<PAGE>
FILED PURSUANT TO
RULE 424(b)(2)
FILE NO: 333-11239
SUBJECT TO COMPLETION
AUGUST 28, 1997
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE INFORMATION CONTAINED HEREIN +
+ARE SUBJECT TO COMPLETION OR AMENDMENT AND PROSPECTIVE PURCHASERS ARE +
+REFERRED TO THE RELATED FINAL PROSPECTUS SUPPLEMENT FOR DEFINITIVE +
+INFORMATION ON ANY MATTER CONTAINED HEREIN. NEITHER THIS PRELIMINARY +
+PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL CONSTITUTE AN +
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUPPLEMENT
(To Prospectus Dated September 13, 1996)
1,200,000 SHARES
ENERGEN CORPORATION
[LOGO OF ENERGEN CORPORATION APPEARS HERE]
COMMON STOCK
($0.01 PAR VALUE)
The shares of Common Stock of Energen Corporation (the "Corporation") being
offered hereby are being issued and sold by the Corporation. The Common Stock
is listed on the New York Stock Exchange under the symbol "EGN." On August 27,
1997, the last reported sale price for the Common Stock, as reported on the New
York Stock Exchange Composite Transactions Tape, was $35.6875 per share. See
"Price Range of Common Stock and Dividends."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT CORPORATION(1)
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(2)................................... $ $ $
- --------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Corporation estimated at $ .
(2) The Corporation has granted to the Underwriters a 30-day option to purchase
up to an aggregate of 180,000 additional shares of Common Stock at the
Price to Public, less Underwriting Discount, solely to cover over-
allotments, if any. If the Underwriters exercise such option in full, the
total Price to Public, Underwriting Discount and Proceeds to Corporation
will be $ , $ and $ , respectively. See "Underwriting."
The Common Stock is offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Common Stock will be made at the office of
Salomon Brothers Inc, Seven World Trade Center, New York, New York, or through
the facilities of The Depository Trust Company, on or about September , 1997.
SALOMON BROTHERS INC SMITH BARNEY INC.
The date of this Prospectus Supplement is September , 1997.
<PAGE>
ENERGEN CORPORATION SYSTEM AND RESERVE LOCATIONS MAP
The following maps reflect the service area of Alabama Gas Corporation
("Alagasco"), the Corporation's utility subsidiary, and the significant
reserve locations of Taurus Exploration, Inc. ("Taurus"), the subsidiary
through which the Corporation conducts its oil and gas activities.
ALAGASCO: SERVICE AREA MAP
[MAP OF STATE OF ALABAMA INDICATING
COUNTIES OF ALAGASCO'S SERVICE AREA
APPEARS HERE]
TAURUS: SIGNIFICANT RESERVE LOCATIONS
[MAP OF VARIOUS STATES INDICATING TAURUS'S
SIGNIFICANT RESERVE LOCATIONS APPEARS HERE]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE AND
PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE
COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES SEE "UNDERWRITING".
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<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Corporation's consolidated financial statements
(including the notes thereto) appearing elsewhere in this Prospectus Supplement
or in the accompanying Prospectus dated September 13, 1996 (the "Prospectus")
or incorporated by reference herein. Unless otherwise indicated, the
information in this Prospectus Supplement does not give effect to the exercise
of the Underwriters' over-allotment option. See "Underwriting."
THE CORPORATION
The Corporation is a diversified energy holding company engaged primarily in
natural gas distribution and the acquisition, exploration, development and
production of domestic natural gas and oil. The Corporation's utility
subsidiary, Alabama Gas Corporation ("Alagasco"), is the largest natural gas
distribution utility in the State of Alabama. Alagasco purchases natural gas
through interstate and intrastate suppliers and distributes the purchased gas
through its distribution facilities for sale to residential, commercial and
industrial customers and other end-users of natural gas. Alagasco also provides
transportation services to selected customers. Alagasco's service territory is
located primarily in central and north Alabama and includes over 175
communities in 30 counties. During fiscal 1996, Alagasco served an average of
418,486 residential customers, 34,028 small commercial and industrial customers
and 54 large commercial and industrial customers.
The Corporation's oil and gas exploration and production activities are
conducted by its subsidiary Taurus Exploration, Inc. ("Taurus"). Taurus's
remaining recoverable reserves at the end of fiscal 1996, all of which were
located in conventional and certain nonconventional domestic reservoirs,
totaled approximately 251 billion cubic feet equivalent ("Bcfe"). During fiscal
1997, Taurus has completed a number of property acquisitions which have
significantly increased its proved reserves. Taurus estimates that it has
acquired an aggregate of 331 Bcfe at an average cost of $0.52 per thousand
cubic feet equivalent ("Mcfe") during the current fiscal year. See "Recent
Developments" and "The Corporation--Oil and Gas Exploration and Production
Activities." Taurus's oil and gas properties are located primarily in Alabama,
New Mexico, Texas, Louisiana, Mississippi and the Gulf of Mexico. In the
quarter ended June 30, 1997, Taurus's average daily net production was 102
million cubic feet equivalent ("MMcfe"), a 113% increase over the same period
for 1996.
BUSINESS STRATEGY
The Corporation seeks to combine the strength of its utility operations with
potential earnings growth through expansion of its oil and gas exploration and
production operations. Taurus contributed 20% of the Corporation's fiscal 1996
net income, and the Corporation anticipates this contribution to increase to
approximately 35% in fiscal 1997. The Corporation's competitive strengths and
the key components of its business strategy for each of its two principal lines
of business are highlighted below.
UTILITY OPERATIONS
Progressive Rate-Setting Mechanism. On October 7, 1996, the Alabama Public
Service Commission ("APSC") extended Alagasco's progressive rate-setting
mechanism, Rate Stabilization and Equalization ("RSE"), through January 1,
2002, with Alagasco's allowed return on equity ("ROE") range remaining 13.15%
to 13.65%. Under RSE, the APSC conducts quarterly reviews to determine,
S-3
<PAGE>
based on Alagasco's projections and fiscal year-to-date performance, whether
Alagasco's ROE for the fiscal year will be within the allowed range. Rates may
be adjusted quarterly (in the case of decreases) and annually (in the case of
increases, and subject to certain other limitations) to bring Alagasco's
projected ROE within the allowed range.
Flexible Rate Strategies. Alagasco's ability to utilize a variety of flexible
rate strategies enhances its ability to attract and retain industrial load. In
1994, Alagasco implemented the "P" Rate, which allows it to, in effect, release
available pipeline capacity, thereby reducing pipeline transportation costs for
its 275 transportation customers. Also, the revenue received from capacity
release reduces core market gas costs, which enhances Alagasco's competitive
position in the residential and small commercial markets. Alagasco also has a
Competitive Fuel Clause as part of its rate tariff which allows Alagasco to
adjust prices on a case-by-case basis in order to compete with alternative
fuels or alternative sources of gas.
Weather Normalization Clause. A significant portion of Alagasco's gas
distribution sales and delivery volumes vary depending upon temperature.
Alagasco's rate tariff includes a temperature adjustment rider which is
designed to mitigate the effect of departures from normal temperature on
Alagasco's earnings.
Municipal Acquisitions. Alagasco has expanded its customer base through the
acquisition of municipally-owned gas distribution systems in Alabama. Since
1985, the purchase of 22 municipal systems has added approximately 44,000
customers, including customers gained after the initial system purchases.
OIL AND GAS EXPLORATION AND PRODUCTION
The Corporation is nearing completion of the second year of implementation of
an aggressive diversified growth strategy which calls for Taurus both to
acquire producing properties and to enhance returns through participation in
selected exploration prospects. Since implementation of this growth strategy,
Taurus had invested, as of August 1, 1997, $279 million in producing
properties, $23 million in associated development and $54 million in
exploration and related activities. During the next three fiscal years,
depending upon the type and availability of appropriate opportunities, Taurus
anticipates spending $300 to $500 million for acquisitions and approximately
$150 million for exploration and related activities.
Acquisitions. Taurus's acquisition efforts focus on the purchase of producing
properties which have proved developed producing ("PDP"), proved developed
nonproducing ("PDNP") and/or proved undeveloped ("PUD") reserves which have
varying degrees of potential for increased reserves and production. From
October 1, 1995 through August 1, 1997, Taurus acquired an estimated 510 Bcfe
of proved reserves at an average acquisition cost of $0.55 per Mcfe. Taurus
replaced through acquisitions approximately 12 times its production of 42 Bcfe
during the same period.
Exploration. Taurus seeks to enhance its returns by participating in higher
potential return exploration activities. Through various joint ventures, Taurus
participates in exploration drilling in east Texas, the Gulf of Mexico and
Mississippi. In light of the large, predominantly PDP property acquisitions
made by Taurus since October 1, 1995, Taurus accelerated its exploration
involvement during 1997 in order to achieve its desired mix of acquisition,
development and exploratory activities.
Mitigation of Risk. Taurus seeks to mitigate the risks inherent in the oil
and gas business through a variety of means. While Taurus maintains its own in-
house acquisition and exploration capabilities, it
S-4
<PAGE>
seeks to form partnerships with proven industry operators having similar risk
tolerances and earnings objectives. Taurus spreads its exploratory risk by
typically taking no more than a 25% interest in any one exploration prospect.
Commodity price risk is mitigated by the use of futures, swaps and firm-
contract pricing. For fiscal 1998, Taurus has hedged or placed under contract
approximately 27.3 billion cubic feet ("Bcf") of its estimated gas production
at an average price of $2.15 per thousand cubic feet ("Mcf") and approximately
433 thousand barrels of its estimated oil production at an average price of
$20.26 per barrel.
RECENT DEVELOPMENTS
SAN JUAN BASIN ACQUISITION
In April 1997, Taurus completed its acquisition of properties in the San Juan
Basin of New Mexico from Burlington Resources Inc. for $77.8 million. The
acquisition included approximately 1,750 producing wells, half of which Taurus
now operates. Taurus estimates that the acquired properties have net proved
reserves of approximately 225 Bcfe, 95% of which is high BTU content natural
gas. Taurus estimates that production from this acquisition will approximate 9
Bcfe in fiscal 1998.
BLACK WARRIOR BASIN ACQUISITION
In August 1997, Taurus acquired coalbed methane properties in the Black
Warrior Basin of Alabama from Amoco Corporation for $72 million. The properties
include more than 260 producing wells, 170 of which have been operated by
Taurus since initial production. Taurus estimates that the acquired properties
have net proved reserves of 90 Bcfe, substantially all of which are classified
as PDP reserves. Net annual production from the properties currently exceeds 7
Bcfe. Through the year 2002, production from all of the wells qualifies for the
federal income tax credit for nonconventional fuels, which presently is valued
at approximately $1.05 per Mcf.
PINNACLE REEF JOINT VENTURE
In June 1997, Taurus acquired for $16 million a 9% interest in a Sonat
Exploration Company/United Meridian Corporation joint venture to explore for
natural gas in the Cotton Valley Pinnacle Reef trend of Texas. The joint
venture controls 195,000 gross acres. Sonat Exploration is the operator and
majority interest owner. The joint venture plans to complete three-dimensional
("3-D") seismic acquisition and data processing on about 70% of its leasehold
by December 31, 1997 and on the remaining acreage by December 31, 1998.
See "The Corporation--Oil and Gas Exploration and Production Activities."
S-5
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus Supplement, including statements of the
future plans, objectives and expected performance of the Corporation and its
subsidiaries, are forward-looking statements that are dependent on certain
events, risks and uncertainties that may be outside their control. Some of
these include, but are not limited to, economic and competitive conditions,
inflation rates, legislative and regulatory changes, financial market
conditions, future business decisions and other uncertainties, all of which are
difficult to predict. There are numerous uncertainties inherent in estimating
quantities of proved oil and gas reserves and in projecting future rates of
production and timing of development expenditures. The total amount and timing
of actual future production may vary significantly from reserves and production
estimates. In the event Taurus is unable to fully invest its planned
acquisition expenditures, future operating revenues and proved reserves could
be negatively affected. The drilling of exploratory wells can involve
significant risks including those related to timing, success rates and cost
overruns. These risks can be impacted by lease and rig availability, complex
geology and other factors. Results of operations and cash flows also could be
affected by future oil and gas prices. Although Taurus makes use of futures
contracts to mitigate risk, fluctuations in oil and gas prices may affect the
Corporation's financial position and results of operations.
THE OFFERING
Common Stock offered(1) .... 1,200,000 shares
Common Stock outstanding
after the Offering (pro
forma as of August 27,
1997) .....................
14,370,624 shares
Indicated annual dividend $1.24 per share
rate ......................
Use of proceeds ............ The Corporation intends to use the net proceeds
from the offering to repay a portion of the
short-term debt incurred by the Corporation to
fund the acquisition of various oil and gas
properties made by Taurus during fiscal 1997,
including the purchase from Amoco Corporation of
Black Warrior Basin coalbed methane properties
described herein. See "Use of Proceeds" and "The
Corporation--Oil and Gas Exploration and
Production Activities."
