal or extension of any Letter of Credit
or processing of drawings thereunder. Participation fees and fronting fees
accrued through and including the last day of March, June, September and
December of each year shall be payable on the third Business Day following such
last day, commencing on the first such date to occur after the Effective Date;
provided that all such fees shall be payable on the date on which the
- --------
Commitments terminate and any such fees accruing after the date on which the
Commitments terminate shall be payable on demand. Any other fees payable to the
Issuing Bank pursuant to this paragraph shall be payable within 10 days after
demand. All participation fees and fronting fees shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
(c) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of
facility fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
SECTION 2.11. Interest. (a) The Loans comprising each ABR
---------
Borrowing shall bear interest at the Alternate Base Rate plus the Applicable
Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest
at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and, in the case of Revolving Loans, upon
termination of the Commitments; provided that (i) interest accrued pursuant to
--------
paragraph (c) of this Section shall be payable on demand, (ii) in the event of
any repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan prior to the end of the Availability Period), accrued interest on
the principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Revolving Loan prior to the end of the current Interest Period
therefor, accrued interest on such Loan shall be payable on the effective date
of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.
SECTION 2.12. Alternate Rate of Interest. If prior to the
------------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Revolving Borrowing to, or
continuation of any Revolving Borrowing as, a Eurodollar Borrowing shall be
ineffective and (ii) if any Borrowing Request requests a Eurodollar Revolving
Borrowing, such Borrowing shall be made as an ABR Borrowing.
SECTION 2.13. Increased Costs. (a) If any Change in Law shall:
----------------
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate), or the Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or Eurodollar
Loans or Fixed Rate Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank such additional amount or
amounts as will compensate such Lender or the Issuing Bank, as the case may be,
for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender's or the Issuing Bank's capital or on the capital of
such Lender's or the Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company could have achieved but for such Change in Law (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or amounts
necessary to compensate such Lender or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender or the Issuing Bank, as the case may be, the amount shown as due on
any such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
--------
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 180 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
-------- -------
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
SECTION 2.14. Break Funding Payments. In the event of (a) the
-------------------------
payment of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, (c) the failure to borrow, convert,
continue or prepay any Revolving Loan on the date specified in any notice
delivered pursuant hereto (regardless of whether such notice may be revoked or
the effective date postponed under Section 2.07(c) and is revoked in accordance
therewith), or (d) the assignment of any Eurodollar Loan other than on the last
day of the Interest Period applicable thereto as a result of a request by the
Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a Eurodollar Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the Adjusted LIBO
Rate that would have been applicable to such Loan, for the period from the date
of such event to the last day of the then current Interest Period therefor (or,
in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for dollar deposits of a comparable amount and period from other
banks in the eurodollar market. A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 10 days after receipt thereof.
SECTION 2.15. Taxes. (a) Any and all payments by or on account
------
of any obligation of the Borrower hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if the
--------
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent and each
Lender and the Issuing Bank, within 10 days after written demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent or such Lender or the Issuing Bank, as the case may be, on
or with respect to any payment by or on account of any obligation of the
Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A
certificate as to the amount of such payment or liability delivered to the
Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its
own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive
absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate.
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of
---------------------------------------------------
Set-offs. (a) The Borrower shall make each payment required to be made by it
- --------
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.13, 2.14 or 2.15, or
otherwise) prior to 12:00 noon, New York City time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York, except payments to be made directly to the Issuing Bank as
expressly provided herein and except that payments pursuant to Sections 2.13,
2.14, 2.15 and 9.03 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Revolving Loans or participations in LC Disbursements
resulting in such Lender receiving payment of a greater proportion of the
aggregate amount of its Revolving Loans and participations in LC Disbursements
and accrued interest thereon than the proportion received by any other Lender,
then the Lender receiving such greater proportion shall purchase (for cash at
face value) participations in the Revolving Loans and participations in LC
Disbursements of other Lenders to the extent necessary so that the benefit of
all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective
Revolving Loans and participations in LC Disbursements; provided that (i) if any
--------
such participations are purchased and all or any portion of the payment giving
rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply). The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made by
it pursuant to 2.05(b) or 2.16(d), then the Administrative Agent may, in its
discretion (notwithstanding any contrary provision hereof), apply any amounts
thereafter received by the Administrative Agent for the account of such Lender
to satisfy such Lender's obligations under such Sections until all such
unsatisfied obligations are fully paid.
SECTION 2.17. Mitigation Obligations; Replacement of Lenders.
---------------------------------------------------
(a) If any Lender requests compensation under Section 2.13, or if the Borrower
is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.15, then such
Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.13, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
--------
shall have received the prior written consent of the Administrative Agent (and,
if a Commitment is being assigned, the Issuing Bank), which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.13 or payments required to be made
pursuant to Section 2.15, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
SECTION 2.18. Borrowing Base .
---------------
(a) The borrowing base ("Borrowing Base") shall be determined in
accordance with Section 2.18(b) by the Administrative Agent with the concurrence
of the Required Lenders and is subject to redetermination in accordance with
Section 2.18(d). Upon any redetermination of the Borrowing Base, such
redetermination shall remain in effect until the next successive Redetermination
Date. "Redetermination Date" means the date that the redetermined Borrowing
---------------------
Base becomes effective in accordance with Section 2.18(e) both for Scheduled
Redeterminations and unscheduled redeterminations. So long as any of the
Commitments are in effect and until all of the Loans outstanding hereunder are
paid in full, this facility shall be governed by the then effective Borrowing
Base. During the period from and after the Effective Date until the first
Redetermination Date, the amount of the Borrowing Base shall be $150,000,000.
(b) Upon receipt of the Reports in accordance with Section 5.09, the
Administrative Agent will propose a new Borrowing Base. Such proposal will be
in accordance with the Administrative Agent's normal and customary procedures
for evaluating international or domestic, as the case may be, oil and gas
reserves and other related assets as such exist at that particular time with any
changes to such procedures as the Administrative Agent, in its sole discretion,
deems reasonably appropriate to reflect changed circumstances or conditions
generally in the domestic or international oil and gas industry including,
without limitation, adjustments to the rates, volumes, prices and other
assumptions set forth therein from time to time. The Administrative Agent shall
propose to the Lenders a new Borrowing Base within 30 days following receipt by
the Administrative Agent of the Reports in a timely and complete manner. After
having received notice of such proposal by the Administrative Agent, the
Required Lenders shall have 14 days to agree or disagree with such proposal.
If, at the end of 14 days, the Required Lenders have not communicated their
approval or disapproval, such silence shall be deemed to be an approval and the
Administrative Agent's proposal shall be the new Borrowing Base. If however,
the Required Lenders notify the Agent within 14 days of their disapproval, the
Required Lenders shall, within a reasonable period of time, agree on a new
Borrowing Base.
(c) The Administrative Agent may exclude any Oil and Gas Property or
portion of production therefrom or any income from any other Property from the
Borrowing Base, at any time, if any Hydrocarbon Interests are forfeited or
suspended pursuant to the terms of the instrument granting the same.
(d) So long as any of the Commitments are in effect or there is any
Revolving Credit Exposure, effective as of the day notice is given under
Section 2.18(e) (each being a "Scheduled Redetermination Date"), the
--------------------------------
Administrative Agent and Required Lenders shall redetermine the amount of the
Borrowing Base in accordance with Section 2.18(b) (each being a "Scheduled
---------
Redetermination"). In addition, Borrower may request an unscheduled
- ---------------
redetermination of the Borrowing Base at any other time but no more often than
once between Scheduled Redetermination Dates by specifying in writing to the
Administrative Agent the date on which such redetermination is to occur and
providing a Reserve Report in accordance with Section 5.09(b) prior to the
requested redetermination date and providing any Additional Reports. Also, the
Required Lenders may request an unscheduled redetermination of the Borrowing
Base at any other time but no more often than once between Scheduled
Redetermination Dates by specifying in writing to the Borrower the date on which
the Borrower is to furnish a Reserve Report (and the "as of" date of such
Reserve Report) and Additional Reports, if any, in accordance with Section
5.09(b) and the date on which such redetermination is to occur.
(e) The Administrative Agent shall promptly notify in writing the
Borrower and the Lenders of the new Borrowing Base. Any redetermination of the
Borrowing Base shall not be in effect until written notice is given in
accordance with Section 9.01.
ARTICLE III
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower and its
---------------------
Material Subsidiaries is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, has all requisite
corporate power and authority to carry on its business as now conducted and,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions
-------------------------------
are within the Borrower's corporate powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. This Agreement has
been duly executed and delivered by the Borrower and constitutes a legal, valid
and binding obligation of the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The
----------------------------------------
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of the Borrower or any of its Subsidiaries or any order
of any Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon the Borrower or any of
its Subsidiaries or its assets, or give rise to a right thereunder to require
any payment to be made by the Borrower or any of its Subsidiaries, and (d) will
not result in the creation or imposition of any Lien on any asset of the
Borrower or any of its Subsidiaries.
SECTION 3.04. Financial Condition; No Material Adverse Change.
---------------------------------------------------
(a) The Borrower has heretofore furnished to the Lenders its consolidated
balance sheet and statements of operations, shareholders equity and cash flows
(i) as of and for the fiscal year ended December 31, 1998, reported on by
independent, United States-based public accountants of recognized national
standing, and (ii) as of and for the fiscal quarter and the portion of the
fiscal year ended September 30, 1999, certified by a Financial Officer (the
statements in (i) and (ii) are referred to as the "Delivered Statements"). The
Delivered Statements present fairly, in all material respects, the financial
position and results of operations and cash flows of the Borrower and its
consolidated Subsidiaries as of such dates and for such periods in accordance
with GAAP, subject to the adjustments described in Schedule 3.04 and subject to
year-end audit adjustments and the absence of footnotes in the case of the
statements referred to in clause (ii) above. Before the day of the initial
Loans, the Borrower will have furnished to the Lenders its consolidated balance
sheet and statements of operations, shareholders equity and cash flows as of and
for the fiscal year ended December 31, 1999, reported on by independent, United
States-based public accountants of recognized national standing ("1999
Statements"). The 1999 Statements present fairly, in all material respects,
the financial position and results of operations and cash flows of the Borrower
and its consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP
(b) Since September 30, 1999, there have been no events or occurrences
that, in the aggregate, have had a Material Adverse Effect.
SECTION 3.05. Properties. (a) Each of the Borrower and its
-----------
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and the use thereof by the Borrower and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.06. Litigation and Environmental Matters. (a) There
---------------------------------------
are no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries (i) as to which
there is a reasonable possibility of an adverse determination and that, if
adversely determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the Disclosed
Matters) or (ii) that involve this Agreement or the Transactions.
(b) Except for the Disclosed Matters and except with respect to any
other matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Borrower nor any of
its Subsidiaries (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
SECTION 3.07. Compliance with Laws and Agreements. Each of the
-------------------------------------
Borrower and its Subsidiaries is in compliance with all laws, regulations and
orders of any Governmental Authority applicable to it or its property and all
indentures, agreements and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. No Default has
occurred and is continuing.
SECTION 3.08. Investment and Holding Company Status. Neither the
--------------------------------------
Borrower nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 3.09. Taxes. Each of the Borrower and its Subsidiaries
------
has timely filed or caused to be filed all Tax returns and reports required to
have been filed and has paid or caused to be paid all Taxes required to have
been paid by it, except (a) Taxes that are being contested in good faith by
appropriate proceedings and for which the Borrower or such Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.10. ERISA. No ERISA Event has occurred or is
------
reasonably expected to occur that, when taken together with all other such ERISA
Events for which liability is reasonably expected to occur, could reasonably be
expected to result in a Material Adverse Effect. The present value of all
accumulated benefit obligations under each Plan (based on the assumptions used
for purposes of Statement of Financial Accounting Standards No. 87) did not, as
of the date of the most recent financial statements reflecting such amounts,
exceed by more than $10,000,000 the fair market value of the assets of such
Plan, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed by more than
$10,000,000 the fair market value of the assets of all such underfunded Plans.
