UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 1-3551
EQUITABLE RESOURCES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-0464690
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
420 BOULEVARD OF THE ALLIES 15219
PITTSBURGH, PENNSYLVANIA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (412) 261-3000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, no par value New York Stock Exchange
Philadelphia Stock Exchange
7 1/2% Debentures due July 1, 1999 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Philadelphia Stock Exchange
Securities registered pursuant to Section
12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of February 28, 1998: $1,167,676,996 The number of shares
outstanding of the issuer's classes of common stock as of February 28, 1998:
37,069,111
DOCUMENTS INCORPORATED BY REFERENCE
Part III, a portion of Item 10 and Items 11, 12, and 13 are incorporated by
reference to the Proxy Statement for the Annual Meeting of Stockholders on May
22, 1998, to be filed with the Commission within 120 days after the close of the
Company's fiscal year ended December 31, 1997.
Index to Exhibits - Page 67
<PAGE>
TABLE OF CONTENTS
PART I PAGE
Item 1 Business 1
Item 2 Properties 7
Item 3 Legal Proceedings 8
Item 4 Submission of Matters to a Vote of Security Holders 8
Item 10 Directors and Executive Officers of the Registrant 9
PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters 10
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 8 Financial Statements and Supplementary Data 28
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 62
PART III
Item 10 Directors and Executive Officers of the Registrant 63
Item 11 Executive Compensation 63
Item 12 Security Ownership of Certain Beneficial Owners
and Management 63
Item 13 Certain Relationships and Related Transactions 63
PART IV
Item 14 Exhibits and Reports on Form 8-K 64
Index to Financial Statements
Covered by Report of Independent Auditors 65
Index to Exhibits 67
Signatures 70
<PAGE>
PART I
ITEM 1. BUSINESS
Equitable Resources, Inc. (Equitable, ERI or the Company) is a
fully-integrated energy exploration, production, transmission, distribution and
marketing company. Through its subsidiaries and a division, it offers energy
(natural gas, natural gas liquids, crude oil and electricity) products and
services to wholesale and retail customers from its three primary business
segments: ERI Supply & Logistics, ERI Utilities and ERI Services. ERI and its
subsidiary companies had 1,978 employees at the end of 1997.
The company was formed under the laws of Pennsylvania by the
consolidation and merger in 1925 of two constituent companies, the older of
which was organized in 1888. In 1984 the corporate name was changed to Equitable
Resources, Inc. to reflect more appropriately the Company's transition from a
regulated utility to an integrated energy company.
ERI SUPPLY & LOGISTICS
Supply & Logistics explores for, produces and delivers natural gas and
oil, with operations in the Appalachian Basin and Gulf of Mexico regions of the
United States. It is also engaged in the intrastate transportation and storage
of natural gas, production of natural gas liquids and the bulk trading of
natural gas and electricity.
EXPLORATION AND PRODUCTION
Equitable Resources Energy Company (EREC) is the exploration and
production unit of the Supply & Logistics segment. EREC has been a low-cost
operator in the Appalachian Basin for more than 100 years. The operating area in
eastern Kentucky and western Virginia contains approximately 89 percent of
Equitable's natural gas and oil reserves. The Company has been able to develop
gas reserves at costs which make it very competitive in marketing its gas to
pipeline and commercial buyers. As a result, even in periods of surplus gas
supply, the Company has been able to sell all of its gas production at a profit.
EREC also extracts and markets natural gas liquids in Kentucky. EREC sold its
West Virginia-based contract drilling operations in October 1997.
Exploration and production activities are also conducted in the Gulf
Coast region of the U.S. This is a very competitive market requiring substantial
on-going investment in Federal leases, in which drilling and production activity
by producers has increased in recent years. EREC has recently begun to operate
some of the offshore drilling projects in which it has a majority working
interest. Approximately 11 percent of the Company's year-end natural gas and oil
reserves are located in the Gulf region. EREC also owns interests in two natural
gas liquids plants in Texas but is negotiating a possible sale of those
interests.
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
EREC sold its oil and gas properties in six western states and the
Canadian Rockies in the second half of 1997. The Company used a part of the
proceeds from the property sales to finance the acquisition from Chevron USA of
two producing gas and oil fields off Louisiana's Gulf Coast. The daily gas and
oil production from the Gulf acquisition more than offset the production
displaced by the western property sale. In 1997 the Company increased its
Appalachian reserve life from 35 years to 50 years to more closely reflect
actual production experience. This revision increased 1997 proved developed
natural gas and oil reserves by 78.6 billion cubic feet equivalent. At year-end
1997 proved developed natural gas reserves were 769 billion cubic feet compared
to 732 billion cubic feet at year-end 1996. Oil reserves declined during 1997
from 18.8 million barrels of proved developed reserves to 8.9 million barrels
of proved developed reserves. The decrease in oil reserves is the result of the
sale of the properties in the western states and Canada.
ENERGY MARKETING, STORAGE AND TRANSMISSION
In Louisiana, Louisiana Intrastate Gas Company, L.L.C. (LIG) provides
intrastate transportation of gas regulated by the Federal Energy Regulatory
Commission (FERC) and extracts and markets natural gas liquids. It has the most
extensive intrastate gas system in the state, with 1,900 miles of pipeline
serving most major producing and consuming areas of Louisiana. Liquid extraction
plant capacity utilization for the system is currently about 90 percent. Because
of recent increases in both onshore and offshore exploration and production
activity in Southern Louisiana, LIG has had increased opportunities to process
and transport natural gas. LIG markets primarily to industrial and municipal
markets and to local distribution companies. In 1997 LIG added to its
transportation services with the acquisition of the Department of Energy (DOE)
pipeline in southern Louisiana. This high-capacity pipeline was converted from
an oil pipeline and began gas transmission operations in October 1997. The
pipeline has take-away capacity of 500,000 MMBtu/day for newly developed
offshore gas from an area along the central Gulf Coast to pipelines and
industrial end-users in other parts of Louisiana. LIG is also expanding its
liquids processing capacity at its Plaquemine, Louisiana, plant to accommodate
additional processing volumes anticipated under a new agreement with Amoco
Production Company. The expansion is expected to be completed and operational by
the last quarter of 1998.
Equitable Storage Company, L.L.C. provides natural gas storage services
at its Jefferson Island Underground Gas Storage and Interchange Facility.
Jefferson Island is strategically located in both a major production and market
area, as well as providing a direct interconnection to a number of interstate
pipelines transporting gas through the Henry Hub. Work has begun on a second
storage cavern at Jefferson Island that will double the storage capacity to 7
Bcf of natural gas. This project is expected to be completed and in operation by
the fall of 1999.
The Supply & Logistics segment's operations also include nationwide
natural gas marketing, supply, peak shaving and transportation arrangements and
electricity marketing. Energy is purchased from independent brokers, marketers
and producers throughout the United States and Canada. Most marketed natural gas
is sold to local distribution companies, marketers and industrial end-users. The
natural gas marketing business is extremely competitive. The unbundling of gas
sales on local distribution systems is expected to provide increased marketing
opportunities. Currently, electricity marketing activities of this segment are
significantly less than its gas marketing activities.
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
The Supply & Logistics segment generated approximately 48% of ERI's net
operating revenue and 61% of ERI's net operating income in 1997, excluding
intercompany transactions.
ERI UTILITIES
NATURAL GAS DISTRIBUTION
The Utilities segment's distribution operations are conducted by
Equitable Gas Company, a division of the Company. The service territory for
Equitable Gas is southwestern Pennsylvania, a few municipalities in northern
West Virginia and field line sales in eastern Kentucky. The distribution company
provides gas services to more than 266,000 customers, comprised of approximately
248,000 residential customers and approximately 18,000 commercial and industrial
customers and is regulated by the state utility commissions in the three states
it serves. In October 1997, the Pennsylvania Public Utility Commission (PUC)
authorized a rate increase to Equitable Gas of $15.8 million annually, most of
which will be applied to customers' monthly fixed charges for transportation
services. Equitable Gas Company's new rate structure approved by the PUC is
expected to reduce from 64% to 54% its percentage of revenues affected by
weather conditions. The PUC concurrently authorized Equitable Gas to reduce its
gas supply rates by $37.4 million annually to reflect lower gas cost. In
December 1997 the PUC granted the Company's request to offer "unbundled" service
to all of its customers in the state, allowing them to choose their natural gas
supplier. Revenues derived from transportation charges on gas sold by other
suppliers will enable Equitable Gas to avoid economic loss resulting from the
switching of residential customers to other suppliers. This results from the
fact that the margin on natural gas commodity approximates the margin received
on transportation making Equitable Gas neutral to transportation or sales.
Equitable Gas will continue to provide other utility services to all of its
customers.
Equitable Gas Company purchases natural gas through short-term,
medium-term and long-term contracts. Most gas is purchased from Southwest
suppliers and transported by Texas Eastern Transmission Corporation and
Tennessee Gas Pipeline Company. A smaller percentage of natural gas has been
purchased from production properties in Kentucky owned by EREC.
Equitable Gas Company's rates, terms of service, contracts with
affiliates and issuances of securities are regulated primarily by the PUC along
with the Kentucky Public Service Commission and the West Virginia Public Service
Commission.
Historically, approximately 65 percent of natural gas distribution
revenue has been recorded during the winter heating season from November through
March. Significant quantities of purchased gas are placed in underground storage
inventory during the off-peak season to accommodate high customer demands during
the winter heating season.
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
NATURAL GAS GATHERING, INTERSTATE TRANSMISSION AND STORAGE
Kentucky West Virginia Gas Company, L.L.C. is a FERC-regulated,
interstate pipeline company that gathers natural gas production in eastern
Kentucky. It has more than 2,200 miles of gathering and transmission lines that
serve Equitable Gas, EREC and nonaffiliated companies. Most of the gas
transported on Kentucky West is delivered to Columbia Gas Transmission, a major
interstate pipeline. Nora Transmission Company is also a FERC-regulated,
transmission system, transporting EREC's gas production in western Virginia for
redelivery to key Southeast markets.
Another FERC-regulated interstate pipeline, Equitrans, L.P. provides
transportation, storage and transmission service for Equitable Gas, ERI
Services, and nonaffiliates in western Pennsylvania and northern West Virginia.
Although a substantial portion of Equitrans' throughput has been gas purchased
by Equitable Gas, no revenue loss is expected as a result of residential
customers of Equitable Gas switching to other suppliers, since gas transported
to Equitable Gas by such suppliers will continue to flow through the Equitrans'
system. Equitrans has more than 500 miles of transmission lines and
interconnections with five major interstate pipelines. The FERC-regulated
company also has 15 gas storage reservoirs with approximately 500 MMcf per day
of peak delivery capacity. This storage service is fully subscribed. Equitrans
is currently involved in a rate case before the FERC, which is expected to
continue through 1998.
The Utilities segment generated approximately 48% of ERI's net
operating revenues and 47% of ERI's net operating income in 1997.
ERI SERVICES
ERI Services provides energy and energy related products and services
to commercial, government, institutional and industrial end-users designed to
reduce the customer's operating costs and improve their productivity. The
segment was created through internal development and a series of acquisitions of
private energy performance and facility management contractors beginning in
1995. In September 1996 ERI Services began marketing a complete menu of energy
management services to energy customers. In July 1997 ERI significantly added to
its energy performance and facilities management capabilities with the
acquisition of Northeast Energy Services, Inc. (NORESCO), a major energy
services company. ERI Services now operates through several specialized
operating groups: Performance Contracting, Government Services, Facilities
Management and Energy Services Marketing. ERI Services operates in a highly
competitive environment, with a significant number of companies, including
affiliates of existing energy companies, entering this market in recent years.
PERFORMANCE CONTRACTING
Performance Contracting provides comprehensive performance-based energy
savings solutions that offer a wide array of integrated energy management
services. Performance-based energy savings solutions include the development,
design, construction, financing, operation and maintenance of various
facilities. Since 1979, NORESCO, a major component of this group, has completed
several hundred energy savings projects for commercial, industrial,
institutional, and governmental customers. With offices in eleven states,
NORESCO is involved in energy savings and facilities management projects
throughout the U.S.
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
GOVERNMENT SERVICES
The Government Services group specializes in energy savings performance
contracting with the Federal, state and municipal governments. Beginning in
1996, the DOE initiated a series of regional energy service performance
contracts. These contracts act as a partnership between a Federal agency and an
energy service company whereby the contractor incurs the cost of implementing
new energy savings projects in exchange for a share of the energy savings
resulting from the measures taken during the term of the contract. During the
twelve month period through January 1998, the Government Services group has been
awarded the right to negotiate for $575 million of regional energy service
performance contracts.
FACILITIES MANAGEMENT
Facilities Management is a group that develops and operates private
power, cogeneration and central plant facilities in the U.S. and selected
international markets. The projects serve a variety of consumers including
hospitals, universities, commercial and industrial customers and utilities. ERI
Services' Facilities Management provides for its customers all aspects of
project development including technical feasibility, equipment selection, fuel
procurement, environmental permitting and contract negotiation.
ENERGY SERVICES MARKETING
Energy Services Marketing, which includes the former Merchant Services
division of ERI Services, Inc., provides gas operations, commodity procurement
and delivery, risk management and customer services to energy consumers
including large industrial, utility, commercial, institutional and residential
end-users. In 1998 a new division, Equitable Energy, began marketing natural gas
and other services to residential consumers on the Equitable Gas system in
western Pennsylvania. Equitable Energy has contracted to purchase its natural
gas supply from the natural gas marketing operations of the Supply & Logistics
segment.
ERI Services generated approximately 4% of ERI's net operating revenues
in 1997 and experienced an operating loss which lowered the Company's overall
net operating profit by approximately 8%.
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
Operating revenues as a percentage of total operating revenues for each
of the three business segments during the years 1995 through 1997 are as
follows:
1997 1996 1995
--------- --------- --------
Supply & Logistics:
Marketed natural gas 53 % 52 % 53 %
Produced natural gas 4 4 6
Natural gas liquids 5 5 5
Oil 1 1 2
Contract drilling 1 1 1
Other 2 2 4
--------- --------- --------
Total Supply & Logistics 66 65 71
--------- --------- --------
Utilities:
Residential gas sales 13 15 19
Commercial gas sales 2 4 3
Industrial and utility gas sales 1 4 1
Transportation service 3 2 4
Other - 1 2
--------- --------- --------
Total Utilities 19 26 29
--------- --------- --------
Services:
Marketed natural gas 13 9 -
Energy service contracting 2 - -
--------- --------- --------
Total Services 15 9 -
--------- --------- --------
Total Revenues 100 % 100 % 100 %
========= ========= ========
The results of operations for the Company's three business segments will
be affected by future changes in oil and gas prices and the interrelationship
between oil, gas and other energy prices.
See Management's Discussion and Analysis of Financial Condition and
Results of Operations and Notes Q and T to the consolidated financial statements
in Part II regarding financial information by business segment.
<PAGE>
ITEM 2. PROPERTIES
Principal facilities are owned by the Company's business segments with
the exception of various office locations and warehouse buildings. All leases
contain renewal options for various periods. A minor portion of equipment is
also leased. With few exceptions, transmission, storage and distribution
pipelines are located on or under (1) public highways under franchises or
permits from various governmental authorities, or (2) private properties owned
in fee, or occupied under perpetual easements or other rights acquired for the
most part without examination of underlying land titles. The Company's
facilities have adequate capacity, are well maintained and, where necessary, are
replaced or expanded to meet operating requirements.
UTILITIES. Equitable Gas owns and operates natural gas distribution
properties as well as other general property and equipment in Pennsylvania, West
Virginia and Kentucky. Equitrans owns and operates production, underground
storage and transmission facilities as well as other general property and
equipment in Pennsylvania and West Virginia. Kentucky West owns and operates
gathering and transmission properties as well as other general property and
equipment in Kentucky. Three Rivers Pipeline Corporation owns transmission
properties in southwestern Pennsylvania.
SUPPLY & LOGISTICS. This business segment owns or controls substantially
all of the Company's acreage of proved developed and undeveloped gas and oil
production properties, which are located in the Appalachian and Gulf Coast
offshore areas. Supply & Logistics' properties also include hydrocarbon
extraction facilities in Kentucky with a 100-mile liquid products pipeline which
extends into West Virginia and an interest in two hydrocarbon extraction plants
in Texas. This segment also owns an intrastate pipeline system and four
hydrocarbon extraction plants in Louisiana, a high-deliverability gas storage
facility in Louisiana and a 15-mile interchange system that interconnects the
storage facility to LIG. Information relating to Company estimates of natural
gas and oil reserves and future net cash flows is highlighted below and
summarized in Note T to the consolidated financial statements in Part II.
Gas and Oil Production:
1997 1996 1995
-------- ------ ------
Natural Gas - MMcf produced 56,693 57,295 64,984
- Average sales price per Mcf $2.24 $1.91 $1.61
Crude Oil - Thousands of barrels produced 1,511 1,727 1,932
- Average sales price per barrel $17.22 $14.78 $16.44
Average production cost (lifting cost) of natural gas and oil during 1997,
1996 and 1995 was $.499, $.469 and $.413 per Mcf equivalent, respectively.
<PAGE>
ITEM 2. PROPERTIES (CONTINUED)
Gas Oil
Total productive wells at December 31, 1997:
Total gross productive wells 4,445 397
Total net productive wells 3,972 352
Total acreage at December 31, 1997:
Total gross productive acres 567,000
Total net productive acres 502,000
Total gross undeveloped acres 1,656,000
Total net undeveloped acres 1,319,000
Number of net productive and dry exploratory wells and number of net
productive and dry development wells drilled:
1997 1996 1995
-------- -------- ------
Exploratory wells:
Productive 2.9 3.3 1.6
Dry 1.5 5.8 2.8
Development wells:
Productive 88.7 73.1 39.1
Dry - 1.6 2.6
No report has been filed with any Federal authority or agency reflecting
a five percent or more difference from the Company's estimated total reserves.
ERI SERVICES. This business segment leases office facilities in
approximately twenty locations across the United States.
ITEM 3. LEGAL PROCEEDINGS
Two subsidiary companies of the Company, ET Blue Grass Company and EQT
Capital Corporation, are among a group of defendants in a lawsuit filed by
Raytheon Engineers & Constructors, Inc. (Raytheon) in June 1997 in connection
with a storage project in Avoca, New York, whose operating partnership and
partners have filed for bankruptcy. Raytheon's total claim for compensatory
damages against all defendants is less than $20 million. The Company believes
that its subsidiary companies have adequate legal defenses to all of Raytheon's
claims.
There are no other material pending legal proceedings, other than those
which are adequately covered by insurance, to which the Company or any of its
subsidiaries is a party, or to which any of their property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the last quarter of its fiscal year ended December 31, 1997.
<PAGE>
<TABLE>
<CAPTION>
ITEM 10. EXECUTIVE OFFICERS
- ---------------------------------------------------------------------------------------------------------
Name and Age Title Business Experience
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Donald I. Moritz Interim President and Chief Present position since July 17, 1997; Chairman and
(70) Executive Officer Chief Executive Officer from December 17, 1993,
until retirement on December 31, 1994; President and
Chief Executive Officer from 1978.
- ---------------------------------------------------------------------------------------------------------
R. Gerald Bennett Senior Vice President First elected to present position June 1, 1996;
(56) President and Chief Executive Officer - Fuel
Resources, Inc. from February 1991.
- ---------------------------------------------------------------------------------------------------------
John C. Gongas, Jr. Senior Vice President First elected to present position May 23, 1996;
(53) Vice President-Corporate Operations from May 26,
1995; Vice President - Utility Group from January
1, 1994; Vice President - Utility Services from
June 1, 1992.
- ---------------------------------------------------------------------------------------------------------
Audrey C. Moeller Vice President and Corporate First elected to present position May 22, 1986.
(62) Secretary
- ---------------------------------------------------------------------------------------------------------
Johanna G. O'Loughlin Vice President and General First elected to present position December 19,
(51) Counsel 1996; Deputy General Counsel from April 1996;
Senior Vice President and General Counsel of Fisher
Scientific Company from June 1986.
- ---------------------------------------------------------------------------------------------------------
Gregory R. Spencer Senior Vice President and First elected to present position May 23, 1996.
(49) Chief Administrative Officer Vice President-Human Resources and Administration
from May 26, 1995; Vice President - Human
Resources from October 10, 1994; Vice President of
Human Resources Administration of AMSCO
International, Inc., Pittsburgh, PA, from May
1993; General Manager-Human Resources of U.S.
Steel Group of USX Corporation, Pittsburgh, PA,
from October 1991.
- ---------------------------------------------------------------------------------------------------------
Richard D. Spencer Vice President - Planning First elected to present position May 23, 1997;
(44) and Chief Information Vice President and Chief Information Officer from
Officer April 1, 1996; Manager - Technology Programs of
General Electric Corporation from February 1991.
- ---------------------------------------------------------------------------------------------------------
Jeffrey C. Swoveland Vice President - Finance First elected to present position May 23, 1996.
(42) and Treasurer/Interim Interim Chief Financial Officer since October 16,
Chief Financial Officer 1997; Treasurer from December 15, 1995; Director
of Alternative Finance from September 27, 1994;
Vice President - Global Corporate Banking of
Mellon Bank, Pittsburgh, PA, from June 1993;
Assistant Vice President - Global Corporate
Banking of Mellon Bank, Pittsburgh, PA, from June,
1989.
- ---------------------------------------------------------------------------------------------------------
Officers are elected annually to serve during the ensuing year or until their
successors are chosen and qualified. Except as indicated, the officers listed
above were elected on May 23, 1997.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange and
the Philadelphia Stock Exchange. The high and low sales prices reflected in the
New York Stock Exchange Composite Transactions as reported by The Wall Street
Journal and the dividends declared and paid per share are summarized as follows:
1997 1996
---------------------------- -----------------------------
High Low Dividend High Low Dividend
---------------------------- -----------------------------
1st Quarter 32 3/4 27 3/4 $.295 31 1/2 27 3/4 $.295
2nd Quarter 31 28 1/16 .295* 30 5/8 27 3/4 .295*
3rd Quarter 31 3/4 27 3/8 .295 29 7/8 25 1/4 .295
4th Quarter 35 1/2 29 5/8 .295 31 1/8 27 1/2 .295
* Actually declared near the end of the preceding quarter.
As of December 31, 1997, there were 7,026 shareholders of record of the
Company's common stock.
The indentures under which the Company's long-term debt is outstanding
contain provisions limiting the Company's right to declare or pay dividends and
make certain other distributions on, and to purchase any shares of, its common
stock. Under the most restrictive of such provisions, $423 million of the
Company's consolidated retained earnings at December 31, 1997, was available for
declarations or payments of dividends on, or purchases of, its common stock.
The Company anticipates dividends will continue to be paid on a regular
quarterly basis.
On July 16, 1997, the Company issued 2,091,407 shares of common stock to
the shareholders of Northeast Energy Services, Inc. (NORESCO). These shares were
transferred to those shareholders (along with cash) in exchange for all of the
outstanding stock of NORESCO. The shares were deemed exempt from registration
under Section 4(2) of the Securities Act of 1933, because they were issued to
only four shareholders, all of whom were accredited investors, as defined by
Rule 501 of the Securities Act of 1933, and who acknowledged in writing the
restrictions on resale under the Securities Act of 1933 and that they were not
acquiring the shares with any plan of distribution. The shares were subsequently
registered for resale on Form S-3.
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------
(Thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating revenues $ 2,151,015 $ 1,861,799 $ 1,425,990 $ 1,397,280 $ 1,094,794
============== ============== =============== ============== ===============
Net income (a) $ 78,057 $ 59,379 $ 1,548 $ 60,729 $ 73,455
============== ============== =============== ============== ===============
Earnings per share of
common stock:
Basic $2.17 $1.69 $.04 $1.76 $2.27
===== ===== ==== ===== =====
Assuming dilution $2.16 $1.69 $.04 $1.75 $2.25
===== ===== ==== ===== =====
Total assets $ 2,411,010 $ 2,096,299 $ 1,963,313 $ 2,019,122 $ 1,946,907
Long-term debt $ 417,564 $ 422,112 $ 415,527 $ 398,282 $ 378,845
Cash dividends
paid per share of
common stock $1.18 $1.18 $1.18 $1.15 $1.10
(a) Includes nonrecurring items, as described in Management's Discussion and
Analysis of Financial Condition and Result of Operations and in Notes C, D
and F to the consolidated financial statements.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
ERI's consolidated net income for 1997 was $78.1 million, or $2.17 per
share, compared with $59.4 million, or $1.69 per share, for 1996 and $1.5
million, or $.04 per share, for 1995. Earnings for 1997 include the following
nonrecurring items, all of which are described in Notes C and F to the
consolidated financial statements: aftertax gain of $31.3 million, $0.87 per
share, on the sale of ERI's oil and natural gas producing properties in the
western United States and Canada and its contract drilling operations; aftertax
charge of $8.5 million, $0.24 per share, from the impairment of a proposed
bedded salt natural gas storage project; and $6.7 million aftertax charge, $0.19
per share, related to the evaluation and reduction of corporate office and
noncore business functions. The 1996 net income includes an aftertax gain of
$4.4 million, or $.13 per share, from the curtailment of ERI's defined benefit
pension plan for certain nonutility employees. Earnings for 1995 include an
aftertax charge of $74.2 million, or $2.12 per share, due to the recognition of
impairment of assets. The results for 1995 also include a nonrecurring aftertax
gain of $29.1 million, or $.83 per share, related to the Columbia Gas
Transmission (Columbia) bankruptcy settlement and an aftertax gain of $6.6
million, or $.19 per share, resulting from regulatory approval for accelerated
recovery of future gas costs as described in Note D to the consolidated
financial statements.
Excluding these items, ERI's 1997 net income of $61.9 million, or $1.73
per share, was 13% higher than 1996 net income of $55.0 million which, in turn,
was 38% higher than 1995 net income of $40.0 million. The 1997 operating results
benefited from higher natural gas prices, lower exploration expense, higher
natural gas marketing volumes, higher, newly-approved residential rates in the
Company's regulated utility operations and lower start-up costs in the Services
segment. These benefits were partially offset by lower natural gas production
volumes and lower commercial and industrial sales in the utility operations.
In 1996 operating results benefited from higher sales prices for
produced natural gas and natural gas liquids compared to 1995, and from lower
depletion rates, increased commercial and industrial sales by the utility
operations and lower interest costs. These items were partially offset by
decreased natural gas production, lower federal income tax credits related to
the production of nonconventional fuels and costs incurred for the start-up and
development of Services operations.
