<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1997
REGISTRATION NO. 333-19363
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BARRETT RESOURCES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-0832476
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1515 ARAPAHOE STREET, TOWER 3, SUITE 1000
DENVER, COLORADO 80202
(303) 572-3900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
EUGENE A. LANG, JR., ESQUIRE, SENIOR VICE PRESIDENT--GENERAL COUNSEL
BARRETT RESOURCES CORPORATION
1515 ARAPAHOE STREET, TOWER 3, SUITE 1000
DENVER, COLORADO 80202
(303) 572-3900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ALAN L. TALESNICK, ESQUIRE MICHAEL P. FINCH, ESQUIRE MARK ZVONKOVIC, ESQUIRE
FRANCIS B. BARRON, ESQUIRE VINSON & ELKINS L.L.P. CHRISTINE B. LAFOLLETTE,
BEARMAN TALESNICK & 2300 FIRST CITY TOWER ESQUIRE
CLOWDUS 1001 FANNIN ANDREWS & KURTH L.L.P.
PROFESSIONAL CORPORATION HOUSTON, TEXAS 425 LEXINGTON AVENUE
1200 SEVENTEENTH STREET (713) 758-2222 NEW YORK, NEW YORK 10017
DENVER, COLORADO 80202 (212) 850-2800
(303) 572-6500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after effective date of Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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<PAGE>
[LOGO OF BARRETT RESOURCES CORPORATION APPEARS HERE]
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE +
+SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE +
+TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT +
+CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL +
+THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 29, 1997
$150,000,000
BARRETT RESOURCES CORPORATION
% SENIOR NOTES DUE 2007
-----------
The % Senior Notes due 2007 of Barrett Resources Corporation will be senior
unsecured obligations of the Company and will mature on , 2007. Interest
on the Notes is payable on and of each year, commencing , 1997.
The Notes may be redeemed at any time, at the option of the Company, in whole
or in part, at a price equal to 100% of the principal amount plus accrued and
unpaid interest (if any) to the date of redemption plus a Make-Whole Premium,
if any, relating to the then prevailing Treasury Yield and the remaining life
of the Notes. The Notes will rank pari passu in right of payment with any
existing and future senior unsecured indebtedness of the Company, including
under its bank credit facility, and senior in right of payment to all existing
and future subordinated indebtedness of the Company. See "Description of
Notes."
The Company will use the net proceeds of the Offering to repay in full
indebtedness under its bank credit facility, to fund a portion of its planned
exploration and development activities and for other general corporate
purposes, including possible acquisitions. See "Use of Proceeds."
The Notes will be evidenced by a Global Certificate in fully registered form
without coupons, deposited with a custodian for and registered in the name of a
nominee of The Depository Trust Company. Except as described herein, beneficial
interests in the Global Certificate will be shown on, and transfers thereof
will be effected only through, records maintained by DTC and its direct and
indirect participants. See "Description of Notes." The Notes are not entitled
to any sinking fund. The Company does not intend to apply for listing of the
Notes on any securities exchange or for inclusion of the Notes in any automated
quotation system.
SEE "RISK FACTORS" COMMENCING ON PAGE 9 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS IN CONNECTION WITH AN INVESTMENT IN THE
NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(2) COMPANY(1)(3)
----------------- ------------ -------------
<S> <C> <C> <C>
Per Note..................................... % % %
Total........................................ $ $ $
</TABLE>
- -----
(1) Plus accrued interest, if any, from , 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting estimated expenses of $450,000 payable by the Company.
-----------
The Notes offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
Notes will be ready for delivery in book-entry form only through the facilities
of DTC in New York, New York, on or about , 1997, against payment therefor
in immediately available funds.
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
LEHMAN BROTHERS
PETRIE PARKMAN & CO.
-----------
The date of this Prospectus is , 1997.
<PAGE>
[CORE AREAS OF ACTIVITY MAP APPEARS HERE]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus and
in the documents incorporated by reference into this Prospectus. As used
herein, the "Company" or "Barrett" means Barrett Resources Corporation and its
subsidiaries unless the context requires otherwise. Unless otherwise indicated,
all references to annual or quarterly periods refer to the Company's fiscal
year ending December 31. Unless otherwise indicated herein, the information in
this Prospectus includes the effects of the restatement of the Company's
financial, operating and reserve information to include Plains Petroleum
Company ("Plains") on a combined basis effective for all periods as a result of
the July 18, 1995 merger with Plains, which was accounted for as a pooling of
interests. Investors should carefully consider the information set forth under
the heading "Risk Factors." Certain terms used herein relating to the oil and
gas industry are defined in "Certain Definitions" included on pages 55 and 56
of this Prospectus.
THE COMPANY
GENERAL
Barrett is an independent natural gas and crude oil exploration and
production company with core areas of activity in the Rocky Mountain Region of
Colorado, Wyoming and Utah; the Mid-Continent Region of Kansas, Oklahoma, New
Mexico and Texas; and the Gulf of Mexico Region of offshore Texas and
Louisiana. At December 31, 1995, the Company's estimated proved reserves were
591.3 Bcfe (87% natural gas and 13% crude oil) with an implied reserve life of
10.2 years based on 1995 total production of 57.9 Bcfe. The Company's
preliminary estimate of its proved reserves as of December 31, 1996 is 785 Bcfe
(83% natural gas and 17% crude oil) with an implied reserve life of 10.9 years
based on 1996 total production of 72 Bcfe. The Company anticipates that the
final estimate, which will be available on or about February 10, 1997, will be
at least 785 Bcfe. See "--Recent Developments--Preliminary Estimate of Proved
Reserves as of December 31, 1996."
The Company concentrates its activities in core areas in which it has
accumulated detailed geologic knowledge and developed significant management
expertise. The Company continues to build on its interests in the Piceance
Basin in northwestern Colorado, the Uinta Basin of northeastern Utah, the
Anadarko and Arkoma Basins in Oklahoma, the Wind River Basin in Wyoming and the
Gulf of Mexico. The Company also has significant interests in the Hugoton
Embayment in Kansas and Oklahoma, the Permian Basin in Texas and New Mexico and
the Powder River Basin in Wyoming. At December 31, 1995, these principal areas
of focus represented approximately 93% of the Company's estimated proved
reserves.
The Company continues to experience significant growth in its proved
reserves, production volumes, revenues and cash flow, particularly in the Wind
River, Piceance, Anadarko, Arkoma and Uinta Basins. The Company currently is
pursuing development projects in the Wind River, Piceance, Anadarko, Arkoma and
Uinta Basins, and exploration projects in the Wind River and Anadarko Basins,
the Gulf of Mexico and the Republic of Peru. The Company's average net daily
production increased to 192 MMcfe for the nine months ended September 30, 1996
from 159 MMcfe for the full year of 1995.
As of September 30, 1996, the Company owned interests in 2,124 producing
wells and operated 1,131 of these wells. These operated wells contributed
approximately 82% of Barrett's natural gas and oil production for the nine
months ended September 30, 1996. The Company also owns interests in and
operates a natural gas gathering system, a 27-mile pipeline and a natural gas
processing plant in the Piceance Basin.
3
<PAGE>
Barrett markets all of its own natural gas and oil production from wells that
it operates. In addition, the Company engages in natural gas trading
activities, which involve purchasing natural gas from third parties and selling
natural gas to other parties at prices and volumes that management anticipates
will result in profits to the Company. Through these natural gas trading
activities, the Company obtains knowledge and information that enables it to
more effectively market its own production. See "Business and Properties--
Natural Gas and Oil Marketing and Trading."
BUSINESS STRATEGY
Barrett's business strategy is to generate strong growth in reserves,
production, earnings and cash flow through exploration, development and
selective acquisitions of natural gas and oil properties in its core areas of
activity. The Company implements this strategy through a series of continuing
initiatives:
SPECIALIZED GEOLOGIC EXPERTISE. Both the CEO and President of Barrett are
experienced, practicing geologists. They have established a team of geologists
and geophysicists with expertise in the Company's core areas of activity. Prior
to undertaking projects in new areas, the Company assembles specialized
geologic expertise to identify and evaluate drilling prospects.
ACTIVE DRILLING PROGRAM. Barrett maintains a high quality, balanced portfolio
of lower risk development projects complemented by higher potential exploration
prospects. The Company's preliminary 1997 capital expenditure budget is $278
million, approximately 75% of which is allocated to drilling and production
activities. This budget, which is subject to revision based upon market
conditions and other factors, contemplates that the Company will participate in
drilling approximately 290 gross wells in 1997 as compared with 196 gross wells
drilled in 1996. The Company expects to continue high levels of drilling
activity after 1997.
ADVANCED TECHNOLOGY. The Company makes extensive use of advanced
technologies, including 3-D seismic and in-house analytical and processing
capabilities, to better define drilling prospects. The Company also uses
advanced production techniques, such as alkaline surfactant polymer ("ASP")
technology, in its enhanced recovery operations.
OPERATING CORE PROPERTIES. At September 30, 1996, Barrett served as operator
for 1,131 wells, which contributed approximately 82% of the Company's
production during the nine months ended September 30, 1996. As operator, the
Company coordinates drilling activities and arranges for the production,
gathering and sale of its natural gas and oil from operated wells. Serving as
operator enables the Company to exert greater control over the cost and timing
of its exploration, development and production activities.
CONTINUING COST MANAGEMENT. The Company continually strives to reduce
expenses through implementation of cost control programs and active management
of its operations, personnel and administrative activities. Current cost
management initiatives include entering into multi-well and longer term
contracts with drilling companies and participating in alliances with oil field
service companies to obtain more favorable terms.
FINANCIAL STRENGTH. The Company is committed to maintaining financial
flexibility in order to pursue exploration and development activities and to
take advantage of other opportunities that may arise. Historically, the Company
has funded its growth primarily through the issuance of common stock, including
four public stock offerings, its 1995 stock-for-stock merger with Plains and
several recent acquisitions financed with common stock. The issuance of the
Notes offered hereby (the "Notes") adds ten-year fixed rate debt financing to
the Company's capital structure, which will improve Barrett's liquidity,
diversify its capital base and enhance the Company's ability to pursue its
business strategy.
4
<PAGE>
SELECTIVE RESERVE AND LEASEHOLD ACQUISITIONS. From time to time the Company
seeks to augment activities in its core areas, establish operations in new
areas and build acreage positions for exploration prospects through selective
acquisitions. As a result of acquisitions completed during 1996, the Company
increased its working interests in the Piceance Basin, expanded its operations
in the Uinta Basin and substantially increased its leased acreage position in
the Gulf of Mexico.
RECENT DEVELOPMENTS
PRELIMINARY ESTIMATE OF PROVED RESERVES AS OF DECEMBER 31, 1996. The Company
has preliminarily estimated that, as of December 31, 1996, the Company's proved
reserves were 785 Bcfe. This estimate was prepared by the Company and has not
been reviewed by the Company's independent petroleum engineers. The Company
anticipates that the final estimate of its proved reserves as of December 31,
1996, which will have been reviewed by the Company's independent petroleum
engineers and will be available on or about February 10, 1997, will be at least
785 Bcfe. See "Risk Factors--Engineer's Estimates of Reserves and Future Net
Revenues" and "Business and Properties--Reserves."
CAPITAL EXPENDITURES. The Company's preliminary 1997 capital expenditure
budget for natural gas and oil activities is $278 million. Total estimated 1997
expenditures are allocated approximately 41% to the Gulf of Mexico Region, 25%
to the Rocky Mountain Region, 19% to the Mid-Continent Region, 6% to
international activities and 9% to possible acquisitions. This budget is
subject to revision based upon market conditions and other factors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business and Properties--Core Areas of Activities."
OFFSHORE FEDERAL LEASE SALES. At the September 1996 Western Gulf of Mexico
Offshore Lease Sale, the Company significantly expanded its position in the
Gulf of Mexico. The Minerals Management Service ("MMS") awarded the Company
leases covering 17 blocks. The Company has a 100% working interest in 14 of
these blocks and a 50% working interest in the three other blocks. The
Company's net share of the bonus payments for these leases was $34.4 million.
As a result of these transactions, Barrett holds interests in 46 lease blocks
in the Gulf of Mexico covering approximately 185,000 gross acres. See "Business
and Properties--Core Areas of Activity--Gulf of Mexico Region."
UINTA BASIN ACQUISITIONS. In November 1996, the Company expanded its
operations in the Uinta Basin of northeastern Utah when it acquired producing
and non-producing natural gas and oil properties in the Altamont-Bluebell
Field. The effective date of the acquisition of a significant portion of these
properties is January 1, 1997. The purchase included 120 operated wells with an
average working interest of 80%, together with 100,000 gross and 72,000 net
acres of leasehold interests. The total purchase price was approximately $32
million, including approximately $14 million in cash, 50,000 shares of the
Company's common stock, and certain non-strategic producing properties owned by
the Company. In January 1997, the Company acquired additional interests in the
Altamont-Bluebell Field for an aggregate purchase price of $3.5 million in
cash. These interests consist of 16 non-operated wells with average working
interests of 42% together with approximately 10,000 gross and 4,600 net acres
of leasehold interests. See "Business and Properties--Core Areas of Activity--
Rocky Mountain Region--Uinta Basin."
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Issuer Barrett Resources Corporation.
Securities Offered $150,000,000 principal amount of % Senior Notes due
2007.
Maturity Date , 2007.
Interest Payment Dates and of each year, beginning on , 1997.
Optional Redemption The Notes may be redeemed at any time, at the option of
the Company, in whole or in part, at a price equal to
100% of the principal amount plus accrued and unpaid
interest (if any) to the date of redemption plus a Make-
Whole Premium (if any) relating to the then prevailing
Treasury Yield and the remaining life of the Notes.
Mandatory Redemption None.
Ranking The Notes will be senior unsecured obligations of the
Company and will rank pari passu in right of payment with
any existing and future senior unsecured indebtedness of
the Company, including under its bank credit facility,
and senior in right of payment to all existing and future
subordinated indebtedness of the Company.
Certain Covenants The indenture (the "Indenture") relating to the Notes
will contain limitations on, among other things, the
Company's ability to (i) incur indebtedness secured by
certain liens, (ii) engage in certain sale/leaseback
transactions, and (iii) engage in certain merger,
consolidation or reorganization transactions. See
"Description of Notes."
Use of Proceeds The net proceeds from the offering of the Notes will be
used to repay in full indebtedness under the Company's
bank credit facility ($70 million outstanding as of
December 31, 1996 and $85 million outstanding as of
January 28, 1997), to fund a portion of the Company's
planned exploration and development activities and for
other general corporate purposes, including possible
acquisitions. See "Use of Proceeds."
</TABLE>
6
<PAGE>
SELECTED CONSOLIDATED FINANCIAL, RESERVE AND OPERATING DATA
The following table sets forth the selected historical consolidated
financial, reserve and operating data of Barrett for each of the periods
indicated. The historical financial data of Barrett for the three-year period
ended December 31, 1995 have been derived from Barrett's audited consolidated
financial statements. The historical financial data for the nine months ended
September 30, 1995 and 1996 are derived from unaudited financial statements of
the Company. Production data for all periods are unaudited. Barrett's
previously reported data for 1995 and prior years have been restated to reflect
the merger with Plains under the pooling of interests method of accounting and
the change in fiscal year end from September 30 to December 31. The selected
consolidated financial, reserve and operating data set forth below should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and notes thereto and other information included elsewhere in this Prospectus
and the documents incorporated herein by reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER NINE MONTHS ENDED
31, SEPTEMBER 30,
----------------------- -------------------
1993 1994 1995(1) 1995(1) 1996
------ ------ ------- ---------- --------
(UNAUDITED)
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE AND SALES PRICE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (2):
Revenues.......................... $106.1 $109.5 $128.0 $ 92.7 $ 136.1
Depreciation, depletion and
amortization..................... 20.2 22.8 33.5 23.6 31.9
Interest expense(3)............... 0.7 0.9 4.6 3.3 3.2
Income (loss) before income taxes
and cumulative effect of change
in method of accounting for
postretirement benefits.......... 21.0 16.4 (0.4) (3.1) 27.4
Net income (loss)................. 13.7 11.3 (2.2) (5.9) 17.0
Net income (loss) per share....... 0.55 0.46 (0.09) (0.23) 0.62
CASH FLOW STATEMENT DATA:
Cash flow from operations before
changes in working capital....... $ 40.5 $ 39.0 $ 33.4 $ 19.5 $ 57.5
Cash flow from operations after
changes in working capital....... 41.6 36.6 35.5 16.5 62.7
Cash flow used in investing
activities....................... 33.2 91.0 82.3 46.7 122.1
Cash flow provided by financing
activities....................... 11.2 37.2 41.9 36.5 61.3
OTHER FINANCIAL DATA:
EBITDA(4)......................... $ 41.2 $ 39.3 $ 37.0 $ 23.3 $ 61.7
Additions to property, plant and
equipment........................ 45.5 95.6 82.8 46.9 124.1
EBITDA/Interest expense(5)........ 56.9x 37.1x 7.3x 6.4x 19.5x
Ratio of earnings to fixed
charges(6)....................... 20.3x 12.2x 0.9x 0.1x 8.8x
RESERVE AND OPERATING DATA:
Estimated proved reserves
Natural gas (Bcf)................ 364.8 458.8 513.5 -- --
Oil and condensate (MMBbls)...... 6.9 11.4 13.0 -- --
Total (Bcfe).................... 406.5 527.5 591.3 -- --
Present value of estimated future
net revenues before future income
taxes discounted at 10%(7)....... $277.6 $322.7 $432.6 -- --
Standardized measure of discounted
net cash flows (8)............... $203.1 $242.6 $309.9 -- --
Production
Natural gas (Bcf)................ 31.7 33.3 47.7 33.9 44.1
Oil and condensate (MMBbls)...... 1.3 1.3 1.7 1.3 1.4
Total (Bcfe).................... 39.5 41.0 57.9 41.7 52.5
Reserves to production ratio
(years).......................... 10.3 12.9 10.2 -- --
Average sales price
Natural gas ($/Mcf).............. $ 1.94 $ 1.83 $ 1.47 $ 1.48 $ 1.73
Oil and condensate ($/Bbl)....... 14.93 13.95 15.76 15.84 18.61
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30, 1996
------------------- ----------------------
1994 1995 ACTUAL AS ADJUSTED (9)
--------- --------- ------ ---------------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........... $ 12.3 $ 7.5 $ 9.4 $ 144.0
Working capital..................... 2.5 3.7 2.0 136.6
Total assets........................ 311.0 340.4 472.1 610.1
Total debt.......................... 53.0 89.0 12.0 150.0
Stockholders' equity................ 188.1 191.8 363.6 363.6
Total capitalization(10)............ 241.1 280.8 375.6 513.6
</TABLE>
- --------
(1) Excluding 1995 nonrecurring transaction costs relating to the Plains merger
totaling $14.2 million ($13.2 million for the nine months ended September
30, 1995), net income (loss) for the year ended December 31, 1995 and the
nine months ended September 30, 1995 would be $9.5 million and $7.0
million, respectively, EBITDA would be $51.2 million and $36.5 million,
respectively, and cash flow from operations before changes in working
capital would be $47.6 million and $32.7 million, respectively. EBITDA and
cash flow from operations before changes in working capital are not
measures determined pursuant to generally accepted accounting principles
("GAAP") nor are they alternatives to GAAP income or cash flow provided by
operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(2) Plains used the successful efforts method of accounting and adopted the
full cost method used by Barrett in the retroactively restated financial
statements. See Note 2 to the Consolidated Financial Statements.
(3) Interest expense is net of capitalized interest of $0, $0.1 million and
$0.4 million for the years ended December 31, 1993, 1994 and 1995,
respectively, and $0.3 million and $0, for the nine months ended September
30, 1995 and 1996, respectively. On a pro forma basis, assuming the sale of
the Notes and the application of a portion of the net proceeds therefrom to
repay $70 million under the bank credit facility at the beginning of each
period, interest expense would be $12.5 million for the year ended December
31, 1995 and $9.4 million for the nine months ended September 30, 1996.
(4) EBITDA is defined as income before income taxes less interest income, plus
interest expense, plus depreciation, depletion and amortization expense.
EBITDA does not purport to reflect any measure of operations or cash flow.
(5) Represents the ratio of EBITDA to interest expense. On a pro forma basis,
assuming the sale of the Notes and the application of a portion of the net
proceeds therefrom to repay $70 million under the bank credit facility at
the beginning of each period, and excluding the nonrecurring 1995 merger
costs, EBITDA/Interest expense would be 4.0x for the year ended December
31, 1995 and 6.6x for the nine months ended September 30, 1996.
(6) For purposes of determining the ratio of earnings to fixed charges,
earnings are computed as net income (loss) before income taxes, plus fixed
charges. Fixed charges consist of interest expense, whether expensed or
capitalized, on all indebtedness plus amortization of debt issuance costs.
For the year ended December 31, 1995 and the nine months ended September
30, 1995, earnings were not sufficient to cover historical fixed charges
due to the incurrence of $14.2 million of nonrecurring merger costs ($13.2
million for the nine months ended September 30, 1995). On a pro forma
basis, assuming the sale of the Notes and the application of a portion of
the net proceeds therefrom to repay $70 million under the bank credit
facility at the beginning of each period, and excluding the nonrecurring
1995 merger costs, the ratio of earnings to fixed charges would be 1.6x for
the year ended December 31, 1995 and 3.4x for the nine months ended
September 30, 1996.
(7) The Present value of estimated future net revenues on a non-escalated basis
is based on weighted average prices realized by the Company of $1.95 per
Mcf of natural gas and $11.05 per Bbl of oil at December 31, 1993, $1.67
per Mcf of natural gas and $14.43 per Bbl of oil at December 31, 1994 and
$1.77 per Mcf of natural gas and $17.35 per Bbl of oil at December 31,
1995.
(8) The Standardized measure of discounted net cash flows prepared by the
Company represents the Present value of estimated future net revenues after
income taxes discounted at 10%.
(9) As adjusted to give effect to the issuance and sale of the $150,000,000
principal amount of the Notes and the application of net proceeds
therefrom. See "Use of Proceeds" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
(10)The sum of total debt and stockholders' equity.
8
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, including
but not limited to information under the heading "Disclosure Regarding
Forward-Looking Statements," the following risk factors should be considered
when evaluating an investment in the Notes offered hereby:
VOLATILITY OF PRICES AND AVAILABILITY OF MARKETS
The Company's revenues, profitability and future rate of growth are
dependent in part upon prevailing prices for natural gas and oil, which can be
extremely volatile. There can be no assurance that current price levels can be
sustained. Prices also are affected by actions of state and local agencies,
the United States and foreign governments, and international cartels. These
external factors and the volatile nature of the energy markets make it
difficult to estimate future prices of natural gas and oil. Any substantial or
extended decline in the price of natural gas would have a material adverse
effect on the Company's financial condition and results of operations,
including reduced cash flow and borrowing capacity. All of these factors are
beyond the control of the Company. The marketability of the Company's
production depends in part upon the availability, proximity and capacity of
natural gas gathering systems, pipelines and processing facilities. Federal
and state regulation of natural gas and oil production and transportation,
general economic conditions, changes in supply and changes in demand all could
adversely affect the Company's ability to produce and market its natural gas
and oil. If market factors were to change dramatically, the financial impact
on the Company could be substantial. For the year ended December 31, 1995, the
Company's production and reserve base were approximately 82% and 87% natural
gas, respectively, on an energy equivalent basis. As a result, the Company's
earnings and cash flow are more sensitive to fluctuations in the price of
natural gas than to fluctuations in the price of oil. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business and Properties--Natural Gas and Oil Marketing and Trading."
The Company engages in hedging activities with respect to some of its
natural gas and oil production through a variety of financial arrangements
designed to protect against price declines, including swaps. To the extent
that Barrett engages in such activities, it may be prevented from realizing
the benefits of price increases above the levels of the hedges. Risks related
to hedging activities include the risk that counterparties to hedge
transactions will default on obligations to the Company. The Company maintains
a Risk Management Committee to oversee its production hedging and trading
activities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business and Properties--Natural Gas and Oil
Marketing and Trading."
The Company reports its operations using the full cost method of accounting
for natural gas and oil properties. Under full cost accounting rules, the net
capitalized costs of natural gas and oil properties may not exceed a "ceiling"
limit of the present value of estimated future net revenues from proved
reserves, discounted at 10%, plus the lower of cost or fair market value of
unproved properties. This rule requires calculating future revenues at
unescalated prices in effect as of the end of each fiscal quarter and requires
a write-down if the net capitalized costs of the natural gas and oil
properties exceed the ceiling limit, even if price declines are temporary. The
risk that the Company will be required to write-down the carrying value of its
natural gas and oil properties increases when natural gas and oil prices are
depressed or unusually volatile. A ceiling limitation write-down is a one-time
charge to earnings, which does not impact cash flow from operating activities.
OTHER INDUSTRY AND BUSINESS RISKS
The Company competes in the areas of natural gas and oil exploration,
production, development and transportation with other companies, many of which
may have substantially greater financial and other resources. The nature of
the natural gas and oil business also involves a variety of risks,
9
<PAGE>
including the risks of operating hazards such as fires, explosions, cratering,
blow-outs, encountering formations with abnormal pressures and, in horizontal
wellbores, the increased risk of mechanical failure and collapsed holes, and
damage or loss from adverse weather and seas, the occurrence of any of which
could result in losses to the Company. The operation of the Company's natural
gas processing plant and its natural gas gathering systems involves certain
risks, including explosions and environmental hazards caused by pipeline leaks
and ruptures. The effect of these hazards are increased with respect to the
Company's Gulf of Mexico activities due to the difficulty of containing leaks
and ruptures in offshore locations as well as hazards inherent in marine
operations, such as capsizing, grounding, collision and damage from weather or
sea conditions or unsound location. In accordance with customary industry
practices, the Company maintains insurance against some, but not all, of these
risks in amounts that management believes to be reasonable. The occurrence of
a significant event that is not fully insured could have a material adverse
effect on the Company's financial position. International operations are
subject to certain risks, including expropriation of assets, governmental
changes in applicable law, policies and contract terms, foreign government
approvals, political instability, guerilla activity, payment delays, and
currency exchange and repatriation losses.
The Company's revenues depend on its level of success in acquiring or
finding additional reserves. Certain areas in which the Company is engaged in,
or planning, significant exploration and development activities are
experiencing increased activity by other companies. This may result in
shortages of, or delays in the availability of, drilling rigs and other
equipment and increased costs as more users pursue available rigs. Except to
the extent that the Company acquires properties containing proved reserves or
conducts successful exploration and development activities, or both, the
proved reserves of the Company will decline as reserves are produced. There
can be no assurance that the Company's planned exploration and development
projects will result in additional reserves or that the Company will have
future success in drilling productive wells.
Natural gas trading activities involve a high degree of risk because of the
inherent uncertainties associated with the natural gas trading process. These
uncertainties include the lack of predictability in natural gas prices, risk
of non-performance by counterparties, market imperfections caused by regional
price differentials, possible lack of liquidity in the trading markets and
possible failure of physical delivery. Although the possibility of lower
natural gas prices tends to add risk to the Company's exploration and
development activities, it is the possibility of unexpected price volatility
that represents a primary risk for the Company's natural gas trading
activities. In addition, natural gas trading is highly competitive and the
Company competes with several other companies, many of which have more
experience, personnel and other resources available to them. However, the
Company does not believe that any one competitor is dominant in the industry.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business and Properties--Natural Gas and Oil Marketing and
Trading."
ENGINEERS' ESTIMATES OF RESERVES AND FUTURE NET REVENUES
This Prospectus contains estimates of reserves and of future net revenues
which have been prepared by the Company and, with respect to estimates as of
and prior to December 31, 1995, have been reviewed by independent petroleum
engineers. However, petroleum engineering is not an exact science and involves
estimates based on many variable and uncertain factors. Estimates of reserves
and of future net revenues prepared by different petroleum engineers may vary
substantially depending, in part, on the assumptions made and may be subject
to adjustment either up or down in the future. The actual amounts of
production, revenues, taxes, development expenditures, operating expenses, and
quantities of recoverable natural gas and oil reserves to be encountered may
vary substantially from the engineers' estimates. Estimates of reserves also
are extremely sensitive to the market prices for natural gas and oil. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business and Properties--Reserves."
10
<PAGE>
FUTURE CAPITAL NEEDS
The Indenture under which the Notes will be issued restricts the Company's
ability to grant liens. However, the Company will be able to incur substantial
amounts of additional debt. Existing and possible future leverage of the
Company poses risks to the holders of the Notes. These risks include higher
interest rates on floating rate debt and the risk that the Company might not
be able to generate sufficient cash to service or repay the Notes and its
other existing and possible future debt and to adequately fund its capital
expenditures. Existing and possible future leverage also may reduce the
ability of the Company to respond to changing business and economic
conditions, particularly the ability to make capital expenditures or to
withstand competitive pressures.
GOVERNMENT REGULATION AND ENVIRONMENTAL RISKS
The production and sale of natural gas and oil are subject to a variety of
federal, state and local government regulations that may be changed from time
to time in response to economic or political conditions. The regulations
concern, among other matters, the prevention of waste, the discharge of
materials into the environment, the conservation of natural gas and oil,
pollution, permits for drilling operations, drilling bonds, reports concerning
operations, the spacing of wells, the unitization and pooling of properties,
and various other matters including taxes. The Company currently has a dispute
with the Internal Revenue Service. Although the Company believes it will
prevail in its position, there can be no assurance of a favorable outcome. See
Note 11 to the Consolidated Financial Statements. Many jurisdictions have at
various times imposed limitations on the production of natural gas and oil by
restricting the rate of flow for natural gas and oil wells below their actual
capacity to produce. In addition, many states have raised state taxes on
energy sources and additional increases may occur, although there can be no
certainty of the effect that increases in state energy taxes would have on
natural gas and oil prices. Although the Company believes it is in substantial
compliance with applicable environmental and other government laws and
regulations and to date such compliance has not had a material adverse effect
on the earnings or competitive position of the Company, there can be no
assurance that significant costs for compliance will not be incurred in the
future. Compliance with environmental laws, including the preparation of
environmental assessments and impact statements, can delay drilling activity,
thereby potentially reducing revenue and cash flow. See "Business and
Properties--Core Areas of Activity--Rocky Mountain Region--Wind River Project"
and "--Government Regulation of the Oil and Gas Industry."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes are estimated to
be $146.6 million after deducting underwriting discounts and estimated
offering expenses payable by the Company. The Company intends to use these net
proceeds to repay the outstanding balance on its bank credit facility, which
had $85 million outstanding as of January 28, 1997 at an average interest rate
of 6.16%. The remainder of the net proceeds will be used to fund a portion of
the Company's planned exploration and development activities and for other
general corporate purposes, including possible acquisitions. See
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources," and "Business and
Properties--Core Areas of Activity."
The estimated amounts and uses set forth above indicate the Company's
intentions for use of the net proceeds from the sale of the Notes. The Company
may reallocate the proceeds or utilize the proceeds for other natural gas and
oil opportunities the Company deems to be in its best interests, due to a
change in circumstances concerning matters such as economic conditions,
availability of additional debt financing or the existence of a property
acquisition or development opportunity.
The excess of net proceeds from the Offering after paying the outstanding
balance of the Company's bank credit facility will be placed temporarily in
certificates of deposit, short-term obligations of the United States
government, or other money-market instruments that are rated investment grade
or its equivalent until used for the purposes described above.
To date, funds borrowed under the Company's bank credit facility, which
matures on October 31, 2000, have been used primarily for the Company's
natural gas and oil activities. Texas Commerce Bank is a lending agent under
the Company's bank credit facility and is affiliated with Chase Securities
Inc., one of the Underwriters of the Offering. See "Underwriting."
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996 and as adjusted to give effect to the sale of the Notes as
of such date and the application of the net proceeds therefrom (assumed to be
approximately $146.6 million) as described under "Use of Proceeds." This table
should be read in conjunction with "Selected Consolidated Financial, Reserve
and Operating Data," "Use of Proceeds," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and notes thereto and other information included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------
ACTUAL AS ADJUSTED
------- -----------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents................................. $ 9.4 $ 144.0
======= =======
Debt:
Bank credit facility(1)................................. $ 12.0 $ --
Notes offered hereby.................................... -- 150.0
------- -------
Total debt............................................ $ 12.0 $ 150.0
Stockholders' equity:
Common stock, $.01 par value: 35,000,000 shares autho-
rized, 31,319,193 issued and outstanding(2)............ 0.3 0.3
Additional paid-in capital.............................. 241.4 241.4
Retained earnings....................................... 122.8 122.8
Treasury stock, at cost................................. (1.0) (1.0)
------- -------
Total stockholders' equity............................ $ 363.6 $ 363.6
------- -------
Total capitalization.................................. $ 375.6 $ 513.6
======= =======
</TABLE>
- --------
(1) As of December 31, 1996, the outstanding balance under the Company's bank
credit facility was $70 million with interest at the average rate of 6.51%
per annum, and as of January 28, 1997 the outstanding balance was $85
million with interest at the average rate of 6.16% per annum. See "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations-- Liquidity and Capital Resources" and Note 6 to
Consolidated Financial Statements for certain terms of the Company's bank
credit facility.
(2) Does not include 1,338,892 shares of common stock issuable upon exercise of
outstanding stock options.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On July 18, 1995, the Company consummated the merger of a wholly owned
subsidiary of the Company with Plains by issuing 12.8 million shares of its
common stock to the former Plains stockholders. As a result of this merger,
Plains became a wholly owned subsidiary of the Company. Also on July 18, 1995,
the Company changed its fiscal year end from September 30 to December 31. The
merger was accounted for using the pooling of interests method. The pooling of
interests method combines previously reported results as though the
combination had occurred at the beginning of the periods being presented.