SECTION 3.11. Disclosure. The Borrower has disclosed to the
-----------
Lenders all agreements, instruments and corporate or other restrictions to which
it or any of its Subsidiaries is subject, and all other matters known to it,
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. None of the other reports, financial statements,
certificates or other information furnished by or on behalf of the Borrower to
the Administrative Agent or any Lender in connection with the negotiation of
this Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
--------
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.
SECTION 3.12. Year 2000. The Year 2000 date change has not
-----------
resulted in a material disruption of the Borrower's and its Subsidiaries'
computer hardware, software, databases, systems and other equipment containing
embedded microchips (including systems and equipment supplied by others or with
which the Borrower's or its Subsidiaries' systems interface), or to the
Borrower's or its Subsidiaries' operations or business systems, or to the best
of the Borrower's and its Subsidiaries' knowledge, to the operations or business
systems of the Borrower's major vendors, customers, suppliers and
counterparties. Borrower has no reason to believe that liabilities and
expenditures related to the Year 2000 date-change (including, without
limitation, costs caused by reprogramming errors, the failure of others' systems
or equipment, and the potential liability, if any, of the Borrower or its
Subsidiaries for Year 2000 related costs incurred or disruption experienced by
others) will result in a Default or a Material Adverse Effect.
SECTION 3.13. Regulation U . Following application of the
-------------
proceeds of each Loan, not more than 25 percent of the value of the assets which
are subject to any arrangement with the Administrative Agent or any Lender
(herein or otherwise) whereby the Borrower's right or ability to sell, pledge or
otherwise dispose of assets is in any way restricted (or pursuant to which the
exercise of any such right is or may be cause for accelerating the maturity of
all or any portion of the Loans or any other amount payable hereunder or under
any such other arrangement), will be margin stock (within the meaning of
Regulation U issued by the Federal Reserve Board). No proceeds of any Loan have
been used in violation of Section 5.08.
SECTION 3.14. Subsidiaries . Each Subsidiary of the Borrower as
------------
of February 29, 2000 is listed on Schedule 3.14. Each Material Subsidiary as
of the date of the most recently delivered certificate of a Financial Officer
described in Section 5.01(c) is listed on Schedule 3.14 as revised by such
certificate in accordance with Section 5.01(c).
SECTION 3.15. Outside Letters of Credit . Each Outside Letter of
-------------------------
Credit is listed on Schedule 3.15, with its expiration date, name of issuer,
beneficiary and face amount except that, if the face amount is different from
the amount stated on Schedule 3.15, it is no greater than the amount stated on
Schedule 3.15. Schedule 3.15 may be updated by written notice to the
Administrative Agent and the Lenders delivered in accordance with Section 9.01
and 5.01(h).
ARTICLE IV
Conditions
----------
SECTION 4.01. Effective Date. The obligations of the Lenders to
---------------
make Loans and of the Issuing Bank to issue, extend or renew Letters of Credit
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received from
each party hereto either (i) a counterpart of this Agreement signed on behalf of
such party or (ii) written evidence satisfactory to the Administrative Agent
(which may include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement.
(b) The Administrative Agent shall have received favorable written
opinions (addressed to the Administrative Agent and the Lenders and dated the
Effective Date) of Jackson Walker L.L.P., special counsel for the Borrower,
substantially in the form of Exhibit B-1, and covering such other matters
relating to the Borrower, or this Agreement as the Required Lenders may
reasonably request and Walkers, Cayman Islands counsel for the Borrower,
substantially in the form of Exhibit B-2, and covering such other matters
relating to the Borrower, or this Agreement, as the Required Lenders may
reasonably request. The Borrower hereby requests such counsel to deliver such
opinions.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably request
relating to the organization, existence and good standing of the Borrower, the
authorization of the Transactions and any other legal matters relating to the
Borrower, this Agreement or the Transactions, all in form and substance
satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a Financial
Officer of the Borrower, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.02 and confirming the Moody's and S&P
ratings of the Index Debt.
(e) The Administrative Agent shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to the
extent invoiced, reimbursement or payment of all out-of-pocket expenses required
to be reimbursed or paid by the Borrower hereunder.
(f) The Administrative Agent shall have received the Initial Reserve
Report.
SECTION 4.02. Each Credit Event. The obligation of each Lender
-------------------
to make a Loan on the occasion of any Borrowing, and of the Issuing Bank to
issue, amend, renew or extend any Letter of Credit, is subject to the
satisfaction of the following conditions:
(a) The representations and warranties of the Borrower set forth in
this Agreement shall be true and correct on and as of the date of such Borrowing
or the date of issuance, amendment, renewal or extension of such Letter of
Credit, as applicable.
(b) At the time of and immediately after giving effect to such
Borrowing or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, no Default shall have occurred and be continuing.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, the Borrower covenants and
agrees with the Lenders that:
SECTION 5.01. Financial Statements; Ratings Change and Other
---------------------------------------------------
Information. The Borrower will furnish to the Administrative Agent and each
- -----------
Lender:
(a) within 90 days after the end of each fiscal year of the Borrower,
its audited consolidated balance sheet and related statements of operations,
shareholders' equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported independent, United States-based public accountants of recognized
national standing (without a "going concern" or like qualification or exception
and without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated balance sheet and
related statements of operations, shareholders' equity and cash flows as of the
end of and for such fiscal quarter and the then elapsed portion of the fiscal
year, setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet, as of
the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under clause
(a) or (b) above, a certificate of a Financial Officer of the Borrower (i)
certifying as to whether a Default has occurred and, if a Default has occurred,
specifying the details thereof and any action taken or proposed to be taken with
respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.06, 6.09, 6.10 and 6.11, (iii) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 3.04 and, if any
such change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate and (iv) stating any revisions to
Schedule 3.14 necessary so such Schedule includes each Material Subsidiary;
(d) concurrently with any delivery of financial statements under clause
(a) above, a certificate of the accounting firm that reported on such financial
statements stating whether they obtained knowledge during the course of their
examination of such financial statements of any Default (which certificate may
be limited to the extent required by accounting rules or guidelines);
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by the
Borrower or any Subsidiary with the SEC, or with any national securities
exchange, as the case may be;
(f) promptly after Moody's or S&P shall have announced a change in the
rating established or deemed to have been established for the Index Debt,
written notice of such rating change; and
(g) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or compliance with the terms of this Agreement, as
the Administrative Agent or any Lender may reasonably request.
(h) promptly after any change in the information set forth in Schedule
3.15 or Schedule 3.16, the Borrower shall update such schedules in accordance
with Section 3.15 or Section 3.16, respectively except that, with respect to the
face amount of Outside Letters of Credit listed on Schedule 3.15, a reduction in
the face amount below the amount stated in such Schedule (as updated in
accordance with this Agreement) need not be updated until the next delivery of a
certificate of a Financial Officer under Section 5.01(c).
(i) promptly after execution therof, the Borrower shall deliver a copy
of all documents evidencing the FPSO Obligation, as amended from time to time.
SECTION 5.02. Notices of Material Events. The Borrower will
------------------------------
furnish to the Administrative Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$10,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Borrower will,
-------------------------------
and will cause each of its Subsidiaries to, do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its legal
existence and the rights, licenses, permits, privileges and franchises material
to the conduct of the business of the Borrower and its Subsidiaries taken as a
whole; provided that the foregoing shall not prohibit any merger, consolidation,
--------
liquidation or dissolution permitted under Section 6.03.
SECTION 5.04. Payment of Obligations. The Borrower will, and
-------------------------
will cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Borrower or such Subsidiary has set aside on its books adequate reserves
with respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The Borrower
-------------------------------------
will, and will cause each of its Subsidiaries to, (a) keep and maintain all
property material to the conduct of the business of the Borrower and its
Subsidiaries taken as a whole in good working order and condition, ordinary wear
and tear excepted, and (b) maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.
SECTION 5.06. Books and Records; Inspection Rights. The Borrower
-------------------------------------
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times and as often as
reasonably requested.
SECTION 5.07. Compliance with Laws. The Borrower will, and will
---------------------
cause each of its Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property, except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.08. Use of Proceeds and Letters of Credit. The
--------------------------------------------
proceeds of the Loans will be used only for general corporate purposes,
including but not limited to capital expenditures. No part of the proceeds of
any Loan will be used, whether directly or indirectly, to purchase or carry
"margin stock" (as defined by Regulation U) or for any purpose that entails a
violation of any of the Regulations of the Board, including Regulations G, U and
X.
SECTION 5.09. Engineering Reports .
--------------------
(a) On or prior to each March 1 (or such other date specified in the
event of an unscheduled redetermination under Section 2.18(d)) commencing with
the Scheduled Redetermination Date to occur on March 1, 2000, the Borrower shall
furnish to the Lenders a Reserve Report prepared and certified by (i) DeGolyer
and MacNaughton, with respect to the proved reserves in the Cusiana and Cupiagua
fields in the Republic of Colombia (ii), Netherland Sewell and Associates, with
respect to the proved reserves in the Ceiba Field in Equatorial Guinea, and
(iii) the petroleum engineers of the Borrower or Carigali-Triton Carigali-Triton
Operating Company Sdn. Bhd. with respect to the proved reserves in
Malaysia-Thailand on Block A-18 in the Gulf of Thailand or, in the case of (i),
(ii) or (iii) above, such other certified independent engineers satisfactory to
the Administrative Agent. The Borrower will also provide the Lenders with any
supplemental information or updates to the information in the Reserve Report as
may be reasonably requested by any Lender through the Administrative Agent
("Additional Reports").
(b) For each unscheduled redetermination, the Borrower shall furnish to
the Lenders a Reserve Report prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be true and
accurate and to have been prepared in accordance with the procedures used in the
immediately preceding Reserve Report and shall furnish to the Lenders any
Additional Reports as may be reasonably requested. For any unscheduled
redetermination requested by the Required Lenders pursuant to Section 2.18(d),
the Borrower shall provide such Reserve Report as soon as practicable, but in
any event no later than 30 days following the receipt of the request by the
Required Lenders.
(c) Concurrently with the delivery of each Reserve Report, the Borrower
shall provide the Lenders production reports covering in the aggregate, the
Borrower's net production of oil and gas, which reports shall include quantities
or volumes of production, realized product prices, operating expenses, taxes,
capital expenditures and such other information as the Administrative Agent may
reasonably request and having the same "as of" date and period as the Reserve
Report being delivered with such production report.
(d) With the delivery of each Reserve Report, the Borrower shall
provide to the Lenders, a certificate from a Responsible Officer of the Borrower
that, to the best of his or her knowledge and in all material respects, (a) the
information contained in the Reserve Report is true and correct, (b) the
Borrower has the contractual right to receive the proceeds from the production
from the Oil and Gas Properties evaluated in such Reserve Report, in such
amounts and for such durations consistent with the projected proceeds from such
production, and free of all Liens except for Permitted Encumbrances, (c) except
as set forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments with respect to the Oil and Gas
Properties evaluated in such Reserve Report which would require the Borrower to
deliver Hydrocarbons produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (d) no Oil and
Gas Properties have been sold since the date of the last Borrowing Base
determination except as consented to in writing by the Required Lenders or as
permitted by the terms of this Agreement, (e) attached to the certificate is a
list of the Oil and Gas Properties added to and deleted from the immediately
prior Reserve Report, and (f) attached to the certificate are statements of the
Borrower's outstanding Hedging Agreements, which statements shall include for
each such Hedging Agreement (A) the termination date, (B) the notional amounts
or volumes and the periods covered by such volumes; and (C) the price to be paid
or the basis for calculating the price to be paid by the Borrower and the other
Person under each Hedging Agreement for each of the future periods covered by
each Hedging Agreement.