Business segment operating results are presented in the segment
discussions and financial tables on the following pages.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SUPPLY & LOGISTICS
Supply & Logistics' operations are comprised of the production and sale
of natural gas, natural gas liquids and crude oil, marketing of natural gas and
electricity and storage and intrastate transportation of natural gas in
Louisiana.
Supply & Logistics operates its exploration and production activities
through Equitable Resources Energy Company (EREC). In 1997 EREC made a strategic
shift to concentrate its exploration and development activities in its core
Appalachian and growing offshore Gulf Coast holdings. In July 1997 EREC
announced that it had entered into sales agreements for $170 million with five
purchasers covering its oil and natural gas properties in the western United
States and Canada, which are no longer a part of ERI's primary geographic focus.
In October 1997 EREC sold its Union Drilling division, a contract drilling
company. These asset sales in 1997 resulted in pretax gains of $52.2 million,
and more importantly, allow management of the segment to refocus its exploration
and production resources on areas with potential for higher return on invested
capital.
During 1997 daily net natural gas and crude oil production in the Gulf
of Mexico quadrupled to 63 million cubic feet per day, partly as a result of the
acquisition in October 1997 of West Cameron Block 180 and 198 fields, two
producing oil and gas fields offshore Louisiana's Gulf Coast, for $77.6 million.
EREC operates both fields which include portions of six leases. EREC is
producing about 23 million cubic feet of gas and about 2,650 barrels of oil per
day from these fields and has begun an analysis of additional prospective
drilling sites based on the latest 3D seismic survey over the leases.
In addition, EREC's Gulf Coast Region had two new discoveries at West
Cameron Block 540 and South Marsh Island 39. Two wells have been drilled at each
site.
EREC also participated in other development activity during the year.
Successes include a Vermilion 215 well, in which EREC has a 51% working
interest, currently producing 13.5 million cubic feet of gas and 540 barrels per
day and a High Island Blocks A269/A270 well, 75% interest owned by EREC,
currently flowing 10.7 million cubic feet of gas per day. Also during 1997, EREC
won eleven of eighteen bids on new blocks awarded at the federal lease sale,
adding 33,000 net acres, including 100% working interests in Vermilion 137,
Vermilion 177 and South Marsh Island 5, and 50% interests in Vermilion 114,
Vermilion 153, Vermilion 173, South Marsh Island 25, South Marsh Island 151 -
153, and Eugene Island 180. These blocks, together with those acquired in 1996,
form the basis for exploration activities planned for 1998.
In the Appalachian Region during 1997, 138 wells were drilled. This
drilling was concentrated within the core areas of southwest Virginia and
southeast Kentucky. This activity resulted in an additional 5 million cubic feet
per day of gas sales and proved reserve additions of 44 Bcf. Additional capital
was invested in the Banner compressor station, which became operational in
mid-1997. This compressor station injects gas to be sold into El Paso's East
Tennessee system. The station has a capacity of 5 million cubic feet per day and
can be expanded to provide capacity of up to 15 million cubic feet per day. In
1998 the region will continue to focus on development of its sizable prospect
inventory.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SUPPLY & LOGISTICS (CONTINUED)
Exploration spending decreased in 1997, as exploration in the western
properties was suspended and focus shifted from those properties to exploration,
development and the evaluation of acquisition opportunities in the core Gulf
Coast and Appalachian Regions. In addition, the 97% drilling success rate on the
170 gross wells drilled has reduced the dry hole cost as compared to prior
years.
In other Supply & Logistics' operations, 1997 benefited from higher
natural gas and electricity marketing volumes and marked the initiation of two
important expansion projects, along with an acquisition in the Company's
midstream operations.
At Louisiana Intrastate Gas (LIG), the Company's intrastate pipeline
subsidiary, a $23 million, 200 million cubic feet per day, expansion of the
Plaquemine gas processing plant began. The project, scheduled for completion in
the fourth quarter of 1998, will increase the processing capacity at Plaquemine
to approximately 435 million cubic feet per day to accommodate volumes committed
under a new contract.
Work also began on a second salt-dome storage cavern at the Company's
Jefferson Island storage facility. The $13.5 million project, scheduled for
completion in August 1999, is designed to double storage capacity at the
facility and provide increased operational flexibility for our customers. Since
a major portion of the infrastructure was funded with the construction of the
first cavern, costs are substantially lower for this second cavern and thus
returns should improve markedly.
The year 1998 will mark the first full year of operation of the former
Department of Energy (DOE) pipeline, which was acquired by LIG for $22 million
in 1997 and was placed in natural gas service in the fourth quarter. The 67-mile
pipeline provides over 500 million cubic feet per day of additional capacity in
southern Louisiana and, in combination with LIG and Equitable Storage
facilities, is expected to enhance ERI's Gulf Coast capabilities in the
purchase, transport and aggregation of offshore gas and related services.
A 1998 capital expenditure budget of $110.8 million for Supply &
Logistics has been approved. It includes $81.8 million for exploration and
production activities with $56.3 million for exploration and development
drilling in the Gulf of Mexico and $25.5 million for development of Appalachian
holdings including $6.4 million for improvements to gathering system pipelines.
The evaluation of new prospects, market forecasts and price trends for natural
gas and oil will continue to be the principal factors for the economic
justification of drilling investments. The 1998 program also includes $22.1
million for a portion of the cost of the Plaquemine plant expansion, and $6.8
million for the first phase of the Jefferson Island storage expansion project.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Operating revenues (millions):
Marketed natural gas $ 1,236 $ 1,019 $ 761
Produced natural gas 122 109 105
Natural gas liquids 101 101 74
Marketed electricity 37 15 -
Crude oil 26 26 32
Natural gas transportation 9 8 9
Direct billing settlements 8 8 33
Other 34 33 46
--------- --------- --------
Total revenues 1,573 1,319 1,060
Cost of energy purchased 1,328 1,093 801
--------- --------- --------
Net operating revenues 245 226 259
Operating expenses:
Production 32 32 32
Exploration 9 16 13
Gas processing 11 10 11
Other 65 66 63
Depreciation, depletion and
amortization 58 55 78
Impairment of assets and other
nonrecurring items 1 (5) 95
--------- --------- --------
Total operating expenses 176 174 292
--------- --------- --------
Operating income (loss) $ 69 $ 52 $ (33)
========= ========= ========
Sales quantities:
Marketed natural gas (Bcf) 500.6 446.7 466.3
Produced natural gas (Bcf) 54.6 57.3 65.0
Natural gas liquids (million gallons) 285.8 280.6 261.0
Crude oil (MMBls) 1.5 1.7 1.9
Transportation deliveries (Bcf) 113.1 120.4 122.4
Average selling prices:
Marketed natural gas (per Mcf) $ 2.47 $ 2.28 $ 1.63
Produced natural gas (per Mcf) 2.24 1.91 1.61
Natural gas liquids (per gallon) 0.35 0.36 0.28
Crude oil (per barrel) 17.22 14.78 16.44
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SUPPLY & LOGISTICS (CONTINUED)
1997 VS. 1996
Absent the effect of the impairment of assets and other nonrecurring
items described above, 1997 operating income for this segment improved nearly
50% compared to 1996. Higher natural gas prices, lower exploration expenses and
growth in marketed gas volumes combined to benefit earnings in 1997.
Realized price for produced natural gas increased 17% over 1996, as
increases in the market, along with a more favorable overall net hedged
position, combined to increase 1997 operating revenues. The 1997 revenues also
increased marginally due to a full year of storage operations and increased
utilization of capacity at the Jefferson Island storage facility.
Cost of energy purchased includes natural gas and electricity purchased
for marketing activities and natural gas used in the production of natural gas
liquids. In 1997 natural gas liquids margins benefited from a positive spread
early in the year between high liquids sales prices and low cost of gas.
Marketed gas and electricity margins, as a percent of sales, were substantially
unchanged with year-end mark-to-market gains providing slight improvement over
1996. See "Market Risk Management and Financial Trading Activity" for a more
detailed discussion of trading and hedging activities.
Operating expenses were slightly lower for the year as the decrease in
exploration expense resulting from less exploratory drilling and a higher
success rate in Gulf exploration, was partially offset by higher depreciation
and depletion expense related to increased Gulf of Mexico production and
expenses of a full-year operation at Jefferson Island storage facility.
1996 VS. 1995
The increase in revenues for 1996 compared to 1995 is due to an increase
in average selling prices for marketed and produced natural gas of 40% and 19%,
respectively, an increase in average selling price and production of natural gas
liquids of 27% and 8%, respectively, and initial revenues from the marketing of
electricity. These increases were partially offset by a 12% decline in natural
gas production, lower marketed natural gas sales and lower average selling
prices and production of oil.
The increase in cost of energy purchased for 1996 is due to higher
prices for natural gas and the initial sales of electricity.
The decrease in operating expenses, excluding the charge in 1995, is due
primarily to lower depreciation and depletion expense reflecting lower depletion
rates and the decrease in natural gas production.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
UTILITIES
Utilities' operations are comprised of the sale and transportation of
natural gas to retail customers at state-regulated rates, interstate
transportation and storage of natural gas subject to federal regulation and the
marketing of natural gas.
The local distribution operations of Equitable Gas Company are subject
to rate regulation by state regulatory commissions in Pennsylvania, West
Virginia and Kentucky. In Pennsylvania, where approximately 95% of its revenues
are derived, Equitable Gas received approval during 1997 from the
Pennsylvania Public Utility Commission (PUC) for a $15.8 million annual increase
in base rates. The new tariff provides for the unbundling of the local
distribution services to enable customers to choose their gas supplier. Gas
purchased from other suppliers would continue to be transported and delivered by
Equitable Gas at regulated rates. Under the new rate structure, Equitable Gas
earns a greater portion of its revenues from the monthly customer charge, making
it less sensitive to weather fluctuations and margin neutral between sales and
transportation service for those customers who purchase their gas from other
suppliers. The new rates went into effect October 15, 1997.
ERI's interstate pipeline companies are subject to rate regulation by
the Federal Energy Regulatory Commission (FERC). Under present rates, a majority
of the annual costs are recovered through fixed charges to customers. Equitrans
filed a rate case with the FERC requesting an increase in annual revenue of
approximately $4 million and the recovery of certain gathering facility costs
related to the implementation of Order 636. Effective September 1, 1997, the
FERC permitted Equitrans to implement the higher rates subject to refund pending
the outcome of the regulatory process.
The 1998 capital expenditure program of $40.4 million for Utilities
includes $17.5 million for the distribution operations and $9.9 million for
interstate pipeline operations, including maintenance and improvements to
existing lines and facilities, and approximately $5 million for new business
development opportunities. The capital spending plan also includes $12.8 million
for corporate and utility information systems, in the second phase of a
corporate-wide initiative to integrate systems and enhance operational
efficiencies.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Operating revenues (millions):
Residential gas sales $ 294 $ 272 $ 267
Commercial gas sales 32 68 39
Industrial and utility gas sales 64 112 59
Transportation service 58 38 53
Other 20 17 24
---------- ---------- --------
Total revenues 468 507 442
Cost of energy purchased 218 246 181
---------- ---------- --------
Net operating revenues 250 261 261
Operating expenses:
Operations and maintenance 148 147 154
Depreciation, depletion and
amortization 27 27 26
Impairment of assets and other
nonrecurring items 22 (2) 26
---------- ---------- --------
Total operating expenses 197 172 206
---------- ---------- --------
Operating income $ 53 $ 89 $ 55
========== ========== ========
Sales quantities (Bcf):
Residential 28.5 30.5 29.5
Commercial 3.2 10.5 4.5
Industrial and utility 23.6 36.8 28.9
Transportation deliveries 81.9 70.3 72.3
Average selling prices (per Mcf):
Residential $ 10.33 $ 8.89 $ 9.05
Commercial 10.08 6.51 8.75
Industrial and utility 2.73 3.05 2.04
Heating degree days (normal - 5,968) 5,919 5,988 5,748
1997 VS. 1996
Operating income in the Utilities segment decreased by $36 million to
$53 million in 1997 compared to $89 million in 1996, primarily as a result of
impairment of assets and other nonrecurring items. In June 1997 the Utilities
segment recorded a pretax charge of $13 million to recognize the impairment of
the Company's 25% interest in a proposed bedded salt natural gas storage project
in Avoca, New York. The project encountered technical difficulties related to
the proper disposal of brine water. In September 1997 the Utilities segment
recorded an additional pretax charge of $9.3 million related to the evaluation
and reduction of corporate office and noncore business functions. In 1996 the
Utilities segment recorded a $2.4 million pretax gain related to the curtailment
of certain defined benefit pension plans. Excluding these nonrecurring items,
segment operating income decreased 14% to $75 million in 1997, compared to $87
million in 1996 due principally to reduced net revenue as a result of lower
throughput.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
UTILITIES (CONTINUED)
Utilities segment operating revenues for 1997 benefited from the new
rate structure approved for residential retail customers. These improvements
were more than offset by a 7% decrease in residential volumes, a 70% decrease in
commercial sales volumes and a 36% decrease in industrial and utility sales
volumes.
The decrease in residential sales resulted from mild winter weather,
followed by below-normal temperatures for the spring and fall. While this
weather pattern results in an average number of degree days, volumes lost in the
winter heating months are not recovered in a cool spring and fall.
The 1997 commercial and industrial sales volume losses reflect the
continued movement of large commercial and industrial customers between sales
and transportation arrangements for their gas delivery, based on regulatory
changes and the development of new pricing products. The effect of 1997's
significant losses in volumes were mitigated by a 55% increase in the overall
average commercial rate, as the larger customers with more competitive rates
decreased their gas purchases, and by the 17% increase in the distribution
division's transportation deliveries.
The decrease in the cost of energy purchased reflects decreased sales
volumes. Increases and decreases in the cost of energy generally do not affect
operating income for this segment, as energy cost is a pass-through to customers
for all rate-regulated sales.
Operating expenses, excluding nonrecurring items, were substantially
unchanged from 1996 to 1997.
1996 VS. 1995
Revenues for 1995 include $4.8 million related to the Columbia
bankruptcy settlement described in Note D to the consolidated financial
statements. The increase in revenues for 1996 compared to 1995, excluding the
effect of the settlement in 1995, is due to a 48% increase in sales to
industrial and utility customers, the effect of commercial customers switching
from transportation service to gas sales, and increased retail gas sales
reflecting 4% colder weather.
The increase in cost of energy purchased for 1996 compared to 1995
reflects commercial customers switching from transportation service to gas sales
and higher industrial and utility gas sales.
The decrease in operating expenses for 1996 compared to 1995 reflects
savings from reengineering efforts that began in 1995.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SERVICES
Services' operations are comprised of two business lines: (1) marketing
of natural gas and (2) comprehensive energy services provided to industrial,
commercial, institutional and governmental customers. Energy services includes
the development, implementation, financing and management of energy and water
efficiency programs through the use of performance-based contracting activities,
the development and construction of cogeneration and independent power
production facilities and central plant facilities management. The Services
business segment was formed by combining certain of ERI's natural gas marketing
activities with the operations of Northeast Energy Services, Inc. (NORESCO) and
two smaller entities, Scallop Thermal Management, Inc. and Lighting Management,
Inc., all acquired in 1997, and the operations of Independent Energy
Corporation, Conogen, Inc. and Pequod Associates, Inc. which were acquired
during 1995 and 1996. The Company purchased the stock of NORESCO in exchange for
a combination of 2.1 million shares of ERI stock valued at $67 million and $10
million in cash, including transaction costs. The ERI Services business segment
employed approximately 300 professional staff at year-end 1997, making it one of
the largest energy services companies in the U.S.
A capital expenditure budget of $18 million has been approved for
Services for 1998. The capital spending plan includes $15 million of energy
service expenditures, principally for the development and construction of
cogeneration and independent power facilities. The balance is planned to be used
for information systems, as part of a corporate-wide initiative to integrate
systems and enhance operational efficiencies.
YEARS ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Operating revenues (millions):
Marketed natural gas $ 292 $ 163 $ -
Energy service contracting 52 9 -
Other 1 - -
---------- --------- -------
Total revenues 345 172 -
Cost of energy purchased 285 160 -
Energy service contract costs 38 5 -
---------- --------- -------
Net operating revenues 22 7 -
Operating expenses:
Other 30 20 1
Depreciation, depletion and
amortization 2 - -
Impairment of assets and other
nonrecurring items - - -
---------- --------- -------
Total operating expenses 32 20 1
---------- --------- -------
Operating loss $ (10) $ (13) $ (1)
========== ========= =======
Sales quantities:
Marketed natural gas (Bcf) 94.3 55.9 -
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SERVICES (CONTINUED)
1997 VS. 1996
The increase in energy service revenue from 1996 to 1997 of $43.0
million represents $28.7 million from post-acquisition activities of NORESCO and
the growth of this segment's existing business, which began operations in 1996.
The increase in other operating expenses from 1996 to 1997 of $10.0 million
includes $4.2 million from post-acquisition activities of NORESCO, with the
remaining increase related to the development of ERI Services' market presence
and professional resources. As this business segment continues to grow and build
on the core infrastructure that was in place at the end of 1997, operating
expenses are expected to level off (decline in proportion to total operating
revenues) as the Company realizes the future economic benefits associated with
greater employee and resource utilization over a broader customer base.
The acquisitions of NORESCO, Scallop Thermal Management, Inc., Lighting
Management, Inc. and Conogen, Inc. were accounted for using the purchase method
and resulted in $68.0 million of goodwill, which is being amortized over 20
years. Amortization of goodwill related to energy services contracting is $2.2
million in 1997. Also included in energy service contract costs in 1997 is $5.3
million of amortization related to the valuation, at fair market value, of
certain energy contracts owned by NORESCO at the time of acquisition.
1996 VS. 1995
Operating expenses include operating, start-up and development costs for
the new segment in 1996. Operating results reflect the start-up and development
status of this segment in 1996.
OTHER INCOME STATEMENT ITEMS
Other Income
YEARS ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Other income (millions):
Gain on sale of assets $ 52 $ - $ -
Other 5 3 -
---------- --------- ---------
Total other income $ 57 $ 3 $ -
========== ========= =========
The 1997 asset sale is described above in "Results of Operations" and
"Supply & Logistics." There were no other significant changes in other income
between 1997 and 1995.
Interest Charges
YEARS ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Interest charges (millions) $ 45 $ 42 $ 50
========= ========= ==========
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
OTHER INCOME STATEMENT ITEMS (CONTINUED)
1997 VS. 1996
Interest charges rose in 1997 as a result of a 55% increase in the average
daily total of short-term loans outstanding of $229 million in 1997 compared to
$147 million in 1996. The increased 1997 borrowings were used primarily to
finance acquisitions and other capital expenditures described in the segment
discussions above.
1996 VS. 1995
Interest charges decreased in 1996, as a result of the refinancing of $150
million of 8.25% and 9.9% debentures with 7.75% debentures due in 2026, and by a
30% decrease in average short-term debt outstanding of $147 million in 1996
compared to $214 million in 1995. The short-term debt balance was reduced in
late 1995 with the proceeds from the sale of certain interests in the Company's
Appalachian properties described in Note E to the consolidated financial
statements.
Average annual interest rates on short-term debt remained relatively
constant, in a range of 5.5% to 6.0%, throughout the three-year period.
Income Taxes
YEARS ENDED DECEMBER 31, 1997 1996 1995
- --------------------------------------------------------------------------------
Income taxes (net - millions):
Income tax expense (benefit) $ 47 $ 34 $ (16)
Tax credits (1) (3) (13)
--------- --------- ----------
Net income tax expense (benefit) $ 46 $ 31 $ (29)
========= ========= ==========
1997 VS. 1996
The effective income tax rate increased from 1996 to 1997 as a result of
decreased tax credits, nondeductible amortization of goodwill and higher state
income tax rates resulting from a change in law.
1996 VS. 1995
The effective income tax rate increased from 1995 to 1996 as a result of
substantially decreased tax credits in 1996 and a change in tax status of
certain subsidiaries in 1995 that resulted in lower state income tax
liabilities. The 1995 sale of an interest in the Company's Appalachian
properties producing nonconventional fuels has significantly reduced the
generation of credits.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
CAPITAL RESOURCES AND LIQUIDITY
CASH FLOWS
OPERATING ACTIVITIES
Cash required for operations is impacted primarily by the seasonal nature
of ERI's natural gas distribution operations and the volatility of oil and gas
commodity prices. Short-term loans used to support working capital requirements
during the summer months are repaid as gas is sold during the heating season.
The Company's performance contracting business requires substantial
initial working capital investments which are recovered in revenues as the
related energy savings are realized or when the contract is assigned.
Cash flows from operating activities totaled $114 million in 1997,
compared to $66 million in 1996 and $280 million in 1995.
Cash flows from operations increased in 1997 primarily as a result of a
reduction in working capital requirements for deferred purchased gas cost due to
the increased collection of deferred costs in regulated rates, somewhat offset
by an increase in accounts receivable.
Cash flows from operations in 1995 included approximately $130 million of
proceeds from the sale of certain interests in the Company's Appalachian
producing acreage and $56 million in accelerated direct billing and other claim
settlements, as described in Notes D and E to the consolidated financial
statements. The 1996 cash flows decrease, excluding the effects of these items,
was due to increases in the cost of purchased gas, to be recovered from future
billings to rate-regulated customers, and increases in the value of gas stored
underground inventories, both as a result of increases in 1996 in the price of
natural gas.
Cash flow has been affected by the Alternative Minimum Tax (AMT) since
1988. ERI incurred an AMT liability in past years primarily as a result of
nonconventional fuels tax credits. Although AMT payments can be carried forward
indefinitely and applied to income tax liabilities in future periods, they
reduce cash generated from operations. In 1997, $8.2 million of AMT credits were
utilized to reduce current year tax payments. At December 31, 1997, ERI has
available $64.3 million of AMT credit carryforwards. The impact of AMT on future
cash flow will depend on the level of taxable income.
INVESTING ACTIVITIES
ERI's financial objectives require ongoing capital expenditures for growth
projects in the Supply & Logistics and Services units, as well as replacements,
improvements and additions to plant assets in the Utilities unit. Such capital
expenditures during 1997 were $253 million, including the $10 million cash
portion of the July 1997 acquisition of NORESCO described above in "Services,"
and the $77 million October 1997 acquisition of certain Gulf of Mexico
properties and $22 million purchase of the DOE pipeline, both described above in
"Supply & Logistics."
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
CAPITAL RESOURCES AND LIQUIDITY (CONTINUED)
In September and October 1997, ERI completed the sale of its oil and
natural gas properties in the western United States and Canada for aggregate
cash proceeds of $170 million. As part of a tax deferred like-kind exchange, a
portion of the proceeds were placed in escrow and used to fund the purchase of
Gulf properties from Chevron. The $49 million balance in escrow at December 31,
1997, is included in cash and cash equivalents in the consolidated balance
sheets. Early in 1998 the escrow account was closed and the balance of escrow
funds and other proceeds were used to pay down short-term debt.
A total of $168.7 million has been authorized for the 1998 capital
expenditure program, described in more detail in the segment discussions above.
The Company expects to finance its authorized 1998 capital expenditure program
with cash generated from operations and with short-term loans.
FINANCING ACTIVITIES
In 1997 financing activities generated $12 million of cash, as a result of
a net increase of $77 million in short-term loans, partially offset by $29
million used for treasury stock purchases. The common stock was used for a
portion of the 2.1 million shares valued at $67 million issued in the purchase
of NORESCO, while the short-term loans funded the $10 million cash portion of
that purchase and other 1997 capital expenditures.
In 1996 financing activities generated $25 million of cash, as $150
million of 7.75% debentures were issued, and used to retire $75 million each of
8.25% and 9.9% debentures. In addition, short-term loans increased $70 million
and were used to fund a portion of the Company's capital expenditure program.
Cash generated in all years was partially offset by the payment of the
Company's dividends on common shares, which remained substantially unchanged at
$42 million.
In March 1998 ERI's Board of Directors authorized management to develop a
plan to sell its natural gas midstream operations located in Louisiana and
Texas. These operations include a fully-integrated gas gathering, processing
and storage system onshore Louisiana and a natural gas and electric marketing
business based in Houston. A transaction resulting in the sale of the midstream
assets could take place as early as the third quarter of 1998.
CAPITAL RESOURCES
ERI has adequate borrowing capacity to meet its financing requirements.
Bank loans and commercial paper, supported by available credit, are used to meet
short-term financing requirements. Interest rates on these short-term loans
averaged 5.7% during 1997. At December 31, 1997, $255 million of commercial
paper and $26 million of bank loans were outstanding at an average annual
interest rate of 5.4%. ERI maintains a revolving credit agreement with a group
of banks providing $500 million of available credit. The agreement requires a
facility fee of one-tenth of one percent and expires September 1, 2001. Adequate
credit is expected to continue to be available in the future.
ERI has filed a registration statement with the Securities and Exchange
Commission to issue $125 million of Trust Preferred Capital Securities during
1998 to take advantage of the financial flexibility as well as the favorable tax
attributes of the instrument. The proceeds of this offering will be used for
general corporate purposes.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
CAPITAL RESOURCES AND LIQUIDITY (CONTINUED)
RATE REGULATION
Accounting for the operations of ERI's Utilities segment is in accordance
with the provisions of Statement of Financial Accounting Standards (SFAS) No.
71, "Accounting for the Effects of Certain Types of Regulation." As described in
Note A to the consolidated financial statements, regulatory assets and
liabilities are recorded to reflect future collections or payments through the
regulatory process. The Company believes that it will continue to be subject to
rate regulation that will provide for the recovery of deferred costs.
ENVIRONMENTAL MATTERS
ERI and its subsidiaries are subject to extensive federal, state and local
environmental laws and regulations that affect their operations. Governmental
authorities may enforce these laws and regulations with a variety of civil and
criminal enforcement measures, including monetary penalties, assessment and
remediation requirements, and injunctions as to future activities.
Management does not know of any environmental liabilities that will have a
material effect on ERI's financial position or results of operations. The
Company has identified situations that require remedial action for which
approximately $3 million is accrued at December 31, 1997. Environmental matters
are described in Note R to the consolidated financial statements.
MARKET RISK MANAGEMENT AND FINANCIAL TRADING ACTIVITY
The Company's primary market risk exposure is the volatility of
spot-market natural gas and oil prices, which affects the operating results of
Supply & Logistics and Services segments. The Company's use of derivatives to
reduce the effect of this volatility is described in Note B to the consolidated
financial statements. The Company uses simple, nonleveraged derivative
instruments that are placed with major institutions whose creditworthiness is
continually monitored. The Company's use of these derivative financial
instruments is implemented under a set of policies approved by the Board of
Directors.