New York Stock Exchange EGN
symbol ....................
- --------
(1) Each share of Common Stock includes two-thirds of a right to purchase
1/100th of one share of Series A Junior Participating Preferred Stock, par
value $0.01 per share. See "Description of Capital Stock" in the
accompanying Prospectus.
S-6
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The selected historical consolidated financial information of the Corporation
shown below for the five-year period ended September 30, 1996, has been derived
from previously published audited consolidated financial statements of the
Corporation, prepared in accordance with generally accepted accounting
principles, which have been audited and reported upon by Coopers & Lybrand,
L.L.P., independent auditors. The selected historical consolidated financial
information for the nine months ended June 30, 1997 and 1996, as well as other
data for all periods shown below, are unaudited. This information should be
read in conjunction with the consolidated financial statements and related
notes included in the Corporation's Annual Report on Form 10-K for the year
ended September 30, 1996 and the Corporation's Quarterly Reports on Form 10-Q
for the periods ended December 31, 1996, March 31, 1997 and June 30, 1997,
which reports are incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30, YEAR ENDED SEPTEMBER 30,
------------------------ ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED
STATEMENT OF INCOME
DATA:
Operating Revenues..... $ 370,823 $ 336,940 $ 399,442 $ 318,580 $ 374,503 $ 355,878 $ 331,065
Operating Income....... 57,797 42,427 38,797 32,033 35,328 29,919 22,548
Income Before Income
Taxes................. 44,270 34,467 26,589 22,989 30,362 21,489 16,069
Net Income(1).......... 36,715 26,779 21,541 19,308 23,751 18,081 16,628
Earnings Per Average
Common Share(1)....... 2.98 2.44 1.95 1.77 2.19 1.77 1.64
Average Common Shares
Outstanding........... 12,327,739 10,991,275 11,023,434 10,906,315 10,833,619 10,236,926 10,168,111
Cash Dividends Paid Per
Common Share.......... $ 0.90 $ 0.87 $ 1.17 $ 1.13 $ 1.09 $ 1.05 $ 1.01
HISTORICAL CONSOLIDATED
STATEMENT OF CASH FLOW
DATA:
Net Cash Provided by
Operating Activities.. $ 59,371 $ 63,940 $ 52,457 $ 60,869 $ 34,343 $ 40,441 $ 30,302
HISTORICAL CONSOLIDATED
BALANCE SHEET DATA (AT
PERIOD END):
Capitalization:
Long-Term Debt......... $ 279,622(2) $ 130,652 $ 195,545 $ 131,600 $ 118,302 $ 85,852 $ 90,609
Common Shareholders'
Equity................ 269,799 194,657 188,405 173,924 167,026 140,313 129,858
Preferred Stock........ -- -- -- -- -- -- 1,800
Total Capitalization... 549,421 325,309 383,950 305,524 285,328 226,165 222,267
Total Assets........... 704,321 487,589 570,971 459,084 411,314 370,685 342,119
Property, Plant and
Equipment (Net)....... 577,531 367,858 444,916 327,264 287,182 273,097 254,630
OTHER DATA (UNAUDITED):
Proved Reserves (Bcfe)
(at period end)(3).... -- -- 250.9 95.2 69.0 75.0 53.3
Production (Bcfe)...... 22.7 10.3 16.1 10.1 10.3 7.5 7.3
Natural Gas
Distribution
Throughput (Bcf)...... 84.0 92.0 111.4 101.4 97.5 94.4 91.8
Standardized Measure of
Discounted Future Net
Cash Flows Relating to
Proved Oil and Gas
Reserves (PV10) (in
thousands) (at period
end)(3)............... -- -- $ 170,839 $ 63,559 $ 51,654 $ 72,784 $ 48,298
Capital Expenditures
(in thousands):
Natural Gas
Distribution.......... $ 29,048 $ 29,524 $ 43,175 $ 42,780 $ 38,473 $ 22,093 $ 20,228
Exploration and
Production(4)......... $ 146,665 $ 43,315 $ 130,486 $ 28,493 $ 8,970 $ 22,181 $ 4,386
</TABLE>
- -------
(1) With respect to 1994, includes one-time gain of approximately $2,000,000,
or $0.18 per share, from the sale of certain assets.
(2) Includes $85 million of medium-term notes issued during July 1997.
(3) Interim period data not available.
(4) Includes exploration expenses charged to income.
S-7
<PAGE>
USE OF PROCEEDS
The net proceeds to the Corporation from the sale of the shares of Common
Stock offered hereby are estimated to be approximately $41,201,000
($47,400,000 if the Underwriters' over-allotment option is exercised in full).
The Corporation intends to use the net proceeds from the offering to repay a
portion of the short-term debt incurred by the Corporation to fund the
acquisition of various oil and gas properties made by Taurus during fiscal
1997, including the purchase from Amoco Corporation of Black Warrior Basin
coalbed methane properties described herein. See "The Corporation--Oil and Gas
Exploration and Production Activities." As of August 27, 1997 the Corporation
had short-term indebtedness of approximately $136,000,000 having a weighted
average interest rate of 5.88% per annum, and maturities ranging from August
29, 1997 to October 2, 1997.
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Corporation at June 30, 1997, on an historical basis and as adjusted to
reflect the August 1997 acquisition of certain coalbed methane properties in
the Black Warrior Basin of Alabama and the sale by the Corporation of the
1,200,000 shares of Common Stock offered hereby and the use of proceeds
thereof (after deducting the underwriting discount and estimated offering
expenses). This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of the Corporation and the notes thereto
contained in the Corporation's Annual Report on Form 10-K for the year ended
September 30, 1996 and the Corporation's Quarterly Reports on Form 10-Q for
the periods ended December 31, 1996, March 31, 1997 and June 30, 1997, which
reports are incorporated by reference herein.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
--------------------------------------
AS
AS ADJUSTED FOR
ADJUSTED FOR ACQUISITION AND
ACTUAL ACQUISITION OFFERING
-------- ------------ ---------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt(1)...................... $ 35,855 $107,855(2) $ 66,654
======== ======== ========
Long-term debt (excluding current
maturities)(3)......................... $279,622 $279,622 $279,622
-------- -------- --------
Common shareholders' equity:
Common stock, $0.01 par value,
authorized 30,000,000 shares, with
13,139,031 actual shares outstanding
and 14,339,031 shares as adjusted for
the offering(4)...................... 131 131 143
Premium on capital stock.............. 142,704 142,704 183,893
Capital surplus....................... 2,802 2,802 2,802
Retained earnings..................... 124,162 124,162 124,162
-------- -------- --------
Total common shareholders' equity... 269,799 269,799 311,000
-------- -------- --------
Total capitalization................ $549,421 $549,421 $590,622
======== ======== ========
</TABLE>
- --------
(1) Includes $1,855,000 of current maturities of long-term debt and
$34,000,000 of notes payable.
(2) Reflects the short-term debt incurred in connection with the August 1997
acquisition of Black Warrior Basin coalbed methane properties from Amoco
Corporation for $72 million.
(3) Includes $85,000,000 of medium-term notes issued during July 1997.
(4) Does not include a total of 1,361,462 shares reserved for issuance at June
30, 1997 under the Corporation's stock option, long range performance
share, employee stock purchase, director stock and other employee benefit
plans or 734,159 shares reserved for issuance at June 30, 1997 under the
Corporation's dividend reinvestment and direct stock purchase plan.
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<PAGE>
FUTURE CAPITAL RESOURCES AND LIQUIDITY
The Corporation anticipates that utility capital expenditures by Alagasco
may approximate $55 million in fiscal 1998, representing principally additions
for normal distribution system renewals and expansion. The Corporation
anticipates funding these capital requirements through internally generated
capital and the utilization of short-term credit facilities.
The Corporation is nearing completion of the second year of implementation
of an aggressive diversified growth strategy which calls for Taurus both to
acquire producing properties and to enhance returns through participation in
selected exploration prospects. Since implementation of this growth strategy,
Taurus had invested, as of August 1, 1997, $279 million in producing
properties, $23 million in associated development and $54 million in
exploration and related activities. During the next three fiscal years,
depending upon the type and availability of appropriate opportunities, Taurus
anticipates spending $300 to $500 million for acquisitions and approximately
$150 million for exploration and related activities. Taurus's continued
ability to invest in property acquisitions will be significantly influenced by
industry trends as the producing property acquisition market has historically
been cyclical. As part of these activities, Taurus is continually engaged in
evaluating and making proposals with respect to potential property
acquisitions and, at any time, may be involved in negotiations with respect to
such acquisitions. From time to time, Taurus also may be engaged in
negotiations to sell, trade or otherwise dispose of previously acquired
property.
To finance Taurus's investment program, the Corporation initially will
utilize short-term credit facilities of $166 million to supplement internally
generated cash flow, with additional offerings of long-term debt and common
stock by the Corporation providing permanent financing. During fiscal 1996,
the Corporation filed a $250 million shelf registration for debt and common
stock. Under that registration, the Corporation issued $40 million of medium-
term notes in September 1996; 1.7 million shares of common stock in January
1997 generating $49.1 million in proceeds; and $85 million of medium-term
notes in July 1997.
The Corporation is currently soliciting the consents of the holders of its
Series 1993 Notes and 8% Debentures due 2007 to remove certain covenant
restrictions on the Corporation's ability to issue additional long-term
indebtedness. See "Description of Debt Securities--Certain Conditions for
Issuance of Additional Indebtedness" in the accompanying Prospectus.
Under Alabama law, the bonded indebtedness of Alabama corporations may not
be increased without the consent of shareholders. The Corporation is presently
authorized to issue without further shareholder approval bonded indebtedness
in an amount which, when added to bonded indebtedness then outstanding, does
not exceed the greater of (i) $750,000,000 or (ii) one hundred fifty percent
(150%) of the total shareholders' equity of the Corporation as reflected in
the consolidated financial statements of the Corporation as of the end of the
Corporation's most recently completed fiscal quarter. See "Description of Debt
Securities--Certain Conditions for Issuance of Additional Indebtedness" in the
accompanying Prospectus.
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<PAGE>
THE CORPORATION
The Corporation is a diversified energy holding company engaged primarily in
natural gas distribution and the acquisition, exploration, development and
production of domestic natural gas and oil. Certain statements under this
section of the Prospectus Supplement, including statements of the future
plans, objectives and expected performance of the Corporation and its
subsidiaries, are forward-looking statements that are dependent on certain
events, risks and uncertainties that may be outside their control. See
"Prospectus Supplement Summary--Forward-Looking Statements."
NATURAL GAS DISTRIBUTION
General. Alagasco, the Corporation's utility subsidiary, is the largest
natural gas distribution utility in the State of Alabama. Alagasco purchases
natural gas through interstate and intrastate suppliers and distributes the
purchased gas through its distribution facilities for sale to residential,
commercial and industrial customers and other end-users of natural gas.
Alagasco also provides transportation services to industrial and commercial
customers located on its distribution system. These transportation customers,
acting on their own or using Alagasco as their agent, purchase gas directly
from producers or other suppliers and arrange for delivery of the gas into the
Alagasco distribution system. Alagasco then charges a fee to transport this
customer-owned gas through its distribution system to the customer's facility.
Alagasco's service territory is located primarily in central and north
Alabama and includes over 175 communities in 30 counties. Birmingham, the
largest city in Alabama, and Montgomery, the state capital, are served by
Alagasco. The aggregate population of the counties served by Alagasco is
estimated to be 2.4 million. During fiscal 1996, Alagasco served an average of
418,486 residential customers, 34,028 small commercial and industrial
customers, and 54 large commercial and industrial customers.
APSC Regulation. As an Alabama utility, Alagasco is subject to regulation by
the Alabama Public Service Commission ("APSC") which, in 1983, established the
Rate Stabilization and Equalization ("RSE") rate-setting process. RSE was
extended for the fourth time on October 7, 1996, for a five-year period
through January 1, 2002. Under the terms of that extension, RSE will continue
after January 1, 2002, unless, after notice to the Corporation and a hearing,
the Commission votes to either modify or discontinue its operation.
Under RSE, the APSC conducts quarterly reviews to determine, based on
Alagasco's projections and fiscal year-to-date performance, whether Alagasco's
return on equity for the fiscal year will be within the allowed range of
13.15% to 13.65%. Reductions in rates can be made quarterly to bring the
projected return within the allowed range; increases, however, are allowed
only once each fiscal year, effective December 1, and cannot exceed 4% of
prior-year revenues. RSE limits the utility's equity upon which a return is
permitted to 60% of total capitalization and provides for certain cost control
measures designed to monitor Alagasco's operations and maintenance ("O&M")
expense. If the change in O&M expense per customer falls within 1.25
percentage points above or below the Consumer Price Index for All Urban
Customers ("index range"), no adjustment is required. If, however, the change
in O&M expense per customer exceeds the index range, three-quarters of the
difference is returned to customers. To the extent the change is less than the
index range, the utility benefits by one-half of the difference through future
rate adjustments. The most recent RSE adjustment, a $1.5 million annual
decrease in revenue, became effective April 1, 1997.
