<PAGE> 1
FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-72291
THIS PROSPECTUS SUPPLEMENT RELATES TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933. THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT
COMPLETE AND MAY BE CHANGED. WE WILL DELIVER TO PURCHASERS OF THESE SECURITIES A
FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. WE ARE NOT USING THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS TO OFFER TO SELL THESE SECURITIES OR TO SOLICIT
OFFERS TO BUY THESE SECURITIES IN ANY PLACE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 26, 1999
PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 24, 1999)
$
CONOCO INC. [CONOCO LOGO]
$ % NOTES DUE 20
$ % NOTES DUE 20
$ % NOTES DUE 20
----------------
We will pay interest on all the notes on and of each
year, beginning , 1999. We may redeem some or all of the notes at any
time at a redemption price equal to the principal amount of the notes we redeem
plus a make-whole premium. The redemption price is described beginning on page
S-17 of this prospectus supplement.
We have applied to list the notes on the Luxembourg Stock Exchange.
WE URGE YOU TO READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE S-12 OF
THIS PROSPECTUS SUPPLEMENT, WHERE WE DESCRIBE SPECIFIC RISKS YOU SHOULD CONSIDER
BEFORE PURCHASING ANY OF THE NOTES.
<TABLE>
<CAPTION>
PRICE TO DISCOUNT TO PROCEEDS TO
PUBLIC(1) UNDERWRITERS CONOCO(1)
--------- ------------ -----------
<S> <C> <C> <C>
Per Note due 20 ....................... % % %
Per Note due 20 ....................... % % %
Per Note due 20 ....................... % % %
Total.................................... $ $ $
</TABLE>
- ---------------
(1) Plus accrued interest, if any, from , 1999
Delivery of the notes in book-entry form only will be made through The
Depository Trust Company on or about , 1999, against payment in
immediately available funds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The Joint Book Runners are:
CREDIT SUISSE FIRST BOSTON SALOMON SMITH BARNEY
----------------
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER
NATIONSBANC MONTGOMERY SECURITIES
LLC
----------------
PROSPECTUS SUPPLEMENT DATED , 1999
<PAGE> 2
[PHOTO OF DEEPWATER
PATHFINDER DRILLSHIP]
The Deepwater Pathfinder is one of two new
deepwater drillships owned by a Conoco joint
venture. Deepwater Pathfinder began operating
in the Gulf of Mexico in early 1999, and is
capable of drilling in 10,000 feet of water.
Conoco's 40-percent ownership
of the new 100,000-barrel-per-
day refinery at Melaka,
Malaysia, is supporting the [PHOTO OF REFINERY
company's downstream IN MELAKA, MALAYSIA]
expansion in Asia Pacific.
Conoco currently has 100 retail
outlets in Thailand.
<PAGE> 3
CONOCO AT A GLANCE
[PHOTO OF NYSE WITH CONOCO BANNER ACROSS FRONT]
A Conoco banner spanned the
facade of the New York Stock
Exchange last October to
celebrate the company's $4.4
billion initial public offering,
the largest in U.S. corporate
history.
[GLOBE DEPICTING CONOCO'S EXPLORATION AND PRODUCTION OPERATIONS, NATURAL GAS
AND GAS PRODUCTS OPERATIONS, REFINING OPERATIONS, MARKETING OPERATIONS AND
POWER OPERATIONS FOR EXISTING CORE AREAS, DEVELOPING CORE AREAS AND POTENTIAL
CORE AREAS]
Our vision is to be recognized around the world as a truly great, integrated,
international energy company that gets to the future first.
Conoco operates in 40 countries worldwide, and at year-end 1998 had
approximately 16,000 employees. In the global energy industry, Conoco is active
in both upstream and downstream segments of the petroleum business, and in
power generation. Upstream activities cover the discovery, development and
production of crude oil, natural gas and natural gas liquids, as well as gas
processing. Downstream activities cover the refining of crude oil and other
feedstocks into petroleum products, trading in crude oil and products, and the
distribution and marketing of petroleum products. Power activities involve the
development of power generation projects, often drawing on Conoco's fuel
resources.
o Exploration and Production operations in 1998 included the daily production
of approximately 348,000 barrels of petroleum liquids and 1.4 billion cubic
feet of natural gas from fields in North America, South America, Europe,
Africa, the Middle East and Asia Pacific. Exploration activities are focused
in 15 countries.
o Natural gas and gas products operations include the gathering, processing,
distribution and marketing of natural gas and natural gas liquids in North
America, the U.K., Norway and Trinidad. In 1998, Conoco marketed natural gas
volumes in excess of 4.1 billion cubic feet per day in the U.S. and Europe.
o Refining operations include four refineries in the U.S., one in the U.K.,
and partial ownership of a refinery in Germany, two in the Czech Republic and
the recently commissioned refinery in Malaysia. Conoco has processing
capacity of about 800,000 barrels of crude oil per day at these facilities.
o Marketing operations include the distribution and sale of gasoline, diesel
fuel and motor oils through about 7,900 outlets in the U.S., Europe and Asia
Pacific. These products are sold primarily under the Conoco and Jet brands.
The company is a major supplier of industrial lubricants and specialty
products and is the world's leading supplier of graphite coke. Conoco's total
refined product sales are more than 1 million barrels per day.
o Power operations focus on the development of power generation projects that
combine Conoco's fuels and industrial cogeneration expertise. Generating
facilities developed by Conoco are onstream in the Netherlands and Colombia,
and one plant is under construction, while another is under development, in
Texas. Also, an agreement has been finalized for plants in four European
countries.
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION WE HAVE INCLUDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY OTHER INFORMATION. IF YOU RECEIVE
ANY UNAUTHORIZED INFORMATION, YOU MUST NOT RELY ON IT. WE ARE OFFERING TO SELL
THE NOTES ONLY IN PLACES WHERE SALES ARE PERMITTED. YOU SHOULD NOT ASSUME THAT
THE INFORMATION WE HAVE INCLUDED IN THIS PROSPECTUS SUPPLEMENT OR THE
ACCOMPANYING PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR THAT ANY INFORMATION WE
HAVE INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE OF
THE DOCUMENT INCORPORATED BY REFERENCE. WE ARE RESPONSIBLE FOR THE INFORMATION
CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
THE LUXEMBOURG STOCK EXCHANGE TAKES NO RESPONSIBILITY FOR THE CONTENTS OF
THIS DOCUMENT, MAKES NO REPRESENTATION AS TO ITS ACCURACY OR COMPLETENESS AND
EXPRESSLY DISCLAIMS ANY LIABILITY WHATSOEVER FOR ANY LOSS HOWSOEVER ARISING FROM
OR IN RELIANCE UPON THE WHOLE OR ANY PART OF THE CONTENTS OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... S-4
Risk Factors................................................ S-12
Use of Proceeds............................................. S-15
Capitalization.............................................. S-15
Executive Officers and Directors............................ S-16
Description of the Notes.................................... S-17
United States Taxation of Non-United States Persons......... S-21
Underwriters................................................ S-23
Notice to Canadian Residents................................ S-25
Listing and General Information............................. S-26
Legal Matters............................................... S-26
Experts..................................................... S-26
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
Forward-Looking Information................................. 4
About Conoco................................................ 4
Use of Proceeds............................................. 5
Ratio of Earnings to Fixed Charges.......................... 5
Description of Debt Securities.............................. 5
Plan of Distribution........................................ 14
Legal Opinions.............................................. 15
Experts..................................................... 15
</TABLE>
We cannot guarantee that listing will be obtained on the Luxembourg Stock
Exchange, and settlement of the notes is not conditioned on obtaining this
listing. Copies of this prospectus supplement and the accompanying prospectus,
and the documents we have incorporated by reference, will be available free of
charge at the office of Kredietbank S.A. Luxembourg, Kredietbank S.A.
Luxembourgeoise, 43, Boulevard Royal, L-2955 Luxembourg.
All references in this prospectus supplement and the accompanying
prospectus to "dollars" or "$" are to the currency of the United States of
America.
S-3
<PAGE> 5
SUMMARY
This summary highlights selected information from this prospectus
supplement and the accompanying prospectus, but does not contain all information
that may be important to you. This prospectus supplement and the accompanying
prospectus include specific terms of the offering of the notes, information
about our business and financial data. We encourage you to read this prospectus
supplement and the accompanying prospectus in its entirety before making an
investment decision.
In this prospectus supplement and the accompanying prospectus, we refer to
Conoco Inc., its wholly owned and majority-owned subsidiaries and its ownership
interest in equity affiliates as "we" or "Conoco," unless the context clearly
indicates otherwise. Our ownership interest in equity affiliates includes
corporate entities, partnerships, limited liability companies and other ventures
in which we exert significant influence by virtue of our ownership interest,
typically between 20 and 50 percent.
The term "20 Notes" refers to the % Notes due 20 . The term "20
Notes" refers to the % Notes due 20 . The term "20 Notes" refers to the
% Notes due 20 . The term "Notes" refers to all three series of notes
collectively.
ABOUT CONOCO
Conoco is a major, integrated, global energy company involved in both the
Upstream and Downstream segments of the petroleum business. Upstream activities
include exploring for and developing, producing and selling crude oil, natural
gas and natural gas liquids. Downstream activities include refining crude oil
and other feedstocks into petroleum products, buying and selling crude oil and
refined products and transporting, distributing and marketing petroleum
products. In addition to Upstream and Downstream operations, we also develop and
operate power facilities. We operate in 40 countries worldwide.
As of December 31, 1998, we had proved worldwide reserves of 2,622 million
barrels of oil equivalent ("BOE"), 39 percent of which were natural gas
(converted to BOE using a ratio of six thousand cubic feet of natural gas to one
barrel-of-oil-equivalent). Based on 1998 annual production of 213 million BOE
(excluding natural gas liquids from gas plant ownership), we had a reserve life
of 12.3 years as of December 31, 1998. Over the last five years, we have
replaced an average of 195 percent of the oil and gas we have produced each
year. We own or have equity interests in nine refineries worldwide, with a total
crude and condensate processing capacity of approximately 807,000 barrels per
day. We have a marketing network of approximately 7,900 outlets in the United
States, Europe and Asia. Based on public filings, for the year ended December
31, 1998, we ranked eighth in the worldwide production of petroleum liquids by
U.S.-based companies, eleventh in the production of natural gas and eighth in
refining throughput. For that same period, we reported net income of $450
million, which included a net charge for special items of $271 million, on total
revenues of $23,168 million.
UPSTREAM
We are currently exploring for, developing or producing crude oil, natural
gas and/or natural gas liquids in 17 countries around the world. In 1998,
production averaged 583,000 BOE per day, consisting of 348,000 barrels per day
of petroleum liquids (excluding natural gas liquids from gas plant ownership)
and 1,411 million cubic feet of natural gas per day. The majority of this
production came from fields located in the United States, the United Kingdom and
Norway, with the remaining production coming from operations in Canada, the
United Arab Emirates, Indonesia, Nigeria, Russia and Venezuela.
In 1998, we replaced nearly 110 percent of the oil and natural gas we
produced, adding 234 million BOE to our worldwide reserves while producing 213
million BOE (excluding natural gas liquids from gas plant ownership), for a net
addition of 21 million BOE. This marks the sixth consecutive year in which we
have replaced more reserves than we produced. We replaced 163 percent of the
natural gas produced and 74 percent of the oil produced. On December 31, 1998,
we had proved reserves of 2,622 million BOE,
S-4
<PAGE> 6
consisting of 1,591 million barrels of petroleum liquids and 6,183 billion cubic
feet of natural gas, representing an increase of 48 percent on a BOE basis since
December 31, 1994.
We made capital investments in Upstream activities in 1998 of $1,965
million, including the continued development of major projects, such as the Lobo
trend, Britannia, Ursa and Petrozuata. We anticipate that these projects will
contribute to our 1999 production and significantly increase our production
rates over current levels in future years.
The majority of our exploration and production assets are located in North
America (United States and Canada) and Western Europe (United Kingdom and
Norway). The producing properties in these areas generate cash to fund growth
opportunities around the world. Outside of North America and Western Europe, our
investment activities are focused on areas that have the potential to become
major business areas in the future, such as northern South America and the
Caribbean, Asia Pacific, West Africa, Middle East and Russia/Caspian Sea
regions.