For commodity price derivatives used to hedge Company production, ERI
policies set limits regarding volumes relative to expected production or sales
levels. The level of hedges which can be consummated is limited to a percent of
production or sales levels the Company believes is highly probable of occurring.
Volumes associated with future activities, such as new drilling, recompletions
and acquisitions, are not eligible for hedging. Management monitors price and
production levels on essentially a continuous basis and will make adjustments to
quantities hedged as warranted. In general, ERI's strategy is to become more
highly hedged at prices considered to be at the upper end of historical levels.
The Company's natural gas trading group uses derivatives to hedge physical
positions and to engage in financial transactions subject to policies that limit
the net positions to specific value at risk limits. In general, the trading
group considers profit opportunities in both physical and financial positions,
and ERI's policies apply equally thereto.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
INFLATION AND THE EFFECT OF CHANGING ENERGY PRICES
The rate of inflation in the United States has been moderate over the past
several years and has not significantly affected the profitability of the
Company. In prior periods of high general inflation, oil and gas prices
generally increased at comparable rates; however, there is no assurance that
this will be the case in the current environment or in possible future periods
of high inflation. Regulated utility operations would be required to file a
general rate case in order to recover higher costs of operations. Margins in the
energy marketing business in the Supply & Logistics segment are highly sensitive
to competitive pressures and may not reflect the effects of inflation. The
results of operations in the Company's three business segments will be affected
by future changes in oil and gas prices and the interrelationship between oil,
gas and other energy prices.
YEAR 2000 COSTS
ERI recognizes the need to ensure the continued safe and reliable
operation of its regulated utility systems and its nonregulated businesses up
to, across and beyond the year 2000. To achieve this, ERI has established a
program office to coordinate ongoing efforts to identify systems (and
operational processes) that are not Year 2000 compliant and to take corrective
actions as appropriate. The Company also has initiated discussions with its
significant suppliers, large customers and financial institutions to ensure that
those parties have appropriate plans to remediate Year 2000 issues where their
systems interface with the Company's systems or otherwise impact its operations.
The Company is assessing the extent to which its operations are vulnerable
should those organizations fail to remediate properly their computer systems.
Within ERI, assessment of systems has been substantially completed, systems have
been prioritized for remediation or replacement activities and corrective action
has been completed and tested on certain systems. In addition, ERI is presently
upgrading many of its financial and operating systems as part of an
enterprise-wide initiative to integrate systems and enhance operational
efficiencies. These systems are Year 2000 compliant. Management believes it has
adequate resources, both internal and external, to complete all necessary
activities. The estimated costs to convert remaining systems is not expected to
be material to results of operations in any future period.
AUDIT COMMITTEE
The Audit Committee, composed entirely of outside directors, meets
periodically with ERI's independent auditors, its internal auditor and
management to review the Company's financial statements and the results of audit
activities. The Audit Committee, in turn, reports to the Board of Directors on
the results of its review and recommends the selection of independent auditors.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
FORWARD-LOOKING STATEMENTS
Disclosures in this annual report include forward-looking statements
related to such matters as anticipated financial performance, business
prospects, capital projects, new products and operational matters. The Company
notes that a variety of factors could cause the Company's actual results to
differ materially from the anticipated results or other expectations expressed
in the Company's forward-looking statements. The risks and uncertainties that
may affect the operations, performance, development and results of the Company
business include, but are not limited to, the following: weather conditions, the
pace of deregulation of retail natural gas and electricity markets, the timing
and extent of changes in commodity prices for gas and oil, changes in interest
rates, the timing and extent of the Company's success in acquiring gas and oil
properties and in discovering, developing and producing reserves, delays in
obtaining necessary governmental approvals and the impact of competitive factors
on profit margins in various markets in which the Company competes.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE REFERENCE
Report of Independent Auditors 29
Statements of Consolidated Income
for each of the three years in
the period ended December 31, 1997 30
Statements of Consolidated Cash Flows
for each of the three years in the
period ended December 31, 1997 31
Consolidated Balance Sheets
December 31, 1997 and 1996 32 - 33
Statements of Common Stockholders'
Equity for each of the three
years in the period ended
December 31, 1997 34
Notes to Consolidated Financial
Statements 35 - 61
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Equitable Resources, Inc.
We have audited the accompanying consolidated balance sheets of Equitable
Resources, Inc., and Subsidiaries at December 31, 1997 and 1996, and the related
consolidated statements of income, common stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Equitable
Resources, Inc., and Subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As described in Note C to the consolidated financial statements, in 1995
the Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets. "
s/ Ernst & Young LLP
-------------------------------
Ernst & Young LLP
Pittsburgh, Pennsylvania
February 24, 1998
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
YEARS ENDED DECEMBER 31,
1997 1996 1995
---------------------------------------------------
(Thousands except per share amounts)
<S> <C> <C> <C>
Operating revenues $2,151,015 $1,861,799 $1,425,990
Cost of sales 1,636,332 1,373,406 911,357
--------------- --------------- ---------------
Net operating revenues 514,683 488,393 514,633
--------------- --------------- ---------------
Operating expenses:
Operation 225,022 215,893 198,502
Maintenance 27,952 26,544 26,635
Depreciation, depletion and
amortization 87,142 82,381 104,625
Impairment of assets and
other nonrecurring items 23,725 (7,370) 121,081
Taxes other than income 38,404 42,157 41,838
--------------- --------------- ---------------
Total operating expenses 402,245 359,605 492,681
--------------- --------------- ---------------
Operating income 112,438 128,788 21,952
Other income 57,442 2,998 387
Interest charges 45,678 41,825 50,098
--------------- --------------- ---------------
Income (loss) before income taxes 124,202 89,961 (27,759)
Income taxes (benefit) 46,145 30,582 (29,307)
--------------- --------------- ---------------
Net income $ 78,057 $ 59,379 $ 1,548
=============== =============== ===============
Average common shares outstanding 36,003 35,188 34,793
=============== =============== ===============
Earnings per share of common stock:
Basic $ 2.17 $ 1.69 $ 0.04
=============== =============== ===============
Assuming dilution $ 2.16 $ 1.69 $ 0.04
=============== =============== ===============
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
YEARS ENDED DECEMBER 31,
1997 1996 1995
------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 78,057 $ 59,379 $ 1,548
---------------- ---------------- ----------------
Adjustments to reconcile net income to
net cash provided by operating activities:
Impairment of assets 13,000 - 121,081
Depreciation, depletion and amortization 87,142 82,381 104,625
Gain on sale of property (52,204) - -
Amortization of construction contract
costs - net 7,925 - -
Deferred income taxes (benefits) 25,268 26,091 (74,348)
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues (59,015) (47,909) (74,275)
Deferred purchased gas cost 16,026 (49,919) 14,730
Prepaid expenses and other (12,858) (10,281) (8,754)
Accounts payable 54,254 49,784 58,791
Deferred revenue (22,156) (22,200) 129,874
Other - net (21,265) (21,758) 6,530
---------------- ---------------- ----------------
Total adjustments 36,117 6,189 278,254
---------------- ---------------- ----------------
Net cash provided by
operating activities 114,174 65,568 279,802
---------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (252,935) (110,284) (118,112)
Proceeds from sale of property 181,566 4,180 24,610
---------------- ---------------- ----------------
Net cash used in
investing activities (71,369) (106,104) (93,502)
---------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 6,631 2,306 2,756
Purchase of treasury stock (28,596) (33) (240)
Dividends paid (42,679) (41,548) (41,098)
Proceeds from issuance of long-term debt - 144,919 17,836
Repayments and retirements of long-term debt - (150,440) (24,500)
Increase (decrease) in short-term loans 76,544 69,900 (134,300)
---------------- ---------------- ----------------
Net cash provided (used) by
financing activities 11,900 25,104 (179,546)
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash equivalents 54,705 (15,432) 6,754
Cash and cash equivalents at beginning of year 14,737 30,169 23,415
---------------- ---------------- ----------------
Cash and cash equivalents at end of year $ 69,442 $ 14,737 $ 30,169
================ ================ ================
CASH PAID DURING THE YEAR FOR:
Interest (net of amount capitalized) $ 43,533 $ 43,025 $ 46,359
================ ================ ================
Income taxes $ 16,030 $ 10,456 $ 41,272
================ ================ ================
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31,
ASSETS
1997 1996
--------------------------------
(Thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 69,442 $ 14,737
Accounts receivable (less accumulated provision for
doubtful accounts: 1997, $9,985; 1996, $10,714) 360,713 296,175
Unbilled revenues 25,935 24,157
Inventory 37,156 38,009
Deferred purchased gas cost 44,053 60,079
Derivative commodity instruments, at fair value 82,912 -
Prepaid expenses and other 64,523 52,604
------------ ------------
Total current assets 684,734 485,761
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Supply & Logistics (successful efforts method) 1,182,253 1,220,756
Utilities 1,018,650 988,425
Services 9,886 1,810
------------ ------------
Total property, plant and equipment 2,210,789 2,210,991
Less accumulated depreciation and depletion 704,294 731,306
------------ ------------
Net property, plant and equipment 1,506,495 1,479,685
------------ ------------
OTHER ASSETS:
Regulatory assets 69,919 73,150
Goodwill 66,823 8,396
Other 83,039 49,307
------------ ------------
Total other assets 219,781 130,853
------------ ------------
Total $2,411,010 $2,096,299
============ ============
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY
1997 1996
---------------------------------
(Thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Short-term loans $ 286,444 $ 204,900
Accounts payable 288,192 231,969
Derivative commodity instruments, at
fair value 79,012 -
Other current liabilities 92,052 83,545
------------ ------------
Total current liabilities 745,700 520,414
------------ ------------
LONG-TERM DEBT 417,564 422,112
------------ ------------
DEFERRED AND OTHER CREDITS:
Deferred income taxes 291,196 260,700
Deferred investment tax credits 18,792 19,892
Deferred revenue 85,518 107,674
Other 28,720 23,224
------------ ------------
Total deferred and other credits 424,226 411,490
------------ ------------
Commitments and contingencies - -
------------ ------------
COMMON STOCKHOLDERS' EQUITY 823,520 742,283
------------ ------------
Total $2,411,010 $2,096,299
============ ============
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Common Stock
-------------------------- Foreign Common
Shares No Retained Currency Stockholders'
Outstanding Par Value Earnings Translation Equity
-----------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995 34,541 $ 210,030 $ 541,476 $ (1,504) $ 750,002
Net income for the year 1995 1,548
Dividends ($1.18 per share) (41,098)
Foreign currency translation 366
Adjustment for Independent Energy
Corporation pooling of interests 233 26 110
Stock issued:
Conversion of 9 1/2% debentures 146 1,611
Restricted stock option plan 43 1,232
Dividend reinvestment plan 52 1,524
Treasury stock (8) (242)
--------- ----------- ------------ ------------- ---------------
BALANCE, DECEMBER 31, 1995 35,007 214,181 502,036 (1,138) 715,079
Net income for the year 1996 59,379
Dividends ($1.18 per share) (41,548)
Foreign currency translation (83)
Acquisition of subsidiary 239 7,000
Stock issued:
Conversion of 9 1/2% debentures 16 178
Restricted stock option plan 36 855
Dividend reinvestment plan 49 1,456
Treasury stock (1) (33)
--------- ----------- ------------ ------------- ---------------
BALANCE, DECEMBER 31, 1996 35,346 223,637 519,867 (1,221) 742,283
Net income for the year 1997 78,057
Dividends ($1.18 per share) (42,679)
Foreign currency translation 1,168
Acquisition of subsidiary 2,401 68,276
Stock issued:
Conversion of 9 1/2% debentures 33 370
Restricted stock option plan 106 3,323
Dividend reinvestment plan 43 1,318
Treasury stock (1,000) (28,596)
--------- ----------- ------------ ------------- ---------------
BALANCE, DECEMBER 31, 1997 36,929 $ 268,328 $ 555,245 $ (53) $ 823,520
========= =========== ============ ============= ===============
<FN>
Shares authorized: Common - 80,000,000 shares, Preferred - 3,000,000 shares.
Shares outstanding are net of treasury stock: 1997 - 56,000 shares ($1,550,000);
1996 - 169,000 shares ($4,023,000); 1995 - 407,000 shares ($9,673,000).
Retained earnings of $422,866,000 are available for dividends on, or purchase
of, common stock pursuant to restrictions imposed by indentures securing
long-term debt.
</FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of Equitable Resources, Inc., and all subsidiaries,
ventures and partnerships in which a controlling interest is held (ERI or the
Company). ERI also consolidates its interest in oil and gas joint ventures. ERI
uses the equity method of accounting for companies where its ownership is
between 20% and 50% and for other ventures and partnerships in which less than a
controlling interest is held.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
CASH EQUIVALENTS: The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
These investments are accounted for at cost.
INVENTORIES: Inventories, which consist of gas stored underground and
materials and supplies, are stated
at average cost.
PROPERTIES, DEPRECIATION AND DEPLETION: Plant, property and equipment is
carried at cost. Depreciation is provided on the straight-line method at
composite rates based on estimated service lives, ranging from 5 to 70 years
except for most gas and oil production properties as explained below.
The Company uses the successful efforts method of accounting for
exploration and production activities. Under this method, the cost of productive
wells and development dry holes, as well as productive acreage, are capitalized
and depleted on the unit-of-production method.
DEFERRED PURCHASED GAS COST AND OTHER REGULATORY ASSETS: The Company's
distribution and interstate pipelines are subject to rate regulation by state
and federal regulatory commissions. Accounting for these operations is in
accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation."
Where permitted by regulatory authority under purchased gas adjustment clauses
or similar tariff provisions, the Company defers the difference between
purchased gas cost, less refunds, and the billing of such cost and amortizes the
deferral over subsequent periods in which billings either recover or repay such
amounts.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain other costs, which will be passed through to customers under
ratemaking rules for regulated operations, are deferred by the Company as
regulatory assets. These amounts relate primarily to the accounting for income
taxes. The Company believes that it will continue to be subject to rate
regulation that will provide for the recovery of deferred costs.
DERIVATIVE COMMODITY INSTRUMENTS: The Company uses exchange-traded
natural gas and crude oil futures contracts and options and over-the-counter
(OTC) natural gas and crude oil swap agreements and options for trading purposes
and to hedge exposures to fluctuations in oil and gas prices.
The Company accounts for trading activities using mark-to-market (MTM)
accounting. Under MTM accounting, derivative commodity instruments are reported
at fair value in other current assets and other current liabilities. Changes in
these fair values are reflected as net unrealized gains or losses in operating
revenues.
The Company uses the deferral accounting method to account for
derivative commodity instruments designated and effective as hedges. Under this
method, changes in the market value of these hedge positions are deferred and
included in other current assets and other current liabilities. These deferred
realized and unrealized gains and losses are included in operating revenues when
the hedged transactions occur. It is management's intent to hold derivative
commodity instruments designated as hedges until maturity. However, in the event
a hedge contract is terminated early, the deferred gain or loss realized on
early termination of the contract will be recognized as the hedged production
occurs. If the underlying asset to a hedge contract is sold, the deferred gain
or loss associated with the contract will be recognized at the time the oil and
gas property is sold. Premiums on option contracts are deferred in other current
assets and recognized in operating revenues over the option term. Cash flows
from derivative contracts are considered operating activities.
GOODWILL: Goodwill consists of costs in excess of the net assets of
businesses acquired. Goodwill is amortized on a straight-line basis over a
period of twenty years.
STOCK BASED COMPENSATION: The Company has elected to follow Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for stock options and
awards. Accordingly, compensation cost for stock options and awards is measured
as the excess, if any, of the quoted market price of the Company's stock at the
date of grant over the exercise price of the stock option or award.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION: Revenues for regulated gas sales to retail
customers are recognized as service is rendered, including an accrual for
unbilled revenues from the date of each meter reading to the end of the
accounting period. Revenue is recognized for exploration and production
activities when deliveries of natural gas, oil and natural gas liquids are made.
Revenues from natural gas transportation and storage activities are recognized
in the period service is provided. Revenues from energy marketing activities are
recognized when deliveries occur.
The Company recognizes revenue from shared energy savings contracts as
energy savings are generated. Revenue received from customer contract
termination payments is recognized when received. Revenue from other long-term
contracts, such as turnkey contracts, is recognized on a
percentage-of-completion basis. Any maintenance revenues are recognized as
related services are performed.
INCOME TAXES: The Company files a consolidated federal income tax
return. The current provision for income taxes represents amounts paid or
estimated to be payable. Deferred income tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities. Where deferred tax liabilities will be passed through to
customers in regulated rates, the Company establishes a corresponding regulatory
asset for the increase in future revenues that will result when the temporary
differences reverse.
Investment tax credits realized in prior years were deferred and are
being amortized over the estimated service lives of the related properties where
required by ratemaking rules.
EARNINGS PER SHARE: In February 1997 the Financial Accounting Standards
Board (FASB) issued SFAS No. 128, "Earnings Per Share." Under SFAS No. 128,
primary Earnings Per Share (EPS) is replaced by "basic" EPS, which excludes
dilution and is computed by dividing income available to common stockholders by
the weighted-average number of common shares outstanding for the period.
"Diluted" EPS reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted to common
stock.
The Company has adopted the new standard in its 1997 financial
statements. All prior period EPS information (including interim EPS) has been
restated.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPREHENSIVE INCOME: In June 1997 the FASB issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 is designed to improve the
reporting of changes in equity from period to period. SFAS No. 130 is effective
for the Company's 1998 financial statements. Management does not expect SFAS No.
130 to have a significant impact on the Company's financial statements.
SEGMENT DISCLOSURES: In June 1997 the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS
No. 131 requires that an enterprise disclose certain information about operating
segments. SFAS No. 131 is effective for the Company's year-end 1998 financial
statements. Management does not expect SFAS No. 131 to have a significant impact
on the Company's financial statements.
RECLASSIFICATION: Certain previously reported amounts have been
reclassified to conform with the 1997 presentation.
B. DERIVATIVE COMMODITY INSTRUMENTS
The Company uses exchange-traded natural gas and crude oil futures
contracts and options and OTC natural gas and crude oil swap agreements and
options (collectively derivative contracts) for trading purposes and to hedge
exposures to fluctuations in oil and gas prices. Futures contracts obligate the
Company to buy or sell a designated commodity at a future date for a specified
price. Swap agreements involve payments to or receipts from counterparties based
on the differential between a fixed and variable price for the commodity.
Exchange-traded instruments are generally settled with offsetting positions but
may be settled by delivery of commodities. OTC arrangements require settlement
in cash.
TRADING ACTIVITIES
The primary functions of the Company's trading business are to provide
price risk management services to the Company's Utilities and Services segments
and to contribute to the Company's earnings by taking market positions within
defined trading limits.
At December 31, 1997, the absolute notional quantities of the futures,
swaps and options contracts held for trading purposes were 43.7 Bcfe, 149.4 Bcfe
and 10.0 Bcfe, respectively. The futures and option contracts all have
maturities of less than 18 months, while the swap agreements extend through
October of 2000. There were no outstanding derivative contracts held for trading
purposes at December 31, 1996.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
B. DERIVATIVE COMMODITY INSTRUMENTS (CONTINUED)
The table below sets forth the end of period fair value and average fair
value during the year for all the derivative contracts held for trading
purposes.
1997 1996
--------------------------------------------------
Assets Liabilities Assets Liabilities
--------------------------------------------------
(Thousands)
Fair value at December 31 $ 82,912 $ 79,012 $ - $ -
Average fair value $ 12,161 $ 10,509 $ 98 $ 75
Trading activity resulted in net gains of $1.1 million and $0.8 million
for 1997 and 1996, respectively, and a net loss of $1.9 million for 1995.
NONTRADING ACTIVITIES
The Company is exposed to risk from fluctuations in energy prices in the
normal course of business. The Company uses derivative contracts to hedge
exposures to oil and gas price changes.
The following table summarizes the absolute notional quantities of the
derivative contracts held for purposes other than trading at December 31, 1997
and 1996. The open futures and options contracts at year-end 1997 all mature
within one year, while the swap agreements have maturities extending through
November of 2000. At December 31, 1996, the remaining terms of the open
derivatives contracts were the same as those at December 31, 1997.
Absolute Notional Deferred Unrealized
Quantity Gain/(Loss)
--------------------- -------------------------
1997 1996 1997 1996
--------------------- -------------------------
(Bcf equivalent) (Millions)
Futures 4.5 14.0 $ 1.0 $ 1.7
Swaps 96.5 136.2 (10.3) (11.1)
Options 1.8 2.6 (0.1) (1.5)
----- ------- ------- ---------
Total 102.8 152.8 $ (9.4) $ (10.9)
===== ======= ======= =========
Deferred realized gains and losses from hedge transactions were a $1.3
million gain and a $1.6 million loss at December 31, 1997, and a $0.4 million
gain and a $1.3 million loss at December 31, 1996. The Company recognized net
losses on its hedging activities of $9.8 million, $44.4 million and $2.0 million
in 1997, 1996, and 1995, respectively. These losses are offset when the
underlying products are sold.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
B. DERIVATIVE COMMODITY INSTRUMENTS (CONTINUED)
The Company is exposed to credit loss in the event of nonperformance by
counterparties to derivative contracts. This credit exposure is limited to
derivative contracts with a positive fair value. Futures contracts have minimal
credit risk because futures exchanges are the counterparties. The Company
manages the credit risk of the other derivative contracts by limiting dealings
to those counterparties who meet the Company's criteria for credit and liquidity
strength.
C. ASSET IMPAIRMENT AND OTHER NONRECURRING ITEMS
The Company's results of operations include several significant
nonrecurring items which are included in operating expense.
In June 1997 an evaluation of the carrying value of long-lived assets
resulted in a write-down of the Utilities segment's investment in the Avoca
bedded salt natural gas storage project, for which the Company recognized a $13
million pretax charge. In September 1997 the Company recorded an additional
pretax charge of $10.7 million related to evaluation and reduction of corporate
office and noncore business functions.
In December 1996 the Company recognized a pretax gain of $7.4 million
related to the curtailment of the Company's defined benefit pension plan for
nonutility employees.
In 1995, as a result of the sustained decrease in gas and oil prices,
the Company recognized a write-down in the carrying value of assets of $121.1
million, which decreased net income by $74.2 million. The 1995 write-down
included $95.1 million for exploration and production properties and intrastate
transmission facilities included in the Supply & Logistics segment and $26.0
million for information systems, storage development projects and other assets
reflected in the Utilities segment.
D. DIRECT BILLING AND OTHER SETTLEMENTS
Kentucky West Virginia Gas Company L.L.C., a subsidiary of the Company,
received Federal Energy Regulatory Commission (FERC) approval of settlement
agreements with all customers for the direct billing to recover the higher
Natural Gas Policy Act (NGPA) prices, which the FERC had denied on natural gas
produced from exploration and production properties between 1978 and 1983. The
portion of the settlement with Equitable Gas division has been subject to
Pennsylvania Public Utility Commission (PUC) review. The PUC approved Equitable
Gas Company's collection of $7.8 million in September 1997 and 1996, and $18.8
million in September 1995 related to the direct billing settlement. The 1995
amount includes $11.0 million for accelerated collection of amounts that would
have otherwise been subject to approval by the PUC and recognized in income in
later years. Approximately $2.4 million from the settlement remains to be
recovered in gas costs filings with the PUC in 1998.
In November 1995 Kentucky West Virginia Gas Company received $13.8
million from Columbia Gas Transmission Company (Columbia) as settlement, in
Columbia's bankruptcy proceeding, of Kentucky West's claim for $19 million
related to the direct billing settlements.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
D. DIRECT BILLING AND OTHER SETTLEMENTS (CONTINUED)
In addition to the direct billing settlement described above, the
Company had various claims against Columbia for abrogation of contracts to
purchase gas from the Company and collection of FERC Order 636 transition costs.
In November 1995 the Company received $31.2 million in Columbia's bankruptcy
settlement related to these items, which increased net income for 1995 by $20.2
million.
E. DEFERRED REVENUE
In November 1995 the Company sold an interest in certain Appalachian gas
properties, the production from which qualifies for nonconventional fuels tax
credit. The Company retained an interest in the properties that will increase
based on performance. As such, the proceeds of $133.5 million were recorded as
deferred revenues and are being recognized in income as financial targets are
met.
F. SALE OF PROPERTY
In July 1997 the Company entered into agreements with five parties for
the sale of the Company's oil and natural gas properties in the western United
States and Canada. The sales were completed in September and October for an
aggregate cash sales price of $170 million. In October 1997 the Company sold its
Union Drilling division, a contract drilling company, for $7 million. The sales
resulted in gains of $52 million.
In October 1995 the Company sold most of its gas and oil properties in
the northern Appalachian basin areas of New York, Pennsylvania and West
Virginia. The properties comprised less than four percent of the Supply &
Logistics segment's total gas and oil production and reserves. The Company
previously operated the majority of these properties with its working interest
averaging approximately 25 percent. Proceeds from the sale were $17 million.
G. ACQUISITIONS
In July 1997 the Company completed its acquisition of Northeast Energy
Services, Inc. (NORESCO) in exchange for a combination of 2.1 million shares of
the Company's stock valued at approximately $67 million and $10 million in cash,
including transaction costs. NORESCO is a provider of comprehensive energy
efficiency systems and services for commercial, industrial, government and
institutional customers and is included in the Services segment. NORESCO's
primary assets are accounts receivable from customers and deferred contract
costs which are included in other assets in the consolidated balance sheets. The
transaction was treated as a purchase for accounting purposes. The Company has
recorded goodwill of $57 million which will be amortized over 20 years. The $67
million noncash portion of the acquisition is excluded from capital expenditures
in the 1997 cash flows statement.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
G. ACQUISITIONS (CONTINUED)
In 1997 the Services segment also acquired Scallop Thermal Industries
and Lighting Management, Inc. for a total cost of $4 million. These acquisitions
were accounted for under the purchase method of accounting.
In 1996 ERI acquired an intrastate pipeline, Three Rivers Pipeline, for
$3.3 million and two performance contracting companies, Conogen and Pequod, in
exchange for cash and stock valued at $8.7 million. The 1996 acquisitions were
accounted for under the purchase method of accounting. The pipeline is included
in the Utilities segment. Pequod and Conogen are included in the Services
segment.
In July 1995 the Company acquired all of the outstanding stock of
Independent Energy Corporation (IEC) in exchange for 232,564 shares of the
Company's common stock held in treasury. IEC is engaged in the development,
construction, operation and ownership of private power and cogeneration
projects. The acquisition was accounted for as a pooling of interests.