Merger costs have been expensed during the 1995 year. The financial statements
of the Company and Plains for 1993 through 1995 have been restated and
adjusted for the merger with Plains and the change in fiscal year end. Due to
this restatement, these financial statements are not comparable to the
financial statements for the same periods as previously presented by the
Company or Plains. The following discussion should be read in conjunction with
the Consolidated Financial Statements and Notes thereto presented elsewhere in
this Prospectus.
LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures. Capital expenditures were $156 million for the nine
months ended September 30, 1996 as compared to $47 million for the nine months
ended September 30, 1995. Full year 1996 capital expenditures were
approximately $237 million and the preliminary capital expenditure budget for
1997 is $278 million.
Capital Sources. The Company's drilling activities and its acquisitions have
increased its reserve base and its productive capacity and, therefore, its
potential cash flow. The Company anticipates that funds available from the
Company's operations, the Notes offered hereby and borrowings under the
Company's bank credit facility will be sufficient to fund the capital
expenditures described above. At September 30, 1996, the Company had cash and
short-term investments of $9.4 million, working capital of $2.0 million,
property and equipment of $422.2 million and total assets of $472.1 million.
Compared to December 31, 1995, cash and short-term investments increased $1.9
million, working capital decreased $1.7 million and property and equipment
increased $121.5 million. Total assets increased by $131.4 million, funded by
the Company's cash flow and the issuance of 5.4 million shares of the
Company's common stock in June 1996. As of December 31, 1996, as adjusted for
the sale of the Notes and repayment of the $70 million outstanding under the
bank credit facility, the Company's cash and cash equivalents will increase by
$76.6 million.
During the first nine months of 1996 and 1995, the Company generated
operating cash flow of $57.5 million and $19.5 million, respectively, before
working capital changes. After working capital changes, cash flow provided by
operations was $62.7 million and $16.5 million, respectively. Excluding merger
costs, cash flow from operations before working capital changes for the first
nine months of 1995 was $32.7 million ($29.7 million after working capital
changes).
As of September 30, 1996 and December 31, 1995, respectively, the
outstanding balance under the bank credit facility was $12 million and $89
million, as compared with $53 million at December 31, 1994. The Company's bank
credit facility is an unsecured $200 million facility entered into by the
Company in July 1995 with a consortium of six banks. The amount of borrowing
base under the bank credit facility at any time is determined by the lenders
with reference to the collateral value of the Company's proved reserves and
the Company's projected cash requirements. The current borrowing base is $205
million, based on the banks' review of June 30, 1996 proved reserve
information and the Company's projected cash requirements. Upon issuance of
the Notes, representing $150 million of senior indebtedness of the Company,
the borrowing base will be reduced to $75 million. At the Company's election
at the time of borrowing funds, interest begins to accrue on those funds
either at the London interbank eurodollar rate (LIBOR) plus a spread ranging
from 0.5% to 1.0% (depending on
14
<PAGE>
the ratio of the Company's outstanding indebtedness to its borrowing base) or
at the U.S. prime rate of interest. The Company is required to pay interest on
a quarterly basis until the entire outstanding balance matures on October 31,
2000. As of December 31, 1996, the outstanding balance under the bank credit
facility was $70 million, which was accruing interest at an average rate of
6.51% per annum. As of January 28, 1997, the outstanding balance was $85
million with interest accruing at the average rate of 6.16% per annum.
From time to time the Company uses swaps to hedge the sales price of its
natural gas and oil. In a typical swap agreement, the Company and a
counterparty will enter into an agreement whereby one party will pay a fixed
price and the other will pay an index price on a specified volume of production
during a specified period of time. Settlement is made by the parties for the
difference between the two prices at approximately the same time as the
physical transactions. The intent of hedging activities is to reduce the
volatility associated with the sales prices of the Company's natural gas and
oil production. Although hedging transactions associated with the Company's
production minimize the Company's exposure to reductions in production revenue
as a result of unfavorable price changes, these transactions also limit the
Company's ability to benefit from favorable price changes. The Company
maintains a Risk Management Committee to oversee its production hedging and
trading activities. See "Business and Properties--Natural Gas and Oil Marketing
and Trading."
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
The following discussion of operating results is based on historical
consolidated financial information that has been restated to reflect the merger
of the Company and Plains on July 18, 1995 under the pooling of interests
method of accounting.
Net income for the nine months ended September 30, 1996 was $17.0 million
($.62 per share) compared with a net loss of $5.9 million ($.23 per share) for
the 1995 period. This increase is primarily due to increased natural gas and
oil production revenue, a 17% increase in average natural gas sales prices, a
17% increase in average oil sales prices, a $1.3 million increase in gross
profit from natural gas trading and the merger costs of $13.2 million that were
incurred in the first nine months of 1995.
Total revenues for the nine months ended September 30, 1996 were $136.1
million, an increase of 47% from $92.7 million for the same period in 1995.
This increase is attributable to higher production revenues and a 52% increase
in trading revenues.
Production revenues for the nine months ended September 30, 1996 increased
45% from $70.5 million to $102.4 million. Production revenues and related
volumes and average prices during the periods presented were as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1996 1995
-------- --------
<S> <C> <C>
Natural Gas Revenues (in millions)...................... $ 76.4 $ 50.1
Natural Gas Production (Bcf)............................ 44.1 33.9
Average Price per Mcf................................... $ 1.73 $ 1.48
Oil Revenues (in millions).............................. $ 26.0 $ 20.4
Oil Production (MBbls).................................. 1,397 1,288
Average Price per Barrel................................ $ 18.61 $ 15.84
</TABLE>
Natural gas revenues increased 53% during the nine months ended September 30,
1996 as compared with the same period in 1995, principally due to a 30%
increase in production volumes and a 17% increase in average natural gas
prices.
15
<PAGE>
The 28% increase for the nine months ended September 30, 1996 in oil
revenues from the same period in 1995 is directly attributable to an 8%
increase in production volumes and a 17% increase in average oil prices.
For the nine months ended September 30, 1996, revenues from trading were
$30.5 million compared with $20.2 million for the same period in 1995. The
associated costs of trading increased to $28.4 million from $19.4 million due
to the increase in natural gas trading volumes. Gross profit from trading was
$2.1 million and $771,000 for the respective nine months ended September 30,
1996 and 1995.
To reduce its exposure to natural gas and oil price fluctuations, the
Company enters into hedging arrangements from time to time for both trading
and producing activities. During the nine months ended September 30, 1996, the
Company hedged approximately 21% of the Company's natural gas production at an
average price of $1.99 per Mcf.
For the fourth quarter of 1996, the Company hedged approximately 31% of the
Company's natural gas production at an average price of $2.05 per Mcf. As of
December 31, 1996, the Company held positions to hedge approximately 8.8 Bcf
of the Company's future natural gas production at an average price of $1.87
per Mcf. In addition, during January 1997 the Company hedged an aggregate of
25.6 Bcf of natural gas production from the Rocky Mountain Region for the
five-year period from March 1998 through February 2003 at an average price of
$1.75 per Mcf.
Production costs increased in the first nine months of 1996 compared to 1995
due to increases in sales and higher operating costs in the winter months in
the first quarter of 1996.
Depreciation, depletion and amortization increased to $31.9 million from
$23.6 million due to a 26% increase in gas and oil equivalent production.
During the 1996 and 1995 periods, depletion, depreciation and amortization was
$.58 and $.53 per Mcfe, respectively.
Interest expense for the nine months ended September 30, 1996 decreased from
$3.3 million in 1995 to $3.2 million in 1996. This decrease is attributable to
the repayment in June 1996 of the Company's debt under the bank credit
facility with proceeds from the June 1996 common stock offering.
The Company's largest source of operating income is from sales of its
natural gas and oil production. Therefore, the levels of the Company's
revenues and earnings are affected by prices at which natural gas and oil are
being sold. This is particularly true with respect to natural gas, which
accounted for approximately 75% of the Company's production revenue for the
nine months ended September 30, 1996. As a result, the Company's operating
results for any prior period are not necessarily indicative of future
operating results because of the fluctuations in natural gas and oil prices
and the lack of predictability of those fluctuations as well as changes in
production levels.
YEAR ENDED DECEMBER 31, 1995 AS COMPARED TO YEAR ENDED DECEMBER 31, 1994
During 1995, the Company incurred a net loss of $2.2 million ($0.09 per
share) compared to net income of $11.3 million ($0.46 per share) in 1994. The
1995 results include merger and reorganization costs of $14.2 million.
Excluding these merger costs, the Company's net income after taxes would have
been $9.5 million ($0.38 per share).
Revenues increased 17% from 1994 to $128.0 million, and operating expenses,
including $14.2 million of merger and reorganization costs, increased 38% to
$128.4 million. Oil and natural gas production revenue increased 23% to $97.0
million. Lease operating expenses increased $6.3 million and depreciation,
depletion and amortization increased $10.7 million.
16
<PAGE>
Production revenues increased $18.2 million primarily due to a 43% increase
in natural gas production to 47.7 Bcf (130.7 MMcf per day). Oil production
increased 32% to 1,702,000 barrels (4,660 barrels per day). Average natural
gas sales prices decreased 20% to $1.47 per Mcf, while average oil prices
increased 13% to $15.76 per barrel. Natural gas production accounted for 82%
of total production on an energy equivalent basis. The Hugoton Embayment and
Piceance Basin properties accounted for 37% and 14%, respectively, of total
natural gas production. The Powder River and Permian Basins accounted for 43%
and 32%, respectively, of total oil production. The decreased natural gas
sales price was due to an overall deterioration in natural gas markets during
most of the year.
Lease operating expenses of $34.5 million was $0.60 per Mcfe compared to
$0.69 per Mcfe in 1994. Depreciation, depletion and amortization increased
$10.7 million primarily due to production increases. During 1995,
depreciation, depletion and amortization on natural gas and oil production was
provided at an average rate of $0.55 per Mcfe compared to an average rate of
$0.52 per Mcfe in 1994.
The gross margin on trading activities was virtually unchanged from 1994 at
$943,000. Natural gas trading volumes increased 26% to 22.2 Bcf in 1995.
During 1995, the Company hedged 4.9 Bcf (22%) of its natural gas trading
volumes to lock in margins on specific transactions at a cost of $2.1 million.
In addition, the Company hedged 11.0 Bcf (23%) of natural gas production for a
net gain of $417,000. The hedging gain related to production is net of $1.2
million for an expense recorded in the fourth quarter due to a lack of
correlation of the hedging instruments to the underlying commodity as of
December 31, 1995. The Company enters into the hedging arrangements to reduce
its exposure to price risks associated with commodities markets. Although
hedging transactions associated with its production minimize the Company's
exposure to reductions in production revenue as a result of unfavorable price
changes, these transactions also limit the Company's ability to benefit from
favorable price changes. At the end of December 1995, the basis differential
between the commodities markets and the market price of the Company's natural
gas widened to historically high levels. Because the increase in the
commodities price was not accompanied by a similar increase in the market
price of the Company's natural gas, the Company recorded an expense for the
difference due to the inefficient hedge and positions that did not qualify for
hedge accounting treatment. With respect to trading activities, the Company
generally will not enter into a commitment for either a purchase or a sale
unless (i) it has established a commitment for an offsetting sale or purchase,
or (ii) it has established a hedge arrangement with a counter party that
creates the same matching position.
General and administrative expenses of $13.4 million were 1% greater than
the previous year. The 1995 amount is net of $3.8 million of operating fee
recoveries compared to a $3.4 million recovery in 1994. General and
administrative expense in 1995 is generally a combination of the separate
companies' expenses, because the integration of the two entities did not occur
until late in the year and included costs for the Company to expand its
business in existing and new activity areas. The Company expects to eliminate
duplicative costs in 1996. Interest expense increased significantly from $0.9
million in 1994 to $4.6 million in 1995 as the Company financed a portion of
its growth with bank debt. The Company incurred a 1995 expense of $14.2
million to combine Barrett and Plains and to integrate the separate companies'
operations. The costs consist primarily of $7.4 million of investment banker
and other professional fees to evaluate and consummate the merger and $5.6
million for employee termination and benefit costs. See "Underwriting."
During 1995, the Company recorded a $1.8 million income tax expense even
though it incurred a loss before taxes due to non-deductible merger costs.
Excluding non-deductible merger costs, the Company would have had a $600,000
tax benefit.
17
<PAGE>
The Company's results of operations depend primarily on the production of
natural gas which accounted for 87% of the Company's reserves and 82% of its
production during 1995. Therefore, the Company's future results will depend on
both the volume of natural gas production and the sales price for gas. The
Company continues to explore for natural gas and oil to increase its
production. The lack of predictability of both production volumes and sales
prices may influence future operating results.
YEAR ENDED DECEMBER 31, 1994 AS COMPARED TO YEAR ENDED DECEMBER 31, 1993
During 1994, the Company earned net income of $11.3 million ($0.46 per
share) compared to net income of $13.7 million ($0.55 per share) in 1993. The
1994 results include a tax benefit of $2.1 million due to an increase in
financial reporting value of the Company's net operating loss carryover.
Without the tax benefit from the net operating loss carryover, the Company's
net income after taxes in 1994 would have been $9.2 million ($0.37 per share).
The 1993 results include a tax benefit of $1.5 million from the value of the
tax loss carryover and an expense of $656,000 for the cumulative effect of
adopting Statement No. 106 of the Financial Accounting Standards Board to
recognize accumulated postretirement benefit liabilities as of January 1,
1993. Net income before income taxes and the cumulative effect of the change
in accounting method was $16.4 million in 1994 compared to $21.0 million in
1993.
Revenues increased 3% from 1993 to $109.5 million, and operating expenses
increased 9% to $93.0 million. Production revenue decreased $2.1 million, and
trading revenues increased $5.2 million. These changes were offset by a
decrease of $2.2 million in lease operating expenses, an increase of $2.6
million in depreciation, depletion and amortization and an increase of $5.5
million in the cost of trading.
Production revenues decreased $2.1 million as a 5% increase in gas
production was offset by a 6% decrease in the average natural gas sales price
and a 7% decline in the average oil sales price. Oil production was virtually
unchanged from 1993 to 1994. During 1994, the Company produced 91.2 MMcf of
natural gas per day and 3.5 MBbls of oil per day. Natural gas production
accounted for 81% of total production on an energy equivalent basis of 41.0
Bcfe. During 1994, the average natural gas sales price was $1.83 per Mcf
($1.94 in 1993) and the average oil sales price was $13.95 per barrel ($14.93
in 1993). The decreased natural gas and oil sales prices were due to an
overall market reduction in the commodity prices of the products.
Lease operating expenses of $28.2 million averaged $0.69 per Mcfe compared
with $0.77 per Mcfe in 1993. Depreciation, depletion and amortization
increased $2.6 million primarily due to production increases. During 1994,
depreciation, depletion and amortization was $0.52 per Mcfe compared to $0.48
per Mcfe in 1993.
The gross margin on trading activities decreased to $924,000 from $1.3
million in 1993. Natural gas trading volumes increased 62% to 17.5 Bcf in
1994. The reduced results were due to a reduction of margins available for gas
trading activities.
General and administrative expenses of $13.3 million were 18% greater than
the previous year. The 1994 amount is net of $3.4 million of operating fee
recoveries compared to a $3.8 million recovery in 1993. The increased general
and administrative expense was due to additional costs incurred by the Company
to expand its activities and to explore in other areas.
During 1994, the Company recorded a $5.1 million net income tax expense
compared to a $6.7 net income tax expense in 1993. The 1994 expense is net of
a $2.1 million reduction in the valuation allowance provided for the deferred
income tax benefit of the net operating loss carryover.
18
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements other than statements of historical facts
included in this Prospectus, including without limitation statements under
"Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Business and Properties"
regarding the Company's financial position, reserve quantities and net present
values, business strategy, plans and objectives of management of the Company
for future operations and capital expenditures, are forward-looking
statements. Although the Company believes that the expectations reflected in
the forward-looking statements and the assumptions upon which such forward-
looking statements are based are reasonable, it can give no assurance that
such expectations and assumptions will prove to have been correct. Reserve
estimates are generally different from the quantities of oil and natural gas
that are ultimately recovered. Additional important factors that could cause
actual results to differ materially from the Company's expectations
("Cautionary Statements") are disclosed in the "Risk Factors" section and
elsewhere in this Prospectus. All written and oral forward-looking statements
attributable to the Company or persons acting on its behalf subsequent to the
date of this Prospectus are expressly qualified in their entirety by the
Cautionary Statements.
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BUSINESS AND PROPERTIES
OVERVIEW
Barrett is an independent natural gas and crude oil exploration and
production company with core areas of activity in the Rocky Mountain Region of
Colorado, Wyoming and Utah; the Mid-Continent Region of Kansas, Oklahoma, New
Mexico and Texas; and the Gulf of Mexico Region of offshore Texas and
Louisiana. At December 31, 1995, the Company's estimated proved reserves were
591.3 Bcfe (87% natural gas and 13% crude oil) with an implied reserve life of
10.2 years based on 1995 total production of 57.9 Bcfe. The Company's
preliminary estimate of its proved reserves as of December 31, 1996 is 785
Bcfe (83% natural gas and 17% crude oil) with an implied reserve life of 10.9
years based on 1996 total production of 72 Bcfe. The Company anticipates that
the final estimate, which will be available on or about February 10, 1997,
will be at least 785 Bcfe. See "--Recent Developments--Preliminary Estimate of
Proved Reserves as of December 31, 1996."
The Company concentrates its activities in core areas in which it has
accumulated detailed geologic knowledge and developed significant management
expertise. The Company continues to build on its interests in the Piceance
Basin in northwestern Colorado, the Uinta Basin of northeastern Utah, the
Anadarko and Arkoma Basins in Oklahoma, the Wind River Basin in Wyoming and
the Gulf of Mexico. The Company also has significant interests in the Hugoton
Embayment in Kansas and Oklahoma, the Permian Basin in Texas and New Mexico
and the Powder River Basin in Wyoming. At December 31, 1995, these principal
areas of focus represented approximately 93% of the Company's estimated proved
reserves.
The Company continues to experience significant growth in its proved
reserves, production volumes, revenues and cash flow, particularly in the Wind
River, Piceance, Anadarko, Arkoma and Uinta Basins. The Company currently is
pursuing development projects in the Wind River, Piceance, Anadarko, Arkoma
and Uinta Basins, and exploration projects in the Wind River and Anadarko
Basins, the Gulf of Mexico and the Republic of Peru. The Company's average net
daily production increased to 192 MMcfe for the nine months ended September
30, 1996 from 159 MMcfe for the full year of 1995.
As of September 30, 1996, the Company owned interests in 2,124 producing
wells and operated 1,131 of these wells. These operated wells contributed
approximately 82% of Barrett's natural gas and oil production for the nine
months ended September 30, 1996. The Company also owns interests in and
operates a natural gas gathering system, a 27-mile pipeline and a natural gas
processing plant in the Piceance Basin.
Barrett markets all of its own natural gas and oil production from wells
that it operates. In addition, the Company engages in natural gas trading
activities, which involve purchasing natural gas from third parties and
selling natural gas to other parties at prices and volumes that management
anticipates will result in profits to the Company. Through these natural gas
trading activities, the Company obtains knowledge and information that enables
it to more effectively market its own production. See
"--Natural Gas and Oil Marketing and Trading."
BUSINESS STRATEGY
Barrett's business strategy is to generate strong growth in reserves,
production, earnings and cash flow through exploration, development and
selective acquisitions of natural gas and oil properties in its core areas of
activity. The Company implements this strategy through a series of continuing
initiatives:
SPECIALIZED GEOLOGIC EXPERTISE. Both the CEO and President of Barrett are
experienced, practicing geologists. They have established a team of geologists
and geophysicists with expertise in the Company's core areas of activity.
Prior to undertaking projects in new areas, the Company assembles specialized
geologic expertise to identify and evaluate drilling prospects.
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ACTIVE DRILLING PROGRAM. Barrett maintains a high quality, balanced
portfolio of lower risk development projects complemented by higher potential
exploration prospects. The Company's preliminary 1997 capital expenditure
budget is $278 million, approximately 75% of which is allocated to drilling
and production activities. This budget, which is subject to revision based
upon market conditions and other factors, contemplates that the Company will
participate in drilling approximately 290 gross wells in 1997 as compared with
196 gross wells drilled in 1996. The Company expects to continue high levels
of drilling activity after 1997.
ADVANCED TECHNOLOGY. The Company makes extensive use of advanced
technologies, including 3-D seismic and in-house analytical and processing
capabilities, to better define drilling prospects. The Company also uses
advanced production techniques, such as ASP technology, in its enhanced
recovery operations.
OPERATING CORE PROPERTIES. At September 30, 1996, Barrett served as operator
for 1,131 wells, which contributed approximately 82% of the Company's
production during the nine months ended September 30, 1996. As operator, the
Company coordinates drilling activities and arranges for the production,
gathering and sale of its natural gas and oil from operated wells. Serving as
operator enables the Company to exert greater control over the cost and timing
of its exploration, development and production activities.
CONTINUING COST MANAGEMENT. The Company continually strives to reduce
expenses through implementation of cost control programs and active management
of its operations, personnel and administrative activities. Current cost
management initiatives include entering into multi-well and longer term
contracts with drilling companies and participating in alliances with oil
field service companies to obtain more favorable terms.
FINANCIAL STRENGTH. The Company is committed to maintaining financial
flexibility in order to pursue exploration and development activities and to
take advantage of other opportunities that may arise. Historically, the
Company has funded its growth primarily through the issuance of common stock,
including four public stock offerings, its 1995 stock-for-stock merger with
Plains and several recent acquisitions financed with common stock. The
issuance of the Notes adds ten-year fixed rate debt financing to the Company's
capital structure, which will improve Barrett's liquidity, diversify its
capital base and enhance the Company's ability to pursue its business
strategy.
SELECTIVE RESERVE AND LEASEHOLD ACQUISITIONS. From time to time the Company
seeks to augment activities in its core areas, establish operations in new
areas and build acreage positions for exploration prospects through selective
acquisitions. As a result of acquisitions completed during 1996, the Company
increased its working interests in the Piceance Basin, expanded its operations
in the Uinta Basin and substantially increased its leased acreage position in
the Gulf of Mexico.
RECENT DEVELOPMENTS
PRELIMINARY ESTIMATE OF PROVED RESERVES AS OF DECEMBER 31, 1996. The Company
has preliminarily estimated that, as of December 31, 1996, the Company's
proved reserves were 785 Bcfe. This estimate was prepared by the Company and
has not been reviewed by the Company's independent petroleum engineers. The
Company anticipates that the final estimate of its proved reserves as of
December 31, 1996, which will have been reviewed by the Company's independent
petroleum engineers and will be available on or about February 10, 1997, will
be at least 785 Bcfe. See "Risk Factors--Engineer's Estimates of Reserves and
Future Net Revenues" and "--Reserves."
CAPITAL EXPENDITURES. The Company's preliminary 1997 capital expenditure
budget for natural gas and oil activities is $278 million. Total estimated
1997 expenditures are allocated approximately 41% to the Gulf of Mexico
Region, 25% to the Rocky Mountain Region, 19% to the Mid-Continent
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Region, 6% to international activities and 9% to possible acquisitions. This
budget is subject to revision based upon market conditions and other factors.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "--Core Areas of Activities."
OFFSHORE FEDERAL LEASE SALES. At the September 1996 Western Gulf of Mexico
Offshore Lease Sale, the Company significantly expanded its position in the
Gulf of Mexico. The MMS awarded the Company leases covering 17 blocks. The
Company has a 100% working interest in 14 of these blocks and a 50% working
interest in the three other blocks. The Company's net share of the bonus
payments for these leases was $34.4 million. As a result of these
transactions, Barrett holds interests in 46 lease blocks in the Gulf of Mexico
covering approximately 185,000 gross acres. See
"--Core Areas of Activity--Gulf of Mexico Region."
UINTA BASIN ACQUISITIONS. In November 1996, the Company expanded its
operations in the Uinta Basin of northeastern Utah when it acquired producing
and non-producing natural gas and oil properties in the Altamont-Bluebell
Field. The effective date of the acquisition of a significant portion of these
properties is January 1, 1997. The purchase included 120 operated wells with
an average working interest of 80%, together with 100,000 gross and 72,000 net
acres of leasehold interests. The total purchase price was approximately $32
million, including approximately $14 million in cash, 50,000 shares of the
Company's common stock, and certain non-strategic producing properties owned
by the Company. In January 1997, the Company acquired additional interests in
the Altamont-Bluebell Field for an aggregate purchase price of $3.5 million in
cash. These interests consist of 16 non-operated wells with average working
interests of 42% together with approximately 10,000 gross and 4,600 net acres
of leasehold interests. See "--Core Areas of Activity--Rocky Mountain Region--
Uinta Basin."
CORE AREAS OF ACTIVITY
[CORE AREAS OF ACTIVITY MAP APPEARS HERE]
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The following table sets forth certain information concerning these core
areas of activity:
<TABLE>
<CAPTION>
PRELIMINARY
AVERAGE DAILY 1997
ESTIMATED PROVED PRODUCTION FOR CAPITAL
RESERVES AT THREE MONTHS ENDED EXPENDITURE
BASIN OR FIELD DECEMBER 31, 1995 SEPTEMBER 30, 1996 BUDGET
-------------- ----------------- ------------------ -------------
(BCFE) (MMCFE) (IN MILLIONS)
<S> <C> <C> <C>
Rocky Mountain Region
Wind River............... 88.1 45.9 $ 25
Piceance................. 119.1 32.3 25
Powder River............. 30.0 16.5 6
Green River.............. 12.5 1.5 1
Uinta.................... 4.2 6.2 12
Mid-Continent Region
Arkoma................... 27.4 12.6 18
Anadarko................. 33.7 22.5 27
Hugoton Embayment........ 200.7 38.8 2
Permian.................. 39.1 14.0 6
Gulf of Mexico Region...... 8.7 4.5 114
International(1)........... -- -- 16
Other Natural Gas and Oil
Activities(2)............. 27.8 6.6 26
----- ----- ----
Total.................. 591.3 201.4 $278
===== ===== ====
</TABLE>
(1) Consists of the Company's Republic of Peru project.
(2) Reserves primarily located in northeastern Colorado, the Paradox Basin
(Utah and Colorado) and Nevada. Also includes preliminary 1997 capital
budget of $25 million for possible acquisitions.
ROCKY MOUNTAIN REGION
WIND RIVER BASIN. In 1994, following its major natural gas discovery in the
Cave Gulch Field, the Company began a focused exploration program in the Wind
River Basin of Wyoming, particularly along the Owl Creek Thrust fault.
Cave Gulch Field. In August 1994, the Company drilled the Cave Gulch Federal
Unit #1 well and discovered a significant natural gas field in the Fort Union
and Lance Sandstones below the Owl Creek Thrust. The Company currently owns a
94% working interest in the Cave Gulch Federal Unit. Since August 1994, the
Company has acquired additional interests in the area and currently owns
working interests ranging from 5% to 100% in 16,011 gross leasehold acres,
constituting 9,590 net leasehold acres, in the Cave Gulch area. Combined daily
production for the Cave Gulch Field net to the Company's interest at September
30, 1996 was 42.9 MMcf of natural gas and 160 barrels of oil.
In September 1996, the Company began drilling the Cave Gulch #16 deep test
well. This well has a target depth of 18,650 feet to test the deeper Frontier,
Muddy, Dakota and Lakota formations. The Company anticipates reaching target
depth in February 1997. The Company owns an 85.2% working interest in this
well, subject to reduction to 84.9% after payout.
During 1996, the Company had planned to drill up to 10 wells in the Cave
Gulch Field. However, the Bureau of Land Management (the "BLM") determined
that an environmental impact statement ("EIS") in the greater Cave Gulch area
would be required to assess future development proposals from the Company and
other operators in the area. As a result, the Company drilled four wells in
1996, with the Cave Gulch #16 drilling at year-end. The BLM has indicated that
the EIS will be completed in August 1997, but there is no assurance that this
will be the case. No additional drilling activity in this area for 1997 has
been approved by the BLM, and the BLM has indicated that no drilling activity
will be approved prior to the completion of the EIS. The Company will,
however, be permitted to recomplete wells. In the event that the BLM allows
drilling activity in this area pending the completion of the EIS, the Company
will proceed accordingly.
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<PAGE>
Through December 31, 1996, the Company had drilled 14 wells in the Cave
Gulch area to test the Lance and Fort Union Sandstones. Five of these wells
are producing, two are shut in due to line pressures, four are shut in due to
limited pipeline capacity, two are being completed and one is waiting on
completion. The Company's natural gas production is currently constrained to a
production rate of approximately 39 MMcf per day due to pipeline take-away
capacity in the Cave Gulch area of operation and the Wind River Basin. Two
interstate pipelines serve the Cave Gulch area, and both have proposed
expansions to increase their take-away capacity. The Company is supporting
these expansion proposals with transportation volume commitments. Both
pipeline expansions are scheduled to be completed by mid-1997. In an effort to
increase production, the Company is in the process of starting up a temporary
gas conditioning facility that will allow the Company to remove liquids from
the portion of the gas that currently does not meet pipeline specifications
and to compress gas prior to entering one of the interstate pipelines. Once
fully operational, estimated to be in February 1997, the Company believes that
this temporary facility will be able to increase its natural gas production in
the Cave Gulch area to approximately 59 MMcf per day. See "--Natural Gas and
Oil Marketing and Trading."
Stone Cabin Project. In the second quarter of 1996, the Company acquired a
100% working interest in 9,754 acres in the Wallace Creek Unit and adjacent
land. This acreage, in the Company's Stone Cabin Project, is along the south
flank of the Wind River Basin. In July 1996, the Company began an exploration
and development program to target the Upper Cretaceous Muddy Sandstone and the
Raderville Sandstone of the Lower Cody Shale Formation. The Company has
drilled four wells in this program, two of which are producing. The Company is
testing the other two wells to determine if they are capable of commercial
production. The Company plans to drill up to nine wells in 1997 to test the
Muddy Formation. However, the BLM is imposing restrictions on winter drilling
activities and drilling is not expected to resume until April 1997.
Owl Creek Thrust. The Company continues to evaluate additional exploration
prospects in the Owl Creek Thrust and central Wind River Basin. The Company
has 82,406 gross and 76,681 net acres under lease in portions of the Owl Creek
Thrust and central Wind River Basin outside of the Cave Gulch area. In 1997,
the Company plans to drill three exploratory test wells along the Owl Creek
Thrust and one exploratory test well in the central portion of the Basin.
At December 31, 1995, the Wind River Basin represented 15% of the Company's
estimated proved reserves, and for the nine months ended September 30, 1996,
it represented 21% of the Company's total production. In 1997, 9% of Barrett's
preliminary capital expenditure budget is planned to be spent in the Wind
River Basin for development, leasehold acquisition, seismic surveys and
exploration, including participating in drilling up to 17 wells.
PICEANCE BASIN. The Piceance Basin of northwestern Colorado is a core
operating area for the Company and will continue to be very prominent in the
Company's capital spending plans. The Company's activities in the Piceance
Basin are conducted primarily in three fields: Parachute, Rulison and Grand
Valley.
The Company's drilling activities in the Piceance Basin primarily target the
lenticular sandstones of the Williams Fork Formation of the Mesaverde Group.
These sandstone reservoirs overlie the blanket sandstones of the Iles
Formation in the basal Mesaverde. Barrett drilled its first well in the
Piceance Basin in 1984. At present, the Company owns interests in 297 wells
and operates 285 wells in the Piceance Basin.
In 1996, the Company completed the acquisition of working interests in the
Piceance Basin from some of the Company's former joint working interest owners
in this project, and the Company's average working interest in properties in
this area increased from approximately 29% to approximately 62%. The Company
paid an aggregate of $28.9 million cash and issued an aggregate of 585,661
shares of common stock to acquire these interests.
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<PAGE>
In February 1995, the Company received approval for 40-acre well density by
the Colorado Oil and Gas Conservation Commission (the "Colorado Commission")
with respect to 81 640-acre sections in the Parachute, Rulison and Grand
Valley Fields, and has commenced an active development drilling program on 40-
acre sites in the Rulison, Grand Valley and Parachute Fields. In November
1996, the Company requested and received approval from the Colorado Commission
for two four-well pilot drilling programs on 20-acre well density. These two
pilot programs are located in the Grand Valley and Rulison Fields and are
scheduled to be drilled in early 1997. The Company will evaluate the
engineering and geologic data resulting from these pilot programs and
determine whether to apply for approval for 20-acre well density on all or
selected acreage in the Piceance Basin in the future. There is no assurance
that the Colorado Commission will approve any additional requests for 20-acre
well density.
At December 31, 1995, the Piceance Basin represented 20% of the Company's
estimated proved reserves, and for the nine months ended September 30, 1996,
it represented 14% of the Company's total production. The Company currently is
continuously operating three drilling rigs in the Basin. In 1997, the Company
intends to spend 9% of its preliminary capital expenditure budget in the
Piceance Basin for development and exploration, including participating in
drilling up to 56 wells and 20 recompletions.
Grand Valley Gathering System. In 1985, the Company's wholly-owned
subsidiary, Bargath, Inc., designed and constructed a gathering system in the
Grand Valley Field to transport natural gas from certain of the Company's
wells to Questar Pipeline Corporation's interstate pipeline. This gathering
system subsequently has been expanded to approximately 150 miles, and a 16-
inch, 27-mile pipeline has been added. Through three acquisitions in 1996, the
Company increased its ownership interest in this system to approximately 62%.