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit have expired or terminated and all LC Disbursements
shall have been reimbursed, the Borrower covenants and agrees with the Lenders
that:
SECTION 6.01. Indebtedness. The Borrower will not, and will not
-------------
permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness of the Consolidated Group created hereunder;
(b) Indebtedness of the Consolidated Group existing on the date hereof
and set forth in Schedule 6.01 (which schedule may exclude Indebtedness of a
member of the Consolidated Group (other than the Borrower) to any other member
of the Consolidated Group) and Indebtedness incurred by the Consolidated Group
after the date of this Agreement the proceeds of which are applied substantially
simultaneously with the receipt thereof to the repayment, retirement,
redemption, prepayment or defeasance of existing Indebtedness of the
Consolidated Group (the "Refinanced Indebtedness"); provided, that (i) such
Indebtedness incurred shall be subordinate and junior to the Indebtedness of the
Consolidated Group to the same (or greater) extent that the Refinanced
Indebtedness was subordinate and junior to the Indebtedness of the Consolidated
Group, (ii) such Indebtedness incurred shall not have a maturity date prior to
March 31, 2005 or require the amortization of principal (whether pursuant to any
mandatory payment, prepayment, repurchase or other obligation) prior to or in an
amount greater than the amortization required under the terms of the Refinanced
Indebtedness and (iii) such Indebtedness incurred shall have terms not
materially more burdensome to the Borrower than such Refinanced Indebtedness,
as determined by the Administrative Agent in its sole discretion;
(c) Indebtedness of a member of the Consolidated Group to any other
member of the Consolidated Group;
(d) Guarantees by the Borrower of Indebtedness of any member of the
Consolidated Group;
(e) Indebtedness of any member of the Consolidated Group incurred to
finance the acquisition, construction or improvement of any fixed or capital
assets of any member of the Consolidated Group, including Capital Lease
Obligations (other than the FPSO Obligation, to the extent the FPSO Obligation
is deemed to be a Capital Lease) and any Indebtedness (other than the FPSO
Obligation, to the extent the FPSO Obligation is deemed to be a Capital Lease)
assumed in connection with the acquisition of any such assets or secured by a
Lien on any such assets prior to the acquisition thereof, and extensions,
renewals and replacements of any such Indebtedness that do not increase the
outstanding principal amount thereof; provided that (i) such Indebtedness is
--------
incurred prior to or within 90 days after such acquisition or the completion of
such construction or improvement and (ii) the aggregate principal amount of
Indebtedness permitted by Section 6.01(e) and (f) shall not exceed $20,000,000
at any time outstanding;
(f) other unsecured Indebtedness of the Consolidated Group; provided
--------
that the aggregate principal amount of Indebtedness of the Consolidated Group
permitted by Section 6.01(e) and (f) shall not exceed $20,000,000 at any time
outstanding;
(g) Outside Letters of Credit if the aggregate Outside LC Exposure for
such Outside Letters of Credit is less than $25,000,000;
(h) Project Financings and liabilities under Completion Guaranties if
the aggregate amount of such Project Financings plus the aggregate maximum
liabilities under such Completion Guaranties is less than $25,000,000; and
(i) The FPSO Obligation, to the extent the FPSO Obligation is deemed to
be a Capital Lease.
SECTION 6.02. Liens. The Borrower will not, and will not permit
------
any Subsidiary to, create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect of any
thereof, except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Borrower or any Subsidiary
existing on the date hereof and set forth in Schedule 6.02; provided that (i)
--------
such Lien shall not apply to any other property or asset of the Borrower or any
Subsidiary and (ii) such Lien shall secure only those obligations which it
secures on the date hereof;
(c) any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower or any Subsidiary or existing on any property or asset
of any Person that becomes a Subsidiary after the date hereof prior to the time
such Person becomes a Subsidiary; provided that (i) such Lien is not created in
--------
contemplation of or in connection with such acquisition or such Person becoming
a Subsidiary , as the case may be, (ii) such Lien shall not apply to any other
property or assets of the Borrower or any Subsidiary and (iii) such Lien shall
secure only those obligations which it secures on the date of such acquisition
or the date such Person becomes a Subsidiary, as the case may be;
(d) Liens on fixed or capital assets acquired, constructed or improved
by the Borrower or any Subsidiary; provided that (i) such security interests
--------
secure only Indebtedness permitted by clause (e) of Section 6.01, (ii) such
security interests and the Indebtedness secured thereby are incurred prior to or
within 90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing or improving such fixed or capital assets and (iv) such
security interests shall not apply to any other property or assets of the
Borrower or any Subsidiary; and
(e) Liens securing any Project Financing, provided that such Lien shall
--------
secure only such Project Financing and shall extend only to the project being
acquired or constructed with the proceeds of such Project Financing and any
capital stock, partnership interest or other ownership interest in the Project
Financing Subsidiary that is acquiring or constructing such project or in the
Project Financing Subsidiary that owns the Project Financing Subsidiary that is
acquiring or constructing such project.
SECTION 6.03. Fundamental Changes. (a) The Borrower will not,
---------------------
and will not permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) all or any substantial part of its assets, or all or
substantially all of the stock of any of its Subsidiaries (in each case, whether
now owned or hereafter acquired), or liquidate or dissolve, except that, if at
the time thereof and immediately after giving effect thereto no Default shall
have occurred and be continuing (i) any Subsidiary may merge into the Borrower
in a transaction in which the Borrower is the surviving corporation, (ii) any
Subsidiary may merge into any Subsidiary in a transaction in which the surviving
entity is a Subsidiary, (iii) any Subsidiary may sell, transfer, lease or
otherwise dispose of its assets to the Borrower or to another Subsidiary, (iv)
any Subsidiary may merge with or into another Person in a transaction that is
not prohibited by Section 6.11, (v) the Borrower may transfer shares of any
Subsidiary to any other Subsidiary and (vi) any Subsidiary may liquidate or
dissolve if the Borrower determines in good faith that such liquidation or
dissolution is in the best interests of the Borrower and is not materially
disadvantageous to the Lenders; provided that any such merger involving a Person
--------
that is not a wholly owned Subsidiary immediately prior to such merger shall not
be permitted unless also permitted by Section 6.04.
(b) The Borrower will not, and will not permit any of its Subsidiaries
to, engage to any material extent in any business other than businesses of the
type conducted by the Borrower and its Subsidiaries on the date of execution of
this Agreement and businesses reasonably related thereto.
SECTION 6.04. Investments, Loans, Advances, Guarantees and
------------------------------------------------
Acquisitions. The Borrower will not, and will not permit any of its
- -----------
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments by the Borrower in the capital stock of its
Subsidiaries;
(c) loans or advances among the Consolidated Group;
(d) Guarantees constituting Indebtedness permitted by Section 6.01;
(e) investments in Project Financing Subsidiaries, if the aggregate
such investments are less than $10,000,000;
(f) acquisition of all of the ownership interest of Triton Pipeline
Colombia, Inc. or of any other Person substantially all of whose assets consist
of an interest in OCENSA for $100,000,000 or less before June 30, 2000, and new
investments in OCENSA (after the acquisition of such ownership interests) in an
aggregate amount not to exceed $10,000,000 from the date of this Agreement;
(g) new investments in Triton International Oil Corporation (a Cayman
Islands company) and its Subsidiaries and in Carigali-Triton Operating Co.
SDN.BHD, a Malaysia corporation, in an aggregate amount not to exceed
$25,000,000 from the date of this Agreement;
(h) Acquisition of assets or ownership interests in Persons and assets
in the same line of business as the Borrower and its Subsidiaries, provided such
Persons become Subsidiaries at the time of such acquisition; provided that the
--------
aggregate purchase price for such acquisitions (including the value of any
assumed Indebtedness) shall not exceed $20,000,000 from the date of this
Agreement; and
(i) any other Investments, not to exceed $5,000,000 in the aggregate
outstanding at any time.
SECTION 6.05. Hedging Agreements. The Consolidated Group will
--------------------
not enter into any Hedging Agreement, other than Hedging Agreements (i) for
total aggregate volumes of oil or total aggregate volumes of natural gas less
than 70% of the oil or natural gas net volumes, respectively, for the next
12-month period, as projected in the most recently delivered Reserve Report,
(ii) for total aggregate volumes of oil or total aggregate volumes of natural
gas less than 60% of the oil or natural gas net volumes, respectively, for the
next 36-month period, as projected in the most recently delivered Reserve Report
and (iii) for total aggregate volumes of oil or total aggregate volumes of
natural gas less than 50% of the oil or natural gas net volumes, respectively,
for the next 60-month period, as projected in the most recently delivered
Reserve Report.
SECTION 6.06. Restricted Payments. The Borrower will not, and
---------------------
will not permit any of its Subsidiaries to, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, except (a) the Borrower
may declare and pay dividends and distributions with respect to its capital
stock payable solely in additional shares of its common stock and may purchase
shares of its capital stock with consideration consisting solely of shares of
its common stock, (b) Subsidiaries may declare and pay dividends ratably with
respect to their capital stock, (c) the Borrower may make Restricted Payments
pursuant to and in accordance with stock option plans or other benefit plans for
management or employees of the Borrower and its Subsidiaries, (d) Restricted
Payments on Preferred Stock issued by the Borrower before the date of this
Agreement or additional shares of Preferred Stock issued as dividends after the
date of this Agreement in accordance with the terms of such Preferred Stock, and
(e) the Borrower may repurchase shares of its common stock for an aggregate
consideration not exceeding $100,000 in any fiscal year.
SECTION 6.07. Transactions with Affiliates. The Borrower will
-------------------------------
not, and will not permit any of its Subsidiaries to, sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any
property or assets from, or otherwise engage in any other transactions with, any
of its Affiliates, except (a) in the ordinary course of business at prices and
on terms and conditions not less favorable to the Borrower or such Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its wholly owned Subsidiaries
not involving any other Affiliate, (c) any Restricted Payment permitted by
Section 6.06, (d) transactions with Affiliates of any director of the Borrower
in accordance with agreements in effect as of the date of this Agreement and (e)
transactions that would be permitted pursuant to Section 6.04(b), (c), (f) and
(g).
SECTION 6.08. Restrictive Agreements. The Borrower will not, and
-----------------------
will not permit any of its Subsidiaries to, directly or indirectly, enter into,
incur or permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon the ability of any Subsidiary to pay
dividends or other distributions with respect to any shares of its capital stock
or to make or repay loans or advances to the Borrower or any other Subsidiary or
to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that
--------
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.08 (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition), (iii) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, and (iv) the foregoing shall not apply to a Project
Financing Subsidiary.
SECTION 6.09. Net Debt to EBITDA Ratio . For each period of four
------------------------
consecutive fiscal quarters of the Borrower, the Borrower will not permit the
ratio of (i) Consolidated Net Debt as of the end of such period to (ii) EBITDA
for such period to be greater than 3.75 to 1.0.
SECTION 6.10. Ratio of EBITDA to Interest Expense . The Borrower
-----------------------------------
will not permit, for each period of four consecutive fiscal quarters of the
Borrower, the ratio of EBITDA for such period to Consolidated Net Interest
Expense for such period to be less than the 2.5 to 1.00.
