<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
MONTEREY RESOURCES, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
SUPPLEMENT TO PROXY STATEMENT/PROSPECTUS REGARDING
SPECIAL MEETING OF STOCKHOLDERS
MERGER PROPOSED--YOUR
VOTE IS VERY IMPORTANT
October 21, 1997
To the Stockholders of Monterey Resources, Inc.:
As I indicated in my letter of September 29, 1997 attached to the Proxy
Statement/Prospectus that was sent to you, the Board of Directors of Monterey
Resources, Inc. unanimously approved a merger between Monterey and a subsidiary
of Texaco Inc. I noted that the Board unanimously believes that the merger
provides Monterey stockholders with both fair value for their investment in the
company and the chance to benefit from the company's rapidly expanding
operations, as supported by the diversity of opportunities and financial
strength of a major worldwide energy company in Texaco.
ON BEHALF OF YOUR BOARD OF DIRECTORS, I URGE YOU TO VOTE "FOR" APPROVAL OF
THE MERGER AND THE RELATED MERGER AGREEMENT.
Enclosed is a Supplement to the September 29, 1997 Proxy
Statement/Prospectus. The Supplement summarizes a number of recent developments
relating to the company, including (i) an agreement in principle to settle a
class action lawsuit seeking to enjoin the merger, (ii) the company's third
quarter results, and (iii) the expiration of a regulatory waiting period.
There has been no change to the time or place of the meeting, which will
take place at 10:00 a.m. on November 4, 1997 at the Doubletree Inn, 3100 Camino
Del Rio Court, Bakersfield, California.
As I stated before, on behalf of the Board, I urge you to be represented in
person or by proxy at the meeting, regardless of the number of shares you own.
STOCKHOLDERS WHO PREVIOUSLY SUBMITTED A PROXY AND WHO DO NOT WISH TO CHANGE
THEIR PROXY DO NOT NEED TO EXECUTE AND SUBMIT THE ENCLOSED PROXY. If, after
reviewing and considering the information contained in the Supplement, you wish
to change your proxy or, if you did not submit a proxy and you wish to submit a
proxy, simply mark the enclosed proxy appropriately, and return it in the
enclosed envelope as soon as possible. This action will not limit your right to
vote in person at the meeting if you wish to do so. Thank you.
/s/ R. Graham Whaling
R. Graham Whaling
Chairman of the Board and
Chief Executive Officer
This Supplement and the accompanying proxy are first being mailed to
stockholders of the company on or about October 21, 1997.
<PAGE>
UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED TERMS USED IN THIS SUPPLEMENT
("SUPPLEMENT") TO THE PROXY STATEMENT/PROSPECTUS DATED SEPTEMBER 29, 1997 AND
FIRST MAILED TO STOCKHOLDERS OF MONTEREY RESOURCES, INC. ("MONTEREY") ON OCTOBER
1, 1997 (THE "PROXY STATEMENT/PROSPECTUS") HAVE THE RESPECTIVE MEANINGS ASSIGNED
TO THEM IN THE PROXY STATEMENT/PROSPECTUS. STOCKHOLDERS ARE URGED TO READ THIS
SUPPLEMENT TOGETHER WITH THE INFORMATION INCLUDED IN THE PROXY
STATEMENT/PROSPECTUS, COPIES OF WHICH WERE PREVIOUSLY FURNISHED TO STOCKHOLDERS
OF RECORD AS OF SEPTEMBER 26, 1997. EXCEPT WHERE OTHERWISE NOTED, ALL REFERENCES
TO TEXACO INC. ("TEXACO") COMMON STOCK CONTAINED IN THIS SUPPLEMENT HAVE BEEN
ADJUSTED TO REFLECT TEXACO'S TWO-FOR-ONE STOCK SPLIT, EFFECTIVE SEPTEMBER 29,
1997. IF YOU REQUIRE ANOTHER COPY OF THE PROXY STATEMENT/PROSPECTUS, PLEASE
CONTACT CORPORATE INVESTOR COMMUNICATIONS, INC. AT 888-881-0530 (TOLL FREE) AND
A COPY WILL BE FORWARDED TO YOU WITHOUT CHARGE.
GENERAL
At the Special Meeting, holders of Monterey Common Stock will be asked to
vote upon a proposal to approve and adopt an Agreement and Plan of Merger dated
as of August 17, 1997 (the "Merger Agreement") between Texaco and Monterey.