Alagasco calculates a temperature adjustment to customers' monthly bills to
remove the effect of departures from normal temperature on Alagasco's
earnings. The calculation is performed monthly, and the adjustments to
customers' bills are made in the same billing cycle the weather variation
occurs.
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<PAGE>
Alagasco's rate schedules for natural gas distribution charges contain a Gas
Supply Adjustment ("GSA") rider which permits the pass-through to customers of
changes in the cost of gas supply, including Gas Supply Realignment surcharges
imposed by Alagasco's suppliers resulting from changes in gas supply purchases
related to the implementation of Federal Energy Regulatory Commission ("FERC")
Order 636. On October 7, 1996, the APSC issued an order providing for the
refund to customers of approximately $17.1 million, including interest, of
supplier refunds. Alagasco refunded these amounts to customers during January
1997. These refunds were collected from a variety of sources and most relate
to the settlement of rate case and FERC Order 636 proceedings of Southern
Natural Gas Company ("Southern").
Gas Supply. The Alagasco distribution system is connected to and has firm
transportation contracts with two major interstate pipeline systems--Southern
and Transcontinental Gas Pipe Line Corporation ("Transco"). On Southern's
system, Alagasco has 250,924 Mcf per day of No-Notice Firm Transportation
service through October 31, 2008, 91,946 Mcf per day of Firm Transportation
service through October 31, 2008, 40,000 Mcf per day of Firm Transportation
service through October 31, 2002, and 10,000 Mcf per day of Firm
Transportation service through October 31, 1998. Alagasco also has 12,426,687
Mcf of storage capacity on Southern's system with a maximum withdrawal rate
from storage of 250,924 Mcf per day and a maximum injection rate into storage
of 95,590 Mcf per day. The Transco firm transportation contract, which expires
in 2002, provides for maximum daily firm transportation of up to 100,000 Mcf.
Thus, Alagasco has a peak day firm interstate pipeline transportation capacity
of 492,870 Mcf per day.
Alagasco purchases gas from various gas producers and marketers, including
affiliates of Southern and Transco, and from certain intrastate producers.
Alagasco has contracts in place to purchase up to a total of 246,776 Mcf per
day of interstate firm supply, of which 241,946 Mcf is supported by firm
transportation on the Transco and Southern systems. Alagasco also has
intrastate firm supply contracts for approximately 25,000 Mcf which is
purchased at the city gate. These volumes, along with Alagasco's maximum
withdrawal from storage of 250,924 Mcf per day, liquefied natural gas peak
shaving capacity of 200,000 Mcf per day and miscellaneous other sources, give
Alagasco a peak day firm supply of approximately 720,000 Mcf per day. Alagasco
also utilizes the Southern and Transco pipeline systems to access spot market
gas in order to supplement its firm system supply and serve its industrial
transportation customers.
Competition and Pricing. The price of natural gas is a significant marketing
factor in the territory served by Alagasco; propane, coal and fuel oil are
readily available, and many major industrial customers have the capability to
switch to alternate fuels. In the residential and small industrial and
commercial markets, electricity is the principal competitor.
Natural gas service available to Alagasco customers generally falls into two
categories--interruptible and firm. Interruptible service is contractually
subject to interruption by Alagasco for various reasons, the most common of
which is curtailment of industrial customers during periods of peak
residential heating demand on the Alagasco system. Firm service is generally
not subject to interruption and, therefore, is more expensive than
interruptible service. Firm service is generally provided to residential and
small commercial and industrial customers. Interruptible service is generally
provided to large commercial and industrial customers which typically have the
capacity to reduce consumption by adjusting their production schedules or by
switching to alternate fuels during periods of interruption. Deliveries of
sales and transportation gas totaled 111,422 million cubic feet ("MMcf")
in 1996.
In 1994, capitalizing on federally mandated changes in the natural gas
industry, Alagasco implemented the "P" Rate. This tariff allows the utility
to, in effect, release available pipeline capacity thereby reducing pipeline
transportation costs for its 275 transportation customers. These lower costs
help
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prevent bypass. Also, because revenue received from capacity release reduces
core market gas costs, Alagasco's competitive position in the residential and
small commercial markets is enhanced as well.
Alagasco has a Competitive Fuel Clause ("CFC") as part of its rate tariff
which allows Alagasco to adjust large commercial and industrial prices on a
case-by-case basis to compete with either alternate fuels or alternate sources
of gas. The GSA rider to Alagasco's tariff increases the rates paid by other
customers to recover the reduction in rates allowed under the CFC because the
retention of any customer, particularly large commercial and industrial,
benefits all customers by recovering a portion of the system's fixed cost.
Alagasco also has a Transportation Tariff (the "Tariff") which allows
Alagasco to transport gas for customers rather than buying for and reselling
gas to them. The Tariff is based on Alagasco's gas sales profit margin so that
Alagasco's net income is not affected whether it transports or sells gas. The
Tariff also may be adjusted under the CFC. Of Alagasco's total large
commercial and industrial customer deliveries during 1996, over 99% (46,207
MMcf) was from transportation of customer-owned gas.
Growth. Alagasco has supplemented traditional service area growth with
acquisitions of municipally-owned gas distribution systems. Since 1985
Alagasco has acquired 22 such systems. Approximately 44,000 customers have
been added through initial system purchases and subsequent customer additions,
as Alagasco has increased the relatively low saturation rates in the acquired
areas through a variety of marketing efforts, including offering natural gas
service to propane customers already situated on the municipal system lines,
extending the acquired municipal system into nearby neighborhoods that desire
natural gas service, and marketing natural gas appliances to existing and new
customers. Approximately 80 municipal systems, representing about 250,000
customers, remain in Alabama, and many are located in or near Alagasco's
existing service territory. Alagasco is optimistic that additional acquisition
opportunities will arise in the future, although there can be no assurance
that any additional acquisitions of municipal gas distribution systems will in
fact occur.
Weather. Alagasco's gas distribution business is highly seasonal since a
significant portion of Alagasco's total sales and delivery volumes is to
customers whose use varies depending upon temperature, principally
residential, small commercial and small industrial customers. Alagasco's rate
tariff includes a temperature adjustment rider which is designed to mitigate
the effect of departures from normal temperature on Alagasco's earnings. The
calculation is performed monthly and adjustments are made to customers' bills
in the actual month the weather variation occurs.
OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITIES
General. The Corporation's oil and gas activities are conducted by Taurus,
and involve the acquisition, exploration, development and production of
natural gas and oil from conventional and nonconventional reservoirs in the
United States. Taurus's remaining recoverable reserves at the end of fiscal
1996 totaled approximately 251 Bcfe. During fiscal 1997, Taurus has completed
a number of property acquisitions which have significantly increased its
proved reserves. Taurus estimates that it has acquired an aggregate of 331
Bcfe at an average cost of $0.52 per Mcfe during the current fiscal year. See
"Property Acquisitions and Development." Taurus's oil and gas properties are
located primarily in Alabama, New Mexico, Texas, Louisiana, Mississippi and
the Gulf of Mexico. In the quarter ended June 30, 1997, Taurus's average daily
net production was 102 MMcfe, a 113% increase over the same period for 1996.
As the Corporation's dominant growth vehicle, Taurus is continuing its
strategic focus on acquiring oil and gas producing properties and
supplementing returns with exploration and related development. The
Corporation is nearing completion of the second year of implementation of an
aggressive
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diversified growth strategy which calls for Taurus both to acquire producing
properties and to enhance returns through participation in selected
exploration prospects. Since implementation of this growth strategy, Taurus
had invested, as of August 1, 1997, $279 million in producing properties, $23
million in associated development and $54 million in exploration and related
activities. During the next three fiscal years, depending upon the type and
availability of appropriate opportunities, Taurus anticipates spending $300 to
$500 million for acquisitions and approximately $150 million for exploration
and related activities. Taurus's continued ability to invest in property
acquisitions will be significantly influenced by industry trends as the
producing property acquisition market has historically been cyclical.
In implementing the Corporation's growth strategy, Taurus works with a
variety of experienced industry partners in its acquisition and exploration
activities. Taurus also is increasing its internal generation of acquisition
and exploration opportunities. To help minimize risk, Taurus takes small
working interest positions in numerous exploratory prospects rather than large
positions in a few. Taurus also utilizes the natural gas and oil futures
markets as well as fixed-price contracts as defensive mechanisms to mitigate
the impact of commodity price volatility on targeted returns of reserve
acquisitions and to manage overall price volatility on other production.
Taurus also serves as the operator of extensive Black Warrior Basin coalbed
methane properties for its own interests and those of its partners and
provides third-party operations. Since making the transition away from the
development of new coalbed methane projects in the early 1990s, Taurus has
continued to operate coalbed methane wells as a profitable business activity.
Property Acquisitions and Development. Taurus's acquisition efforts focus on
the purchase of producing properties which have PDP, PDNP and/or PUD reserves
which have varying degrees of potential for increased reserves and production.
From October 1, 1995 through August 1, 1997, Taurus acquired an estimated 510
Bcfe of proved reserves at an average acquisition cost of $0.55 per Mcfe.
Taurus replaced through acquisitions approximately 12 times its production of
42 Bcfe during the same period.
Taurus's two largest property acquisitions to date occurred in fiscal 1997.
During April 1997, Taurus purchased an estimated 225 Bcfe of high BTU content
natural gas reserves in the San Juan Basin of New Mexico from Burlington
Resources Inc. for $77.8 million. The acquisition included approximately 1,750
producing wells, with Taurus now operating about half of them. Net production
is expected to approximate 9 Bcfe in fiscal 1998. Taurus plans to spend $18.5
million over the next two to three years to fully develop these long-lived,
predominantly PDP reserves.
On August 1, 1997, Taurus closed on the $72 million purchase of an estimated
90 Bcf of coalbed methane reserves in the Black Warrior Basin of Alabama from
Amoco Corporation. Net annual production currently exceeds 7 Bcf and, through
the year 2002, qualifies for the federal income tax credit for nonconventional
fuels; the credit presently is valued at approximately $1.05 per Mcf and
increases annually with inflation. The properties include more than 260
producing wells, 170 of which have been operated by Taurus since initial
production.
On July 22, 1997, Taurus purchased an estimated 10 Bcfe of domestic oil and
gas reserves from United Meridian Corporation ("UMC") for $9.6 million. These
properties are located in Texas and the Rocky Mountains and are part of UMC's
1991 acquisition program in which Taurus already owned a 14% interest.
Virtually all the reserves are classified as PDP reserves.
In four smaller transactions in 1997, Taurus acquired an estimated 16.3 Bcfe
of oil and gas reserves for $11.5 million. The largest of these was the $8.2
million acquisition from Griffin and Griffin
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<PAGE>
Oil Company Inc. of an estimated 10.7 Bcfe of predominantly natural gas
reserves in southwest Mississippi. Taurus estimates that approximately 60% of
the reserves are PDP reserves. Taurus plans to spend another $1.2 million to
develop the remaining behind-pipe and PUD reserves. Taurus is operating 34 of
the 39 wells, which target the Frio and Tuscaloosa trends. The other three
transactions totaled $3.3 million for an estimated 5.6 Bcfe of predominantly
natural gas reserves in Texas and Louisiana. Taurus expects to spend an
additional $3.2 million to fully develop the behind-pipe and PUD reserves.
Taurus's largest property acquisition in fiscal 1996 was the $61 million
purchase of 105 Bcf of coalbed methane reserves in Alabama from Burlington
Resources Inc. Located on 19,000 gross acres adjacent to Taurus's existing
coalbed methane interests in west central Alabama, substantially all of these
long-lived reserves are classified as PDP. Production from 43 of the more than
100 wells qualifies for the federal tax credit for nonconventional fuels.
Through its acquisition partnership with Sonat Exploration Company, a
subsidiary of Birmingham-based Sonat Inc., Taurus invested $28 million in four
property acquisitions during fiscal 1996. Three of the properties are located
in Louisiana and the other is located in the Gulf of Mexico, offshore
Louisiana and Texas. Taurus's working interest in these projects ranges from
one-third to 40%. Taurus estimates it will spend approximately $20 million
over the ensuing three to four years to fully develop these predominantly
behind-pipe and PUD reserves.
Exploration and Development. In the period from October 1, 1995 through June
30, 1997, Taurus invested $54 million in exploration and related development
(including $16 million to acquire the Cotton Valley Pinnacle Reef interests
described below). In light of the large, predominantly PDP property
acquisitions it had made, Taurus accelerated its exploration involvement
during 1997 in order to achieve its desired mix of acquisition, development
and exploratory activities.