As of December 31, 1996, the Grand Valley Gathering System was connected to
220 producing natural gas wells in the Piceance Basin. The system now has the
flexibility to deliver natural gas to three interstate pipelines, which are
owned respectively by Questar Pipeline Company, Northwest Pipeline Corporation
and Colorado Interstate Gas Company, and one intrastate pipeline owned by
Public Service Company of Colorado and K N Energy, Inc. ("K N"). In December
1994, the Company completed the construction of a 90,000 MMBtu per day natural
gas processing plant to extract liquid hydrocarbons from the natural gas
stream. Depending on the take-away capacity from time to time of these four
pipeline systems, the gathering system has the capability of delivering
approximately 90,000 MMBtu of natural gas per day.
POWDER RIVER BASIN. The Powder River Basin in Wyoming is primarily an oil
province, with production from Cretaceous and Permian-age formations. One of
the reservoir targets in this area is the Permian Minnelusa Formation. This
Basin contributes approximately 40% of the Company's daily oil production. The
Company currently anticipates that additional activity will concentrate on
development drilling and enhanced recovery projects utilizing 3-D seismic
technology where appropriate.
The Company has initiated or is planning the use of ASP technology to
chemically enhance oil recovery in a number of fields. The Company also is
using 3-D seismic technology to identify development opportunities in this
area.
At December 31, 1995, the Powder River Basin represented 5% of the Company's
estimated proved reserves, and for the nine months ended September 30, 1996,
it represented 8% of the Company's total production. In 1997, the Company
intends to spend 2% of its preliminary capital expenditure budget for
development, enhanced recovery projects utilizing 3-D seismic technology, and
exploration opportunities in the Powder River Basin, including participating
in drilling up to 15 wells.
GREEN RIVER BASIN/WYOMING OVERTHRUST. The Company owns leasehold interests
within the greater Green River Basin, primarily in the Moxa Arch, Rock Springs
Uplift and Wamsutter Arch areas,
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<PAGE>
the West Side Canal Field, and in the Wyoming Overthrust Trend. The Company
participated in two wells in the Green River Basin in 1996. At December 31,
1995, the Green River Basin represented 2% of the Company's estimated proved
reserves and for the nine months ended September 30, 1996, it represented 3%
of the Company's total production. In 1997, the Company intends to spend
approximately $626,000 for capital expenditures in drilling up to six wells
and recompleting three additional wells in the Green River Basin.
UINTA BASIN. As an extension of its Piceance Basin operations, in 1995, the
Company entered the Uinta Basin of Duchesne and Uintah Counties, in
northeastern Utah. The Uinta Basin is separated from the Piceance Basin by the
Douglas Creek Arch.
Brundage Canyon Field. Beginning in December 1995, the Company made
acquisitions totaling $5.2 million in the Brundage Canyon Field. As a result
of these acquisitions and new drilling, the Company currently owns working
interests ranging from 47% to 100% in 32 producing wells, a gathering and
transmission system, and 40,000 gross acres, covering approximately 34,000 net
acres, all of which are on the Ute Indian Reservation. Wells in this Field
produce primarily from multiple sandstone reservoirs of the lower Green River
Formation at depths averaging 5,500 feet. As of December 31, 1996, these wells
produced approximately 640 barrels of black wax crude oil per day.
The Company plans extensive work in this Field during 1997, including a 15-
well program to develop infill and field extension locations, a 40-acre pilot
waterflood project, and recompletions and workovers of existing wells to test
the viability of shallower horizons for potential future development.
Altamont-Bluebell Project. The Altamont-Bluebell Field complex, which
includes the Cedar Rim area, covers a large portion of the northern Uinta
Basin. In 1996, the Company acquired through a number of transactions working
interests ranging from 25% to 100% in 159 producing wells, and approximately
126,000 gross and 91,000 net acres of leasehold interests. The largest of
these acquisitions was completed on November 1, 1996 when the Company acquired
producing and non-producing natural gas and oil properties in the Altamont-
Bluebell Field. The effective date of the acquisition of a significant portion
of these properties is January 1, 1997. The purchase included 120 operated
wells with an average working interest of 80%, together with approximately
100,000 gross and 72,000 net acres of leasehold interests. The total purchase
price for the November 1996 acquisition was approximately $32 million,
including approximately $14 million cash, 50,000 shares of the Company's
common stock, and certain non-strategic producing properties owned by the
Company. The Company's production in this area is predominantly from the
multiple sandstone reservoirs in the Wasatch Formation which are found at an
average depth of 12,000 feet. Also productive in the Field are the upper,
lower, and middle portions of the Green River Formation at depths of 5,000 to
7,000 feet.
In January 1997, the Company acquired additional interests in this Field for
$3.5 million. These interests consist of 16 non-operated wells with average
working interests of 42%, together with approximately 10,000 gross and 4,600
net acres of leasehold interests.
In 1997, the Company plans a 30 well recompletion/restimulation program and
the drilling of six development and extension wells in the Uinta Basin.
Expenditures for this activity in 1997 are expected to total $12 million, or
4% of the Company's preliminary capital expenditure budget. With this activity
the Company plans to test the potential in the lower, middle, and upper Green
River Formation both from behind pipe in existing wells and in new infill
locations.
MID-CONTINENT REGION
ARKOMA BASIN. Due to the complex structure and overlapping nature of the
rock formations, the Company has been using and will continue to use 3-D
seismic surveys extensively in the Arkoma Basin in Oklahoma. In 1996, Barrett
participated in the drilling of 15 wells in five areas of the Arkoma
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<PAGE>
Basin in Oklahoma: South Panola 3-D area, Limestone Ridge area, Wilburton
Field, the Choctaw Thrust 3-D area, and Alderson area. At December 31, 1995,
the Arkoma Basin represented 5% of the Company's estimated proved reserves, and
for nine months ended September 30, 1996, it represented 7% of the Company's
total production.
In 1997, the Company intends to spend 7% of its preliminary capital
expenditure budget for drilling in the Arkoma Basin, including participating in
drilling up to 22 wells, together with land and seismic surveys.
ANADARKO BASIN. Since 1993, the Anadarko Basin in southwestern Oklahoma has
been one of the Company's most active drilling areas. In 1996, the Company
participated in the drilling of 58 wells with working interests ranging from
1.5% to 100% after payout. While staying active in the Strong City Red Fork
Play, the Company has become increasingly active in the Mountain Front Granite
Wash play and the Sentinel Field area. At December 31, 1995, the Anadarko Basin
represented 6% of the Company's estimated proved reserves, and for the nine
months ended September 30, 1996, 11% of the Company's total production.
The Company plans to spend 10% of its preliminary 1997 capital expenditure
budget in the Anadarko Basin for development and exploration drilling,
including participating in drilling up to 60 wells, together with leasehold
acquisitions and seismic surveys as currently planned.
HUGOTON EMBAYMENT. The largest single producing area for the Company is the
Hugoton Embayment, which is one of the largest natural gas producing areas in
the United States, located in southwest Kansas, the Oklahoma panhandle and the
Texas panhandle. The Company produces natural gas from three fields in the
Hugoton Embayment: the Hugoton, the Guymon-Hugoton and Panoma Fields. At
December 31, 1995, the Hugoton Embayment represented 34% of the Company's
estimated proved reserves, and for the nine months ended September 30, 1996, it
represented 22% of the Company's total production.
Hugoton and Guymon-Hugoton Fields. In the Hugoton and Guymon-Hugoton Fields,
the Company has working interests in 359 gross wells and operates 314 of them.
The Hugoton and the Guymon-Hugoton Fields produce from the Chase Formation. Six
wells were drilled in the Hugoton Field in 1996, three of which are on
production and the remaining three of which are expected to begin production in
February 1997.
Panoma Field. Panoma is the field designation for natural gas produced from
the Council Grove Formation, a formation beneath the Chase Formation. The
Council Grove Formation has similar reservoir rocks as the Chase Formation.
However, the productive limits are not as extensive. Presently, the Company has
a working interest in 55 gross Panoma wells and operates 51 of those wells,
including one well drilled in 1996 which was placed on production in January
1997.
Natural Gas Sales Agreement. The majority of the Company's natural gas
production from the Hugoton and Panoma Fields is sold under a long-term
contract (life-of-field) to KN Gas Supply Services, Inc. ("KNGSS"). Among other
things, this contract provides for annual re-determination of the price the
Company is to receive. In 1997, as in 1996, the price is calculated each month
by using the average of four Mid-Continent index prices less a variable amount
ranging from $.11 per MMBtu for an average index price less than $.75 to a
maximum of $.20 for an average index price of $2.26 or higher. The volume of
natural gas for which the Company receives payment is reduced by one percent of
the volume as an in-kind fuel charge for moving the natural gas.
Net Profit Agreements. The Company produces natural gas in the Guymon-Hugoton
Field and the nearby Camrick Field under a Dry Gas Agreement with Chevron
U.S.A. Inc. ("Chevron"). This agreement allows the Company to expend funds for
the operation of the properties (including the cost
27
<PAGE>
of drilling wells) and to recoup the funds so expended from current production
income. Eighty percent of net operating income generated by the natural gas
production (after operational costs are recouped, including the cost of
drilling and equipping wells) is then paid to Chevron. At each of December 31,
1995 and 1996, the Company had interests in 56 wells subject to the terms of
this agreement. The Company also produces natural gas in the Hugoton Field
under various agreements similar to the Chevron agreement, except that net
operating income is allocated 15% to the Company and 85% to other parties. At
December 31, 1996, the Company had interests in an aggregate of 49 Chase
Formation wells and eight Council Grove Formation wells under these other
agreements.
The third party interests under all the net profit agreements are treated as
lease operating expenses by the Company. Additional or replacement wells
drilled on the properties would be operated under the same terms and conditions
as existing wells, and would result in the commencement of the 80/20 or 85/15
net operating income allocation after the cost of the new wells is recovered.
Hugoton Gas Trust Agreement. Natural gas rights established in 1955 to
approximately 50,000 acres in Finney and Kearny Counties, Kansas were
transferred to Plains by K N on October 1, 1984 subject to a natural gas
payment of $0.06 per Mcf for natural gas produced from the acreage. Quarterly
payments are made by the Company to the Hugoton Gas Trust, a publicly held
trust created in 1955. Payments terminate when the estimated gross recoverable
natural gas reserves decline to 50 Bcf or less. As of December 31, 1995, the
gross proved natural gas reserves attributable to the leases burdened by this
agreement were estimated to be 176.4 Bcf. The natural gas payments are treated
as lease operating expenses by the Company. At December 31, 1996, the Company
had working interests in 196 wells that were subject to these payments. Any
additional natural gas wells drilled on this acreage also will be subject to
the $0.06 payment per Mcf of natural gas produced.
Barrett intends to spend $2 million of its preliminary 1997 capital
expenditure budget on the Hugoton Embayment for development drilling and
increased deliverability through compression, including participating in
drilling eight new wells.
PERMIAN BASIN. The Permian Basin in west Texas and southeast New Mexico is
primarily an oil province. As of December 31, 1996, the Company had an interest
in 224 gross wells (170 net wells) located in the Permian Basin, which produce
approximately 2,200 barrels of oil per day net to the Company's interests. In
1996, Barrett participated in drilling 15 wells in the Permian Basin. At
December 31, 1995, the Permian Basin represented 7% of the Company's estimated
proved reserves, and for the nine months ended September 30, 1996, 7% of the
Company's total production. Barrett intends to spend 2% of its preliminary 1997
capital expenditure budget in the Permian Basin, including participating in
drilling up to 31 wells. If a pending down-spacing request regarding the
Spraberry Trend area is approved, which would allow an optional well on each
existing 80 acre well site, the Company intends to drill approximately 15
additional infill wells in 1997.
GULF OF MEXICO REGION
Beginning in the latter half of 1995 and continuing during 1996, the Company
established a new core area in the Gulf of Mexico offshore Louisiana and Texas.
The Company believes that this area has significant reserve potential and is
well suited to its exploration emphasis and geologic expertise. The
availability of extensive 3-D seismic coverage over most of the Outer
Continental Shelf ("OCS"), the frequency of lease sales and the turnover of
expiring leases also make the Gulf of Mexico an attractive area. In addition,
wells in the Gulf of Mexico typically produce at higher rates, which increases
cash flow, but have relatively shorter productive lives. This production
profile will complement the Company's long-lived, relatively lower
deliverability wells in the Rocky Mountain and Mid-Continent regions. Also,
Gulf of Mexico natural gas prices historically have been higher than prices in
other regions in which the Company operates.
28
<PAGE>
Initially, the Company's Gulf of Mexico operations centered on developing
high quality prospects with established operators. At the April 1996 Central
Gulf of Mexico Outer Continental Shelf Lease Sale, the Company joined another
operator in acquiring nine blocks. The Company has a 25% working interest
through completion of production facilities and a 22% working interest
thereafter in each of these nine blocks. Separately, the Company joined with a
second operator with a 50% working interest, in acquiring one block. In
addition, the Company acquired a block in which it has a 100% interest. Bonus
payments net to the Company for these lease interests totaled $2.3 million.
The Company's efforts are now directed at internally developing an inventory
of high quality prospects for future drilling. This effort was significantly
advanced at the Western Gulf of Mexico Outer Continental Shelf Sale in
September 1996. The Company was high bidder on 19 blocks in water depths
ranging from 33 feet to 315 feet. The MMS awarded the Company leases covering
17 of these blocks. The Company has a 100% working interest in 14 of these
blocks and a 50% working interest in the three other blocks. The Company's net
share of the bonus payments for these leases was $34.4 million. The MMS
rejected the two remaining high bids submitted by the Company because the MMS
deemed these bids insufficient.
In 1996, the Company participated in 15 Gulf of Mexico wells, 12 of which
were successful. The preliminary 1997 Gulf of Mexico capital expenditure
budget is estimated at $114 million to drill 31 wells, acquire additional 3-D
seismic for future prospects, lease additional future prospects and to put
into production eight wells drilled in 1996.
At December 31, 1995, the Gulf of Mexico represented 1% of the Company's
estimated proved reserves, and for the nine months ended September 30, 1996,
it represented 2% of the Company's total production.
INTERNATIONAL OPERATIONS
With an industry partner, the Company obtained in November 1996 a license to
evaluate, explore and develop approximately 820,000 acres in the Maranon Basin
of eastern Peru. The Company currently has a 55% working interest in this
project and has the right to increase its working interest to 77.5%. Pursuant
to the license, the Republic of Peru receives a variable royalty payment on
production that is anticipated to average approximately 23%. In the initial
phase of the license, which is underway, the Company and its co-venturer will
be conducting seismic reprocessing and environmental and engineering
feasibility studies regarding the viability of developing the Bretana Field,
which was discovered in 1974 by another company. Gross costs of approximately
$1.3 million for this first phase are expected. Following those studies, it is
anticipated that an appraisal well will be drilled in the third quarter of
1997. The gross costs of drilling and testing this well are anticipated to be
approximately $4.5 million.
The Company currently is evaluating additional opportunities in Peru and
other countries. It has executed a letter setting forth basic terms that is
subject to, among other things, the execution of a definitive agreement and
approval of the government of Peru, to acquire an interest in an additional
unrelated acreage block in Peru. There is no assurance that this acquisition
will be completed. Estimated capital expenditures for international operations
for 1997 constitute approximately 6% of the Company's preliminary capital
expenditure budget, assuming the Company is successful in acquiring an
interest in this additional block.
NATURAL GAS AND OIL MARKETING AND TRADING
Barrett markets all of its own natural gas and oil production from wells
that it operates. In addition, the Company engages in natural gas trading
activities, which involve purchasing natural gas from third parties and
selling natural gas to other parties at prices and volumes that management
anticipates will result in profits to the Company. Through these natural gas
trading activities, the Company obtains knowledge and information that enables
it to more effectively market its own production. See "Risk Factors--
Volatility of Prices and Availability of Markets" and "--Other Industry and
Business Risks."
29
<PAGE>
NATURAL GAS. The Company has entered into a number of gas sales agreements
on behalf of itself and its industry partners with respect to the sale of
natural gas from its properties in each of the Company's basins. These
contracts vary with respect to their specific provisions, including price,
quantity, and length of contract. As of December 31, 1996, less than 7% of the
Company's production was committed to natural gas sales contracts that had
fixed prices or price ceilings. With the exception of two contracts covering
approximately 8,100 MMBtu per day of natural gas production from the Piceance
Basin through 2011, none of the contracts provides for fixed prices or price
ceilings beyond October 1997. The Company believes that it has sufficient
production from its properties to meet the Company's delivery obligations
under its existing natural gas sales contracts.
The Company has entered into a series of firm transportation agreements with
various Rocky Mountain pipeline companies. At January 1, 1997, these
transportation arrangements had terms ranging from seven months to ten years.
These transportation agreements provide the Company the opportunity to
transport its Rocky Mountain natural gas production into the Mid-Continent
area. These agreements in total provide transportation of approximately 52% of
the Company's current daily Rocky Mountain production.
In addition to the agreements described above, the Company has entered into
transportation arrangements to support future expansions of Rocky Mountain
interstate pipelines. These expansions are designed to transport Rocky
Mountain natural gas production to the Mid-Continent area for sale. The
Company has committed to 5,000 MMBtu per day of pipeline capacity for terms
ranging from five years to 10 years. These expansions are subject to Federal
Energy Regulatory Commission ("FERC") approval and are scheduled to be
operational by the third quarter of 1997.
For each of 1996 and 1997, the Company renegotiated the pricing provisions
with KNGSS with respect to a majority of its Hugoton and Panoma Fields natural
gas production. The price is calculated on a monthly basis by using the
average of four Mid-Continent index prices less a variable amount ranging from
$.11 per MMBtu for an average index price less than $.75 to a maximum of $.20
for an average index price of $2.26 or higher. The volume of natural gas for
which the Company receives payment is reduced by one percent of the volume as
an in-kind fuel charge for moving the natural gas.
During the year ended December 31, 1996, there was one natural gas
purchaser, KNGSS, that accounted for approximately 16% of the Company's total
revenues. The Company believes it would be able to locate alternate customers
in the event of the loss of this customer.
The Company has established a Risk Management Committee to oversee its
production hedging and trading activities. The Risk Management Committee
consists of the Chief Executive Officer, the President and Chief Operating
Officer, the Chief Financial Officer, and the Executive Vice President--
Operations. With respect to production hedge transactions, it is the policy of
the Company that the Risk Management Committee review and approve all such
transactions.
As a result of its natural gas trading activities, the Company may from time
to time have natural gas purchase or sales commitments without corresponding
contracts to offset these commitments, which could result in losses to the
Company. The Company currently attempts to control and manage its exposure to
these risks by monitoring and hedging its trading positions as it deems
appropriate and by having the Company's Risk Management Committee review
significant trades or positions before they are committed to by trading
personnel. All fixed price trading activities are hedged to lock in margins.
As of December 31, 1996, the Company had entered into financial transactions
to hedge approximately 8.8 Bcf of natural gas production for the period from
January 1997 through October 1997. In January 1997, the Company entered into a
transaction to hedge an aggregate of 25.6 Bcf of natural gas production from
the Rocky Mountain Region for the five-year period from March 1998 through
February 2003.
30
<PAGE>
For the year ended December 31, 1995, revenues from trading activities,
which includes the cost of natural gas purchased or sold for trading purposes,
were $28.6 million, which constituted 22% of the Company's consolidated
revenues and generated a gross margin of $943,000. For the nine months ended
September 30, 1996, revenues from trading activities were $30.5 million, which
constituted 22% of the Company's consolidated revenues and generated a gross
margin of $2.1 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
OIL AND CONDENSATE. Oil, including condensate production, is generally sold
from the leases at posted field prices, plus negotiated bonuses. Marketing
arrangements are made locally with various petroleum companies. The Company
sells its own oil production to numerous customers. No single customer's total
oil purchases represented more than 10% of total Company revenues in 1996. Oil
revenues totaled $26.0 million for the nine months ended September 30, 1996
and represented 19% of the Company's total revenues for that period. The
Company does not engage in oil trading activities.
PRODUCTION
The table below sets forth information with respect to the Company's net
interests in producing natural gas and oil properties for each of its last
three years and for the nine months ended September 30, 1996 and 1995,
respectively:
<TABLE>
<CAPTION>
NATURAL GAS AND OIL PRODUCTION
----------------------------------
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Quantities Produced and Sold
Natural gas (Bcf).......................... 31.7 33.3 47.7 33.9 44.1
Oil and condensate (MMBbls)................ 1.3 1.3 1.7 1.3 1.4
Average Sales Price
Natural gas ($/Mcf)........................ $ 1.94 $ 1.83 $ 1.47 $ 1.48 $ 1.73
Oil and condensate ($/Bbl)................. 14.93 13.95 15.76 15.84 18.61
Average Production Costs/Mcfe............... $ 0.77 $ 0.69 $ 0.60 $ 0.61 $ 0.65
</TABLE>
PRODUCTIVE WELLS AND DEVELOPED ACREAGE
The productive wells in which the Company owned a working interest as of
December 31, 1996 are described in the following table:
<TABLE>
<CAPTION>
PRODUCTIVE WELLS (1)
-------------------------
GAS WELLS OIL WELLS DEVELOPED ACREAGE
------------ ------------ -----------------
GROSS NET GROSS NET GROSS NET
----- ------ ----- ------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rocky Mountain Region
Wind River............. 462 23.24 0 0.00 5,115 3,411
Piceance............... 308 161.31 0 0.00 36,560 20,336
Powder River........... 39 3.25 335 80.74 42,848 26,319
Green River............ 45 22.64 3 1.80 22,055 7,038
Uinta.................. 1 .78 135 115.58 97,580 60,940
Mid-Continent Region
Arkoma................. 121 32.06 0 0.00 51,200 14,450
Anadarko............... 149 64.89 13 12.60 83,265 49,920
Hugoton Embayment...... 412 347.80 0 0.00 88,332 84,946
Permian................ 54 17.63 210 145.69 45,701 15,143
Gulf of Mexico Region... 21 5.86 3 1.00 34,765 9,255
Other................... 88 60.84 74 5.78 41,225 28,209
----- ------ --- ------ -------- --------
Total.................. 1,203 640.87 854 332.27 548,646 319,967
===== ====== === ====== ======== ========
</TABLE>
- --------
(1) Each well completed to more than one producing zone is counted as a single
well. The Company has royalty interests in certain wells that are not
included in this table.
31
<PAGE>
DRILLING ACTIVITY
The following table summarizes the Company's natural gas and oil drilling
activities, all of which were located in the United States, during the last
three years:
<TABLE>
<CAPTION>
WELLS DRILLED
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1995 1996
----------- ----------- -----------
GROSS NET GROSS NET GROSS NET
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Development
Natural gas............................... 100 36.51 88 39.03 94 46.24
Oil....................................... 19 12.62 22 11.68 43 30.48
Non-productive............................ 18 7.65 10 3.51 17 8.03
--- ----- --- ----- --- -----
Total................................... 137 56.78 120 54.22 154 84.75
=== ===== === ===== === =====
Exploratory
Natural gas............................... 1 0.50 0 0.00 8 4.05
Oil....................................... 5 .58 1 0.33 3 1.00
Non-productive............................ 8 1.84 8 2.65 6 3.66
--- ----- --- ----- --- -----
Total................................... 14 2.92 9 2.98 17 8.71
=== ===== === ===== === =====
</TABLE>
In addition, the Company was participating in 25 gross (10.82 net) wells,
which were in the process of being drilled, at December 31, 1996.
RESERVES
The table below sets forth the Company's estimated quantities of historical
proved reserves, all of which were located in the United States, and the
present values attributable to those reserves. These estimates were prepared
by the Company, with certain portions having been reviewed by Ryder Scott
Company, an independent reservoir engineer, and the other portions having been
reviewed by Netherland, Sewell & Associates, Inc., an independent reservoir
engineer. The total proved net reserves estimated by the Company were within
10% of those reviewed and estimated by the engineers; however, on a well by
well basis, differences of greater than 10% may exist. See "Risk Factors--
Engineers' Estimates of Reserves and Future Net Revenues."
<TABLE>
<CAPTION>
ESTIMATED PROVED RESERVES
-----------------------------------------------
DECEMBER 31,
-----------------------------------------------
1993 1994 1995
--------------- --------------- ---------------
(DOLLARS IN MILLIONS EXCEPT SALES PRICE DATA)
<S> <C> <C> <C>
Estimated Proved Reserves(1):
Natural gas (Bcf)........... 364.8 458.8 513.5
Oil and condensate
(MMBbls)................... 6.9 11.4 13.0
Total (Bcfe).............. 406.5 527.5 591.3
Proved developed reserves
(Bcfe)....................... 375.6 440.1 489.7
Natural gas price as of Decem-
ber 31 ($/Mcf)............... $ 1.95 $ 1.67 $ 1.77
Oil price as of December 31
($/Bbl)...................... $ 11.05 $ 14.43 $ 17.35
Present value of estimated fu-
ture net revenues
before future income taxes
discounted at 10%(2)....... $ 277.6 $ 322.7 $ 432.6
Standardized measure of
discounted net cash
flows(3)..................... $ 203.1 $ 242.6 $ 309.9
</TABLE>
32
<PAGE>
- --------
(1) The Company's annual reserve report as of December 31, 1995 was prepared
by the Company, with certain portions of the reserve report having been
reviewed by Ryder Scott Company, an independent reservoir engineer. The
portions of the report concerning the reserves that are held by the
Company's Plains subsidiary were reviewed by Netherland, Sewell &
Associates, Inc., an independent reservoir engineering firm that reviewed
Plains' reserve reports from 1988 through 1995.
(2) The Present value of estimated future net revenues on a non-escalated
basis is based on weighted average prices realized by the Company of $1.95
per Mcf of natural gas and $11.05 per Bbl of oil at December 31, 1993,
$1.67 per Mcf of natural gas and $14.43 per Bbl of oil at December 31,
1994 and $1.77 per Mcf of natural gas and $17.35 per Bbl of oil at
December 31, 1995.
(3) The Standardized measure of discounted net cash flows prepared by the
Company represents the Present value of estimated future net revenues
after income taxes discounted at 10%.
The Company has preliminarily estimated that, as of December 31, 1996, the
Company's proved reserves were 785 Bcfe. This estimate was prepared by the
Company and has not been reviewed by the Company's independent petroleum
engineers. The Company anticipates that the final estimate of its proved
reserves as of December 31, 1996, which will have been reviewed by the
Company's independent petroleum engineers and will be available on or about
February 10, 1997, will be at least 785 Bcfe. See, "Risk Factors--Engineer's
Estimates of Reserves and Future Net Revenues."
In accordance with applicable requirements of the Securities and Exchange
Commission, (the "Commission"), estimates of the Company's proved reserves and
future net revenues are made using sales prices estimated to be in effect as
of the date of such reserve estimates and are held constant throughout the
life of the properties (except to the extent a contract specifically provides
for escalation). Estimated quantities of proved reserves and future net
revenues therefrom are affected by natural gas and oil prices, which have
fluctuated widely in recent years. There are numerous uncertainties inherent
in estimating natural gas and oil reserves and their estimated values,
including many factors beyond the control of the producer. The reserve data
set forth in this Prospectus represents only estimates. Reservoir engineering
is a subjective process of estimating underground accumulations of natural gas
and oil that cannot be measured in an exact manner. The accuracy of any
reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. As a result, estimates
of different engineers, including those used by the Company, may vary. In
addition, estimates of reserves are subject to revision based upon actual
production, results of future development and exploration activities,
prevailing natural gas and oil prices, operating costs and other factors,
which revisions may be material. Accordingly, reserve estimates are often
different from the quantities of natural gas and oil that are ultimately
recovered and are highly dependent upon the accuracy of the assumptions upon
which they are based.
In general, the volume of production from natural gas and oil properties
owned by the Company declines as reserves are depleted. Except to the extent
the Company acquires additional properties containing proved reserves or
conducts successful exploration and development activities, or both, the
proved reserves of the Company will decline as reserves are produced. Volumes
generated from future activities of the Company are therefore highly dependent
upon the level of success in acquiring or finding additional reserves and the
costs incurred in doing so.
Reference should be made to "Supplemental Gas and Oil Information" on pages
F-23 and F-24 following the Consolidated Financial Statements included in this
Prospectus for additional information pertaining to the Company's proved
natural gas and oil reserves as of the end of each of the last three fiscal
years. During the past year, the only report concerning the Company's
estimated proved reserves that was filed with a U.S. federal agency other than
the Commission was filed prior to the
33
<PAGE>
Company's merger with Plains, by Barrett and Plains, respectively. This report
was the Annual Survey of Domestic Oil and Gas Reserves and was filed with the
Energy Information Administration ("EIA") as required by law. Only minor
differences of less than 5% in reserve estimates, which were due to small
variances in actual production versus year end estimates, have occurred in
certain classifications reported in this Prospectus as compared to those in
the EIA report.
UNDEVELOPED ACREAGE
The gross and net acres of undeveloped natural gas and oil leases held by
the Company as of December 31, 1996 are summarized in the following table.
"Undeveloped Acreage" includes leasehold interests that already may have been
classified as containing proved undeveloped reserves.
<TABLE>
<CAPTION>
UNDEVELOPED
ACREAGE(1)
-----------------
UNITED STATES
- ---------------------------------------------------------
GROSS NET
- --------------------------------------------------------- --------- -------
<S> <C> <C>
Colorado (Piceance and other basins)..................... 125,506 59,035
Oklahoma (Anadarko and Arkoma Basins).................... 75,429 65,706
Texas (Permian Basin).................................... 5,952 1,313
Utah (Uinta Basin)....................................... 57,168 44,346
Wyoming (Wind River, Greater Green River, Powder River
and other
basins)................................................. 228,257 157,244
Gulf of Mexico .......................................... 179,791 114,093
Other.................................................... 16,050 7,537
<CAPTION>
INTERNATIONAL
- ---------------------------------------------------------
<S> <C> <C>
Peru..................................................... 820,000 451,000
--------- -------
Total.................................................. 1,508,153 900,274
========= =======
</TABLE>
- --------
(1) Undeveloped acreage is leased acreage on which wells have not been drilled
or completed to a point that would permit the production of commercial
quantities of natural gas and oil regardless of whether such acreage
contains proved reserves. Of the aggregate of 1,508,153 gross and 900,274
net undeveloped acres, 165,896 gross and 75,250 net acres are held by
production from other leasehold acreage.
Substantially all the leases summarized in the preceding table will expire
at the end of their respective primary terms unless the existing leases are
renewed or production has been obtained from the acreage subject to the lease
prior to that date, in which event the lease will remain in effect until the
cessation of production. The following table sets forth the gross and net
acres subject to leases summarized in the preceding table that will expire
during the periods indicated:
<TABLE>
<CAPTION>
ACRES EXPIRING
-----------------
GROSS NET
--------- -------
<S> <C> <C>
Twelve Months Ending:
December 31, 1997........................................... 91,416 31,630
December 31, 1998........................................... 30,493 30,348
December 31, 1999........................................... 58,476 58,408
December 31, 2000 and later................................. 1,327,768 779,888
</TABLE>
OVERRIDING ROYALTY INTERESTS
The Company owns overriding royalty interests covering in excess of 52,394
gross acres. The majority of these overriding royalty interests are within a
range of approximately 0.25 to 2.5 percent.
34
<PAGE>
GOVERNMENT REGULATION OF THE OIL AND GAS INDUSTRY
GENERAL
The Company's exploration, production and marketing operations are regulated
extensively at the federal, state and local levels. Natural gas and oil
exploration, development and production activities are subject to various laws
and regulations governing a wide variety of matters. For example, hydrocarbon-
producing states have statutes or regulations addressing conservation practices
and the protection of correlative rights, and such regulations may affect the
Company's operations and limit the quantity of hydrocarbons the Company may
produce and sell. Other regulated matters include marketing, pricing,
transportation, and valuation of royalty payments.
Certain operations the Company conducts are on federal oil and gas leases,
which the MMS administers. The MMS issues such leases through competitive
bidding. These leases contain relatively standardized terms and require
compliance with detailed MMS regulations and orders pursuant to the Outer
Continental Shelf Lands Act ("OCSLA"), which are subject to change by the MMS.
For offshore operations, lessees must obtain MMS approval for exploration plans
and development and production plans prior to the commencement of such
operations. In addition to permits required from other agencies (such as the
Coast Guard, the Army Corps of Engineers and the Environmental Protection
Agency), lessees must obtain a permit from the MMS prior to the commencement of
drilling. The MMS has promulgated regulations requiring offshore production
facilities located on the OCS to meet stringent engineering and construction
specifications. The MMS proposed additional safety-related regulations
concerning the design and operating procedures for OCS production platforms and
pipelines. These proposed regulations were withdrawn pending further
discussions among interested federal agencies. The MMS also has issued
regulations restricting the flaring or venting of natural gas and liquid
hydrocarbons without prior authorization. Similarly, the MMS has promulgated
regulations governing the plugging and abandonment of wells located offshore
and the removal of all production facilities. To cover the various obligations
of lessees on the OCS, the MMS generally requires that lessees post substantial
bonds or other acceptable assurances that such obligations will be met. The
cost of such bonds or other surety can be substantial and there is no assurance
that bonds or other surety can be obtained in all cases. Under certain
circumstances, the MMS may require any Company operations on federal leases to
be suspended or terminated. Any such suspension or termination could materially
and adversely affect the Company's financial condition and operations.
At the U.S. federal level, the FERC regulates interstate transportation of
natural gas under the Natural Gas Act and regulates the maximum selling prices
of certain categories of natural gas sold in "first sales" in interstate and
intrastate commerce under the Natural Gas Policy Act ("NGPA"). Effective
January 1, 1993, the Natural Gas Wellhead Decontrol Act deregulated natural gas
prices for all "first sales" of natural gas, which includes sales by Barrett of
its own production. As a result, all sales of the Company's natural gas
produced in the U.S. may be sold at market prices, unless otherwise committed
by contract. Congress could reenact price controls in the future. See "--
Natural Gas and Oil Marketing and Trading."