The effect of each of these acquisitions, individually and aggregated by
year of purchase, is not material to the results of operations or financial
position of ERI, and therefore, pro forma financial information is not
presented.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
H. INCOME TAXES
The following table summarizes the source and tax effects of temporary
differences between financial reporting and tax bases of assets and liabilities.
December 31,
-----------------------------
1997 1996
-----------------------------
(Thousands)
Deferred tax liabilities (assets):
Exploration and development costs
expensed for income tax reporting $ 88,782 $ 63,435
Tax depreciation in excess of
book depreciation 249,634 251,951
Regulatory temporary differences 28,108 28,467
Deferred purchased gas cost 16,069 21,210
Alternative minimum tax (64,258) (72,470)
Investment tax credit (7,554) (7,997)
Other (6,831) (4,887)
----------- -----------
Total (including amounts classified as
current liabilities of $12,754 for 1997
and $19,009 for 1996) ....................... $ 303,950 $ 279,709
=========== ===========
As of December 31, 1997 and 1996, $63.8 million and $64.1 million,
respectively, of the net deferred tax liabilities are related to rate-regulated
operations and have been deferred as regulatory assets.
Income tax expense (benefit) is summarized as follows:
Years Ended December 31,
--------------------------------------------------
1997 1996 1995
--------------------------------------------------
(Thousands)
Current:
Federal $ 20,040 $ 3,953 $ 36,681
State 837 538 8,360
Deferred:
Federal 20,789 22,905 (56,953)
State 3,327 2,405 (17,384)
Foreign 1,152 781 (11)
----------- ----------- -----------
Total $ 46,145 $ 30,582 $ (29,307)
=========== =========== ===========
Provisions for income taxes differ from amounts computed at the federal
statutory rate of 35% on pretax income. The reasons for the difference are
summarized as follows:
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
H. INCOME TAXES (CONTINUED)
Years Ended December 31,
-------------------------------------------
1997 1996 1995
-------------------------------------------
(Thousands)
Tax at statutory rate $ 43,471 $ 31,487 $ (9,716)
State income taxes 2,707 1,913 (5,866)
Nonconventional fuels tax credit (816) (1,299) (13,114)
Other 783 (1,519) (611)
----------- ---------- -----------
Income tax expense (benefit) $ 46,145 $ 30,582 $ (29,307)
=========== ========== ===========
Effective tax rate (benefit) 37.2% 34.0% (105.6)%
=========== ========== ===========
The consolidated federal income tax liability of the Company has been
settled through 1994.
I. SHORT-TERM LOANS
Maximum lines of credit available to the Company were $500 million
during 1997, 1996 and 1995. The Company is not required to maintain compensating
bank balances. Commitment fees averaging one-tenth of one percent were paid to
maintain credit availability.
At December 31, 1997, short-term loans consisted of $254.5 million of
commercial paper and $26.3 million of bank loans at a weighted average annual
interest rate of 5.71% and at December 31, 1996, $199.3 million of commercial
paper and $5.6 million of bank loans at a weighted average annual interest rate
of 5.44%. The maximum amount of outstanding short-term loans was $302.5 million
in 1997, $295.5 million in 1996 and $314.6 million in 1995. The average daily
total of short-term loans outstanding was approximately $229.6 million during
1997, $147.4 million during 1996 and $214.2 million during 1995; weighted
average annual interest rates applicable thereto were 5.7% in 1997, 5.5% in 1996
and 6.0% in 1995.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
J. LONG-TERM DEBT
December 31,
1997 1996
--------------------------
(Thousands)
7 1/2% debentures, due July 1, 1999
($75,000 principal amount, net of unamortized
original issue discount) $ 73,184 $ 72,205
9 1/2% convertible subordinated debentures,
due January 15, 2006 - 527
9.9% debentures, due April 15, 2013 5,880 5,880
7 3/4% debentures, due July 15, 2026 150,000 150,000
Medium-term notes:
7.2% to 9.0% Series A, due 1998 thru 2021 100,000 100,000
5.1% to 7.6% Series B, due 2003 thru 2023 75,500 75,500
6.8% to 7.6% Series C, due 2007 thru 2018 18,000 18,000
----------- ----------
Total long-term debt 422,564 422,112
Less long-term debt payable within one year 5,000
----------- ----------
Total $417,564 $422,112
=========== ==========
In 1996 the Company commenced a tender offer for the purchase of all the
outstanding 9.9% debentures due April 15, 2013. Approximately $69 million of the
$75 million debentures were tendered. Premiums paid in 1996 for the redemption
were $6.3 million.
In 1996 the Company issued $150 million of 30-year debentures with a
coupon rate of 7.75%. The proceeds were used to finance the retirement of
certain outstanding debentures including the 9.9% debentures described above. At
December 31, 1997, the Company has the ability to issue $100 million of
additional long-term debt under the provisions of shelf registrations filed with
the Securities and Exchange Commission.
The 9 1/2% convertible subordinated debentures were convertible at any
time into common stock at a conversion price of $11.06 per share. During 1997,
1996 and 1995, $527,000, $178,000 and $1,611,000 of these debentures were
converted into 33,445 shares, 16,089 shares and 145,635 shares of common stock,
respectively.
Interest expense on long-term debt amounted to $35.1 million in 1997,
$34.8 million in 1996 and $36.5 million in 1995. Aggregate maturities of
long-term debt will be $5 million in 1998, $75 million in 1999, none in 2000,
$14 million in 2001 and none in 2002.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
K. EMPLOYEE PENSION BENEFITS
The Company has several trusteed retirement plans covering substantially
all employees. Plans covering union members generally provide benefits of stated
amounts for each year of service. Plans covering salaried utility employees use
a benefit formula which is based upon employee compensation and years of service
to determine benefits to be provided. All other salaried employees who meet
certain minimum service requirements are covered by enhanced 401(k) savings
plans. Plan assets consist principally of mutual funds and other equity and debt
securities.
The following table sets forth the defined benefit plans' funded status
and amounts recognized for those plans in the Company's consolidated balance
sheets:
December 31,
---------------------------
1997 1996
---------------------------
(Thousands)
Actuarial present value of benefit
obligations:
Vested benefit obligation $134,999 $124,477
=========== ==========
Accumulated benefit obligation $141,112 $130,416
=========== ==========
Market value of plan assets $164,801 $165,360
Projected benefit obligation 143,440 137,477
----------- ----------
Excess of plan assets over projected
benefit obligation 21,361 27,883
Unrecognized net asset (1,295) (1,833)
Unrecognized net gain (23,335) (28,871)
Unrecognized prior service cost 14,689 11,124
----------- ----------
Prepaid pension cost recognized in
the consolidated balance sheets $ 11,420 $ 8,303
=========== ==========
At year end the discount rate used in determining the actuarial present
value of benefit obligations was 7% for 1997, 7 3/4% for 1996 and 7 1/2% for
1995. The assumed rate of increase in compensation levels was 4 1/2% for all
three years.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
K. EMPLOYEE PENSION BENEFITS (CONTINUED)
The Company's pension cost related to defined benefit plans, using a 10%
average rate of return on plan assets, comprised the following:
Year Ended December 31,
-----------------------------------------
1997 1996 1995
-----------------------------------------
(Thousands)
Service cost benefits earned
during the period $ 2,228 $ 4,053 $ 3,452
Interest cost on projected benefit
obligation 10,280 11,197 11,165
Actual return on assets (31,276) (26,828) (34,054)
Net amortization and deferral 16,720 12,756 19,806
Gain on curtailment - (7,370) -
----------- ----------- -----------
Net periodic pension (benefit) cost $ (2,048) $ (6,192) $ 369
=========== =========== ===========
As of January 1, 1997, the Company amended its 401(k) employee savings
plan for salaried employees to provide a base Company contribution to that plan
for employees no longer eligible for defined benefit plans. In addition, during
1997 the present value of these employees' future retirement benefits under the
defined benefit plans could be rolled over to the 401(k) plan, at the employee's
option, or used to purchase an annuity. Expense recognized by the Company
related to this and other 401(k) savings plans totaled $3.9 million in 1997,
$1.4 million in 1996 and $0.5 million in 1995.
L. OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees and their
dependents.
In determining the accumulated postretirement benefit obligation at
December 31, 1997, the Company used a beginning inflation factor ranging from 6%
to 8%, depending on the level of coverage, decreasing gradually to 4.0% to 4.5%
after 4 to 8 years and a discount rate of 7%. At December 31, 1996, the
beginning inflation factor had a range from 6% to 8%, decreasing gradually to 4
1/4% to 4 3/4% after 4 to 8 years and the discount rate was 7 3/4%. The
Company's transition obligation is being amortized through 2012.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
L. OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The following summarizes the status of the Company's accrued
postretirement benefit costs (OPEBS):
December 31,
------------------------------------
1997 1996
------------------------------------
(Thousands)
Accumulated postretirement benefit
obligation:
Retired employees $ 31,263 $ 26,357
Active employees:
Fully eligible 3,562 4,212
Other 5,252 5,125
-------------- --------------
Total obligation 40,077 35,694
Trust assets 6,274 4,623
-------------- --------------
Obligation in excess of trust assets 33,803 31,071
Unrecognized net loss (14,800) (10,567)
Unrecognized prior service cost 2,172 2,386
Unrecognized transition obligation (14,780) (15,765)
-------------- --------------
Accrued postretirement
benefit cost $ 6,395 $ 7,125
============== ==============
The net periodic cost for postretirement health care and life insurance
benefits includes the following:
Years Ended December 31,
------------------------------------
1997 1996 1995
------------------------------------
(Thousands)
Service cost $ 254 $ 746 $ 993
Interest cost 2,898 2,892 4,200
Amortization of transition obligation 1,197 1,329 2,306
Return on assets (292) (198) -
--------- --------- ---------
Periodic cost $ 4,057 $ 4,769 $ 7,499
========= ========= =========
As of December 31, 1997 and 1996, approximately $4.0 million of the
accrued OPEBS related to rate-regulated operations have been deferred as
regulatory assets. Rate recovery has begun in several jurisdictions which
requires the Company to place agreed upon amounts in trust when collected in
rates until such time as they are applied to retiree benefits or returned to
ratepayers. Trust assets consist principally of equity and debt securities.
An increase of 1% in the assumed medical cost inflation rate would
increase the accumulated postretirement benefit obligation by 7% and would
increase the periodic cost by 6%.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
M. COMMON STOCK AND EARNINGS PER SHARE
COMMON STOCK RESERVE
At December 31, 1997, shares of ERI's authorized and unissued common
stock were reserved as follows:
Possible future acquisitions 6,713,000
Stock compensation plans 1,695,000
Dividend reinvestment and stock purchase plan 49,000
--------------
Total 8,457,000
==============
EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted SFAS No. 128,
"Earnings per Share." This statement establishes standards for computing and
presenting basic and diluted EPS. It supersedes APB Opinion No. 15 that required
the presentation of primary and fully diluted EPS.
Basic EPS is computed by dividing net income by the weighted average
number of common shares outstanding during the period, without considering any
dilutive items. Diluted EPS is computed by dividing net income, adjusted for the
assumed conversion of debt, by the weighted average number of common shares and
potentially dilutive securities, net of shares assumed to be repurchased using
the treasury stock method. Purchases of treasury shares are calculated using the
average share price for the Company's common stock during the period.
Potentially dilutive securities arise from the assumed conversion of outstanding
stock options and awards and convertible debentures.
As required, all previously reported EPS amounts have been replaced with
the presentation of basic and diluted EPS. The impact of the adoption of this
statement and the restatement of prior-period amounts was not material. The
computation of basic and diluted earnings per common share is shown in the table
below:
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
M. COMMON STOCK AND EARNINGS PER SHARE (CONTINUED)
Years Ended December 31,
1997 1996 1995 (c)
---------------------------------
(Thousands except per
share amounts)
BASIC EARNINGS PER COMMON SHARE
Net income applicable to common stock $ 78,057 $ 59,379 $ 1,548
Average common shares outstanding 36,003 35,188 34,793
Basic earnings per common share $ 2.17 $ 1.69 $ 0.04
DILUTED EARNINGS PER COMMON SHARE
Net income applicable to common stock (a) $ 78,060 $ 59,414 $ 1,548
Average common shares outstanding 36,003 35,188 34,793
Potentially dilutive securities:
Stock options and awards (b) 109 18 -
Common shares issuable upon conversion
of 9 1/2% convertible debentures 4 53 -
---------- ---------- ----------
Total 36,116 35,259 34,793
========== ========== ==========
Diluted earnings per common share $ 2.16 $ 1.69 $ 0.04
(a) The aftertax benefit of interest expense on the assumed conversion of
the 9 1/2% convertible debentures was $3,000 in 1997 and $35,000 in
1996.
(b) Options to purchase 284,000 and 347,000 shares of common stock were not
included in the computation of diluted earnings per common share because
the options' exercise prices were greater than the average market prices
of the common shares for 1997 and 1996, respectively.
(c) There were no dilutive securities included in the computation because
the options' exercise prices were greater than the average market prices
and the 9 1/2% convertible debentures, if included, would have an
antidilutive effect.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
N. STOCK-BASED COMPENSATION PLANS
LONG-TERM INCENTIVE PLANS
The Company's Long-Term Incentive Plan provides for the granting of
shares of common stock to officers and key employees of the Company. These
grants may be made in the form of stock options, restricted stock, stock
appreciation rights and other types of stock-based or performance-based awards
as determined by the Compensation Committee of the Board of Directors at the
time of each grant. Stock awarded under the plan, or purchased through the
exercise of options, and the value of stock appreciation units are restricted
and subject to forfeiture should an optionee terminate employment prior to
specified vesting dates. In no case may the number of shares granted under the
plan exceed 1,725,500 shares. Options granted under the plan expire 5 to 10
years from the date of grant and some contain vesting provisions which are based
upon Company performance. In 1994 this plan replaced the Key Employee Restricted
Stock Option Plan, which at December 31, 1997, has 39,950 options outstanding at
an option price of $36.50. These options are reflected with the Long-Term
Incentive Plan amounts presented in the tables below.
Also reflected in the option tables below are options assumed in
conjunction with the NORESCO acquisition in July 1997. All outstanding options
granted under NORESCO's 1990 Incentive Stock Option Plan were converted by ERI
to nonqualified stock options with the right to receive, upon exercise of the
option, the same ERI stock and cash that shareholders of NORESCO received in the
acquisition. As a result of this conversion, 872,000 NORESCO stock options were
converted to 256,400 ERI stock options with the exercise price per share
proportionately adjusted. The adjusted exercise prices of these stock options
ranges from $5.1012 to $5.9516 per share. The acquisition also accelerated the
vesting period of these options, the latest of which expire in 2006. During
1997, 180,416 stock options were exercised under this plan.
Pro forma information regarding net income and earnings per share for
options granted is required by SFAS No. 123, "Accounting for Stock-Based
Compensation," and has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS No. 123. The fair
value for these option grants was estimated at the dates of grant using a
Black-Scholes option pricing model with the following assumptions for 1997,
1996, and 1995, respectively:
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
N. STOCK-BASED COMPENSATION PLANS (CONTINUED)
Years Ended December 31,
-----------------------------------------
1997 1996 1995
-----------------------------------------
Risk-free interest 5.71% 5.82% 5.97%
rate (range) to 5.79% to 6.34%
Dividend yield 3.96% 4.00% 4.00%
Volatility factor 0.132 0.161 0.161
Weighted-average expected
life of options 1.25 years 2 years 2 years
Options granted 339,100 125,400 739,000
Weighted-average fair market
value of options
granted duriing the year $1.93 $2.51 $2.82
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options. The amount of
estimated expense that would have been recognized under SFAS No. 123 is not
considered material to the financial statements in any of the years presented.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
N. STOCK-BASED COMPENSATION PLANS (CONTINUED)
The following schedule summarizes the stock option activity:
Years Ended December 31,
-------------------------------------------
1997 1996 1995
-------------------------------------------
Options outstanding January 1 948,650 1,077,325 605,218
Granted 339,100 125,400 739,000
Forfeitures (348,800) (210,650) (212,793)
Exercised (180,416) (43,425) (54,100)
------------- -------------- ------------
Options outstanding December 31 758,534 948,650 1,077,325
============= ============== ============
At December 31:
Prices of options outstanding $ 5.10 $ 27.50 $ 28.625
to $ 36.50 to $ 36.50 to $ 33.81
Average option price $ 28.02 $ 30.59 $ 30.48
On September 5, 1997, the Company granted 106,127 stock awards from the
Long-Term Incentive Plan for the Key Employee Retention Program. This program
was established to provide additional incentive benefits to retain senior
executive employees of the Company. The vesting of these awards is contingent on
attainment of specific stock price targets and the continued employment of the
participants until January 1, 2001. The fair value of these awards was estimated
at the date of grant utilizing a Black-Scholes pricing model and the same 1997
assumptions as listed above and would result in compensation expense not
materially different from that recorded by the Company under APB Opinion No. 25.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
N. STOCK-BASED COMPENSATION PLANS (CONTINUED)
NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN
The Company's Non-Employee Directors' Stock Incentive Plan provides for
the granting of up to 80,000 shares of common stock in the form of stock option
grants and restricted stock awards to non-employee directors of the Company. The
exercise price for each share is equal to market price of the common stock on
the date of grant. Each option is subject to time-based vesting provisions and
expires five years after date of grant. At December 31, 1997, 27,500 options
were outstanding at prices ranging from $27.50 to $33.87 per share and no
options had been exercised under this plan.
O. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents as well as short-term
loans approximates fair value due to the short maturity of the instruments.
The estimated fair value of long-term debt at December 31, 1997 and
1996, would be $436.3 million and $445.6 million, respectively. The fair value
was estimated based on discounted values using a current discount rate
reflective of the remaining maturity. The Company's 7 1/2% debentures may not be
redeemed prior to maturity.
The estimated fair value of derivative commodity instruments described
in Note B, excluding trading activities which are marked-to-market, was $(9.7)
million and $(.2) million at December 31, 1997 and 1996, respectively.
P. CONCENTRATIONS OF CREDIT RISK
Revenues and related accounts receivable from the Supply & Logistics
segment's operations are generated primarily from the sale of produced natural
gas to utility and industrial customers located mainly in the Appalachian area,
the sale of produced oil to refinery customers in the Appalachian area, the sale
of produced natural gas liquids to a refinery customer in Kentucky, the sale of
produced natural gas liquids and intrastate transportation of natural gas in
Louisiana and the marketing of natural gas and electricity.
The Utilities segment's operating revenues and related accounts
receivable are generated from state-regulated utility natural gas sales and
transportation to more than 266,000 residential, commercial and industrial
customers located in southwest Pennsylvania and parts of West Virginia and
Kentucky; and FERC-regulated interstate pipeline transportation and storage
service for the affiliated utility, Equitable Gas, as well as other utility and
end-user customers located in nine mid-Atlantic and northeastern states. Under
state regulations, the utility is required to provide continuous gas service to
residential customers during the winter heating season.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
P. CONCENTRATIONS OF CREDIT RISK (CONTINUED)
The Services segment's operating revenues and related accounts
receivable are generated from the nationwide marketing of natural gas to brokers
and large volume utility and industrial customers; and cogeneration and power
plant development, performance contracting, and water efficiency and program
development for commercial, industrial and institutional customers and various
government facilities.
The Company is not aware of any significant credit risks which have not
been recognized in provisions for doubtful accounts.
Q. FINANCIAL INFORMATION BY BUSINESS SEGMENT
The Company reports operations in three segments which reflect its lines
of business. The Supply & Logistics segment's activities comprise the
exploration, development, production and sale of natural gas and oil, extraction
and sale of natural gas liquids, intrastate transportation, nationwide natural
gas marketing and supply, peak shaving, transportation arrangements and
electricity marketing. The Utilities segment's activities comprise the
operations of the Company's state-regulated local distribution company, in
addition to gas transportation, gathering, storage and marketing activities
involving the Company's FERC-regulated gas pipelines. The Services segment's
activities comprise marketing of natural gas, cogeneration and power plant
development, the development and implementation of energy and water efficiency
programs, performance contracting and central facility plant operations.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
Q. FINANCIAL INFORMATION BY BUSINESS SEGMENT (CONTINUED)
Years Ended December 31,
------------------------------------------------
1997 1996 1995
------------------------------------------------
(Thousands)
OPERATING REVENUES:
Supply & Logistics $ 1,573,220 $ 1,318,661 $1,059,854
Utilities 467,895 507,441 441,732
Services 345,005 172,335 473
Sales between segments (235,105) (136,638) (76,069)
------------- ------------- -----------
Total $ 2,151,015 $ 1,861,799 $1,425,990
============= ============= ===========
OPERATING INCOME (LOSS):
Supply & Logistics $ 69,123 $ 52,010 $ (32,668)
Utilities 53,286 89,320 55,612
Services (9,971) (12,542) (992)
------------- ------------- -----------
Total $ 112,438 $ 128,788 $ 21,952
============= ============= ===========
IDENTIFIABLE ASSETS:
Supply & Logistics $ 1,262,526 $ 1,089,669 $1,044,045
Utilities 1,017,985 998,064 932,529
Services 184,364 50,584 3,419
Eliminations (53,865) (42,018) (16,680)
------------- ------------- -----------
Total $ 2,411,010 $ 2,096,299 $1,963,313
============= ============= ===========
DEPRECIATION, DEPLETION
AND AMORTIZATION:
Supply & Logistics $ 57,731 $ 55,415 $ 78,444
Utilities 27,261 26,608 26,181
Services 2,150 358 -
------------- ------------- -----------
Total $ 87,142 $ 82,381 $ 104,625
============= ============= ===========
CAPITAL EXPENDITURES:
Supply & Logistics $ 183,467 $ 72,617 $ 68,950
Utilities 41,372 36,831 49,131
Services 28,096 (a) 836 31
------------- ------------- -----------
Total $ 252,935 $ 110,284 $ 118,112
============= ============= ===========
(a) Excludes $68 million total noncash portion of the acquisitions of
NORESCO and Scallop Thermal Management. See Note G.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
R. COMMITMENTS AND CONTINGENCIES
The Company has annual commitments of approximately $31.5 million for
demand charges under existing long-term contracts with pipeline suppliers for
periods extending up to 16 years at December 31, 1997, which relate to gas
distribution operations. However, substantially all of these costs are
recoverable in customer rates.
The Company is subject to federal, state and local environmental laws
and regulations. These laws and regulations, which are constantly changing, can
require expenditures for remediation and may in certain instances result in
assessment of fines. The Company has established procedures for ongoing
evaluation of its operations to identify potential environmental exposures and
assure compliance with regulatory policies and procedures. The estimated costs
associated with identified situations that require remedial action are accrued.
However, certain of these costs are deferred as regulatory assets when
recoverable through regulated rates. Ongoing expenditures for compliance with
environmental laws and regulations, including investments in plant and
facilities to meet environmental requirements, have not been material.
Management believes that any such required expenditures will not be
significantly different in either their nature or amount in the future and does
not know of any environmental liabilities that will have a material effect on
the Company's financial position or results of operations.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
S. INTERIM FINANCIAL INFORMATION (UNAUDITED)
The following quarterly summary of operating results reflects variations
due primarily to the seasonal nature of the Company's utility business and
volatility of oil and gas commodity prices:
<TABLE>
<CAPTION>
March June September December
31 30 30 31
(Thousands except per share amounts)
1997
<S> <C> <C> <C> <C>
Operating revenues $552,575 $400,760 $508,102 $689,578
Operating income (loss) 53,347 (5,927) 9,951 55,067
Net income (loss) 27,790 (9,263) 16,987 42,543
Earnings (loss) per share - basic $ 0.78 $(0.26) $ 0.47 $ 1.16
Earnings (loss) per share - assuming dilution $ 0.78 $(0.26) $ 0.47 $ 1.15
1996
Operating revenues $640,278 $391,767 $357,011 $472,743
Operating income 69,403 8,983 3,860 46,542
Net income (loss) 38,726 928 (3,687) 23,412
Earnings (loss) per share - basic $ 1.11 $ 0.03 $(0.10) $ 0.66
Earnings (loss) per share - assuming dilution $ 1.10 $ 0.03 $(0.10) $ 0.66
</TABLE>
T. NATURAL GAS AND OIL PRODUCING ACTIVITIES
The supplementary information summarized below presents the results of
natural gas and oil activities for the Supply & Logistics segment in
accordance with SFAS No. 69, "Disclosures About Oil and Gas Producing
Activities."
The information presented excludes data associated with natural gas
reserves related to rate-regulated and other utility operations. These reserves
(proved developed) are less than 5% of total Company proved reserves for the
years presented.
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
T. NATURAL GAS AND OIL PRODUCING ACTIVITIES (CONTINUED)
PRODUCTION COSTS
The following table presents the costs incurred relating to natural gas
and oil production activities:
1997 1996 1995
-----------------------------------------
(Thousands)
At December 31:
Capitalized costs $779,936 $840,136 $803,124
Accumulated depreciation
and depletion 293,594 342,950 311,524
----------- ----------- -----------
Net capitalized costs $486,342 $497,186 $491,600
=========== =========== ===========
Costs incurred:
Property acquisition:
Proved properties $ 68,334 $ 68 $ 222
Unproved properties 15,813 6,411 -
Exploration 22,665 17,934 14,844
Development 40,982 33,298 31,802
RESULTS OF OPERATIONS FOR PRODUCING ACTIVITIES
The following table presents the results of operations related to
natural gas and oil production, including the effect in 1995 of impairment of
assets as described in Note C:
1997 1996 1995
-----------------------------------------
(Thousands)
Revenues:
Affiliated $ 52,956 $ 50,968 $ 20,619
Nonaffiliated 97,493 86,319 114,247
Production costs 31,777 31,746 31,626
Exploration expenses 8,950 15,714 13,312
Depreciation and depletion 41,153 40,872 62,212
Impairment of assets - - 65,563
Income tax expense (benefit) 26,303 18,062 (27,992)
----------- ----------- ----------
Results of operations from
producing activities (excluding
corporate overhead) $ 42,266 $ 30,893 $ (9,855)
=========== =========== ==========
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
T. NATURAL GAS AND OIL PRODUCING ACTIVITIES (CONTINUED)
RESERVE INFORMATION (UNAUDITED)
The information presented below represents estimates of proved gas and
oil reserves prepared by Company engineers. Proved developed reserves represent
only those reserves expected to be recovered from existing wells and support
equipment. In 1997 the Company increased its Appalachian reserve life from 35 to
50 years to more closely reflect actual production experience. This revision
increased 1997 proved developed natural gas and crude oil reserves by 78,607
million cubic feet equivalent. Proved undeveloped reserves represent proved
reserves expected to be recovered from new wells after substantial development
costs are incurred. As of December 31, 1997, all of the Company's proved
reserves are in the United States. During 1997 the Company sold its Canadian
properties, which accounted for less than 10% of the Company's proved reserves.