SECTION 6.11. Asset Disposition . The Consolidated Group will not
-----------------
sell, lease, transfer (including, without limitation, any transfer pursuant to
any merger) or otherwise dispose of, any property of the Consolidated Group,
except (i) sales, leases, transfers and other dispositions of assets in the
ordinary course of business and for fair market value, (ii) the sale of assets
among members of the Consolidated Group, (iii) the sale of assets located in the
Republic of Colombia for fair market value if the aggregate fair market value of
all such assets does not exceed $10,000,000 in any fiscal year of the Borrower
(iv) the sale of assets not located in the Republic of Colombia for fair market
value if the aggregate fair market value of all such assets does not exceed
$50,000,000 in any fiscal year of the Borrower, (v) any transfer of the capital
stock among members of the Consolidated Group if (A) no Default or Event of
Default exists at the time of such transfer or would result therefrom and (B)
after giving effect to such transfer the Borrower owns, directly or indirectly,
the same percentage interest in the member of the Consolidated Group the stock
of which is being transferred as it owned immediately prior to such transfer,
(vi) any merger permitted by Section 6.03, and (vii) the transfer of assets from
a Project Financing Subsidiary.
ARTICLE VII
Events of Default
SECTION 7.01. Events of Default. If any of the following events
------------------
("Events of Default") shall occur:
-------------------
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of five days;
(c) any representation or warranty made or deemed made by or on behalf
of the Borrower (including, without limitation, the certificate provided by the
chief engineer under Section 5.09 (b)) or any Subsidiary in or in connection
with this Agreement or any amendment or modification hereof or waiver hereunder,
or in any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any amendment or
modification hereof or waiver hereunder, shall prove to have been incorrect in
any material respect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.02, 5.03 (with respect to the
Borrower's existence) or 5.08 or in Article VI;
(e) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clause (a), (b) or (d) of this Article), and such failure shall continue
unremedied for a period of 15 days after notice thereof from the Administrative
Agent to the Borrower (which notice will be given at the request of any Lender);
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any Material Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Material Subsidiary or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;
(i) the Borrower or any Material Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply for
or consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Material Subsidiary or
for a substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any Material Subsidiary shall become unable, admit
in writing its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against the Borrower, any
Material Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Material
Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse Effect;
(m) a Change in Control shall occur; or
(n) any change in a contract or concession of the Borrower or any of
its Subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h) or (i)
of this Article, the Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
ARTICLE VIII
The Administrative Agent
------------------------
Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the
same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
wilful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into (i)
any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower.
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York, or an Affiliate of any
such bank. Upon the acceptance of its appointment as Administrative Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 9.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender acknowledges
that it will, independently and without reliance upon the Administrative Agent
or any other Lender and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement, any related agreement or
any document furnished hereunder or thereunder. Each Lender acknowledges that
there is no fact, and that it has not made any assumption of fact, material to
its inducement to become a Bank hereunder which it has not independently and
without reliance on the Administrative Agent investigated and determined to its
satisfaction prior to its execution of this Credit Agreement.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.01. Notices. Except in the case of notices and other
--------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it in care of Triton Energy, 6688 North
Central Expressway, Suite 1400, Dallas, Texas 75206, Attention of Treasurer,
(Telecopy No. (214) 691-0340);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan
and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York, New
York 10081, Attention of Michael Cerniglia (Telecopy No. (212) 552-5777); and
(c) if to any other Lender (in its capacity as a Lender or Issuing
Bank) , to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by
---------------------
the Administrative Agent, the Issuing Bank or any Lender in exercising any right
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent, the Issuing Bank and the
Lenders hereunder are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
consent to any departure by the Borrower therefrom shall in any event be
effective unless the same shall be permitted by paragraph (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Bank may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
--------
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the principal amount of any Loan or
LC Disbursement or reduce the rate of interest thereon, or reduce any fees
payable hereunder, without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, or (v) change any of the provisions of this
Section or the definition of "Required Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, without the written consent of each Lender; provided further that no
----------------
such agreement shall amend, modify or otherwise affect the rights or duties of
the Administrative Agent or the Issuing Bank hereunder without the prior written
consent of the Administrative Agent or the Issuing Bank, as the case may be.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The
--------------------------------------
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including the reasonable fees, charges
and disbursements of counsel for the Administrative Agent, in connection with
the syndication of the credit facilities provided for herein, the preparation
and administration of this Agreement or any amendments, modifications or waivers
of the provisions hereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment, renewal
or extension of any Letter of Credit or any demand for payment thereunder and
(iii) all out-of-pocket expenses incurred by the Administrative Agent, the
Issuing Bank or any Lender, including the fees, charges and disbursements of any
counsel for the Administrative Agent, the Issuing Bank or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with
the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.
(b) The Borrower shall indemnify the Administrative Agent, the Issuing
Bank and each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an "Indemnitee") against, and hold each
----------
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of this
Agreement or any agreement or instrument contemplated hereby, the performance by
the parties hereto of their respective obligations hereunder or the consummation
of the Transactions or any other transactions contemplated hereby, (ii) any Loan
or Letter of Credit or the use of the proceeds therefrom (including any refusal
by the Issuing Bank to honor a demand for payment under a Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of such Letter of Credit), (iii) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
the Borrower or any of its Subsidiaries, or any Environmental Liability related
in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
--------
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required to
be paid by it to the Administrative Agent or the Issuing Bank under paragraph
(a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as the case may be, such Lender's
Applicable Percentage (determined as of the time that the applicable
unreimbursed expense or indemnity payment is sought) of such unpaid amount;
provided that the unreimbursed expense or indemnified loss, claim, damage,
- --------
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent or the Issuing Bank in its capacity as such.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable promptly after
written demand therefor.
SECTION 9.04. Successors and Assigns. (a) The provisions of
-------------------------
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns permitted hereby (including
any Affiliate of the Issuing Bank that issues any Letter of Credit), except that
the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b) Any Lender may assign to one or more assignees all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it); provided that (i) except
--------
in the case of an assignment to a Lender or an Affiliate of a Lender, each of
the Borrower and the Administrative Agent (and, in the case of an assignment of
all or a portion of a Commitment or any Lender's obligations in respect of its
LC Exposure, the Issuing Bank) must give their prior written consent to such
assignment (which consent shall not be unreasonably withheld), (ii) except in
the case of an assignment to a Lender or an Affiliate of a Lender or an
assignment of the entire remaining amount of the assigning Lender's Commitment,
the amount of the Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $5,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and obligations
under this Agreement, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together with
a processing and recordation fee of $3,500, and (v) the assignee, if it shall
not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire; and provided further that any consent of the Borrower otherwise
----------------
required under this paragraph shall not be required if an Event of Default has
occurred and is continuing. Subject to acceptance and recording thereof
pursuant to paragraph (d) of this Section, from and after the effective date
specified in each Assignment and Acceptance the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of the assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
--------
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall
be available for inspection by the Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
-----------
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
--------
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
--------
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.16(c) as though it were a
Lender.
(f) A Participant shall not be entitled to receive any greater payment
under Section 2.13 or 2.15 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were
a Lender shall not be entitled to the benefits of Section 2.15 unless the
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with Section
2.15(e) as though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
--------
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements,
---------
representations and warranties made by the Borrower herein and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of this Agreement and the
making of any Loans and issuance of any Letters of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the Issuing Bank or any Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and
Article VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
-------------------------------------------
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement
and any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held
-------------
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
----------------
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
---------------------------------------------------
Process. (a) This Agreement shall be construed in accordance with and
- -------
governed by the law of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that the Administrative Agent, the Issuing Bank or any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement against the Borrower or its properties in the courts of any
jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
------------------------
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the
---------
Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent,
----------------
the Issuing Bank and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement, (e) in
connection with the exercise of any remedies hereunder or any suit, action or
proceeding relating to this Agreement or the enforcement of rights hereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section, to any assignee of or Participant in, or any prospective
assignee of or Participant in, any of its rights or obligations under this
Agreement, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section or (ii) becomes available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis from a source other than the
Borrower. For the purposes of this Section, "Information" means all information
-----------
received from the Borrower relating to the Borrower or its business, other than
any such information that is available to the Administrative Agent, the Issuing
Bank or any Lender on a nonconfidential basis prior to disclosure by the
Borrower; provided that, in the case of information received from the Borrower
--------
after the date hereof, such information is clearly identified at the time of
delivery as confidential. Any Person required to maintain the confidentiality
of Information as provided in this Section shall be considered to have complied
with its obligation to do so if such Person has exercised the same degree of
care to maintain the confidentiality of such Information as such Person would
accord to its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
-------------------------
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
-------
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
------------
taken, received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 9.14 U.S. Dollars of the Essence . Each reference in the
---------------------------
Loan Documents to U.S. Dollars is of the essence. The obligation of the
Borrower in respect of any amount due under the Loan Documents shall,
notwithstanding any payment in any other currency (whether pursuant to a
judgment or otherwise), be discharged only to the extent of the amount in U.S.
Dollars that the Lender may, in accordance with normal banking procedures,
purchase with the sum paid in such other currency (after any premium and costs
of exchange) on the Business Day immediately following the day on which the
Lender receives such payment. If the amount in U.S. Dollars that may be so
purchased for any reasons falls short of the amount originally due, the Borrower
shall pay such additional amounts, in U.S. Dollars, as may be necessary to
compensate for such a shortfall. Any obligation of the Borrower not discharged
by such payment shall be due as a separate and independent obligation and, until
discharged as provided herein, shall continue in full force and effect.
SECTION 9.15 Waiver of Sovereign Immunity; Commercial Activity .
--------------------------------------------------
Neither the Borrower nor its property has any right of immunity on the grounds
of sovereignty or otherwise from jurisdiction, attachment (before or after
judgment) or execution in respect of any action or proceeding relating in any
way to the Loan Documents that may be brought before any Governmental Authority.
The execution, delivery and performance of the obligations of the Loan Documents
by the Borrower constitute commercial transactions.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
TRITON ENERGY LIMITED
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
THE CHASE MANHATTAN BANK, individually
and as Administrative Agent,
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
PARIBAS
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
BANKERS TRUST COMPANY
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
MEESPIERSON CAPITAL CORP.
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
BANK OF AMERICA, N.A.
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
BARCLAYS BANK PLC
By:____________________________________
Name:__________________________________
Title:_________________________________
<PAGE>
Schedule 1.01A
Investments
-----------
1. U.S. Government and government-sponsored securities
a. Direct obligations of the U.S. government-including Treasury Bills,
Notes and Bonds.
b. Government-sponsored Agency securities as follows:
- Government National Mortgage Agency (GNMA)
- Federal National Mortgage Association (FNMA)
- Student Loan Marketing Association (SLMA)
- Federal Home Loan Bank (FHLB)
- Federal Home Loan Mortgage Corporation (FHLMC)
- Federal Home Credit Banks (FFCB)
2. Money Market Funds
a Funds must be rated AAA or equivalent and have at least $1.0 billion in
assets with an average fund maturity not to exceed 90 days.
3. Corporate Debt Securities
a. Commercial paper (US or EURO)--Corporate issuers of commercial paper
having original maturities of not more than 180 days. Must be rated A-1/P-1 or
equivalent.
4. Bank Related Securities (banks rated AA or equivalent with assets of at
least $10.0 billion).
a. Certificates of deposit
b. Bankers acceptances
c. Time deposits
d. Eurodollar time deposits up to 180 days (incl. overnight sweep accounts)
e. Overnight Bank Loan Participations (must be A-1/P-1 commercial paper
rated companies or be fully guaranteed by parent company with an A-1/P rating)
5. Repurchase Agreements - Securities must be with major banks or dealers
that are recognized as Primary Dealers by the Federal Reserve Bank of New York.
Collateral for the transactions must be U.S. Treasury or Agency securities
collateralized at 102% of value.