The Company's natural gas sales are affected by regulation of intrastate and
interstate natural gas transportation. In an attempt to promote competition,
the FERC has issued a series of orders which have altered significantly the
marketing and transportation of natural gas. The effect of these orders has
been to enable the Company to market its natural gas production to purchasers
other than the interstate pipelines located in the vicinity of its producing
properties. The Company believes that these changes have generally improved the
Company's access to transportation and have enhanced the marketability of its
natural gas production. To date, Barrett has not experienced any material
adverse effect on natural gas marketing as a result of these FERC orders;
however, the Company cannot predict what new regulations may be adopted by the
FERC and other regulatory authorities, or what effect subsequent regulations
may have on its future natural gas marketing.
35
<PAGE>
The Company also is subject to laws and regulations concerning occupational
safety and health. It is not anticipated that the Company will be required in
the near future to expend amounts that are material in the aggregate to the
Company's overall operations by reason of occupational safety and health laws
and regulations, but inasmuch as such laws and regulations are frequently
changed, the Company is unable to predict the ultimate cost of compliance.
ENVIRONMENTAL MATTERS
The Company, as an owner or lessee and operator of natural gas and oil
properties, is subject to various federal, state and local laws and regulations
relating to discharge of materials into, and protection of, the environment.
These laws and regulations may, among other things, impose liability and
substantial penalties on the lessee under a natural gas and oil lease for the
cost of pollution clean-up resulting from operations, subject the lessee to
liability for pollution damages, require suspension or cessation of operations
in affected areas and impose restrictions on the injection of liquid into
subsurface aquifers that may contaminate groundwater. The Oil Pollution Act of
1990, as recently amended by the Coast Guard Authorization Act of 1996,
requires operators of offshore facilities to provide financial assurance in the
amount of $35 million to cover potential environmental cleanup and restoration
costs. This amount is subject to upward regulatory adjustment.
The Company has made, and will continue to make, expenditures in its efforts
to comply with these requirements, which it believes are necessary business
costs in the oil and gas industry.The Company believes it is in substantial
compliance with applicable environmental laws and requirements and to date such
compliance has not had a material adverse effect on the earnings or competitive
position of the Company, although there can be no assurance that significant
costs for compliance will not be incurred in the future. The Company maintains
insurance coverages which it believes are customary in the industry although it
is not fully insured against many environmental risks. See "Risk Factors--
Government Regulation and Environmental Risks."
TITLE TO PROPERTIES
Title to properties is subject to royalty, overriding royalty, carried, net
profits, working and other similar interests and contractual arrangements
customary in the oil and gas industry, to liens for current taxes not yet due
and to other encumbrances. As is customary in the industry in the case of
undeveloped properties, little investigation of record title is made at the
time of acquisition (other than a preliminary review of local records). The
Company reviews information concerning federal and state offshore lease blocks
prior to acquisition. Drilling title opinions are always prepared before
commencement of drilling operations; however, as is customary in the industry,
the Company does not obtain drilling title opinions on offshore leases it has
received directly from the MMS.
EMPLOYEES AND OFFICES
The Company currently has 176 full time employees, including 12 officers
(five of whom are geologists and two of whom are petroleum engineers), 14
geologists, six geophysicists, 13 engineers, one environmental manager, 11
landmen, four district managers, one operations superintendent, and
administrative, clerical, accounting and field operations personnel, none of
whom is represented by organized labor unions.
The Company's executive offices are located at 1515 Arapahoe Street, Tower 3,
Suite 1000, Denver, Colorado 80202, and its telephone number is (303) 572-3900.
In addition, the Company maintains regional offices in Tulsa, Oklahoma and
Houston, Texas.
36
<PAGE>
MANAGEMENT
The directors and executive officers of the Company, their respective
positions and ages, and the year in which each director was first elected, are
set forth in the following table. Additional information concerning each of
these individuals follows the table:
<TABLE>
<CAPTION>
DIRECTOR
AGE POSITION WITH THE COMPANY SINCE
--- ------------------------- --------
<S> <C> <C> <C>
William J. Barrett 68 Chief Executive Officer, Chairman of the 1983
(1)(2)(3).............. Board, and a Director
C. Robert Buford 63 1983
(4)(5)................. Director
Derrill Cody (4)(5)..... 58 Director 1995
James M. Fitzgibbons 62 1987
(4)(5)(6).............. Director
Hennie L.J.M. Gieskes 57 1985
(4)(5)................. Director
William W. Grant, III 64 1995
(4).................... Director
J. Frank Keller (1)..... 53 Chief Financial Officer, Executive Vice 1983
President, Secretary, and a Director
Paul M. Rady............ 43 President, Chief Operating Officer, and a 1994
Director
A. Ralph Reed........... 59 Executive Vice President--Operations and a 1990
Director
James T. Rodgers 62 1993
(4)(5)................. Director
Philippe S.E. Schreiber 56 1985
(4)(5)................. Director
Harry S. Welch (5)...... 73 Director 1995
Joseph P. Barrett (2)... 43 Vice President--Land --
Peter A. Dea............ 43 Senior Vice President--Exploration --
Clifford S. Foss, Jr.... 49 Vice President and General Manager--Gulf of --
Mexico Region
Bryan G. Hassler........ 37 Vice President--Marketing --
Robert W. Howard........ 42 Senior Vice President--Finance and --
Treasurer
Eugene A. Lang, Jr...... 43 Senior Vice President--General Counsel --
Donald H. Stevens....... 44 Vice President--Corporate Relations and --
Capital Markets
Maurice F. Storm........ 36 Vice President and General Manager--Mid- --
Continent Region
</TABLE>
- --------
(1) William J. Barrett and J. Frank Keller are brothers-in-law.
(2) Joseph P. Barrett is the son of William J. Barrett.
(3) William J. Barrett's retirement plans include remaining as Chairman of the
Board until January 1999 and remaining as Chief Executive Officer until
the Company's 1997 Annual Meeting of Stockholders.
(4) Member of the Audit Committee of the Board of Directors.
(5) Member of the Compensation Committee of the Board of Directors.
(6) James M. Fitzgibbons served as a director of the Company from July 1987
until October 1992. He was reelected to the Board of Directors in January
1994.
37
<PAGE>
WILLIAM J. BARRETT has been Chief Executive Officer since December 1983 and
Chairman of the Board of Directors of the Company since March 1994. Mr.
Barrett was President of the Company from December 1983 through September
1994. From January 1979 to February 1982, Mr. Barrett was an independent oil
and gas operator in the western United States in association with Aeon Energy,
a partnership composed of four sole proprietorships. From 1971 to 1978, Mr.
Barrett served as Vice President--Exploration and a director of Rainbow
Resources, Inc., a publicly held independent oil and gas exploration company
that merged with a subsidiary of the Williams Companies in 1978. Mr. Barrett
served as President, Exploration Manager and Director for B&C Exploration from
1969 until 1971 and was a chief geologist for Wolf Exploration Company, now
known as Inexco Oil Co., from 1967 to 1969. He was an exploration geologist
with Pan-American Petroleum Corporation from 1963 to 1966 and worked as an
exploration geologist, a petroleum geologist and a stratigrapher for El Paso
Natural Gas Co. at various times from 1958 to 1963. Mr. Barrett's retirement
plans include remaining as Chairman of the Board until January 1999 and
remaining as Chief Executive Officer until the Company's 1997 Annual Meeting
of Stockholders.
C. ROBERT BUFORD has been a director of the Company since December 1983 and
served as Chairman of the Board of Directors from December 1983 through March
1994. Mr. Buford has been President, Chairman of the Board and controlling
shareholder of Zenith Drilling Corporation ("Zenith"), Wichita, Kansas, since
February 1966. Zenith is engaged in the oil and gas business and owns
approximately 3% of the Company's Common Stock. Since 1993, Mr. Buford has
served as a director of Encore Energy, Inc., a wholly owned subsidiary of
Zenith engaged in the marketing of natural gas. Mr. Buford is also a member of
the Board of Directors of First Bancorp of Wichita, Kansas, a bank holding
company, and Lonestar Steakhouse & Saloon, Inc., a restaurant company
headquartered in Wichita, Kansas.
DERRILL CODY has been a director of the Company since July 1995. Mr. Cody
was a director of Plains from May 1990 through July 1995. Since January 1990,
Mr. Cody has been an attorney in private practice in Oklahoma City, Oklahoma.
From 1986 to 1990, he was Executive Vice President of Texas Eastern
Corporation, and from 1987 to 1990 he was the Chief Executive Officer of Texas
Eastern Pipeline Company. He has been a director of the general partner of
TEPPCO Partners, L.P. since January 1990.
JAMES M. FITZGIBBONS has been a director of the Company since January 1994,
and previously served as a director of the Company from July 1987 until
October 1992. Since October 1990, Mr. Fitzgibbons has been Chairman and Chief
Executive Officer of Fieldcrest Cannon, Inc., a manufacturer of home
furnishing textiles. From January 1986 until October 1990, Mr. Fitzgibbons was
President of Amoskeag Company in Boston, Massachusetts. Prior to 1986, he was
President of Howes Leather Company, a producer of leather. Mr. Fitzgibbons is
also member of the Board Of Directors of Lumber Insurance Company, American
Textile Manufacturers Institute and a Trustee of Laurel Funds, a series of
mutual funds.
HENNIE L.J.M. GIESKES has been a director of the Company since November
1985. Mr. Gieskes is the Managing Director of Spaarne Compagnie N.V., a
Netherlands company engaged in the investment business. From before 1976 until
December 1990, Mr. Gieskes was a Managing Director of Vitol Beheer B.V., a
Netherlands trading company engaged primarily in energy-related commodities.
WILLIAM W. GRANT, III has been a director of the Company since July 1995.
Mr. Grant was a director of Plains from May 1987 through July 1995. He has
been an advisory director of Colorado National Bankshares, Inc. and Colorado
National Bank since 1993. He was a director of Colorado National Bankshares,
Inc. from 1982 to 1993 and the Chairman of the Board of Colorado National Bank
from 1986 to 1993. He served as the Chairman of the Board of Colorado Capital
Advisors from 1989 through 1994.
38
<PAGE>
J. FRANK KELLER has been Chief Financial Officer since July 1995 and an
Executive Vice President, the Secretary and a director of the Company since
December 1983. Mr. Keller was an Executive Vice President of the Company from
December 1983 through September 1995. Mr. Keller was the President and a co-
founder of Myriam Corp., an architectural design and real estate development
firm beginning in 1976, until it was reorganized as Barrett Energy in February
1982.
PAUL M. RADY has been President, Chief Operating Officer, and a director of
the Company since September 1994. Prior to that time Mr. Rady served as
Executive Vice President--Exploration of the Company beginning February 1993.
From August 1990 until July 1992, Mr. Rady served as Chief Geologist for the
Company, and from July 1992 until January 1993 he served as Exploration
Manager for the Company. From July 1980 until August 1990, Mr. Rady served in
various positions with the Denver, Colorado regional office of Amoco
Production Company ("Amoco"), the exploration and production subsidiary of
Amoco Corporation. While with Amoco, Mr. Rady's areas of responsibility
included the Rocky Mountain Basins, Utah-Wyoming Overthrust Belt, offshore
Alaska, Oklahoma, particularly with respect to the Arkoma Basin, and the New
Ventures Group, which concentrated on the western United States.
A. RALPH REED has been an Executive Vice President of the Company since
November 1989 and a director of the Company since September 1990. From 1986 to
1989, Mr. Reed was an independent oil and gas operator in the Mid-Continent
region of the United States, including the period from January 1988 to
November 1989 when he acted as a consultant to Zenith. From 1982 to 1986, Mr.
Reed was President and Chief Executive Officer of Cotton Petroleum
Corporation, a wholly owned exploration and production subsidiary of United
Energy Resources, Inc. Prior to joining Cotton Petroleum Corporation in 1980,
Mr. Reed was employed by Amoco from 1962, holding various positions including
Manager of International Production, Division Production Manager and Division
Engineer.
JAMES T. RODGERS has been a director of the Company since October 1993. Mr.
Rodgers served as the President, Chief Operating Officer and a director of
Anadarko Petroleum Corporation ("Anadarko") from 1986 through 1992. Anadarko
is a Houston-based oil and gas exploration and production company. Prior to
1986, Mr. Rodgers was employed in other capacities by Anadarko and Amoco. Mr.
Rodgers taught Petroleum Engineering at the University of Texas in Austin in
1958 and at Texas Tech University in Lubbock from 1958 to 1961. Mr. Rodgers
currently serves as a Director of Louis Dreyfus Natural Gas Corporation and as
an advisor to Ural Petroleum Corporation, a privately held exploration and
production company operating exclusively in the former Soviet Union.
PHILIPPE S.E. SCHREIBER has been a director of the Company since November
1985. Mr. Schreiber is an independent lawyer and business consultant who also
is of counsel to the law firm of Walter, Conston, Alexander & Green, P.C. in
New York, New York. Mr. Schreiber has been affiliated with that law firm as
counsel or partner since August 1985. From 1988 to mid-1992, he also was the
Chairman of the Board and a principal shareholder of HSE, Inc., d/b/a
Manhattan Kids Limited, a privately owned corporation involved in catalogue
sales of American made children's clothing in Europe. From October 1985
through June 1992, Mr. Schreiber served as a director, and from July 1990
until June 1991 as Managing Director, of Owl Creek Investments Plc, a publicly
traded English oil and gas company.
HARRY S. WELCH has been a director of the Company since July 1995. Mr. Welch
was a director of Plains from May 1986 to July 1995. Since August 1989, he has
been an attorney in private practice in Houston, Texas. He served as Vice
President and General Counsel of Texas Eastern Corporation from 1988 to July
1989.
39
<PAGE>
JOSEPH P. BARRETT has been a Vice President since March 1995 and has been
with the Company in various positions in the Land Department since 1982.
PETER A. DEA has been Senior Vice President--Exploration of the Company
since June 1996. Mr. Dea served as Exploration Manager beginning August 1995.
Mr. Dea served as Chief Geologist from January 1995 to August 1995 and as
Senior Geologist from February 1994 to January 1995. Mr. Dea served as
President of Nautilus Oil and Gas Company in Denver, Colorado from 1992
through 1993. From 1982 until 1991, Mr. Dea served in various positions with
Exxon Company USA as a Geologist in the Production Department in Corpus
Christi, Texas and as a Senior Geologist and Supervisor in the Exploration
Department in Denver, Colorado. While with Exxon, Mr. Dea's areas of
responsibility included the Rocky Mountain Basins and South Texas Gulf Coast
and new ventures in the Special Trades Unit. Mr. Dea served as adjunct
Professor of Geology at Western State College, Gunnison, Colorado in the
spring semesters of 1980 and 1982.
CLIFFORD S. FOSS, JR. has been General Manager of the Gulf of Mexico Region
for the Company since January 1996 and Vice President-General Manager of the
Gulf of Mexico Region for the Company since June of 1996. Prior to joining the
Company, Mr. Foss served from January 1973 to 1996 in various positions with
Cockrell Oil Corporation as Geologist, District Geologist, Exploration Manager
and Vice President of Exploration and Exploitation. Mr. Foss's primary areas
of responsibility at Cockrell Oil Corporation included the Gulf Coast and Gulf
of Mexico. Prior to January 1973, Mr. Foss served as an exploration geologist
for Cities Services Oil Company in its Gulf of Mexico Division.
BRYAN G. HASSLER has been Vice-President--Marketing of the Company since
December 1996 and has been with the Company as Director of Marketing since
August 1994. Prior to joining the Company, Mr. Hassler held various positions
with Questar Corporation's exploration and production, pipeline and marketing
groups.
ROBERT W. HOWARD has been Senior Vice President of the Company since March
1992. Mr. Howard served as the Executive Vice President--Finance from December
1989 until March 1992 and served as Vice President--Finance of the Company
from December 1983 until December 1989. Mr. Howard has been the Treasurer of
the Company since March 1986. During 1982, Mr. Howard was a Manager/Accountant
with Weiss & Co., a certified public accounting firm.
EUGENE A. LANG, JR. has been Senior Vice President--General Counsel of the
Company since September 1995. Mr. Lang served as Senior Vice President,
General Counsel and Secretary of Plains from May 1994 to July 1995, and from
October 1990 to May 1994 he served as Vice President, General Counsel and
Secretary of Plains. From 1986 to 1990 he was an associate with the Houston,
Texas law firm of Vinson & Elkins. From 1984 to 1986, he was General Attorney
and Assistant Secretary of K N. From 1978 to 1984, he was an attorney for K N.
DONALD H. STEVENS has been the Vice President--Corporate Relations and
Capital Markets for the Company since August 1992. From July 1989 until August
1992, Mr. Stevens served as Manager of Corporate and Tax Planning for
Kennecott Corporation, a mining company. From May 1986 until September 1989,
Mr. Stevens served as Corporate Planning Analyst in Corporate Acquisition and
Divestitures for BP America, Inc., formerly The Standard Oil Company. Prior to
May 1986, Mr. Stevens served in various finance, tax and analyst positions
with Seco Energy Corporation and Gulf Oil Corporation, both of which are oil
and gas companies.
MAURICE F. STORM has been Vice President and General Manager of the
Company's Mid-Continent Division since July 1996. From October 1991 to July
1996 Mr. Storm was retained by the Company as a consultant to develop drilling
opportunities in the Anadarko and Arkoma Basins. From September 1984 through
October 1991 Mr. Storm worked for other independent exploration and production
companies in various exploration geologist and management positions.
40
<PAGE>
BENEFICIAL OWNERS OF SECURITIES
The following table summarizes certain information as of January 28, 1997
with respect to the ownership by each director, by all executive officers and
directors as a group, and by each other person known by the Company to be the
beneficial owner of more than 5% of the Common Stock:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
------------------------ ------------------ ----------------
<S> <C> <C>
William J. Barrett....................... 390,172(1) 1.2%
C. Robert Buford......................... 652,366(2) 2.1%
Derrill Cody............................. 12,560(3) *
James M. Fitzgibbons..................... 11,000(3) *
Hennie L.J.M. Gieskes.................... 898,714(3) 2.9%
William W. Grant, III.................... 25,650(3) *
J. Frank Keller.......................... 74,036(3) *
Eugene A. Lang, Jr....................... 49,852(3) *
Paul M. Rady............................. 78,122(3) *
A. Ralph Reed............................ 80,328(4) *
James T. Rodgers......................... 11,500(3) *
Philippe S.E. Schreiber.................. 19,507(3) *
Harry S. Welch........................... 19,300(3) *
All Directors and Executive Officers as a
Group (20 persons)...................... 2,410,993(5) 7.6%
Fidelity Management and Research
Corporation
82 Devonshire Street
Boston, MA 02109........................ 3,300,000(6) 10.5%
State Farm Mutual Automobile
Insurance Company and affiliates
One State Farm Plaza
Bloomington, IL 61710................... 2,278,233(6)(7) 7.3%
</TABLE>
- --------
* Less than 1% of the Common Stock outstanding.
(1) The number of shares indicated includes 36,292 shares owned by Louise K.
Barrett, Mr. Barrett's wife, 230,000 shares owned by the Barrett Family
L.L.L.P., a Colorado limited partnership for which Mr. Barrett and his
wife are general partners and owners of an aggregate of 62.9% of the
partnership interests, and 55,000 shares underlying options that currently
are exercisable or become exercisable within the next 60 days. Pursuant to
Rule 16a-1(a)(4) under the Exchange Act, Mr. Barrett disclaims ownership
of all but 144,723 shares held by the Barrett Family L.L.L.P., which
constitutes Mr. and Mrs. Barrett's proportionate share of the shares held
by the Barrett Family L.L.L.P.
(2) C. Robert Buford is considered a beneficial owner of the 598,210 shares of
which Zenith is the record owner. Mr. Buford owns approximately 89% of the
outstanding common stock of Zenith. The number of shares of the Company's
stock indicated for Mr. Buford also includes 10,000 shares that are owned
by Aguilla Corporation, which is owned by Mr. Buford's wife and adult
children. Mr. Buford disclaims beneficial ownership of the shares held by
Aguilla Corporation pursuant to Rule 16a-1(a)(4) under the Exchange Act.
The number of shares indicated also includes 10,500 shares underlying
options currently exercisable.
41
<PAGE>
(3) The number of shares indicated consists of or includes the following
number of shares underlying options that currently are exercisable or that
become exercisable within the next 60 days that are held by each of the
following persons: Derrill Cody, 12,300; James M. Fitzgibbons, 9,000;
Hennie L.J.M. Gieskes, 9,500; William W. Grant, III, 15,900; J. Frank
Keller, 32,300; Eugene A. Lang, Jr., 43,259; Paul M. Rady, 48,000; James
T. Rodgers, 11,500; Philippe S.E. Schreiber, 9,500; and Harry S. Welch,
16,700.
(4) The number of shares indicated includes 10,150 shares owned by Mary C.
Reed, Mr. Reed's wife and 45,048 shares underlying options that currently
are exercisable or that become exercisable within the next 60 days.
(5) The number of shares indicated includes the shares owned by Zenith that
are beneficially owned by Mr. Buford as described in note (2), the
aggregate of 318,507 shares underlying the options described in notes (1),
(2), (3) and (4), an aggregate of 25,086 shares owned by seven executive
officers not named in the above table, and an aggregate of 62,800 shares
underlying options that currently are exercisable or that are exercisable
within 60 days that are held by those seven executive officers.
(6) Based on information included in a Schedule 13G filed with the Commission
by the named stockholder and from information obtained from other sources.
(7) The number of shares indicated includes the shares owned by entities
affiliated with State Farm Mutual Automobile Insurance Company ("SFMAI").
Those entities and SFMAI may be deemed to constitute a "group" with regard
to the ownership of shares reported on a Schedule 13G under the Exchange
Act.
42
<PAGE>
DESCRIPTION OF NOTES
The Notes will be issued pursuant to an Indenture to be dated as of ,
1997 (the "Indenture") among the Company, and Bankers Trust Company, as
trustee (the "Trustee"), a copy of the form of which is filed as an exhibit to
the Registration Statement of which this Prospectus is a part. The following
summaries of certain provisions of the Notes and the Indenture do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, the Notes and the Indenture, including the definitions therein
of certain capitalized terms used but not defined herein.
GENERAL
Each Note will mature on , 2007 and will bear interest at the rate per
annum stated on the cover page hereof from , 1997 payable semiannually on
and of each year, commencing , 1997, to the person in whose name the
Note is registered at the close of business on the or preceding such
interest payment date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. Principal and interest will be payable at the
offices of the Trustee and the Paying Agent. In addition, in the event the
Notes do not remain in book-entry form, at the option of the Company payment
of interest will be made by check mailed to the address of the person entitled
thereto as it appears in the register of the Notes (the "Note Register")
maintained by the Registrar. The aggregate principal amount of the Notes that
may be issued will be limited to $150,000,000. The Notes will be transferable
and exchangeable at the office of the Registrar and any co-registrar and will
be issued in fully registered form, without coupons, in denominations of
$1,000 and any whole multiple thereof. The Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection with certain transfers and exchanges.
The Notes will be senior unsecured obligations of the Company and will rank
pari passu in right of payment with the Company's obligations under all
existing and future senior unsecured indebtedness of the Company (including
the bank credit facility) and senior in right of payment to all existing and
future indebtedness of the Company that is, by its terms, expressly
subordinated to the Notes.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the option of the Company, at any time in
whole or from time to time in part, upon not less than 30 and not more than 60
days' notice mailed to each holder of Notes to be redeemed at the holder's
address appearing in the Note Register, on any date prior to maturity at a
price equal to 100% of the principal amount thereof plus accrued interest to
the Redemption Date (subject to the right of holders of record on the relevant
record date to receive interest due on an interest payment date that is on or
prior to the Redemption Date) plus a Make-Whole Premium, if any (the
"Redemption Price"). In no event will the Redemption Price ever be less than
100% of the principal amount of the Notes plus accrued interest to the
Redemption Date.
The amount of the Make-Whole Premium with respect to any Note (or portion
thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption Date, of:
A. each interest payment that, but for such redemption, would have been
payable on the Note (or portion thereof) being redeemed on each
Interest Payment Date occurring after the Redemption Date (excluding
any accrued interest for the period prior to the Redemption Date); and
B. the principal amount that, but for such redemption, would have been
payable at the final maturity of the Note (or portion thereof) being
redeemed;
over
(ii)the principal amount of the Note (or portion thereof) being redeemed.
43
<PAGE>
The present values of interest and principal payments referred to in clause
(i) above will be determined in accordance with generally accepted principles
of financial analysis. Such present values will be calculated by discounting
the amount of each payment of interest or principal from the date that each
such payment would have been payable, but for the redemption, to the
Redemption Date at a discount rate equal to the Treasury Yield (as defined
below) plus basis points.
The Make-Whole Premium will be calculated by an independent investment
banking institution of national standing appointed by the Company; provided,
that if the Company fails to make such appointment at least 45 business days
prior to the Redemption Date, or if the institution so appointed is unwilling
or unable to make such calculation, such calculation will be made by Goldman,
Sachs & Co. or, if such firm is unwilling or unable to make such calculation,
by an independent investment banking institution of national standing
appointed by the Trustee (in any such case, an "Independent Investment
Banker").
For purposes of determining the Make-Whole Premium, "Treasury Yield" means a
rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Notes, calculated to the nearest 1/12th
of a year (the "Remaining Term"). The Treasury Yield will be determined as of
the third business day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be determined
by reference to the most recent statistical release published by the Federal
Reserve Bank of New York and designated "H.15(519) Selected Interest Rates" or
any successor release (the "H.15 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States
Treasury Notes having a constant maturity that is the same as the Remaining
Term, then the Treasury Yield will be equal to such weekly average yield. In
all other cases, the Treasury Yield will be calculated by interpolation, on a
straight-line basis, between the weekly average yields on the United States
Treasury Notes that have a constant maturity closest to and greater than the
Remaining Term and the United States Treasury Notes that have a constant
maturity closest to and less than the Remaining Term (in each case as set
forth in the H.15 Statistical Release). Any weekly average yields so
calculated by interpolation will be rounded to the nearest 1/100th of 1%, with
any figure of 1/200% or above being rounded upward. If weekly average yields
for United States Treasury Notes are not available in the H.15 Statistical
Release or otherwise, then the Treasury Yield will be calculated by
interpolation of comparable rates selected by the Independent Investment
Banker.
If less than all of the Notes are to be redeemed, the Trustee will select
the Notes to be redeemed by such method as the Trustee shall deem fair and
appropriate. The Trustee may select for redemption Notes and portions of Notes
in amounts of $1,000 or whole multiples of $1,000.
The Notes will not be entitled to the benefit of any sinking fund or other
mandatory redemption provisions.
CERTAIN COVENANTS
LIMITATION ON LIENS. Nothing in the Indenture or the Notes will in any way
limit the amount of indebtedness or securities (other than the Notes) that the
Company or any of its Subsidiaries may incur or issue. The Indenture will
provide that the Company will not, and will not permit any Restricted
Subsidiary to, issue, assume or guarantee any Indebtedness for borrowed money
secured by any Lien on any property or asset now owned or hereafter acquired
by the Company or such Restricted Subsidiary without making effective
provision whereby any and all Notes then or thereafter outstanding will be
secured by a Lien equally and ratably with any and all other obligations
thereby secured for so long as any such obligations shall be so secured.
44
<PAGE>
The foregoing restriction will not, however, apply to:
(a) Liens existing on the date on which the Notes are originally issued
or provided for under the terms of agreements existing on such date;
(b) Liens on property securing (i) all or any portion of the cost of
exploration, drilling or development of such property, (ii) all or any
portion of the cost of acquiring, constructing, altering, improving or
repairing any property or assets, real or personal, or improvements used or
to be used in connection with such property or (iii) Indebtedness incurred
by the Company or any Restricted Subsidiary to provide funds for the
activities set forth in clauses (i) and (ii) above;
(c) Liens securing Indebtedness owed by a Restricted Subsidiary to the
Company or to any other Restricted Subsidiary;
(d) Liens on property existing at the time of acquisition of such
property by the Company or a Subsidiary or Liens on the property of any
corporation or other entity existing at the time such corporation or other
entity becomes a Restricted Subsidiary of the Company or is merged with the
Company in compliance with the Indenture and in either case not incurred as
a result of (or in connection with or in anticipation of) the acquisition
of such property or such corporation or other entity becoming a Restricted
Subsidiary of the Company or being merged with the Company, provided that
such Liens do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries other than the property so acquired;
(e) Liens on any property securing (i) Indebtedness incurred in
connection with the construction, installation or financing of pollution
control or abatement facilities or other forms of industrial revenue bond
financing or (ii) Indebtedness issued or guaranteed by the United States or
any State thereof or any department, agency or instrumentality of either;
(f) any Lien extending, renewing or replacing (or successive extensions,
renewals or replacements of) any Lien of any type permitted under clauses
(a) through (e) above, provided that such Lien extends to or covers only
the property that is subject to the Lien being extended, renewed or
replaced;
(g) certain Liens arising in the ordinary course of business of the
Company and the Restricted Subsidiaries;
(h) any Lien resulting from the deposit of moneys or evidences of
indebtedness in trust for the purpose of defeasing Indebtedness of the
Company or any Subsidiary; or
(i) Liens (exclusive of any Lien of any type otherwise permitted under
clauses (a) through (h) above) securing Indebtedness of the Company or any
Restricted Subsidiary in an aggregate principal amount which, together with
the aggregate amount of Attributable Indebtedness deemed to be outstanding
in respect of all Sale/Leaseback Transactions entered into pursuant to
clause (a) of the covenant described under "Limitation on Sale/Leaseback
Transactions" below (exclusive of any such Sale/Leaseback Transactions
otherwise permitted under clauses (a) through (h) above), does not at the
time such Indebtedness is incurred exceed 5% of the Consolidated Net
Tangible Assets of the Company (as shown in the most recent audited
consolidated balance sheet of the Company and its Subsidiaries).
The following types of transactions will not be prohibited or otherwise
limited by the foregoing covenant: (i) the sale, granting of Liens with
respect to, or other transfer of, crude oil, natural gas or other petroleum
hydrocarbons in place for a period of time until, or in an amount such that,
the transferee will realize therefrom a specified amount (however determined)
of money or of such crude oil, natural gas or other petroleum hydrocarbons;
(ii) the sale or other transfer of any other interest in property of the
character commonly referred to as a production payment, overriding royalty,
forward sale or similar interest; (iii) the entering into of Currency Hedge
Obligations, Interest Rate Hedging Agreements or Oil and Gas Hedging Contracts
although Liens securing any Indebtedness for borrowed money that is the
subject of any such obligation shall not be permitted hereby unless permitted
under
45
<PAGE>
clauses (a) through (i) above; and (iv) the granting of Liens required by any
contract or statute in order to permit the Company or any Restricted
Subsidiary to perform any contract or subcontract made by it with or at the
request of the United States or any State thereof or any department, agency or
instrumentality of either, or to secure partial, progress, advance or other
payments to the Company or any Restricted Subsidiary by such governmental unit
pursuant to the provisions of any contract or statute.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Indenture will provide that
the Company will not, and will not permit any Restricted Subsidiary to, enter
into any Sale/Leaseback Transaction with any person (other than the Company or
a Restricted Subsidiary) unless:
(a) the Company or such Restricted Subsidiary would be entitled to incur
Indebtedness, in a principal amount equal to the Attributable Indebtedness
with respect to such Sale/Leaseback Transaction, secured by a Lien on the
property subject to such Sale/Leaseback Transaction pursuant to the
covenant described under "Limitation on Liens" above without equally and
ratably securing the Notes pursuant to such covenant;
(b) after the date on which the Notes are originally issued and within a
period commencing six months prior to the consummation of such
Sale/Leaseback Transaction and ending six months after the consummation
thereof, the Company or such Restricted Subsidiary shall have expended for
property used or to be used in the ordinary course of business of the
Company and the Restricted Subsidiaries (including amounts expended for the
exploration, drilling or development thereof, and for additions,
alterations, repairs and improvements thereto) an amount equal to all or a
portion of the net proceeds of such Sale/Leaseback Transaction and the
Company shall have elected to designate such amount as a credit against
such Sale/Leaseback Transaction (with any such amount not being so
designated to be applied as set forth in clause (c) below); or
(c) the Company, during the 12-month period after the effective date of
such Sale/Leaseback Transaction, shall have applied to the voluntary
defeasance or retirement of Notes or any Pari Passu Indebtedness an amount
equal to the greater of the net proceeds of the sale or transfer of the
property leased in such Sale/Leaseback Transaction and the fair value, as
determined by the Board of Directors of the Company, of such property at
the time of entering into such Sale/Leaseback Transaction (in either case
adjusted to reflect the remaining term of the lease and any amount expended
by the Company as set forth in clause (b) above), less an amount equal to
the principal amount of Notes and Pari Passu Indebtedness voluntarily
defeased or retired by the Company within such 12-month period and not
designated as a credit against any other Sale/ Leaseback Transaction
entered into by the Company or any Restricted Subsidiary during such
period.
LIMITATIONS ON MERGERS AND CONSOLIDATIONS
The Indenture will provide that the Company will not consolidate or merge
with or into any Person, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets, or assign any of its obligations under the
Indenture or under the Notes, to any Person, unless: (i) the Person formed by
or surviving such consolidation or merger (if other than the Company), or to
which such sale, lease, conveyance or other disposition or assignment shall be
made (collectively, the "Successor"), is a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia and the Successor assumes by supplemental indenture in a form
satisfactory to the Trustee all of the obligations of the Company under the
Indenture and under the Notes; and (ii) immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing.