<TABLE>
<CAPTION>
NATURAL GAS 1997 1996 1995
-----------------------------------------------------
(Millions of cubic feet)
<S> <C> <C> <C>
Proved developed and undeveloped reserves:
Beginning of year 849,530 845,771 874,964
Revision of previous estimates 80,264 6,710 16,999
Purchase of natural gas in place 62,485 811 23
Sale of natural gas in place (107,138) (368) (31,752)
Extensions, discoveries and other additions 61,380 53,901 50,521
Production (56,693) (57,295) (64,984)
------------- ------------- -------------
End of year 889,828 849,530 845,771
============= ============= =============
Proved developed reserves:
Beginning of year 732,158 739,249 771,635
End of year 769,312 732,158 739,249
OIL 1997 1996 1995
-----------------------------------------------------
(Thousands of barrels)
Proved developed and undeveloped reserves:
Beginning of year 19,517 18,201 18,283
Revision of previous estimates 849 1,867 (356)
Purchase of oil in place 2,592 67 5
Sale of oil in place (12,392) (235) (1,076)
Extensions, discoveries and other additions 1,045 1,344 3,278
Production (1,511) (1,727) (1,933)
------------- ------------- -------------
End of year 10,100 19,517 18,201
============= ============= =============
Proved developed reserves:
Beginning of year 18,482 16,834 18,110
End of year 8,941 18,482 16,834
</TABLE>
<PAGE>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
T. NATURAL GAS AND OIL PRODUCING ACTIVITIES (CONTINUED)
STANDARD MEASURE OF DISCOUNTED FUTURE CASH FLOW (UNAUDITED)
Management cautions that the standard measure of discounted future cash
flows should not be viewed as an indication of the fair market value of gas and
oil producing properties, nor of the future cash flows expected to be generated
therefrom. The information presented does not give recognition to future changes
in estimated reserves, selling prices or costs and has been discounted at an
arbitrary rate of 10%. Estimated future net cash flows from natural gas and oil
reserves based on selling prices and costs at year-end price levels are as
follows:
1997 1996 1995
------------------------------------------
(Thousands)
Future cash inflows $ 2,607,077 $3,610,060 $2,279,509
Future production costs (680,405) (790,140) (635,540)
Future development costs (80,965) (50,708) (51,081)
Future income tax expenses (671,713) (1,007,421) (539,106)
------------ ------------ -----------
Future net cash flow 1,173,994 1,761,791 1,053,782
10% annual discount for estimated
timing of cash flows (633,000) (877,077) (535,921)
------------ ------------ -----------
Standardized measure of discounted
future net cash flows $ 540,994 $ 884,714 $ 517,861
============ ============ ===========
Summary of changes in the standardized measure of discounted future net
cash flows:
1997 1996 1995
---------------------------------------
(Thousands)
Sales and transfers of gas
and oil produced - net $ (118,672) $ (105,541) $ (103,240)
Net changes in prices, production
and development costs (447,251) 482,376 54,806
Extensions, discoveries, and
improved recovery, less related costs 58,205 86,306 65,603
Development costs incurred 13,634 13,543 18,620
Purchase (sale) of minerals in
place - net (73,099) 1,506 (22,990)
Revisions of previous quantity estimates 16,913 47,545 5,278
Accretion of discount 108,935 72,375 64,875
Net change in income taxes 143,429 (232,841) (97,808)
Other (45,814) 1,584 (7,950)
------------- ------------ ------------
Net increase (decrease) (343,720) 366,853 (22,806)
Beginning of year 884,714 517,861 540,667
------------- ------------ ------------
End of year $ 540,994 $ 884,714 $ 517,861
============= ============ ============
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 10 with respect to directors is
incorporated herein by reference to the section describing "Election of
Directors" in the Company's definitive proxy statement relating to the annual
meeting of stockholders to be held on May 22, 1998, which will be filed with the
Commission within 120 days after the close of the Company's fiscal year ended
December 31, 1997.
Information required by Item 10 with respect to compliance with
Section 16(a) of the Exchange Act is incorporated by reference to the section
describing "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive proxy statement relating to the annual meeting of
stockholders to be held on May 22, 1998.
Information required by Item 10 with respect to executive officers
is included herein after Item 4 at the end of Part I.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 11 is incorporated herein by reference
to the sections describing "Executive Compensation", "Employment Contracts and
Change-In-Control Arrangements" and "Pension Plan" in the Company's definitive
proxy statement relating to the annual meeting of stockholders to be held on May
22, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 12 is incorporated herein by reference
to the section describing "Voting Securities and Record Date" in the Company's
definitive proxy statement relating to the annual meeting of stockholders to be
held on May 22, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
<PAGE>
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K
(a) 1. Financial statements
The financial statements listed in the accompanying index to
financial statements are filed as part of this annual report.
2. Financial Statement Schedule
The financial statement schedule listed in the accompanying
index to financial statements and financial schedule is filed
as part of this annual report.
3. Exhibits
The exhibits listed on the accompanying index to exhibits
(pages 67 through 69) are filed as part of this annual report.
(b) Reports on Form 8-K filed during the quarter ended December
31, 1997.
None
<PAGE>
EQUITABLE RESOURCES, INC.
INDEX TO FINANCIAL STATEMENTS COVERED
BY REPORT OF INDEPENDENT AUDITORS
(ITEM 14 (A))
1. The following consolidated financial statements of Equitable Resources,
Inc. and Subsidiaries are included in Item 8:
PAGE REFERENCE
Statements of Consolidated Income
for each of the three years in
the period ended December 31, 1997 30
Statements of Consolidated Cash Flows
for each of the three years in the
period ended December 31, 1997 31
Consolidated Balance Sheets
December 31, 1997 and 1996 32 & 33
Statements of Common Stockholders'
Equity for each of the three years in the
period ended December 31, 1997 34
Notes to Consolidated Financial Statements 35 through 61
2. Schedule for the Years Ended December 31, 1997,
1996 and 1995 included in Part IV:
II - Valuation and Qualifying
Accounts and Reserves 66
All other schedules are omitted since the subject matter thereof is
either not present or is not present in amounts sufficient to require
submission of the schedules.
<PAGE>
<TABLE>
<CAPTION>
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
Column A Column B Column C Column D Column E
- ----------------------------------------------------------------------------------------------
Balance At Additions Charged Balance
Beginning To Costs At End
Description Of Period and Expenses Deductions Of Period
- ----------------------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C> <C>
1997
Accumulated Provision
for Doubtful Accounts $ 10,714 $ 16,386 $ 17,115(A) $ 9,985
1996
Accumulated Provision
for Doubtful Accounts $ 10,539 $ 17,707 $ 17,532(A) $ 10,714
1995
Accumulated Provision
for Doubtful Accounts $ 10,890 $ 10,810 $ 11,161(A) $ 10,539
Note:
(A) Customer accounts written off, less recoveries.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBITS DESCRIPTION METHOD OF FILING
- ----------------- ------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
3.01 Restated Articles of Incorporation of the Company Filed as Exhibit 3(i) to Form 10-Q for the quarter
dated May 27, 1996 (effective May 28, 1996) ended March 31, 1996
- ----------------- ------------------------------------------------------- -----------------------------------------------------
3.02 By-Laws of the Company (amended through March 21, Filed as Exhibit 3(ii) to Form 10-Q for the quarter
1996) ended March 31, 1996
- ----------------- ------------------------------------------------------- -----------------------------------------------------
4.01 (a) Indenture dated as of April 1, 1983 between the Filed as Exhibit 4.01 (Revised) to Post-Effective
Company and Pittsburgh National Bank relating to Debt Amendment No. 1 to Registration Statement
Securities (Registration No. 2-80575)
- ----------------- ------------------------------------------------------- -----------------------------------------------------
4.01 (b) Instrument appointing Bankers Trust Company as Filed as Exhibit 4.01 (b) to Form 10-K for the year
successor trustee to Pittsburgh National Bank ended December 31, 1993
- ----------------- ------------------------------------------------------- -----------------------------------------------------
4.01 (d) Resolutions adopted June 22, 1987 by the Finance Filed as Exhibit 4.01 (d) to Form 10-K for the year
Committee of the Board of Directors of the Company ended December 31, 1993
establishing the terms of the 75,000 units
(debentures with warrants) issued July 1, 1987
- ----------------- ------------------------------------------------------- -----------------------------------------------------
4.01 (e) Resolution adopted April 6, 1988 by the Ad Hoc Filed as Exhibit 4.01 (e) to Form 10-K for the year
Finance Committee of the Board of Directors of the ended December 31, 1993
Company establishing the terms and provisions of the
9.9% Debentures issued April 14, 1988
- ----------------- ------------------------------------------------------- -----------------------------------------------------
4.01 (f) Supplemental indenture dated March 15, 1991 with Filed as Exhibit 4.01(f) to Form 10-K for the year
Bankers Trust Company eliminating limitations on ended December 31, 1996
liens and additional funded debt
- ----------------- ------------------------------------------------------- -----------------------------------------------------
4.01 (g) Resolution adopted August 19, 1991 by the Ad Hoc Filed as Exhibit 4.01(g) to Form 10-K for the year
Finance Committee of the Board of Directors of the
ended December 31, 1996 Company Addenda Nos. 1 through
27, establishing the terms and provisions of the Series
A Medium-Term Notes
- ----------------- ------------------------------------------------------- -----------------------------------------------------
4.01 (h) Resolutions adopted July 6, 1992 and February 19, Refiled herewith as Exhibit 4.01(h) pursuant to
1993 by the Ad Hoc Finance Committee of the Board of Rule 24 of the SEC's Rules of Practice
Directors of the Company and Addenda Nos. 1 through
8, establishing the terms and provisions of the
Series B Medium-Term Notes
- ----------------- ------------------------------------------------------- -----------------------------------------------------
4.01 (i) Resolution adopted July 14, 1994 by the Ad Hoc Filed as Exhibit 4.01(i) to Form 10-K for the year
Finance Committee of the Board of Directors of the ended December 31, 1995
Company and Addenda Nos. 1 and 2, establishing the
terms and provisions of the Series C Medium-Term Notes
- ----------------- ------------------------------------------------------- -----------------------------------------------------
Each management contract and compensatory arrangement in which any
director or any named executive officer participates has been marked with
an asterisk (*)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBITS DESCRIPTION METHOD OF FILING
- ----------------- ------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
4.01 (j) Resolution adopted January 18 and July 18, 1996 by Filed as Exhibit 4.01(j) to Form 10-K for the year
the Board of Directors of the Company and Resolutions ended December 31, 1996
adopted July 18, 1996 by the Executive Committee of the
Board of Directors of the Company, establishing the
terms and provisions of the 7.75% Debentures issued
July 29, 1996
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.01 Equitable Resources, Inc. Key Employee Restricted Filed as Exhibit 10.01 to Form 10-K for the year
Stock Option and Stock Appreciation Rights Incentive ended December 31, 1994
Compensation Plan (as amended through March 17, 1989)
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.02 Confidential Agreement and Release dated as of August Filed herewith as Exhibit 10.02
1, 1997, with Frederick H. Abrew
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.03 Confidential Agreement and Release dated as of Filed herewith as Exhibit 10.03
February 15, 1998 with Edward J. Meyer.
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.04 (a) Agreement dated May 29, 1996 with Paul Christiano for Filed as Exhibit 10.04(a) to Form 10-K for the year
deferred payment of 1996 director fees beginning May ended December 31, 1996.
29, 1996
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.04 (b) Agreement dated November 26, 1996 with Paul Filed as Exhibit 10.04(b) to Form 10-K for the year
Christiano for deferred payment of 1997 director fees ended December 31, 1996
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.04 (c) Agreement dated December 1, 1997 with Paul Christiano Filed herewith as Exhibit 10.04 (c)
for deferred payment of 1998 director fees
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.05 Supplemental Executive Retirement Plan (as amended Filed as Exhibit 10.05 to Form 10-K for the year
and restated through October 20, 1995) ended December 31, 1995
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.06 Retirement Program for the Board of Directors of Filed as Exhibit 10.06 to Form 10-K for the year
Equitable Resources, Inc. (as amended through August ended December 31, 1994
1, 1989)
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.07 Supplemental Pension Plan (as amended and restated Filed as Exhibit 10.07 to Form 10-K for the year
through December 16, 1994) ended December 31, 1994
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.08 Employment Agreement dated as of August 1, 1997, and Filed herewith as Exhibit 10.08
Employment Agreement Addendum dated as of November
19, 1997, with Donald I. Moritz
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.09 Equitable Resources, Inc. and Subsidiaries Short-Term Filed as Exhibit 10.09 to Form 10-K for the year
Incentive Compensation Plan as amended March 1997 ended December 31, 1996
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.10 (a) Agreement dated December 31, 1987 with Malcolm M. Filed as Exhibit 10.10 (a) to Form 10-K for the
Prine for deferred payment of 1988 director fees year ended December 31, 1993
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.10 (b) Agreement dated December 30, 1988 with Malcolm M. Filed as Exhibit 10.10 (b) to Form 10-K for the
Prine for deferred payment of 1989 director fees year ended December 31, 1993
- ----------------- ------------------------------------------------------- -----------------------------------------------------
Each management contract and compensatory arrangement in which any
director or any named executive officer participates has been marked with
an asterisk (*)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBITS DESCRIPTION METHOD OF FILING
- ----------------- ------------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
10.11 Trust Agreement with Pittsburgh National Bank to act Filed as Exhibit 10.12 to Form 10-K for the year
as Trustee for Supplemental Pension Plan, ended December 31, 1994
Supplemental Deferred Compensation Benefits,
Retirement Program for Board of Directors, and
Supplemental Executive Retirement Plan
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.12 Equitable Resources, Inc. Non-Employee Directors' Filed as Exhibit 10.13 to Form 10-K for the year
Stock Incentive Plan ended December 31, 1994
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.13 Equitable Resources, Inc. Long-Term Incentive Plan Filed as Exhibit 10.14 to Form 10-K for the year
ended December 31, 1994
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.14 (a) Agreement dated May 24, 1996 with Phyllis A. Savill Filed as Exhibit 10.14(a) to Form 10-K for the year
for deferred payment of 1996 director fees beginning ended December 31, 1996
May 24, 1996
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.14 (b) Agreement dated November 27, 1996 with Phyllis A. Filed as Exhibit 10.14 (b) to Form 10-K for the
Savill for deferred payment of 1997 director fees year ended December 31, 1996
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.14 (c) Agreement dated November 30, 1997 with Phyllis A. Filed herewith as Exhibit 10.14 (c)
Savill for deferred payment of 1998 director fees
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.15 Change in Control Agreement executed with certain key Filed as Exhibit 10.15 to the Form 10-K for the
employees year ended December 31, 1995
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.16 Equitable Resources, Inc. and Subsidiaries Deferred Filed as Exhibit 10.16 to the Form 10-K for the
Compensation Plan year ended December 31, 1995
- ----------------- ------------------------------------------------------- -----------------------------------------------------
*10.17 Employment Agreement executed with certain key Filed herewith as Exhibit 10.17
employees
- ----------------- ------------------------------------------------------- -----------------------------------------------------
21 Schedule of Subsidiaries Filed herewith as Exhibit 21
- ----------------- ------------------------------------------------------- -----------------------------------------------------
23.01 Consent of Independent Auditors Filed herewith as Exhibit 23.01
- ----------------- ------------------------------------------------------- -----------------------------------------------------
The Company agrees to furnish to the Commission, upon request, copies
of instruments with respect to long-term debt which have not previously been
filed.
Each management contract and compensatory arrangement in which any
director or any named executive officer participates has been marked with
an asterisk (*)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EQUITABLE RESOURCES, INC.
By: /s/ Donald I. Moritz
---------------------------------------------
Donald I. Moritz
Interim President and Chief Executive Officer
March 19, 1998
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
<S> <C> <C>
Interim President and Chief Executive
/s/ Donald I. Moritz Officer and Director March 19, 1998
- --------------------------------------
Donald I. Moritz
(Principal Executive Officer)
Vice President - Finance and Treasurer/
/s/ Jeffrey C. Swoveland Interim Chief Financial Officer March 19, 1998
- --------------------------------------
Jeffrey C. Swoveland
(Principal Financial Officer)
/s/ John A. Bergonzi Corporate Controller March 19, 1998
- --------------------------------------
John A. Bergonzi
(Principal Accounting Officer)
/s/ Paul Christiano Director March 19, 1998
- --------------------------------------
Paul Christiano
/s/ E. Lawrence Keyes, Jr. Director March 19, 1998
- --------------------------------------
E. Lawrence Keyes, Jr.
/s/ Thomas A. McConomy Director March 19, 1998
- --------------------------------------
Thomas A. McConomy
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES (Continued)
<S> <C> <C>
/s/ Guy W. Nichols Director March 19, 1998
- --------------------------------------
Guy W. Nichols
/s/ Malcolm M. Prine Director March 19, 1998
- --------------------------------------
Malcolm M. Prine
/s/ James E. Rohr Director March 19, 1998
- --------------------------------------
James E. Rohr
/s/ Phyllis A. Savill Director March 19, 1998
- --------------------------------------
Phyllis A. Savill
/s/ David S. Shapira Director March 19, 1998
- --------------------------------------
David S. Shapira
/s/ J. Michael Talbert Director March 19, 1998
- --------------------------------------
J. Michael Talbert
</TABLE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
Ad Hoc Finance Committee Meeting
Pittsburgh, PA
July 6, 1992
In accordance with notice duly given, a telephonic meeting of the Ad Hoc
Finance Committee of the Board of Directors of Equitable Resources, Inc., was
held on Monday, July 6, 1992, at 3:00 p.m., Eastern Daylight Time.
Committee members participating: Messrs. Merle E. Gilliand, E. Lawrence
Keyes, Jr., Donald I. Moritz and Malcolm M. Prine.
Also present: Messrs. Frederick H. Abrew, Executive Vice President and
Chief Operating Officer; Robert E. Daley, Vice President and Treasurer; and Ms.
Audrey C. Moeller, Vice President and Corporate Secretary.
Mr. Donald I. Moritz, President and Chief Executive Officer, acted as
Chairman of the meeting and Ms. Audrey C. Moeller acted as Secretary of the
meeting.
The Chairman stated that the purpose of the meeting was to adopt a
resolution establishing certain terms and provisions of the sixth series of
securities of the Company to be issued under the Indenture dated as of April 1,
1983 from Equitable Resources, Inc., to Bankers Trust Company, as Successor
Trustee, and to authorize the Vice President and Treasurer of the Company to
take certain other action on the Committee's behalf as previously authorized by
the Board of Directors. Mr. Moritz asked the Committee if they received the
letter from Robert Daley dated July 2, 1992, together with relevant material,
and each one acknowledged that he received and reviewed same.
Mr. Daley then briefly reviewed the material and updated the Committee
on the bond market as of today, stating that interest rates further declined
since the date of his letter. He said that of the $100 million of Medium-Term
Notes authorized for issuance, he recommended the negotiation of issuing $30
million of the Notes with maturities in the next three years with additional
Notes maturing within five years. He pointed out that the issuance of the Notes
would be similar to the recent issuance of $100 million Medium-Term Notes,
Series A; i.e., that the Notes may be redeemed prior to maturity; shall not be
convertible; that the Company has no obligation to repay the Notes prior to
maturity; and that he would be negotiating with Agents, Lehman Brothers, Morgan
Stanley & Co. Incorporated, and The First Boston Corporation in fixing the
interest rate on each issue of Notes.
The Committee discussed the recommendation and concluded that
authorization would be given to Mr. Daley to issue up to $30 million of
Medium-Term Notes, Series B, with maturities of three to five years and that if
it became apparent that additional Notes should be issued, further action by the
Committee would be taken at a later date.
After full discussion, on motion duly made and seconded, the following
resolutions were unanimously adopted:
RESOLVED, That, in accordance with Section 301 of the Indenture dated as
of April 1, 1983 (the "Original Indenture") from Equitable Resources, Inc. (the
"Company") to Bankers Trust Company, as trustee (the "Trustee"), as amended by
the 1991 Supplemental Indenture dated as of March 15, 1991 (the Original
Indenture as so amended, the "Indenture"), there is hereby established for
authentication and delivery by the Trustee an additional series of Securities of
the Company (such series being referred to herein as the "Notes") to be issued
from time to time under the Indenture, having the following terms and provisions
in addition to the terms and provisions established by the Indenture:
1. TITLE. The title of the Notes shall be "Medium-Term Notes, Series B".
2. PRINCIPAL AMOUNT. The aggregate principal amount of Notes which may be
authenticated and delivered (except for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Notes
pursuant to Section 304, 305, 306, 906 or 1107 of the Indenture) shall be
limited to $30,000,000. Notes may be issued at any time or from time to time in
such principal amounts as shall be specified in one or more Addenda hereto
(individually an "Addendum" and collectively "Addenda") which may be executed at
any time or from time to time by the President, the Executive Vice President or
the Vice President and Treasurer of the Company. Each Addendum shall be deemed
to have been, and hereby is, adopted by this Committee, and may be certified by
the Secretary or Assistant Secretary of the Company as a part of this Board
Resolution. For purposes of each issue of Notes established pursuant to any
Addendum, all references in Sections 304, 305, 306, 906 and 1107 of the
Indenture to the Securities of any "series" shall be deemed to be references
solely to the Notes so established and to any other Notes having the same
interest rate, Maturity Date, Interest Payment Dates, Record Dates, redemption
provisions and other relevant terms.
3. MATURITY. The principal of the Notes shall be payable on such
date as shall be three to five years from the date of issue, as shall be
specified in any applicable Addendum.
4.1 INTEREST RATE. The Notes shall bear interest at such fixed rate per
annum as shall be specified in any applicable Addendum, in each case until the
principal thereof is paid or made available for payment and (to the extent that
the payment of such interest shall be legally enforceable) at the same rate per
annum on any overdue principal and premium and on any overdue installment of
interest.
4.2 INTEREST ACCRUAL. Interest on the Notes shall accrue from the date of
the original issue of such Notes or from the most recent Interest Payment Date
(as specified in section 4.3 below) to which interest has been paid or duly
provided for.
4.3 INTEREST PAYMENT DATES. Unless otherwise specified in any applicable
Addendum, the Interest Payment Dates on which interest on the Notes shall be
paid or duly provided for shall be semiannually on April 1 and October 1 in
each year, commencing on such date as shall be specified in any applicable,
Addendum.
4.4 REGULAR RECORD DATES. Unless otherwise specified in any applicable
Addendum. the Regular Record Dates for the interest on the Notes so payable on
any Interest Payment Date (as specified in Section 4.3 above) shall be the
March 15 or September 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date.
5. PLACE OF PAYMENT. Principal of, and premium, if any, on, and interest
payable upon maturity or earlier redemption of, the Notes shall be payable at
the office or agency of the company maintained for that purpose in the Borough
of Manhattan, the City of New York, New York (the "Paying Agent"). Interest on
the Notes, other than interest payable at maturity or earlier redemption, shall
be payable by check mailed to the registered address of the holder of record on
the Regular Record Date for such interest payment. Unless otherwise designated
by the Company in a written notice to the Trustee, the office or agency in the
Borough of Manhattan for the above purpose shall be the Corporate Trust Office
of the Trustee. Notwithstanding the foregoing, (a) interest on any Note held in
the name of a nominee of the Depository (as defined in Section 13.2 below) shall
be payable by wire transfer of immediately available funds and (b) interest on
any Certificated Note (as defined in Section 13.2 below) held by a holder of
$10,000,000 or more in aggregate principal amount of Certificated Notes having
the same Interest Payment Dates shall be entitled to receive payments of
interest by wire transfer of immediately available funds upon written request to
the Paying Agent not later than 15 calendar days prior to the applicable
Interest Payment Date.
6. REDEMPTION. The Notes may be subject to redemption prior to Maturity at
the option of the Company, as a whole at any time or in part from time to time,
otherwise than through operation of a sinking fund, at such Redemption Prices
(expressed as percentages of the principal amount) prevailing during such
periods of time as shall be specified in any applicable Addendum, in each case
together with accrued interest to the Redemption Date.
7. SINKING FUND. The Notes may be entitled to the benefit of a sinking
fund requiring payments by the Company to the Trustee at such times, in amounts
sufficient to redeem such principal amount of the Notes at such sinking fund
redemption price, with such right of the Company to increase such payments or to
deliver Notes or to apply Notes previously delivered in satisfaction of such
sinking fund requirements, and with such credit to the Company for previously
increased sinking fund payments, in each case as shall be specified in any
applicable Addendum.
8. DENOMINATIONS. Unless otherwise specified in any applicable
Addendum, the Notes shall be issuable in denominations of $100,000 or any
amount in excess thereof which is an integral multiple of $1,000.
9. CONVERTIBILITY. The Notes shall not be convertible into shares of
capital stock or other securities of the Company.
10. REPAYMENT. Except as provided in Sections 7 and 11 hereof, the
Company shall have no obligation to repay the Notes (at the option of Holders
or otherwise) prior to the Maturity of the Notes (as specified in Section 3
above).
11. ACCELERATION. The entire principal amount of the Notes (and not a
portion thereof) shall be payable upon declaration of acceleration of the
Maturity of any Note pursuant to Section 502 of the Indenture.
12. SECTION 403 OF INDENTURE. Section 403 of the Indenture shall
apply to the Notes.
13.1 ADDITIONAL COVENANTS. No additional covenants shall be
applicable in respect of the Notes.
13.2 NOTES ISSUABLE AS GLOBAL SECURITIES. Each Note will be represented
either by a Global Note registered in the name of a nominee of The Depository
Trust Company, as Depository (a "Book-Entry Note"), or by a certificate issued
in definitive or temporary form (a "Certified Note"), as specified in the
applicable Addendum. Each Global Note representing Book-Entry Notes will be
deposited with The Depository Trust Company, New York, New York (the
"Depository"), and registered in the name of a nominee of the Depository.
Certificated Notes will not be exchangeable for Book-Entry Notes and, except
under the circumstances described below, Book-Entry Notes will not be
exchangeable for Certificated Notes and will not otherwise be issuable as
Certificated Notes.
So long as the Depository's nominee is the registered owner of a Global
Note, such nominee will be considered to be the sole owner or Holder of the
Notes represented by such Global Note for all purposes of the Indenture. Except
as set forth below, owners of beneficial interests in a Global Note will not be
entitled to have the Notes represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of such
Notes in definitive form, and will not be considered to be the owners or Holders
thereof under the Indenture.