INVESTMENT CONCENTRATION LIMITS - Investments may be made only in securities for
which there are consistent and adequate secondary markets or that are
immediately liquid.
1. Money Market Funds - No cumulative limit, however investments may not
exceed 10% of a fund's assets.
2. U.S. Government and government-sponsored securities - No limit.
3. Foreign securities - Investments in foreign securities (non-U.S. but
including U.S. branches of foreign banks) will be limited to 30% with no single
issuer and/or country exceeding the lower of 5% of the portfolio or $5 million
(except for Euro-commercial paper at the lower of 10% of the portfolio or $10
million).
4. All other investments/issuers - Maximum expose is 10% of the portfolio up
to $10 million.
MATURITY - At a minimum, maturities shall be structured to meet the funding
requirements of the Company.
1. No investment may exceed one year to maturity.
2. The weighted average maturity of the portfolio may not exceed six months.
3. 25% of the portfolio must mature within 30 days.
4. 10% of the portfolio must mature within 7 days.
OTHER
1. Securities denomination - All securities must be dollar-denominated.
2. Securities lending - Securities will not be lent.
3. Unrated securities - No unrated company/securities will be acquired.
4. Brokers and dealers - a sufficient number of business relationships
should be maintained to assure competitive pricing, information flow and cost
effective execution of the Company's business.
5. Fixed/floating rate securities - both are allowed, but the maturity of
the security must still be under one year.
<PAGE>
Schedule 2.01
Lenders Commitments
- ------- -----------
The Chase Manhattan Bank $27,500,000.00
Barclays Bank PLC $27,500,000.00
Paribas $27,500,000.00
Deutsche Bank AG $27,500,000.00
MeesPierson Capital Corp. $20,000,000.00
Bank of America, N.A. $20,000,000.00
--------------
TOTAL $150,000,000.00
<PAGE>
Schedule 3.04
Commencing with the 1999 Form 10-K, Borrower will account for its 50% ownership
in Triton International Oil Corporation ("TIOC") using the equity method
instead of the pro rata consolidation method. For purposes of the 1999 Form
10-K, Borrower will reflect its investment in TIOC at December 31, 1999 as an
equity investment in the consolidated balance sheet. The December 31, 1998
consolidated balance sheet will be reclassified to conform to the 1999
presentation.
<PAGE>
Schedule 3.06
Disclosed Matters
-----------------
Litigation and Environmental Matters
In re: Triton Energy Limited Securities Litigation. Consolidated lawsuits filed
in the United States District Court for the Eastern District of Texas, Texarkana
Division, against the Borrower and Thomas G. Finck and Peter Rugg, in their
capacities as Chairman and Chief Executive Officer and Chief Financial Officer,
respectively. The complaint alleges violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated
thereunder, and negligent misrepresentation in connection with disclosures
concerning the Company's properties, operations, and value relating to a
prospective sale of the Company or of all or a part of its assets.
Operating Industries, Inc. One of Borrower's former domestic oil and gas
subsidiaries (dissolved) has been named as a potentially responsible party for
the clean-up of the Monterey Park, California, Superfund site operated by
Operating Industries, Inc.
Hite and Nordell International Resources vs. Triton. Lawsuit by David A. Hite,
Nordell International Resources Ltd., and International Veronex Resources, Ltd.
against the Borrower, Triton Energy Corporation and Triton Indonesia, Inc. The
lawsuit was tried and the jury found in favor of the plaintiffs and assessed
compensatory damages in the amount of approximately $700,000 and punitive
damages in the amount of approximately $11 million.
Also pending are lawsuits involving Borrower and the other named defendants in
the above listed Hite lawsuit involving coverage issues under insurance
policies. The lawsuits are (1) American International Specialty Lines Ins. vs.
the Borrower, Triton Energy Corporation and Triton Indonesia, Inc.; Cause No.
BC220090, Superior Court, CA, and (2) Triton Energy Limited, et al. vs. Sphere
Drake Insurance, PLC, et al. Dallas, County, Texas [insurers have removed to
federal court].
Aaron Sherman, et al vs Triton Energy Corporation et al. Lawsuit filed in the
___ Judicial District, Dallas County, Texas against the Borrower, Triton Energy
Corporation, and Messrs. Finck, Rugg and Holland alleging as causes of action
fraud and negligent misrepresentation in connection with disclosures concerning
the prospective sale of the Borrower or of all or a part of its assets.
Maria Ninfa Diaz vs. Triton Colombia, Inc., TOTAL, BP and Ecopetrol. Triton
Colombia Inc. is a defendant, together with Total, BP and Ecopetrol in a civil
action filed in February, 1997 in the 8th Judicial Circuit Court in Bogota by
Ninfa Diaz Toloza. The plaintiff's claim arises out of the flaring of natural
gas from the Cusiana CPF and the Cupiagua CPF and alleges (1) damage to the
environment, (2) inappropriate use of a natural resource, (3) hazard to the
people and animal life of the area, (4) interruption to the tranquillity,
intimacy and quality of life, (5) reduction in the bovine livestock and (6)
noise pollution. In discovery stage.
Juvenal Huertas Romero vs. Triton Colombia, Inc., Case No. 33492, 6th Judicial
Labor Circuit of Bogot . Suit seeking damages of Col$50,000,000 for wrongful
termination; etc. In discovery stage.
BP Exploration Company (Colombia) Ltd. has informed the Borrower that a "popular
action" was instituted against the Ministry of Environment of Colombia alleging
that the Ministry issued an environmental license permitting the water injection
project to proceed without conducting a thorough analysis and evaluation of the
environmental impact of the water injection to the natural resources. BP is
currently evaluating its alternatives to intervene in the action.
<PAGE>
SCHEDULE 3.14
SECTION 3.14 - LIST OF SUBSIDIARIES
-----------------------------------
THE FOLLOWING ARE THE SUBSIDIARIES OF THE COMPANY AS OF THE DATE OF THIS
AGREEMENT:
<TABLE>
<CAPTION>
<S> <C> <C>
Jurisdiction of Jurisdiction where
--------------- ------------------
Name Organization Qualified
- ---- ------------ ---------
Inlet North Sea Corporation Delaware
Inlet Oil & Mineral Company (U.K.) Limited U.K.
North Central Aviation, Inc. Delaware
Oil & Gas Colombia GmbH Germany Colombia
Servion, Inc. Delaware
TriBlora Indonesia B.V. Netherlands
Triton Air Holdings, Inc. Delaware
Triton Algeria, Inc. Cayman Islands
Triton Angola, Inc. Cayman Islands
Triton Asia Holdings, Inc. Cayman Islands
Triton Australia, Inc. Cayman Islands Australia
Triton Brazil, Inc. Cayman Islands
Triton Cambodia, Inc. Cayman Islands
Triton China Resources, Inc. Cayman Islands
Triton China, Inc. LLC Cayman Islands
Triton Colombia, Inc. Cayman Islands Colombia
Triton Domestic Oil & Gas Corp. Nevada
Triton Ecuador, Inc. LLC Cayman Islands
Triton Energy Corporation Delaware Texas
Triton Equatorial Guinea, Inc. Cayman Islands [Equatorial Guinea
in process]
Triton Exploration (Malaysia) Sdn. Bhd. Malaysia
Triton Exploration Services, Inc. Delaware Texas
Triton Financial Services, Inc. Cayman Islands
Triton Guatemala S.A. B.V.I.
Triton Hellas Exploration and Exploitation
of Hydrocarbons Anonymous Industrial Technical
and Commercial Company Greece
Triton Holdings (U.K.) Limited U.K.
Triton Indonesia Resources, Inc. Cayman Islands
Triton Indonesia, Inc. Delaware
Triton International Finance, Inc. Cayman Islands
Triton International Oil Corporation,
a Delaware corporation Delaware
Triton International Petroleum, Inc. Cayman Islands
Triton Italy, Inc. Cayman Islands Italy
Triton Madagascar, Inc. Cayman Islands Madagascar
Triton Mediterranean Oil & Gas N.V. Netherlands
Triton Oil (GB) Limited U.K.
Triton Oil & Gas GmbH Germany
Triton Oman Resources, Inc. Cayman Islands Oman
Triton Oman, Inc. Cayman Islands
Triton Resources (UK) Limited U.K.
Triton Resources Argentina, Inc. Cayman Islands
Triton Tunisia, Inc. Cayman Islands
Triton Ventures, Inc. Cayman Islands
</TABLE>
Also own 50% of Triton International Oil Corporation, a Cayman Islands company,
which owns 100% of:
Triton Oil Company of Thailand (JDA) Limited, incorporated in Cayman Islands and
qualified in Malaysia, Thailand, and
Triton Oil Company of Thailand Ltd. Co., incorporated in Texas and qualified in
Thailand, which owns 50% of :
Carigali-Triton Operating Co. SDN.BHD, a Malaysia corporation
<PAGE>
SCHEDULE 3.15
OUTSIDE LETTERS OF CREDIT
-------------------------
EXPIRATION DATE ISSUER BENEFICIARY FACE AMOUNT
--------------- ------ ----------- -----------
9/30/00 MeesPierson Shell Overseas Co. 725,029
9/30/00 MeesPierson Shell Overseas Co. 695,027
10/14/00 Banque Paribas Public Petroleum 10,683,012
Corp. - Greece
3/22/00 Union Bank St. Paul Fire &
Marine Insurance 100,000
9/8/00 Societe Generale Public Petroleum 4,202,515
Corp. - Greece
THE AMOUNT OF THE OUTSIDE LC EXPOSURE IS $16,405,583.
<PAGE>
SCHEDULE 6.01
EXISTING INDEBTEDNESS
---------------------
DESCRIPTION AMOUNT MATURITY
Export-Import Bank term loan facility 13,540,712 Jan. 15, 2001
Senior notes 8 3/4 199,946,833 April 15, 2002
Senior notes 9 1/4 200,000,000 April 15, 2005
Note payable to Triton Financial Services, Inc. (a Subsidiary) in the amount of
$14,545,356.
Note payable to Triton Italy, Inc. (a Subsidiary) in the amount of $280,915.
<PAGE>
SCHEDULE 6.02
EXISTING LIENS
--------------
Pursuant to the Shareholders Agreement with ARCO JDA Limited and Atlantic
Richfield Company (the "ARCO Shareholders Agreement"), the transfer of the
shares of any Subsidiary holding the Company's interest in Triton International
Oil Corporation is subject to a right of first refusal. This does not apply to a
transaction involving a merger of, or a sale of the shares of, the ultimate
parent company.
Triton Oil Company of Thailand and Federated Consultant Limited are parties to
an Assignment of Overriding Royalty Interest dated march 25, 1993, as amended
pursuant to a Consulting Agreement among Triton Energy Corporation, Triton Oil
Company of Thailand and Federated Consultant Limited dated January 3, 1996 and
Addendum to Consulting Agreement Triton Energy Corporation, Triton Oil Company
of Thailand and Federated Consultant Limited dated July 19, 1996.
<PAGE>
SCHEDULE 6.08
EXISTING RESTRICTIVE AGREEMENTS
-------------------------------
None
<PAGE>
EXHIBIT A
[FORM OF]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of February 29,
2000 (as amended and in effect on the date hereof, the "Credit Agreement"),
among Triton Energy Limited, the Lenders named therein and The Chase Manhattan
Bank, as Administrative Agent for the Lenders. Terms defined in the Credit
Agreement are used herein with the same meanings.