We are exploring for oil and/or natural gas in 15 countries. Since 1996, we
have pursued and continue to implement an exploration strategy focused on
acquiring large acreage positions in areas that are relatively under-explored.
The purpose of these acreage acquisitions has been to establish us at an early
stage in areas that have the potential for large discoveries. During the same
period, we acquired significant acreage positions in the deepwater Gulf of
Mexico, the Atlantic Margin of Northwest Europe, northern South America and the
Caribbean, and selected basins in the Asia Pacific region. In 1998, our
exploratory success rate was its best in 15 years. Approximately 30 percent of
the exploratory wells we drilled (excluding appraisal wells) were potentially
commercial.
We intend to manage our asset portfolio to increase the proportion of
Upstream assets relative to Downstream assets and the proportion of large-scale,
long-lived, early-life-cycle assets relative to mature assets. In the course of
implementing this strategy, we have in the past, and may from time to time in
the future, purchase or sell producing Upstream assets. We may also consider
forming alliances or joint ventures to hold and operate selected Upstream
assets, either to optimize the efficiency of such operations through achieving
economies of scale or, in certain circumstances, to monetize a portion of the
value of such assets.
DOWNSTREAM
Downstream operations are organized regionally with operations in the
United States, Europe and the Asia Pacific region. United States and European
operations each provided about one-half (55 and 56 percent, respectively) of
total Downstream earnings in 1998, partially offset by a small loss resulting
from start-up activities in Asia Pacific.
We have made capital investments in Downstream activities averaging
approximately $600 million per year for the last three years. In 1998, capital
investments in Downstream activities were approximately $530 million, relating
primarily to worldwide retail marketing operations and the completion of the
Melaka refinery in Malaysia.
Downstream's strengths are in processing heavy, high sulfur and acidic
crudes, upgrading bottom-of-the-barrel feedstocks via coking technology,
maintaining low cost, high volume retail marketing operations and developing
specialty products. Approximately 50 percent of our worldwide refining capacity
is designed to process heavy, high sulfur crude. The Humber refinery in the
United Kingdom can process about 44 percent acidic crudes in its crude slate. We
have applied our coking technology to nearly all of our refining operations
throughout the world. This has enabled us to become a world leader in producing
petroleum coke products, such as high value graphite and anode coke, which are
used in the production of electrodes and anodes for the steel and aluminum
industries, respectively. We have also licensed our fuel coking technology
around the world, which has in turn created other business development
opportunities.
We produce and market a full range of refined petroleum products, including
gasolines, diesel fuels, heating oils, aviation fuels, heavy fuel oils,
asphalts, lubricants, petroleum coke products and petrochemical feedstocks. We
own and operate, or are a partner in the operation of, nine refineries worldwide
with a total
S-5
<PAGE> 7
crude and condensate capacity of 807,000 barrels per day. Refining capacity is
distributed 62 percent in the United States, 33 percent in Europe and 5 percent
in the Asia Pacific region.
Capacity has risen by over 185,000 barrels per day, or 30 percent, since
year end 1995 as a result of the expansion of the Lake Charles refinery, the
upgrade of the Humber refinery, the acquisition of an interest in two refineries
in the Czech Republic and an investment in the new Melaka refinery in Malaysia.
In the United States, we primarily market through low cost wholesale operations.
We have a growing marketing presence in Europe and Asia Pacific, where we are a
leader in operating low cost, high volume retail stations. In 1998, refined
product sales averaged 1,049,000 barrels per day, distributed 68 percent, 31
percent and one percent in the United States, Europe and the Asia Pacific
region, respectively.
Our objective for Downstream is to continue to provide an appropriate
return on investment by improving the competitiveness of the core business,
while providing free cash flow to fund growth in Upstream, as well as in new
Downstream businesses. Consistent with such objectives, we have in the past, and
may from time to time in the future, purchase or sell Downstream assets. We may
also consider forming alliances or joint ventures to hold and operate all or a
selected part of our Downstream assets, either to optimize the efficiency of
such operations through achieving economies of scale or, in certain
circumstances, to monetize a portion of the value of such assets.
BUSINESS STRATEGY
We intend to pursue a growth-oriented business strategy by exploiting
growth opportunities where we have existing major areas of operation, creating
at least two new major business areas in northern South America and the
Caribbean, and one of the Asia Pacific, West Africa, Middle East or
Russia/Caspian Sea regions, and continuing to improve the profitability,
efficiency and effectiveness of our existing operations. Specifically, we intend
to:
- manage our portfolio to increase the proportion of Upstream assets
relative to Downstream assets and the proportion of large-scale,
long-lived, early-life-cycle assets relative to mature assets, which
could include forming joint ventures or alliances to optimize the
efficiency of operations or monetize a portion of the value of such
assets
- achieve significant near-term production growth through large scale
projects such as Petrozuata, Britannia, Lobo and Ursa
- seek opportunities created by worldwide privatizations and the opening of
new markets previously closed to private investment
- apply our strengths in carbon upgrading, project management, deepwater
technology, natural gas processing, seismic processing and
interpretation, and our ability to present integrated Upstream/
Downstream solutions to host governments and other institutions in new
and emerging markets
- pursue exploration activities that have significant value-creation
potential by concentrating on areas that are underexplored
- capitalize on our ability to convert low cost, heavy, high sulfur and
acidic crude oils into high-value light oil products
- continuously rationalize our asset base, contain costs, optimize our
investment portfolio and improve operating reliability
In all our activities, we will strive to act in accordance with our core values
of operating safely, protecting the environment, acting ethically and valuing
all people.
SEPARATION FROM DUPONT
In May 1998, E. I. du Pont de Nemours and Company announced its intention
to divest its oil and gas business, operated through Conoco. In October 1998,
Conoco completed its initial public offering,
S-6
<PAGE> 8
selling 191.5 million shares of Conoco Class A Common Stock (entitled to one
vote per share), representing approximately 30.5 percent of the total shares
outstanding. DuPont, through its ownership of all of the 436.5 million shares of
Conoco Class B Common Stock (entitled to five votes per share), retained 69.5
percent of the total outstanding shares and 91.9 percent of the total voting
power of Conoco. DuPont has announced that it intends to divest its remaining
ownership interest in Conoco through a "split-off" in 1999, in which holders of
DuPont common stock will have the option of electing to exchange some or all of
their DuPont shares for the remaining Conoco shares held by DuPont. On March 22,
1999, the registration statement for the split-off was initially filed with the
SEC. We can give no assurance as to the timing or successful completion of the
split-off.
THE OFFERING
Securities Offered......... $ million principal amount of % Notes due
20
$ million principal amount of % Notes due
20
$ million principal amount of % Notes due
20
Maturity Dates............. , 20 for the 20 Notes
, 20 for the 20 Notes
, 20 for the 20 Notes
Interest Payment Dates..... and of each year,
commencing , 1999
Redemption................. At any time, we may redeem any or all of the Notes
in principal amounts of $1,000 or any integral
multiple thereof. We will pay a redemption price
equal to the principal amount of Notes we redeem
plus a make-whole premium, which is described under
the heading "Description of the
Notes -- Redemption" beginning on page S-17. We
also will pay accrued interest to the redemption
date.
Ranking.................... The Notes:
- are unsecured
- rank equally with all our existing and
future unsecured senior debt
- are senior to any future subordinated debt
- are effectively junior to our secured debt
and to all existing and future debt and
other liabilities of our subsidiaries
Covenants.................. We will issue the Notes under an indenture
containing covenants for your benefit. These
covenants restrict our ability, with certain
exceptions, to:
- incur debt secured by liens
- engage in sale/leaseback transactions
Use of Proceeds............ We intend to use the net proceeds of approximately
$ billion to repay a portion of our debt owed to
DuPont.
S-7
<PAGE> 9
SUMMARY FINANCIAL DATA
We have provided in the tables below summary consolidated historical
financial data. We have derived the statement of income data for each of the
years in the four-year period ended December 31, 1998, and the historical
balance sheet data as of December 31, 1998, 1997 and 1996, from our audited
consolidated financial statements. We have based the statement of income data
for the year ended December 31, 1994, and the historical balance sheet data as
of December 31, 1995 and 1994, on the accounting records of DuPont, which, in
our management's opinion, include all adjustments necessary for the fair
presentation of our financial position at such dates and our results of
operations for such periods. You should read the following financial information
in conjunction with our consolidated financial statements and related notes that
we have incorporated by reference in the accompanying prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------------
1998 1997 1996 1995 1994
------- -------- -------- -------- -------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Total Revenues(1)............................ $23,168 $26,263 $24,416 $20,518 $19,433
Cost of Goods Sold and Other Operating
Expenses................................... 13,840 16,226 14,560 11,146 10,640
Selling, General and Administrative
Expenses................................... 736 726 755 728 679
Stock Option Provision....................... 236 -- -- -- --
Exploration Expenses(2)...................... 380 457 404 331 357
Depreciation, Depletion and Amortization
(DD&A)..................................... 1,113 1,179 1,085 1,067 1,244
Taxes Other Than on Income(1)................ 5,970 5,532 5,637 5,823 5,477
Interest and Debt Expense.................... 199 36 74 74 63
------- ------- ------- ------- -------
Income Before Income Taxes................... 694 2,107 1,901 1,349 973
Provision for Income Taxes................... 244 1,010 1,038 774 551
------- ------- ------- ------- -------
Net Income(3)(4)................... $ 450 $ 1,097 $ 863 $ 575 $ 422
======= ======= ======= ======= =======
Segment After-Tax Income:
Upstream:
United States.............................. $ 219 $ 445 $ 314 $ 258 $ 248
International.............................. 283 439 367 234 250
Downstream:
United States.............................. 135 216 172 112 104
International.............................. 156 91 117 121 137
Corporate and Other(3)....................... (343) (94) (107) (150) (317)
------- ------- ------- ------- -------
$ 450 $ 1,097 $ 863 $ 575 $ 422
======= ======= ======= ======= =======
OTHER DATA:
Cash Provided by Operations.................. $ 1,373 $ 2,876 $ 2,396 $ 1,924 $ 2,143
Cash Used for Investing Activities........... 1,598 2,037 1,647 1,677 1,364
Cash Used for Financing Activities........... 555 499 187 313 773
Capital Expenditures and Investments......... 2,516 3,114 1,944 1,837 1,665
Cash Exploration Expense..................... 217 286 262 204 200
EBITDA(4)(5)................................. 2,006 3,322 3,060 2,490 2,280
Ratio of EBITDA to Interest Expense(4)....... 10.1x 92.3x 41.4x 33.6x 36.2x
Ratio of Earnings to Fixed Charges(4)(6)..... 3.2x 12.9x 11.6x 7.3x 7.3x
Ratio of Earnings Before Special Items to
Fixed Charges(4)(7)........................ 4.6x 12.4x 11.5x 7.7x 8.0x
</TABLE>
- ---------------
(1) Includes petroleum excise taxes of $5,801, $5,349, $5,461, $5,655 and $5,291
for 1998, 1997, 1996, 1995 and 1994, respectively.
S-8
<PAGE> 10
(2) Includes cash exploration overhead and operating expense, DD&A, dry hole
costs and impairments of unproved properties.
(3) Includes after-tax exchange gains (losses) of $32, $21, $(7), $(40) and
$(143) for 1998, 1997, 1996, 1995 and 1994, respectively.
(4) Our current report on Form 8-K incorporated by reference in the accompanying
prospectus includes a pro forma statement of income for the year ended
December 31, 1998 that gives effect to our initial public offering, our
separation from DuPont and related transactions. Pro forma net income and
EBITDA for the year ended December 31, 1998 were $392 million and $1,948
million, respectively. The pro forma ratios of EBITDA to interest expense,
earnings to fixed charges and earnings before special items to fixed charges
were 8.7x, 2.8x and 4.1x, respectively, for the same period.
(5) EBITDA means earnings before interest expense, income taxes, depreciation,
depletion and amortization. EBITDA is not a generally accepted accounting
principles measure and may not be comparable to similarly titled items of
other companies. You should not consider EBITDA as an alternative to net
income or any other generally accepted accounting principles measure of
performance as an indicator of our operating performance or as a measure of
liquidity. EBITDA does not represent funds available for management's
discretionary use because certain future cash expenditures are not reflected
in the EBITDA presentation. Some investors use this data as an indicator of
a company's ability to service debt.