CERTAIN DEFINITIONS
The following is a summary of certain defined terms to be used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms and for the definitions of other capitalized terms used herein and
not defined below.
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"Attributable Indebtedness", when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at a rate equivalent to the Company's then current weighted
average cost of funds for borrowed money as at the time of determination,
compounded on a semi-annual basis) of the total obligations of the lessee for
rental payments during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which such lease can be
extended).
"Capitalized Lease Obligation" of any Person means any obligation of such
Person to pay rent or other amounts under a lease of property, real or
personal, that is required to be capitalized for financial reporting purposes
in accordance with generally accepted accounting principles; and the amount of
such obligation shall be the capitalized amount thereof determined in
accordance with generally accepted accounting principles.
"Consolidated Net Tangible Assets" means, for the Company and its Restricted
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles, the aggregate amounts of assets (less
depreciation and valuation reserves and other reserves and items deductible
from gross book value of specific asset accounts under generally accepted
accounting principles) that would be included on a balance sheet after
deducting therefrom (a) all liability items except deferred income taxes,
commercial paper, short term bank indebtedness, Funded Indebtedness, other
long-term liabilities and shareholders' equity and (b) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other
like intangibles.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time that were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure
to fluctuations in foreign currency exchange rates.
"Funded Indebtedness" means all Indebtedness (including Indebtedness
incurred under any revolving credit, letter of credit or working capital
facility) that matures by its terms, or that is renewable at the option of any
obligor thereon to a date, more than one year after the date on which such
Indebtedness is originally incurred.
"Indebtedness" of any Person at any date means, without duplication, (i) all
indebtedness of such Person for borrowed money (whether or not the recourse of
the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit
incurred by such Person in the ordinary course of business, (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued expenses incurred in
the ordinary course of business, (v) all Capitalized Lease Obligations of such
Person, (vi) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (vii) all
Indebtedness of others guaranteed by such Person to the extent of such
guarantee and (viii) all obligations of such Person in respect of Currency
Hedge Obligations, Interest Rate Hedging Agreements and Oil and Gas Hedging
Contracts.
"Interest Rate Hedging Agreements" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset
(including, without limitation, any production payment, advance payment or
similar arrangement with respect to minerals in place), whether or not filed,
recorded or otherwise perfected under applicable law. For the purposes of the
Indenture, the Company or any Restricted Subsidiary shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement,
Capitalized Lease Obligation (other than any Capitalized Lease Obligation
relating to any building, structure, equipment or other property used or to be
used in the ordinary course of business of the Company and the Restricted
Subsidiaries) or other title retention agreement relating to such asset.
"Oil and Gas Hedging Contracts" means any oil and gas purchase or hedging
agreement, and other agreement or arrangement, in each case, that is designed
to provide protection against oil and gas price fluctuations.
"Pari Passu Indebtedness" means any Indebtedness of the Company, whether
outstanding on the date on which the Notes are originally issued or thereafter
created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
be subordinated in right of payment to the Notes.
"Restricted Subsidiary" means each of the existing Subsidiaries of the
Company and any Subsidiary of the Company that is a successor corporation of
any of the existing Subsidiaries, except for BGP Inc. The status of any
Subsidiary of the Company as a Restricted Subsidiary shall continue so long as
it is a Subsidiary of the Company.
"Sale/Leaseback Transaction" means any arrangement with any Person providing
for the leasing by the Company or any Restricted Subsidiary, for a period of
more than three years, of any real or tangible personal property, which
property has been or is to be sold or transferred by the Company or such
Restricted Subsidiary to such Person in contemplation of such leasing.
EVENTS OF DEFAULT
An Event of Default will be defined in the Indenture as being: (i) default
by the Company for 30 days in payment of any interest on the Notes; (ii)
default by the Company in any payment of principal of or premium, if any, on
the Notes; (iii) default by the Company in performance of any other covenant
or agreement in the Notes, or the Indenture which shall not have been remedied
within 60 days after written notice by the Trustee or by the holders of at
least 25% in principal amount of the Notes then outstanding; (iv) the
acceleration of the maturity of any Indebtedness of the Company or any
Restricted Subsidiary (other than the Notes) having an outstanding principal
amount of $5 million or more individually or in the aggregate, or a default in
the payment of any principal or interest in respect of any Indebtedness of the
Company or any Restricted Subsidiary (other than the Notes) having an
outstanding principal amount of $5 million or more individually or in the
aggregate and such default shall be continuing for a period of 30 days without
the Company or such Restricted Subsidiary, as the case may be, effecting a
cure of such default; (v) failure by the Company or any Restricted Subsidiary
to pay final, non-appealable judgments aggregating in excess of $10 million,
which judgments are not paid, discharged or stayed for a period of 60 days; or
(vi) certain events involving bankruptcy, insolvency or reorganization of the
Company or any Restricted Subsidiary. The Indenture will provide that the
Trustee may withhold notice to the holders of the Notes of any default (except
in payment of principal of, or premium, if any, or interest on the Notes) if
the Trustee considers it in the interest of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default occurs and is
continuing with respect to the Indenture, the Trustee or the holders of not
less than 25% in principal amount of the Notes outstanding may declare the
principal of and premium, if any, and accrued and unpaid interest on all the
Notes to
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be due and payable. Upon such a declaration, such principal, premium, if any,
and interest will be due and payable immediately. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company or any Restricted Subsidiary occurs and is continuing, the principal
of and premium, if any, and interest on all the Notes will become and be
immediately due and payable without any declaration or other act on the part
of the Trustee or any holders of the Notes. The amount due and payable on the
acceleration of any Note will be equal to 100% of the principal amount of such
Note, plus accrued interest to the date of payment. Under certain
circumstances, the holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
The Indenture will provide that no holder of a Note may pursue any remedy
under the Indenture unless (i) the Trustee shall have received written notice
of a continuing Event of Default, (ii) the Trustee shall have received a
request from holders of at least 25% in principal amount of the Notes to
pursue such remedy, (iii) the Trustee shall have been offered indemnity
satisfactory to it and (iv) the Trustee shall have failed to act for a period
of 60 days after receipt of such notice and offer of indemnity; however, such
provision does not affect the right of a holder of a Note to sue for
enforcement of any overdue payment thereon.
The holders of a majority in principal amount of the Notes then outstanding
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee under the
Indenture, subject to certain limitations specified in the Indenture. The
Indenture will require the annual filing by the Company with the Trustee of a
written statement as to compliance with the covenants contained in the
Indenture.
MODIFICATION AND WAIVER
The Indenture will provide that modifications and amendments to the
Indenture or the Notes may be made by the Company, and the Trustee with the
consent of the holders of a majority in principal amount of the Notes then
outstanding; provided that no such modification or amendment may, without the
consent of the holder of each Note then outstanding affected thereby, (i)
reduce the percentage in principal amount of Notes whose holders must consent
to an amendment, supplement or waiver; (ii) reduce the rate of or change the
time for payment of interest, including default interest, on any Note; (iii)
reduce the principal of or change the fixed maturity of any Note or alter the
premium or other provisions with respect to redemption; (iv) make any Note
payable in money other than that stated in the Note; (v) impair the right to
institute suit for the enforcement of any payment of principal of, or premium,
if any, or interest on, any Note; (vi) make any change in the percentage of
principal amount of Notes necessary to waive compliance with certain
provisions of the Indenture; or (vii) waive a continuing Default or Event of
Default in the payment of principal of, or premium, if any, or interest on the
Notes. The Indenture will provide that modifications and amendments of the
Indenture may be made by the Company, and the Trustee without the consent of
any holders of Notes in certain limited circumstances, including (a) to cure
any ambiguity, omission, defect or inconsistency, (b) to provide for the
assumption of the obligations of the Company under the Indenture upon the
merger, consolidation or sale or other disposition of all or substantially all
of the assets of the Company, (c) to provide for uncertificated Notes in
addition to or in place of certificated Notes, (d) to comply with any
requirement in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act of 1939 or (e) to make any change that does not
adversely affect the rights of any holder of Notes in any material respect.
The Indenture will provide that the holders of a majority in aggregate
principal amount of the Notes then outstanding may waive any past default
under the Indenture, except a default in the payment of principal, or premium,
if any, or interest.
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DISCHARGE AND TERMINATION
DEFEASANCE OF CERTAIN OBLIGATIONS. The Indenture will provide that the
Company may terminate certain of its obligations under the Indenture,
including those described under the section "Certain Covenants," if (i) the
Company irrevocably deposits in trust with the Trustee money or U.S.
Government Obligations sufficient to pay principal of and interest on the
Notes to maturity, and to pay all other sums payable by it under the
Indenture, provided that the Trustee shall have been irrevocably instructed to
apply such money or the proceeds of such U.S. Government Obligations to the
payment of said principal and interest with respect to the Notes as the same
shall become due; (ii) the Company delivers to the Trustee an Officers'
Certificate stating that all conditions precedent to satisfaction and
discharge of the Indenture have been complied with, and an Opinion of Counsel
to the same effect; (iii) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit; and (iv) the Company shall have
delivered to the Trustee an Opinion of Counsel from nationally recognized
counsel acceptable to the Trustee or a tax ruling to the effect that the
holders of the Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of the Company's exercise of its option under
such section and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
option had not been exercised. In order to have money available on a payment
date to pay principal of or interest on the Notes, the U.S. Government
Obligations shall be payable as to principal or interest on or before such
payment date in such amounts as will provide the necessary money. U.S.
Government Obligations shall not be callable at the issuer's option. The
Company's payment obligation shall survive until the Notes are no longer
outstanding.
DISCHARGE. The Indenture will provide that the Indenture shall cease to be
of further effect (subject to certain exceptions relating to compensation and
indemnity of the Trustee and repayment to the Company of excess money or
securities) when (i) either (A) all outstanding Notes theretofore
authenticated and issued (other than destroyed, lost or stolen Notes that have
been replaced or paid) have been delivered to the Trustee for cancellation; or
(B) all outstanding Notes not theretofore delivered to the Trustee for
cancellation: (x) have become due and payable, or (y) will become due and
payable at their stated maturity within one year or (z) are to be called for
redemption within one year under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company, and the Company, in the case of clause (x), (y) or
(z) above, has deposited or caused to be deposited with the Trustee as funds
(immediately available to the holders in the case of clause (x) ) in trust for
such purpose an amount which, together with earnings thereon, will be
sufficient to pay and discharge the entire indebtedness on such Notes for
principal, premium, if any, and interest to the date of such deposit (in the
case of Notes which have become due and payable) or to the stated maturity or
Redemption Date, as the case may be; (ii) the Company has paid or caused to be
paid all other sums payable by it under the Indenture; and (iii) the Company
has delivered to the Trustee an Officers' Certificate stating that all
conditions precedent to satisfaction and discharge of the Indenture have been
complied with, together with an Opinion of Counsel to the same effect.
GOVERNING LAW
The Indenture will provide that it will be governed by, and construed in
accordance with, the laws of the State of New York.
THE TRUSTEE
Bankers Trust Company will be the Trustee under the Indenture. Its address
is Four Albany Street, New York, New York 10006. The Company has also
appointed the Trustee as the initial Registrar and as the initial Paying Agent
under the Indenture.
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The Indenture will contain certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. In the event the Trustee acquires any
conflicting interest (as defined in the Trust Indenture Act of 1939), however,
it must eliminate such conflict or resign.
The Indenture will provide that in case an Event of Default shall occur (and
be continuing), the Trustee will be required to use the degree of care and
skill of a prudent man in the conduct of his own affairs. The Trustee will be
under no obligation to exercise any of its powers under the Indenture at the
request of any of the holders of the Notes, unless such holders shall have
offered the Trustee indemnity reasonably satisfactory to it.
BOOK-ENTRY, DELIVERY AND FORM
The Notes to be sold as set forth herein will be issued in the form of a
fully registered Global Certificate (the "Global Certificate"). The Global
Certificate will be deposited on the date of the closing of the sale of the
Notes offered hereby (the "Closing Date") with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of its
nominee (such nominee being referred to herein as the "Global Certificate
Holder") or will remain in the custody of the Trustee pursuant to a FAST
Balance Certificate Agreement or similar agreement between the Depositary and
the Trustee.
Except as set forth below, the Global Certificate may be transferred, in
whole and not in part, only to another nominee of the Depositary or to a
successor of the Depositary or its nominee.
The Depositary has advised the Company and the Underwriters as follows: It
is a limited-purpose trust company which was created to hold securities for
its participating organizations (the "Participants") and to facilitate the
clearance and settlement of transactions in such securities between
Participants through electronic book-entry changes in accounts of its
Participants. Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations and certain
other organizations. Access to the Depositary's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly ("indirect participants"). Persons who are not
Participants may beneficially own securities held by the Depositary only
through Participants or indirect participants.
The Depositary has also advised that pursuant to procedures established by
it (i) upon the issuance by the Company of the Notes, the Depositary will
credit the accounts of Participants designated by the Underwriters with the
principal amount of the Notes purchased by the Underwriters, and (ii)
ownership of beneficial interests in the Global Certificate will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the Depositary (with respect to Participants' interests), the
Participants and the indirect participants. The laws of some states require
that certain persons take physical delivery in definitive form of securities
which they own. Consequently, the ability to transfer beneficial interests in
the Global Certificate is limited to such extent.
All payments on the Global Certificate registered in the name of the
Depositary's nominee will be made by the Company through the Paying Agent to
the Depositary's nominee as the registered owner of the Global Certificate.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes are registered as the owners of such Notes
for the purpose of receiving payments of principal and interest on such Notes
and for all other purposes whatsoever. Therefore, neither the Company, the
Trustee nor the Paying Agent has any direct responsibility or liability for
the payment of principal or interest on the Notes to owners of beneficial
interests in the Global Certificate. The Depositary has advised the Company
and the Trustee that its present practice is, upon receipt of any payment of
principal or interest, to credit immediately the accounts of the
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Participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the Global Certificate
as shown on the records of the Depositary. Payments by Participants and
indirect participants to owners of beneficial interests in the Global
Certificate will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name" and will be the responsibility of
such Participants or indirect participants.
The Company will issue Notes in definitive form in exchange for the Global
Certificate if, and only if, either (1) the Depositary is at any time
unwilling or unable to continue as depositary and a successor depositary is
not appointed by the Company within 90 days, (2) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depositary to issue Notes in definitive form in lieu of all or a portion of
the Global Certificate (in which case the Company shall deliver Notes in
definitive form within 30 days of such request), or (3) the Company determines
not to have the Notes represented by a Global Certificate. In any instance, an
owner of a beneficial interest in the Global Certificate will be entitled to
have Notes equal in principal amount to such beneficial interest registered in
its name and will be entitled to physical delivery of such Notes in definitive
form. Notes so issued in definitive form will be issued in denominations of
$1,000 and integral whole multiples thereof and will be issued in registered
form only, without coupons.
So long as the Global Certificate Holder is the registered owner of the
Global Certificate, the Global Certificate Holder will be considered the sole
Holder under the Indenture of any Notes evidenced by the Global Certificates.
Beneficial owners of Notes evidenced by the Global Certificate will not be
considered the owners or Holders thereof under the Indenture for any purpose,
including with respect to the giving of any directions, instructions or
approvals to the Trustee thereunder. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records of the
Depositary or for maintaining, supervising or reviewing any records of the
Depositary relating to the Notes.
SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. If the total outstanding principal amount of the Notes is
represented by a Global Certificate, all payments of principal of and any
premium and interest on the Notes will be made by the Company in immediately
available funds; otherwise, payments on definitive physical certificates will
be made in U.S. Clearing House funds. Secondary market trading activity in the
Notes will also settle in immediately available funds.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the Underwriters named below, and each
of such Underwriters has severally agreed to purchase from the Company, the
aggregate principal amount of Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
----------- ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Chase Securities Inc........................................
Lehman Brothers Inc.........................................
Petrie Parkman & Co., Inc...................................
------------
Total..................................................... $150,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Notes, if any are
taken.
The Underwriters propose to offer the Notes in part directly to the public
at the initial public offering price set forth on the cover page of this
Prospectus and in part to certain securities dealers at such price less a
concession of % of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession not to exceed % of the
principal amount of the Notes to certain brokers and dealers. After the Notes
are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend
to make a market in the Notes but are not obligated to do so and may
discontinue market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for the Notes.
The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act.
Under Rule 2710(c)(8) of the National Association of Securities Dealers,
Inc. (the "NASD"), Chase Securities Inc. may be deemed to have a conflict of
interest with the Company because more than 10% of the net proceeds of the
sale of the Notes is expected to be paid to an affiliate of such Underwriter
in its capacity as a lender under the Company's bank credit facility. See "Use
of Proceeds." This Offering is being conducted in accordance with Rule
2710(c)(8), which provides that, among other things, when an NASD member
participates in the underwriting of debt securities of a company with which it
or its associated persons, parent or affiliates have a conflict of interest,
the yield to maturity can be no lower than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Goldman, Sachs & Co. will serve in such role and will recommend a
minimum yield to maturity in compliance with the requirements of Rule
2710(c)(8). Goldman, Sachs & Co. will receive compensation from the Company in
the amount of $10,000 for serving in such role. In connection with the
Offering, Goldman, Sachs & Co. in its role as qualified independent
underwriter has performed due diligence investigations and reviewed and
participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus forms a part.
Goldman, Sachs & Co. provided Plains, and Petrie Parkman & Co., Inc.
provided the Company with investment banking services in connection with the
merger of Plains and the Company. Goldman, Sachs & Co. and Petrie Parkman &
Co., Inc. each provided the Company with investment banking services in
connection with the public offering of 5.4 million shares of the Company's
common stock in June 1996.
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LEGAL MATTERS
Certain legal matters regarding the Offering have been passed upon on behalf
of the Company by Bearman Talesnick & Clowdus Professional Corporation,
Denver, Colorado. Attorneys employed by that law firm beneficially own
approximately 14,700 shares of the Company's common stock. Vinson & Elkins
L.L.P., Houston, Texas, as special counsel to the Company, has passed upon the
validity of the issuance of the Notes. Certain legal matters in connection
with the Notes will be passed upon for the Underwriters by Andrews & Kurth
L.L.P., New York, New York.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 included in this Prospectus and elsewhere in the
Registration Statement of which this Prospectus forms a part have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of such firm as experts in giving such reports.
The information included and incorporated by reference herein regarding the
total proved reserves of the Company was prepared by the Company. A portion
was reviewed by Ryder Scott Company and the remaining portion was reviewed by
Netherland, Sewell & Associates, Inc., as stated in their respective letter
reports with respect thereto. The reserve review letters of Ryder Scott
Company and Netherland, Sewell & Associates, Inc. are filed as exhibits to the
Registration Statement of which this Prospectus is a part, in reliance upon
the authority of said firms as experts with respect to the matters covered by
their reports and the giving of their reports.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein together with all amendments thereto referred to as the "Registration
Statement") filed by the Company with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement and exhibits thereto, and
statements included in this Prospectus as to the content of any contract or
other document referred to are not necessarily complete. For further
information, reference is made to the Registration Statement and to the
exhibits and schedules filed therewith. All these documents may be inspected
at the Commission's principal office in Washington, D.C. without charge, and
copies of them may be obtained from the Commission upon payment of prescribed
fees. Statements contained in this Prospectus as to the contents of any
contract or other document filed as an exhibit to the Registration Statement
are not necessarily complete, and in each instance reference is hereby made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, Room 1024 and at the following Regional Offices of the Commission: 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World
Trade Center, New York, New York 10048. Copies of such material also can be
obtained at prescribed rates by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such
material may also be inspected and copied at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005. In addition, such
materials filed electronically by the Company with the Commission are
available at the Commission's World Wide Web site at http://www.sec.gov.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents that previously were, or are required in the future
to be, filed with the Commission (File No. 1-13446) pursuant to the Exchange
Act are incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1995;
(ii) the Company's Quarterly Reports on Form 10-Q for each of the
quarters ended March 31, 1996, June 30, 1996, and September 30, 1996;
(iii) the Company's Current Reports on Form 8-K dated each of June 20,
1996, November 4, 1996 and January 8, 1997;
(iv) the description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A as filed with the Commission
on October 27, 1994;
(v) the Company's Proxy Statement dated April 11, 1996 concerning the
Company's Annual Meeting of Stockholders held June 5, 1996; and
(vi) all documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made hereby.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that such statement is modified or replaced by a statement contained in
this Prospectus or in any other subsequently filed document that also is or is
deemed to be incorporated by reference into this Prospectus. Any such
statement so modified or superseded shall not be deemed, except as so modified
or replaced, to constitute a part of this Prospectus. The Company will provide
without charge to each person to whom a copy of this Prospectus has been
delivered, upon the written or oral request of any such person, a copy of any
or all of the documents referred to above that have been or may be
incorporated in this Prospectus by reference, other than exhibits to such
documents. Written or oral requests for such copies should be directed to
Donald H. Stevens, Vice President, Barrett Resources Corporation, 1515
Arapahoe Street, Tower 3, Suite 1000, Denver, Colorado 80202, (303) 572-3900.
CERTAIN DEFINITIONS
Unless otherwise indicated in this Prospectus, natural gas volumes are
stated at the legal pressure base of the state or area in which the reserves
are located at 60(degrees) Fahrenheit. Natural gas equivalents are determined
using the ratio of six Mcf of natural gas to one barrel of crude oil,
condensate or natural gas liquids so that one barrel of oil is referred to as
six Mcf of natural gas equivalent or "Mcfe."
As used in this Prospectus, the following terms have the following specific
meanings: "Mcf" means thousand cubic feet, "MMcf" means million cubic feet,
"Bcf" means billion cubic feet, "Bbl" means barrel, "MBbl" means thousand
barrels, "Mcfe" means thousand cubic feet equivalent, "MMcfe" means million
cubic feet equivalent, and "MMBtu" means million British thermal units.
With respect to information concerning the Company's working interests in
wells or drilling locations, "gross" natural gas and oil wells or "gross"
acres is the number of wells or acres in which the Company has an interest,
and "net" gas and oil wells or "net" acres are determined by multiplying
"gross" wells or acres by the Company's working interest in those wells or
acres. A working interest in an oil and natural gas lease is an interest that
gives the owner the right to drill, produce, and conduct operating activities
on the property and to receive a share of production of any hydrocarbons
covered by the lease. A working interest in an oil and gas lease also entitles
its owner to a proportionate interest in any well located on the lands covered
by the lease, subject to all royalties, overriding royalties and other
burdens, to all costs and expenses of exploration, development and operation
of any well located on the lease, and to all risks in connection therewith.
55
<PAGE>
"Behind-pipe recompletion" is the completion of an existing well for
production from a formation that exists behind the casing of the well.
"Capital expenditures" means costs associated with exploratory and
development drilling (including exploratory dry holes); leasehold
acquisitions; seismic data acquisitions; geological, geophysical and land
related overhead expenditures; delay rentals; producing property acquisitions;
and other miscellaneous capital expenditures. "Capital expenditure budget"
means an estimate prepared by management for the total expenditures
anticipated to be incurred during the subject time period. This amount can
deviate or fluctuate due to the timing of drilling of wells, environmental
considerations, acquisition of key fee, state and federal leases, and natural
gas and oil prices. "Reserve replacement cost" means the cost to the Company
of additions to the Company's reserve base divided by the aggregate costs of
developing or acquiring those additional reserves.
A "development well" is a well drilled as an additional well to the same
horizon or horizons as other producing wells on a prospect, or a well drilled
on a spacing unit adjacent to a spacing unit with an existing well capable of
commercial production and which is intended to extend the proven limits of a
prospect. An "exploratory well" is a well drilled to find commercially
productive hydrocarbons in an unproved area, or to extend significantly a
known prospect.
A "farmout" is an assignment to another party of an interest in a drilling
location and related acreage conditional upon the drilling of a well on that
location. A "farm-in" is an assignment by the owner of a working interest in
an oil and gas lease of the working interest or a portion thereof to another
party who desires to drill on the leased acreage. Generally, the assignee is
required to drill one or more wells in order to earn its interest in the
acreage. The assignor usually retains a royalty or reversionary working
interest in the lease. The assignee is said to have "farmed-in" the acreage.
"Present value of estimated future net revenues" means the present value of
estimated future revenues to be generated from the production of proved
reserves calculated in accordance with Commission guidelines, net of estimated
production and future development costs, using prices and costs as of the date
of estimation without future escalation, without giving effect to non-property
related expenses such as general and administrative expenses, debt service,
future income tax expense and depreciation, depletion and amortization, and
discounted using an annual discount rate of 10%.
"Reserves" means natural gas and crude oil, condensate and natural gas
liquids on a net revenue interest basis, found to be commercially recoverable.
"Proved developed reserves" includes proved developed producing reserves and
proved developed behind-pipe reserves. "Proved developed producing reserves"
includes only those reserves expected to be recovered from existing completion
intervals in existing wells. "Proved developed behind-pipe reserves" includes
those reserves that exist behind the casing of existing wells when the cost of
making such reserves available for production is relatively small compared to
the cost of a new well. "Proved undeveloped reserves" includes those reserves
expected to be recovered from new wells on proved undrilled acreage or from
existing wells where a relatively major expenditure is required for
recompletion.
56
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report Of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of September 30, 1996 (unaudited) and at
December 31, 1995 and 1994.............................................. F-3
Consolidated Statements Of Income for the nine months ended September 30,
1996 and 1995 (unaudited) and each of the three years in the period
ended December 31, 1995................................................. F-4
Consolidated Statements Of Stockholders' Equity for the nine months ended
September 30, 1996 and 1995 (unaudited) and each of the three years in
the period ended December 31, 1995...................................... F-5
Consolidated Statements Of Cash Flows for the nine months ended September
30, 1996 and 1995 (unaudited) and each of the three years in the period
ended December 31, 1995................................................. F-6
Notes to the Consolidated Financial Statements........................... F-7
Supplemental Oil And Gas Information..................................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF ARTHUR ANDERSEN LLP
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Barrett Resources Corporation
Denver, Colorado 80202
We have audited the accompanying consolidated balance sheets of Barrett
Resources Corporation (a Delaware corporation) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits 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 financial position of Barrett Resources
Corporation and subsidiaries as of December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As explained in Note 8 to the financial statements, effective January 1,
1993, the Company changed its method of accounting for postretirement
benefits.
Arthur Andersen LLP
Denver, Colorado
March 1, 1996
F-2
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ 12,348 $ 7,529 $ 9,446
Receivables, net........................... 34,522 31,089 38,680
Inventory.................................. 643 554 962
Other current assets....................... 1,099 574 886
-------- -------- --------
Total current assets..................... 48,612 39,746 49,974
Net property and equipment (full cost
method)..................................... 261,424 300,666 422,168
Other assets................................. 916 -- --
-------- -------- --------
$310,952 $340,412 $472,142
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 24,587 $ 14,369 $ 14,860
Amounts payable to oil and gas property
owners.................................... 16,091 13,366 16,199
Accrued and other liabilities.............. 5,468 8,325 16,913
-------- -------- --------
Total current liabilities................ 46,146 36,060 47,972
Long term debt............................... 53,000 89,000 12,000
Deferred income taxes........................ 21,726 23,524 48,595
Postretirement benefits...................... 927 -- --
Other long term liabilities.................. 1,017 -- --
Commitments and contingencies--Note 10
Stockholders' equity
Preferred stock, $.001 par value: 1,000,000
shares authorized, none outstanding....... -- -- --
Common stock, $.01 par value: 35,000,000
shares authorized, 31,319,193 outstanding
(25,092,246 and 24,694,669 at December 31,
1995 and 1994, respectively............... 247 251 313
Additional paid-in capital................... 78,628 86,154 241,407
Retained earnings............................ 109,304 105,890 122,849
Treasury stock, at cost...................... (43) (467) (994)
-------- -------- --------
Total stockholders' equity............... 188,136 191,828 363,575
-------- -------- --------
$310,952 $340,412 $472,142
======== ======== ========
</TABLE>
(See accompanying notes)
F-3
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Oil and gas production...... $ 80,911 $ 78,794 $ 96,996 $70,481 $102,412
Trading revenues............ 22,955 28,114 28,554 20,156 30,547
Revenue from gas gathering.. 216 353 1,074 917 1,996
Interest income............. 736 864 714 529 633
Other income................ 1,254 1,333 678 594 465
-------- -------- -------- -------- --------
106,072 109,458 128,016 92,677 136,053
Operating expenses:
Lease operating expenses.... 30,383 28,223 34,525 25,418 34,027
Depreciation, depletion and
amortization............... 20,185 22,760 33,480 23,625 31,859
Cost of trading............. 21,675 27,190 27,611 19,385 28,449
General and administrative.. 11,194 13,261 13,426 10,255 11,212
Interest expense............ 725 942 4,631 3,284 3,154
Other expenses, net......... 867 645 588 568 --
Merger and reorganization
expense.................... -- -- 14,161 13,207 --
-------- -------- -------- -------- --------
85,029 93,021 128,422 95,742 108,701
-------- -------- -------- -------- --------
Income (loss) before income
taxes and cumulative effect
of change in method of
accounting for postretirement
benefits..................... 21,043 16,437 (406) (3,065) 27,352
Provision for income taxes.... 6,721 5,138 1,834 2,812 10,393
-------- -------- -------- -------- --------
Income (loss) before
cumulative effect of change
in method of accounting for
postretirement benefits...... 14,322 11,299 (2,240) (5,877) 16,959
Cumulative effect of change in
accounting for postretirement
benefits, net of tax......... (656) -- -- -- --
-------- -------- -------- -------- --------
Net income (loss)............. $ 13,666 $ 11,299 $ (2,240) $ (5,877) $ 16,959
======== ======== ======== ======== ========
Net income (loss) per common
share and common share
equivalent before change in
method of accounting for
postretirement benefits...... $ 0.58 $ 0.46 $ (0.09) $ (0.23) $ 0.62
Net income (loss) per common
share and common share
equivalent--cumulative
effect....................... $ (0.03) $ -- $ -- $ -- $ --
-------- -------- -------- -------- --------
Net income (loss) per common
share and common share
equivalent................... $ 0.55 $ 0.46 $ (0.09) $ (0.23) $ 0.62
======== ======== ======== ======== ========
</TABLE>
(See accompanying notes)
F-4
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN TREASURY RETAINED STOCKHOLDERS'
STOCK CAPITAL STOCK EARNINGS EQUITY
------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balances, October 1, 1992 as
previously reported........ $ 97 $ 39,651 $ -- $ 3,567 $ 43,315
Effect of change to December
31 year end
Net income for the three
month period ending
December 31, 1992........ -- -- -- 1,333 1,333
Pooling of interests with
Plains Petroleum
Company.................. 128 19,163 -- 84,144 103,435
---- -------- ----- -------- --------
Balance, December 31, 1992
as restated................ 225 58,814 -- 89,044 148,083
Exercise of stock
options.................. 1 515 (204) -- 312
Issuance of common stock.. 20 18,881 -- -- 18,901
Cash dividends--Plains
common stock............. -- -- -- (2,352) (2,352)
Net income for the year
ended December 31, 1993.. -- -- -- 13,666 13,666
---- -------- ----- -------- --------
Balance, December 31, 1993.. 246 78,210 (204) 100,358 178,610
Exercise of stock
options.................. 1 970 (313) -- 658
Purchase of treasury
stock.................... -- -- (78) -- (78)
Retirement of treasury
stock.................... -- (552) 552 -- --
Cash dividends--Plains
common stock............. -- -- -- (2,353) (2,353)
Net income for the year
ended December 31, 1994.. -- -- -- 11,299 11,299
---- -------- ----- -------- --------
Balance, December 31, 1994.. 247 78,628 (43) 109,304 188,136
Exercise of stock
options.................. 4 7,690 (588) -- 7,106
Retirement of treasury
stock.................... -- (164) 164 -- --
Cash dividends--Plains
common stock............. -- -- -- (1,174) (1,174)
Net loss for the year
ended December 31, 1995.. -- -- -- (2,240) (2,240)
---- -------- ----- -------- --------
Balance, December 31, 1995.. 251 86,154 (467) 105,890 191,828
Exercise of stock
options.................. 2 3,801 (527) -- 3,276
Issuance of common stock.. 60 151,452 -- -- 151,512
Net income for the nine
months ended September
30, 1996 (unaudited)..... -- -- -- 16,959 16,959
---- -------- ----- -------- --------
Balance, September 30,
1996....................... $313 $241,407 $(994) $122,849 $363,575
==== ======== ===== ======== ========
</TABLE>
(See accompanying notes)
F-5
<PAGE>
BARRETT RESOURCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operations:
Net income (loss)......... $ 13,666 $ 11,299 $ (2,240) $ (5,877) $ 16,959
Adjustments needed to
reconcile to net cash
flow provided by
operations:
Depreciation, depletion
and amortization....... 20,185 22,760 33,480 23,625 31,859
Unrealized (gain) loss
on trading............. (124) 58 1,139 -- (1,138)
Deferred income taxes... 5,975 4,788 1,798 2,543 9,778
Other................... 782 70 (787) (770) --
-------- -------- -------- -------- ---------
40,484 38,975 33,390 19,521 57,458
Change in current assets
and liabilities:
Accounts receivable... (4,304) (8,436) 3,433 9,505 (7,246)
Other current assets.. (209) (148) 525 432 (416)
Accounts payable...... (1,870) 6,803 (524) (15,305) 457
Amounts due oil and
gas property owners.. 5,640 623 (2,725) (942) 7,325
Accrued and other
liabilities.......... 1,839 (1,244) 1,439 3,242 5,132
-------- -------- -------- -------- ---------
Net cash flow provided by
operations................. 41,580 36,573 35,538 16,453 62,710
Cash flows from investing
activities:
Proceeds from sale of oil
and gas properties....... 16,210 458 504 209 1,992
Purchase of short-term in-
vestments................ (5,952) (11,322) -- -- --
Maturity of short-term in-
vestments................ 1,984 15,290 -- -- --
Acquisition of property
and equipment............ (45,488) (95,589) (82,758) (46,945) (124,054)
Other..................... 65 146 -- -- --
-------- -------- -------- -------- ---------
Net cash flow used in in-
vesting
activities................. (33,181) (91,017) (82,254) (46,736) (122,062)
Cash flows from financing
activities:
Proceeds from issuance of
common stock............. 19,212 301 7,071 6,413 138,269
Purchase of treasury
stock.................... -- (78) -- -- --
Borrowing under line of
credit................... 1,300 44,000 115,000 69,000 33,000
Payments on line of cred-
it....................... (7,800) (4,500) (79,000) (37,000) (110,000)
Dividends paid............ (2,352) (2,353) (1,174) (1,179) --
Other..................... 868 (147) -- (767) --
-------- -------- -------- -------- ---------
Net cash flow provided by
financing
activities................. 11,228 37,223 41,897 36,467 61,269
Increase (decrease) in cash
and cash equivalents....... 19,627 (17,221) (4,819) 6,184 1,917
Cash and cash equivalents at
beginning of period........ 9,942 29,569 12,348 12,348 7,529
-------- -------- -------- -------- ---------
Cash and cash equivalents at
end of period.............. $ 29,569 $ 12,348 $ 7,529 $ 18,532 $ 9,446
======== ======== ======== ======== =========
</TABLE>
(See accompanying notes)
F-6
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Barrett Resources Corporation (the "Company") is an independent natural gas
and oil exploration and production company with producing properties located
in the mid-continent states and Rocky Mountain region of the United States.