If the Depository is at any time unwilling or unable to continue to act as
Depository, and a successor depository is not appointed by the Company within 90
days, the Company will issue Certificated Notes in definitive form in exchange
for the Global Note or Notes previously deposited with the Depository. In
addition, the Company may at any time in its sole discretion determine not to
have the Notes represented by one or more Global Notes and, in such event, will
issue Certificated Notes in definitive form in exchange for such Global Note or
Notes.
13.3 OTHER PROVISIONS. The Notes shall have no other terms than as set
forth in this Board Resolution (including any Addenda) and the Indenture or as
may be set forth in any indenture or indentures supplemental to the Indenture.
13.4 INDEMNIFICATION. The Company agrees to indemnify the Trustee for, and
to hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of the duties set forth in those certain
Administrative Procedures, which comprise a part of that certain Distribution
Agreement, dated March 26, 1992, between the Company and the
Agents named therein (the "Administrative Procedures"), relating to the Notes,
as though such Administrative Procedures were set forth in the Indenture.
Capitalized terms used in this Board Resolution have the meanings set forth in
the Indenture unless otherwise indicated or the context otherwise requires.
RESOLVED FURTHER, That Robert E. Daley, Vice President and Treasurer,
is hereby appointed as this Committee's agent to act in its name, place and
stead with regard to the determination of all the terms and conditions of the
$30 million aggregate principal amount of Notes to be issued under the
Indenture, including, without limitation, the interest rates and maturity dates
and other terms of the Notes and terms of sale thereof, so long as the maturity
period of any such Notes is no less than three (3) years nor more than five (5)
years from the date of issuance.
The meeting adjourned at 3:20 p.m.
s/ Audrey C. Moeller
--------------------
Secretary
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
Ad Hoc Finance Committee Meeting
Pittsburgh, PA
February 19, 1993
In accordance with notice duly given, a telephonic meeting of the Ad Hoc
Finance Committee of the Board of Directors of Equitable Resources, Inc., was
held on Friday, February 19, 1993, at 10:45 a.m., Eastern Standard Time.
Committee members participating: Messrs. Merle E. Gilliand, E. Lawrence
Keyes, Jr., Donald I. Moritz and Malcolm M. Prine.
Also present: Messrs. Frederick H. Abrew, Executive Vice President and
Chief Operating Officer; Robert E. Daley, Vice President and Treasurer; and Ms.
Audrey C. Moeller, Vice President and Corporate Secretary.
Mr. Donald I. Moritz, President and Chief Executive Officer, acted as
Chairman of the meeting and Ms. Audrey C. Moeller acted as Secretary of the
meeting.
Mr. Moritz asked those participating by phone whether they had received
the letter directed to the Committee by Robert E. Daley which set forth the
reasons for the call of the meeting. Mr. Daley then reviewed and discussed the
material.
The Chairman stated that on July 6, 1992, the Ad Hoc Finance Committee
adopted resolutions establishing certain terms and provisions of the sixth
series of securities of the Company to be issued under the Indenture dated as of
April 1, 1983, from Equitable Resources, Inc. to Bankers Trust Company, as
Successor Trustee, in which it authorized the Vice President and Treasurer of
the Company, as the Committee's Agent, to act on its behalf in determining the
terms and conditions of up to $30 million aggregate principal amount of Notes to
be issued, so long as the maturity period of such Notes was not less than three
nor more than five years from the date of issuance. The Committee agreed at that
time to limit the Vice President and Treasurer's authorization to $30 million of
the $100 million authorized by the Shelf Registration filing with the Securities
and Exchange Commission in March 1992 and indicated that the Committee would
take further action at a later date if it became apparent that additional Notes
should be issued.
The Chairman stated that, to date, $24.5 million of the $100 million
shelf registration has been issued in Medium-Term Notes, Series "B". He said
that management is recommending that the Vice President and Treasurer be
authorized to issue the remaining available $75.5 million in Medium-Term Notes,
Series "B" and that he be authorized to negotiate the maturity period of such
Notes for no less than three years nor more than thirty years at a maximum
interest rate of 8 1/4%. He said that market conditions are very attractive
currently with rates at levels that have not been seen in 20 years.
The Chairman recommended that the resolutions adopted by the Committee
on July 6, 1992, establishing the terms and provisions of the Notes, be amended
in their entirety to change the principal amount authorized for issuance from
"$30 million" to "$100 million" and to change the period of maturity from "three
to five years" to "three to thirty years."
After full discussion, on motion duly made and seconded, the following
resolutions were unanimously adopted:
RESOLVED, That the resolutions adopted by this Committee on July 6, 1992,
be amended in their entirety to read as follows:
RESOLVED, That, in accordance with Section 301 of the Indenture dated as
of April 1, 1983 (the "Original Indenture") from Equitable Resources, Inc. (the
"Company") to Bankers Trust Company, as trustee (the "Trustee"), as amended by
the 1991 Supplemental Indenture dated as of March 15, 1991 (the Original
Indenture as so amended, the "Indenture"), there is hereby established for
authentication and delivery by the Trustee an additional series of Securities of
the Company (such series being referred to herein as the "Notes") to be issued
from time to time under the Indenture, having the following terms and provisions
in addition to the terms and provisions established by the Indenture:
1. TITLE. The title of the Notes shall be "Medium-Term Notes, Series B".
2. PRINCIPAL AMOUNT. The aggregate principal amount of Notes which may be
authenticated and delivered (except for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Notes
pursuant to Section 304, 305, 306, 906 or 1107 of the Indenture) shall be
limited to $100,000,000. Notes may be issued at any time or from time to time in
such principal amounts as shall be specified in one or more Addenda hereto
(individually an "Addendum" and collectively "Addenda") which may be executed at
any time or from time to time by the President, the Executive Vice President or
the Vice President and Treasurer of the Company. Each Addendum shall be deemed
to have been, and hereby is, adopted by this Committee, and may be certified by
the Secretary or Assistant Secretary of the Company as a part of this Board
Resolution. For purposes of each issue of Notes established pursuant to any
Addendum, all references in Sections 304, 305, 306, 906 and 1107 of the
Indenture to the Securities of any "series" shall be deemed to be references
solely to the Notes so established and to any other Notes having the same
interest rate, Maturity Date, Interest Payment Dates, Record Dates, redemption
provisions and other relevant terms.
3. MATURITY. The principal of the Notes shall be payable on such date as
shall be three to thirty years from the date of issue, as shall be specified in
any applicable Addendum.
4.1 INTEREST RATE. The Notes shall bear interest at such fixed rate per
annum as shall be specified in any applicable Addendum, in each case until the
principal thereof is paid or made available for payment and (to the extent that
the payment of such interest shall be legally enforceable) at the same rate per
annum on any overdue principal and premium and on any overdue installment of
interest.
4.2 INTEREST ACCRUAL. Interest on the Notes shall accrue from the date of
the original issue of such Notes or from the most recent Interest Payment Date
(as specified in section 4.3 below) to which interest has been paid or duly
provided for.
4.3 INTEREST PAYMENT DATES. Unless otherwise specified in any applicable
Addendum, the Interest Payment Dates on which interest on the Notes shall be
paid or duly provided for shall be semiannually on April 1 and October 1 in
each year, commencing on such date as shall be specified in any applicable,
Addendum.
4.4 REGULAR RECORD DATES. Unless otherwise specified in any applicable
Addendum. the Regular Record Dates for the interest on the Notes so payable on
any Interest Payment Date (as specified in Section 4.3 above) shall be the
March 15 or September 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date.
5. PLACE OF PAYMENT. Principal of, and premium, if any, on, and interest
payable upon maturity or earlier redemption of, the Notes shall be payable at
the office or agency of the company maintained for that purpose in the Borough
of Manhattan, the City of New York, New York (the "Paying Agent"). Interest on
the Notes, other than interest payable at maturity or earlier redemption, shall
be payable by check mailed to the registered address of the holder of record on
the Regular Record Date for such interest payment. Unless otherwise designated
by the Company in a written notice to the Trustee, the office or agency in the
Borough of Manhattan for the above purpose shall be the Corporate Trust Office
of the Trustee. Notwithstanding the foregoing, (a) interest on any Note held in
the name of a nominee of the Depository (as defined in Section 13.2 below) shall
be payable by wire transfer of immediately available funds and (b) interest on
any Certificated Note (as defined in Section 13.2 below) held by a holder of
$10,000,000 or more in aggregate principal amount of Certificated Notes having
the same Interest Payment Dates shall be entitled to receive payments of
interest by wire transfer of immediately available funds upon written request to
the Paying Agent not later than 15 calendar days prior to the applicable
Interest Payment Date.
6. REDEMPTION. The Notes may be subject to redemption prior to Maturity at
the option of the Company, as a whole at any time or in part from time to time,
otherwise than through operation of a sinking fund, at such Redemption Prices
(expressed as percentages of the principal amount) prevailing during such
periods of time as shall be specified in any applicable Addendum, in each case
together with accrued interest to the Redemption Date.
7. SINKING FUND. The Notes may be entitled to the benefit of a sinking
fund requiring payments by the Company to the Trustee at such times, in amounts
sufficient to redeem such principal amount of the Notes at such sinking fund
redemption price, with such right of the Company to increase such payments or to
deliver Notes or to apply Notes previously delivered in satisfaction of such
sinking fund requirements, and with such credit to the Company for previously
increased sinking fund payments, in each case as shall be specified in any
applicable Addendum.
8. DENOMINATIONS. Unless otherwise specified in any applicable
Addendum, the Notes shall be issuable in denominations of $100,000 or any
amount in excess thereof which is an integral multiple of $1,000.
9. CONVERTIBILITY. The Notes shall not be convertible into shares of
capital stock or other securities of the Company.
10. REPAYMENT. Except as provided in Sections 7 and 11 hereof, the
Company shall have no obligation to repay the Notes (at the option of Holders
or otherwise) prior to the Maturity of the Notes (as specified in Section 3
above).
11. ACCELERATION. The entire principal amount of the Notes (and not a
portion thereof) shall be payable upon declaration of acceleration of the
Maturity of any Note pursuant to Section 502 of the Indenture.
12. SECTION 403 OF INDENTURE. Section 403 of the Indenture shall
apply to the Notes.
13.1 ADDITIONAL COVENANTS. No additional covenants shall be
applicable in respect of the Notes.
13.2 NOTES ISSUABLE AS GLOBAL SECURITIES. Each Note will be represented
either by a Global Note registered in the name of a nominee of The Depository
Trust Company, as Depository (a "Book-Entry Note"), or by a certificate issued
in definitive or temporary form (a "Certified Note"), as specified in the
applicable Addendum. Each Global Note representing Book-Entry Notes will be
deposited with The Depository Trust Company, New York, New York (the
"Depository"), and registered in the name of a nominee of the Depository.
Certificated Notes will not be exchangeable for Book-Entry Notes and, except
under the circumstances described below, Book-Entry Notes will not be
exchangeable for Certificated Notes and will not otherwise be issuable as
Certificated Notes.
So long as the Depository's nominee is the registered owner of a Global
Note, such nominee will be considered to be the sole owner or Holder of the
Notes represented by such Global Note for all purposes of the Indenture. Except
as set forth below, owners of beneficial interests in a Global Note will not be
entitled to have the Notes represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of such
Notes in definitive form, and will not be considered to be the owners or Holders
thereof under the Indenture.
If the Depository is at any time unwilling or unable to continue to act as
Depository, and a successor depository is not appointed by the Company within 90
days, the Company will issue Certificated Notes in definitive form in exchange
for the Global Note or Notes previously deposited with the Depository. In
addition, the Company may at any time in its sole discretion determine not to
have the Notes represented by one or more Global Notes and, in such event, will
issue Certificated Notes in definitive form in exchange for such Global Note or
Notes.
13.3 OTHER PROVISIONS. The Notes shall have no other terms than as set
forth in this Board Resolution (including any Addenda) and the Indenture or as
may be set forth in any indenture or indentures supplemental to the Indenture.
13.4 INDEMNIFICATION. The Company agrees to indemnify the Trustee for, and
to hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of the duties set forth in those certain
Administrative Procedures, which comprise a part of that certain Distribution
Agreement, dated March 26, 1992, between the Company and the Agents named
therein (the "Administrative Procedures"), relating to the Notes, as though
such Administrative Procedures were set forth in the Indenture.
Capitalized terms used in this Board Resolution have the meanings set
fort in the Indenture unless otherwise indicated or the context otherwise
requires.
RESOLVED FURTHER, That Robert E. Daley, Vice President and Treasurer,
is hereby appointed as this Committee's agent to act in its name, place and
stead with regard to the determination of all the terms and conditions of the
$100,000,000 million aggregate principal amount of Notes to be issued under the
Indenture, including, without limitation, the interest rates and maturity dates
and other terms of the Notes and terms of sale thereof, so long as the maturity
period of any such Notes is no less than three (3) years nor more than thirty
(30) years from the date of issuance and the interest rate is no higher than
8 1/4%.
The meeting adjourned at 3:20 p.m.
s/ Audrey C. Moeller
--------------------
Secretary
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
ADDENDUM NO. 1 TO BOARD RESOLUTION
Establishing Certain Terms and Provisions
of an Issue of Medium-Term Notes, Series B
Pursuant to the Board Resolution
Adopted July 6, 1992
RESOLVED, that, as contemplated by the Board Resolution adopted July 6,
1992, there is hereby established for authentication and delivery by the Trustee
an issue of the Medium-Term Notes, Series B of the Company having the following
terms and provisions in addition to the terms and provisions established by the
Indenture and the aforesaid Board Resolution:
1. Principal Amount. $8,000,000.
2. Maturity Date. July 20, 1995.
3.1. Interest Rate. 5.34% per annum.
3.2. Interest Payment Dates. April 1 and October 1, commencing
October 1, 1992.
4. Notes Issuable as Global Securities. The Notes of this issue
shall be issuable only as Global Notes, except under the circumstances
described in the Board Resolution.
5. Price to the Public. 100%.
Capitalized terms used in this Addendum to Board Resolution have the
meanings set forth in the Board Resolution unless otherwise indicated or the
context otherwise requires.
In response to certain provisions of the orders of the Pennsylvania Public
Utility Commission and the Kentucky Public Service Commission, it is noted that
the interest rate set forth above represents a premium of 45 basis points over
the corresponding Treasury rate.
WITNESS the due execution hereof this 13th day of July, 1992.
s/ Robert E. Daley
--------------------------
Vice President & Treasurer
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
ADDENDUM NO. 2 TO BOARD RESOLUTION
Establishing Certain Terms and Provisions
of an Issue of Medium-Term Notes, Series B
Pursuant to the Board Resolution
Adopted July 6, 1992
RESOLVED, that, as contemplated by the Board Resolution adopted July 6,
1992, there is hereby established for authentication and delivery by the Trustee
an issue of the Medium-Term Notes, Series B of the company having the following
terms and provisions in addition to the terms and provisions established by the
Indenture and the aforesaid Board Resolution:
1. Principal Amount. $500,000.
2. Maturity Date. August 1, 1995.
3.1. Interest Rate. 5.19% per annum.
3.2. Interest Payment Dates. April 1 and October 1, commencing
October 1, 1992.
4. Notes Issuable as Global Securities. The Notes of this issue
shall be issuable only as Global Notes, except under the circumstances
described in the Board Resolution.
5. Price to the Public. 100%.
Capitalized terms used in this Addendum to Board Resolution have the
meanings set forth in the Board Resolution unless otherwise indicated or the
context otherwise requires.
In response to certain provisions of the orders of the Pennsylvania Public
Utility Commission and the Kentucky Public Service Commission, it is noted that
the interest rate set forth above represents a premium of 45 basis points over
the corresponding Treasury rate.
WITNESS the due execution hereof this 22nd day of July, 1992.
s/ Robert E. Daley
--------------------------
Vice President & Treasurer
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
ADDENDUM NO. 3 TO BOARD RESOLUTION
Establishing Certain Terms and Provisions
of an Issue of Medium-Term Notes, Series B
Pursuant to the Board Resolution
Adopted July 6, 1992
RESOLVED, that, as contemplated by the Board Resolution adopted July 6,
1992, there is hereby established for authentication and delivery by the Trustee
an issue of the Medium-Term Notes, Series B of the company having the following
terms and provisions in addition to the terms and provisions established by the
Indenture and the aforesaid Board Resolution:
1. Principal Amount. $5,000,000.
2. Maturity Date. August 4, 1995.
3.1. Interest Rate. 5.10% per annum.
3.2. Interest Payment Dates. April 1 and October 1, commencing
October 1, 1992.
4. Notes Issuable as Global Securities. The Notes of this issue
shall be issuable only as Global Notes, except under the circumstances
described in the Board Resolution.
5. Price to the Public. 99.958%.
Capitalized terms used in this Addendum to Board Resolution have the
meanings set forth in the Board Resolution unless otherwise indicated or the
context otherwise requires.
In response to certain provisions of the orders of the Pennsylvania Public
Utility Commission and the Kentucky Public Service Commission, it is noted that
the interest rate set forth above represents a premium of 47 basis points over
the corresponding Treasury rate.
WITNESS the due execution hereof this 28th day of July, 1992.
s/ Robert E. Daley
--------------------------
Vice President & Treasurer
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
ADDENDUM NO. 4 TO BOARD RESOLUTION
Establishing Certain Terms and Provisions
of an Issue of Medium-Term Notes, Series B
Pursuant to the Board Resolution
Adopted July 6, 1992
RESOLVED, that, as contemplated by the Board Resolution adopted July 6,
1992, there is hereby established for authentication and delivery by the Trustee
an issue of the Medium-Term Notes, Series B of the company having the following
terms and provisions in addition to the terms and provisions established by the
Indenture and the aforesaid Board Resolution:
1. Principal Amount. $10,000,000.
2. Maturity Date. December 15, 1995.
3.1. Interest Rate. 5.50% per annum.
3.2. Interest Payment Dates. April 1 and October 1, commencing
October 1, 1992.
4. Notes Issuable as Global Securities. The Notes of this issue
shall be issuable only as Global Notes, except under the circumstances
described in the Board Resolution.
5. Price to the Public. 100%.
Capitalized terms used in this Addendum to Board Resolution have the
meanings set forth in the Board Resolution unless otherwise indicated or the
context otherwise requires.
In response to certain provisions of the orders of the Pennsylvania Public
Utility Commission and the Kentucky Public Service Commission, it is noted that
the interest rate set forth above represents a premium of 43.5 basis points over
the corresponding Treasury rate.
WITNESS the due execution hereof this 31st day of July, 1992.
s/ Robert E. Daley
--------------------------
Vice President & Treasurer
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
ADDENDUM NO. 5 TO BOARD RESOLUTION
Establishing Certain Terms and Provisions
of an Issue of Medium-Term Notes, Series B
Pursuant to the Board Resolution
Adopted July 6, 1992
RESOLVED, that, as contemplated by the Board Resolution adopted July 6,
1992, there is hereby established for authentication and delivery by the Trustee
an issue of the Medium-Term Notes, Series B of the company having the following
terms and provisions in addition to the terms and provisions established by the
Indenture and the aforesaid Board Resolution:
1. Principal Amount. $1,000,000.
2. Maturity Date. August 10, 1995
3.1. Interest Rate. 5.29% per annum.
3.2. Interest Payment Dates. April 1 and October 1, commencing
October 1, 1992.
4. Notes Issuable as Global Securities. The Notes of this issue
shall be issuable only as Global Notes, except under the circumstances
described in the Board Resolution.
5. Price to the Public. 100%.
Capitalized terms used in this Addendum to Board Resolution have the
meanings set forth in the Board Resolution unless otherwise indicated or the
context otherwise requires.
In response to certain provisions of the orders of the Pennsylvania Public
Utility Commission and the Kentucky Public Service Commission, it is noted that
the interest rate set forth above represents a premium of 45 basis points over
the corresponding Treasury rate.
WITNESS the due execution hereof this 3rd day of August, 1992.
s/ Robert E. Daley
--------------------------
Vice President & Treasurer
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
ADDENDUM NO. 6 TO BOARD RESOLUTION
Establishing Certain Terms and Provisions
of an Issue of Medium-Term Notes, Series B
Pursuant to the Board Resolution
Adopted July 6, 1992, as Amended February 19, 1993
RESOLVED, That, as contemplated by the Board Resolution adopted July 6,
1992, as amended February 19, 1993, there is hereby established for
authentication and delivery by the Trustee an issue of the Medium-Term Notes,
Series B of the Company having the following terms and provisions in addition to
the terms and provisions established by the Indenture and the aforesaid Board
Resolution:
1. Principal Amount. $12,000,000.
2. Maturity Date. March 3, 2003.
3.1. Interest Rate. 6.49% per annum.
3.2. Interest Payment Dates. April 1 and October 1, commencing
April 1, 1993.
4. Notes Issuable as Global Securities. The Notes of this issue
shall be issuable only as Global Notes, except under the circumstances
described in the Board Resolution.
5. Price to the Public. 100%.
Capitalized terms used in this Addendum to Board Resolution have the
meanings set forth in the Board Resolution unless otherwise indicated or the
context otherwise requires.
In response to certain provisions of the Orders of the Pennsylvania Public
Utility Commission and the Kentucky Public Service Commission, it is noted
that the interest rate set forth above represents a premium of 55 basis points
over the corresponding Treasury rate.
WITNESS the due execution hereof this 23rd day of February, 1993.
s/ Robert E. Daley
--------------------------
Vice President & Treasurer
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
ADDENDUM NO. 7 TO BOARD RESOLUTION
Establishing Certain Terms and Provisions
of an Issue of Medium-Term Notes, Series B
Pursuant to the Board Resolution
Adopted July 6, 1992, as Amended February 19, 1993
RESOLVED, That, as contemplated by the Board Resolution adopted July 6,
1992, as amended February 19, 1993, there is hereby established for
authentication and delivery by the Trustee an issue of the Medium-Term Notes,
Series B of the Company having the following terms and provisions in addition to
the terms and provisions established by the Indenture and the aforesaid Board
Resolution:
1. Principal Amount. $10,000,000.
2. Maturity Date. March 2, 2023.
3.1. Interest Rate. 7.42% per annum.
3.2. Interest Payment Dates. April and October 1, commencing
April 1, 1993.
4. Notes Issuable as Global Securities. The Notes of this issue
shall be issuable only as Global Notes, except under the circumstances
described in the Board Resolution.
5. Price to the Public. 100%.
Capitalized terms used in this Addendum to Board Resolution have the
meanings set forth in the Board Resolution unless otherwise indicated or the
context otherwise requires.
In response to certain provisions of the Orders of the Pennsylvania Public
Utility Commission and the Kentucky Public Service Commission, it is noted
that the interest rate set forth above represents a premium of 60 basis points
over the corresponding Treasury rate.
WITNESS the due execution hereof this 23rd day of February, 1993.
s/ Robert E. Daley
--------------------------
Vice President & Treasurer
<PAGE>
Exhibit 4.01 (h)
EQUITABLE RESOURCES, INC.
ADDENDUM NO. 8 TO BOARD RESOLUTION
Establishing Certain Terms and Provisions
of an Issue of Medium-Term Notes, Series B
Pursuant to the Board Resolution
Adopted July 6, 1992, as Amended February 19, 1993
RESOLVED, That, as contemplated by the Board Resolution adopted July 6,
1992, as amended February 19, 1993, there is hereby established for
authentication and delivery by the Trustee an issue of the Medium-Term Notes,
Series B of the Company having the following terms and provisions in addition to
the terms and provisions established by the Indenture and the aforesaid Board
Resolution:
1. Principal Amount. $10,000,000.
2. Maturity Date. March 4, 2013.
3.1. Interest Rate. 7.30% per annum.
3.2. Interest Payment Dates. April 1 and October 1, commencing
April 1, 1993.
4. Notes Issuable as Global Securities. The Notes of this issue
shall be issuable only as Global Notes, except under the circumstances
described in the Board Resolution.
5. Price to the Public. 100%.
Capitalized terms used in this Addendum to Board Resolution have the
meanings set forth in the Board Resolution unless otherwise indicated or the
context otherwise requires.
In response to certain provisions of the orders of the Pennsylvania Public
Utility Commission and the Kentucky Public Service Commission, it is noted that
the interest rate set forth above represents a premium of 40 basis points over
the corresponding Treasury rate.
WITNESS the due execution hereof this 25th day of February, 1993.
s/ Robert E. Daley
--------------------------
Vice President & Treasurer
Exhibit 10.02
CONFIDENTIAL AGREEMENT AND RELEASE
In consideration of their mutual promises set forth in this
Confidential Agreement and Release ("Agreement and Release"), Frederick H. Abrew
and Equitable Resources, Inc. (ERI), intending to be legally bound, hereby agree
as follows:
1. Frederick H. Abrew does hereby voluntarily retire from ERI effective
as of August 1, 1997 ("Retirement Date"). It is mutually agreed that the certain
Employment Agreement dated as of March 18, 1988 and amended and restated on
March 15, 1996 between Mr. Abrew and ERI ("Employment Agreement") is hereby
terminated as of August 1, 1997, and ERI and Mr. Abrew shall have no further
obligations to each other thereunder, it being understood and agreed that,
except as expressly provided herein, the relationship between ERI and Mr. Abrew
shall be governed only by the terms of this Agreement and Release.
2. Mr. Abrew will continue to comply with his obligations of Non
Competition and Confidentiality as set forth in the Employment Agreement, which
provisions are incorporated herein by reference, for a three-year period after
the Retirement Date, ending July 31, 2000. Mr. Abrew shall not, without the
written consent of ERI, for a period of three years from the Retirement Date,
directly or indirectly, for the benefit of an employer or others, employ,
attempt to employ, solicit for employment, or in any other way, assist in
employment or hire as an employee, agent, consultant, contractor, or otherwise,
any employee of ERI or any affiliate nor solicit or induce any such employee to
leave ERI or any affiliate for any reason whatsoever. Mr. Abrew shall not act in
any capacity, directly or indirectly, to provide information or services to any
third party in any way relating to ERI without ERI's prior written consent.
3. Mr. Abrew will be paid his remaining unused 1997 vacation, if any,
from which required tax withholdings will be made. This amount will be included
in his final regular pay check.
4. All stock options granted to Mr. Abrew under any ERI plan, whether
vested or unvested, were forfeited on the Retirement Date and are of no further
force or effect.