(6) We have computed the ratio of earnings to fixed charges by dividing earnings
by fixed charges. For this purpose, "earnings" consist of income before
income taxes and extraordinary items and fixed charges. "Fixed charges"
consist of interest expense, capitalized interest, amortization of debt
expense and that portion of annual rental expense we have deemed to
represent the interest factor.
(7) For the ratio of earnings before special items to fixed charges, we have
excluded special items from the computation of earnings. Special items are
material nonrecurring items and generally consist of asset sales, property
impairments, tax rate changes, employee separation costs, inventory
write-downs, environmental insurance litigation recoveries, environmental
litigation charges and, in 1998, a stock option provision. For more
information about our special items, please read "Results of Operations --
Special Items" beginning on page 45 in Item 7 of our annual report on Form
10-K for the year ended December 31, 1998, as amended on March 12, 1999.
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents.................... $ 394 $ 1,147 $ 846 $ 286 $ 319
Working Capital.............................. 45 567 862 999 1,790
Net Property, Plant and Equipment............ 11,413 10,828 10,082 9,758 9,522
Total Assets................................. 16,075 17,062 15,226 14,229 15,271
Long-Term Borrowings -- Related Parties...... 4,596 1,450 2,287 2,141 2,279
Other Long-Term Borrowings and Capital Lease
Obligations................................ 93 106 101 65 342
Total Stockholders' Equity/Owner's Net
Investment................................. 4,438 7,896 6,579 6,754 7,274
</TABLE>
S-9
<PAGE> 11
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Proved Reserves at December 31(1):
Oil (MMbbls)(2)................................. 1,591 1,624 973 977 988
Natural Gas (Bcf)............................... 6,183 5,861 5,396 5,048 4,674
Total Proved Reserves (MMBOE)(3)................ 2,622 2,601 1,872 1,818 1,767
International Proved Reserves (% of Total)........ 73% 73% 65% 63% 61%
Reserve Replacement Ratio(1)...................... 110% 448% 126% 127% 157%
Reserve Life (years)(1)(4)........................ 12.3 12.4 8.9 9.3 8.2
Finding and Development Costs per BOE(1)(3)(5).... $ 4.03 $ 3.63 $ 4.84 $ 5.39 $ 6.24
Average Daily Production(1):
Oil (Mbbls/day)(2).............................. 348 374 374 346 367
Natural Gas (MMcf/day).......................... 1,411 1,203 1,211 1,126 1,327
Total Production (MBOE/day)(3).................. 583 575 576 534 558
Average Production Costs per BOE(3)(6)............ $ 3.95 $ 4.21 $ 3.84 $ 3.92 $ 3.59
Refinery Capacity at December 31
(Mbbls/day)(1)(7)............................... 807 754 743 621 602
Refinery Utilization(7)........................... 92% 91% 83% 97% 99%
Total Refinery Inputs (Mbbls/day)(1)(8)........... 823 780 732 721 697
Sales of Refined Products (Mbbls/day)(1).......... 1,049 1,048 998 983 931
Retail Marketing Outlets at December 31(9):
United States................................... 4,897 4,903 4,976 5,125 5,196
International................................... 3,023 2,971 2,874 2,390 2,438
</TABLE>
- ---------------
(1) Includes our share of equity affiliates.
(2) Includes crude oil, condensate and natural gas liquids expected to be
removed for our account from our natural gas production.
(3) 6,000 cubic feet of natural gas = one barrel-of-oil-equivalent (BOE).
(4) Total proved reserves at December 31 divided by annual production for the
year ended December 31, excluding natural gas liquids from gas plant
ownership.
(5) Finding and development costs per BOE represent a trailing five-year average
for each year displayed.
(6) Excludes equity affiliates and processed natural gas liquids.
(7) Based on rated capacity to process crude oil and condensate (excludes other
feedstocks).
(8) Includes crude oil, condensate and other feedstocks.
(9) Represents outlets owned by us and others that sell our refined products.
S-10
<PAGE> 12
SUMMARY RESERVE DATA
We have provided in the tables below summary information as of the dates
indicated with respect to our estimated proved reserves of oil and natural gas
at year-end for 1998 and 1997. Unless we inform you otherwise, all information
in this prospectus supplement relating to oil and natural gas reserves has been
based upon our estimates and reflects our net interest after royalties. Please
read "Risk Factors -- The oil and gas reserves data in this document are only
estimates and may prove to be inaccurate" on page S-13 of this prospectus
supplement.
<TABLE>
<CAPTION>
PROVED RESERVES
AT DECEMBER 31,
------------------ % INCREASE
1998 1997 (DECREASE)
--------- ------ ----------
(NET AFTER ROYALTY
BASIS)(1)
<S> <C> <C> <C>
United States:
Oil (MMbbls)(2)........................................... 261 277 (6)
Natural Gas (Bcf)......................................... 2,700 2,605 4
-------- -----
Total Proved Reserves (MMBOE)(3).................. 711 711 --
International:
Oil (MMbbls)(2)........................................... 1,330 1,347 (1)
Natural Gas (Bcf)......................................... 3,483 3,256 7
-------- -----
Total Proved Reserves (MMBOE)(3).................. 1,911 1,890 1
Worldwide:
Total Proved Reserves (MMBOE)(3).................. 2,622 2,601 1
======== =====
</TABLE>
- ---------------
(1) Includes our share of equity affiliate reserves.
(2) Reserves comprise crude oil, condensate and natural gas liquids expected to
be removed for our account from our natural gas production.
(3) 6,000 cubic feet of natural gas = one barrel-of-oil-equivalent (BOE).
S-11
<PAGE> 13
RISK FACTORS
In considering whether to purchase the Notes, you should carefully consider
all the information we have included or incorporated by reference in this
prospectus supplement and the accompanying prospectus. In particular, you should
carefully consider the risk factors described below. In addition, please read
"Forward-Looking Information" on page 4 of the accompanying prospectus, where we
describe additional uncertainties associated with our business and the
forward-looking statements in this prospectus supplement and the accompanying
prospectus.
LOW OIL AND GAS PRICES HAVE NEGATIVELY AFFECTED OUR FINANCIAL RESULTS AND MAY
CONTINUE TO DO SO IN THE FUTURE.
Crude oil prices declined substantially in 1998, and we expect these
depressed prices to continue in 1999. During 1998, West Texas Intermediate crude
oil prices fell to 12-year lows as measured in absolute dollars, and 25-year
lows as measured in inflation-adjusted dollars, and closed at $12.05 per barrel
on December 31, 1998. These lower prices had a significant negative impact on
our financial results in 1998, in which our net income fell 59 percent compared
to 1997. We expect these prices to continue to affect 1999 financial results
negatively.
Our profitability is determined in large part by the difference between the
prices we receive for the crude oil, natural gas, natural gas liquids and
refined products we produce and the costs of finding, developing, producing,
refining and marketing these resources. We have no control over many factors
affecting prices for our products. Prices for crude oil, natural gas and refined
products may fluctuate widely in response to changes in global and regional
supply, political developments and the ability of the Organization of Petroleum
Exporting Countries, or OPEC, and other producing nations to set and maintain
production levels and prices. Prices for crude oil, natural gas and refined
products are also affected by changes in demand for these products, which may
result from global events, as well as supply and demand in industrial markets,
such as the steel and aluminum markets.
Reduced Asian demand, as a result of the recent economic downturn in Asia,
has negatively affected worldwide crude oil and product prices. Decreases in
crude oil and natural gas prices and refined product margins may adversely
affect us. Lower crude oil and natural gas prices may reduce the amount of oil
and natural gas reserves we can produce economically, and existing contracts
that we have entered into may become uneconomic.
GLOBAL POLITICAL AND ECONOMIC DEVELOPMENTS MAY HURT OUR OPERATIONS.
Local political and economic factors in international markets may have a
material adverse effect on us. Approximately 43 percent of our sales in 1998 was
derived from markets outside the United States, and 73 percent of our proved
reserves at year-end 1998 were located outside the United States.
There are many risks associated with operations in international markets,
including changes in foreign governmental policies relating to crude oil,
natural gas or refined product pricing and taxation, other political, economic
or diplomatic developments, changing political conditions and international
monetary fluctuations. These risks include:
- political and economic instability or war
- the possibility that a foreign government may seize our property with or
without compensation
- confiscatory taxation
- a foreign government's attempting to renegotiate or revoke existing
contractual arrangements
- fluctuating currency values, hard currency shortages and currency
controls
Recent turmoil in regions such as Russia, Southeast Asia and South America has
subjected our operations in these regions to increased risks.
S-12
<PAGE> 14
Actions of the United States government can also expose our operations to
risk. The United States government can use tax and other legislation, executive
orders and commercial restrictions to prevent or restrict us from doing business
in foreign countries. These restrictions and those of foreign governments have
in the past limited our ability to operate in or gain access to opportunities in
various countries. Actions of the United States government through tax and other
legislation, executive order and commercial restrictions could adversely affect
our operating profitability both in the U.S. and overseas. Various agencies of
the United States and other governments have from time to time imposed
restrictions on our ability to operate in or gain attractive opportunities in
various countries. Actions by both the United States and host governments have
affected operations significantly in the past and will continue to do so in the
future.
We are also exposed to fluctuations in foreign currency exchange rates. We
do not intend to comprehensively hedge our exposure to currency rate changes,
although we may choose to selectively hedge certain working capital balances,
firm commitments, cash returns from affiliates or tax payments. These efforts
may not be successful.
THE OIL AND GAS RESERVES DATA IN THIS DOCUMENT ARE ONLY ESTIMATES AND MAY PROVE
TO BE INACCURATE.
Estimating quantities of proved oil and natural gas reserves involves many
uncertainties. The reserve data included in this prospectus supplement represent
estimates only. Reservoir engineering is a subjective and inexact process of
estimating underground accumulations of oil and natural gas that cannot be
measured in an exact manner. We base our estimates of economically recoverable
oil and natural gas reserves and future net cash flows on many variables and
assumptions related to reserve performance that require evaluation by engineers
interpreting the available geologic, engineering and economic data, as well as
price and other economic factors. Many of these factors, assumptions and
variables are beyond our control, and some or all of them may prove wrong over
time.
The reliability of reserve estimates depends on the quality and quantity of
technical and economic data, the production performance of the reservoirs and
extensive engineering judgment. Results of drilling, testing and production
after the date of the estimates may require substantial upward or downward
revisions. Adverse changes in economic conditions, including a drop in oil or
natural gas prices, may render it uneconomical to produce certain reserves.
Accordingly, actual production, revenues and expenditures with respect to our
reserves will likely vary from estimates, and such variances may be material.
OUR GROWTH DEPENDS ON FINDING NEW RESERVES.
Our ability to achieve our growth objectives depends upon our success in
finding, acquiring or gaining access to additional reserves. In general,
production from oil and natural gas properties declines as reserves are
depleted, with the rate of decline depending on reservoir characteristics. Our
total proved reserves will decline as reserves are produced unless we conduct
successful exploration and development activities or acquire properties
containing proved reserves, or both. Our exploration and development activities
expose us to inherent drilling risks, including the risk that we will encounter
no economically productive natural gas or oil reservoirs. The costs of drilling,
completing and operating wells are often uncertain and numerous factors beyond
our control may cause drilling operations to be curtailed, delayed or cancelled.
Our future drilling, exploration and acquisition activities may not be
successful. If these activities are unsuccessful, this failure would have an
adverse effect on our future results of operations and financial condition.
POTENTIAL YEAR 2000 PROBLEMS MAY ADVERSELY AFFECT OUR BUSINESS.
Many existing computer programs were designed and developed using only two
digits to represent the year of a date. This failure to consider the upcoming
change in the century could lead to the failure of computer applications or
create erroneous results by or at the year 2000. This issue is referred to as
the "Year 2000 Issue." The Year 2000 Issue extends beyond traditional computer
hardware and software to possible failure of automated plant systems and
instrumentation. The Year 2000 Issue also affects third
S-13
<PAGE> 15
parties with whom we do business. These third parties may not successfully
reprogram or replace, and test, all of their own computer hardware, software and
process control systems to ensure they are Year 2000 compliant. Failure by us,
our business associates or other constituents, such as governments, to become
Year 2000 compliant on a timely basis could have a material adverse effect on
our financial position and results of operations. For more information about
Year 2000 risks, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year 2000" beginning on page 53 of our
annual report on Form 10-K for the year ended December 31, 1998, as amended on
March 12, 1999.