Barrett also operates gas gathering systems and related facilities in the
areas which are synergistic to the Company's production. Barrett has a gas
marketing and trading subsidiary, which allows the Company to market the
Company's natural gas production and to purchase and sell other companies'
natural gas.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany transactions have been eliminated in consolidation. Certain
reclassifications have been made to 1993 and 1994 amounts to conform to the
1995 presentation.
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 reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. There are many factors, including global events, that may influence
the production, processing, marketing, and valuation of crude oil and natural
gas. A reduction in the valuation of oil and gas properties resulting from
declining prices or production could adversely impact depletion rates and
ceiling test limitations.
Partnerships
The consolidated financial statements include the Company's proportionate
share of the assets, liabilities, revenues and expenses of its oil and gas
partnership interests.
Cash and cash equivalents
Cash in excess of daily requirements is invested in money market accounts
and commercial paper with maturities of three months or less. Such investments
are deemed to be cash equivalents for purposes of the consolidated statements
of cash flows. The carrying amount of cash equivalents approximates fair value
because of the short maturity of those instruments.
Oil and gas properties
The Company utilizes the full cost method of accounting for oil and gas
properties whereby all productive and nonproductive costs paid to third
parties that are incurred in connection with the acquisition, exploration and
development of oil and gas reserves are capitalized. No gains or losses are
recognized upon the sale, conveyance or other disposition of oil and gas
properties except in extraordinary transactions.
F-7
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
Capitalized costs are accumulated on a country-by-country basis subject to a
cost center ceiling and amortized using the units-of-production method. The
Company presently has only one cost center since all of its properties are
located in the United States. Amortizable costs include developmental drilling
in progress as well as estimates of future development costs of proved
reserves but exclude the costs of unevaluated oil and gas properties.
Accumulated depreciation and amortization is written off as assets are
retired. Depletion and amortization equaled approximately $.55, $.52 and $.48
per Mcfe ($3.28, $3.14 and $2.87 per BOE) during the years ended December 31,
1995, 1994 and 1993, respectively.
The Company capitalizes interest costs on amounts expended on assets during
the period in which activities are occurring to place the asset in service.
Amounts spent to develop properties included in the full cost center of oil
and gas properties are excluded from the interest capitalization computation.
The Company acquires nonproducing acreage for its exploration and
development activities. The cost of these leases is included in unevaluated
oil and gas property costs recorded at the lower of cost or fair market value.
The Company operates many of the wells in which it owns an economic
interest. The operating agreements for these activities provide for a fee
structure to allow the Company to recover a portion of its direct and overhead
charges related to its operating activities. The fees collected under the
operating agreements are recorded as a reduction of general and administrative
expenses. Any amounts collected from a sale of oil and gas interests or earned
as a result of assembling oil and gas drilling activities are applied to
reduce the book value of oil and gas properties.
Other property and equipment
Other property and equipment is recorded at cost. Renewals and betterments
which substantially extend the useful life of the assets are capitalized.
Maintenance and repairs are expensed when incurred. Depreciation is provided
using accelerated and straight-line methods over the estimated useful lives,
ranging from five to ten years, of the assets.
Amounts payable to oil and gas property owners
Amounts payable to oil and gas property owners consist of cash calls from
working interest owners to pay for development costs of properties being
currently developed, production revenue that the Company, as operator, is
collecting and distributing to revenue interest owners and production revenue
taxes that the Company, as operator, has withheld for timely payment to the
tax agencies.
Trading and hedging activities
The Company's business activities include buying and selling of natural gas.
The Company recognizes revenue and costs on gas trading transactions at the
point in time when gas is delivered to the purchaser.
The Company uses both commodity futures contracts and price swaps to hedge
the impact of price fluctuations on a portion of its production and trading
activities. The Company enters into a
F-8
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
hedging position for specific transactions that management deems expose the
Company to an unacceptable market price risk. Price swaps or commodities
transactions without corresponding scheduled physical transactions (scheduled
physical transactions include committed trading activities or production from
producing wells) do not qualify for hedge accounting. The Company classifies
these positions as trading positions and records these instruments at fair
value. Gains and losses are recognized as fair values fluctuate from time to
time compared to cost.
Gains or losses on hedging transactions are deferred until the physical
transaction occurs for financial reporting purposes. Deferred gains and losses
and unrealized gains and losses are evaluated in connection with the physical
transaction underlying the hedge position. Hedging gains or losses
significantly exceeding the price movement of the underlying physical
transaction are recorded in the consolidated statements of income in the
period in which the lack of correlation occurred. Gains or losses on hedging
activities are recorded in the consolidated statements of income as
adjustments of the revenue or cost of the underlying physical transaction.
Hedging transactions are reported as operating activities in the consolidated
statements of cash flows.
Earnings per share
Per share amounts were computed using the weighted average number of shares
of common stock and common stock equivalents outstanding during each year:
1995--24,931,000; 1994--24,967,000 and 1993--24,778,000. Options to purchase
stock are included as common stock equivalents, when dilutive, using the
treasury stock method.
Change in fiscal year
On July 18, 1995, the Company changed its fiscal year-end from September 30
to December 31. A transition report for the period October 1, 1994 through
December 31, 1994 was filed with the Securities and Exchange Commission.
During the three months ended December 31, 1994, the Company reported revenues
of $15 million and net income of $207,000.
Unaudited financial statements:
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to present
fairly the financial position of the Company as of September 30, 1996 and the
results of operations and cash flows for the periods presented. All such
adjustments are of a normal recurring nature. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the SEC's rules and regulations. The results of operations for the
periods presented are not necessarily indicative of the results for the full
year.
2. MERGER
On July 18, 1995 Plains Petroleum Company ("Plains") was merged with and
into a subsidiary of the Company, resulting in Plains becoming a wholly-owned
subsidiary of the Company. Approximately 12.8 million shares of the Company's
common stock were issued in exchange for all of the outstanding common stock
of Plains. Additionally, outstanding options to acquire Plains common stock
were converted to options to acquire approximately 593,000 shares of the
Company's common stock. In
F-9
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
connection with the merger, the Company's authorized number of shares of
common stock was increased to 35 million. The merger was accounted for as a
pooling of interests, and accordingly, the accompanying financial statements
have been restated to include the accounts and operations of Plains for all
periods prior to the merger.
Plains used the successful efforts method of accounting for its oil and gas
exploration and development activities. In conjunction with the merger, Plains
adopted the full cost method used by the Company resulting in increases of net
property and equipment due to the capitalization of exploration costs,
reversal of impairment and adjustments of depreciation, depletion and
amortization expense for periods prior to the merger. The financial statements
for 1994 and 1993 have been retroactively restated for the change in
accounting method which resulted in increased net income. Retained earnings
and deferred income taxes have been adjusted for the effect of the retroactive
application of the new method.
Certain reclassifications have been made to the historical consolidated
financial statements of the separate companies to conform the financial
statements to a comparable presentation. There were no intercompany
transactions between the Company and Plains. Separate results for the periods
preceding the merger, including the conversion to full cost for Plains and the
change to a December 31 year-end for the Company, were as follows (in 000's):
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED
JUNE 30, 1995 BARRETT PLAINS(1) ADJUSTMENTS(2) COMBINED
---------------------- ------- --------- -------------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues....................... $29,277 $35,823 -- $ 65,100
Net income......................... 2,200 3,771 -- 5,971
<CAPTION>
12 MONTH PERIOD ENDED 9/30/94 12/31/94 12/31/94
--------------------- ------- --------- --------
<S> <C> <C> <C> <C>
Net revenues....................... $41,252 $63,024 $ 5,182 $109,458
Net income......................... 4,439 7,768 (908) 11,299
<CAPTION>
12 MONTH PERIOD ENDED 9/30/93 12/31/93 12/31/93
--------------------- ------- --------- --------
<S> <C> <C> <C> <C>
Net revenues....................... $42,686 $64,998 $(1,612) $106,072
Net income......................... 5,756 8,128 (218) 13,666
</TABLE>
- --------
(1) Restated to full cost to conform accounting policies.
(2) To conform year ends.
In connection with the merger, approximately $14.2 million of merger and
reorganization costs and expenses were incurred and have been charged to
expense in the Company's third and fourth quarters of fiscal 1995. These
nonrecurring costs and expenses consist of (1) investment banker and
professional fees of $7.4 million; (2) severance and employee benefit costs of
$5.6 million for approximately 38 employees, terminated through consolidation
of administrative and operational functions; (3) a non-cash credit of
approximately $.9 million associated with the termination of Plains'
postretirement benefit plans and other related benefit plans and (4) other
merger and reorganization related costs of $2.1 million.
F-10
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
3. RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Oil and gas revenue receivable.............................. $13,257 $15,535
Joint interest billings..................................... 14,542 7,652
Trading receivables......................................... 6,483 5,665
Other accounts receivable................................... 240 2,237
------- -------
$34,522 $31,089
======= =======
</TABLE>
The Company's accounts receivable are primarily due from medium size oil and
gas entities in the Rocky Mountain region. Collection of joint interest
billings is generally secured by future production. The Company performs
periodic credit evaluations of customers purchasing production for which no
collateral is required. Historically, the Company has not experienced
significant losses related to these extensions of credit.
As of December 31, 1995 and 1994, receivables are recorded net of allowance
for doubtful accounts of $201,000 and $224,000, respectively.
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Oil and gas properties, full cost method:
Unevaluated costs, not being amortized................. $ 12,611 $ 10,579
Evaluated costs........................................ 346,950 420,784
Gas gathering systems.................................. 8,388 8,815
Furniture, vehicles and equipment........................ 9,765 9,801
-------- --------
377,714 449,979
Less accumulated depreciation, depletion, amortization
and impairment.......................................... 116,290 149,313
-------- --------
$261,424 $300,666
======== ========
</TABLE>
The Company capitalized interest costs of $403,000 in 1995 with respect to
qualifying properties. Total interest costs incurred after recognition of the
capitalized interest amount was $4.6 million in 1995.
F-11
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
5. UNEVALUATED OIL AND GAS PROPERTY COSTS
Unevaluated oil and gas property costs consist of the following:
<TABLE>
<CAPTION>
COSTS INCURRED DURING
-------------------------------
1992 1993 1994 1995 TOTAL
---- ---- ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Acquisition costs............................... $71 $-- $2,130 $5,623 $ 7,824
Exploration costs............................... 11 32 53 2,659 2,755
--- --- ------ ------ -------
$82 $32 $2,183 $8,282 $10,579
=== === ====== ====== =======
</TABLE>
The unevaluated costs were incurred for projects which are being explored.
The Company anticipates that substantially all unevaluated costs will be
classified as evaluated costs within the next three years.
6. LONG-TERM DEBT
The Company has a reserve-based line of credit with a group of banks which
provides up to $200 million for a four year period ending July 19, 1999. The
amount actually available to the Company under the line at any given time is
limited to the collateral value of proved reserves as determined by the
lenders. Based on the lenders' determination of collateral value, as of
December 31, 1995 (which was based on the March 31, 1995 and December 31, 1994
reserve reports), the Company has a borrowing limit of $160 million. In order
to reduce the commitment fees, the Company voluntarily requested that the
lenders limit the maximum borrowing to $90 million through December 31, 1995.
Subsequent to December 31, 1995, the lenders increased the collateral value to
$205 million based on the June 30, 1996 reserve report. The lenders also
extended the maturity date to October 31, 2000. The Company is required to pay
interest only during the revolving period. At its option, the Company has
elected to use the London interbank eurodollar rate (LIBOR) plus a spread
ranging from 0.5% to 1.0% (depending on the Company's indebtedness relative to
its borrowing base) for a substantial portion of the outstanding balance. As
of December 31, 1995 the Company's outstanding balance under the line of
credit was $89 million of which $83 million was accruing interest at an
average LIBOR based rate of 6.62% and $6 million was accruing interest on a
prime based rate of 8.50%. The line of credit agreement restricts the payment
of dividends, borrowings, sale of assets, loans to others, investment and
merger activity over certain limits without the prior consent of the bank and
requires the Company to maintain certain net worth and debt to equity levels.
Based on the variable borrowing rates and re-pricing terms currently available
to the Company for the line of credit, management believes the fair value of
long-term debt approximates the carrying value. As of September 30, 1996, the
Company's outstanding balance under the line of credit was $12 million, all of
which was accruing interest at an average rate of six percent.
7. OPTIONS
The Company has two employee stock option plans, a 1990 Plan and a 1994
Plan, under which the Company's common stock may be granted to officers and
employees of the Company and subsidiaries. The 1990 Plan, as amended, provided
for the granting of 775,000 shares. The 1994 Plan provides for the granting of
400,000 shares of the Company's common stock. In addition, the Company has a
non-discretionary stock option plan under which options for an aggregate of
100,000 shares of
F-12
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
the Company's common stock may be granted to non-employee directors. In
connection with the merger discussed in Note 2, the Company assumed
preexisting Plains stock option plans and converted all options then
outstanding into options to acquire shares of the Company's common stock. No
further options will be granted under the Plains' plans.
Summary of options granted, exercised and outstanding during 1994 and 1995
is as follows:
<TABLE>
<CAPTION>
NUMBER OPTION OPTION
OF SHARES PRICE VALUE
--------- ------------- --------
($000'S)
<S> <C> <C> <C>
Outstanding at December 31, 1993......... 336,500 $ 3.88-$13.38 $ 1,949
Plains outstanding options............... 592,611 $15.91-$27.50 13,962
--------- ------------- -------
Outstanding at December 31, 1993, restat-
ed...................................... 929,111 $ 3.88-$27.50 15,911
Granted.................................. 585,500 $10.38-$20.88 8,560
Exercised or canceled.................... (154,820) $ 3.88-$12.13 (712)
--------- ------------- -------
Outstanding at December 31, 1994......... 1,359,791 $ 3.88-$27.50 23,759
Granted.................................. 110,000 $13.38-$22.75 2,454
Exercised or canceled.................... (477,460) $ 3.88-$27.50 (9,443)
--------- ------------- -------
Outstanding at December 31, 1995......... 992,331 $ 5.00-$26.94 $16,770
========= ============= =======
Exercisable at December 31, 1995......... 354,883 $ 5.13-$26.94 $ 6,349
========= ============= =======
</TABLE>
8. RETIREMENT BENEFITS
The Company has a voluntary 401(k) employee savings plan. Under this plan,
the Company matches 50% of each of the participating employees' contributions,
up to a maximum of 6% of base salary. Effective April 1, 1996, the Company's
match was increased to 100% of each of the participating employees
contributions, up to a maximum of 6% of base salary, with one-half of the
match paid in cash and one half of the match paid in the Company's common
stock. The Company's matching contributions are subject to a vesting schedule.
Company contributions were $239,000, $179,000 and $166,000 in 1995, 1994 and
1993, respectively.
Plains had several employee benefit plans described below. Pursuant to the
terms of the merger agreement between Plains and the Company, these plans were
terminated.
Plains' qualified, defined benefit retirement plan covered substantially all
of its employees. The benefits were based on a specified level of the
employee's compensation during plan participation. As of July 18, 1995, the
plan froze benefit accruals. Pursuant to the plan, all participants became
fully vested. Plan assets consist of cash and equivalents, corporate stocks
and bonds, U.S. treasury notes, insured annuity contracts, and accrued
interest. Contributions totaled $169,000, $312,000 and $341,000 for the 1995,
1994 and 1993 plan years, respectively.
F-13
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
The following table sets forth the plan's funded status:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $1,290,000, $1,637,000 and
$2,961,000 respectively....................... $(1,383) $(1,666) $(2,961)
======= ======= =======
Projected benefit obligation................... $(2,321) $(2,396) $(2,961)
Plan assets at fair value...................... 1,977 2,205 2,709
------- ------- -------
Projected benefit obligation in excess of plan
assets........................................ (344) (191) (252)
Unrecognized net (gain) loss................... 16 (141) --
Prior service cost not yet recognized in net
periodic pension costs........................ 64 93 --
Unrecognized net obligation being recognized
over 9.5 and 10.5 years in 1994 and 1993,
respectively.................................. 146 132 --
------- ------- -------
Accrued pension cost........................... $ (118) $ (107) $ (252)
======= ======= =======
Net pension cost included the following compo-
nents:
Service cost--benefits earned.................. $ 346 $ 290 $ 140
Interest cost on projected benefit obligation.. 150 157 160
Actual loss (return) on plan assets............ (145) 70 (369)
Net amortization of unrecognized obligation and
deferral...................................... 28 (216) 347
Curtailment gain............................... -- -- (735)
------- ------- -------
Net periodic pension cost (benefit).............. $ 379 $ 301 $ (457)
======= ======= =======
</TABLE>
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation was 4.5% (termination rates). The
rate of increase used for compensation levels was nil in 1995 and 5% in 1994
and 1993, respectively. The expected long-term rate of return on assets was
8.5%.
Plains also contributed the lesser of 10% of its net earnings or 10% of
employee compensation to a profit sharing plan of Plains. No contributions
were made for 1995. Plains contributed $334,000 and $188,000 for 1994 and
1993, respectively.
Through June 30, 1995 and during 1994, Plains matched 401(k) plan deferrals
with contributions equal to 50% of each deferral up to 6% of current salary.
This matching contribution was invested in Plains stock and were subject to a
vesting schedule. Participants became fully vested with the merger with and
into Barrett. Contributions were approximately $112,000, $192,000 and $250,000
for 1995, 1994 and 1993, respectively.
The above described profit-sharing and 401(k) plans were terminated July 1,
1995; the pension plans were terminated September 18, 1995. Internal Revenue
Service approval for termination of these plans was received in January 1996.
Final distribution of plan assets was made to participants in the second
quarter of 1996.
Plains' executive deferred compensation plan and directors' deferred plan
permitted the deferral of current salary or directors' fees for the purpose of
providing funds at retirement or death for
F-14
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
employees, directors and their beneficiaries. These plans were terminated
effective June 30, 1995 and will be disbursed to the participants by the
trustee of the assets over a period ending January 1, 1997. Total accrued
liability under these plans at December 31, 1995 and 1994 was $36,000 and
$1,006,000, respectively.
Concurrently with the effective date of the merger, Plains' postretirement
healthcare benefit and salary continuation plans were terminated. Participants
in the salary continuation plan received (1) a lump sum benefit equal to the
present value of the remaining monthly payments if receiving Death Benefits
under the plan at the date of the termination, or (2) insurance polices, the
cost of which was limited to the cash values of the life insurance policies
owned by Plains. Benefits associated with the postretirement healthcare
benefit plan were terminated and, accordingly, accrued postretirement benefit
costs were relieved.
Effective January 1, 1993, Plains adopted Statement No. 106 (FAS 106) issued
by the Financial Accounting Standards Board on accounting for postretirement
benefits other than pensions. In accordance with this statement, Plains
elected to recognize the accumulated postretirement benefit liability as of
the effective date, totaling approximately $800,000 (pretax). With the
termination of these plans in 1995, all future obligations were settled and
ceased to exist.
Obligations for previous periods were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
-----------------
(IN THOUSANDS)
<S> <C>
Accumulated postretirement benefit obligation:
Active plan participants................................ $(458)
Retirees................................................ (302)
-----
(760)
Plan assets............................................. 0
-----
Net accumulated postretirement benefit obligation....... (760)
Unrecognized net gain from past experience different
from that assumed and from changes in assumptions...... (167)
-----
Accrued postretirement benefit cost..................... $(927)
=====
Net periodic postretirement benefit cost included the fol-
lowing components:
Service cost of benefits earned......................... $ 41
Interest cost on accumulated post-retirement benefit ob-
ligation............................................... 61
-----
Net periodic postretirement benefit cost................ $ 102
=====
</TABLE>
9. HEDGING ACTIVITIES
The Company uses various hedging techniques to reduce the effect of price
volatility on the sales price of a portion of its oil and gas sales. The
objective of its hedging activities is to achieve more predictable revenues
and cash flows. The following is a summary of the Company's hedging
transactions in effect as of December 31, 1995.
F-15
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
A. The Company is the fixed price payor for hedging transactions relating to
6,000 MMBtu of gas per day for 1996 at $1.33 per MMBtu and approximately 7,000
MMBtu of gas per day for January through May 1996 at an average price of $2.12
per MMBtu. Under these price swap arrangements, the Company has agreed to buy
gas at a fixed price and sell gas at an index price. These price swaps were
entered to accommodate markets desiring fixed price supplies.
B. The Company will receive fixed prices ranging from $1.46 to $2.12 per
MMBtu in swap transactions associated with an average of 52,000 MMBtu of gas
per day to be produced by the Company subsequent to December 31, 1995 through
March 1996. The Company is required to pay an index price to its financial
counterparty. The Company sold a call option on 20,000 MMBtu per day for April
through October 1996. Under this option, the Company will receive $1.86 per
MMBtu should the option holder elect to exercise.
C. The Company's gas hedges also include a collar in which the Company sold
a call and purchased a put with respect to 10,000 MMBtu per day in 1996 with
an average floor (put) price of $1.60 per MMBtu and an average ceiling (call)
price of $1.92 per MMBtu. Under this arrangement, the Company receives a
payment if the index price falls below the floor and makes a payment to the
counterparty if the index price exceeds the ceiling. To reduce exposure to
increasing index prices, the Company purchased call options with prices
averaging $2.673 per MMBtu January--March and $1.969 per MMBtu April--
December, 1996.
D. The Company has entered into basis swaps to minimize different index
price fluctuations. The Company will receive a payment in the event that the
New York Mercantile Exchange ("NYMEX") price per MMBtu for a reference period
exceeds the average specified index price by more than an average of $.29 on
10,000 MMBtu of gas per day from January through March 1996 ($.44 on 5,000
MMBtu of gas per day for April 1996). In separate basis swaps, the Company
will receive a payment in the event the specified index price exceeds the
NYMEX price net of a basis adjustment of an average of $.48 on 10,000 MMBtu of
gas per day from January through October 1996. Conversely, the Company will be
required to make payments to the counterparty if the opposite situation exists
in these swaps. These swaps were entered to offset a portion of the risk
associated with the Company's long-term firm transportation portfolio.
E. With respect to crude oil production, the Company entered into a price
swap whereby the Company will receive a fixed price of $18.00 per Bbl for
1,000 Bbls per day through March 1996. The Company is required to pay the
counterparty a NYMEX settlement price.
As of December 31, 1995, some of the Company's hedging positions described
above did not qualify for hedge accounting due to reduced correlation between
the index price and the prices to be realized for certain physical gas
deliveries. Accordingly, the Company recognized hedging losses of $1.2 million
in the fourth quarter of 1995. These losses offset hedging gains of $1.6
million realized in 1995. The net hedging gain was included in oil and gas
revenues. The Company paid and received certain premiums related to its option
contracts for future periods. The unrealized hedging losses and net deferred
premium costs have been included in other liabilities.
During the first nine months of 1996, the Company recognized net production
hedging expense of $1.5 million which was recorded in the consolidated
statements of income as adjustments of gas and
F-16
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
oil production revenue. As of September 30, 1996, the Company held positions
to hedge production of approximately 11.5 Bcf of gas through October 1997.
During 1995, the Company incurred a net cost of $2.1 million to hedge the
index based price for a portion of its gas purchased in various transactions
for gas trading activities. These payments allowed the Company to purchase gas
on a fixed price basis to satisfy fixed price sales commitments. This hedging
allowed the Company to avoid gas price fluctuations for the related
transactions so that the Company realized the gross profit margins anticipated
upon entering into the trading arrangements. This hedging cost is included in
the income statement as a component of "Cost of Trading."
10. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The minimum future payments under the terms of operating leases, principally
for office space, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Year ended December 31, 1996................................ $1,012
1997........................................................ 988
1998........................................................ 1,001
1999........................................................ 887
2000........................................................ 610
2001........................................................ 205
------
$4,703
======
</TABLE>
The Company plans to sublet office space vacated with the consolidation and
relocation of its Denver offices and accordingly anticipates a substantial
reduction in rental expense for the years 1996 through 1999. Rent expense was
$956,000, $859,000 and $788,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
Litigation
On November 2, 1994, a putative class action was filed in Delaware Chancery
Court. In that case, entitled Miller v. Cody, the plaintiff has alleged that
certain named former directors of Plains, and Plains, have, among other
things, breached their fiduciary duties and otherwise acting to entrench
themselves in office. Plaintiff seeks various forms of injunctive relief,
damages and an award of plaintiff's costs and disbursements.
On May 3, 1995, the same day Plains announced it had executed a merger
agreement with the Company, a putative class action, entitled Crandon Capital
Partners v Miller, was filed in Delaware Chancery Court against Plains and the
then-current members of its Board of Directors. In this suit it is alleged
that, among other things, the agreement was inadequate, plaintiff seeks
various forms of declaratory and injunctive relief, damages and an award of
plaintiff's costs and disbursements.
In March 1996, these two putative class actions were dismissed without
prejudice. No defendant paid any consideration for such dismissals.
F-17
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
At December 31, 1995, the Company was a party to certain other legal
proceedings which have arisen out of the ordinary course of business. Based on
the facts currently available, in management's opinion the liability,
individually or in the aggregate, if any, to the Company resulting from such
actions will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
Environmental Controls
At year end 1995, there were no known environmental or other regulatory
matters related to the Company's operations which are reasonably expected to
result in a material liability to the Company. Compliance with environmental
laws and regulations has not had, and is not expected to have, a material
adverse effect on the Company's capital expenditures, earnings or competitive
position.
Major Purchaser
During 1995, one purchaser accounted for 18 percent of the Company's total
revenue (24 percent of oil and gas revenues.) Sales of gas to this purchaser
represented 19 percent and 29 percent of total revenues in 1994 and 1993,
respectively.
11. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal.............................................. $ 174 $ 233 $ 269
State................................................ 416 117 (233)
------ ------ ------
590 350 36
Deferred:
Federal.............................................. 5,138 4,511 2,039
State................................................ 993 277 (241)
------ ------ ------
6,131 4,788 1,798
------ ------ ------
$6,721 $5,138 $1,834
====== ====== ======
</TABLE>
F-18
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
The difference between the provision for income taxes and the amounts which
would be determined by applying the statutory federal income tax rate to
income before provision for income taxes is analyzed below:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax by applying the statutory federal income tax
rate to pretax accounting income (loss)........ $ 7,365 $ 5,753 $ (138)
Increase (decrease) in tax from:
Change in valuation allowance................. (1,477) (2,148) 396
State income taxes............................ 1,409 394 (474)
Non-deductible merger costs................... -- -- 2,429
Other, net.................................... (576) 1,139 (379)
------- ------- ------
$ 6,721 $ 5,138 $1,834
======= ======= ======
</TABLE>
Long-term deferred tax assets (liabilities) are comprised of the following
at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Allowance for losses.................................. $ 624 $ 81
Loss carryforwards and other.......................... 30,221 26,520
-------- --------
Gross deferred tax assets........................... 30,845 26,601
Deferred tax liabilities:
Deferred revenue--partnership activities.............. (1,086) (466)
Depreciation, depletion and amortization.............. (50,650) (48,460)
Capitalized interest on other assets.................. (38) (6)
-------- --------
Gross deferred tax liabilities...................... (51,774) (48,932)
-------- --------
Net deferred tax liability........................ (20,929) (22,331)
Valuation allowance............................... (797) (1,193)
-------- --------
$(21,726) $(23,524)
======== ========
</TABLE>
Valuation allowances of $1,193,000 and $797,000 were provided at December
31, 1995 and 1994, respectively, based on carryforward amounts which may not
be utilized before expiration and the possible effect of exploratory drilling
costs.
F-19
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
The Company has the following net operating loss and investment tax credit
carryforwards available:
<TABLE>
<CAPTION>
EXPIRATION NET OPERATING INVESTMENT
YEAR LOSS TAX CREDIT
---------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C>
1996.............................................. $ 4,227 $172
1997.............................................. 4,673 246
1998.............................................. 8,090 103
1999.............................................. 6,530 100
2000.............................................. 4,900 25
2001.............................................. 3,274 5
2002.............................................. 108 --
2004.............................................. 197 --
2005.............................................. 685 --
2006.............................................. 1,446 --
2007.............................................. 37 --
2008.............................................. 22,352 --
2009.............................................. 6,123 --
------- ----
Total............................................. $62,642 $651
======= ====
</TABLE>
A substantial portion of the net operating losses were acquired in
conjunction with purchased operations.
The 1990 public offering of common stock by the Company before the Plains
merger resulted in a change in the Company's ownership as defined in Section
382 of the Internal Revenue Code. The effect of this change in ownership
limits the utilization of net operating losses for income tax purposes to
approximately $3,069,000 per year which affects $13,590,000 of the net
operating losses. The 1995 merger with Plains also resulted in a change in the
Company's and Plains' ownership as defined by Section 382 of the Internal
Revenue Code. The change effectively limits the utilization of the remaining
net operating losses for income tax purposes to approximately $14,000,000 for
each company. Portions of the above limitations which are not used each year
may be carried forward to future years.
The Internal Revenue Service ("IRS") has examined the federal tax returns of
Plains Petroleum Company, a subsidiary of Barrett Resources Corporation, for
the pre-merger calendar years 1991, 1992 and 1993. The IRS issued a "Notice of
Deficiency" of $5.3 million together with penalties of $1.1 million, and an
undetermined amount of interest. The IRS notice of deficiency resulted
primarily from the IRS's disallowance of certain net operating loss deductions
claimed during the periods under examination. These net operating losses
originally had been incurred by a company that was acquired by Plains in 1986.
The Company currently has additional unused net operating loss carryforwards
of approximately $30 million related to the same acquisition.
Management disagrees with the IRS position. In management's opinion, the
federal tax returns of Plains reflect the proper federal income tax liability
and the existing net operating loss carryforwards are appropriate as supported
by relevant authority. The Company will vigorously contest these proposed
adjustments and believes it will prevail in its positions. It is anticipated
that the final
F-20
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
determination of this matter will involve a lengthy process. On November 29,
1996 the Company filed a petition with the United States Tax Court to request
the IRS notice of deficiency be redetermined by allowing the net operating
losses deductions as originally reported.
During the nine months ended September 30, 1996 the Company acquired oil and
gas properties in purchase transactions that qualify as tax-free exchanges for
tax purposes. The Company deferred income taxes payable of $10.1 million for
the estimated income tax effect of the difference between the financial and
tax basis of the properties acquired.
12. SUPPLEMENTAL CASH FLOW SCHEDULES AND INFORMATION
CASH PAID DURING YEARS:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes................................................ $426 $338 $ 65
Interest.................................................... 792 711 5,129
</TABLE>
SUPPLEMENTAL INFORMATION OF NONCASH INVESTING AND FINANCING ACTIVITIES:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Issuance of common stock for
property and related deferred
taxes......................... $ -- $ -- $ -- $ -- $ 31,603
Treasury shares purchased in
option transactions........... 204 313 545 157 527
</TABLE>
In May 1994, Plains completed a contingent provision of the 1990 McAdams,
Roux and Associates, Inc. ("MRA") Agreement and Plan of Merger, as it related
to the right of the MRA shareholders to receive additional shares of Plains'
common stock and cash subject to reserves additions on certain property
interests owned by MRA prior to the merger. Under this Agreement, 31,873
shares of Plains' common stock were issued and a cash payment of $1.5 million
was paid to MRA's shareholders in settlement of this obligation.
13. RELATED PARTIES
During the years ended December 31, 1995, 1994 and 1993 Zenith Drilling
Corporation ("Zenith") was billed by the Company as operator, approximately
$1,062,000, $1,853,000 and $2,555,000, respectively, for Zenith's portion of
lease operating expenses and development costs in certain leases operated by
the Company. Also as a result of Zenith's working interest ownership, the
Company distributed oil and gas revenue of approximately $942,000, $936,000
and $1,074,000 to Zenith during 1995, 1994 and 1993, respectively. Zenith owns
its working interests subject to the same terms and arrangements that exist
for all working interest owners in the properties. Zenith owns approximately
three percent of the Company's common stock and its president is a member of
the Company's board of directors.