In June 1997, Taurus joined a Sonat Exploration Company/United Meridian
Corporation joint venture in the Cotton Valley Pinnacle Reef trend by
acquiring a 9% working interest in the joint venture's future exploration
activities for $16 million. Located in the east Texas salt basin, the joint
venture leasehold includes 195,000 gross acres in Henderson County and in Van
Zandt, Wood and Smith counties to the northeast and in Anderson County to the
southeast. The joint venture's lease acquisitions have been based on the
presence of reef-like seismic anomalies on available two-dimensional seismic
lines. The joint venture plans to complete 3-D seismic acquisition and data
processing on about 70% of its leasehold by the end of calendar 1997 and on
the remaining acreage in calendar 1998.
The joint venture's first well, the Ryon No. 1, failed to encounter a
pinnacle reef, but the results do not change the joint venture's view
concerning the productive potential for reef drilling in this area. The joint
venture expects to drill at least one additional well by the end of calendar
1997.
Through a joint venture with DDD Energy Inc. and Griffin and Griffin Oil
Company Inc., Taurus plans to explore and develop in the Frio and Tuscaloosa
trends in Wilkinson and Amite counties in southwest Mississippi. Taurus will
have a 50% working interest to casing point and will drill and operate the
wells for the joint venture. Casing has been set on the initial well, and
testing and evaluation are underway.
In fiscal 1997 year-to-date, Taurus has participated in nine offshore Gulf
of Mexico exploration wells; the well operators have indicated three
discoveries which could add an estimated 2.5 Bcf to 3 Bcf of gas to Taurus's
reserves. In addition, Taurus is participating in two offshore Gulf of Mexico
wells currently drilling. Also during 1997, Taurus increased its working
interest position in its offshore Gulf of Mexico exploration joint venture
with UMC from 12.5% to 20%.
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<PAGE>
Mitigation of Risk. Taurus seeks to mitigate the risks inherent in the oil
and gas business through a variety of means. While Taurus maintains its own
in-house acquisition and exploration capabilities, it seeks to form
partnerships with proven industry operators having similar risk tolerances and
earnings objectives. Taurus spreads its exploratory risk by typically taking
no more than a 25% interest in any one exploration prospect. Commodity price
risk is mitigated by the use of futures, swaps and firm-contract pricing. For
fiscal 1998, Taurus has hedged or placed under contract approximately 27.3 Bcf
of its estimated gas production at an average price of $2.15 per Mcf and
approximately 433 thousand barrels of its estimated oil production at an
average price of $20.26 per barrel.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Corporation's Common Stock is listed for trading on the New York Stock
Exchange under the symbol EGN. The following table sets forth for the periods
indicated the high and low sales prices of the Common Stock as reported on the
New York Stock Exchange Composite Transactions Tape, and the amount of cash
dividends paid per share of Common Stock:
<TABLE>
<CAPTION>
DIVIDENDS
HIGH LOW PAID
------- ------- ---------
<S> <C> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1995
First Quarter...................................... $22 3/4 $19 3/4 $0.28
Second Quarter..................................... 23 1/2 20 5/8 0.28
Third Quarter...................................... 23 1/4 20 1/8 0.28
Fourth Quarter..................................... 22 3/8 21 0.29
FISCAL YEAR ENDED SEPTEMBER 30, 1996
First Quarter...................................... 25 1/8 21 3/8 0.29
Second Quarter..................................... 25 3/8 21 3/4 0.29
Third Quarter...................................... 24 1/4 21 7/8 0.29
Fourth Quarter..................................... 25 22 0.30
FISCAL YEAR ENDING SEPTEMBER 30, 1997
First Quarter...................................... 31 1/4 23 3/4 0.30
Second Quarter..................................... 31 3/8 29 0.30
Third Quarter...................................... 35 1/8 29 1/8 0.30
Fourth Quarter (through August 27, 1997)........... 36 3/8 33 1/4 0.31(1)
</TABLE>
- --------
(1) A quarterly dividend of $0.31 per share will be paid on September 2, 1997
to shareholders of record as of August 15, 1997.
On August 27, 1997, the last reported per share sales price of the
Corporation's Common Stock on the New York Stock Exchange Composite
Transactions Tape was $35 11/16.
The Corporation has paid quarterly dividends on its Common Stock since the
Corporation became publicly held in 1953. Dividends paid by the Corporation on
its Common Stock are at the discretion of the Board of Directors and depend
upon the Corporation's earnings, financial condition and other relevant
factors. The Corporation is a party to indentures and other debt instruments
which restrict the Corporation's ability to pay dividends. Under the most
restrictive provisions of these agreements, the Corporation is required to
maintain a consolidated tangible net worth of not less than $80,000,000. At
June 30, 1997, the Corporation had a consolidated tangible net worth of
$269,799,000 and, therefore, under this restriction, the Corporation could
make dividend payments in respect of its Common Stock of $189,799,000. See
"Description of Capital Stock--Common Stock--Limitations on Dividend Payments"
in the accompanying Prospectus.
S-15
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Corporation and each of the
underwriters named below (the "Underwriters"), the Corporation has agreed to
sell to each of the Underwriters, and each of the Underwriters has severally
agreed to purchase the number of shares of Common Stock set forth opposite its
respective name below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Salomon Brothers Inc ........................................
Smith Barney Inc. ...............................................
---------
Total.......................................................... 1,200,000
=========
</TABLE>
The Underwriters have agreed, subject to the terms and conditions set forth
in the Underwriting Agreement, to purchase all of the shares of Common Stock
offered hereby if any of the shares of Common Stock are purchased (other than
those shares of Common Stock covered by the Underwriters' over-allotment
option described below). In the event of default by an Underwriter, the
Underwriting Agreement provides that, in certain circumstances, purchase
commitments of the nondefaulting Underwriters may be increased or the
Underwriting Agreement may be terminated.
The Underwriters have advised the Corporation that they propose initially to
offer the shares of Common Stock directly to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of $ per share on sales to certain other dealers. After the
offering of the Common Stock, the public offering price, concession and
discount may be changed.
The Corporation has granted the Underwriters an option exercisable within 30
days after the date hereof to purchase up to an aggregate of 180,000
additional shares of Common Stock solely to cover over-allotments, if any, at
the public offering price set forth on the cover page of this Prospectus
Supplement, less the underwriting discount, determined in the manner described
on the cover page hereof. If the Underwriters exercise this option, each of
the Underwriters will have a firm commitment, subject to certain conditions,
to purchase approximately the same proportion of the option shares that the
number of shares of Common Stock to be purchased by it in the foregoing table
bears to the total number of shares of Common Stock offered by the
Underwriters hereby.
The Corporation has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
The Corporation has agreed that, for a period of 90 days from the date of
the Underwriting Agreement, it will not, without the prior written consent of
the Underwriters, offer, sell or contract to sell, or otherwise dispose of,
directly or indirectly, or announce the offering of, any other shares of
Common Stock or any securities convertible into or exchangeable for, any
shares of Common Stock; provided, however, that the Corporation may issue and
sell Common Stock pursuant to any director or employee stock option, stock
bonus or incentive plan, stock ownership plan, any Corporation sponsored
retirement or similar plan, any dividend reinvestment or direct stock purchase
plan or any other similar plan of the Corporation in effect on such date and
the Corporation may issue Common Stock issuable upon the conversion of
securities or the exercise of warrants outstanding on such date.
In connection with this offering, certain Underwriters and their respective
affiliates may engage in transactions that stabilize, maintain or otherwise
affect the market price of the Common Stock. Such
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<PAGE>
transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M under the Securities Exchange Act of 1934, as
amended, pursuant to which such persons may bid for or purchase Common Stock
for the purpose of stabilizing its market price. The Underwriters also may
create a short position for their respective accounts by selling more Common
Stock in connection with this offering than they are committed to purchase
from the Corporation and in such case may purchase Common Stock in the open
market following completion of this offering to cover all or a portion of such
short position. In addition, Salomon Brothers Inc, on behalf of the
Underwriters, may impose "penalty bids" under contractual arrangements between
the Underwriters whereby it may reclaim from an Underwriter (or dealer
participating in this offering) for the account of the Underwriters, the
selling concession with respect to Common Stock that is distributed in this
offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and, if they are undertaken, they may be
discontinued at any time.
Each of the Underwriters was a party to a Selling Agency Agreement with the
Corporation pursuant to which each acted as placement agent for the
Corporation's issuance of medium-term notes in September 1996 and July 1997,
for which each received customary commissions. Each of the Underwriters has
also acted as a placement agent in connection with the sale of medium-term
notes by Alagasco, for which each has received customary commissions. The
Underwriters and certain affiliates thereof engage in transactions with and
provide services for the Corporation in the ordinary course of business.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Corporation by Bradley Arant Rose & White LLP, Birmingham,
Alabama. Certain legal matters will be passed upon for the Underwriters by
Winthrop, Stimson, Putnam & Roberts, New York, New York. As of the date of
this Prospectus Supplement, the partners and associates of Bradley Arant Rose
& White LLP beneficially owned approximately shares of Common Stock of the
Corporation.
EXPERTS
The consolidated balance sheets of the Corporation as of September 30, 1996
and 1995 and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended
September 30, 1996 and the related financial statement schedules which are
incorporated by reference or included in the Corporation's Annual Report on
Form 10-K for the year ended September 30, 1996 and which have been
incorporated by reference herein have been incorporated herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Reference is made to "Incorporation of Certain Documents by Reference" in
the accompanying Prospectus. At the date of this Prospectus Supplement, the
documents incorporated by reference herein also include the Corporation's
Annual Report on Form 10-K for the year ended September 30, 1996, the
Corporation's Quarterly Reports on Form 10-Q for the periods ended December
31, 1996, March 31, 1997 and June 30, 1997, and the Corporation's Current
Reports on Form 8-K, dated July 9, 1997 and August 11, 1997.
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<PAGE>
PROSPECTUS
$250,000,000
ENERGEN CORPORATION
DEBT SECURITIES
COMMON STOCK
Energen Corporation (the "Corporation") may offer from time to time up to an
aggregate amount of $250,000,000 (or the equivalent thereof if any of the
securities offered hereby are denominated in a currency, currency unit or
composite currency other than the U.S. dollar) of (i) its notes, debentures or
other evidences of unsecured indebtedness (the "Debt Securities") in one or
more currencies on terms to be determined at the time of sale and (ii) shares
of its common stock, par value $.01 per share (the "Common Stock"), on terms
to be determined at the time of sale. The Common Stock is referred to herein
as the "Equity Securities," and the Debt Securities and the Equity Securities
are collectively referred to herein as the "Offered Securities." The Offered
Securities may be sold for U.S. Dollars, foreign currencies or foreign
currency units, and the principal of or any interest on the Debt Securities
may be payable in U.S. Dollars, foreign currencies or foreign currency units.
The Debt Securities will rank equally with all other outstanding unsecured
senior indebtedness of the Corporation. The Debt Securities may be issued in
one or more series with the same or various maturities, at par or with an
original issue discount. The Debt Securities of any series may be in
registered or bearer form and may be represented by a single global security
registered in the name of a securities depositary.
When Debt Securities are offered, a supplement to this Prospectus (the
"Prospectus Supplement") will set forth the specific terms of such Debt
Securities, including, where applicable, the specific designation, aggregate
principal amount, authorized denominations, currency or currency unit of
denomination and payment, maturity, interest rate (which may be fixed or
variable) and time of payment of interest, if any, any terms for redemption
(which either may be at the option of the Corporation or the holder), any
terms for sinking fund payments, and information about any listing on a
securities exchange of such Debt Securities. When Equity Securities are
offered, a Prospectus Supplement will set forth the aggregate number of shares
offered. Any Prospectus Supplement will also set forth the initial public
offering price, the net proceeds to the Corporation and other specific terms
of the Offered Securities.
The Offered Securities may be sold to or through underwriters, dealers or
agents, or directly to purchasers. If any agents of the Corporation or any
underwriters are involved in the sale of the Offered Securities, their names,
and any applicable fee, commission or discount arrangements with them will be
set forth in any applicable Prospectus Supplement. See "Plan of Distribution."
No Offered Securities may be sold without delivery of a Prospectus Supplement
describing such series or issue of Offered Securities and the method and the
terms thereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 13, 1996.
<PAGE>
AVAILABLE INFORMATION
The Corporation is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information filed by the Corporation can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material also can be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding reporting companies, including the
Corporation. The shares of Common Stock of the Corporation are listed on the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
Reports, proxy and information statements and other information concerning the
Corporation can be inspected at the offices of that exchange.
The Corporation has filed a Registration Statement on Form S-3 (herein,
together with all exhibits and amendments thereto, called the "Registration
Statement") with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Offered Securities. This
Prospectus does not contain all of the information included in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Corporation and the Offered Securities,
reference is hereby made to the Registration Statement and the exhibits and
schedules thereto. The registration statement may be inspected without charge
at the offices of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and copies thereof may be obtained from the Public Reference Section of
the Commission at such address at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Corporation with the Commission are
incorporated by reference in the Prospectus:
(a) The Corporation's Annual Report on Form 10-K for the year ended
September 30, 1995 filed pursuant to Section 13(a) of the Exchange Act;
(b) The Corporation's Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1995, March 31, 1996, and June 30, 1996 filed pursuant
to Section 13(a) of the Exchange Act;
(c) The Corporation's Current Report on Form 8-K filed August 23, 1996,
as amended by the Corporation's Amendment No. 1 to Form 8-K on Form 8-K/A
filed September 3, 1996, each filed pursuant to Section 13(a) of the
Exchange Act;
(d) The description of the Corporation's preferred stock purchase rights
contained in, and the Rights Agreement filed as an exhibit to, the
Corporation's Registration Statement on Form 8-A, as amended, File No. 1-
7810, dated August 8, 1988.