The Merger Agreement provides, on the terms and subject to the conditions
set forth therein, (i) for the merger of a newly formed wholly owned subsidiary
of Texaco with and into Monterey (the "Merger"), with Monterey surviving the
Merger as a wholly owned subsidiary of Texaco, and (ii) that each share of
Monterey Common Stock outstanding immediately prior to the Effective Time, as
defined below (other than shares owned by Monterey as treasury stock or by
Texaco or any subsidiary of Texaco), will be converted into the right to receive
that number of shares of common stock, par value $3.125 per share, of Texaco
("Texaco Common Stock") derived by dividing $21 by the average closing price of
Texaco Common Stock on the New York Stock Exchange ("NYSE") for the thirty
consecutive trading day period ending on and including the fifth trading day
prior to the Effective Time ("Average Closing Price"); PROVIDED, that if the
Average Closing Price is greater than $60.50, the number of shares of Texaco
Common Stock to be issued per share of Monterey Common Stock will be 0.3471, and
if the Average Closing Price is less than $49.50, the number of shares of Texaco
Common Stock to be issued per share of Monterey Common Stock will be 0.4242. The
Merger will become effective (the "Effective Time") at the time of filing of a
certificate of merger with the Secretary of State of the State of Delaware (or
at such later time as is specified in the certificate of merger), which is
expected to occur as soon as practicable after the last of the conditions
precedent to the Merger set forth in the Merger Agreement has been satisfied or
waived.
Record holders of Monterey Common Stock as of September 26, 1997, the record
date, will be entitled to vote at the Special Meeting.
DESCRIPTION OF THE LITIGATION RELATED TO THE MERGER
On or about August 21, 1997, a putative class action on behalf of all
stockholders of Monterey was filed in the Court of Chancery in the State of
Delaware (the "Court"). The complaint, styled LEVITIN V. WHALING, ET AL., No.
15886 (the "Complaint"), named as defendants Monterey and its Board of Directors
and alleged that the defendants breached their fiduciary duties to Monterey's
stockholders in connection
2
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with the Merger and the Merger Agreement. The Complaint sought as relief, among
other things, an order enjoining consummation of the Merger.
On October 1, 1997, Monterey mailed to its stockholders the Proxy
Statement/Prospectus.
On October 6, 1997, the plaintiff filed an amended complaint with the Court
(the "Amended Complaint"). The Amended Complaint repeats the claim that Monterey
and its Board of Directors breached their fiduciary duties to Monterey's
stockholders by entering into the Merger Agreement and alleges new claims
relating to certain disclosures in the Proxy Statement/Prospectus concerning the
Merger. In addition to Monterey and its Board of Directors, the Amended
Complaint names Texaco as a defendant and alleges that Texaco aided and abetted
the alleged breaches of fiduciary duty by Monterey and its Board of Directors.
The Amended Complaint seeks as relief, among other things, an order enjoining
consummation of the Merger and requiring Monterey to make additional disclosures
to its stockholders concerning the Merger. The plaintiff filed motions for
expedited discovery and for an order that would, among other things,
preliminarily enjoin the defendants from proceeding with and consummating the
Merger and require certain additional disclosures.
Monterey and its Board of Directors believe that the allegations in the
Amended Complaint are without merit. However, they also believe that this
litigation could delay and create uncertainty with respect to the consummation
of the Merger and that such delay and uncertainty are not in the best interests
of Monterey and its stockholders. Accordingly, representatives of Monterey and
Texaco entered into discussions with counsel for the plaintiff concerning a
possible settlement of the action. An agreement in principle has been reached to
settle the action. In connection with the agreement in principle, Monterey and
its Board of Directors made no admission of liability, but agreed to circulate
to Monterey stockholders a supplement to the Proxy Statement/Prospectus
containing certain financial information concerning Monterey during the
three-month period ending September 30, 1997 and additional information relating
to the prior relationship between Goldman, Sachs & Co. ("Goldman Sachs") and
Texaco. This information is set forth elsewhere herein. The plaintiff withdrew
her motion for a preliminary injunction and agreed that, except for certain
confirmatory discovery, she will refrain from further proceedings pending
approval of a final settlement agreement by the Court. Finally, the defendants
agree not to oppose an application by plaintiff's counsel for an award of
counsel fees and expenses not to exceed $395,000. If the fee application is
approved, such amount will be payable by Monterey.
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MONTEREY'S THIRD QUARTER RESULTS
The following table sets forth selected financial and operating data for
Monterey. The selected statement of operations data is derived from the
unaudited financial statements of Monterey and includes, in the opinion of
Monterey's management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial data for such periods.