The Assignor named on the reverse hereof hereby sells and assigns,
without recourse, to the Assignee named on the reverse hereof, and the Assignee
hereby purchases and assumes, without recourse, from the Assignor, effective as
of the Assignment Date set forth on the reverse hereof, the interests set forth
on the reverse hereof (the "Assigned Interest") in the Assignor's rights and
obligations under the Credit Agreement, including, without limitation, the
interests set forth on the reverse hereof in the Commitment of the Assignor on
the Assignment Date and Competitive Loans and Revolving Loans owing to the
Assignor which are outstanding on the Assignment Date, together with the
participations in Letters of Credit and LC Disbursements held by the Assignor on
the Assignment Date, but excluding accrued interest and fees to and excluding
the Assignment Date. The Assignee hereby acknowledges receipt of a copy of the
Credit Agreement. From and after the Assignment Date (i) the Assignee shall be
a party to and be bound by the provisions of the Credit Agreement and, to the
extent of the Assigned Interest, have the rights and obligations of a Lender
thereunder and (ii) the Assignor shall, to the extent of the Assigned Interest,
relinquish its rights and be released from its obligations under the Credit
Agreement.
This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is a Foreign Lender, any
documentation required to be delivered by the Assignee pursuant to Section
2.15(e) of the Credit Agreement, duly completed and executed by the Assignee,
and (ii) if the Assignee is not already a Lender under the Credit Agreement, an
Administrative Questionnaire in the form supplied by the Administrative Agent,
duly completed by the Assignee. The [Assignee/Assignor] shall pay the fee
payable to the Administrative Agent pursuant to Section 9.04(b) of the Credit
Agreement.
This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of New York.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
("Assignment Date"):
Percentage Assigned of
Facility/Commitment (set forth,
Principal to at least 8 decimals, as a
Amount Assigned percentage of the Facility and
the aggregate Commitments of
all Lenders thereunder)
----------
Facility
- --------
Commitment Assigned: $ %
Revolving Loans:
The terms set forth above and on the reverse side hereof are hereby agreed to:
[Name of Assignor], as Assignor
------------------
By:
Name:
Title:
[Name of Assignee], as Assignee
------------------
By:
Name:
Title:
<PAGE>
The undersigned hereby consents to the within assignment: (8)
TRITON ENERGY LIMITED THE CHASE MANHATTAN BANK,
as Administrative Agent,
By: By:
Name: Name:
Title: Title:
THE CHASE MANHATTAN BANK,
as Issuing Bank
By:
Name:
Title:
(8) Consents to be included to the extent required by
Section 9.04(b) of the Credit Agreement.
<PAGE>
EXHIBIT B-1
________, 2000
To the Lenders and the Administrative Agent
from time to time parties to the Credit Agreement and
The Chase Manhattan Bank, as Administrative Agent
270 Park Avenue
New York, New York 10017
Gentlemen:
We have acted as special counsel to Triton Energy Limited, a Cayman Islands
company ("Borrower"), in connection with that certain Credit Agreement dated of
even date herewith (the "Credit Agreement"), among Borrower, the Lenders named
therein, and The Chase Manhattan Bank, as Administrative Agent. Capitalized
terms used herein and not otherwise defined shall have the same meanings
assigned to them in the Credit Agreement.
In our examination we have assumed the genuineness of all signatures other
than the Borrower's, due execution and delivery by all parties other than the
Borrower of all documents submitted to us, the authenticity of all documents
submitted to us as originals and the conformity to authentic original documents
of all documents submitted to us as certified, conformed or photostatic copies.
As to questions of fact material to this opinion, we have relied, to the extent
we deem appropriate, upon the certificates of governmental officials. As
special counsel for Borrower, we have examined the Credit Agreement and such
other documents and have conducted such other investigations of fact and law as
we consider necessary to enable us to give this opinion.
Based upon the foregoing and subject in all respects to the qualifications,
limitations, conditions, assumptions and exceptions herein expressed, it is our
opinion that:
1. Each of the Borrower and its Material Subsidiaries (i) to our
current actual knowledge, without independent investigation, qualified as a
foreign corporation and to do business in and in good standing in each
jurisdiction where failure to qualify would have a Material Adverse Effect
(other than Equatorial Guinea); and (ii) to our current actual knowledge,
without independent investigation, has the requisite corporate power and
authority to own its properties, to lease the property it operates under lease,
and to conduct its business as presently conducted.
2. The execution, delivery and performance of the Credit Agreement by
Borrower (I) will not, violate any law or regulation, or, to our current actual
knowledge, any order or decree, of any court or governmental instrumentality of
the State of New York, the State of Texas or the United States of America; (ii)
will not, to our current actual knowledge, without independent investigation,
conflict with or result in the breach or termination of, or constitute a default
under, any indenture, mortgage, deed of trust, lease, agreement or other
instrument binding upon the Borrower or any of its Subsidiaries or any of its
assets, or give rise to a right thereunder to require any payment to be made by
the Borrower or any of its Subsidiaries; (iii) will not, to our current actual
knowledge, without independent investigation, result in the creation or
imposition of any Lien upon any of the property of Borrower or any of its
Subsidiaries, pursuant to any such agreement or instrument referred to in clause
(ii) above; and (iv) do not require the consent or approval of, or registration
or filing with, or any other action by, any governmental body, agency, authority
of the State of New York, the State of Texas or United States of America except
such as have been obtained or made and are in full force and effect or, to our
current actual knowledge without independent investigation, any other Person,
other than those previously obtained and in full force and effect or as
disclosed in the Loan Documents.
3. The Credit Agreement has been duly executed and delivered by or on
behalf of Borrower. Assuming the corporate power and due authorization of
Borrower and that the execution, delivery and performance of the Credit
Agreement is not in contravention of any provision of its Memorandum and
Articles of Association, the Credit Agreement constitutes a valid and binding
agreement of Borrower enforceable in accordance with its terms.
4. Neither the Borrower nor, to our current actual knowledge, without
independent investigation, any of its Subsidiaries is an "investment company" as
defined in the Investment Company Act of 1940, as amended. Neither the Borrower
nor any of its Subsidiaries is a 'holding company" as defined in our subject to
regulation under the Public Utility Holding Company Act of 1934.
5. To the best of our current actual knowledge, without independent
investigation, no action, claim or proceeding, other than as set forth in the
Loan Documents, is now pending or threatened against Borrower, at law, in equity
or otherwise, before any Governmental Authority, which, if determined adversely,
could reasonably be expected to have a Material Adverse Effect or that involve
the Credit Agreement or the Loan Documents.
The opinions set forth above are limited by, subject to and based on the
following:
(a) The opinions are limited in all respects to the laws of the State
of Texas, State of New York and applicable federal law. We are licensed to
practice law in the State of New York and Texas only and do not hold ourselves
out to be experts on the laws of any jurisdiction other than the States of New
York and Texas and the United States of America.
(b) With respect to the opinions expressed in paragraphs 1(i), 1(ii),
2(i) through (iv) and 5 above, we advise you that we act only as special counsel
to Borrower for certain matters and do not represent them in all of their legal
matters. "Current actual knowledge" as expressed therein means that no
information has come to the attention of the attorneys of this firm currently
engaged in this representation that would give us present knowledge of the
existence or absence of facts that would render the opinions expressed in
paragraphs 1(i), 1(ii), 2(i) through (iv) and 5 above to be untrue. "Without
independent investigation" as expressed therein means that we have not
investigated or reviewed material which is not in our possession as a result of
our retention in connection with this loan facility or other matters for which
we have been presently retained by the Borrower.
(c) Our opinions set forth in paragraph 3 above concerning the
enforceability of the Credit Agreement may be limited by and are subject to (i)
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, marshaling and similar laws affecting the enforcement of creditors'
rights and remedies generally (including but not limited to such as may deny
giving effect to waivers or debtors' rights), (ii) general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), and (iii) other applicable federal and state laws, statutes,
ordinances, rules, regulations, judicial decisions and constitutional
requirements may delay but should not materially diminish the practical
realization of the enforceability of such obligation, right or remedy.
(d) We express no opinion as to (i) the enforceability of any
particular provision of the Credit Agreement (A) against any party other than
Borrower, (B) relating to waivers of defenses, of rights to trial by jury, or
rights to object to jurisdiction or venue and other rights or benefits bestowed
by operation of law, (C) waivers of provisions which are not capable of waiver
under applicable law, (D) grants of powers of attorney, or (E) exculpation
clauses, indemnity clauses to the extent violative of public policy or clauses
relating to releases or waivers of unmatured rights or claims, or (ii) the
availability of any specified equitable relief of any kind.
(e) The opinions contained herein are limited to the matters expressly
set forth in paragraphs 1 through 5 above, and no opinion may be implied or
inferred beyond the matters expressly so stated.
(f) The opinions herein expressed are given as of the date hereof and
we assume no obligation to update or supplement such opinion to reflect any
facts or circumstances that may hereafter come to our attention or any changes
in law which may hereafter occur.
(g) The opinions herein expressed are for the benefit of the Lenders
and the Administrative Agent and their successors and assigns and may be relied
upon only by the Lenders and the Administrative Agent and their successors and
assigns and only in consummating the transactions evidenced by the Credit
Agreement.
Very truly yours,
JACKSON WALKER L.L.P.
By: _________________________________________
Lawrence A. Waks, Partner
By: _________________________________________
Bryan C. Birkeland, Partner
<PAGE>
EXHIBIT B-2
WALKERS
Attorneys-at-Law
WALKER HOUSE, P.O. BOX 265
GEORGE TOWN, GRAND CAYMAN
CAYMAN ISLANDS
TEL: (345) 949-0100 FAX: (345) 949-7886
Internet:- [email protected]
Our ref:GWP/dw/T183-10663
January[ ], 2000
THE CHASE MANHATTAN BANK
ONE CHASE MANHATTAN PLAZA
8TH FLOOR, NEW YORK, NEW YORK
10018
(THE "BANK")
Dear Sirs,
We have been asked to provide this legal opinion to you with regard to the laws
of the Cayman Islands in relation to the Credit Agreement dated ________, 2000
being entered into by TRITON ENERGY LIMITED (the "Company"), the Lenders named
therein and the Bank as Administrative Agent (the "Agreement").
For the purposes of giving this opinion, we have examined the documents listed
in Schedule 1 hereto.
In giving this opinion we have relied upon the assumptions set out in Schedule 2
hereto, which we have not independently verified.
We are Attorneys-at-Law in the Cayman Islands and express no opinion as to any
laws other than the laws of the Cayman Islands in force and as interpreted at
the date hereof. Except as explicitly stated herein, we express no opinion in
relation to any representation or warranty contained in the Agreement nor upon
the commercial terms of the transactions contemplated by the Agreement.
Based upon the foregoing examinations and assumptions and upon such searches as
we have conducted and having regard to legal considerations which we deem
relevant, and subject to the qualifications set out in Schedule 3 hereto, we are
of the opinion that under the laws of the Cayman Islands:
1. The Company is a company duly incorporated, validly existing and in
good standing under the laws of the Cayman Islands and has full power and legal
right to execute and deliver the Agreement and to perform the provisions of the
Agreement to be performed on its part.
2. The Agreement has been duly authorized and executed and when delivered
by the Company, will constitute the legal, valid and binding obligations of the
Company enforceable in accordance with its terms.
3. The execution, delivery and performance of the Agreement, the
consummation of the transactions contemplated thereby and the compliance by the
Company with the terms and provisions thereof do not:
(i) contravene any law or regulation of the Cayman Islands applicable
to the Company; or
(ii) contravene the Memorandum and Articles of Association of the
Company.
4. Neither the execution, delivery or performance of the Agreement nor the
consummation or performance of any of the transactions contemplated thereby by
the Company, requires the consent or approval of, the giving of notice to, or
the registration with, or the taking of any other action in respect of any
Cayman Islands governmental or judicial authority or agency.