All documents filed by the Corporation pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the securities offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded, for purposes of this Prospectus, to
the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or replaces such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The information relating to the Company contained in this Prospectus
summarizes, is based upon, or refers to, information and financial statements
contained in one or more of the documents incorporated by reference in
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this Prospectus; accordingly, such information contained herein is qualified
in its entirety by reference to such incorporated documents and should be read
in conjunction therewith.
The Corporation will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any and all of the
information that has been incorporated by reference in the Prospectus (not
including exhibits to the information that is incorporated by reference in the
Prospectus unless such exhibits are specifically incorporated by reference
into the information that the Prospectus incorporates). Requests for such
copies should be addressed to Energen Corporation, Investor Relations
Department, 2101 Sixth Avenue North, Birmingham, Alabama 35203 (telephone
number (800) 654-3206 or (205) 326-2634).
ENERGEN CORPORATION
The Corporation is a diversified energy holding company engaged primarily in
natural gas distribution and the exploration and production of natural gas and
oil. The Corporation's principal utility subsidiary, Alabama Gas Corporation
("Alagasco"), is the largest natural gas distribution utility in the State of
Alabama. Alagasco purchases natural gas through interstate and intrastate
suppliers and distributes the purchased gas through its distribution
facilities for sale to residential, commercial, industrial and other end-users
of natural gas. Alagasco also provides distribution services for selected
customers. The Corporation's oil and gas exploration, production and
development activities are conducted by its subsidiary, Taurus Exploration,
Inc. ("Taurus"), and involve the exploration for and the production of natural
gas and oil from both conventional and nonconventional reservoirs. Taurus also
seeks to increase its reserves of natural gas and oil through the acquisition
of such properties.
The Corporation's executive offices are located at 2101 Sixth Avenue North,
Birmingham, Alabama 35203, and its telephone number is (205) 326-2700.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges for
each of the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------ NINE MONTHS ENDED
1995 1994 1993 1992 1991 JUNE 30, 1996
---- ---- ---- ---- ---- -----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges....................... 2.95 3.68 3.01 2.52 2.28 4.47
</TABLE>
For purposes of computing the consolidated ratio, earnings represent net
income applicable to Common Stock, plus applicable income taxes and fixed
charges. Fixed charges represent interest expense, capitalized interest and
amortization of debt expense.
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USE OF PROCEEDS
Except as may otherwise be described or referred to in a Prospectus
Supplement, the Company intends to use the net proceeds from the sale of the
Offered Securities for general corporate purposes, including the Corporation's
working capital needs, the funding of investments in, or extensions of credit
to, its subsidiaries, the possible acquisition of other corporations or their
assets or liabilities, including the acquisition of natural gas and oil
properties, the reduction of short-term or other outstanding indebtedness and
the funding of Alagasco's share of supplier refunds due customers in
accordance with the settlement of certain rate cases between Southern Natural
Gas Company and the Federal Energy Regulatory Commission. Pending such use,
the Corporation may temporarily invest the net proceeds in investment grade
securities. The Corporation may, from time to time, engage in additional
capital financings of a character and in amounts to be determined by the
Corporation in light of its need at such time or times and in light of
prevailing market conditions.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
applicable Prospectus Supplement may relate. The particular terms of the Debt
Securities offered by any applicable Prospectus Supplement (the "Offered Debt
Securities") and the extent, if any, to which such general provisions may
apply to the Debt Securities so offered will be described in the Prospectus
Supplement relating to such Offered Debt Securities.
The Debt Securities will be issued under an Indenture (the "Indenture")
between the Corporation and The Bank of New York (the "Trustee"). A copy of
the Indenture is filed as an exhibit to this Registration Statement. The
following summaries of the Debt Securities and the Indenture do not purport to
be complete and are subject to, and are qualified in their entirety by
reference to, all the provisions of the Indenture, including the applicable
definitions therein of certain terms used in this Prospectus. All capitalized
terms not defined in this Prospectus shall have the definitions ascribed to
them in the Indenture. Copies of the Indenture are available for inspection
during normal business hours at the principal office of the Corporation or at
the corporate trust office of the Trustee.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Corporation
and will rank pari passu with all outstanding unsecured senior indebtedness of
the Corporation. The Indenture does not limit the aggregate principal amount
of Debt Securities that may be issued thereunder and provides that Debt
Securities may be issued thereunder from time to time in one or more series.
All securities issued under the Indenture will rank equally and ratably with
all other securities to be issued under such Indenture.
The Debt Securities will be obligations exclusively of the Corporation.
Since substantially all of the operations of the Corporation are conducted
through its subsidiaries, principally Alagasco and Taurus, the Corporation's
cash flow and consequently its ability to service debt is dependent upon the
cash flow of its subsidiaries and the payment of funds by those subsidiaries
in the form of dividends.
The Prospectus Supplement and any related Pricing Supplement will describe
certain terms of the Offered Debt Securities, including: (1) the title of the
Offered Debt Securities; (2) any limit on the aggregate principal amount of
the Offered Debt Securities; (3) the date or dates on which the principal of
the Offered Debt Securities is payable; (4) the rate or rates per annum (which
may be fixed or variable) at which the Offered Debt Securities will bear
interest, if any, or any method by which such rate or rates shall be
determined, and the date or dates from which such interest will accrue; (5)
the date or dates on which interest, if any, on the Offered Debt Securities
will be payable and the Regular Record Dates for any such Interest Payment
Dates; (6) each office or agency where the principal of, and premium, if any,
and any interest on the Offered Debt Securities will be payable and may be
surrendered for registration of transfer or exchange; (7) the period or
periods within which,
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the price or prices at which, and the terms and conditions upon which the
Offered Debt Securities may be redeemed, in whole or in part, at the option of
the Corporation; (8) the obligation, if any, of the Corporation to redeem or
purchase the Offered Debt Securities pursuant to any sinking fund or similar
provisions or at the option of a Holder thereof and the period or periods
within which, the price or prices at which and the terms and conditions upon
which the Offered Debt Securities will be redeemed or purchased, in whole or
in part, pursuant to any such obligation; (9) whether the Offered Debt
Securities are to be issued in whole or in part in the form of one or more
global notes, and, if so, the identity of the depositary for such global notes
and the terms and conditions, if any, on which interests in such global notes
may be exchanged for the individual securities represented thereby; (10)
whether the Offered Debt Securities are to be issued with original issue
discount within the meaning of section 1273(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations thereunder and the amount
of such discount; (11) the obligations or instruments which shall be
considered to be Eligible Obligations in respect of Offered Debt Securities
denominated in any currency other than United States Dollars or in a composite
currency, and any additional or alternative provisions for the reinstatement
of the Company's indebtedness in respect of Offered Debt Securities after the
satisfaction and discharge thereof; (12) any provisions for payment of
additional amounts for taxes, and any provisions for redemption in the event
the Corporation must comply with withholding tax or other tax reporting
requirements in respect of an Offered Debt Security other than a Floating Rate
Security ("Affected Security") or must pay such additional amounts in respect
of any Offered Debt Security; (13) any index used to determine the amount of
payment of principal of, and premium, if any, and any interest on the Offered
Debt Securities; (14) the applicable Overdue Rate, if any; (15) any addition
to, or modification or deletion of, any Events of Default or covenants
provided for with respect to the Offered Debt Securities; (16) if the
principal of or premium, if any, or interest, if any, on the Offered Debt
Securities are to be payable, at the election of the Corporation or a Holder
thereof, in a coin or currency other than that in which the Debt Securities
are stated to be payable, the period or periods within which, and the terms
and conditions upon which, such election may be made; (17) the currency or
currencies, including composite currencies, in which payment of the principal
of and premium, if any, and interest, if any, on the Offered Debt Securities
shall be payable (if other than the currency of the United States); (18) if
the principal of or premium, if any, or interest on the Offered Debt
Securities are to be payable, or are to be payable at the election of the
Corporation or a Holder thereof, in securities or other property, the type and
amount of such securities or other property, or the method by which such
amount shall be determined, and the period or periods within which, and the
terms and conditions upon which, any such election may be made; (19) the
terms, if any, pursuant to which the Offered Debt Securities may be converted
into or exchanged for shares of capital stock or other securities of the
Corporation; (20) the obligations or instruments, if any, which shall be
considered to be Eligible Obligations (as defined herein) in respect of the
Offered Debt Securities denominated in any currency other than United States
Dollars or in a composite currency, and any additional or alternative
provisions for the reinstatement of the Corporation's indebtedness in respect
of such Debt Securities after the satisfaction and discharge thereof; and (21)
any other terms and provisions of the Offered Debt Securities which are not
inconsistent with the Indenture.
Unless otherwise provided in the Prospectus Supplement or a Pricing
Supplement, the Debt Securities will be issued only in fully registered form,
without coupons, in denominations of $1,000 or any integral multiple thereof.
Debt Securities may be issued as Discount Securities to be sold at a
substantial discount below their principal amount. Discount Securities mean
any Debt Securities issued with "original issue discount" within the meaning
of Section 1273(a) of the Code and the regulations thereunder. Special United
States income tax and other considerations applicable to Discount Securities
will be described in any applicable Prospectus Supplement relating thereto.
Discount Securities may provide for the declaration of acceleration of the
Maturity of an amount less than the principal amount thereof upon the
occurrence of an Event of Default and the continuation thereof.
The Indenture provides that all Debt Securities of any one series need not
be issued at the same time and that the Corporation may, from time to time,
issue additional Debt Securities of a previously issued series. In addition,
the Indenture provides that the Corporation may issue Debt Securities with
terms different from those
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of any other series of Debt Securities and, within a series of Debt
Securities, terms (such as interest rate or manner in which interest is
calculated, original issue date, redemption provisions and maturity date) may
differ.
CERTAIN CONDITIONS FOR ISSUANCE OF ADDITIONAL INDEBTEDNESS
Under the indentures relating to its Series 1993 Notes due annually
beginning March 1, 1996 to March 1, 2008 (the "1993 Notes") and 8% Debentures
due 2007 (the "8% Debentures"), the Corporation is not permitted to create or
issue any indebtedness, other than indebtedness maturing on demand or within
one year, which ranks prior to or on a parity with the 1993 Notes or the 8%
Debentures in right of payment unless immediately thereafter, and after giving
effect thereto and to the application of the proceeds thereof, Consolidated
Net Utility Fixed Assets (defined generally as the aggregate value of all the
physical property owned by the Corporation and its consolidated subsidiaries
used or useful in the business of furnishing or distributing gas service, less
accumulated depreciation) shall be at least equal to Consolidated Funded
Indebtedness (defined generally as all outstanding indebtedness of the
Corporation and its consolidated subsidiaries, other than indebtedness
maturing on demand or within one year).
Pursuant to Section 234 of the Constitution of Alabama of 1901, the bonded
indebtedness of Alabama corporations may not be increased without the consent
of shareholders. The Corporation currently has shareholder approval to issue
bonded indebtedness in an amount not exceeding, when taken together with then
outstanding bonded indebtedness, $75 million, and may not issue more than such
amount without the further consent of shareholders. Based upon such
requirement, the Corporation may presently issue an additional $40 million of
bonded indebtedness. The Corporation intends to request an increase in such
amount at the next annual meeting of shareholders in January 1997.
GLOBAL NOTES
If the Prospectus Supplement so provides, the Offered Debt Securities of a
series may be issued in whole or in part in the form of one or more Global
Notes that will be deposited with or on behalf of a depositary located in the
United States identified in any applicable Prospectus Supplement relating to
such series. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests
in a Global Note. The specific terms of the depositary arrangement with
respect to any Offered Debt Securities of a series will be described in any
applicable Prospectus Supplement relating to such series.
PAYMENT AND PAYING AGENTS
Except as may be provided in the applicable Prospectus Supplement, interest,
if any, on each Debt Security payable on each Interest Payment Date will be
paid to the person in whose name such Debt Security is registered as of the
close of business on the Regular Record Date relating to such Interest Payment
Date. However, if there has been a default in the payment of interest on any
Debt Security, such defaulted interest may be payable to the Holder of such
Debt Security as of the close of business on a date selected by the Trustee
not more than 15 days and not less than 10 days prior to the date proposed by
the Corporation for payment of such defaulted interest.