This selected financial and operating data should be read in conjunction with
Monterey's financial statements and the notes thereto appearing in the Proxy
Statement/Prospectus. This information should not be considered indicative of
future operating results of Monterey.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
<CAPTION>
(IN MILLIONS OF DOLLARS, EXCEPT
PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues................................................................... $ 77.4 $ 76.9 $ 236.9 $ 205.0
--------- --------- --------- ---------
Costs and Expenses
Production and operating................................................. 34.1 28.4 94.8 77.4
Cost of crude oil purchased.............................................. 5.0 9.6 26.4 10.8
Exploration, including dry hole costs.................................... 1.6 0.3 2.4 1.2
Depletion, depreciation & amortization................................... 11.3 9.8 30.3 27.9
General and administrative............................................... 5.0 1.9 11.5 5.8
Taxes (other than income)................................................ 3.0 2.5 9.0 6.8
--------- --------- --------- ---------
60.0 52.5 174.4 129.9
--------- --------- --------- ---------
Income from Operations..................................................... 17.4 24.4 62.5 75.1
Interest, net............................................................ (5.4) (6.1) (13.5) (18.6)
--------- --------- --------- ---------
Income Before Income Taxes................................................. 12.0 18.3 49.0 56.5
Income taxes............................................................. (3.7) (6.6) (15.7) (20.6)
--------- --------- --------- ---------
Net Income................................................................. $ 8.3 $ 11.7 $ 33.3 $ 35.9
--------- --------- --------- ---------
--------- --------- --------- ---------
Net Income Per Share....................................................... $ 0.15 $ -- $ 0.61 $ --
--------- --------- --------- ---------
--------- --------- --------- ---------
Pro Forma Net Income Per Share............................................. $--....... $ 0.21 $ -- $ 0.66
--------- --------- --------- ---------
--------- --------- --------- ---------
Number of shares used in computing net income per share (in millions)...... 54.8 54.8 54.8 54.8
--------- --------- --------- ---------
--------- --------- --------- ---------
SELECTED OPERATING DATA
Crude Oil and Liquids
Sales volumes (MBbls/day)................................................ 54.0 48.1 51.5 46.1
Sales prices ($/Bbl)
Unhedged............................................................... $ 14.28 $ 15.27 $ 14.96 $ 15.54
Hedged................................................................. $ 14.28 $ 15.12 $ 14.96 $ 15.30
Natural Gas
Sales volumes (MMcf/day)................................................. 9.3 3.5 5.1 3.6
Sales prices ($/Mcf)..................................................... $ 1.66 $ 0.89 $ 1.42 $ 1.00
</TABLE>
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Monterey's net income for the third quarter of 1997 totaled $8.3 million or
$0.15 per share, compared with net income of $11.7 million or $0.21 per share on
a pro forma basis for the same period in 1996.
Monterey's oil production in the third quarter averaged 54,000 barrels per
day, up approximately 12% from the third quarter 1996 average of 48,100 barrels
per day. Natural gas production in the 1997 period averaged 9.3 million cubic
feet per day, compared with 3.5 million cubic feet per day in the third quarter
of 1996. Monterey's third quarter 1997 production includes approximately 3,800
barrels of oil per day and 5.4 million cubic feet of natural gas per day
attributable to properties acquired in Monterey's acquisition of McFarland
Energy, Inc. ("McFarland"), which was effective July 24, 1997. Oil prices
received by Monterey during the third quarter of 1997 averaged $14.28 per barrel
compared with $15.12 per barrel during the same period in 1996. The 1996 price
is net of a $0.15 per barrel hedging expense. Natural gas prices averaged $1.66
per thousand cubic feet (Mcf) compared with $0.89 per Mcf during the third
quarter of 1996.
Revenues for the third quarter of 1997 totaled $77.4 million, compared with
$76.9 million in the third quarter of 1996. Increased production resulted in a
$5.1 million increase in revenues from oil and gas produced; however, revenues
attributable to the sale of light crude oil purchased from third party companies
for blending with Monterey's heavy oil production decreased $4.7 million.
Revenues for the third quarter of 1997 include $6.6 million attributable to the
properties acquired in the McFarland acquisition. Total costs and expenses in
the 1997 quarter were $60.0 million, compared with $52.5 million in the same
period in 1996. Costs and expenses for the third quarter of 1997 include $4.8
million attributable to the properties acquired in the McFarland acquisition and
$1.6 million in costs related to the proposed Merger with Texaco.
Production and operating costs for the third quarter of 1997 were $34.1
million, up from $28.4 million in the third quarter of 1996, primarily due to
increased production and higher prices for natural gas used as fuel in
Monterey's enhanced oil recovery ("EOR") operations. On a barrel of oil
equivalent ("BOE") basis, non-fuel operating costs in the third quarter of 1997
averaged $3.60 per BOE, compared with $3.53 per BOE (excluding $0.19 per BOE of
environmental clean-up costs) in the same period in 1996. Fuel costs in the
current quarter averaged $3.07 per BOE compared with $2.62 per BOE in the same
period last year.
For the nine months ended September 30, 1997, Monterey's net income totaled
$33.3 million or $0.61 per share compared with net income of $35.9 million or
pro forma $0.66 per share for the first nine months of 1996.