WE WILL INCUR SUBSTANTIAL COSTS TO COMPLY WITH ENVIRONMENTAL REGULATIONS.
We incur, and expect to continue to incur, substantial capital and
operating costs to comply with increasingly complex laws and regulations
covering the protection of the environment, including costs to remediate
contamination at various owned and previously owned facilities and at
third-party sites where our products or wastes have been handled or disposed.
New laws and regulations, the imposition of tougher requirements in permits,
increasingly strict enforcement of existing laws and regulations or the
discovery of previously unknown contamination may require future expenditures to
modify operations, install pollution control equipment, perform site clean ups
or curtail our operations. For example, the European Union recently enacted
legislation to reduce the sulfur content of motor fuels we produce and market.
We estimate that this legislation will require us to make capital expenditures
of approximately $100 million in 1999, $100 million in 2000 and $50 million in
2001. The U.S. Environmental Protection Agency is considering similar measures.
We cannot assure you that these future expenditures, investments or curtailments
will not have a material adverse effect on us.
WE MAY FACE CONFLICTS OF INTEREST WITH DUPONT.
DuPont currently owns 91.9 percent of the combined voting power of all
classes of our voting stock and therefore can control all determinations with
respect to corporate governance matters affecting us, including establishing the
terms of the proposed split-off, our direction and policies, acquisitions or
dispositions of assets, future issuances of securities, incurrence of debt and
payment of dividends. Conflicts of interest may arise between us and DuPont in a
number of areas.
THERE IS NO PUBLIC MARKET FOR THE NOTES, AND WE DO NOT INTEND TO LIST THEM ON
ANY U.S. SECURITIES EXCHANGE OR DEALER QUOTATION SYSTEM.
There is no existing market for the Notes. We cannot provide any assurance
about:
- the liquidity of any markets that may develop for the Notes
- your ability to sell your Notes
- the prices at which you will be able to sell your Notes
Future trading prices of the Notes will depend on many factors, including
prevailing interest rates, our operating results, ratings of the Notes and the
market for similar securities. The underwriters have advised us that they intend
to make a market in the Notes of each series after completion of the offering.
The underwriters do not, however, have any obligation to do so, and they may
discontinue any market-making activities at any time without any notice. In
addition, although we have applied to list the Notes on the Luxembourg Stock
Exchange, we do not intend to apply for the listing of the Notes on any other
securities exchange or for quotation of the Notes in any dealer quotation
system.
S-14
<PAGE> 16
USE OF PROCEEDS
We expect the net proceeds from the offering of the Notes to be
approximately $ billion, after deducting discounts to the underwriters and
estimated expenses of the offering that we will pay. We expect to use the net
proceeds to repay a portion of our debt owed to DuPont (with an interest rate of
6.0125%). We incurred the debt as a dividend in July 1998 in connection with our
separation from DuPont.
CAPITALIZATION
We have provided in the table below our consolidated capitalization as of
December 31, 1998 and as adjusted to give effect to the issuance of the Notes
and the application of the net proceeds from that issuance as described in "Use
of Proceeds." Except as described in this prospectus supplement, the
accompanying prospectus or the documents we incorporate by reference, there has
been no material change in our consolidated capitalization since December 31,
1998. In addition to the issuance of the Notes, we intend to establish a
commercial paper program that will be supported by a committed bank credit
facility. We will use the proceeds from the commercial paper program both to
repay any remaining debt owed to DuPont after the application of the net
proceeds from the issuance of the Notes and for general corporate purposes.
DuPont intends to complete the split-off in 1999, and we intend to complete the
refinancing of our debt owed to DuPont prior to the split-off.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS, EXCEPT
SHARE DATA)
<S> <C> <C>
LONG-TERM DEBT:
% Notes due 20 .................................... --
% Notes due 20 .................................... --
% Notes due 20 .................................... --
Long-Term Borrowings -- Related Parties(1).................. 4,596
Other Long-Term Borrowings and Capital Lease Obligations.... 93 93
------ ------
Total Long-Term Debt.............................. $4,689
------ ------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value:
250,000,000 shares authorized; none issued................ -- --
Class A Common Stock, $.01 par value:
3,000,000,000 shares authorized; 191,497,821 shares
issued................................................. 2 2
Class B Common Stock, $.01 par value:
1,600,000,000 shares authorized; 436,543,573 shares issued
and outstanding........................................ 4 4
Additional Paid-in Capital.................................. 4,955 4,955
Accumulated Deficit......................................... (244) (244)
Accumulated Other Comprehensive Loss........................ (274) (274)
Treasury Stock, at cost(249,863 Class A shares)............. (5) (5)
------ ------
Total Stockholders' Equity........................ $4,438 $4,438
------ ------
Total Capitalization.............................. $9,127
====== ======
</TABLE>
- ---------------
(1) We also have an agreement with DuPont under which DuPont provides us with a
revolving credit facility of up to $500 million in principal amount. The
principal amounts outstanding under this agreement at December 31, 1998 and
March 15, 1999 were $0 and $330 million, respectively.
S-15
<PAGE> 17
EXECUTIVE OFFICERS AND DIRECTORS
We have provided in the tables below information about our current
executive officers and directors:
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Archie W. Dunham......................... President and Chief Executive Officer
Gary W. Edwards.......................... Executive Vice President, Refining,
Marketing, Supply and Transportation
Robert E. McKee III...................... Executive Vice President, Exploration
Production
Robert W. Goldman........................ Senior Vice President, Finance, and Chief
Financial Officer
Rick A. Harrington....................... Senior Vice President, Legal, and General
Counsel
</TABLE>
DIRECTORS
<TABLE>
<CAPTION>
NAME(1) PRINCIPAL OCCUPATION
------- --------------------
<S> <C>
Edgar S. Woolard, Jr..................... Chairman of the Board of Conoco Inc.
Archie W. Dunham......................... President and Chief Executive Officer of
Conoco Inc.
Ruth R. Harkin........................... Senior Vice President, International
Affairs and Government Relations of
United Technologies Corporation
Frank A. McPherson....................... Former Chairman and Chief Executive
Officer of Kerr-McGee Corporation
Gary M. Pfeiffer......................... Senior Vice President, Finance, and Chief
Financial Officer of E. I. du Pont de
Nemours and Co.
William K. Reilly........................ President and Chief Executive Officer of
Aqua International Partners
William R. Rhodes........................ Vice Chairman of Citigroup, Inc.
Franklin A. Thomas....................... Consultant to the TFF Study Group
</TABLE>
- ---------------
(1) The business address of our directors is c/o Conoco Inc., 600 North Dairy
Ashford, Houston, Texas 77079.
S-16
<PAGE> 18
DESCRIPTION OF THE NOTES
We have summarized selected provisions of the Notes below. Each series of
Notes is a separate series of debt securities described in the accompanying
prospectus, and this summary supplements that description. We urge you to read
that description for provisions that may be important to you.
GENERAL
The 20 Notes will mature on , 20 and will bear interest at %
per annum. The 20 Notes will mature on , 20 and will bear interest
at % per annum. The 20 Notes will mature on , 20 and will bear
interest at % per annum. Interest on the Notes will accrue from ,
1999. We:
- will pay interest semiannually on and of each year,
commencing , 1999
- will pay interest to the person in whose name a Note is registered at the
close of business on the or preceding the interest
payment date
- will compute interest on the basis of a 360-day year consisting of twelve
30-day months
- will make payments on the Notes at the offices of the trustee
- may make payments by wire transfer for Notes held in book-entry form or
by check mailed to the address of the person entitled to the payment as
it appears in the Note register
We will issue the Notes only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. The Notes will not be
subject to any sinking fund, and are subject to redemption at our option.
REDEMPTION
The Notes of each series will be redeemable at our option, in whole or in
part, at any time and from time to time, at a redemption price equal to the
greater of:
- 100 percent of the principal amount of the Notes of that series to be
redeemed
- the sum of the present values of the Remaining Scheduled Payments on the
Notes being redeemed, discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at the
Treasury Rate plus basis points for the 20 Notes, basis points
for the 20 Notes and basis points for the 20 Notes
In each case, we will pay accrued interest to the date of redemption.
"Treasury Rate" means the rate per annum equal to the semiannual equivalent
yield to maturity (computed as of the second business day immediately preceding
the redemption date) of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that would be used, at the time of
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the applicable series of Notes. "Independent Investment Banker" means one of
the Reference Treasury Dealers that we appoint.
"Comparable Treasury Price" means:
- the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) as of
the third business day preceding the redemption date, as set forth in the
daily statistical release (or any successor release) published by the
Federal
S-17
<PAGE> 19
Reserve Bank of New York and designated "Composite 3:30 p.m. Quotations
for U.S. Government Securities" or
- if that release (or any successor release) is not published or does not
contain such prices on that business day, (a) the average of the
Reference Treasury Dealer Quotations for the redemption date, after
excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (b) if the trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all quotations obtained
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation (and its successors), Salomon Smith Barney Inc. (and its successors)
and two other nationally recognized investment banking firms that are primary
U.S. Government securities dealers specified from time to time by us. If,
however, any of them shall cease to be a primary U.S. Government securities
dealer, we will substitute another nationally recognized investment banking firm
that is such a dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the trustee by such Reference Treasury Dealer as of 3:30 p.m., New
York time, on the third business day preceding the redemption date.
"Remaining Scheduled Payments" means the remaining scheduled payments of
the principal of and interest on each Note to be redeemed that would be due
after the related redemption date but for such redemption. If the redemption
date is not an interest payment date with respect to the Note being redeemed,
the amount of the next succeeding scheduled interest payment on the Note will be
reduced by the amount of interest accrued thereon to that redemption date.
We will mail notice of a redemption not less than 30 days nor more than 60
days before the redemption date to holders of Notes to be redeemed. As long as
those Notes are listed on the Luxembourg Stock Exchange, we also will publish
notice in the Luxemburger Wort or another newspaper of general circulation in
Luxembourg.
If we are redeeming less than all the Notes of a series, the trustee will
select the particular Notes of the series to be redeemed by lot or by another
method the trustee deems fair and appropriate. Unless we default in payment of
the redemption price, on and after the redemption date, interest will cease to
accrue on the Notes or portions thereof called for redemption.
Except as described above, the Notes will not be redeemable by us prior to
maturity and will not be entitled to the benefit of any sinking fund.
RANKING
The Notes of each series will be our senior unsecured obligations and will
rank equally in right of payment with Notes of the other series and with all of
our other senior unsecured and unsubordinated indebtedness.
We currently conduct substantially all our operations through our
subsidiaries, and our subsidiaries generate substantially all our operating
income and cash flow. As a result, distributions or advances from our
subsidiaries are the principal source of funds necessary to meet our debt
service obligations. Contractual provisions or laws, as well as our
subsidiaries' financial condition and operating requirements, may limit our
ability to obtain cash from our subsidiaries that we require to pay our debt
service obligations, including payments on the Notes. The Notes will be
structurally subordinated to all obligations of our subsidiaries, including
claims of trade payables. This means that holders of the Notes will have a
junior position to the claims of creditors of our subsidiaries on their assets
and earnings. The Notes will also be effectively subordinated to any secured
debt we may incur, to the extent of the value of the assets securing that debt.
The indenture does not limit the amount of debt our subsidiaries can incur, and
it
S-18
<PAGE> 20
permits us to incur secured debt, subject to the limitations described under
"Descriptions of Debt Securities -- Restrictive Covenants" in the accompanying
prospectus.
As of December 31, 1998, as adjusted to give effect to this offering and
the anticipated use of proceeds received, we would have had an aggregate of $
billion of consolidated indebtedness. Approximately $ billion would have ranked
equally in right of payment with the Notes. Approximately $ billion would have
been owed by subsidiaries or secured and therefore effectively senior to the
Notes.
NOTICES
We will mail notices and communications to the holder's address shown on
the register of the Notes. In addition, as long as a series of Notes is listed
on the Luxembourg Stock Exchange, we will publish notices for that series in the
Luxemburger Wort or another newspaper of general circulation in Luxembourg.