Unless otherwise indicated in any applicable Prospectus Supplement,
principal of, and premium and interest, if any, on the Debt Securities will be
payable at the office of the Trustee designated for such purpose or at any
paying agent maintained by the Corporation for such purpose, except that at
the option of the Corporation payment of any interest may be made (i) by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register, or (ii) by wire transfer to an account
maintained by the Person entitled thereto. The Corporation may appoint one or
more Paying Agents and may remove any Paying Agent, all in its discretion.
The transfer of the Debt Securities may be registered, and the Debt
Securities may be exchanged for other Debt Securities of authorized
denominations and of like tenor and aggregate principal amount at the office
of the Trustee designated for such purpose or at any paying agency maintained
by the Corporation for such purpose.
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The Corporation may appoint one or more additional security registrars or
transfer agents and may remove any security registrar or transfer agent, all
in its discretion. The applicable Prospectus Supplement will identify any
additional security registrar or transfer agent appointed.
No service charge will be made for any registration of transfer or exchange
of the Debt Securities, but the Corporation may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The Corporation will not be required (a) to issue, register the
transfer of or exchange Debt Securities during the period of 15 days prior to
giving any notice of redemption or (b) to issue, register the transfer of or
exchange any Debt Security selected for redemption in whole or in part, except
the unredeemed portion of any Debt Security being redeemed in part.
All moneys paid by the Corporation to the Trustee or a Paying Agent for the
payment of principal of, and premium, if any, and any interest on any Debt
Securities which remain unclaimed at the end of two years after such
principal, premium or interest shall become due and payable will be repaid,
subject to applicable laws of escheat, to the Corporation, and the Holder of
such Debt Securities will thereafter look only to the Corporation for payment
thereof.
REDEMPTION
Any terms for the optional or mandatory redemption of the Offered Debt
Securities will be set forth in the applicable Prospectus Supplement. In
accordance with the terms of the Indenture, Debt Securities will be redeemable
only upon notice, by mail, not less than 30 nor more than 60 days prior to the
date fixed for redemption and, if less than all of the Debt Securities of any
series are to be redeemed, the particular Debt Securities will be selected by
the Security Registrar by such method as the Trustee deems fair and
appropriate.
Any notice of optional redemption may state that such redemption shall be
conditional upon the receipt by the Trustee, on or prior to the date fixed for
such redemption, of money sufficient to pay the principal of and premium and
interest, if any, on such Debt Securities and that if such money has not been
so received, such notice will be of no force or effect and the Corporation
will not be required to redeem such Debt Securities.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture with respect to the
Debt Securities of a series: (a) failure to pay any interest on any Debt
Security of that series within 30 days after the same becomes due and payable;
(b) failure to pay the principal of or premium, if any, on any Debt Security
of that series within three business days after the same becomes due and
payable; (c) failure to perform, or breach of, any other covenant or warranty
of the Corporation in the Indenture (other than a covenant or warranty
included in the Indenture solely for the benefit of one or more series of Debt
Securities other than such series), continued for 90 days after written notice
by the Trustee to the Corporation or by the Holders of at least 25% in
principal amount of all Outstanding Debt Securities of such series to the
Corporation and the Trustee as provided in the Indenture; (d) certain events
involving bankruptcy, insolvency, conservatorship, receivership or
reorganization of the Corporation or Alagasco or Taurus, whether voluntary or
involuntary; (e) a default under any other indebtedness of the Corporation or
Alagasco or Taurus or instrument under which there may be issued or by which
there may be secured or evidenced any indebtedness of the Corporation or
Alagasco or Taurus, in each case aggregating in excess of $10,000,000, which
default constitutes a failure to pay any portion of the principal of such
indebtedness when due or results in the acceleration of the maturity of such
indebtedness, unless within a period of 10 days after written notice of such
default has been given to the Corporation by the Trustee or to the Corporation
and the Trustee by the Holders of at least 10% in principal amount of the
Outstanding Debt Securities of any series, such indebtedness has been
discharged or such acceleration has been rescinded or annulled; and (f) any
other Event of Default provided for with respect to Debt Securities of that
series.
Except as described in (e) above, no Event of Default with respect to the
Debt Securities of one series necessarily constitutes an Event of Default with
respect to the Debt Securities of any other series issued under the Indenture.
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REMEDIES
If any Event of Default with respect to the Debt Securities of any series
occurs and is continuing, either the Trustee or the Holders of at least 33% in
aggregate principal amount of all the Outstanding Debt Securities of that
series may declare the principal amount of all the Outstanding Debt Securities
of that series to be due and payable immediately; provided, however, that if
an Event of Default occurs and is continuing with respect to more than one
series of Debt Securities, the Trustee or the Holders of not less than 33% in
aggregate principal amount of the Outstanding Debt Securities of all such
series, considered as one class, may make such declaration of acceleration and
not the Holders of the Debt Securities of any one of such series.
The Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of each series may, on behalf of all Holders of the Debt
Securities of that series, waive any past default and its consequences under
the Indenture with respect to the Debt Securities of that series, except a
default in the payment of principal or premium or interest, if any, on any
Debt Security of that series, or in respect of a provision of the Indenture
which cannot be amended or modified without the consent of the Holder of each
Outstanding Debt Security of the series affected.
At any time after the declaration of acceleration with respect to Debt
Securities of any series has been made, but before a judgment or decree for
the payment of money due has been obtained, the Event or Events of Default
giving rise to such declaration of acceleration shall, without further act, be
deemed to have been waived, and such declaration and its consequences shall,
without further act, be deemed to have been rescinded and annulled if (a) the
Corporation has paid or deposited with the Trustee a sum sufficient to pay (1)
all overdue interest on all of such Debt Securities; (2) the principal of and
premium, if any, on any of such Debt Securities which have become due
otherwise than by such declaration of acceleration and interest thereon at the
rate or rates prescribed therefor in such Debt Securities; (3) to the extent
that payment of such interest is lawful, interest upon overdue interest at the
rate or rates prescribed therefor in such Debt Securities; (4) all amounts due
to the Trustee under the Indenture; and (b) any other Events of Default with
respect to the Debt Securities of such series, other than the nonpayment of
the principal of such Debt Securities which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture.
MISCELLANEOUS RIGHTS AND OBLIGATIONS OF TRUSTEE
The Indenture provides that, subject to the duty of the Trustee during the
continuance of an Event of Default to act with the required standard of care,
the Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the Holders,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity. Subject to such provisions for the indemnification of the Trustee
and subject to certain other limitations, the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, with respect to the Debt Securities of that
series; provided, however, that if an Event of Default occurs and is
continuing with respect to more than one series of Debt Securities, the
Holders of a majority in aggregate principal amount of the outstanding Debt
Securities of all such series, considered as one class, will have the right to
make such direction, and not the Holders of the Debt Securities of any one of
such series; and provided, further, that (a) such direction will not be in
conflict with any rule of law or with the Indenture and would not involve the
Trustee in personal liability in circumstances where reasonable indemnity
would not, in the Trustee's sole discretion, be adequate, (b) the Trustee
shall not have determined that the action so directed would be unjustly
prejudicial to the Holders not taking part in such direction and, (c) the
Trustee may take any other action it deems proper which is not inconsistent
with such direction. The right of a Holder of any Debt Security of such series
to institute a proceeding with respect to the Indenture is subject to certain
conditions precedent, but each Holder has an absolute right to receive payment
of principal and premium and interest, if any, when due and to institute suit
for the enforcement of any such payment. The Indenture provides that the
Trustee, within 90 days after the occurrence of any default thereunder with
respect to the Debt Securities of a series, is required to give the Holders of
the Debt Securities of such series notice of any default known to it, unless
cured or waived;
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provided, however, that, except in the case of a default in the payment of
principal of or premium or interest, if any, on any Debt Securities of such
series, the Trustee may withhold such notice if the Trustee determines that it
is in the interest of such Holders to do so; and, provided, further, that in
the case of an Event of Default of the character specified above in clause (c)
under "Events of Default," no such notice shall be given to such Holders until
at least 75 days after the occurrence thereof.
The Corporation is required to furnish to the Trustee annually a statement
as to the performance by the Corporation of certain of its obligations under
the Indenture and as to any default in such performance. The Corporation is
also required to notify the Trustee of any Event of Default within 10 days
after certain of its officers obtain actual knowledge thereof.
MODIFICATION, WAIVER AND AMENDMENT
Certain modifications and amendments of the Indenture may be made by the
Corporation and the Trustee without the consent of the Holders, including
those which: (a) evidence the assumption by any successor to the Corporation
of the Corporation's obligations under the Indenture or with respect to the
Debt Securities; (b) add to the covenants of or surrender any rights of the
Corporation under the Indenture; (c) add any Events of Default, in addition to
those specified in the Indenture, with respect to all or any series of
Outstanding Debt Securities; (d) change or eliminate any provision of the
Indenture or add any new provision to the Indenture; provided, however, that
if such change, elimination or addition will materially and adversely affect
the interests of Holders of Debt Securities of any series, such change,
elimination or addition will become effective with respect to such series only
when there is no Debt Security of such series remaining outstanding under the
Indenture; (e) provide collateral security for the Debt Securities; (f)
establish the form or terms of Debt Securities of any series; (g) evidence the
appointment of a successor Trustee with respect to the Debt Securities of one
or more series and to add to or change any of the provisions of the Indenture
as shall be necessary to provide for or facilitate the administration of the
trusts under the Indenture by more than one trustee; (h) provide for the
procedures required to permit the utilization of a noncertificated system of
registration for all or any series of Debt Securities; (i) subject to certain
conditions, change the place where Debt Securities may be transferred,
exchanged or paid; or (j) cure any ambiguity or inconsistency or make any
other provisions with respect to matters and questions arising under the
Indenture, provided such provisions shall not adversely affect the interests
of the Holders of Debt Securities of any series in any material respect.
Without limiting the generality of the foregoing, if the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"), is amended after the date of
the Indenture to require changes to the Indenture or the incorporation therein
of additional provisions or permit changes to, or the elimination of,
provisions which at the date of the Indenture are required by the Trust
Indenture Act to be contained in the Indenture, the Corporation and the
Trustee may, without the consent of any Holders, enter into one or more
supplemental indentures to effect or reflect any such change, incorporation or
elimination.
Modifications of and amendments to the Indenture may be made by the
Corporation and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Debt Securities of
each series affected by such modification or amendment voting separately;
provided, however, that no such modification or amendment may, without the
consent of the Holder of each Outstanding Debt Security affected thereby, (a)
change the Stated Maturity of the principal of, or any installment of
principal or interest on, any Debt Security; (b) reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon redemption
thereof; (c) reduce the amount of the principal of Discounted Securities that
would be due and payable upon a declaration of acceleration of the maturity
thereof; (d) change the coin or currency in which any Debt Security or any
premium or the interest thereon is payable; (e) impair the right to institute
suit for the enforcement of any such payment; (f) reduce the percentage in
principal amount of Outstanding Debt Securities of any series, the consent of
whose Holders is required for modification or amendment of the Indenture or
for waiver of compliance with certain provisions of the Indenture or for
waiver of certain defaults; (g) reduce the requirements for quorum or voting;
or (h) modify the provisions of the Indenture relating to the modification of
the Indenture, or the circumstances under which the Holders may waive past
defaults by and certain covenants of the Corporation except to increase the
percentages in principal amount referred to therein.
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The Holders of not less than a majority in aggregate principal amount of the
Outstanding Debt Securities of all series with respect to which a certain
covenant or restriction has been specified, may, on behalf of all Holders of
Debt Securities waive compliance by the Corporation with certain covenants of
the Indenture. The Holders of a majority in aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all Holders of
Debt Securities of that series (a) waive any past default under the Indenture
with respect to Debt Securities of that series, except a default (i) in the
payment of principal, premium, if any, or interest on any Debt Security, or
(ii) in respect of a covenant or provision that cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security affected
thereby, and (b) waive any Event of Default resulting in acceleration of such
Debt Securities in specified circumstances.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Indenture provides that the Corporation shall not consolidate with or
merge into any other corporation, association, company, joint stock company,
limited liability company or business trust (the "Successor Corporation") or
convey, transfer or lease its properties and assets substantially as an entity
to any Person unless (i) the Successor Corporation into which the Corporation
is merged or into which it is consolidated or the Person to which
substantially all of the Corporation's assets or properties are conveyed,
transferred or leased, is a Person organized under the laws of the United
States, any state thereof or the District of Columbia, and expressly assumes
by means of a supplemental indenture the due and punctual payment of the
principal (and premium, if any) and interest on all the Outstanding Debt
Securities and the performance of every covenant of the Corporation in the
Indenture; (ii) upon the occurrence of such a transaction, treating any
indebtedness for borrowed money which becomes an obligation of the Corporation
as a result of such transaction as having been incurred by the Corporation at
the time of such transaction, no Event of Default, and no event which, after
notice or lapse of time, or both, would become an Event of Default, shall
occur or be continuing; and (iii) the Corporation or the Successor Corporation
or Person delivers to the Trustee an Officers' Certificate and an Opinion of
Counsel stating that the consolidation, merger, conveyance, transfer or lease
and the supplemental indenture complies with the Indenture and all conditions
precedent for such transaction in the Indenture have been complied with.