5. The law chosen by the Agreement to govern its interpretation would be
upheld as a valid choice of law in any action on that document in the courts of
the Cayman Islands.
6. There are no stamp duties (other than the stamp duties mentioned in
qualification 2 in Schedule 3 hereto), income taxes, withholdings, levies,
registration taxes, or other duties or similar taxes or charges now imposed, or
which under the present laws of the Cayman Islands could in the future become
imposed, in connection with the enforcement or admissibility in evidence of the
Agreement or on any payment to be made by the Company or any other person
pursuant to the Agreement.
7. None of the parties to the Agreement (other than the Company) is or
will be deemed to be resident, domiciled or carrying on business in the Cayman
Islands by reason only of the execution, delivery, performance or enforcement of
the Agreement.
8. A judgement obtained in a foreign court will be recognized and enforced
in the courts of the Cayman Islands without any re-examination of the merits:
(a) at common law, by an action commenced on the foreign judgement debt
in the Grand Court of the Cayman Islands, where the judgement is final and in
respect of which the foreign court had jurisdiction over the defendant according
to Cayman Islands conflict of law rules and which is conclusive, for a
liquidated sum not in respect of penalties or taxes or a fine or similar fiscal
or revenue obligations, and which was neither obtained in a manner, nor is of a
kind enforcement of which is contrary to natural justice or the public policy of
the Cayman Islands; or
(b) by statute, registration in the Grand Court of the Cayman Islands
and execution as if it were a judgement of the Grand Court, where the judgement
is a judgement of a superior court of any state of the Commonwealth of Australia
which is final and conclusive for a sum of money not in respect of taxes or
other charges of a like nature or in respect of a fine, penalty or revenue
obligation and which remains enforceable by execution in that jurisdiction.
9. It is not necessary or advisable under the laws of the Cayman Islands
that the Agreement or any document relating thereto be registered or recorded in
any public office or elsewhere in the Cayman Islands in order to ensure the
validity, effectiveness or enforceability of the Agreement.
10. The Company has executed an effective submission to the jurisdiction
of the courts of the jurisdiction specified in the Agreement.
11. The Company is subject to civil and commercial law with respect to its
obligations under the Agreement and neither the Company nor any of its assets is
entitled to immunity from suit or enforcement of a judgment on the grounds of
sovereignty or otherwise in the courts of the Cayman Islands in proceedings
against the Company in respect of any obligations under the Agreement, which
obligations constitute private and commercial acts rather than governmental or
public acts.
12. There are no actions, suits or proceedings pending against the Company
before any court in the Cayman Islands and no steps have been, or are being,
taken to compulsorily wind up the Company and no resolution to voluntarily wind
up the Company has been adopted by its members.
13. A judgment of a court in the Cayman Islands may be expressed in a
currency other than Cayman Islands dollars.
14. On a liquidation of the Company, claims against the Company under the
Agreement to which it is party will rank at least pari passu with the claims of
---- -----
all other unsecured creditors (other than those preferred by law).
This opinion is limited to the matters referred to herein and shall not be
construed as extending to any other matter or document not referred to herein.
This opinion is given solely for your benefit and the benefit of your legal
advisers acting in that capacity in relation to this transaction and may not be
relied upon by any other person without our prior written consent. This opinion
is governed by and shall be construed in accordance with the laws of the Cayman
Islands.
Yours faithfully,
WALKERS
<PAGE>
SCHEDULE 1
LIST OF DOCUMENTS EXAMINED
(1) the Memorandum and Articles of Association of the Company;
(2) a Certificate of Good Standing in respect of the Company dated
__________, 2000 issued by the Registrar of Companies;
(3) an executed copy of a Secretary's Certificate dated ______, 2000
containing certified resolutions of the Board of Directors of the Company (the
"Resolutions");
(4) the executed Agreement; and
(5) such other documents as we have considered necessary for the
purposes of rendering this opinion.
<PAGE>
SCHEDULE 2
ASSUMPTIONS
The opinions hereinbefore given are based upon the following assumptions:
--
1. There are no provisions of the laws of any jurisdiction outside the
Cayman Islands which would be contravened by the execution or delivery of the
Agreement and that, in so far as any obligation expressed to be incurred under
the Agreement is to be performed in or is otherwise subject to the laws of any
jurisdiction outside the Cayman Islands, its performance will not be illegal by
virtue of the laws of that jurisdiction.
2. The Agreement is within the capacity and powers of and have been or
will be duly authorised, executed and delivered by each of the parties thereto
(other than the Company) and constitute or will, when executed and delivered,
constitute the legal, valid and binding obligations of each of the parties
thereto enforceable in accordance with their terms as a matter of the laws of
all relevant jurisdictions (other than the Cayman Islands).
3. The choice of the laws of the jurisdiction selected to govern the
Agreement has been made in good faith and will be regarded as a valid and
binding selection which will be upheld in the courts of that jurisdiction and
all other relevant jurisdictions (other than the Cayman Islands).
4. All authorisations, approvals, consents, licences and exemptions
required by and all filings and other requirements of each of the parties to the
Agreement outside the Cayman Islands to ensure the legality, validity and
enforceability of the Agreement have been or will be duly obtained, made or
fulfilled and are and will remain in full force and effect and that any
conditions to which they are subject have been satisfied.
5. All conditions precedent contained in the Agreement have been or will
be satisfied or waived.
6. No disposition of property effected by the Agreement is made wilfully
to defeat an obligation owed to a creditor and at an undervalue.
7. The Company was on the date of execution of the Agreement able to pay
its debts as they became due from its own moneys, and that any disposition or
settlement of property effected by the Agreement is made in good faith and for
valuable consideration.
8. The Agreement has not been nor will be executed or delivered in the
Cayman Islands.
9. All original documents are authentic, that all signatures and seals are
genuine, that all documents purporting to be sealed have been so sealed, that
all copies are complete and conform to their original and that the Agreement
conform in every material respect to the latest drafts of the same produced to
us.
10. The Minute Book of the Company examined by us on __________, 2000 at
its Registered Office contains a complete and accurate record of the business
transacted by it.
11. The corporate records of the Company examined by us on __________,
2000 at its Registered Office constitute its complete and accurate corporate
records and that all matters required by law to be recorded therein are so
recorded.
12. The Cause List and the Register of Writs and other Originating Process
of the Cayman Islands Grand Court maintained by the Clerk of the Courts examined
by us at the Courts Office on _________, 2000, constitute a complete record of
the proceedings before the Grand Court of the Cayman Islands.
13. None of the parties to the Agreement is
(a) a "person in Iraq" as that term is defined in The Iraq and Kuwait
(United Nations Sanctions) (Dependent Territories) Order 1990 or an "Iraqi
person" as defined in The Iraq (United Nations) (Sequestration of Assets)
(Dependent Territories) Order 1993 or a person resident in the Republic of Iraq
for the purposes of The Caribbean Territories (Control of Gold, Securities,
Payment and Credits: Kuwait and Republic of Iraq) Order 1990; or
(b) a "person connected with Libya" as that term is defined in The
Libya (United Nations Sanctions) (Dependent Territories) Order 1992.
14. abThe meeting of the Board of Directors at which the Resolutions were
duly adopted was called and held in accordance with the Articles of Association
of the Company.
<PAGE>
SCHEDULE 3
QUALIFICATIONS
The opinions hereinbefore given are subject to the following qualifications:
1. The term "enforceable" as used above means that the obligations assumed
by the Company under the Agreement are of a type which the courts of the Cayman
Islands enforce; it does not mean that those obligations will necessarily be
enforced in all circumstances in accordance with their terms. In particular:
(a) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganisation and other laws of general application relating to or affecting
the rights of creditors;
(b) enforcement may be limited by general principles of equity;
(c) claims may become barred under statutes of limitation or may be or
become subject to defenses of set-off or counterclaim;
(d) where obligations are to be performed in a jurisdiction outside the
Cayman Islands, they may not be enforceable in the Cayman Islands to the extent
that performance would be illegal under the laws of that jurisdiction;
(e) an award of a court of the Cayman Islands may be required to be
made in Cayman Islands dollars;
(f) to the extent that any provision of the Agreement is adjudicated to
be penal in nature, it will not be enforceable in the courts of the Cayman
Islands; in particular, the enforceability of any provision of the Agreement
which imposes additional obligations in the event of any breach or default, or
of payment or prepayment being made other than on an agreed date maybe limited
to the extent that it is subsequently adjudicated to be penal in nature and not
an attempt to make a reasonable pre-estimate of loss;
(g) to the extent that the performance of any obligation arising under
the Agreement would be fraudulent or contrary to public policy, it will not be
enforceable in the courts of the Cayman Islands; and
(h) a Cayman Islands court will not necessarily award costs in
litigation in accordance with contractual provisions in this regard.
2. Cayman Islands stamp duty will be payable if the Agreement is executed
in, brought to, or produced before a court of the Cayman Islands. Such duty
would be nominal except in the case of:
(a) a legal or equitable mortgage or charge of immovable property or a
debenture:
(i) where the sum secured is CIS300,000 (US$360,000) or less, in
which case such duty would be 1% of the sum secured;
(ii) where the sum secured is more than CIS300,000 (US$360,000),
in which case such duty would be 1.5% of the sum secured;
(b) a legal or equitable mortgage of movable property (not including a
debenture), in which case such duty would be 1.5% of the sum secured;
(c) a bill of sale by way of security, in which case such duty would be
1 % of the sum secured;
PROVIDED that no duty shall be payable where the property is situated outside
the Cayman Islands and that in the case of a mortgage of moveable property
situated in the Cayman Islands granted by an exempted company or by an ordinary
non-resident company (as defined in the Companies Law (1995 Revision)) or by a
body corporate incorporated outside the Cayman Islands, the maximum duty payable
shall be CI$500.00. (US$600.00).
3. A certificate, determination, calculation or designation of any party
to the Agreement as to any matter provided therein might be held by a Cayman
Islands court not to be conclusive, final and binding, notwithstanding any
provision to that effect therein contained, if, for example, it could be shown
to have an unreasonable, arbitrary or improper basis or in the event of manifest
error.
4. If any provision of the Agreement is held to be illegal, invalid or
unenforceable, severance of such provision from the remaining provisions will be
subject to the discretion of the Cayman Islands courts.
5. To maintain the Company in good standing under the laws of the Cayman
Islands, annual filing fees must be paid and returns made to the Registrar of
Companies.
6. Any term of the Agreement may be amended orally by the parties thereto,
notwithstanding provisions to the contrary contained therein.
7. Notwithstanding any purported date of execution in any of the
Agreement, the rights and obligations therein contained take effect only on the
actual execution and delivery thereof but the Agreement may provide that they
have retrospective effect as between the parties thereto alone.
8. The effectiveness of terms in the Agreement excusing any party from a
liability or duty otherwise owed or indemnifying that party from the
consequences of incurring such liability or breaching such duty are limited by
law.
<PAGE>
EXHIBIT C
BORROWING REQUEST
[DATE]
The Chase Manhattan Bank, as Administrative Agent under the Credit
Agreement referred to below
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Michael Cerniglia
Ladies and Gentlemen:
The undersigned refers to the Credit Agreement dated as of February 29,
2000 (such Credit Agreement, as it may hereafter be amended or otherwise
modified from time to time, being referred to herein as the "Credit Agreement",
the terms defined therein being used herein as therein defined) among Triton
Energy Limited, a Cayman Islands company, other financial institutions party
("Lenders"), and The Chase Manhattan Bank, as administrative agent for such
Lenders ("Administrative Agent") and hereby gives you notice, irrevocably,
pursuant to Section 2.03 of the Credit Agreement that the undersigned hereby
requests a Borrowing under the Credit Agreement, and in that connection sets
forth below the information relating to such Borrowing (the "Proposed
Borrowing") as required by Section 2.03 of the Credit Agreement:
(i) The Business Day of the Proposed Borrowing is , _________.