PAYING AGENTS AND TRANSFER AGENTS
The trustee will be the paying agent and transfer agent for the Notes. In
addition, as long as a series of Notes is listed on the Luxembourg Stock
Exchange, we will maintain a paying agent and transfer agent for that series in
Luxembourg.
THE TRUSTEE
BancOne, N.A. is the trustee under the indenture. An affiliate of the
trustee is the transfer agent for our common stock. The trustee and its
affiliates also perform certain commercial banking services for us for which
they receive customary fees.
BOOK-ENTRY DELIVERY AND SETTLEMENT
We will issue the Notes of each series in the form of one or more permanent
global notes in definitive, fully registered, book-entry form. The global notes
will be deposited with or on behalf of The Depository Trust Company and
registered in the name of Cede & Co., as nominee of DTC, or will remain in the
custody of the trustee in accordance with the FAST Balance Certificate Agreement
between DTC and the trustee.
DTC has advised us as follows:
- DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code
and a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934
- DTC holds securities that its participants deposit with DTC and
facilitates the settlement among participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in participants' accounts, thereby
eliminating the need for physical movement of securities certificates
- Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and other organizations
- DTC is owned by a number of its direct participants and by the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc.
- Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either
directly or indirectly
- The rules applicable to DTC and its participants are on file with the SEC
S-19
<PAGE> 21
We have provided the following descriptions of the operations and
procedures of DTC solely as a matter of convenience. These operations and
procedures are solely within the control of DTC and are subject to change by
them from time to time. Neither Conoco, the underwriters nor the trustee takes
any responsibility for these operations or procedures, and you are urged to
contact DTC or its participants directly to discuss these matters.
We expect that under procedures established by DTC:
- upon deposit of the global notes with DTC or its custodian, DTC will
credit on its internal system the accounts of direct participants
designated by the underwriters with portions of the principal amounts of
the global notes
- ownership of the Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC or its
nominee, with respect to interests of direct participants, and the
records of direct and indirect participants, with respect to interests of
persons other than participants
The laws of some jurisdictions may require that purchasers of securities
take physical delivery of those securities in definitive form. Accordingly, the
ability to transfer interests in the Notes represented by a global note to those
persons may be limited. In addition, because DTC can act only on behalf of its
participants, who in turn act on behalf of persons who hold interests through
participants, the ability of a person having an interest in Notes represented by
a global note to pledge or transfer those interests to persons or entities that
do not participate in DTC's system, or otherwise to take actions in respect of
such interest, may be affected by the lack of a physical definitive security in
respect of such interest.
So long as DTC or its nominee is the registered owner of a global note, DTC
or that nominee will be considered the sole owner or holder of the Notes
represented by that global note for all purposes under the indenture and under
the Notes. Except as provided below, owners of beneficial interests in a global
note will not be entitled to have Notes represented by that global note
registered in their names, will not receive or be entitled to receive physical
delivery of certificated notes and will not be considered the owners or holders
thereof under the indenture or under the Notes for any purpose, including with
respect to the giving of any direction, instruction or approval to the trustee.
Accordingly, each holder owning a beneficial interest in a global note must rely
on the procedures of DTC and, if that holder is not a direct or indirect
participant, on the procedures of the participant through which that holder owns
its interest, to exercise any rights of a holder of Notes under the indenture or
the global note.
Neither Conoco nor the trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of Notes
by DTC, or for maintaining, supervising or reviewing any records of DTC relating
to the Notes.
Payments on the Notes represented by the global notes will be made to DTC
or its nominee, as the case may be, as the registered owner thereof. We expect
that DTC or its nominee, upon receipt of any payment on the Notes represented by
a global note, will credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the global note as
shown in the records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the global note held through
such participants will be governed by standing instructions and customary
practice as is now the case with securities held for the accounts of customers
registered in the names of nominees for such customers. The participants will be
responsible for those payments.
Transfers between participants in DTC will be effected in accordance with
DTC rules and will be settled in immediately available funds.
S-20
<PAGE> 22
CERTIFICATED NOTES
We will issue certificated notes to each person that DTC identifies as the
beneficial owner of the Notes represented by the global notes upon surrender by
DTC of the global notes if either:
- DTC notifies us that it is no longer willing or able to act as a
depositary for the global notes, and we have not appointed a successor
depositary within 90 days of that notice
- an event of default has occurred and is continuing, and DTC requests the
issuance of certificated notes or
- we determine not to have the Notes represented by a global note
Neither we nor the trustee will be liable for any delay by DTC, its nominee
or any direct or indirect participant in identifying the beneficial owners of
the related Notes. We and the trustee may conclusively rely on, and will be
protected in relying on, instructions from DTC or its nominee for all purposes,
including with respect to the registration and delivery, and the respective
principal amounts, of the Notes to be issued.
UNITED STATES TAXATION OF NON-UNITED STATES PERSONS
This section discusses certain United States federal income tax
consequences of the ownership and disposition of the Notes either by an
individual (a "nonresident alien") who is not a citizen or resident of the
United States within the meaning of Section 7701(b) of the Internal Revenue Code
of 1986, as amended, or by a corporation that is a foreign corporation as to the
United States within the meaning of Section 7701(a) of the Internal Revenue
Code.
In the opinion of Baker & Botts, L.L.P., under United States federal tax
law as of the date of this prospectus supplement:
(a) interest income on a Note that is received by a nonresident alien
or a foreign corporation will not be subject to United States federal
income tax or withholding under the portfolio interest exemption if:
- the interest is not effectively connected with the conduct by the
recipient of a trade or business in the United States
- the recipient of the interest does not actually or constructively own
10 percent or more of the total combined voting power of all classes
of our voting stock
- the recipient of the interest, if a foreign corporation, is not a
controlled foreign corporation that is related, within the meaning of
Section 864(d)(4) of the Internal Revenue Code, to us by reason of
stock ownership and
- the United States person who would otherwise be required to deduct and
withhold tax from the interest receives a statement (which meets the
requirements of Section 871(h)(5) of the Internal Revenue Code) that
the beneficial owner of the Note on which the interest is paid is not
a United States person
(b) a nonresident alien or a foreign corporation will not be subject
to United States federal income tax on any gain realized on the sale,
exchange or redemption of a Note unless the gain is effectively connected
with that person's trade or business in the United States or, in the case
of an individual, that individual is present in the United States for 183
days or more in the taxable year in which the sale, exchange or redemption
occurs and certain other conditions are met
(c) Notes owned by an individual who at the time of his death is not a
citizen or resident of the United States will not be subject to United
States federal estate tax as a result of his death if the
S-21
<PAGE> 23
interest income on the Notes would be eligible for the portfolio interest
exemption if a statement meeting the requirements of Section 871(h)(5) of
the Internal Revenue Code were received
A statement that meets the requirements of Section 871(h)(5) of the
Internal Revenue Code may be provided either:
(a) by the beneficial owner of a Note under penalties of perjury on a
properly completed IRS Form W-8 (which requires the name and address of the
beneficial owner) or
(b) by a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
trade or business (a "financial institution") and holds the Note that
certifies that such a properly completed Form W-8 has been received from
the beneficial owner of the Note by it or by a financial institution
between it and the beneficial owner of the Note
Copies of IRS Form W-8 may be obtained from Paribas Luxembourg S.A., the
Luxembourg listing agent, and when completed by the beneficial owner should be
provided to the person through which the beneficial owner holds the Notes.
Changes to the pertinent Treasury regulations that will affect the ways in which
a statement meeting the requirements of Section 871(h)(5) of the Internal
Revenue Code may be provided are scheduled to be effective on January 1, 2000.
If a statement meeting the requirements of Section 871(h)(5) of the
Internal Revenue Code is not received by the person who would otherwise be
required to deduct and withhold tax from the interest or if the portfolio
interest exemption is not available for another reason, then the interest on a
Note may be subject to United States withholding at a rate of 30 percent.
Interest on a Note that is effectively connected with the conduct of a trade or
business in the United States by a holder of a Note who is a nonresident alien
or a foreign corporation may be subject to United States income tax at rates
applicable to a United States person.
Interest on a Note beneficially owned by a nonresident alien or a foreign
corporation will be reported annually to the IRS on IRS Form 1042S. Neither
information reporting on IRS Form 1099 nor backup withholding will apply to
payments of interest on a Note or to amounts received on the sale, exchange or
redemption of a Note by a nonresident alien or a foreign corporation if an IRS
Form W-8 is provided as outlined above and, in the case of amounts received on
the sale, exchange or redemption of a Note, certain other information is
provided.
The description above does not deal with all aspects of United States
federal income taxation or withholding that may be relevant to a nonresident
alien or a foreign corporation who is the beneficial owner of a Note. You should
consult your own tax advisor for specific advice concerning the ownership and
disposition of a Note.
S-22
<PAGE> 24
UNDERWRITERS
Subject to the terms and conditions stated in the underwriting agreement
dated the date of this prospectus supplement, we have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation and
Salomon Smith Barney Inc. are acting as representatives, the principal amount of
the Notes of each series set forth opposite the name of the underwriter.
<TABLE>
<CAPTION>
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AMOUNT
UNDERWRITER OF 20 NOTES OF 20 NOTES OF 20 NOTES
- ----------- ------------- ------------- -------------
<S> <C> <C> <C>
Credit Suisse First Boston Corporation................. $ $ $
Salomon Smith Barney Inc...............................
Chase Securities Inc...................................
Goldman, Sachs & Co....................................
Lehman Brothers Inc....................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated.....
Morgan Stanley & Co. Incorporated......................
NationsBanc Montgomery Securities LLC..................
-------- -------- --------
Total........................................ $ $ $
======== ======== ========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the Notes if they purchase any of the Notes.
The underwriters propose initially to offer the Notes of each series to the
public at the respective public offering prices set forth on the cover page of
this prospectus supplement and to offer some of the Notes of each series to
certain dealers at the public offering prices less a concession not in excess
of:
- % of the principal amount in the case of the Notes
- % of the principal amount in the case of the Notes
- % of the principal amount in the case of the Notes
The underwriters may allow, and such dealers may reallow, a concession to
certain other dealers not in excess of:
- % of the principal amount in the case of the Notes
- % of the principal amount in the case of the Notes
- % of the principal amount in the case of the Notes
After the initial public offering, the underwriters may change the public
offering prices, concessions and discounts.
Each underwriter has severally represented and agreed that it:
- has not offered or sold, and prior to the expiration of six months from
the closing date, will not offer or sell any Notes to persons in the
United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (whether as
principal or agent) for the purpose of their businesses or otherwise in
circumstances which have not
S-23
<PAGE> 25
resulted and will not result in an offer to the public in the United
Kingdom for the purposes of the Public Offers of Securities Regulations
1995
- has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United Kingdom
and
- has only issued or passed on, and will only issue or pass on, in the
United Kingdom any document received by it in connection with the issue
of the Notes to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 (as amended) or a person to whom the document may otherwise
lawfully be issued or passed on
The Notes are a new issue of securities with no established trading market.
Although we have applied to list the Notes on the Luxembourg Stock Exchange, we
do not currently intend to apply for the listing of the Notes on any other
securities exchange or for quotation of the Notes in any dealer quotation
system. We cannot guarantee that listing will be obtained on the Luxembourg
Stock Exchange, and settlement of the Notes is not conditioned on obtaining this
listing. We have been advised by the underwriters that one or more of them
intend to make a market in the Notes of each series, but the underwriters are
not obligated to do so and may discontinue any market-making activities at any
time without notice. We can give no assurance as to the liquidity of the trading
market for any series of the Notes.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts, will be approximately $1.9 million.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act of 1933, or to contribute to payments the underwriters may be
required to make in respect of any of those liabilities.
In connection with this offering, the representatives, on behalf of the
underwriters, may over-allot, or engage in syndicate covering transactions,
stabilizing transactions and penalty bids. Over-allotment involves syndicate
sales of Notes in excess of the number of Notes to be purchased by the
underwriters in the offering, which creates a syndicate short position.
Syndicate-covering transactions involve purchases of the Notes in the open
market after the distribution has been completed in order to cover syndicate
short positions. Stabilizing transactions consist of certain bids for or
purchases of Notes made for the purpose of preventing or retarding a decline in
the market price of the Notes while the offering is in progress. Penalty bids
permit the representatives to reclaim a selling concession from a syndicate
member when the representatives, in a syndicate covering transaction,
repurchases Notes originally sold by that syndicate member. These activities may
cause the price of the Notes to be higher than it would otherwise be in the open
market in the absence of such transactions. These transactions, if commenced,
may be discontinued at any time.