Oil production in the first nine months of 1997 averaged 51,500 barrels per
day, up from an average of 46,100 barrels per day in the same period in 1996.
Natural gas production in the first nine months of 1997 averaged 5.1 million
cubic feet per day compared with an average of 3.6 million cubic feet per day in
the same period in 1996. Production for the first nine months of 1997 includes
approximately 1,300 barrels of oil per day and 1.8 million cubic feet of natural
gas per day attributable to properties acquired in the McFarland acquisition.
Oil prices in the first nine months of 1997 averaged $14.96 per barrel compared
with an average of $15.30 per barrel in the same period in 1996. The 1996
average price is net of a $0.24 per barrel hedging expense. Natural gas prices
averaged $1.42 per Mcf in the first nine months of 1997 compared to $1.00 per
Mcf in the same period in 1996.
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Revenues in the first nine months of 1997 totaled $236.9 million compared
with $205.0 million in the same period in 1996 principally due to higher volumes
and higher revenues from sales of crude oil purchased. Total costs and expenses
in the first nine months of 1997 were $174.4 million compared with $129.9
million in the same period in 1996 primarily due to an increase in crude oil
purchased for blending purposes, costs associated with increased production, and
higher costs for the natural gas used as fuel in Monterey's EOR activities.
Costs and expenses for the first nine months of 1997 include $4.8 million
attributable to the properties acquired in the McFarland acquisition and $1.6
million in costs related to the proposed Merger with Texaco. Non-fuel operating
costs averaged $3.61 per BOE in the first nine months of 1997 compared with
$3.51 per BOE (excluding $0.07 per BOE of environmental clean-up costs) in the
same period last year, while fuel costs averaged $3.02 per BOE in the first nine
months of 1997 versus $2.47 in the same period in 1996.
INFORMATION CONCERNING CERTAIN FEES PAID
BY TEXACO TO GOLDMAN SACHS
As described in the Proxy Statement/Prospectus, Monterey retained Goldman
Sachs to assist in exploring strategic alternatives. On August 17, 1997, Goldman
Sachs delivered its written opinion to the Board of Directors of Monterey that,
as of such date, the Stock Consideration (as defined in the Proxy
Statement/Prospectus) pursuant to the Merger Agreement was fair to the holders
of Monterey Common Stock. The Goldman Sachs fairness opinion was attached as
Annex B to the Proxy Statement and disclosed that Goldman Sachs had provided
certain financial services to Texaco in the past and might provide services to
Texaco from time to time in the future. In the last five years, Texaco and its
subsidiaries have paid Goldman Sachs, or have accrued liability to Goldman Sachs
for, approximately $2.1 million in fees in return for various services provided
to Texaco and such subsidiaries.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") and specified waiting period requirements have been satisfied.
Monterey and Texaco have filed the required notification and report forms under
the HSR Act with the FTC and the Antitrust Division. On Saturday, October 18,
1997 the applicable waiting period expired with no action by the FTC or the
Antitrust Division.
COMPARATIVE PER SHARE MARKET PRICE
Monterey Common Stock and Texaco Common Stock are listed on the NYSE. The
Monterey ticker symbol on the NYSE is "MRC." The Texaco ticker symbol on the
NYSE is "TX."
For a table setting forth the reported high and low closing prices per share
of Texaco Common Stock and Monterey Common Stock for each calendar quarter since
the first quarter of 1994 (in the case of Texaco) and the fourth quarter of 1996
(in the case of Monterey) through September 26, 1997, see
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<PAGE>
"Comparative Per Share Market Price and Dividend Information" in the Proxy
Statement/Prospectus. During the period from September 26, 1997 through October
20, 1997, Texaco Common Stock closed as low as $59.75 per share and as high as
$63.125 per share, with $61.625 per share as the closing price on the NYSE
Composite Transaction Tape on October 20, 1997 (the last full trading day for
which quotations were available at the time this Supplement was printed). During
the period from September 26, 1997 through October 20, 1997, Monterey Common
Stock closed as low as $20.6875 per share and as high as $21.5625 per share,
with $21.125 per share as the closing price on the NYSE Composite Transaction
Tape on October 20, 1997. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS
FOR TEXACO COMMON STOCK AND MONTEREY COMMON STOCK.
------------------------
Another proxy is enclosed herewith. STOCKHOLDERS WHO PREVIOUSLY SUBMITTED A
PROXY AND WHO DO NOT WISH TO CHANGE THEIR PROXY DO NOT NEED TO EXECUTE AND
SUBMIT THE ENCLOSED PROXY. If, after reviewing the information set forth above,
you wish to revoke your previously submitted proxy, you should complete, date
and sign the enclosed proxy and return it in the attached envelope to arrive
prior to the Special Meeting.
October 21, 1997
7