(ii) The Type of Advances comprising the Proposed Borrowing is [ABR
Loans] [Eurodollar Loans].
(iii) The aggregate amount of the Proposed Borrowing is
$____________________.
(iv) The location and number of the Borrower account to which funds are
to be transferred is ___________.
(v) The Borrowing Base Utilization on the Business Day of the Proposed
Borrowing (after giving effect to the Proposed Borrowing) is _____%.
(vi) The amount of Outside LC Exposure on the Business Day of the
proposed Borrowing is ___________________.
[(vii) The Interest Period for each Eurodollar Loan made as part of the
Proposed Borrowing is _____ months.]
Very truly yours,
TRITON ENERGY LIMITED
By:_______________________________________
Name: ____________________________________
Title: ____________________________________
<PAGE>
EXHIBIT D
INTEREST ELECTION REQUEST
[Date]
The Chase Manhattan Bank, as Administrative Agent under the Credit
Agreement referred to below
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Michael Cerniglia
Ladies and Gentlemen:
The undersigned refers to the Credit Agreement dated as of February 29,
2000 (such Credit Agreement, as it may hereafter be amended or otherwise
modified from time to time, being referred to herein as the "Credit Agreement",
the terms defined therein being used herein as therein defined) among Triton
Energy Limited, a Cayman Islands company, other financial institutions party
("Lenders"), and The Chase Manhattan Bank, as administrative agent for such
Lenders ("Administrative Agent") and hereby gives you notice, irrevocably,
pursuant to Section 2.06 of the Credit Agreement that the undersigned hereby
makes an Interest Election Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing as
required by Section 2.06 of the Credit Agreement:
(i) The Borrowing (or portion thereof)* to which this Interest Election
applies is _______________.
(ii) The effective date (which must be a Business Day) of the election
is ______________________.
(iii) The resulting Borrowing will be an [ABR Borrowing] [Eurodollar
Borrowing].
(iv) The Borrowing Base Utilization on the effective date of the
election is (after giving effect to any new Borrowings on such date) is __%.
[(v) The Interest Period Applicable to the Eurodollar Borrowing is
__________________________.]
*If this Interest Election applies to only a portion of a Borrowing, submit
another Interest Election for the remaining portion or portions.
EXHIBIT 12.1
TRITON ENERGY LIMITED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------------------------
1999 1998 1997 1996 1995
--------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined
Interest charges $ 38,231 $ 50,253 $ 50,625 $ 43,884 $ 41,305
Preferred dividend requirements of
subsidiaries adjusted to pre-tax basis --- --- --- --- ---
--------- ---------- --------- --------- ---------
Total fixed charges $ 38,231 $ 50,253 $ 50,625 $ 43,884 $ 41,305
========= ========== ========= ========= =========
Earnings, as defined (2):
Earnings (loss) from continuing operations
before income taxes and extraordinary item $ 76,177 $(238,609) $ 16,896 $ 20,945 $ 16,600
Fixed charges, above 38,231 50,253 50,625 43,884 41,305
Less interest capitalized (14,539) (23,215) (25,818) (27,102) (16,211)
Plus undistributed (earnings) loss of affiliates 28 --- --- (118) 2,249
Less preferred dividend requirements of
subsidiaries adjusted to pre-tax basis --- --- --- --- ---
--------- ---------- --------- --------- ---------
$ 99,897 $(211,571) $ 41,703 $ 37,609 $ 43,943
========= ========== ========= ========= =========
RATIO OF EARNINGS TO FIXED CHARGES (1) (2) 2.6 --- 0.8 0.9 1.1
========= ========== ========= ========= =========
</TABLE>
____________________
[FN]
(1) Earnings were inadequate to cover fixed for the years ended December
31, 1998, 1997 and 1996 by$261,824,000, $8,922,000 and $6,275,000,
respectively.
(2) Earnings reflect nonrecurring writedowns and loss provisions of
$5,159,000, $348,064,000, $46,153,000 and $1,058,000 for the years ended
December 31, 1999, 1998, 1996 and 1995, respectively. Nonrecurring gains from
the sale of assets and other gains aggregated $442,000, $125,617,000,
$6,253,000, $22,189,000 and $13,617,000 for the years ended December 31, 1999,
1998, 1997, 1996 and 1995, respectively. The ratio of earnings to fixed charges
if adjusted to remove nonrecurring items, would have been 2.7, 0.2, 0.7, 1.4 and
0.8 for the years ended December 31, 1999, 1998, 1997, 1996 and 1995,
respectively. Without nonrecurring items, earnings would have been inadequate
to cover fixed charges for the years ended December 31, 1998, 1997 and 1995 by
$39,377,000, $15,175,000 and $9,921,000, respectively.
EXHIBIT 12.2
TRITON ENERGY LIMITED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERENCE
DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------------------------
1999 1998 1997 1996 1995
--------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest charges $ 38,231 $ 50,253 $ 50,625 $ 43,884 $ 41,305
Preference dividend requirements of
the Company 28,671 3,061 400 985 802
Preferred dividend requirements of
subsidiaries adjusted to pre-tax basis --- --- --- --- ---
--------- ---------- --------- --------- ---------
Total fixed charges $ 66,902 $ 53,314 $ 51,025 $ 44,869 $ 42,107
========= ========== ========= ========= =========
Earnings, as defined (2):
Earnings (loss) from continuing operations
before income taxes and extraordinary item $ 76,177 $(238,609) $ 16,896 $ 20,945 $ 16,600
Fixed charges, above 66,902 53,314 51,025 44,869 42,107
Less interest capitalized (14,539) (23,215) (25,818) (27,102) (16,211)
Plus undistributed (earnings) loss of affiliates 28 --- --- (118) 2,249
Less preference dividend requirements of
the Company and its subsidiaries adjusted
to pre-tax basis (28,671) (3,061) (400) (985) (802)
--------- ---------- --------- --------- ---------
$ 99,897 $(211,571) $ 41,703 $ 37,609 $ 43,943
========= ========== ========= ========= =========
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERENCE DIVIDENDS (1) (2) 1.5 --- 0.8 0.8 1.0
========= ========== ========= ========= =========
</TABLE>
____________________
(1) Earnings were inadequate to cover combined fixed charges and preference
dividends for the years ended December 31, 1998, 1997 and 1996 by $264,885,000,
$9,322,000 and $7,260,000, respectively.
(2) Earnings reflect nonrecurring writedowns and loss provisions of
$5,159,000, $348,064,000, $46,153,000 and $1,058,000 for the years ended
December 31, 1999, 1998, 1996 and 1995, respectively. Nonrecurring gains from
the sale of assets and other gains aggregated $442,000, $125,617,000,
$6,253,000, $22,189,000 and $13,617,000 for the years ended December 31, 1999,
1998, 1997, 1996 and 1995, respectively. The ratio of earnings to combined fixed
charges and preference dividends if adjusted to remove nonrecurring items, would
have been 1.6, 0.2, 0.7, 1.4 and 0.7 for the years ended December 31, 1999,
1998, 1997, 1996 and 1995, respectively. Without nonrecurring items, earnings
would have been inadequate to cover combined fixed charges and preference
dividends for the years ended December 31, 1998, 1997 and 1995 by $42,438,000,
$15,575,000 and $10,723,000, respectively.
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
JURISDICTION OF
---------------
NAME ORGANIZATION
- ---- ------------
<S> <C>
Oil & Gas Colombia GmbH Germany
Triton Algeria, Inc. Cayman Islands
Triton Angola, Inc. Cayman Islands
Triton Asia Holdings, Inc. Cayman Islands
Triton Australia, Inc. Cayman Islands
Triton Brazil, Inc. Cayman Islands
Triton Cambodia, Inc. Cayman Islands
Triton Colombia, Inc. Cayman Islands
Triton Ecuador, Inc. LLC Cayman Islands
Triton Energy Corporation Delaware
Triton Equatorial Guinea, Inc. Cayman Islands
Triton Exploration Services, Inc. Delaware
Triton Financial Services, Inc. Cayman Islands
Triton Guatemala S.A. B.V.I.
Triton Hellas Exploration and Exploitation
of Hydrocarbons Anonymous Industrial Technical
and Commercial Company Greece
Triton International Finance, Inc. Cayman Islands
Triton International Oil Corporation Delaware
Triton International Petroleum, Inc. Cayman Islands
Triton Italy, Inc. Cayman Islands
Triton Madagascar, Inc. Cayman Islands
Triton Mediterranean Oil & Gas N.V. Netherlands
Triton Oil & Gas GmbH Germany
Triton Oman Resources, Inc. Cayman Islands
Triton Oman, Inc. Cayman Islands
Triton Resources (UK) Limited U.K.
Triton Tunisia, Inc. Cayman Islands
Triton Ventures, Inc. Cayman Islands
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-59567,
333-11703, 333-11703-01, 333-67843 and 333-81029) and to the incorporation by
reference in the Registration Statements on Form S-8 (Nos. 2-80978, 33-4042,
33-27203, 33-29498, 33-46968, 33-51691, 333-08005, 333-27313 and 333-81031) of
Triton Energy Limited of our report dated February 23, 2000 appearing on page
F-2 of this Form 10-K.
PricewaterhouseCoopers LLP
Dallas, Texas
March 8, 2000
EXHIIT 23.2
DeGOLYER and MacNAUGHTON
One Energy Square
Dallas, Texas 75206
March 3, 2000
Triton Energy Limited
Caledonian House
Mary Street
P.O. Box 1043
George Town
Grand Cayman, Cayman Islands
Gentlemen:
We hereby consent to (i) the use of the information contained in our
"Appraisal Report, as of December 31, 1999, on Certain Properties in Colombia
owned by Triton Colombia Incorporated," under the caption "Items 1 and 2 -
Business and Properties - Reserves" and in note 23 of the Notes to the
Consolidated Financial Statements under the caption "Oil and Gas Reserve Data"
in the Form 10-K of Triton Energy Limited for the year ended December 31, 1999,
and (ii) the references to our firm under such captions. Our estimates of
reserves, however, for the Cusiana and Cupiagua fields have been aggregated in
the Form 10-K with other Colombian reserves for which we have not prepared
estimates.
Very truly yours,
DeGOLYER and MacNAUGHTON
EXHIBIT 23.3
NETHERLAND, SEWELL
& ASSOCIATES, INC.
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
---------------------------------------------------------
We hereby consent to (i) the use of the information in our report dated
January 31, 2000, for Ceiba Field located offshore Equatorial Guinea (the
"Report") under the caption "Items 1. and 2. Business and Properties - Reserves"
and in note 23 of the Notes to the Consolidated Financial Statements under the
caption "Oil and Gas Reserve Data" in the Form 10-K of Triton Energy Limited for
the year ended December 31, 1999 (the "Form 10-K"), and (ii) the references to
our firm under such captions.
We further consent to (i) the incorporation by reference from the Form 10-K
of certain data from the Report in the Company's Registration Statements on Form
S-3 (Nos. 33-59567, 333-11703, 333-11703-01, 333-67843, and 333-81029), and on
Form S-8 (Nos. 2-80978, 33-4042, 33-27203, 33-29498, 33-46968, 33-51691,
333-08005, 333-27313 and 333-81031) of the Company, and to (ii) references to
our name in said Registration Statements and the Prospectuses contained therein.
NETHERLAND, SEWELL & ASSOCIATES, INC.
By:
Clarence M. Netherland
Chairman
Dallas, Texas
March 3, 2000
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
DEC-31-1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
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