Some of the underwriters or their respective affiliates have performed and
may in the future perform various financial advisory, commercial banking and
investment banking services for us from time to time, for which they have
received or will receive customary fees. Both Credit Suisse First Boston
Corporation and Salomon Smith Barney Inc. served as representatives of the
underwriters of our initial public offering, for which they received customary
compensation. The underwriters may, from time to time, engage in transactions
with us in the ordinary course of business.
S-24
<PAGE> 26
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws. These laws will vary
depending on the relevant jurisdiction and may require resales to be made in
accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
You are advised to seek legal advice prior to any resale of the Notes.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to the dealer from whom that purchaser receives the
purchase confirmation that (a) the purchaser is entitled under applicable
provincial securities laws to purchase such Notes without the benefit of a
prospectus qualified under such securities laws, (b) where required by law, the
purchaser is purchasing as principal and not as agent and (c) the purchaser has
reviewed the text above under "-- Resale Restrictions."
RIGHTS OF ACTION OF ONTARIO PURCHASERS
The securities being offered are those of a foreign issuer, and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities laws. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
Conoco Inc., all of our directors and officers as well as the experts named
in this prospectus supplement and the accompanying prospectus may be located
outside of Canada and, as a result, it may not be possible for Canadian
purchasers to effect service of process within Canada upon us or such persons.
All or a substantial portion of our assets and the assets of such persons may be
located outside of Canada and, as a result, it may not be possible to satisfy a
judgment against us or such persons in Canada or to enforce a judgment obtained
in Canadian courts against us or such persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Notes to whom the Securities Act (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any Notes acquired
by such purchaser in this offering. That report must be in the form attached to
British Columbia Securities Commission Blanket Order BOR #95/17. Only one such
report must be filed for Notes acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Notes should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Notes in
their particular circumstances and with respect to the eligibility of the Notes
for investment by the purchaser under relevant Canadian legislation.
S-25
<PAGE> 27
LISTING AND GENERAL INFORMATION
We have applied to list the Notes on the Luxembourg Stock Exchange. In
connection with the listing application, our Second Amended and Restated
Certificate of Incorporation and by-laws and a legal notice (Notice
Legale)relating to the issuance of the Notes will have been deposited prior to
listing with the Chief Registrar of the District Court of Luxembourg (Greffier
en Chef du Tribunal d'Arrondissement de et a Luxembourg), where you may examine
these documents and obtain copies upon request.
Copies of our Second Amended and Restated Certificate of Incorporation and
our annual, quarterly and current reports will be available for inspection at
the main office of Kredietbank S.A. Luxembourg in Luxembourg as long as the
Notes are outstanding. Kredietbank S.A. Luxembourg will act as intermediary
between the Luxembourg Stock Exchange and us and holders of the Notes. In
addition, you may obtain free copies of these reports at Kredietbank S.A.
Luxembourg's office.
PricewaterhouseCoopers LLP are our independent certified public
accountants.
Our Board of Directors adopted resolutions relating to the sale and
issuance of the Notes on February 23, 1999.
Other than as disclosed in this prospectus supplement, the prospectus and
the documents we have incorporated by reference, there has been no material
adverse change in our financial position since December 31, 1998.
We are not involved in litigation, arbitration or administrative
proceedings relating to claims or amounts that are material in the context of
the issue of the Notes.
The Notes have been accepted for clearance through Euroclear and Cedelbank.
The common code, the International Security Identification Number (ISIN) and the
CUSIP Number assigned to each series of the Notes is as follows:
<TABLE>
<CAPTION>
20 NOTES 20 NOTES 20 NOTES
---------- ---------- ----------
<S> <C> <C> <C>
Common Code.........................................
ISIN................................................
CUSIP No. ..........................................
</TABLE>
LEGAL MATTERS
R. A. Harrington, our Senior Vice President, Legal, and General Counsel,
and Baker & Botts, L.L.P., Houston, Texas, our outside counsel, will issue
opinions about certain legal matters in connection with the offering of the
Notes for us. Cravath, Swaine & Moore, New York, New York, will issue an opinion
about certain legal matters in connection with the offering for the
underwriters.
EXPERTS
The financial statements incorporated in the accompanying prospectus by
reference to our annual report on Form 10-K for the year ended December 31,
1998, as amended on March 12, 1999, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
S-26
<PAGE> 28
PRINCIPAL OFFICE OF CONOCO
600 North Dairy Ashford
Houston, Texas 77079
REGISTERED OFFICE OF CONOCO
1209 Orange Street
Wilmington, Delaware 19801
PRINCIPAL PAYING AGENT, REGISTRAR AND TRUSTEE
BANCONE, N.A.
100 East Broad Street
8th Floor/Corporate Trust Department
Columbus, Ohio 43215
LUXEMBOURG PAYING AGENT
KREDIETBANK S.A. LUXEMBOURG
Kredietbank S.A. Luxembourgeoise
43, Boulevard Royal
L-2955 Luxembourg
LEGAL ADVISORS
<TABLE>
<S> <C> <C>
To Conoco as to Matters of To Conoco as to Matters of To the Underwriters as to
United States Law: United States Law: Matters of United States Law:
BAKER & BOTTS, L.L.P. R.A. HARRINGTON CRAVATH, SWAINE & MOORE
One Shell Plaza Senior Vice President, Legal 825 Eighth Avenue
910 Louisiana and New York, New York 10019
Houston, Texas 77002 General Counsel
Conoco Inc.
600 North Dairy Ashford
Houston, Texas 77079
</TABLE>
INDEPENDENT ACCOUNTANTS TO CONOCO
PRICEWATERHOUSECOOPERS LLP
1201 Louisiana
Houston, Texas 77002
LISTING AGENT
KREDIETBANK S.A. LUXEMBOURG
Kredietbank S.A. Luxembourgeoise
43, Boulevard Royal
L-2955 Luxembourg
S-27
<PAGE> 29
PROSPECTUS
LOGO
CONOCO INC.
600 North Dairy Ashford
Houston, Texas 77079
(281) 293-1000
$4,000,000,000
DEBT SECURITIES
-----------------------------------------------------------------------
We will provide the specific terms of the securities in supplements to this
prospectus.
You should read this prospectus and any supplement carefully before you invest.
-----------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined whether
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is March 24, 1999
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
About This Prospectus....................................... 2
Where You Can Find More Information......................... 2
Forward-Looking Information................................. 4
About Conoco................................................ 4
Use of Proceeds............................................. 5
Ratio of Earnings to Fixed Charges.......................... 5
Description of Debt Securities.............................. 5
Plan of Distribution........................................ 14
Legal Opinions.............................................. 15
Experts..................................................... 15
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with
the Securities and Exchange Commission using a "shelf" registration process.
Using this process, we may offer the securities described in this prospectus in
one or more offerings with a total initial offering price of up to
$4,000,000,000. This prospectus provides you with a general description of the
securities we may offer. Each time we offer securities, we will provide a
prospectus supplement and, if applicable, a pricing supplement. The prospectus
supplement and any pricing supplement will describe the specific terms of that
offering. The prospectus supplement and any pricing supplement may also add,
update or change the information contained in this prospectus. Please carefully
read this prospectus, the prospectus supplement and any pricing supplement, in
addition to the information contained in the documents we refer to under the
heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials we file with the
SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the SEC's regional offices located at Seven World Trade
Center, New York, New York 10048, and at 500 West Madison Street, Chicago,
Illinois 60661. You can obtain information about the operation of the SEC's
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains information we file electronically with the
SEC, which you can access over the Internet at http://www.sec.gov. You can
obtain information about us at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005 or by visiting our Web site at
http://www.conoco.com.
This prospectus is part of a registration statement we have filed with the
SEC relating to the debt securities. As permitted by SEC rules, this prospectus
does not contain all of the information we have included in the registration
statement and the accompanying exhibits and schedules we file with the SEC. You
may refer to the registration statement, the exhibits and schedules for more
information about us and our debt securities. The registration statement,
exhibits and schedules are available at the SEC's Public Reference Room or
through its Web site.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
an important part of this prospectus, and later information that we file with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below, and any future filings we make with the
SEC under Section 13(a), 13(c), 14 or
2
<PAGE> 31
15(d) of the Securities Exchange Act of 1934 until we sell all the debt
securities. The documents we incorporate by reference are:
- our annual report on Form 10-K for the year ended December 31, 1998, as
amended on March 12, 1999
- our current report on Form 8-K as filed with the SEC on March 23, 1999
You may request a copy of these filings (other than an exhibit to those
filings unless we have specifically incorporated that exhibit by reference into
the filing), at no cost, by writing or telephoning us at the following address:
Conoco Inc.
600 North Dairy Ashford
Houston, Texas 77079
Attention: Capital Markets
Telephone: (281) 293-2648
YOU SHOULD RELY ONLY ON THE INFORMATION WE HAVE PROVIDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANY PERSON (INCLUDING ANY SALESMAN OR BROKER) TO PROVIDE INFORMATION
OTHER THAN THAT PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE
FRONT OF THE DOCUMENT.
3
<PAGE> 32
FORWARD-LOOKING INFORMATION
This prospectus, including the information we incorporate by reference,
includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
You can identify our forward-looking statements by the words "expects,"
"intends," "plans," "projects," "believes," "estimates" and similar expressions.
We have based the forward-looking statements relating to our operations on
our current expectations, estimates and projections about us and the petroleum
industry in general. We caution you that these statements are not guarantees of
future performance and involve risks, uncertainties and assumptions that we
cannot predict. In addition, we have based many of these forward-looking
statements on assumptions about future events that may prove to be inaccurate.
Accordingly, our actual outcomes and results may differ materially from what we
have expressed or forecast in the forward-looking statements. Any differences
could result from a variety of factors, including the following:
- fluctuations in crude oil and natural gas prices and refining and
marketing margins
- failure or delays in achieving expected production from oil and gas
development projects
- uncertainties inherent in predicting oil and gas reserves and oil
and gas reservoir performance
- lack of exploration success
- disruption or interruption of our production facilities due to
accidents or political events
- international monetary conditions and exchange controls
- liability for remedial actions under environmental regulations
- disruption to our operations due to untimely or incomplete
resolution of Year 2000 issues by us or other entities
- liability resulting from litigation
- world economic and political conditions
- changes in tax and other laws applicable to our business
ABOUT CONOCO
Conoco Inc. is a major, integrated, international energy company operating
in 40 countries worldwide. We were founded in 1875 and are involved in both the
"Upstream" and "Downstream" segments of the petroleum business. Upstream
activities include exploring for and developing, producing and selling crude
oil, natural gas and natural gas liquids. Downstream activities include refining
crude oil and other feedstocks into petroleum products, buying and selling crude
oil and refined products and transporting, distributing and marketing petroleum
products.
In this prospectus, we refer to Conoco Inc., its wholly owned and majority
owned subsidiaries and its ownership interest in equity affiliates as "we,"
unless the context clearly indicates otherwise. Our ownership interest in equity
affiliates includes corporate entities, partnerships, limited liability
companies and other ventures in which we exert significant influence by virtue
of our ownership interest, typically between 20 and 50 percent.
4
<PAGE> 33
USE OF PROCEEDS
Unless we inform you otherwise in the prospectus supplement, we will use
the net proceeds from the sale of the offered securities for general corporate
purposes. These purposes may include repayment and refinancing of debt
(including debt owed to E. I. du Pont de Nemours and Company), acquisitions,
working capital, capital expenditures and repurchases and redemptions of
securities. Pending any specific application, we may initially invest funds in
short-term marketable securities or apply them to the reduction of short-term
indebtedness.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods shown is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1998 1997 1996 1995 1994
---- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges........................ 3.2x 12.9x 11.6x 7.3x 7.3x
Ratio of earnings before special items to fixed charges... 4.6x 12.4x 11.5x 7.7x 8.0x
</TABLE>
We have computed the ratios of earnings to fixed charges by dividing
earnings by fixed charges. For this purpose, "earnings" consist of income before
income taxes and extraordinary items and fixed charges. "Fixed charges" consist
of interest expense, capitalized interest, amortization of debt expense and that
portion of annual rental expense we have deemed to represent the interest
factor.