CERTAIN COVENANTS
Maintenance of Property. The Corporation will cause (or, with respect to
property owned in common with others, make reasonable effort to cause) all its
properties used or useful in the conduct of its business to be maintained and
kept in good condition, repair and working order and will cause (or with
respect to property owned in common with others, make reasonable effort to
cause) to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as, in the judgment of the Corporation, may be
necessary so that the business carried on in connection therewith may be
properly conducted; provided, however, that the foregoing shall not prevent
the Corporation from discontinuing, or causing the discontinuance of, the
operation and maintenance of any of its properties if such discontinuance, in
the judgment of the Corporation, (a) is desirable in the conduct of its
business and (b) will not adversely affect the interests of the Holders of
Debt Securities of any series in any material respect.
Corporate Existence. Subject to the rights of the Corporation described
under "Consolidation, Merger and Sale of Assets," the Corporation will do or
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and rights (charter and statutory) and
franchises of the Corporation; provided, however, that the Corporation shall
not be required to preserve any such right or franchise if, in the judgment of
the Corporation (a) preservation thereof is no longer desirable in the conduct
of the business of the Corporation and (b) the failure to preserve any such
right or franchise will not adversely affect the interests of the Holders of
Debt Securities of any series in any material respect.
Restriction on Liens. The Corporation will not create, assume, incur or
suffer to exist any mortgage, lien, pledge, charge or encumbrance of any kind
(other than "Excepted Encumbrances") upon property of the Corporation (other
than "Excepted Property") to secure indebtedness without effectively providing
that the Debt
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Securities shall be secured equally and ratably with the indebtedness secured
by such mortgage, lien, pledge, charge or encumbrance. Subject to the next
succeeding sentence, the foregoing restriction shall not apply to (1) pledging
of any assets of the Corporation as security for payment of taxes or other
similar charges in connection with a good faith contest by the Corporation as
to its liability for such payment; (2) pledging of any assets of the
Corporation to secure a stay or discharge in connection with a legal
proceeding in which the Corporation or a subsidiary is a party or for the
purpose of obtaining insurance coverage or other surety obligations providing
for securing such stay or discharge in the event such stay or discharge should
be required; (3) making deposits or providing security in connection with
tenders, redemptions, contracts or leases to which the Corporation is a party
or deposits for the purpose of terminating obligations under an indenture; (4)
pledging of assets in connection with the incurrence of indebtedness in
aggregate principal amount not exceeding 5% of the assets of the Corporation
as presented in the financial statements of the Corporation contained in the
most recently filed report on Form 10-K or 10-Q (or successor forms thereto)
filed with the Commission at the time of such pledge; (5) liens, pledges,
security interests or other encumbrances on property, stock or indebtedness of
any corporation existing at the time such corporation becomes a subsidiary of
or is merged into the Corporation, or existing at the time of acquisition of
such property or stock by the Corporation; (6) incurring liens, licenses,
pledges, security interests or other encumbrances to secure payment of all or
a part of the price of acquisition, construction or improvement of property or
stock acquired by the Corporation or to secure any indebtedness incurred by
the Corporation prior to, at the time of, or within 180 days after the later
of the acquisition or completion of construction where the secured debt is
incurred for the purpose of financing all or any part of the purchase price of
such property or construction or improvements thereon; (7) liens, pledges,
security interests or other encumbrances on property of the Corporation
created in favor of a government or any political subdivision or
instrumentality thereof, to secure partial progress, installment, advance or
other payments pursuant to any contract or statute or to secure any
indebtedness or other obligation incurred for the purpose of financing all or
any part of the purchase price or the cost of construction of property subject
to the encumbrance; or (8) any extension, renewal or replacement of any lien
or encumbrance referred to above, provided that the principal amount of the
indebtedness secured thereby is not increased and the lien or security
interest securing the indebtedness is not extended to cover additional
property. Notwithstanding the foregoing, in no event shall the Corporation
create, assume, incur or suffer to exist pursuant to the foregoing clauses (1)
and (3) through (8) any mortgage, lien, pledge, charge or encumbrance on the
capital stock of either of Alagasco or Taurus directly or indirectly owned by
the Corporation. The term "Excepted Encumbrances" means liens for taxes,
assessments or governmental charges not delinquent; liens securing
indebtedness existing in or relating to real estate acquired for right-of-way
purposes; easements or reservations in property of the Company by statute or
ordinance; liens and charges incidental to current construction activities;
obligations or duties created or imposed by municipalities or other public
authority affecting property of the Company; rights reserved to or vested in
any municipality or public authority to control or regulate the Company or use
of its property; irregularities or deficiencies of title with respect to
rights-of-way; and leases made or existing in the ordinary course of business
of the Company. The term "Excepted Property" generally means certain property
or equipment of the Corporation used in the ordinary course of business,
including current assets, vehicles, certain inventories and equipment, as more
particularly defined in the Indenture, and excludes capital stock issued by
Alagasco and Taurus.
Restriction on Sale-Leaseback Transactions. The Corporation will not enter
into any arrangement providing for the lease to the Corporation of any
property of the Corporation (except for temporary leases for a term, including
any renewal thereof, of not more than three years), which property has been or
is to be sold or transferred by the Corporation to the lessor unless the
proceeds of such sale are at least equal to the fair value of such property
and either: (i) the Corporation would be entitled, under the sub-caption
"Restriction on Liens," to create, assume, incur or suffer to exist a
mortgage, lien, pledge, charge or encumbrance to secure indebtedness on the
property to be leased without equally and ratably securing the Offered
Securities; or (ii) the Corporation shall, or covenants that it will, within
120 days of the effective date of any such arrangement (or in the case of
clause (a) below, within six months thereafter pursuant to a commitment
entered into within such 120 day period), apply an amount not less than the
fair value of such property to any one or more of (a) the optional redemption
of, or the purchase and retirement of, the Debt Securities, or (b) the payment
or other retirement of
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Funded Debt (as defined therein) incurred or assumed by the Corporation which
ranks pari passu with the Debt Securities (other than Funded Debt owned by the
Corporation), or (c) the purchase at not more than the fair value of property
by the Corporation (other than property of the Corporation involved in such
sale).
SATISFACTION AND DISCHARGE; DEFEASANCE
The Indenture, with respect to any and all series of Debt Securities (except
for certain specified surviving obligations) will be discharged and canceled
upon the satisfaction of certain conditions, including: (a) the payment in
full of the principal of (and premium, if any) and interest on all series of
the Debt Securities or the deemed payment in full of such Debt Securities, as
described below; (b) the payment by the Corporation of all other sums required
under the Indenture; and (c) the delivery of a certificate by the Corporation
to the Trustee stating that all conditions precedent relating to the
satisfaction and discharge of the Indenture have been complied with.
In addition, the Corporation may at any time (i) terminate certain of its
obligations under the Indenture with respect to Debt Securities of any series
("legal defeasance") or (ii) terminate its obligations under certain covenants
set forth in the Indenture with respect to Debt Securities of any series,
including the provisions described above under "Certain Covenants--Restriction
on Liens," "--Restriction on Sale-Leaseback Transactions" and "Consolidation,
Merger and Sale of Assets" (after which any omission to comply with such
obligations shall not constitute a Default with respect to such Debt
Securities) ("covenant defeasance"). To exercise either legal defeasance or
covenant defeasance, the Corporation must irrevocably deposit in trust with
the Trustee, for the benefit of the Holders, cash or Eligible Obligations, or
a combination thereof, in such amounts as will be sufficient to pay the
principal of and premium and interest, if any, due and to become due on the
Debt Securities of such series on or prior to their redemption or maturity
date in accordance with the terms of the Indenture and such Debt Securities;
provided that such money or the proceeds of such Eligible Obligations shall
either (i) have been on deposit with the Trustee for a period of at least 90
days, or (ii) the Trustee shall have received an Opinion of Counsel to the
effect that payments to Holders with such moneys as proceeds are not
recoverable as a preference under any applicable United States federal or
state law relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization or relief of debtors. The Corporation must also
comply with certain other conditions, including the delivery of an opinion of
counsel to the effect that the holders of such Debt Securities will not
realize income, gain or loss for Federal income tax purposes as a result of
such defeasance but will realize income, gain or loss on the Debt Securities,
including payments of interest thereon, in the same manner and at the same
times as would have been the case if such defeasance had not occurred. In the
case of legal defeasance, the opinion of counsel must be accompanied by a
ruling of the Internal Revenue Service issued to the Corporation, or based on
a change in law or regulation occurring after the date of the Indenture.
Eligible Obligations include: (a) with respect to Debt Securities
denominated in United States Dollars, Government Obligations (which include
direct obligations of, or obligations unconditionally guaranteed by, the
United States of America entitled to the benefit of the full faith and credit
thereof and certificates, depository receipts or other instruments which
evidence a direct ownership interest in such obligations or in any specific
interest or principal payments due in respect thereof); and (b) with respect
to Debt Securities denominated in a currency other than United States Dollars
or in a composite currency, such other obligations or instruments as shall be
specified with respect to such Debt Securities, as contemplated by the
Indenture.
GOVERNING LAW
The Debt Securities and the Indenture will be governed by, and construed in
accordance with, the laws of the State of New York.
U.S. FEDERAL TAXATION
The Prospectus Supplement will contain a brief summary of the relevant
United States federal income tax laws applicable to the Offered Debt
Securities.
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DESCRIPTION OF CAPITAL STOCK
The Corporation's authorized capital stock consists of 30,000,000 shares of
Common Stock, par value $.01 per share (hereinafter and hereinbefore referred
to as the "Common Stock"), and 5,000,000 shares of Preferred Stock, par value
$.01 per share ("Preferred Stock"), each of which is described below. On
August 27, 1996, 11,119,466 shares of Common Stock were issued and
outstanding, excluding shares held in treasury, and no shares of Preferred
Stock were issued or outstanding. The summary description of the capital stock
of the Corporation contained herein is necessarily general and reference
should be made in each case to the Corporation's Restated Certificate of
Incorporation, Certificate of Adoption of Resolutions Designating Series A
Junior Participating Preferred Stock, Bylaws and Rights Agreement which are
exhibits to the Registration Statement of which this Prospectus is a part.
COMMON STOCK
General. Subject to any prior rights of the Preferred Stock then
outstanding, holders of Common Stock are entitled to receive dividends as and
when they are declared by the Board of Directors out of funds legally
available therefor. Subject to the rights, if any, of the Preferred Stock, all
voting rights are vested in the holders of shares of Common Stock, each share
being entitled to one vote. The holders of Common Stock are not entitled to
cumulative voting rights in the election of directors, which means that the
holders of more than 50% of the shares of Common Stock voting for election of
directors can elect 100% of the directors if they choose to do so and, in such
event, the holders of the remaining less than 50% of the shares voting for the
election of directors are not able to elect any person or persons to the Board
of Directors. Subject to any prior rights of the Preferred Stock, in the event
of liquidation, the holders of Common Stock are entitled to receive pro rata
any assets distributable to shareholders in respect of shares held by them.
Holders of Common Stock do not have any right to subscribe to any additional
securities which may be issued by the Company. The outstanding shares of
Common Stock are fully paid and nonassessable.
Special Vote Requirements for Certain Transactions. The Restated Certificate
of Incorporation of the Corporation provides that certain specified
transactions or a series of such transactions with an "Interested Stockholder"
(generally defined as a holder of 10% or more of the voting power of the
outstanding voting stock of the Corporation or an affiliate of such a holder)
require approval by the vote of the holders of at least 80% of the then
outstanding shares of voting stock of the Corporation, except in cases in
which either certain price criteria and procedural requirements are satisfied
or the transaction is approved by a majority of the members of the Board of
Directors who are unaffiliated with, and not a nominee of, the Interested
Stockholder and who were directors before the Interested Stockholder became an
Interested Stockholder (or successors to such directors who are neither
affiliated with, nor the nominee of, the Interested Stockholder and who were
recommended to succeed their predecessors by a majority of the directors
meeting such criteria). The specified transactions include (i) a merger or
consolidation of the Corporation or any of its subsidiaries with or into an
Interested Stockholder or any other corporation which is, or after such merger
or consolidation would be, an Affiliate (as defined) of an Interested
Stockholder; (ii) the sale, lease, exchange, mortgage, pledge, transfer or
other disposition of assets of the Corporation or any of its subsidiaries
having a value of $1,000,000 or more to or with an Interested Stockholder or
any Affiliate of an Interested Stockholder; (iii) the issuance or transfer of
stock or other securities of the Corporation or of any of its subsidiaries to
an Interested Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property having a value of $1,000,000
or more; (iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate of any Interested Stockholder; or (v) any
reclassification of securities, recapitalization, merger or consolidation of
the Corporation with a subsidiary or any similar transaction which has the
effect, directly or indirectly, of increasing an Interested Stockholder's or
any Affiliate of an Interested Stockholder's proportionate share of the
outstanding equity securities (or securities convertible thereinto) of the
Corporation or any of its subsidiaries. At present, the Corporation is not
aware of the existence of any shareholder who would be an Interested
Stockholder.