5. Conditioned upon Mr. Abrew's compliance with the terms of this
Agreement and Release, ERI shall pay Mr. Abrew (i) the sum of $217,750 in a lump
sum, minus any required withholding taxes, within seven (7) business days of
execution hereof, and (ii) the sum of $43,550 on the 15th of each month,
commencing January 15, 1998 and ending on July 15, 2000. In the event of Mr.
Abrew's death during the term of the Agreement, provided that Mr. Abrew is not
in breach hereof, any remaining payments will be paid monthly to his spouse or,
if she is not living, to his estate. No other payments will be forthcoming
except as expressly set forth herein.
6. ERI shall continue to include Mr. Abrew as a participant in and
continue to pay when due the employer's portion of the monthly premium for Mr.
Abrew's continuation of coverage under ERI's retiree health, medical (including
vision and dental care) and life insurance programs through the month of July
2000 at the same levels as on the Retirement Date, subject to such changes in
the programs as may affect all other participants. From August 1, 2000, Mr.
Abrew is eligible to participate in all ERI retiree programs applicable to him
in accordance with the terms of such programs in effect at any time after such
date, and nothing contained herein shall be construed as a waiver of any such
right thereto which he may have as a retiree.
7. With respect to the executive life insurance policies owned by ERI ,
ERI will pay the estimated amount of premiums due through July 2000 to Mr. Abrew
in a lump sum equal to $45,000 minus applicable tax withholding, if any. ERI
shall have no further obligation to Mr. Abrew with respect to such policies or
premiums therefor and may cancel the policies, collect the cash value or take
other action with respect to such policies in its sole discretion. The life
insurance policies commonly referred to as "Second to Die" will continue to be
owned by ERI with premiums to be paid by ERI in accordance with the terms of
those policies through July, 2000, subject to the provisions of the Split Dollar
Life Insurance Agreement with Mr. Abrew (incorporated herein by reference),
which provides for refund to ERI from any proceeds of such policies of all
premiums paid by it both before and after the Retirement Date.
8. Mr. Abrew shall be entitled to receive all benefits accrued prior to
July 31, 1997 under the ERI's 401K plan and Deferred Compensation Plan,
including the Supplemental Executive Retirement Plan contribution made to the
Deferred Compensation Plan on Mr. Abrew's behalf on January 1, 1997. All monies
in the Deferred Compensation Plan will be valued as of July 31, 1997 and paid to
Mr. Abrew, minus all applicable taxes, if any. Mr. Abrew is not eligible to
participate in any of the referenced plans after July 31, 1997.
9. Mr. Abrew irrevocably and unconditionally remises, releases and
forever discharges ERI and all of its affiliates, related companies,
subsidiaries, predecessors, past, present and future officers, directors,
agents, employees and shareholders, as well as the heirs, successors or assigns
of any of such persons or such entities (severally and collectively called
"Releasees"), jointly and individually, from any and all claims, demands,
issues, or causes of action arising out of, or in any way related to, Mr.
Abrew's employment with Releasees or his separation from employment with
Releasees, whether asserted by him or on his behalf by any person or entity.
This release includes, but is not limited to, claims for back pay, front pay,
compensatory damages, liquidated damages, punitive damages, fringe benefits,
reinstatement, attorneys' fees, interest, costs, and/or other remedies or relief
of any sort whatsoever under any possible legal, equitable, tort, contract, or
statutory theory, including, but not limited to, any claims under the Age
Discrimination in Employment Act of 1967, as amended, Title VII of the Civil
Rights Act of 1964, as amended, the Pennsylvania Human Relations Act, the
Americans With Disabilities Act, and other federal, state, and local statutes,
ordinances, executive orders or regulations prohibiting discrimination in
employment, under the above referenced Employment Agreement or any other
asserted obligation of employment, under theories of unjust dismissal or
wrongful discharge, under theories of breach of contract or under theories based
on any intentional or negligent tort which Mr. Abrew has or may have, whether
now known or unknown and of whatever kind or nature against Releasees, which
arise on or before the date of execution hereof. It is understood and agreed
that this paragraph 9 does not include a discharge by Mr. Abrew of any of the
payments or other benefits which are to be provided to Mr. Abrew pursuant to the
terms and conditions of this Agreement and Release.
10. Mr. Abrew agrees that if he makes any claim against ERI relating to
his employment by ERI or his separation from employment and such claim is held
not to be barred by the release contained in Paragraph 9 or if Mr. Abrew
breaches any of the covenants contained herein, then Mr. Abrew agrees to pay to
ERI upon demand a sum equal to the amount of payments paid to him or on his
behalf pursuant to Paragraphs 4-7 hereof plus interest at the legal rate; in the
event of any such claim or breach, ERI shall not be obligated to make any
further payments to Mr. Abrew under said paragraphs. Mr. Abrew hereby agrees
that before asserting any claim against ERI relating to his employment or his
separation from employment in any local, state or federal tribunal or court, Mr.
Abrew will tender to ERI all amounts previously paid to him hereunder. This
provision will not limit Mr. Abrew's liability if ERI's actual damages exceed
the amount received by him under this Agreement and Release. The
non-competition, non-disclosure and non-solicitation obligations contained
herein shall be extended by the length of time during which Mr. Abrew shall have
been in breach of any said provisions.
11. By entering into this Agreement and Release, ERI in no way thereby
admits that it or any other Releasee has treated Mr. Abrew unlawfully or
wrongfully in any way. Neither this Agreement and Release nor the implementation
thereof shall be construed to be, or shall be admissible in any proceedings as
evidence of an admission by ERI or any other Releasee of any violation of or
failure to comply with any agreement, obligation, or federal, state, or local
law, ordinance, agreement, rule, regulation or order. It is understood and
agreed however, that this Agreement and Release and its implementation by either
party shall be admissible as evidence in any future arbitration, court or other
proceeding alleging a breach of the terms and conditions of this Agreement and
Release by either party.
12. Mr. Abrew and his attorney and ERI and its attorneys shall keep the
terms and existence of this Agreement and Release strictly confidential, and
they promise not to reveal any such terms and existence to any person or entity
other than to governmental taxing authorities or to their tax or financial
consultants or as otherwise may be necessary to discharge their obligations
hereunder or legal obligations so long as done under strict confidentiality or
prior notice is given if confidential protection is not feasible under the
circumstances.
13. Mr. Abrew warrants that he has no complaints, charges or actions
now pending against Releasees in any forum and he shall not institute any action
against Releasees in any forum based upon any acts or events arising out of or
related to his employment with Releasees or his separation from employment with
Releasees, except to the extent that any such action may involve arbitration
hereunder of any claim by Mr. Abrew that ERI has breached the terms and
conditions of this Agreement and Release.
14. Mr. Abrew shall, in the event that ERI becomes subject to or
involved in any claim or legal action relating to events which occurred during
his employment, cooperate to the fullest extent possible in the preparation,
prosecution, or defense of ERI's case, including, but not limited to, the
execution of affidavits or documents or providing information requested by ERI;
out-of-pocket expenses related to such assistance will be provided at ERI's
expense, subject to ERI's prior approval.
15. Mr. Abrew acknowledges that he has been given the opportunity to
consider this Agreement and Release for at least twenty-one (21) days, which is
a reasonable period of time, and that he has been advised to consult with an
attorney in relation thereto prior to executing it. Mr. Abrew further
acknowledges that he has had a full and fair opportunity to consult with an
attorney, that he has carefully read and fully understands all of the provisions
of this Agreement and Release, that he has discussed it with his attorney, and
that he is voluntarily executing and entering into this Agreement and Release,
intending to be legally bound hereby.
16. For the period of seven (7) days following the execution of this
Agreement and Release, Mr. Abrew may revoke it by delivery of a written notice
revoking same within that seven-day period to the office of Gene Musial, Human
Resources Department, 420 Boulevard of the Allies, Pittsburgh, PA 15219. This
Agreement and Release shall not become effective or enforceable until that
seven-day revocation period has expired.
17. The terms and conditions of this Agreement and Release, including
any terms incorporated by reference, constitute the full and complete
understanding, agreement and arrangement of the parties and there are no
agreements, covenants, promises or arrangements other than those set forth
herein. Any subsequent alteration in or variance from any term or condition of
this Agreement and Release shall be effective only if agreed to in writing by
the parties.
18. This Agreement and Release shall be governed by and construed in
accordance with the statutory and decisional law of the Commonwealth of
Pennsylvania, without regard to conflicts of law principles. Without limiting
the remedies available, Mr. Abrew acknowledges that, because of the potential
for immediate and irreparable harm to ERI, damages at law may be an insufficient
remedy in the event that Mr. Abrew violates certain terms of this Agreement and
Release and that ERI shall be entitled to seek injunctive or other equitable
relief in any court of competent jurisdiction to restrain the alleged breach or
threatened alleged breach of, or otherwise to specifically enforce, such terms.
Except for any such injunctive or equitable relief, all claims, disputes, or
causes of action arising between the parties under this Agreement and Release
shall be resolved by a strictly confidential arbitration in Pittsburgh,
Pennsylvania, under the commercial arbitration rules of the American Arbitration
Association before a single arbitrator qualified by education and experience to
be mutually agreed upon the parties within ten (10) days of either party's
notice to refer a matter to arbitration. Should the parties fail to so agree
upon a single arbitrator, then each party shall name an arbitrator within the
succeeding ten (10) days, and the two appointed arbitrators shall within the
succeeding ten (10) days select a third arbitrator to be Chairman of the
arbitration panel. If the two appointed arbitrators fail to so agree upon a
Chairman of the arbitration panel within the ten (10) day period, either or both
parties shall then have the right to request that the American Arbitration
Association appoint a third arbitrator to be Chairman of the arbitration panel
in accordance with the rules of the Association. The decision in such
arbitration shall be rendered within forty-five (45) days of appointment of the
arbitrator(s) and shall be final and binding upon the parties. Judgment may be
entered thereon in any court having jurisdiction. Mr. Abrew hereby submits to
the exclusive jurisdiction of and venue in any federal or state court sitting in
Pittsburgh, Pennsylvania. In any proceeding to enforce this Agreement and
Release or recover damages for a breach thereof, the prevailing party shall be
entitled to recover reasonable attorney's fees and costs.
19. ERI agrees to reflect in its official files and provide reference
information in response to inquiries regarding Mr. Abrew's separation from
employment to indicate only that he voluntarily elected to take an early
retirement from ERI. Mr. Abrew should inform prospective employers that Gene
Musial, Director-Human Resource Operations, is designated as the person to whom
such inquiries should be directed.
20. In the event Mr. Abrew is requested by any third party to make any
statement or otherwise provide information regarding ERI or its management for
any reason, Mr. Abrew agrees to first consult with and obtain the consent of
ERI's Chief Legal Officer, except to the extent disclosure is legally compelled,
in which case reasonable advance notice to said officer will be provided.
Subject to the restrictions contained herein, Mr. Abrew may, without the consent
of ERI's Chief Legal Officer, confirm to any third party his employment history
with ERI. Statements or comments may be made by either party in connection with
any arbitration or judicial proceeding hereunder which such party believes
necessary or relevant to defend or prove a claim that a party has failed to
comply with its obligations hereunder.
21. In the event either party believes that the other party has failed
to comply with its obligations hereunder, notice thereof shall be immediately
given to such other party, stating with particularity the alleged noncompliance.
The other party shall promptly respond and take any and all corrective action to
cure the alleged noncompliance. A negative response or a failure to respond in
writing by the other party within ten (10) days of receiving a notice of alleged
noncompliance will entitle the notifying party to exercise those rights and
remedies provided to him under this Agreement and Release.
22. All notices hereunder shall be in writing and delivered personally
or by certified mail with return receipt requested, registered mail, fax, or
courier service to the following addressees of the parties or to such other
address as they may by written notice designate; provided no such notice other
than certified mail shall be effective as to a party unless actual receipt by
him is confirmed:
Equitable Resources, Inc. Mr. Frederick H. Abrew
420 Boulevard of the Allies 107 Linksview Drive
Pittsburgh, PA 15219 Bridgeville, PA 15017
Attn: Corporate Secretary
23. ERI may assign this Agreement and Release and its rights and
obligations (particularly the confidentiality, non-competition and
non-solicitation provisions hereof) to any person, corporation or other entity
in connection with any merger, sale of assets, recapitalization, or other
transaction to which ERI is a party, and after any such assignment, such person,
corporation or other entity shall be deemed to be ERI hereunder for all
purposes. Mr. Abrew's obligations under this Agreement and Release shall be
binding upon his heirs, executors and administrators, and the provisions hereof
shall inure to the benefit of and be binding on the successors and assigns of
ERI.
IN WITNESS WHEREOF, the aforesaid parties, intending to be legally
bound hereby, have caused this Agreement and Release to be executed as of this
29th day of August, 1997.
EQUITABLE RESOURCES, INC.
By /s/ Gregory R. Spencer /s/ Frederick H. Abrew
------------------------------ ----------------------------------
Gregory R. Spencer Frederick H. Abrew
Senior V.P. & CAO
Sworn to and subscribed before me this
29th day of August, 1997.
/s/ Judith Ann Crawford
----------------------------------
NOTARY PUBLIC
Exhibit 10.03
CONFIDENTIAL AGREEMENT AND RELEASE
In consideration of their mutual promises set forth in this
Confidential Agreement and Release ("Agreement and Release"), Edward J. Meyer
and Equitable Resources, Inc. ("ERI"), intending to be legally bound, hereby
agree as follows:
1. The employment of Edward J. Meyer as Senior Vice President of
Marketing & Business Development has been terminated effective February 15, 1998
("Termination Date") as a result of the elimination of his position. It is
mutually agreed that the certain Employment Agreement dated as of January 16,
1997 between Mr. Meyer and ERI ("Employment Agreement") is hereby terminated as
of February 15, 1998, and ERI and Mr. Meyer shall have no further obligations to
each other thereunder, it being understood and agreed that, except as expressly
provided herein, the relationship between ERI and Mr. Meyer shall be governed
only by the terms of this Agreement and Release.
2. Mr. Meyer will continue to comply with his obligations of Non
Competition and Confidentiality as set forth in the Employment Agreement, which
provisions are incorporated herein by reference, for a one-year period after the
Termination Date. Mr. Meyer shall not, without the written consent of ERI, for a
period of one year after the Termination Date, directly or indirectly, for the
benefit of an employer or others, employ, attempt to employ, solicit for
employment, or in any other way, assist in employment or hire as an employee,
agent, consultant, contractor, or otherwise, any employee of ERI or any
affiliate nor solicit or induce any such employee to leave ERI or any affiliate
for any reason whatsoever. Mr. Meyer shall not act in any capacity, directly or
indirectly, to provide information or services to any third party for the
purposes of effecting a business combination or acquiring control of ERI without
ERI's prior written consent.
3. All stock grants or options granted to Mr. Meyer under any ERI plan,
whether vested or unvested, have been forfeited and are of no further force or
effect.
4. Conditioned upon Mr. Meyer's compliance with the terms of this
Agreement and Release, ERI shall pay Mr. Meyer (i) the sum of $314,298 in a lump
sum, minus any required withholding taxes by February 15, 1998 or the tenth
(10th) day following execution hereof, whichever is later. The payment is
comprised of the following components:
Employment Agreement $220,500
Executive Retention Program $ 59,874 (only included in the lump
sum on condition that the
First Stock Award is
forfeited pursuant to
Paragraph 3)
Severance Program Benefit $ 16,962
1998 Unused Vacation $ 16,962
In addition, Mr. Meyer will be provided six (6) months of outplacement
assistance. Mr. Meyer has chosen the organization and the Company has negotiated
the appropriate level of service in accordance with the employee's specific
needs. No other payments will be forthcoming.
5. Mr. Meyer shall be entitled to receive all benefits accrued prior to
February 15, 1998 under the ERI's Employee Savings Plan, including vesting of
the Company match for that period in accordance with the provisions of the Plan.
Mr. Meyer is not eligible to participate in any of ERI's benefit plans,
including the above-referenced plans, after February 15, 1998, other than as
provided under COBRA.
6. Mr. Meyer irrevocably and unconditionally remises, releases and
forever discharges ERI and all of its affiliates, related companies,
subsidiaries, predecessors, past, present and future officers, directors,
agents, employees and shareholders, as well as the heirs, successors or assigns
of any of such persons or such entities (severally and collectively called
"Releasees"), jointly and individually, from any and all claims, demands,
issues, or causes of action arising out of, or in any way related to, Mr.
Meyer's employment with Releasees or his separation from employment with
Releasees, whether asserted by him or on his behalf by any person or entity.
This release includes, but is not limited to, claims for back pay, front pay,
compensatory damages, liquidated damages, punitive damages, fringe benefits,
reinstatement, attorneys' fees, interest, costs, and/or other remedies or relief
of any sort whatsoever under any possible legal, equitable, tort, contract, or
statutory theory, including, but not limited to, any claims under the Age
Discrimination in Employment Act of 1967, as amended, Title VII of the Civil
Rights Act of 1964, as amended, the Pennsylvania Human Relations Act, the
Americans With Disabilities Act, and other federal, state, and local statutes,
ordinances, executive orders or regulations prohibiting discrimination in
employment, under the above referenced Employment Agreement or any other
asserted obligation of employment, under theories of unjust dismissal or
wrongful discharge, under theories of breach of contract or under theories based
on any intentional or negligent tort which Mr. Meyer has or may have, whether
now known or unknown and of whatever kind or nature against Releasees, which
arise on or before the date of execution hereof. It is understood and agreed
that this paragraph 6 does not include a discharge by Mr. Meyer of any of the
payments or other benefits which are to be provided to Mr. Meyer pursuant to the
terms and conditions of this Agreement and Release.
7. Mr. Meyer agrees that if he makes any claim against ERI relating to
his employment by ERI or his separation from employment and such claim is held
not to be barred by the release contained in Paragraph 6 or if Mr. Meyer
breaches any of the covenants contained herein, then Mr. Meyer agrees to pay to
ERI upon demand a sum equal to the amount of payments paid to him or on his
behalf pursuant to Paragraph 4 hereof plus interest at the legal rate. Mr. Meyer
hereby agrees that before asserting any claim against ERI relating to his
employment or his separation from employment in any local, state or federal
tribunal or court, Mr. Meyer will tender to ERI all amounts previously paid to
him hereunder. This provision will not limit Mr. Meyer's liability if ERI's
actual damages exceed the amount received by him under this Agreement and
Release. The non-competition, non-disclosure and non-solicitation obligations
contained herein shall be extended by the length of time during which Mr. Meyer
shall have been in breach of any said provisions.
8. By entering into this Agreement and Release, ERI in no way thereby
admits that it or any other Releasee has treated Mr. Meyer unlawfully or
wrongfully in any way. Neither this Agreement and Release nor the implementation
thereof shall be construed to be, or shall be admissible in any proceedings as
evidence of an admission by ERI or any other Releasee of any violation of or
failure to comply with any agreement, obligation, or federal, state, or local
law, ordinance, agreement, rule, regulation or order. It is understood and
agreed however, that this Agreement and Release and its implementation by either
party shall be admissible as evidence in any future arbitration, court or other
proceeding alleging a breach of the terms and conditions of this Agreement and
Release by either party.
9. Mr. Meyer and his attorney and ERI and its attorneys shall keep the
terms and existence of this Agreement and Release strictly confidential, and
they promise not to reveal any such terms and existence to any person or entity
other than to governmental taxing authorities or to their tax or financial
consultants or as otherwise may be necessary to discharge their obligations
hereunder or legal obligations so long as done under strict confidentiality or
prior notice is given if confidential protection is not feasible under the
circumstances.
10. Mr. Meyer shall, in the event that ERI becomes subject to or
involved in any claim or legal action relating to events which occurred during
his employment, cooperate to the fullest extent possible in the preparation,
prosecution, or defense of ERI's case, including, but not limited to, the
execution of affidavits or documents or providing information requested by ERI;
out-of-pocket expenses related to such assistance will be provided at ERI's
expense, subject to ERI's prior approval.
11. Mr. Meyer acknowledges that he has been given the opportunity to
consider this Agreement and Release for at least twenty-one (21) days, which is
a reasonable period of time, and that he has been advised to consult with an
attorney in relation thereto prior to executing it. Mr. Meyer further
acknowledges that he has had a full and fair opportunity to consult with an
attorney, that he has carefully read and fully understands all of the provisions
of this Agreement and Release, that he has discussed it with his attorney, and
that he is voluntarily executing and entering into this Agreement and Release,
intending to be legally bound hereby.
12. For the period of seven (7) days following the execution of this
Agreement and Release, Mr. Meyer may revoke it by delivery of a written notice
revoking same within that seven-day period to the office of Gregory R. Spencer,
Senior Vice President and Chief Administrative Officer, Executive Department,
420 Boulevard of the Allies, Pittsburgh, PA 15219. This Agreement and Release
shall not become effective or enforceable until the seven-day revocation period
has expired.
13. The terms and conditions of this Agreement and Release, including
any terms incorporated by reference, constitute the full and complete
understanding, agreement and arrangement of the parties and there are no
agreements, covenants, promises or arrangements other than those set forth
herein. Any subsequent alteration in or variance from any term or condition of
this Agreement and Release shall be effective only if agreed to in writing by
the parties.
14. This Agreement and Release shall be governed by and construed in
accordance with the statutory and decisional law of the Commonwealth of
Pennsylvania, without regard to conflicts of law principles. Without limiting
the remedies available, Mr. Meyer acknowledges that, because of the potential
for immediate and irreparable harm to ERI, damages at law may be an insufficient
remedy in the event that Mr. Meyer violates certain terms of this Agreement and
Release and that ERI shall be entitled to seek injunctive or other equitable
relief in any court of competent jurisdiction to restrain the alleged breach or
threatened alleged breach of, or otherwise to specifically enforce, such terms.
Except for any such injunctive or equitable relief, all claims, disputes, or
causes of action arising between the parties under this Agreement and Release
shall be resolved by a strictly confidential arbitration in Pittsburgh,
Pennsylvania, under the commercial arbitration rules of the American Arbitration
Association before a single arbitrator qualified by education and experience to
be mutually agreed upon the parties within ten (10) days of either party's
notice to refer a matter to arbitration. Should the parties fail to so agree
upon a single arbitrator, then each party shall name an arbitrator within the
succeeding ten (10) days, and the two appointed arbitrators shall within the
succeeding ten (10) days select a third arbitrator to be Chairman of the
arbitration panel. If the two appointed arbitrators fail to so agree upon a
Chairman of the arbitration panel within the ten (10) day period, either or both
parties shall then have the right to request that the American Arbitration
Association appoint a third arbitrator to be Chairman of the arbitration panel
in accordance with the rules of the Association. The decision in such
arbitration shall be rendered within forty-five (45) days of appointment of the
arbitrator(s) and shall be final and binding upon the parties. Judgment may be
entered thereon in any court having jurisdiction. Mr. Meyer hereby submits to
the exclusive jurisdiction of and venue in any federal or state court sitting in
Pittsburgh, Pennsylvania. In any proceeding to enforce this Agreement and
Release or recover damages for a breach thereof, the prevailing party shall be
entitled to recover reasonable attorney's fees and costs.
15. ERI agrees to reflect in its official files and provide reference
information in response to inquiries regarding Mr. Meyer's separation from
employment to indicate only that he voluntarily elected to resign from ERI. Mr.
Meyer should inform prospective employers that Gregory R. Spencer, Senior Vice
President and Chief Administrative Officer, is designated as the person to whom
such inquiries should be directed.
16. In the event Mr. Meyer is requested by any third party to make any
statement or otherwise provide information regarding ERI or its management for
any reason, Mr. Meyer agrees to first consult with and obtain the consent of
ERI's General Counsel, except to the extent disclosure is legally compelled, in
which case reasonable advance notice to said officer will be provided. Subject
to the restrictions contained herein, Mr. Meyer may, without the consent of
ERI's General Counsel, confirm to any third party his employment history with
ERI. Statements or comments may be made by either party in connection with any
arbitration or judicial proceeding hereunder which such party believes necessary
or relevant to defend or prove a claim that a party has failed to comply with
its obligations hereunder.
17. In the event either party believes that the other party has failed
to comply with its obligations hereunder, notice thereof shall be immediately
given to such other party, stating with particularity the alleged noncompliance.
The other party shall promptly respond and take any and all corrective action to
cure the alleged noncompliance. A negative response or a failure to respond in
writing by the other party within ten (10) days of receiving a notice of alleged
noncompliance will entitle the notifying party to exercise those rights and
remedies provided to him under this Agreement and Release.
18. All notices hereunder shall be in writing and delivered personally
or by certified mail with return receipt requested, registered mail, fax, or
courier service to the following addressees of the parties or to such other
address as they may by written notice designate; provided no such notice other
than certified mail shall be effective as to a party unless actual receipt by
him is confirmed:
Equitable Resources, Inc. Mr. Edward J. Meyer
420 Boulevard of the Allies 502 Glenview Road
Pittsburgh, PA 15219 Bryn Mawr, PA 19010
Attn: Corporate Secretary
19. ERI may assign this Agreement and Release and its rights and
obligations (particularly the confidentiality, non-competition and
non-solicitation provisions hereof) to any person, corporation or other entity
in connection with any merger, sale of assets, recapitalization, or other
transaction to which ERI is a party, and after any such assignment, such person,
corporation or other entity shall be deemed to be ERI hereunder for all
purposes. Mr. Meyer's obligations under this Agreement and Release shall be
binding upon his heirs, executors and administrators, and the provisions hereof
shall inure to the benefit of and be binding on the successors and assigns of
ERI.
IN WITNESS WHEREOF, the aforesaid parties, intending to be legally
bound hereby, have caused this Agreement and Release to be executed as of this
5th day of February, 1998.
EQUITABLE RESOURCES, INC.
By /s/ Gregory R. Spencer /s/ Edward J. Meyer
--------------------------------- -------------------------------
Gregory R. Spencer Edward J. Meyer
Senior V.P. & CAO
Sworn to and subscribed before me this
5th day of February, 1998.
/s/ Gaynell A. Sheperd
----------------------------------
NOTARY PUBLIC
Exhibit 10.04 (c)
EQUITABLE RESOURCES, INC.
Board of Directors
Deferred Compensation Agreement
THIS AGREEMENT, made and executed this 1st day of December, 1997, by and
between Equitable Resources, Inc., herein designated as "Equitable", and Paul
Christiano, herein designated as the "Participant."
WITNESSETH:
WHEREAS, the Participant is currently a member of the Board of
Directors of Equitable as a Director or an Advisory Director; and
WHEREAS, Equitable and the Participant desire to defer all of the fees
arising from the above-stated relationship.