For the ratio of earnings before special items to fixed charges, we have
excluded special items from the computation of earnings. Special items are
material nonrecurring items and generally consist of asset sales, property
impairments, tax rate changes, employee separation costs, inventory write-downs,
environmental insurance litigation recoveries, environmental litigation charges
and, in 1998, stock option provision. For more information about our special
items, please read "Results of Operations -- Special Items" beginning on page 45
in Item 7 of our annual report on Form 10-K for the year ended December 31,
1998, as amended on March 12, 1999.
DESCRIPTION OF DEBT SECURITIES
The debt securities covered by this prospectus will be our general
unsecured obligations. The debt securities will be issued under an indenture
between us and a trustee that we will name in the prospectus supplement.
We have summarized selected provisions of the indenture and the debt
securities below. This summary is not complete. We have filed the form of the
indenture with the SEC as an exhibit to the registration statement, and you
should read the indenture for provisions that may be important to you.
In this summary description of the debt securities, all references to us
mean Conoco Inc. only, unless we state otherwise or the context clearly
indicates otherwise.
GENERAL
The debt securities will constitute senior debt and will rank equally with
all of our unsecured and unsubordinated debt. The indenture does not limit the
amount of debt that we may issue under the indenture, nor does it limit the
amount of other unsecured debt or securities that we may issue. We may issue
debt securities under the indenture from time to time in one or more series,
each in an amount we authorize prior to issuance.
We currently conduct substantially all our operations through our
subsidiaries, and our subsidiaries generate substantially all our operating
income and cash flow. As a result, distributions or advances from our
subsidiaries are the principal source of funds necessary to meet our debt
service obligations. Contractual provisions or laws, as well as our
subsidiaries' financial condition and operating requirements,
5
<PAGE> 34
may limit our ability to obtain cash from our subsidiaries that we require to
pay our debt service obligations, including payments on the debt securities. In
addition, holders of the debt securities will have a junior position to the
claims of creditors of our subsidiaries on their assets and earnings.
Other than the restrictions on liens and sale/leaseback transactions
described below, the indenture and the debt securities do not contain any
covenants or other provisions designed to protect holders of the debt securities
in the event we participate in a highly leveraged transaction. The indenture and
the debt securities also do not contain provisions that give holders of the debt
securities the right to require us to repurchase their securities in the event
of a decline in our credit ratings resulting from a takeover, recapitalization
or similar restructuring or otherwise.
The prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:
- The title of the debt securities
- The total principal amount of the debt securities
- Whether we will issue the debt securities in individual certificates
to each holder or in the form of temporary or permanent global
securities held by a depository on behalf of holders
- The date or dates on which the principal of and any premium on the
debt securities will be payable
- Any interest rate, the date from which interest will accrue,
interest payment dates and record dates for interest payments
- Whether and under what circumstances any additional amounts with
respect to the debt securities will be payable
- The place or places where payments on the debt securities will be
payable
- Any provisions for optional redemption or early repayment
- Any provisions that would obligate us to redeem, purchase or repay
debt securities
- The denominations in which we will issue the debt securities
- Whether payments on the debt securities will be payable in foreign
currency or currency units or another form and whether payments will
be payable by reference to any index or formula
- The portion of the principal amount of debt securities that will be
payable if the maturity is accelerated, if other than the entire
principal amount
- Any additional means of defeasance of the debt securities, any
additional conditions or limitations to defeasance of the debt
securities or any changes to those conditions or limitations
- Any changes or additions to the events of default or covenants
described in this prospectus
- Any restrictions or other provisions relating to the transfer or
exchange of debt securities
- Any terms for the conversion or exchange of the debt securities for
other securities of us or any other entity
We may sell the debt securities at a discount (which may be substantial)
below their stated principal amount. These debt securities may bear no interest
or interest at a rate that at the time of issuance is below market rates. We
will describe in the prospectus supplement any material United States federal
income tax consequences and other special considerations.
If we sell any of the debt securities for any foreign currency or currency
unit or if payments on the debt securities are payable in any foreign currency
or currency unit, we will describe in the prospectus
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<PAGE> 35
supplement the restrictions, elections, tax consequences, specific terms and
other information relating to those debt securities and the foreign currency or
currency unit.
RESTRICTIVE COVENANTS
We have agreed to two principal restrictions on our activities for the
benefit of holders of the debt securities. The restrictive covenants summarized
below will apply to a series of debt securities (unless waived or amended) as
long as any of those debt securities are outstanding, unless the prospectus
supplement for the series states otherwise. We have used in this summary
description capitalized terms that we have defined below under "-- Glossary." In
this description of the covenants only, all references to us mean Conoco Inc.
and its principal domestic subsidiaries, unless the context clearly indicates
otherwise. Our principal domestic subsidiaries are those that have substantially
all their assets in the United States and that own a Principal Property.
Limitation on Liens
We have agreed that we will issue, assume or guarantee debt for borrowed
money secured by a lien upon a Principal Property or shares of stock or debt of
any of our principal domestic subsidiaries only if we secure the debt securities
equally and ratably with or prior to the debt secured by that lien. If we so
secure the debt securities, we have the option to secure any of our other debt
or obligations equally and ratably with or prior to the debt secured by the lien
and, accordingly, equally and ratably with the debt securities. This covenant
has exceptions that permit:
(a) Liens existing on the date we first issue a series of debt
securities
(b) Liens on the property, assets, stock, equity or debt of any entity
existing at the time we acquire that entity or its property or at the time
the entity becomes a principal domestic subsidiary
(c) Liens on assets either:
- existing at the time we acquire the assets
- securing all or part of the cost of acquiring, constructing,
improving, developing or expanding the assets or
- securing debt to finance the purchase price of the assets or
the cost of constructing, improving, developing or expanding
the assets that was incurred before, at or within 12 months
after the acquisition or completion of the assets or their
commencing commercial operation
(d) Liens on specific assets to secure debt incurred to provide funds
for the cost of exploration, drilling or development of those assets
(e) Intercompany liens in favor of us
(f) Liens securing industrial development, pollution control or other
revenue bonds of a domestic government entity
(g) Statutory or other liens arising in the ordinary course of our
business and relating to amounts that are not yet delinquent or that we are
contesting in good faith
(h) Any extensions, substitutions, replacements or renewals of the
above-described liens or any debt secured by these liens if both
- the new lien is limited to the property (plus any
improvements) secured by the original lien and
- the amount of debt secured by the new lien and not otherwise
permitted does not materially exceed the amount of debt
refinanced plus any costs incurred to refinance the debt
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In addition, without securing the debt securities as described above, we
may issue, assume or guarantee debt that this covenant would otherwise restrict
in a total principal amount that, when added to all of our other outstanding
debt that this covenant would otherwise restrict and the total amount of
Attributable Debt outstanding for Sale/Leaseback Transactions, does not exceed a
"basket" equal to 10% of Consolidated Net Tangible Assets. When calculating this
total principal amount, we exclude from the calculation Attributable Debt from
Sale/Leaseback Transactions in connection with which we have purchased property
or retired or defeased debt as described in clause (b) below under "Limitation
on Sale/Leaseback Transactions."
For these purposes, "debt" includes all notes, bonds, debentures or similar
evidences of debt for money borrowed. The following types of transactions do not
create "debt" secured by "liens" within the meaning of this covenant:
(a) The sale or other transfer of either:
- oil, gas or other minerals in place for a period of time until, or
in an amount such that, the purchaser will realize from those
minerals a specified amount of money or a specified amount of those
minerals or
- any other interest in property commonly referred to as a
"production payment"
(b) The mortgage or pledge of our property in favor of the United
States, any state of the United States or any department, agency or
instrumentality of either, to secure payments under any contract or statute
Limitation on Sale/Leaseback Transactions
We have agreed that we will enter into a Sale/Leaseback Transaction only if
at least one of the following applies:
(a) We could incur debt in a principal amount equal to the
Attributable Debt for that Sale/ Leaseback Transaction and, without
violating the "Limitation on Liens" covenant, could secure that debt by a
lien on the property to be leased without equally and ratably securing the
debt securities.
(b) Within the period beginning six months before the closing of the
Sale/Leaseback Transaction and ending six months after the closing, we
apply the net proceeds of the Sale/Leaseback Transaction either:
- to the voluntary defeasance or retirement of any debt
securities or Funded Debt or
- to the acquisition, exploration, drilling, development,
construction, improvement or expansion of one or more Principal
Properties
Any amount of the net proceeds we do not apply for these purposes will be
subject to the limitation described in (a). For purposes of these
calculations, the net proceeds of the Sale/Leaseback Transaction means the
net proceeds of the sale or transfer of the property leased in the Sale/
Leaseback Transaction (or, if greater, the fair value of that property at
the time of the Sale/ Leaseback Transaction as determined by our board of
directors) adjusted to reflect the remaining term of the lease.
Glossary
"Attributable Debt" means the present value of the rental payments during
the remaining term of the lease included in the Sale/Leaseback Transaction. To
determine that present value, we use a discount rate equal to the lease rate of
the Sale/Leaseback Transaction. For these purposes, rental payments do not
include any amounts we are required to pay for taxes, maintenance, repairs,
insurance, assessments, utilities, operating and labor costs and other items
that do not constitute payments for property rights. In the case of any lease
that we may terminate by paying a penalty, if the net amount would be reduced if
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we terminated the lease on the first date that it could be terminated, then this
lower net amount will be used.
"Consolidated Net Tangible Assets" means the total amount of assets (after
deducting applicable accumulated depreciation, depletion and amortization and
other reserves and other properly deductible items) less
- all current liabilities (excluding liabilities that are extendable
or renewable at our option to a date more than 12 months after the
date of calculation and excluding current maturities of long-term
debt) and
- all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangible assets
We will calculate our Consolidated Net Tangible Assets based on our most recent
quarterly balance sheet.
The term "debt" means all notes, bonds, debentures or similar evidences of
debt for money borrowed.
"Funded Debt" means all debt that matures on or is renewable to a date more
than one year after the date the debt is incurred.
"Principal domestic subsidiary" means a subsidiary that has substantially
all its assets in the United States and that owns a Principal Property.
"Principal Property" means any oil or gas producing property located
onshore or offshore of the United States or any refinery or manufacturing plant
located in the United States. This term excludes any property, refinery or plant
that in our Board's opinion is not materially important to the total business
conducted by us and our consolidated subsidiaries. This term also excludes any
transportation or marketing facilities or assets.
"Sale/Leaseback Transaction" means any arrangement with anyone under which
we lease any Principal Property that we have or will sell or transfer to that
person. This term excludes the following:
- temporary leases for a term of not more than three years
- intercompany leases between us and one of our subsidiaries or
between two or more of our subsidiaries
- leases of a Principal Property executed by the time of or within 12
months after the acquisition, the completion of construction or
improvement, or the commencement of commercial operation of the
Principal Property
- arrangements under any provision of law with an effect similar to
the former Section 168(f)(8) of the Internal Revenue Code of 1954
CONSOLIDATION, MERGER AND SALE OF ASSETS
The indenture generally permits a consolidation or merger between us and
another entity. It also permits the sale by us of all or substantially all of
our assets. We have agreed, however, that we will consolidate with or merge into
any entity or transfer or dispose of all or substantially all of our assets to
any entity only if:
- we are the continuing corporation or
- if we are not the continuing corporation, the resulting entity is
organized and existing under the laws of any United States
jurisdiction and assumes the due and punctual payments on the debt
securities and the performance of our covenants and obligations
under the indenture and the debt securities and
- in either case, immediately after giving effect to the transaction,
no default or event of default would occur and be continuing or
would result from the transaction
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EVENTS OF DEFAULT
Unless we inform you otherwise in the prospectus supplement, the following
are events of default with respect to a series of debt securities:
- our failure to pay interest on that series of debt securities for 30 days
- our failure to pay principal of or any premium on that series of debt
securities when due
- our failure to redeem, purchase or repay debt securities of that
series
- our failure to comply with any of our covenants or agreements in
that series of debt securities or the indenture (other than an
agreement or covenant that we have included in the indenture solely
for the benefit of other series of debt securities) for 90 days
after written notice by the trustee or by the holders of at least
25% in principal amount of all outstanding debt securities affected
by that failure
- certain events involving bankruptcy, insolvency or reorganization of
Conoco Inc.