Provisions with respect to Board of Directors. The Restated Certificate of
Incorporation of the Corporation provides that the members of the Board of
Directors are divided into three classes as nearly equal as
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possible. Each class is elected for a three-year term. At each annual meeting
of shareholders, one-third of the members of the Board of Directors are
elected for a three-year term, and the other directors remain in office until
their three-year terms expire. Thus, control of the Board of Directors cannot
be changed in one year; rather, at least two annual meetings must be held
before a majority of the members of the Board of Directors can be changed.
Vacancies on the Board of Directors other than those caused by an increase
in the number of directors may be filled by a majority of the remaining
directors though less than a quorum. A director elected to fill such a vacancy
is elected to serve until the next annual meeting of shareholders. Any
directorship to be filled as a result of an increase in the number of
directors may be filled only by election at an annual meeting or at a special
meeting of shareholders called for such purpose unless Alabama law at such
time permits such vacancy to be filled by a majority of the remaining
directors.
The Alabama Business Corporation Act provides (unless otherwise provided in
a corporation's charter) that a director, or the entire Board of Directors,
may be removed by the shareholders at a meeting of shareholders expressly
called for that purpose with or without cause by vote of the holders of a
majority of the shares of the Corporation then entitled to vote on election of
directors. The Restated Certificate of Incorporation and Bylaws of the
Corporation, however, provide that the affirmative vote of the holders of at
least 80% of the voting power of the outstanding capital stock entitled to
vote for the elections of directors is required to remove a director or the
entire Board of Directors from office.
Special Vote Requirements for Certain Amendments to Restated Certificate of
Incorporation. Certain portions of the Restated Certificate of Incorporation
of the Corporation described in certain of the preceding paragraphs, including
those related to business combinations and the classified Board of Directors,
may be amended only by the affirmative vote of the holders of 80% of the
voting power of the outstanding voting stock of the Corporation.
Possible Effects of Special Provisions. Certain of the provisions contained
in the Restated Certificate of Incorporation and Bylaws of the Corporation
described above have the effect of making it more difficult to change the
Board of Directors and may make the Board of Directors less responsive to
shareholder control. Certain of these provisions also may tend to discourage
attempts by third parties to acquire the Corporation because of the additional
time and expense involved and a greater possibility of failure, and, as a
result, may decrease the likelihood of an acquisition of the Corporation by a
potential purchaser or adversely affect the price that a potential purchaser
would be willing to pay for the capital stock of the Corporation.
Preferred Stock Purchase Rights. In order to protect the Corporation's
shareholders from coercive or unfair takeover tactics, the Corporation's Board
of Directors on July 27, 1988 adopted a Shareholder Rights Plan (the
"Shareholder Rights Plan"). Pursuant to the Shareholder Rights Plan, each
share of the Corporation's Common Stock outstanding has associated with it
two-thirds of one right (a "Right") to purchase, until July 27, 1998 (or, if
earlier, the redemption of the Rights), a unit consisting of 1/100th of one
share of Series A Junior Participating Preferred Stock (the "Unit") at an
exercise price of $80 per Unit, subject to certain antidilution and other
adjustments as provided in the Shareholder Rights Plan. The Shareholder Rights
Plan also approved the further issuance of Rights for all shares of Common
Stock that are subsequently issued unless otherwise specified by the Board.
Accordingly and subject to adjustment as provided above, two-thirds of a Right
will be issued for each share of Common Stock offered hereby. Until certain
specified conditions exist, the Rights will be represented by the certificates
for the Common Stock and will not be exercisable or transferable apart from
the certificates for the Common Stock.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Corporation without conditioning the offer on a substantial number of Rights
being acquired. The Rights should not interfere with any merger or other
business combination approved by the Board of Directors of the Corporation
since, among other things, the Board of Directors may, at its option, at any
time until 10 days (subject to extension) following the date on which a person
or group acquires 20% or more of the outstanding Common Stock, except under
certain circumstances, redeem all but not less than all the then outstanding
Rights at $.02 per Right.
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A Rights Agreement dated as of July 27, 1988, between the Corporation and
AmSouth Bank, N.A., as amended, specifies the terms of the Rights and the
foregoing description of the Rights is qualified in its entirety by reference
to such Rights Agreement, which is an exhibit to the Corporation's
Registration Statement on Form 8-A, as amended, File No. 1-7810, dated August
8, 1988, and which is incorporated by reference herein. See "Incorporation of
Certain Documents by Reference".
Limitations on Dividend Payments. The Corporation is subject to several
indentures and other debt instruments which restrict the Corporation's ability
to pay dividends. Under the most restrictive indenture or other debt
instrument, the Corporation is required to maintain a consolidated tangible
net worth of not less than $80,000,000. At June 30, 1996, the Corporation had
a consolidated tangible net worth of approximately $194,657,000 and therefore,
under the indenture restriction, the Corporation could make dividend payments
in respect of its Common Stock of $114,657,000.
Transfer Agent and Registrar. The transfer agent and registrar for the
Common Stock is Harris Trust Company of New York, 77 Water Street, New York,
New York 10005. The Company's Common Stock is listed on the New York Stock
Exchange.
PREFERRED STOCK
General. Under the Corporation's Restated Certificate of Incorporation, the
Board of Directors is authorized without further shareholder action to provide
for the issuance of up to 5,000,000 shares of Preferred Stock, in one or more
series, with such voting powers, or without voting powers, and with such
designations and relative rights and preferences as shall be set forth in
resolutions providing for the issue thereof adopted by the Board of Directors.
It is not possible to state the actual effect of the authorization and
issuance of Preferred Stock upon the rights of holders of the Common Stock
unless and until the Board of Directors determines the attributes of the
Preferred Stock and the specific rights of its holders. Such effects may
include, however, (i) restrictions on dividends on Common Stock if dividends
on Preferred Stock have not been paid; (ii) dilution of the voting power of
Common Stock to the extent that Preferred Stock has voting rights, or to the
extent that any Preferred Stock series is convertible into Common Stock; (iii)
dilution of the equity interest of Common Stock unless Preferred Stock is
redeemed by the Corporation; and (iv) limitation on the right of holders of
Common Stock to share in the Corporation's assets upon liquidation until
satisfaction of any liquidation preference granted to Preferred Stock.
Although the ability of the Corporation to issue Preferred Stock provides
flexibility in connection with possible acquisitions and other corporate
purposes, its issuance could be used to impede an attempt by a third party to
acquire a majority of the outstanding voting stock of the Corporation.
Series A Junior Participating Preferred Stock. In connection with the
adoption of the Shareholder Rights Plan described above, on July 27, 1988, the
Corporation's Board of Directors designated 150,000 shares of the
Corporation's authorized but unissued Preferred Stock as "Series A Junior
Participating Preferred Stock" (the "Series A Preferred Stock"). The terms of
the Series A Preferred Stock are such that one share of Series A Preferred
Stock will be approximately equivalent to 100 shares of Common Stock. Each
1/100th of one share of Series A Preferred Stock has the same dividend and
voting right as one full share of Common Stock, except that, if dividend
payments on the Series A Preferred Stock are in arrears for six consecutive
quarters, the Corporation's ability to pay dividends on its Common Stock is
restricted and holders of the Series A Preferred Stock will have enhanced
voting rights. In addition each 1/100th of one share of Series A Preferred
Stock has a minimum quarterly dividend of $.05 per 1/100th of one share, a
liquidation preference and certain other rights preferential to Common Stock.
Pursuant to the Shareholder Rights Plan, Rights have been issued to the
Corporation's shareholders, but such Rights have not yet become exercisable
and no shares of Series A Preferred Stock have been issued.
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<PAGE>
PLAN OF DISTRIBUTION
The Corporation may sell the Offered Securities being offered hereby to
underwriters or through agents or directly to purchasers. The applicable
Prospectus Supplement will set forth the terms of the offering of the Offered
Securities to which such Prospectus Supplement relates, including the name or
names of any underwriters or agents with whom the Corporation has entered into
arrangements with respect to the sale of such Offered Securities, the public
offering or purchase price of such Offered Securities and the net proceeds to
the Corporation from such sale, any underwriting discounts and other items
constituting underwriters' compensation, any discounts and commissions allowed
or paid to dealers, if any, any commissions allowed or paid to agents, and the
securities exchanges, if any, on which the Offered Securities will be listed.
The Offered Securities may be purchased to be re-offered to the public
through underwriting syndicates led by one or more managing underwriters, or
through one or more underwriters. The underwriter or underwriters with respect
to an underwritten offering of the Offered Securities will be named in any
applicable Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will
be set forth on the cover page of any applicable Prospectus Supplement. Unless
otherwise set forth in any applicable Prospectus Supplement, the obligations
of the underwriters to purchase the Offered Securities will be subject to
certain conditions precedent, and each of the underwriters with respect to a
sale of Offered Securities will be obligated to purchase all of its allocated
Offered Securities if any are purchased. Any initial public offering price and
any discount or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
Offered Securities may be offered and sold by the Corporation, directly or
through agents designated by the Corporation from time to time, which agents
may be affiliates of the Corporation. Any agent involved in the offer and sale
of the Offered Securities in respect of which this Prospectus is being
delivered will be named, and any commissions payable by the Corporation to
such agent will be set forth, in any applicable Prospectus Supplement. Unless
otherwise indicated in any applicable Prospectus Supplement, any such agent
will be acting on a reasonable efforts basis for the period of its
appointment.
The Debt Securities will be new issues of securities with no established
trading market. Any underwriters to whom such Debt Securities are sold by the
Corporation for public offering and sale may make a market in such Debt
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any Offered Securities.
Any underwriter or agent participating in the distribution of the Offered
Securities may be deemed to be an underwriter, as that term is defined in the
Securities Act, of the Offered Securities so offered and sold and any
discounts or commissions received by them from the Corporation and any profit
realized by them on the sale or resale of the Offered Securities may be deemed
to be underwriting discounts and commissions under the Securities Act.
Underwriters, agents and their controlling persons may be entitled, under
agreements entered into with the Corporation, to indemnification by the
Corporation against certain civil liabilities, including liabilities under the
Securities Act or to contribution with respect to payments which the
underwriters or agents may be required to make in respect thereof.
LEGAL OPINIONS
The legality of the Offered Securities being offered hereby will be passed
upon for the Corporation by Bradley, Arant, Rose & White, Birmingham, Alabama,
and certain legal matters will be passed upon for any underwriters, dealers or
agents by Winthrop, Stimson, Putnam & Roberts, New York, New York. As of June
30, 1996, the partners and associates of Bradley, Arant, Rose & White
beneficially owned approximately 5,000 shares of Common Stock of the
Corporation.
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EXPERTS
The consolidated balance sheets of Energen Corporation and its subsidiaries
as of September 30, 1995 and 1994 and the consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ending September 30, 1995, which are included in Energen's annual report on
Form 10-K for the year ended September 30, 1995 and which are incorporated by
reference in the Prospectus, have been incorporated herein in reliance on the
report, which includes an explanatory paragraph regarding Energen changing its
method of accounting for certain other post-retirement benefits effective
October 1, 1993, of Coopers & Lybrand L.L.P., independent accountants, given
on the authority of that firm as experts in auditing and accounting.
17
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PRO-
SPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE-
SENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORA-
TION OR BY ANY OF THE UNDERWRITERS OR ANY OTHER PERSON. NEITHER THE DELIVERY
OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE
MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICA-
TION THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR
THEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY A SECURITY OTHER THAN
THE COMMON STOCK OFFERED HEREBY OR THEREBY, NOR DO THEY CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY
OR THEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION TO SUCH PERSON.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary.............................................. S-3
Use of Proceeds............................................................ S-8
Capitalization............................................................. S-8
Future Capital Resources and Liquidity..................................... S-9
The Corporation............................................................ S-10
Price Range of Common Stock and Dividends.................................. S-15
Underwriting............................................................... S-16
Legal Matters.............................................................. S-17
Experts.................................................................... S-17
Incorporation of Certain Documents by Reference............................ S-17
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Energen Corporation........................................................ 3
Consolidated Ratios of Earnings to Fixed Charges........................... 3
Use of Proceeds............................................................ 4
Description of Debt Securities............................................. 4
Description of Capital Stock............................................... 13
Plan of Distribution....................................................... 16
Legal Opinions............................................................. 16
Experts.................................................................... 17
</TABLE>
1,200,000 SHARES
ENERGEN
CORPORATION
COMMON STOCK
($0.01 PAR VALUE)
[LOGO OF ENERGEN CORP. APPEARS HERE]
SALOMON BROTHERS INC
SMITH BARNEY INC.
PROSPECTUS SUPPLEMENT
DATED SEPTEMBER , 1997