NOW, THEREFORE, the parties hereby agree as follows:
Section 1 - Account
1.1) Effective 1 January 1998, the Participant herein elects to defer,
under the terms of this Agreement, all compensation earned for his/her service
as a Director or an Advisory Director of Equitable for the calendar year 1998.
1.2) Equitable shall establish a bookkeeping account, hereinafter referred
to as the "Account", and shall credit to the Account the amounts of the deferred
fees.
1.3) Interest shall be credited to the Account monthly. The rate of
interest shall be the same as the yield for 30-day Treasury Bills applicable to
the first day of such month.
Section 2 - Payment
2.1) All amounts credited to the Account on the Participant's behalf shall
be payable in one lump sum by Equitable to the Participant on _________________
(date selected by the Participant) but in no event later than sixty (60) days
after the Participant ceases to be a Director or an Advisory Director of
Equitable. Unless a date specific is selected by the Participant, the
distribution will be made within sixty (60) days after the Participant ceases to
be a Director or an Advisory Director of Equitable; provided, however, that
nothing contained in this Section 2.1 shall negate the provisions of Section 2.3
below.
2.2) In the event of the death of the Participant, such payment shall be
made to the Participant's beneficiary. For purposes of the Agreement,
"beneficiary" means any person(s) or trust(s) or combination of these, last
designated by the Participant to receive benefits provided under this Agreement.
Such designation shall be in writing filed with the Compensation Committee of
the Board of Directors (the "Committee") and shall be revocable at any time
through written instrument similarly filed without consent of any beneficiary.
In the absence of any designation, the beneficiary shall be the Participant's
spouse, if surviving, otherwise, all amounts payable hereunder shall be
delivered by Equitable to the executors and administrators of the Participant's
estate for administration as a part thereof.
2.3) For financial reasons, the Participant may apply to the Committee for
withdrawal from the Agreement prior to the Payment Date. Such early withdrawal
shall lie within the absolute discretion of the Committee. Upon approval from
the Committee, and within fifteen (15) days thereafter, the Participant will be
deemed to have withdrawn from the Agreement and a distribution, in the amount
necessary, will be made in a one-time payment. Amounts still payable to the
Participant after the application of this Paragraph 2.3 shall be distributed
pursuant to the foregoing Paragraphs of this Section 2.
Section 3 - Miscellaneous Provisions
3.1) Nothing contained in this Agreement and no action taken pursuant to
the provisions of this Agreement shall create or be construed to create a trust
of any kind, or a fiduciary relationship between Equitable and the Participant,
his/her designated beneficiary or any other person. Any fees deferred under the
provisions of this Agreement shall continue for all purposes to be a part of the
general funds of Equitable. To the extent that any person acquires a right to
receive payment from Equitable under this Agreement, such right shall be no
greater than the right of any unsecured general creditor of Equitable.
3.2) The right of the Participant or any other person to the payment of
deferred fees under this Agreement shall not be assigned, transferred, pledged
or encumbered except by will or by the laws of descent and distribution.
3.3) If the Committee shall find that any person to whom any payment is
payable under this Agreement is unable to care for his/her affairs because of
illness or accident, or is a minor, any payment due (unless a prior claim
therefor shall have been made by a duly appointed guardian, committee or other
legal representative) may be paid to the spouse, child, a parent, or a brother
or sister, or to any person deemed by the Committee to have incurred expense for
such person otherwise entitled to payment, in such manner and proportions as the
Committee may determine. Any such payment shall be a complete discharge of the
liabilities of Equitable under this Agreement.
3.4) Nothing contained herein shall be construed as conferring upon the
Participant the right to continue in the service of Equitable as a member of the
Board of Directors.
3.5) This Agreement shall be binding upon and inure to the benefit of
Equitable, its successors and assigns and the Participant and his/her heirs,
executors, administrators and legal representatives.
3.6) Equitable may terminate this Plan at any time. Upon such termination,
the Committee shall dispose of any benefits of the Participant as provided in
Section 2.
Equitable may also amend the provisions of this Plan at any time;
provided, however, that no amendment shall affect the rights of the Participant,
or his/her beneficiaries, to the receipt of payment of benefits to the extent of
any compensation deferred before the time of the amendment.
This Agreement shall terminate when the payment due under this Agreement
is made.
3.7) This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
Section 4 - Committee
4.1) The Committee's interpretation and construction of the Agreement, and
the actions thereunder, including the amount or recipient of the payment to be
made therefrom, shall be binding and conclusive on all persons for all purposes.
The Committee members shall not be liable to any person for any action taken or
omitted in connection with the interpretation and administration of this
Agreement unless attributable to his/her own willful misconduct or lack of good
faith.
IN WITNESS WHEREOF, Equitable has caused this Agreement to be executed by
its duly authorized officers and the Participant has hereunto set his/her hand
as of the date first above written.
ATTEST: EQUITABLE RESOURCES, INC.
s/ Audrey C. Moeller s/ Donald I. Moritz
- -------------------------- -----------------------------
Vice President and President and
Corporate Secretary Chief Executive Officer
WITNESS: (Participant)
s/ Edna L. Jackson s/ Paul Christiano
- -------------------------- ------------------------------
Edna L. Jackson Paul Christiano
Exhibit 10.08
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made this 1st day of August,
1997, between Equitable Resources, Inc., a Pennsylvania corporation, having an
address of 420 Boulevard of the Allies, Pittsburgh, Pennsylvania 15219
(hereinafter "Company") and Donald I. Moritz, having an address of 75 Woodland
Road, Pittsburgh, Pennsylvania 15232 (hereinafter "Employee").
RECITALS
WHEREAS, Employee has served the Company in a long and successful
tenure as Chief Executive Officer and has developed an extensive knowledge of
the Company's business operations and the natural gas industry in general; and
WHEREAS, Company desires Employee to be available for temporary
part-time employment in order to have the benefit of his knowledge and
experience.
NOW THEREFORE, in consideration of the foregoing premises, and
intending to be legally bound, the parties hereto agree as follows:
1. SERVICES TO BE PROVIDED. Employee will provide day-to-day management
and direction of Company and will perform the duties of the Chief Executive
Officer position during the term of this Agreement. Employee shall be available
to render services in person or by other methods, including mail, telephone, or
telecommunication at such offices and locations as the Company may deem
necessary. Such services shall be rendered by Employee to the best of his
abilities in a manner consistent with his expertise and experience. Employee
shall report and be responsible to Governance Committee of the Board of
Directors of the Company.
2. COMPENSATION. Employee shall receive a monthly salary of $43,550.00,
which shall be paid to Employee in arrears the first week of each month during
the term of this Agreement, beginning September 1997. Employee shall also
receive reimbursement for reasonable out-of-town travel, parking, meals,
lodging, and other such out-of-pocket expenses properly incurred in the
performance of services hereunder, upon submission of such supporting data as
the Company may reasonably require. Employee shall be eligible to participate in
the Short Term Incentive Plan on a pro rata share basis. Employee shall continue
to be eligible to receive applicable Board of Directors' fees as long as he
continues as member of the Company's Board of Directors.
3. TERM. The term of this Agreement shall commence as of August 1,
1997, and continue on a month-to-month basis until terminated by either party
upon 30 days' written notice, without further obligation except for compensation
accrued prior to the termination date; provided, however, upon Employee's death
or substantial disability, the contract shall automatically terminate.
4. EMPLOYMENT RELATIONSHIP. Employee shall at all times be a temporary
part-time employee, subject to the obligations and benefits applicable to such
status.
5. CONFIDENTIALITY. Employee acknowledges and agrees that his
employment by the Company under this Agreement necessarily involves his
knowledge of and access to confidential and proprietary information pertaining
to the business of the Company and its subsidiaries. Accordingly, the Employee
agrees that all time during the term of this Agreement and for a period of two
(2) years after the termination of the Employee's employment hereunder, he will
not, directly or indirectly, without the express written authority of the
Company, unless directed by applicable legal authority having jurisdiction over
the Employee, disclose to or use, or knowingly permit to be so disclosed or
used, for the benefit of himself, any person, corporation or other entity other
than the Company, (i) any information concerning any financial matters, customer
relationships, competitive status, supplier matters, internal organizational
matters, current or future plans, or other business affairs of or relating to
the Company and its subsidiaries, (ii) any management, operational, trade,
technical or other secrets or any other proprietary information or other data of
the Company or its subsidiaries, or (iii) any other information related to the
Company or its subsidiaries or which the Employee should reasonably believe will
be damaging to the Company or its subsidiaries which has not been published an
is not generally known outside of the Company. The Employee acknowledges that
all of the foregoing, constitutes confidential and proprietary information,
which is the exclusive property of the Company.
6. COMPLETE AGREEMENT. This Agreement supersedes all prior written and
oral agreements, obligations, or understandings between the parties, and is
intended as a complete and exclusive statement of the agreement between the
parties regarding the matters covered herein. No oral agreements or
understandings, and no amendment to this Agreement, shall be binding unless
agreed to in writing by the parties. Employee agrees that the compensation
provided for herein is Employee's sole and entire compensation for services
rendered to the Company pursuant to this Agreement.
7. NOTICES. All notices hereunder shall be in writing and delivered
personally or by mail, fax, or courier service to the following addresses of the
parties or to such other addresses as they may by written notice designate:
Equitable Resources, Inc. Mr. Donald I. Moritz
420 Boulevard of the Allies 75 Woodland Road
Pittsburgh, PA 15219 Pittsburgh, PA 15232
Attn: Corporate Secretary
IN WITNESS WHEREOF, the parties have executed this Agreement in
counterpart as of the date first above written.
ATTEST: EQUITABLE RESOURCES, INC.
By: /s/ Audrey C. Moeller By: /s/ Gregory R. Spencer
--------------------------------- --------------------------------
Its: Vice President and Its: Senior Vice President and
Corporate Secretary Chief Administrative Officer
WITNESS: EMPLOYEE:
By: /s/ Katrina Pyrek By: /s/ Donald I. Moritz
--------------------------------- --------------------------------
<PAGE>
EMPLOYMENT AGREEMENT ADDENDUM
WHEREAS, Equitable Resources, Inc. (hereinafter the "Company") and
Donald I. Moritz (hereinafter the "Employee") desire to clarify and/or modify
the terms of the Employee's employment contract dated August 1, 1997
(hereinafter the "Agreement").
For good and valuable consideration, and intending to be legally bound
hereby, the parties agree as follows:
Section 1 of the Agreement shall be clarified by adding the following
sentence:
1. The Employee's performance objectives shall be the following:
(a) To stabilize the Company's earnings through revenue
enhancement and cost containment.
(b) To stabilize the organization and bring operations as close to
plan as possible.
(c) To focus the organization more on short-term results.
2. Section 2 of the Agreement shall be modified by revising the third
sentence thereof to read as follows:
Employee shall be eligible to participate in the Short-Term
Incentive Plan on a full-year basis for 1997.
DATED this 19th day of November, 1997.
ATTEST: EQUITABLE RESOURCES, INC.
/s/ Audrey C. Moeller By: /s/ Gregory R. Spencer
- -------------------------------------- ------------------------------------
Vice President and Corporate Secretary Senior Vice President and
Chief Administrative Officer
WITNESS: EMPLOYEE:
/s/ Katrina Pyrek /s/ Donald I. Moritz
- -------------------------------------- ------------------------------------
Donald I. Moritz
Exhibit 10.14 (c)
EQUITABLE RESOURCES, INC.
Board of Directors
Deferred Compensation Agreement
THIS AGREEMENT, made and executed this 30th day of November, 1997, by and
between Equitable Resources, Inc., herein designated as "Equitable", and Phyllis
A. Savill, herein designated as the "Participant."
WITNESSETH:
WHEREAS, the Participant is currently a member of the Board of
Directors of Equitable as a Director or an Advisory Director; and
WHEREAS, Equitable and the Participant desire to defer all of the fees
arising from the above-stated relationship.
NOW, THEREFORE, the parties hereby agree as follows:
Section 1 - Account
1.1) Effective January 1, 1998, the Participant herein elects to defer,
under the terms of this Agreement, all compensation earned for his/her service
as a Director or an Advisory Director of Equitable for the calendar year 1998.
1.2) Equitable shall establish a bookkeeping account, hereinafter referred
to as the "Account", and shall credit to the Account the amounts of the deferred
fees.
1.3) Interest shall be credited to the Account monthly. The rate of
interest shall be the same as the yield for 30-day Treasury Bills applicable to
the first day of such month.
Section 2 - Payment
2.1) All amounts credited to the Account on the Participant's behalf shall
be payable in one lump sum by Equitable to the Participant on _________________
(date selected by the Participant) but in no event later than sixty (60) days
after the Participant ceases to be a Director or an Advisory Director of
Equitable. Unless a date specific is selected by the Participant, the
distribution will be made within sixty (60) days after the Participant ceases to
be a Director or an Advisory Director of Equitable; provided, however, that
nothing contained in this Section 2.1 shall negate the provisions of Section 2.3
below.
2.2) In the event of the death of the Participant, such payment shall be
made to the Participant's beneficiary. For purposes of the Agreement,
"beneficiary" means any person(s) or trust(s) or combination of these, last
designated by the Participant to receive benefits provided under this Agreement.
Such designation shall be in writing filed with the Compensation Committee of
the Board of Directors (the "Committee") and shall be revocable at any time
through written instrument similarly filed without consent of any beneficiary.
In the absence of any designation, the beneficiary shall be the Participant's
spouse, if surviving, otherwise, all amounts payable hereunder shall be
delivered by Equitable to the executors and administrators of the Participant's
estate for administration as a part thereof.
2.3) For financial reasons, the Participant may apply to the Committee for
withdrawal from the Agreement prior to the Payment Date. Such early withdrawal
shall lie within the absolute discretion of the Committee. Upon approval from
the Committee, and within fifteen (15) days thereafter, the Participant will be
deemed to have withdrawn from the Agreement and a distribution, in the amount
necessary, will be made in a one-time payment. Amounts still payable to the
Participant after the application of this Paragraph 2.3 shall be distributed
pursuant to the foregoing Paragraphs of this Section 2.
Section 3 - Miscellaneous Provisions
3.1) Nothing contained in this Agreement and no action taken pursuant to
the provisions of this Agreement shall create or be construed to create a trust
of any kind, or a fiduciary relationship between Equitable and the Participant,
his/her designated beneficiary or any other person. Any fees deferred under the
provisions of this Agreement shall continue for all purposes to be a part of the
general funds of Equitable. To the extent that any person acquires a right to
receive payment from Equitable under this Agreement, such right shall be no
greater than the right of any unsecured general creditor of Equitable.
3.2) The right of the Participant or any other person to the payment of
deferred fees under this Agreement shall not be assigned, transferred, pledged
or encumbered except by will or by the laws of descent and distribution.
3.3) If the Committee shall find that any person to whom any payment is
payable under this Agreement is unable to care for his/her affairs because of
illness or accident, or is a minor, any payment due (unless a prior claim
therefor shall have been made by a duly appointed guardian, committee or other
legal representative) may be paid to the spouse, child, a parent, or a brother
or sister, or to any person deemed by the Committee to have incurred expense for
such person otherwise entitled to payment, in such manner and proportions as the
Committee may determine. Any such payment shall be a complete discharge of the
liabilities of Equitable under this Agreement.
3.4) Nothing contained herein shall be construed as conferring upon the
Participant the right to continue in the service of Equitable as a member of the
Board of Directors.
3.5) This Agreement shall be binding upon and inure to the benefit of
Equitable, its successors and assigns and the Participant and his/her heirs,
executors, administrators and legal representatives.
3.6) Equitable may terminate this Plan at any time. Upon such termination,
the Committee shall dispose of any benefits of the Participant as provided in
Section 2.
Equitable may also amend the provisions of this Plan at any time;
provided, however, that no amendment shall affect the rights of the Participant,
or his/her beneficiaries, to the receipt of payment of benefits to the extent of
any compensation deferred before the time of the amendment.
This Agreement shall terminate when the payment due under this Agreement
is made.
3.7) This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
Section 4 - Committee
4.1) The Committee's interpretation and construction of the Agreement, and
the actions thereunder, including the amount or recipient of the payment to be
made therefrom, shall be binding and conclusive on all persons for all purposes.
The Committee members shall not be liable to any person for any action taken or
omitted in connection with the interpretation and administration of this
Agreement unless attributable to his/her own willful misconduct or lack of good
faith.
IN WITNESS WHEREOF, Equitable has caused this Agreement to be executed by
its duly authorized officers and the Participant has hereunto set his/her hand
as of the date first above written.
ATTEST: EQUITABLE RESOURCES, INC.
s/ Audrey C. Moeller s/ Donald I. Moritz
- -------------------------- --------------------------------
Vice President and President and
Corporate Secretary Chief Executive Officer
WITNESS: (Participant)
s/ Robert Domm s/ Phyllis A. Savill
- -------------------------- --------------------------------
Robert Domm Phyllis A. Savill
Exhibit 10.17
EMPLOYMENT AGREEMENT
This Agreement made this ____ day of ______, 1998 by and between
Equitable Resources, Inc., a Pennsylvania corporation having a business address
at 420 Boulevard of the Allies, Pittsburgh, Pennsylvania 15219 (Equitable
Resources, Inc. and its subsidiary companies hereinafter collectively known as
the "Company") and ______________________________ ("the Employee").
WITNESSETH
Whereas, Equitable Resources, Inc. ("the Company") is willing to grant
to the Employee certain additional benefits in consideration of the Employee's
agreement to comply with specific post-employment non-competition requirements;
and
Whereas, the Company and the Employee wish to enter into this agreement
to reflect their understanding of those benefits and requirements;
Now therefore, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. If the employment of the Employee with the Company is terminated by
the Company for any reason (other than as the result of a conviction of a
felony, a crime of moral turpitude or fraud, as the result of the Employee's
willful and continuous engagement in conduct which is demonstrably and
materially injurious to the Company, or as the result of a willful refusal by
the Employee to perform his or her job duties in a reasonable manner) or if the
Employee resigns within ninety (90) days of receiving a demotion and/or a
reduction in the Employee's salary, the Employee shall receive, from the date of
termination, in addition to payments to which the Employee is entitled under the
Company's severance pay plan, twelve (12) months of base salary payments at the
Employee's salary level in effect at the time of such termination or prior to
such salary reduction. Such base salary amount shall be paid by the Company to
the Employee in one lump sum payable within thirty (30) days of termination or
resignation hereunder.
2. For a period of twelve (12) months from the termination date of his
or her employment, the Employee will not (i) on his or her own behalf or on
behalf of any company for which he or she works, solicit business from customers
of the Company with whom he or she dealt with when employed by the Company or
from any parties to whom he or she attempted to market the Company's products
and services; (ii) engage in any business activity competitive with any project
or proposed project which has been discussed by the Employee in the course of
his employment with the Company or any project or proposed project with respect
to which the Company has initiated any business activity; (iii) take away or
interfere, or attempt to interfere, with any custom, trade or existing
contractual relations of the Company, including any business project or any
contemplated business project which representatives of the Company have
discussed with any potential participant in such project, or (iv) interfere, or
attempt to interfere with any officer, employee, representative, or agent of the
Company, or induce, or attempt to induce, any of them to leave the employ of the
Company, its successors, assigns, or affiliates, or to violate the terms of
their contracts with the Company, or (v) accept employment with any company,
partnership or other entity engaged in the utility or energy services marketing
business within a fifty (50) mile radius of any location at which the Company
engages in such business.
3. The Company may terminate this Agreement upon twelve (12) months'
prior written notice to the Employee; provided that all provisions of this
Agreement shall apply to any event specified in paragraph 1 or 2 hereof
occurring prior to the expiration of such twelve (12) month period. In any case,
this Agreement shall immediately terminate and be of no further force and effect
if any person, corporation or other entity acquires 20% or more of the Company's
common stock unless such acquisition is approved by a vote of two-thirds of the
Company's Board of Directors as constituted immediately prior to such
acquisition.
4. To the extent that any provision of this Agreement is deemed
unenforceable in any court of law such provision may be modified by such court
to the extent necessary to make this Agreement enforceable.
5. In the event of any controversy, dispute or claim arising out of, or
relating to this Agreement, or the breach thereof, the Company and the Employee
agree that such underlying controversy, dispute or claim shall be settled by
arbitration conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association ("AAA"). The matter shall be heard and decided,
and awards rendered by a panel of three (3) arbitrators (the "Arbitration
Panel"). The Company and the Employee shall each select one arbitrator from the
AAA National Panel of Commercial Arbitrators (the "Commercial Panel") and AAA
shall select a third arbitrator from the Commercial Panel. The award rendered by
the Arbitration Panel shall be final and binding as between the parties hereto
and their heirs, executors, administrators, successors and assigns, and judgment
on the award may be entered by any court having jurisdiction thereof.
6. This Agreement shall inure to the benefit of any successors or
assigns of the Company.
7. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
8. This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written. This Agreement may not be
changed, amended, or modified, except by a written instrument signed by the
parties.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its officers thereunto duly authorized, and the Employee has
hereunto set his hand, all as of the day and year first above written.
ATTEST: EQUITABLE RESOURCES, INC.
By:
- ---------------------------------- --------------------------------
WITNESS: EMPLOYEE:
- ---------------------------------- -----------------------------------
Exhibit 21
EQUITABLE RESOURCES, INC.
SUBSIDIARY COMPANIES
Andex Energy, Inc.
EQT Capital Corporation
Equitable Pipeline Company
Equitable Power Services Company
Equitable Resources (Argentina) Company
Equitable Resources Energy Company
Equitable Storage Company, L.L.C.
Equitrans, L.P.
EREC Canada Ltd.
EREC Nevada, Inc.
ERI Enterprises, L.L.C.
ERI Global Partners, Inc.
ERI Holdings
ERI Holdings II
ERI Investments, Inc.
ERI JAM, LLC
ERI Power Services Canada Ltd.
ERI Services Canada Ltd.
ERI Services, Inc.
ERI Services (St. Lucia) Limited
ERI Trading Company
ET Avoca Company
ET Blue Grass Company
ET Development Company, L.L.C.
420 Energy Investments, Inc.
IEC Hunterdon, Inc.
IEC Management Services, Inc.
IEC Montclair, Inc.
IEC Plymouth, Inc.
Independent Energy Corporation
Independent Energy Finance Corporation
Independent Energy Operations, Inc.
Kentucky West Virginia Gas Company, L.L.C.
LIG Chemical Company
LIG, Inc.
LIG Liquids Company L.L.C.
Louisiana Intrastate Gas Company L.L.C.
Nora Transmission Company
Northeast Energy Services, Inc.
Three Rivers Pipeline Corporation
Three Rivers UtiliCom, Inc.
Tuscaloosa Pipeline Company
Exhibit 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated February 24,
1998, with respect to the consolidated financial statements and schedule of
Equitable Resources, Inc. included in this Annual Report (Form 10-K) for the
year ended December 31, 1997 in the Prospectus part of the following
Registration Statements:
Registration Statement No. 33-52151 on Form S-8 pertaining to the 1994
Equitable Resources, Inc. Long-Term Incentive Plan
Registration Statement No. 33-52137 on Form S-8 pertaining to the 1994
Equitable Resources, Inc. Non-Employee Directors' Stock Incentive Plan;
Post-Effective Amendment No. 2 to Registration Statement No. 2-69010 on
Form S-8 pertaining to the Equitable Resources, Inc. Key Employee
Restricted Stock Option and Stock Appreciation Rights Incentive
Compensation Plan;
Post-Effective Amendment No. 1 to Registration Statement No. 33-00252 on
Form S-8 pertaining to the Equitable Resources, Inc. Employee Savings Plan;
Post-Effective Amendment No. 1 to Registration Statement No. 33-10508 on
Form S-8 pertaining to the Equitable Resources, Inc. Key Employee
Restricted Stock Option and Stock Appreciation Rights Incentive
Compensation Plan;
Registration Statement No. 33-53703 on Form S-3 pertaining to the
registration of $100,000,000 Medium Term Notes, Series C of Equitable
Resources, Inc.;
Registration Statement No. 33-62025 on Form S-3 pertaining to the
registration of 71,110 shares of Equitable Resources, Inc. common stock;
Registration Statement No. 33-62027 on Form S-3 pertaining to the
registration of 161,454 shares of Equitable Resources, Inc. common stock;
Registration Statement No. 333-01879 on Form S-8 pertaining to the
Equitable Resources, Inc. Employee Stock Purchase Plan;
Registration Statement No. 333-03149 on Form S-3 pertaining to the
registration of 239,316 shares of Equitable Resources, Inc. common stock;
Registration Statement No. 333-06839 on Form S-3 pertaining to the
registration of $168,000,000 of debt securities of Equitable Resources,
Inc.;
Registration Statement No. 333-22529 on Form S-8 pertaining to the
Equitable Resources, Inc. Employee Savings and Protection Plan;
Registration Statement No. 333-20323 on Form S-3 pertaining to the
registration of 164,345 shares of Equitable Resources, Inc. common stock;
Registration Statement No. 333-31877 on Form S-3 pertaining to the
registration of 2,091,407 shares of Equitable Resources, Inc. common stock;
Registration Statement No. 333-32197 on Form S-8 pertaining to the
Equitable Resources, Inc. Nonstatutory Stock Option Plan.
By /s/ Ernst & Young LLP
----------------------------
Ernst & Young LLP
Pittsburgh, Pennsylvania
March 20, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
In the following financial data schedule, Earnings Per Share - Basic are listed
in the Earnings Per Share - Primary field. Due to Edgar filing rules and
required tags, the EPS-Primary field could not be changed to read EPS-Basic.
See Notes A and M to the consolidated financial statements.
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED
FROM FINANCIAL STATEMENTS INCLUDED
IN THE ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 69,442
<SECURITIES> 0
<RECEIVABLES> 370,698
<ALLOWANCES> 9,985
<INVENTORY> 37,156
<CURRENT-ASSETS> 684,734
<PP&E> 2,210,789
<DEPRECIATION> 704,294
<TOTAL-ASSETS> 2,411,010
<CURRENT-LIABILITIES> 745,700
<BONDS> 417,564
0
0
<COMMON> 268,328
<OTHER-SE> 555,192
<TOTAL-LIABILITY-AND-EQUITY> 2,411,010
<SALES> 2,151,015
<TOTAL-REVENUES> 2,151,015
<CGS> 1,636,332
<TOTAL-COSTS> 2,038,577
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 16,386
<INTEREST-EXPENSE> 45,678
<INCOME-PRETAX> 124,202
<INCOME-TAX> 46,145
<INCOME-CONTINUING> 78,057
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,057
<EPS-PRIMARY> 2.17
<EPS-DILUTED> 2.16
</TABLE>