- any other event of default provided for that series of debt
securities
A default under one series of debt securities will not necessarily be a
default under another series. The trustee may withhold notice to the holders of
the debt securities of any default or event of default (except in any payment on
the debt securities) if the trustee considers it in the interest of the holders
of the debt securities to do so.
If an event of default for any series of debt securities occurs and is
continuing, the trustee or the holders of at least 25% in principal amount of
the outstanding debt securities of the series affected by the default (or, in
some cases, 25% in principal amount of all debt securities affected, voting as
one class) may require us to pay the principal of and all accrued and unpaid
interest on those debt securities. If an event of default relating to certain
events of bankruptcy, insolvency or reorganization occurs, the principal of and
interest on all the debt securities will become immediately due and payable
without any action on the part of the trustee or any holder. The holders of a
majority in principal amount of the outstanding debt securities of the series
affected by the default (or of all debt securities affected, voting as one
class) may in some cases rescind this accelerated payment requirement.
A holder of a debt security of any series may pursue any remedy under the
indenture only if:
- the holder gives the trustee written notice of a continuing event of
default for that series
- the holders of at least 25% in principal amount of the outstanding
debt securities of that series make a written request to the trustee
to pursue the remedy
- the holder offers to the trustee indemnity reasonably satisfactory
to the trustee
- the trustee fails to act for a period of 60 days after receipt of
notice and offer of indemnity and
- during that 60-day period, the holders of a majority in principal
amount of the debt securities of that series do not give the trustee
a direction inconsistent with the request
This provision does not, however, affect the right of a holder of a debt
security to sue for enforcement of any overdue payment.
In most cases, holders of a majority in principal amount of the outstanding
debt securities of a series (or of all debt securities affected, voting as one
class) may direct the time, method and place of
- conducting any proceeding for any remedy available to the trustee
- exercising any trust or power conferred on the trustee not relating
to or arising under an event of default
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The indenture requires us to file each year with the trustee a written
statement as to our compliance with the covenants contained in the indenture.
MODIFICATION AND WAIVER
We may amend or supplement the indenture if the holders of a majority in
principal amount of the outstanding debt securities of all series affected by
the amendment or supplement (acting as one class) consent to it. Without the
consent of the holder of each debt security affected, however, no modification
may:
- reduce the amount of debt securities whose holders must consent to
an amendment, supplement or waiver
- reduce the rate of or change the time for payment of interest on the
debt security
- reduce the principal of the debt security or change its stated
maturity
- reduce any premium payable on the redemption of the debt security or
change the time at which the debt security may or must be redeemed
- change any obligation to pay additional amounts on the debt security
- make payments on the debt security payable in currency other than as
originally stated in the debt security
- impair the holder's right to institute suit for the enforcement of
any payment on the debt security
- make any change in the percentage of principal amount of debt
securities necessary to waive compliance with certain provisions of
the indenture or to make any change in this provision for
modification
- waive a continuing default or event of default regarding any payment
on the debt securities
We may amend or supplement the indenture or waive any provision of it
without the consent of any holders of debt securities in certain circumstances,
including
- to cure any ambiguity, omission, defect or inconsistency
- to provide for the assumption of our obligations under the indenture
by a successor upon any merger, consolidation or asset transfer
- to provide for uncertificated debt securities in addition to or in
place of certificated debt securities or to provide for bearer debt
securities
- to provide any security for or guarantees of any series of debt
securities
- to comply with any requirement to effect or maintain the
qualification of the indenture under the Trust Indenture Act of 1939
- to add covenants that would benefit the holders of any debt
securities or to surrender any rights we have under the indenture
- to add events of default with respect to any debt securities
- to make any change that does not adversely affect any outstanding
debt securities of any series in any material respect
The holders of a majority in principal amount of the outstanding debt
securities of any series (or of all debt securities affected, voting as one
class) may waive any existing or past default or event of default with respect
to those debt securities. Those holders may not, however, waive any default or
event of
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default in any payment on any debt security or compliance with a provision that
cannot be amended or supplemented without the consent of each holder affected.
DEFEASANCE
When we use the term defeasance, we mean discharge from some or all of our
obligations under the indenture. If we deposit with the trustee funds or
government securities sufficient to make payments on the debt securities of a
series on the dates those payments are due and payable, then, at our option,
either of the following will occur:
- we will be discharged from our obligations with respect to the debt
securities of that series ("legal defeasance") or
- we will no longer have any obligation to comply with the restrictive
covenants under the indenture, and the related events of default
will no longer apply to us ("covenant defeasance")
If we defease a series of debt securities, the holders of the debt
securities of the series affected will not be entitled to the benefits of the
indenture, except for our obligations to register the transfer or exchange of
debt securities, replace stolen, lost or mutilated debt securities or maintain
paying agencies and hold moneys for payment in trust. In the case of covenant
defeasance, our obligation to pay principal, premium and interest on the debt
securities will also survive.
Unless we inform you otherwise in the prospectus supplement, we will be
required to deliver to the trustee an opinion of counsel that the deposit and
related defeasance would not cause the holders of the debt securities to
recognize income, gain or loss for federal income tax purposes. If we elect
legal defeasance, that opinion of counsel must be based upon a ruling from the
United States Internal Revenue Service or a change in law to that effect.
GOVERNING LAW
New York law will govern the indenture and the debt securities.
TRUSTEE
If an event of default occurs and is continuing, the trustee will be
required to use the degree of care and skill of a prudent man in the conduct of
his own affairs. The trustee will become obligated to exercise any of its powers
under the indenture at the request of any of the holders of any debt securities
only after those holders have offered the trustee indemnity reasonably
satisfactory to it.
The indenture contains limitations on the right of the trustee, if it
becomes one of our creditors, to obtain payment of claims or to realize on
certain property received for any such claim, as security or otherwise. The
trustee is permitted to engage in other transactions with us. If, however, it
acquires any conflicting interest, it must eliminate that conflict or resign.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
We will issue the debt securities in registered form, without interest
coupons. We will not charge a service charge for any registration of transfer or
exchange of the debt securities. We may, however, require the payment of any tax
or other governmental charge payable for that registration.
Debt securities of any series will be exchangeable for other debt
securities of the same series, the same total principal amount and the same
terms but in different authorized denominations in accordance with the
indenture. Holders may present debt securities for registration of transfer at
the office of the security registrar or any transfer agent we designate. The
security registrar or transfer agent will effect the transfer or exchange when
it is satisfied with the documents of title and identity of the person making
the request.
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We have appointed the trustee as security registrar for the debt
securities. If a prospectus supplement refers to any transfer agents initially
designated by us, we may at any time rescind that designation or approve a
change in the location through which any transfer agent acts. We are required to
maintain an office or agency for transfers and exchanges in each place of
payment. We may at any time designate additional transfer agents for any series
of debt securities.
In the case of any redemption, neither the security registrar nor the
transfer agent will be required to register the transfer or exchange of any debt
security either:
- during a period beginning 15 business days prior to the mailing of
the relevant notice of redemption and ending on the close of
business on the day of mailing of such notice or
- if we have called the debt security for redemption in whole or in
part, except the unredeemed portion of any debt security being
redeemed in part
PAYMENT AND PAYING AGENTS
Unless we inform you otherwise in a prospectus supplement, payments on the
debt securities will be made in U.S. dollars at the office of the trustee. At
our option, however, we may make payments by check mailed to the holder's
registered address or, with respect to global debt securities, by wire transfer.
Unless we inform you otherwise in a prospectus supplement, we will make interest
payments to the person in whose name the debt security is registered at the
close of business on the record date for the interest payment.
Unless we inform you otherwise in a prospectus supplement, the trustee will
be designated as our paying agent for payments on debt securities issued under
the indenture. We may at any time designate additional paying agents or rescind
the designation of any paying agent or approve a change in the office through
which any paying agent acts.
Subject to the requirements of any applicable abandoned property laws, the
trustee and paying agent shall pay to us upon written request any money held by
them for payments on the debt securities that remain unclaimed for two years
after the date upon which that payment has become due. After payment to us,
holders entitled to the money must look to us for payment. In that case, all
liability of the trustee or paying agent with respect to that money will cease.
BOOK-ENTRY DEBT SECURITIES
We may issue the debt securities of a series in the form of one or more
global debt securities that would be deposited with a depositary or its nominee
identified in the prospectus supplement. We may issue global debt securities in
either temporary or permanent form. We will describe in the prospectus
supplement the terms of any depositary arrangement and the rights and
limitations of owners of beneficial interests in any global debt security.
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PLAN OF DISTRIBUTION
We may sell the offered securities in and outside the United States (a)
through underwriters or dealers, (b) directly to purchasers or (c) through
agents. The prospectus supplement will include the following information:
- the terms of the offering
- the names of any underwriters or agents
- the purchase price of the securities from us
- the net proceeds to us from the sale of the securities
- any delayed delivery arrangements
- any underwriting discounts and other items constituting underwriters'
compensation
- any initial public offering price
- any discounts or concessions allowed or reallowed or paid to dealers.
SALE THROUGH UNDERWRITERS OR DEALERS
If we use underwriters in the sale, the underwriters will acquire the debt
securities for their own account. The underwriters may resell the securities
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Underwriters may offer securities to the public either
through underwriting syndicates represented by one or more managing underwriters
or directly by one or more firms acting as underwriters. Unless we inform you
otherwise in the prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions, and the
underwriters will be obligated to purchase all the offered securities if they
purchase any of them. The underwriters may change from time to time any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers.
During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, whereby selling concessions allowed
to syndicate members or other broker-dealers for the offered securities sold for
their account may be reclaimed by the syndicate if such offered securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
offered securities, which may be higher than the price that might otherwise
prevail in the open market. If commenced, these activities may be discontinued
at any time.
If we use dealers in the sale of securities, we will sell the securities to
them as principals. They may then resell those securities to the public at
varying prices determined by the dealers at the time of resale. We will include
in the prospectus supplement the names of the dealers and the terms of the
transaction.
DIRECT SALES AND SALES THROUGH AGENTS
We may sell the securities directly. In this case, no underwriters or
agents would be involved. We may also sell the securities through agents we
designate from time to time. In the prospectus supplement, we will name any
agent involved in the offer or sale of the offered securities, and we will
describe any commissions payable by us to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to use its
reasonable best efforts to solicit purchases for the period of its appointment.
We may sell the securities directly to institutional investors or others
who may be deemed to be underwriters within the meaning of the Securities Act of
1933 with respect to any sale of those securities. We will describe the terms of
any such sales in the prospectus supplement.
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DELAYED DELIVERY CONTRACTS
If we so indicate in the prospectus supplement, we may authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase securities from us at the public offering price under delayed delivery
contracts. These contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those conditions
described in the prospectus supplement. The prospectus supplement will describe
the commission payable for solicitation of those contracts.
GENERAL INFORMATION
We may have agreements with the agents, dealers and underwriters to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute with respect to payments that the
agents, dealers or underwriters may be required to make. Agents, dealers and
underwriters may be customers of, engage in transactions with or perform
services for us in the ordinary course of their businesses.
LEGAL OPINIONS
R. A. Harrington, our Senior Vice President, Legal, and General Counsel, or
another of our lawyers, or Baker & Botts, L.L.P., Houston, Texas, our outside
counsel, will issue an opinion about the legality of the offered securities for
us. Any underwriters will be advised about other issues relating to any offering
by their own legal counsel.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the annual report on Form 10-K for the year ended December 31, 1998, as amended
on March 12, 1999, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
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The Britannia gas/condensate development in the
U.K., which is operated jointly by Conoco and
[PHOTO OF BRITANNIA Chevron under the first such arrangement in the
PLATFORM] North Sea, has the capacity to supply 8 percent of
Britain's natural gas needs at peak production.
Conoco has drilled more than 200 gas wells on
its Lobo trend properties in South Texas since [PHOTO OF CONOCO
acquiring $929 million in producing acreage and EMPLOYEES DRILLING
transportation assets in the area in 1997. GAS WELL]
A Conoco double-hulled tanker takes on a cargo of
blended crude oil from the Petrozuata project in
[PHOTO OF TANKER] Venezuela. Starting in 2000, the extra-heavy crude
will be processed into a synthetic crude oil by a
$1 billion upgrading facility under construction in
Venezuela.
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[CONOCO LOGO]