F-21
<PAGE>
BARRETT RESOURCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(INFORMATION FOR THE NINE MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND 1995 IS UNAUDITED)
During 1993, the Company and Zenith both sold their respective interests in
the Wattenberg field. The Company and Zenith jointly negotiated the sale but
the purchaser independently determined the individual offer prices and entered
into separate sales agreements with each party.
Grand Valley Corporation owns approximately 10 percent of a pipeline joint
venture for gas gathering of which a subsidiary of the Company owns
approximately 29 percent. A member of the Company's board of directors owns 10
percent of the outstanding stock, and is the president of Grand Valley
Corporation. His three adult children own the remaining 90 percent of the
outstanding stock of Grand Valley Corporation.
14. QUARTERLY INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
3/31/95 6/30/95 9/30/95 12/31/95
--------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995
Net revenues..................... $ 33,060 $ 31,277 $ 27,217 $ 35,070
Gross margin..................... 8,611 8,039 6,476 7,882
Income (loss) from operations.... 4,327 3,997 (11,389) 2,659
Net income (loss)................ 3,014 2,957 (11,848) 3,637
Net income (loss) per share...... .11 .13 (.47) .14
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
3/31/94 6/30/94 9/30/94 12/31/94
--------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1994
Net revenues..................... $ 25,543 $ 24,420 $ 24,222 $ 33,076
Gross margin..................... 8,572 7,499 6,027 6,990
Income from operations........... 5,217 3,869 2,834 4,517
Net income....................... 3,799 2,610 2,081 2,809
Net income per share............. .15 .12 .08 .11
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
3/31/93 6/30/93 9/30/93 12/31/93
--------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1993
Net revenues..................... $ 30,258 $ 26,157 $ 22,836 $ 24,831
Gross margin..................... 8,832 8,759 6,902 7,346
Income from operations........... 6,163 5,649 4,845 4,386
Income before cumulative effect
of change in method of
accounting for income taxes..... 3,828 3,492 3,934 3,068
Net income........... ........... 3,172 3,492 3,934 3,068
Earnings per share:
From continuing operations..... .16 .14 .16 .12
Net income..................... .13 .14 .16 .12
</TABLE>
F-22
<PAGE>
SUPPLEMENTAL OIL AND GAS INFORMATION
The following is information pertaining to the Company's oil and gas
producing activities for the years ended December 31, 1995, 1994 and 1993.
Costs incurred in oil and gas property acquisition, exploration, and
development activities:
<TABLE>
<CAPTION>
1993 1994 1995
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Acquisition of evaluated properties............... $ 6,119 $35,234 $ 7,429
Acquisition of unevaluated properties............. 1,013 8,446 8,383
Exploration costs................................. 12,593 36,232 23,272
Development costs................................. 21,538 20,190 33,029
Other, principally proceeds from mineral convey-
ances............................................ (15,680) (173) (426)
-------- ------- -------
Total additions to oil and gas properties....... $ 25,583 $99,929 $71,687
======== ======= =======
</TABLE>
Oil and gas reserve information (unaudited):
The following reserve related information for 1995 is based on estimates
prepared by the Company. The 1995 reserve information for the Company,
exclusive of the reserves owned by its subsidiary, Plains, were reviewed by
Ryder Scott, an independent reservoir engineer. The 1995 reserve information
for Plains was reviewed by Netherland, Sewell & Associates, Inc., an
independent reservoir engineer. The Company's 1994 and 1993 reserves,
exclusive of Plains were prepared by the Company and reviewed by Ryder Scott
as of September 30, of each year. The 1994 and 1993 proved developed reserve
estimates of Plains were prepared by Netherland, Sewell & Associates, Inc.
whereas the proved undeveloped reserve estimates were prepared by Plains.
Reserve estimates are inherently imprecise and are continually subject to
revisions based on production history, results of additional exploration and
development, prices of oil and gas and other factors.
<TABLE>
<CAPTION>
1993 1994 1995
--------------------- --------------------- ---------------------
OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF) OIL (MBBL) GAS (MMCF)
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Proved developed and
undeveloped reserves:
Beginning of year....... 10,553 370,621 6,947 364,791 11,444 458,820
Revisions of previous
estimates.............. (3,426) (5,418) 772 (5,640) 1,209 (3,805)
Purchase of minerals in
place.................. 217 6,794 2,533 38,717 831 3,983
Extensions and discover-
ies.................... 1,208 28,482 2,547 94,276 1,232 102,329
Production.............. (1,293) (31,712) (1,293) (33,282) (1,702) (47,692)
Sale of minerals in
place.................. (312) (3,976) (62) (42) (47) (104)
------ ------- ------ ------- ------ -------
End of year............. 6,947 364,791 11,444 458,820 12,967 513,531
====== ======= ====== ======= ====== =======
Proved developed re-
serves:
Beginning of year....... 7,398 350,131 5,548 342,287 7,848 393,051
====== ======= ====== ======= ====== =======
End of year............. 5,548 342,287 7,848 393,051 11,669 419,672
====== ======= ====== ======= ====== =======
</TABLE>
F-23
<PAGE>
The following is the standardized measure of discounted future net cash
flows relating to proved oil and gas reserves in which the Company has an
interest.
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Future cash inflows...................... $ 789,693 $ 931,404 $1,132,711
Future production costs.................. (266,920) (310,485) (355,756)
Future development costs................. (22,349) (41,972) (46,888)
Future income tax expenses............... (135,165) (152,890) (207,922)
--------- --------- ----------
Future net cash flows.................. 365,259 426,057 522,145
10% annual discount for estimated timing
of cash flows........................... (162,173) (183,436) (212,271)
--------- --------- ----------
Standardized measure of discounted future
net cash flows.......................... $ 203,086 $ 242,621 $ 309,874
========= ========= ==========
</TABLE>
The future income tax expenses have been computed considering the tax basis
of the oil and gas properties, and net operating and other loss carryforwards.
The following are the principal sources of changes in the standardized
measure of discounted future net cash flows:
<TABLE>
<CAPTION>
1993 1994 1995
-------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net change in sales price and production
costs...................................... $ 12,283 $ (22,409) $ 24,558
Changes in estimated future development
costs...................................... 11,160 14,492 10,301
Sales and transfers of oil and gas produced,
net of production costs.................... (53,594) (50,571) (62,294)
Net change due to extensions and discover-
ies........................................ 20,739 60,613 85,524
Net change due to purchases and sales of
minerals in place.......................... (1,210) 32,726 7,424
Net change due to revisions in quantities... (18,272) (588) (1,393)
Net change in income taxes.................. (4,711) (10,202) (33,172)
Accretion of discount....................... 26,965 27,589 23,112
Other, principally revisions in estimates of
timing of production....................... 5,859 (12,115) 13,193
-------- --------- --------
Net changes................................. (781) 39,535 67,253
Balance, beginning of year.................. 203,867 203,086 242,621
-------- --------- --------
Balance, end of year........................ $203,086 $ 242,621 $309,874
======== ========= ========
</TABLE>
F-24
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 12
Capitalization........................................................... 13
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 14
Disclosure Regarding Forward-Looking Statements.......................... 19
Business and Properties.................................................. 20
Management............................................................... 37
Beneficial Owners of Securities.......................................... 41
Description of Notes..................................................... 43
Underwriting............................................................. 53
Legal Matters............................................................ 54
Experts.................................................................. 54
Available Information.................................................... 54
Incorporation of Certain Documents by Reference.......................... 55
Certain Definitions...................................................... 55
Index to Consolidated Financial Statements............................... F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$150,000,000
BARRETT RESOURCES CORPORATION
% SENIOR NOTES
DUE 2007
----------------
[LOGO OF BARRETT RESOURCES CORPORATION APPEARS HEAR]
----------------
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
LEHMAN BROTHERS
PETRIE PARKMAN & CO.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses of the Offering described in this Registration
Statement are as follows:
<TABLE>
<S> <C>
Registration Fee...................................................... $ 45,455
NASD Filing Fee....................................................... $ 15,500
Printing Expenses..................................................... $100,000
Accounting Fees and Expenses.......................................... $ 25,000
Legal Fees and Expenses............................................... $130,000
Blue Sky Fees and Expenses............................................ $ 5,000
Rating Agency Fees.................................................... $ 65,000
Trustee and Registrar Fees............................................ $ 8,000
Miscellaneous......................................................... $ 56,045
--------
Total............................................................... $450,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law provides for indemnification by a
corporation of costs incurred by directors, employees, and agents in
connection with an action, suit, or proceeding brought by reason of their
position as a director, employee, or agent. The person being indemnified must
have acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation.
In addition to the general indemnification section, Delaware law provides
further protection for directors under Section 102(b)(7) of the General
Corporation Law of Delaware. This section was enacted in June 1986 and allows
a Delaware corporation to include in its certificate of incorporation a
provision that eliminates and limits certain personal liability of a director
for monetary damages for certain breaches of the director's fiduciary duty of
care, provided that any such provision does not (in the words of the statute)
do any of the following:
"eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under section 174 of this Title
[dealing with willful or negligent violation of the statutory provision
concerning dividends and stock purchases and redemptions], or (iv) for any
transaction from which the director derived an improper personal benefit.
No such provision shall eliminate or limit the liability of a director for
any act or omission occurring prior to the date when such provision becomes
effective........"
The Board of Directors is empowered to make other indemnification as
authorized by the Certificate of Incorporation, Bylaws or corporate resolution
so long as the indemnification is consistent with the Delaware General
Corporation Law. Under the Company's bylaws, the Company is required to
indemnify its directors to the full extent permitted by the Delaware General
Corporation Law, common law and any other statutory provision.
The Company also maintains directors and officers insurance that provides
protection for directors and officers of the Company against personal
liability for wrongful acts, including protection for certain matters for
which the Company may not provide indemnification, such as stockholder
derivative actions.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Agreement And Plan Of Merger, dated as of May 2, 1995, among Barrett
Resources Corporation ("Registrant"), Barrett Energy Inc. (formerly
known as Vanilla Corporation), and Plains Petroleum Company
("Plains") is incorporated by reference from Annex I to the Joint
Proxy Statement/Prospectus of Registrant and Plains dated June 13,
1995.
4.1 Form of Indenture between the Company and Bankers Trust Company, as
trustee, with respect to Senior Notes.
5.1 Opinion regarding legality.
*12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1).
23.3 Consent of Ryder Scott Company.
23.4 Consent of Independent Petroleum Engineers and Geologists
(Netherland, Sewell & Associates, Inc.).
*24.1 Power of attorney (included on signature page).
*25.1 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 on Form T-1 of Bankers Trust Company.
99.1 Report of Ryder Scott Company (incorporated by reference from
Exhibit 99.1 to the Registrant's Registration Statement on Form S-3
filed May 17, 1996, File No. 333-04051).
99.2 Report of Netherland, Sewell & Associates, Inc. (incorporated by
reference from Exhibit 99.2 to the Registrant's Registration
Statement on Form S-3 filed May 17, 1996, File No. 333-04051).
</TABLE>
- --------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering hereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities And Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF DENVER, STATE OF COLORADO, ON THE
29TH DAY OF JANUARY, 1997.
Barrett Resources Corporation
/s/ William J. Barrett
By: _________________________________
WILLIAM J. BARRETT,
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ William J. Barrett Chief Executive
_____________________________________ Officer, Chairman January 29,
WILLIAM J. BARRETT Of The Board, and 1997
Director (Principal
Executive Officer)
/s/ Paul M. Rady President, Chief
_____________________________________ Operating Officer, January 29,
PAUL M. RADY and Director 1997
/s/ A. Ralph Reed Executive Vice
_____________________________________ President, and January 29,
A. RALPH REED Director 1997
/s/ John F. Keller Executive Vice
_____________________________________ President, Chief January 29,
JOHN F. KELLER Financial Officer, 1997
Secretary, and
Director (Principal
Financial and
Accounting Officer)
Director
/s/ John F. Keller* January 29,
_____________________________________ 1997
C. ROBERT BUFORD
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ John F. Keller* Director January 29, 1997
_____________________________________
DERRILL CODY
/s/ John F. Keller* Director January 29, 1997
_____________________________________
JAMES M. FITZGIBBONS
January , 1997
_____________________________________ Director
HENNIE L.J.M. GIESKES
/s/ John F. Keller* Director January 29, 1997
_____________________________________
WILLIAM W. GRANT, III
/s/ John F. Keller* Director January 29, 1997
_____________________________________
JAMES T. RODGERS
/s/ John F. Keller* Director January 29, 1997
_____________________________________
PHILIPPE S.E. SCHREIBER
/s/ John F. Keller* Director January 29, 1997
_____________________________________
HARRY S. WELCH
__________
* AS ATTORNEY-IN-FACT.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
(ATTACHED TO AND MADE A PART OF THE REGISTRATION
STATEMENT ON FORM S-3 DATED JANUARY 29, 1997 OF
BARRETT RESOURCES CORPORATION)
EXHIBIT NO. DESCRIPTION
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
2.1 Agreement And Plan Of Merger, dated as of May 2, 1995, among Barrett
Resources Corporation ("Registrant"), Barrett Energy Inc. (formerly
known as Vanilla Corporation), and Plains Petroleum Company
("Plains") is incorporated by reference from Annex I to the Joint
Proxy Statement/Prospectus of Registrant and Plains dated June 13,
1995.
4.1 Form of Indenture between the Company and Bankers Trust Company, as
trustee, with respect to Senior Notes.
5.1 Opinion regarding legality.
*12.1 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1).
23.3 Consent of Ryder Scott Company.
23.4 Consent of Independent Petroleum Engineers and Geologists
(Netherland, Sewell & Associates, Inc.)
*24.1 Power of attorney (included on signature page).
*25.1 Statement of Eligibility and Qualification under the Trust Indenture
Act of 1939 on Form T-1 of Bankers Trust Company.
99.1 Report of Ryder Scott Company (incorporated by reference from Exhibit
99.1 to the Registrant's Registration Statement on Form S-3 filed May
17, 1996, File No. 333-04051).
99.2 Report of Netherland, Sewell & Associates, Inc. (incorporated by
reference from Exhibit 99.2 to the Registrant's Registration
Statement on Form S-3 filed May 17, 1996, File No. 333-04051).
</TABLE>
- --------
* Previously filed.
<PAGE>
BARRETT RESOURCES CORPORATION
__% SENIOR NOTES DUE 2007
---------------
UNDERWRITING AGREEMENT
----------------------
________________, 1997
Goldman, Sachs & Co.,
Chase Securities Inc.,
Lehman Brothers Inc.,
Petrie Parkman & Co., Inc.
As representatives of the several Underwriters
named in Schedule I hereto
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Barrett Resources Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of $150,000,000 principal amount of the __% Senior Notes specified above (the
"Securities").
1. The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and has filed a registration statement on
Form S-3 (File No. 333-19363) (the "Initial Registration Statement") in respect
of the Securities with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any post-effective
<PAGE>
amendment thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference in the
prospectus contained therein, to you for each of the other Underwriters, have
been declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a "Rule
462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Act,
which became effective upon filing, no other document with respect to the
Initial Registration Statement or document incorporated by reference therein has
heretofore been filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or threatened by
the Commission (any preliminary prospectus included in the Initial Registration
Statement or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement and the
Rule 462(b) Registration Statement, if any, including all exhibits thereto but
excluding Form T-1 and including (i) the information contained in the form of
final prospectus filed with the Commission pursuant to Rule 424(b) under the Act
in accordance with Section 6(a) hereof and deemed by virtue of Rule 430A under
the Act to be part of the Initial Registration Statement at the time it was
declared effective and (ii) the documents incorporated by reference in the
prospectus contained in the Initial Registration Statement at the time such part
of the Initial Registration Statement became effective or such part of the Rule
462(b) Registration Statement, if any, became or hereafter becomes effective,
each as amended at the time such part of the Initial Registration Statement
became effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to Rule
424(b) under the Act, is hereinafter called the "Prospectus"; any reference
herein to any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Act, as of the date of such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment or supplement to
any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary Prospectus or
Prospectus, as the case may be, under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any amendment
to the Registration Statement shall be deemed to refer to and include any annual
report of the Company filed pursuant to Section 13(a) or 15(d) of the Exchange
Act after the effective date of the Initial Registration Statement that is
incorporated by reference in the Registration Statement);
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary Prospectus,
at the time of filing thereof, conformed in all material respects to the
requirements of the Act and the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co.
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expressly for use therein;
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; and any further
documents so filed and incorporated by reference in the Prospectus or any
further amendment or supplement thereto, when such documents become effective or
are filed with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman, Sachs &
Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of the Act
and the Trust Indenture Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date as to
the Registration Statement and any amendment thereto and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein;
(e) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Prospectus;
and, since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any change in the
capital stock or any exercisable rights for the Company's Common Stock (other
than for issuances of the Company's Common Stock under Company employee benefit
plans and issuances pursuant to existing conversion rights, each subsequent to
the date thereof) or any material change in the equity investments of the
Company or any increase in the long-term debt of the Company or any of its
subsidiaries in excess of $15 million or any material adverse change, or any
development involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or results
of operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus;
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(f) The Company and its subsidiaries have legal, valid and defensible
title to substantially all of the interests in oil and gas properties underlying
the Company's estimates of its net proved reserves contained in the Prospectus
and to substantially all other real and personal property reflected on the
Company's most recent balance sheet contained in the Prospectus as assets owned
by them, in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or would not have a material
adverse effect on the Company and its subsidiaries taken as a whole; and any
other real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases,
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries; and the Company's interests in its oil and gas properties are not
subject to any arrangements that do not conform to standard industry practice
except as disclosed in the Prospectus and except for the right of certain
lessors to engage in oil shale mining activities on Company leases in the
Piceance Basin area;
(g) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any business so
as to require such qualification, except to the extent that any failure to so
qualify would not have a material adverse effect on the condition (financial or
otherwise), earnings, business or properties of the Company and its
subsidiaries, taken as a whole;
(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company have
been duly and validly authorized and issued and are fully paid and non-
assessable; and all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims;
(i) The Securities have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
indenture to be dated as of ................, 1997 (the "Indenture") between the
Company and Bankers Trust Company, as Trustee (the "Trustee"), under which they
are to be issued, which will be substantially in the form filed as an exhibit to
the Registration Statement; the Indenture has been duly authorized and duly
qualified under the Trust Indenture Act and, when executed and delivered by the
Company and the Trustee, will constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles; and
the Securities and the Indenture will conform to the descriptions thereof in the
Prospectus;
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(j) The issue and sale of the Securities by the Company hereunder and
the compliance by the Company with all of the provisions of this Agreement and
the consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such action result in any
violation of the provisions of the Certificate of Incorporation or By-laws of
the Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Securities
or the consummation by the Company of the transactions contemplated by this
Agreement or the Indenture, except the registration under the Act of the
Securities and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws or as
have been obtained under the Trust Indenture Act in connection with the purchase
and distribution of the Securities by the Underwriters;
(k) Neither the Company nor any of its subsidiaries is in violation of
its Certificate of Incorporation or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
(l) The statements set forth in the Prospectus under the caption
"Description of Notes", insofar as they purport to constitute a summary of the
terms of the Securities, and under the caption "Underwriting", insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(m) Other than as set forth or contemplated in the Prospectus, there
are no legal or governmental proceedings pending to which the Company or any of
its subsidiaries is a party or to which any property of the Company or any of
its subsidiaries is subject, which if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of the Company's knowledge, no such proceedings
are threatened or contemplated by governmental authorities or threatened by
others;
(n) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
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(o) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba within
the meaning of Section 517.075, Florida Statutes;
(p) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(q) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or included or
incorporated by reference in the Prospectus present fairly the financial
condition and results of operations of the entities purported to be shown
thereby, at the dates and for the periods indicated, and have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis throughout the periods involved;
(r) The Company and its subsidiaries have obtained all material
licenses, permits and other governmental or regulatory authorizations required
for the conduct or operation of their respective businesses and such material
licenses, permits or authorizations are in full force and effect, and the
Company and its subsidiaries are presently conducting their respective
businesses in substantial compliance with all applicable laws, the violation of
which would have a material adverse effect on the condition (financial or
other), earnings, business or properties of the Company and its subsidiaries
taken as a whole;
(s) Other than violations that are not reasonably expected to have in
the aggregate a material adverse effect on the Company and its subsidiaries
taken as a whole, and to the best knowledge of the Company, the assets and
business of the Company and the subsidiaries have been operated in compliance
with all applicable Environmental Laws (as defined below); without limitation of
the foregoing, there is at the date hereof no pending litigation or action or,
to the best knowledge of the Company, any threatened litigation or action
relating to any violation of any Environmental Laws with respect to the assets
or business of the Company or its subsidiaries, other than violations, actions,
suits, investigations, inquiries or proceedings that are not reasonably expected
to have, in the aggregate, a material adverse effect on the condition (financial
or other), earnings, business or properties of the Company and its subsidiaries
taken as a whole; and, as of the date hereof, all material notices, permits or
similar documents relating to the operation of the assets or business, of the
Company and each of the subsidiaries including, without limitation, treatment,
storage, disposal or release of a hazardous substance or solid waste in the
environment, have been duly obtained or filed; as used in this Agreement, the
term "Environmental Laws" means any and all laws, statutes, ordinances, rules,
regulations, orders, judicial or arbitrated decisions, or determinations of any
governmental authority or court in effect and pertaining to properties utilized
or under the control of the Company, including, without limitation, the Clean
Air Act, as amended, the Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), the Federal Water Pollution Control Act,
as amended, the Resource Conservation and Recovery Act, as amended ("RCRA"), the
Toxic Substances Control Act, as amended, and
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comparable state and local laws and other safety, health and environmental
conservation or protection laws; the term "release" has the meaning specified in
the CERCLA, and the term "disposal" (or "disposed") has the meaning specified in
the RCRA;
(t) The information underlying the estimates of reserves of the
Company and its subsidiaries, as described in the Prospectus and the documents
incorporated by reference therein, was, at the time such estimates were made,
complete and accurate in all material respects; other than normal production of
the reserves and intervening spot market product price fluctuations described in
the Prospectus, the Company is not aware of any facts or circumstances that are
presently existing or reasonably likely to occur that would result in a
materially adverse change in the reserves, or the present value of future net
cash flows therefrom, as described in the Prospectus and the documents
incorporated by reference therein; estimates of such reserves and present values
comply in all material respects to the applicable requirements of Regulation S-X
and Industry Guide 2 under the Act;
(u) no forward looking statement (as defined in Rule 175 under the
Act) contained in the Registration Statement has been made or reaffirmed without
a reasonable basis or has been disclosed other than in good faith; and
(v) neither the Company nor any of its subsidiaries has, directly or
indirectly, paid or delivered any fee, commission or other form of money or item
of property, however characterized, to any finder, agent, government official or
other party in the United States or any other country, which is in any manner
related to the business or operations of the Company and its subsidiaries, which
the Company knows or has reason to believe to have been illegal under any
federal, state or local laws of the United States or any other country having
jurisdiction.
2. Subject to the terms and conditions herein set forth, the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price of .....% of the principal amount thereof, plus accrued
interest, if any, from ...................., 1997 to the Time of Delivery
hereunder, the principal amount of Securities set forth opposite the name of
such Underwriter in Schedule I hereto.
3. The Company hereby confirms its engagement of Goldman, Sachs & Co.
as, and Goldman, Sachs & Co. hereby confirms its agreement with the Company to
render services as, a "qualified independent underwriter" within the meaning of
Section 2(o) of Rule 2720 of the National Association of Securities Dealers,
Inc. (the "NASD") with respect to the offering and sale of the Securities.
Goldman, Sachs & Co., in its capacity as qualified independent underwriter and
not otherwise, is referred to herein as the "QIU". As compensation for the
services of the QIU hereunder, the Company agrees to pay the QIU $10,000 on the
Closing Date.
4. Upon the authorization by you of the release of the Securities,
the several Underwriters propose to offer the Securities for sale upon the terms
and conditions set forth in the Prospectus.
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5. (a) The Securities to be purchased by each Underwriter hereunder
will be represented by one or more definitive global Securities in book-entry
form which will be deposited by or on behalf of the Company with The Depository
Trust Company ("DTC") or its designated custodian. The Company will deliver the
Securities to Goldman, Sachs & Co., for the account of each Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer, payable to the order of the Company in Federal (same day) funds,
by causing DTC to credit the Securities to the account of Goldman, Sachs & Co.
at DTC. The Company will cause the certificates representing the Securities to
be made available to Goldman, Sachs & Co. for checking at least twenty-four
hours prior to the Time of Delivery (as defined below) at the office of DTC or
its designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be 9:30 a.m., New York City time, on
....................., 1997 or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing. Such time and date are herein called
the "Time of Delivery".
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 8 hereof, including the cross-
receipt for the Securities and any additional documents requested by the
Underwriters pursuant to Section 8(j) hereof, will be delivered at the offices
of Andrews & Kurth L.L.P. , 425 Lexington Avenue, New York, New York 10017 (the
"Closing Location"), and the Securities will be delivered at the Designated
Office, all at the Time of Delivery. A meeting will be held at the Closing
Location at 2:00 p.m., New York City time, on the New York Business Day next
preceding the Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be available
for review by the parties hereto. For the purposes of this Section 5, "New York
Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York City are generally
authorized or obligated by law or executive order to close.
6. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus prior to
the Time of Delivery which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish you with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or sale of
the Securities; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary
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Prospectus or prospectus, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of the issuance of
any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such qualification, to
promptly use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to furnish
the Underwriters with copies of the Prospectus in New York City in such
quantities as you may from time to time reasonably request, and, if the delivery
of a prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering or
sale of the Securities and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such same period to amend or
supplement the Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply with the Act, the
Exchange Act or the Trust Indenture Act, to notify you and upon your request to
file such document and to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such compliance; and in
case any Underwriter is required to deliver a prospectus in connection with
sales of any of the Securities at any time nine months or more after the time of
issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as you
may request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement (as defined in Rule 158(c)), an earnings
statement of the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and continuing to
and including the later of the Time of Delivery and such earlier time as you may
notify the Company, not to offer, sell,
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contract to sell or otherwise dispose of, except as provided hereunder any
securities of the Company that are substantially similar to the Securities;
(f) To furnish to the holders of the Securities as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), consolidated summary financial information of
the Company and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which the Securities or any class of securities of the Company is
listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request (such financial statements to be on a consolidated basis to the extent
the accounts of the Company and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds"; and
(i) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 p.m., Washington D.C. time, on the date of this Agreement,
and the Company shall at the time of filing either pay to the Commission the
filing fee for the Rule 462(b) Registration Statement or give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
7. The Company covenants and agrees with the several Underwriters
that the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Securities under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Indenture, the Blue Sky
Memoranda, closing documents (including any compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 6(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) any fees charged by securities rating services for rating
the Securities; (v) the filing fees incident to,
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and the fees and disbursements of counsel for the Underwriters in connection
with, any required review by the National Association of Securities Dealers,
Inc. of the terms of the sale of the Securities; (vi) the cost of preparing the
Securities; (vii) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of counsel for the Trustee in connection
with the Indenture and the Securities; and (viii) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 9 and 12 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
8. The obligations of the Underwriters hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of the Company herein are, at and as of the Time of Delivery,
true and correct, the condition that the Company shall have performed all of its
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 6(a)
hereof; no stop order suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; all requests for
additional information on the part of the Commission shall have been complied
with to your reasonable satisfaction; and if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have become
effective by 10:00 p.m., Washington, D.C. time, on the date of this Agreement;
(b) Andrews & Kurth L.L.P., counsel for the Underwriters, shall have
furnished to you such opinion or opinions (a draft of such opinion is attached
as Annex II(a) hereto), dated the Time of Delivery, with respect to the matters
covered in paragraphs (i), (vi), (xi) and (xii) of subsection (d) below and
paragraphs (i) and (ii) of subsection (e) below as well as such other related
matters as you may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to pass
upon such matters;
(c) Eugene A. Lang, Jr., General Counsel of the Company, shall have
furnished to you his written opinion (a draft of such opinion is attached as
Annex II(b) hereto), dated at the Time of Delivery, in form and substance
satisfactory to you to the effect that:
(i) Neither the Company nor any subsidiary of the Company is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it is a party or by which it or any of its
properties may be bound.
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(d) Bearman Talesnick & Clowdus Professional Corporation, counsel for
the Company, shall have furnished to you their written opinion (a draft of such
opinion is attached as Annex II(c) hereto), dated the Time of Delivery, in form
and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and nonassessable;
(iii) The Company has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, except to the
extent that any failure to so qualify would not have a material adverse
effect on the condition (financial or otherwise), earnings, business or
properties of the Company and its subsidiaries, taken as a whole (such
counsel being entitled to rely in respect of the opinion in this clause
upon opinions of local counsel and in respect of matters of fact upon
certificates of officers of the Company, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such opinions and certificates);
(iv) Each subsidiary of the Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws
of its jurisdiction of incorporation; and all of the issued shares of
capital stock of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, and are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local counsel and
in respect to matters of fact upon certificates of officers of the
Company or its subsidiaries, provided that such counsel shall state that
they believe that both you and they are justified in relying upon such
opinions and certificates);
(v) To the best of such counsel's knowledge and except for
matters set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a
party or of which any property of the Company or any of its subsidiaries
is the subject which, if determined adversely to the Company or any of
its subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others;
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(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
(vii) The issue and sale of the Securities being delivered at the
Time of Delivery by the Company and the compliance by the Company with
all of the provisions of the Securities, the Indenture and this
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order,
rule or regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Securities or the consummation
by the Company of the transactions contemplated by this Agreement or the
Indenture, except such as have been obtained under the Act and the Trust
Indenture Act of the Securities, and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(ix) The statements set forth in the Prospectus under the
caption "Description of Notes", insofar as they purport to constitute a
summary of the terms of the Securities, and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate and complete in
all material respects;
(x) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act;
(xi) The documents incorporated by reference in the Prospectus
or any further amendment or supplement thereto made by the Company prior
to the Time of Delivery (other than the financial statements and related
schedules therein, the reserve report and other statistical information
related to reserves included therein, as to which such counsel need
express no opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all material
respects with the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder;
and they have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to
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make the statements therein not misleading, or, in the case of other
documents which were filed under the Exchange Act with the Commission,
an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such documents were so
filed, not misleading;
(xii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
the Time of Delivery (other than the financial statements and related
schedules therein, the reserve report and other statistical information
related to reserves included therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder,
although they do not assume any responsibility for the accuracy or
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, except to the extent referred to in the
opinion in subsection (ix) of this Section 8(d); they have no reason to
believe that, as of its effective date, the Registration Statement or
any further amendment thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related statements and
related schedules therein, the reserve report and other statistical
information related to reserves included therein, as to which such
counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to the time of Delivery
(other than the financial statements and related schedules therein, the
reserve report and other statistical information related to reserves
included therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading or that, as
of the Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to the Time of Delivery (other than the financial
statements and related schedules therein, the reserve report and other
statistical information related to reserves included therein, as to
which such counsel need express no opinion) contains an untrue statement
of a material fact or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be incorporated by reference into
the Prospectus or required to be described in the Registration Statement
or the Prospectus which are not filed or incorporated by reference or
described as required; and
(xiii) no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement.
In rendering such opinion, such counsel may state that they express no opinion
as to the laws
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of any jurisdiction outside the United States.
(e) Vinson & Elkins L.L.P., special counsel for the Company, shall
have furnished to you their written opinion (a draft of such opinion is attached
as Annex II (d) hereto), dated the Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and legally
binding obligations of the Company entitled to the benefits provided by
the Indenture; and the Securities and the Indenture conform to the
descriptions thereof in the Prospectus; and
(ii) The Indenture has been duly authorized, executed and
delivered by the parties thereto and constitutes a valid and legally
binding instrument, enforceable in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors' rights
and to general equity principles; and the Indenture has been duly
qualified under the Trust Indenture Act.
(f) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of any
post-effective amendment to the Registration Statement filed subsequent to the
date of this Agreement and also at each Time of Delivery, Arthur Andersen LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or any
exercisable rights for the Company's Common Stock (other than for issuances of
the Company's Common Stock under Company employee benefit plans and issuances
pursuant to existing conversion rights, each subsequent to the date hereof) or
any material change in the equity investments of the Company or any increase in
the long-term debt of the Company or any of its subsidiaries in excess of $15
million or any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of which, in any
such case described in Clause (i) or (ii), is in the judgment of the
Representatives so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Securities on the terms and in the manner
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contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall have occurred
in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on the Nasdaq National Market
System; (ii) a suspension or material limitation in trading in the Company's
securities on NYSE; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York State authorities; (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Securities on the terms and in the manner contemplated in the Prospectus;
or (v) the occurrence of any material adverse change in the existing financial,
political or economic conditions in the United States or elsewhere which, in the
judgment of the Representatives, would materially and adversely affect the
financial markets or the market for the Securities and other debt securities;
and
(j) The Company shall have furnished or caused to be furnished to you
at the Time of Delivery certificates of officers of the Company satisfactory to
you as to the accuracy of the representations and warranties of the Company
herein at and as of such Time of Delivery, as to the performance by the Company
of all of its obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (f) of this Section
and as to such other matters as you may reasonably request.
(k) The Company shall have complied with the provisions of Section
6(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement.
(l) Ryder Scott Company and Netherland, Sewell & Associates shall have
furnished to the Representatives letters dated at the Time of Delivery in the
form heretofore agreed upon.
9. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other
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expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim
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and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses) received
by the Company bear to the total underwriting discounts and commissions received
by the Underwriters with respect to the Securities purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
subsection (d) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
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(e) The obligations of the Company under this Section 9 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 9 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
10. (a) The Company will indemnify and hold harmless Goldman, Sachs
& Co., in its capacity as QIU, against any losses, claims, damages or
liabilities, joint or several, to which the QIU may become subject, in its
capacity as QIU, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the QIU for any legal or other expenses reasonably incurred
by the QIU in connection with investigating or defending any such action or
claim as such expenses are incurred.
(b) Promptly after receipt by the QIU under subsection (a) above of
notice of the commencement of any action, the QIU shall, if a claim in respect
thereof is to be made against the Company under such subsection, notify the
Company in writing of the commencement thereof; but the omission so to notify
the Company shall not relieve it from any liability which it may have to the QIU
otherwise than under such subsection. In case any such action shall be brought
against the QIU and it shall notify the Company of the commencement thereof, the
Company shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to the QIU (who shall not,
except with the consent of the QIU, be counsel to the Company), and, after
notice from the indemnifying party to the QIU of its election so to assume the
defense thereof, the indemnifying party shall not be liable to the QIU under
such subsection for any legal expenses of other counsel or any other expenses,
in each case subsequently incurred by the QIU, in connection with the defense
thereof other than reasonable costs of investigation. The Company shall not,
without the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the QIU is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the QIU form all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
the QIU.
(c) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless Goldman, Sachs & Co., in its
capacity as QIU, under subsection (a) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to therein,
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then the Company shall contribute to the amount paid or payable by the QIU as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the QIU on the other from the
offering of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the QIU
failed to give the notice required under subsection (b) above, then the Company
shall contribute to such amount paid or payable by the QIU in such proportion as
is appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the QIU on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the QIU on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering of the Securities purchased under
this Agreement (before deducting expenses) received by the Company bear to the
fee payable to the QIU pursuant to Section 3 hereof. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the QIU on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the QIU agree that it would not be just and equitable if
contributions pursuant to this subsection (c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (c). The
amount paid or payable by the QIU as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(c) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(d) The obligations of the Company under this Section 10 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the QIU
within the meaning of the Act.
11. (a) If any Underwriter shall default in its obligation to
purchase the Securities which it has agreed to purchase hereunder at the Time of
Delivery you may in your discretion arrange for you or another party or other
parties to purchase such Securities on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Securities, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Securities on such terms. In the
event that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Securities, or the Company
notifies you that it has so arranged for the purchase of such Securities, you or
the Company shall have the right to postpone the Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any
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other documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate principal amount of
such Securities which remains unpurchased does not exceed one-eleventh of the
aggregate principal amount of all the Securities to be purchased at the Time of
Delivery , then the Company shall have the right to require each non-defaulting
Underwriter to purchase the principal amount of Securities which such
Underwriter agreed to purchase hereunder and, in addition, to require each non-
defaulting Underwriter to purchase its pro rata share (based on the principal
amount of Securities which such Underwriter agreed to purchase hereunder) of the
Securities of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Underwriter or Underwriters by you and the
Company as provided in subsection (a) above, the aggregate principal amount of
Securities which remains unpurchased exceeds one-eleventh of the aggregate
principal amount of all the Securities at the Time of Delivery, or if the
Company shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Securities of a defaulting
Underwriter or Underwriters, then this Agreement shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company,
except for the expenses to be borne by the Company and the Underwriters as
provided in Section 6 hereof and the indemnity and contribution agreements in
Section 9 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
12. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company, and
shall survive delivery of and payment for the Securities.
13. If this Agreement shall be terminated pursuant to Section 11
hereof, the Company shall not then be under any liability to any Underwriter
except as provided in Sections 7 and 9 hereof; but, if for any other reason, the
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Securities, but the Company shall then be
under no further liability to any Underwriter in respect of
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the Securities not so delivered except as provided in Sections 7 and 9 hereof.
14. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 9(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
15. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 9 and 12 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Securities from any Underwriter shall be deemed a successor or assign
by reason merely of such purchase.
16. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
17. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
18. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
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If the foregoing is in accordance with your understanding, please sign
and return to us seven counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement between each of the Underwriters and
the Company. It is understood that your acceptance of this letter on behalf of
each of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
Barrett Resources Corporation
By: __________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Chase Securities Inc.
Lehman Brothers Inc.
Petrie Parkman & Co., Inc.
By: __________________________
(Goldman, Sachs & Co.)
23
<PAGE>
SCHEDULE I
PRINCIPAL
AMOUNT OF
SECURITIES
TO BE
UNDERWRITER PURCHASED
----------- ------------
Goldman, Sachs & Co......................................... $
Chase Securities Inc........................................
Lehman Brothers Inc.........................................
Petrie Parkman & Co., Inc...................................
Total $150,000,000
------------
24
<PAGE>
ANNEX I
[FORM OF ANNEX I DESCRIPTION OF COMFORT LETTER
FOR REGISTRATION STATEMENTS ON FORM S-3]
Pursuant to Section 8(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified Public
Accountants of the consolidated interim financial statements, selected
financial data, pro forma financial information, financial forecasts
and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as
indicated in their reports thereon, copies of which have been separately
furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statement of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus and/or included in the Company's quarterly report on Form 10-
Q incorporated by reference into the Prospectus as indicated in their
reports thereon copies of which have been separately furnished to the
Representatives; and on the basis of specified procedures including
inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited
condensed consolidated financial statements referred to in paragraph
(vi)(A)(i) below comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations, nothing came to their
attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal
25
<PAGE>
years included in the Prospectus and included or incorporated by
reference in Item 6 of the Company's Annual Report on Form 10-K for the
most recent fiscal year agrees with the corresponding amounts (after
restatement where applicable) in the audited consolidated financial
statements for such five fiscal years which were included or
incorporated by reference in the Company's Annual Reports on Form 10-K
for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and
on the basis of limited procedures specified in such letter nothing came
to their attention as a result of the foregoing procedures that caused
them to believe that this information does not conform in all material
respects with the disclosure requirements of Items 301, 302, 402 and
503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of
the minute books of the Company and its subsidiaries since the date of
the latest audited financial statements included or incorporated by
reference in the Prospectus, inquiries of officials of the Company and
its subsidiaries responsible for financial and accounting matters and
such other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus and/or included or
incorporated by reference in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included or incorporated by reference in
the Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus, for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements included
or incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
26
<PAGE>
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in Clause (A)
and any unaudited income statement data and balance sheet items
included in the Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis for
the audited financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the most
recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in the
Prospectus do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock (other than issuances of capital stock
upon exercise of options and stock appreciation rights, upon earn-
outs of performance shares and upon conversions of convertible
securities, in each case which were outstanding on the date of the
latest balance sheet included or incorporated by reference in the
Prospectus) or any increase in the consolidated long-term debt of
the Company and its subsidiaries, or any decreases in consolidated
net current assets or stockholders' equity or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included or incorporated
by reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus
to the specified date referred to in Clause (E) there were any
decreases in consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income or other
items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared
with the comparable period of the preceding year and with any
other period of corresponding length specified by the
Representatives, except in each case for increases or decreases
which the Prospectus discloses have occurred or may occur or which
are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and
27
<PAGE>
financial information specified by the Representatives which are derived
from the general accounting records of the Company and its subsidiaries,
which appear in the Prospectus (excluding documents incorporated by
reference) or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
28
<PAGE>
Exhibit 4.1
================================================================================
BARRETT RESOURCES CORPORATION
as Issuer,
AND
BANKERS TRUST COMPANY
as Trustee
____________________________
INDENTURE
DATED AS OF JANUARY 15, 1997
____________________________
US$150,000,000
____% SENIOR NOTES DUE 2007
____________________________
===============================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA SECTION INDENTURE SECTION
<S> <C>
310(a)(1)............................................ 7.10
(a)(2)............................................ 7.10
(a)(3)............................................ N.A.
(a)(4)............................................ N.A.
(b)............................................... 7.08; 7.10
(c)............................................... N.A.
311(a)............................................... 7.11
(b)............................................... 7.11
(c)............................................... N.A.
312(a)............................................... 2.06; 2.13
(b)............................................... 10.03
(c)............................................... 10.03
313(a)............................................... 7.06
(b)............................................... 7.06
(c)............................................... 7.06
(d)............................................... 7.06
314(a)............................................... 4.03
(b)............................................... N.A.
(c)(1)............................................ 10.04
(c)(2)............................................ 10.04
(c)(3)............................................ N.A.
(d)............................................... N.A.
(e)............................................... 10.05
(f)............................................... N.A.
315(a)............................................... 7.01(2)
(b)............................................... 7.05
(c)............................................... 7.01(1)
(d)............................................... 7.01(3)
(e)............................................... 6.11
316(a)(last sentence)................................ 2.09
(a)(1)(A)......................................... 6.05
(a)(1)(B)......................................... 6.04
(a)(2)............................................ N.A.
(b)............................................... 6.07
(c)............................................... N.A.
317(a)(1)............................................ 6.08
(a)(2)............................................ 6.09
(b)............................................... 2.04
318(a)............................................... 10.01
</TABLE>
_________________________
N.A. means Not Applicable
NOTE: This Cross-Reference table shall not, for any purpose, be deemed part of
this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I
Section 1.01 Definitions......................................... 1
Section 1.02 Other Definitions................................... 8
Section 1.03 Incorporation by Reference of Trust Indenture Act... 9
Section 1.04 Rules of Construction............................... 9
ARTICLE II
THE SECURITIES
Section 2.01 Forms of Securities Generally....................... 9
Section 2.02 Title and Terms..................................... 10
Section 2.03 Denominations....................................... 11
Section 2.04 Execution, Authentication, Delivery and Dating...... 11
Section 2.05 Temporary Securities................................ 12
Section 2.06 Registration, Registration of Transfer and Exchange. 12
Section 2.07 Book-Entry Provisions for Global Certificates....... 14
Section 2.08 Mutilated, Destroyed, Lost and Stolen Securities.... 15
Section 2.09 Payment of Interest; Interest Rights Preserved...... 15
Section 2.10 Paying Agent........................................ 17
Section 2.11 Paying Agent to Hold Money in Trust................. 17
Section 2.12 Persons Deemed Owners............................... 17
Section 2.13 Holder Lists........................................ 17
Section 2.14 Outstanding Securities.............................. 18
Section 2.15 Treasury Securities................................. 18
Section 2.16 Cancellation........................................ 18
Section 2.17 Computation of Interest............................. 19
ARTICLE III
REDEMPTION
Section 3.01 Notices to Trustee.................................. 19
Section 3.02 Selection of Securities to be Redeemed.............. 19
Section 3.03 Notices to Holders.................................. 19
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>................................................ <C>
Section 3.04 Effect of Notice of Redemption..................... 20
Section 3.05 Deposit of Redemption Price........................ 20
Section 3.06 Securities Redeemed in Part........................ 21
Section 3.07 Optional Redemption................................ 21
ARTICLE IV
COVENANTS
Section 4.01 Payment of Securities.............................. 22
Section 4.02 Maintenance of Office or Agency.................... 22
Section 4.03 SEC Reports; Financial Statements.................. 23
Section 4.04 Compliance Certificate............................. 23
Section 4.05 Corporate Existence................................ 24
Section 4.06 Maintenance of Properties.......................... 24
Section 4.07 Payment of Taxes and Other Claims.................. 25
Section 4.08 Limitation on Sale/Leaseback Transactions.......... 25
Section 4.09 Limitation on Liens................................ 26
ARTICLE V
SUCCESSORS
Section 5.01 Limitations on Mergers and Consolidations.......... 28
Section 5.02 Successor Corporation Substituted.................. 28
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.................................. 29
Section 6.02 Acceleration....................................... 30
Section 6.03 Other Remedies..................................... 31
Section 6.04 Waiver of Past Defaults............................ 31
Section 6.05 Control by Majority................................ 31
Section 6.06 Limitations on Suits............................... 31
Section 6.07 Rights of Holders to Receive Payment............... 32
Section 6.08 Collection Suit by Trustee......................... 32
Section 6.09 Trustee May File Proofs of Claim................... 32
Section 6.10 Priorities......................................... 33
Section 6.11 Undertaking for Costs.............................. 33
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VII
TRUSTEE
Section 7.01 Duties of Trustee................................... 34
Section 7.02 Rights of Trustee................................... 35
Section 7.03 Individual Rights of Trustee........................ 36
Section 7.04 Trustee's Disclaimer................................ 36
Section 7.05 Notice of Defaults.................................. 36
Section 7.06 Reports by Trustee to Holders....................... 36
Section 7.07 Compensation and Indemnity.......................... 36
Section 7.08 Replacement of Trustee.............................. 37
Section 7.09 Successor Trustee by Merger, etc.................... 38
Section 7.10 Eligibility; Disqualification....................... 38
Section 7.11 Preferential Collection of Claims Against Company... 39
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.01 Termination of Company's Obligations................ 39
Section 8.02 Application of Trust Money.......................... 41
Section 8.03 Repayment to Company................................ 41
Section 8.04 Reinstatement....................................... 42
ARTICLE IX
AMENDMENTS
Section 9.01 Without Consent of Holders.......................... 42
Section 9.02 With Consent of Holders............................. 43
Section 9.03 Compliance with Trust Indenture Act................. 44
Section 9.04 Revocation and Effect of Consents................... 44
Section 9.05 Notation on or Exchange of Securities............... 45
Section 9.06 Trustee to Sign Amendments, etc..................... 45
ARTICLE X
MISCELLANEOUS
Section 10.01 Trust Indenture Act Controls........................ 45
Section 10.02 Notices............................................. 45
Section 10.03 Communication by Holders with Other Holders......... 46
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
Section 10.04 Certificate and Opinion as to Conditions Precedent.. 47
Section 10.05 Statements Required in Certificate or Opinion....... 47
Section 10.06 Rules by Trustee and Agents......................... 47
Section 10.07 Legal Holidays...................................... 47
Section 10.08 No Recourse Against Others.......................... 48
Section 10.09 Governing Law....................................... 48
Section 10.10 No Adverse Interpretation of Other Agreements....... 48
Section 10.11 Successors.......................................... 48
Section 10.12 Severability........................................ 48
Section 10.13 Counterpart Originals............................... 48
Section 10.14 Trustee as Paying Agent and Registrar............... 48
Section 10.15 Table of Contents, Headings, etc.................... 49
</TABLE>
Exhibit A: Form of Security
iv
<PAGE>
INDENTURE dated as of January 15, 1997 among Barrett Resources Corporation,
a Delaware corporation (the "Company"), and Bankers Trust Company of New York, a
New York banking corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Company's ____% Senior Notes
due 2007 (the "Securities"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01 Definitions.
"Affiliate" of any specified Person means any Person directly or indirectly
controlling or controlled by, or under direct or indirect common control with,
such specified Person. For purposes of this definition, control of a Person
shall mean the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise. The Trustee may request and may conclusively rely upon
an Officers' Certificate to determine whether any Person is an Affiliate of any
specified Person.
"Agent" means any Registrar or Paying Agent.
"Attributable Indebtedness", when used with respect to any Sale/Leaseback
Transaction, means, as at the time of determination, the present value
(discounted at a rate equivalent to the Company's then current weighted average
cost of funds for borrowed money as at the time of determination, compounded on
a semiannual basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in such Sale/ Leaseback
Transaction (including any period for which such lease can be extended).
"Bankruptcy Law" means title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board of Directors of the Company.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" of any Person means and includes any and all shares, rights
to purchase, warrants or options (whether or not currently exercisable),
participation or other equivalents of or interests in (however designated) the
equity (which includes, but is not limited to, common stock, preferred stock and
partnership and joint venture interests) of such Person (excluding any debt
securities that are convertible into, or exchangeable for, such equity).
1
<PAGE>
"Capitalized Lease Obligation" of any Person means any obligation of such
Person to pay rent or other amounts under a lease of property, real or personal,
that is required to be capitalized for financial reporting purposes in
accordance with GAAP; and the amount of such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.
"Common Equity" of any Person means and includes all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person, or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Company" means the Person named as the "Company" in the first paragraph of
this instrument until a successor corporation shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor corporation.
"Company Request" and "Company Order" means, respectively, a written
request or order signed in the name of the Company by its Chairman of the Board,
its President or a Vice President, and by its Treasurer, an Assistant Treasurer,
its Controller, an Assistant Controller, its Secretary or an Assistant
Secretary, and delivered to the Trustee.
"Consolidated Net Tangible Assets" means, for the Company and its
Restricted subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles, the aggregate amounts of assets (less
depreciation and valuation reserves and other reserves and items deductible from
gross book value of specific asset accounts under generally accepted accounting
principles) that would be included on a balance sheet after deducting therefrom
(a) all liability items except deferred income taxes, commercial paper, short
term bank indebtedness, Funded Indebtedness, other long-term liabilities and
shareholders' equity and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles.
"Corporate Trust Office of the Trustee" means the address of the Trustee
specified in Section 10.02 or such other address as the Trustee may give notice
thereof to the Company.
"Currency Hedge Obligations" means, at any time as to any Person, the
obligations of such Person at such time that were incurred in the ordinary
course of business pursuant to any foreign currency exchange agreement, option
or futures contract or other similar agreement or arrangement designed to
protect against or manage such Person's or any of its Subsidiaries' exposure to
fluctuations in foreign currency exchange rates.
"Default" means any event, act or condition that is, or after notice or the
passage of time or both would be, an Event of Default.
2
<PAGE>
"Depository" means, with respect to the Securities issued in the form of a
global Security, the Person designated as Depository by the Company pursuant to
Section 2.01 until a successor Depository shall have become such pursuant to the
applicable provisions of this Indenture, and thereafter "Depository" shall mean
or include each Person who is then a Depository hereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor statute.
"Funded Indebtedness" means all Indebtedness (including Indebtedness
incurred under any revolving credit, letter of credit or working capital
facility) that matures by its terms, or that is renewable at the option of any
obligor thereon to a date, more than one year after the date on which such
Indebtedness is originally incurred.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on the Issue Date.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Currency Hedge Obligations, Interest Rate Hedging Agreements or
Oil and Gas Hedging Contracts.
"Holder" means a Person in whose name a Security is registered.
"Indebtedness" of any Person at any date means, without duplication, (i)
all indebtedness of such Person for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a portion
thereof), (ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments, (iii) all obligations of such Person in
respect of letters of credit or other similar instruments (or reimbursement
obligations with respect thereto), other than standby letters of credit incurred
by such Person in the ordinary course of business, (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
except trade payables and accrued expenses incurred in the ordinary course of
business, (v) all Capitalized Lease Obligations of such Person, (vi) all
Indebtedness of others secured by a Lien on any asset of such Person, whether or
not such Indebtedness is assumed by such Person, (vii) all Indebtedness of
others guaranteed by such Person to the extent of such guarantee and (viii) all
Hedging Obligations of such Person.
"Indenture" means this Indenture as amended from time to time.
"Independent Investment Banker" means an independent investment banking
institution of national standing appointed by the Company for purposes of
calculating any Make-Whole Premium, provided, that if the Company fails to make
such appointment at least 45 Business Days prior to the Redemption Date for any
Security to be redeemed, or if the institution so appointed is unwilling or
3
<PAGE>
unable to make such calculation, such calculation will be made by Goldman, Sachs
& Co. or, if such firm is unwilling or unable to make such calculation, by an
independent investment banking institution of national standing appointed by the
Trustee.
"Interest Payment Date" shall have the meaning assigned to such term in the
Securities.
"Interest Rate Hedging Agreements" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates.
"Issue Date" means the date on which the Securities are originally issued
under this Indenture.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset
(including, without limitation, any production payment, advance payment or
similar arrangement with respect to minerals in place), whether or not filed,
recorded or otherwise perfected under applicable law. For the purposes of this
Indenture, the Company or any Restricted Subsidiary shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capitalized
Lease Obligation (other than any Capitalized Lease Obligation relating to any
building, structure, equipment or other property used or to be used in the
ordinary course of business of the Company and the Restricted Subsidiaries) or
other title retention agreement relating to such asset.
"Make-Whole Premium" means, with respect to any Security (or portion
thereof) to be redeemed, an amount equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption
Date, of:
(A) each interest payment that, but for such redemption,
would have been payable on the Security (or portion thereof) being
redeemed on each Interest Payment Date occurring after the Redemption
Date (excluding any accrued interest for the period prior to the
Redemption Date); and
(B) the principal amount that, but for such redemption,
would have been payable at the final maturity of the Security (or
portion thereof) being redeemed;
over
(ii) the principal amount of the Security (or portion thereof)
being redeemed.
4
<PAGE>
The present values of interest and principal payments referred to in clause (i)
above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield plus ___ basis points. The Make-
Whole Premium shall be calculated by an Independent Investment Banker.
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Securities, calculated to the nearest 1/12
of a year (the "Remaining Term"). The Treasury Yield will be determined as of
the third business day immediately preceding the applicable Redemption Date.
The weekly average yields of United States Treasury Notes will be determined by
reference to the most recent statistical release published by the Federal
Reserve Bank of New York and designated "H.15(519) Selected Interest Rates" or
any successor release (the "H.15 Statistical Release"). If the H.15 Statistical
Release sets forth a weekly average yield for United States Treasury Notes
having a constant maturity that is the same as the Remaining Term, then the
Treasury Yield will be equal to such weekly average yield. In all other cases,
the Treasury Yield will be calculated by interpolation, on a straight-line
basis, between the weekly average yields on the United States Treasury Notes
that have a constant maturity closest to and greater than the Remaining Term and
the United States Treasury Notes that have a constant maturity closest to and
less than the Remaining Term (in each case as set forth in the H.15 Statistical
Release). Any weekly average yields so calculated by interpolation will be
rounded to the nearest 1/100 of 1%, with any figure of 1/200% or above being
rounded upward. If weekly average yields for United States Treasury Notes are
not available in the H.15 Statistical Release or otherwise, then the Treasury
Yield will be calculated by interpolation of comparable rates selected by the
Independent Investment Banker.
"Net Proceeds" means, with respect to any Sale/Leaseback Transaction
entered into by the Company or any Restricted Subsidiary, the aggregate net
proceeds received by the Company or such Restricted Subsidiary from such
Sale/Leaseback Transaction after payment of expenses, taxes, commissions and
similar amounts incurred in connection therewith, whether such proceeds are in
cash or in property (valued at the fair market value thereof at the time of
receipt, as determined by the Board of Directors).
"Officer" means the President, the Treasurer, any Assistant Treasurer,
Controller, Secretary, Assistant Secretary or any Vice President or Assistant
Vice President of a Person.
"Officers' Certificate" means a certificate signed by two Officers of a
Person, one of whom must be the Person's chief executive officer, chief
financial officer or chief accounting officer.
"Oil and Gas Hedging Contracts" means any oil and gas purchase or hedging
agreement, and other agreement or arrangement, in each case, that is designed to
provide protection against oil and gas price fluctuations.
5
<PAGE>
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Ordinary Course Lien" means:
(a) Liens for taxes, assessments or governmental charges or levies on
the property of the Company or any Restricted Subsidiary if the same shall not
at the time be delinquent or thereafter can be paid without penalty, or are
being contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on the books of the
Company;
(b) Liens imposed by law, such as carriers', warehousemen's, landlords'
and mechanics' liens and other similar liens arising in the ordinary course of
business which secure obligations not more than 60 days past due or which are
being contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP shall have been set aside on the books of the
Company;
(c) Liens arising out of pledges or deposits under worker's compensation
laws, unemployment insurance, old age pensions, or other social security or
retirement benefits, or similar legislation;
(d) Utility easements, building restrictions and such other encumbrances
or charges against real property as are of a nature generally existing with
respect to properties of a similar character and which do not in any material
way affect the marketability of the same or interfere with the use thereof in
the ordinary course of business of the Company and the Restricted Subsidiaries;
(e) Liens arising under operating agreements or similar agreements in
respect of obligations which are not yet due or which are being contested in
good faith by appropriate proceedings;
(f) Liens reserved in oil, gas and/or mineral leases, production sharing
contracts and petroleum concession agreements and licenses for bonus or rental
payments and for compliance with the terms of such leases, contracts, agreements
and licenses;
(g) Liens pursuant to partnership agreements, oil, gas and/or mineral
leases, production sharing contracts, petroleum concession agreements and
licenses, farm-out agreements, division orders, contracts for the sale,
purchase, exchange, processing or transportation of oil, gas and/or other
hydrocarbons, unitization and pooling declarations and agreements, operating
agreements, development agreements, area of mutual interest agreements, and
other agreements which are customary in the oil, gas and other mineral
exploration, development and production business and in the business of
processing of gas and gas condensate production for the extraction of products
therefrom;
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(h) Liens on personal property (excluding the Capital Stock of any
Restricted Subsidiary) securing Indebtedness of the Company or any Restricted
Subsidiary other than Funded Indebtedness; and
(i) Liens imposed by law or order as a result of any proceeding before
any court or regulatory body that is being contested in good faith, and Liens
which secure a judgment or other court-ordered award or settlement as to which
the Company has not exhausted its appellate rights.
"Pari Passu Indebtedness" means any Indebtedness of the Company, whether
outstanding on the Issue Date or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstanding expressly
provides that such Indebtedness shall be subordinated in right of payment to the
Securities.
"Person" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.08 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security, shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Redemption Date," when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" shall have the meaning assigned to such term in the
Securities.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 2.02, or, if not so specified, the last day of the
calendar month preceding such Interest Payment Date if such Interest Payment
Date is the first date of a calendar month, whether or not such day shall be a
Business Day.
"Restricted Subsidiary" means each of the existing Subsidiaries of the
Company and any Subsidiary of the Company that is a successor corporation of any
of the existing Subsidiaries, except for BGP Inc. The status of any Subsidiary
of the Company as a Restricted Subsidiary shall continue, so long as it is a
Subsidiary of the Company.
"Sale/Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary, for a
period of more than three years, of any
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real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such Person in
contemplation of such leasing.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above issued under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and any
successor statute.
"Special Record Date" for the payment of any Defaulted Interest on the
Securities of any series means a date fixed by the Trustee pursuant to Section
2.09.
"Subsidiary" of any Person means any corporation of which at least a
majority of the aggregate voting power of all classes of the Common Equity is
owned by such Person directly or through one or more other Subsidiaries of such
Person, and any entity other than a corporation in which such Person, directly
or indirectly, owns at least a majority of the Common Equity of such entity.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. (S)(S)
77aaa-77bbbb), as in effect on the Issue Date.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"U.S. Government Obligations" means direct obligations of the United States
of America, obligations on which the payment of principal and interest is fully
guaranteed by the United States of America or obligations or guarantees for the
payment of which the full faith and credit of the United States of America is
pledged.
Section 1.02 Other Definitions.
<TABLE>
<CAPTION>
DEFINED
IN
TERM SECTION
- ---- -------
<S> <C>
"Agent Members"...................... 2.07
"Defaulted Interest"................. 2.09
"Custodian".......................... 6.01
"Event of Default"................... 6.01
</TABLE>
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<TABLE>
<S> <C>
"Global Certificate"................. 2.01
"Legal Holiday"...................... 10.07
"Paying Agent"....................... 2.10
"Physical Certificates".............. 2.01
"Security Register".................. 2.06
"Security Registrar" or "Registrar".. 2.06
"Stated Maturity".................... 2.02
"Successor".......................... 5.01
</TABLE>
Section 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
All terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE II
THE SECURITIES
Section 2.01 Forms of Securities Generally.
The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the Officers executing such Securities, as evidenced by their
execution of such Securities.
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The Securities (including the Trustee's certificate of authentication)
shall be issued initially in the form of one or more global Securities
substantially in the form set forth on Exhibit A hereof (each being called a
"Global Certificate") deposited with The Depository Trust Company (the
"Depository"), and registered in the name of its nominee (such nominee being
referred to herein as the "Global Certificate Holder"), or will remain in the
custody of the Trustee pursuant to a FAST Balance Certificate Agreement or
similar agreement between the Depository and the Trustee, and shall be duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. Subject to the limitation set forth in Section 2.02, the principal
amount of the Global Certificates may be increased or decreased from time to
time by adjustments made on the records of the Trustee as custodian for the
Depository, as hereinafter provided.
The Securities exchanged for beneficial interests in a Global
Certificate as described in Section 2.07 shall be issued in the form of
permanent certificated Securities in registered form in substantially the form
set forth in Exhibit A hereto ("Physical Certificates").
The Securities, and the Trustee's certificate of authentication shall
be in substantially the form set forth in Exhibit A hereto, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, CUSIP or
other numbers or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the Officers
executing such Securities as evidenced by their execution of the Securities.
Any portion of the text of any Security may be set forth on the reverse thereof,
with an appropriate reference thereto on the face of the Security. In addition
to the requirements of Exhibit A, the Securities may also have set forth on the
reverse side thereof a form of assignment.
Section 2.02 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture for original issue is limited
to $150,000,000, and the amount of Securities outstanding at any one time may
not exceed $150,000,000 except as provided in Section 2.08 hereof.
The Securities shall be known and designated as the "___% Senior Notes
due 2007" of the Company. Their Stated Maturity shall be January 15, 2007, and
they shall bear interest at the rate of _____% per annum from __________, 1997,
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, payable semiannually on January 15 and July 15 in each year,
commencing July 15, 1997, and at said Stated Maturity, until the principal
thereof is paid or duly provided for.
The principal of (and premium, if any, on) and interest on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York, or at such other office or agency of
the Company as may be maintained for such purpose; provided, however, that, at
the option of the Company, interest will be paid on Physical Securities by check
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mailed to addresses of the Persons entitled thereto as such addresses shall
appear on the Security Register.
The Securities shall be redeemable as provided in Article 3 hereof.
The Securities shall be subject to defeasance at the option of the
Company as provided in Article 8 hereof.
Section 2.03 Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
Section 2.04 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or a Vice President of the Company, under
its corporate seal affixed thereto or reproduced thereon and attested by its
Secretary or an Assistant Secretary of the Company. The signature of any of
these Officers on the Securities may be manual or facsimile signatures of such
Officer and may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as
provided in this Indenture.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
A hereto, duly executed by the Trustee by manual signature of an authorized
signatory, and such certificate upon any Security shall be conclusive evidence,
and the only evidence, that such Security has been duly authenticated and
delivered hereunder and is entitled to the benefits of this Indenture.
In case the Company, pursuant to and in compliance with Section 5.01
hereof, shall be consolidated or merged with or into any other Person or shall
convey, transfer, lease or otherwise
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dispose of its properties or assets substantially as an entirety to any Person,
and the successor Person resulting from such consolidation, or surviving such
merger, or into which the Company shall have been merged, or the Person which
shall have received a conveyance, transfer, lease or other disposition as
aforesaid, shall have executed an indenture supplemental hereto with the Trustee
pursuant to Section 5.01 hereof, any of the Securities authenticated or
delivered prior to such consolidation, merger, conveyance, transfer, lease or
other disposition may, from time to time, at the request of the successor
Person, be exchanged for other Securities executed in the name of the successor
Person with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Securities surrendered for such
exchange and of like principal amount; and the Trustee, upon Company Request of
the successor Person, shall authenticate and deliver Securities as specified in
such request for the purpose of such exchange. If Securities shall at any time
be authenticated and delivered in any new name of a successor Person pursuant to
this Section in exchange or substitution for or upon registration of transfer of
any Securities, such successor Person, at the option of the Holders but without
expense to them, shall provide for the exchange of all Securities at the time
outstanding for Securities authenticated and delivered in such new name.
Section 2.05 Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the Officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company will cause definitive
Securities to be prepared without unreasonable delay. After the preparation of
definitive Securities, the temporary Securities shall be exchangeable for
definitive Securities upon surrender of the temporary Securities at the office
or agency of the Company designated for such purpose pursuant to Section 4.02
hereof, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
Section 2.06 Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept a register (the register maintained
in such office and in any other office or agency designated pursuant to Section
4.02 hereof being herein sometimes referred to as the "Security Register") in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of Securities and of transfers of Securities.
The Security Register shall be in written form or any other form capable of
being converted into
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<PAGE>
written form within a reasonable time. At all reasonable times and during normal
business hours, the Security Register shall be open to inspection by the
Trustee. The Trustee is hereby initially appointed as security registrar (the
"Security Registrar" or the "Registrar") for the purpose of registering
Securities and transfers of Securities as herein provided.
Subject to the provisions of this Section and Section 2.07, upon
surrender for registration of transfer of any Security at the office or agency
of the Company designated pursuant to Section 4.02 hereof, the Company shall
execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount.
Furthermore, any Holder of the Global Certificate shall, by acceptance
of such Global Certificate, agree that transfers of beneficial interest in such
Global Certificate may be effected only through a book-entry system maintained
by the Holder of such Global Certificate (or its agent), and that ownership of a
beneficial interest in the Security shall be required to be reflected in a book
entry.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Security Registrar)
be duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Security Registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 2.05, 2.07, 3.06 or 9.05 hereof not involving
any transfer.
Neither the Trustee, the Security Registrar nor the Company shall be
required (i) to issue, register the transfer of or exchange any Security during
a period beginning at the opening of business 15 days before the mailing of a
notice of redemption of Securities selected for redemption under Section 3.02
hereof and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for
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<PAGE>
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
Section 2.07 Book-Entry Provisions for Global Certificates.
Each Global Certificate shall be registered in the name of the
Depository for such Global Certificate or the nominee of such Depository and may
be delivered to the Trustee as custodian for such Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Certificate held
on their behalf by the Depository, or the Trustee as its custodian, or under
such Global Certificate, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Certificate for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee, from giving effect to any written certification,
proxy or other authorization furnished by the Depository or shall impair, as
between the Depository and its Agent Members, the operation of customary
practices governing the exercise of the rights of a beneficial owner of any
Security.
Transfers of a Global Certificate shall be limited to transfers of
such Global Certificate in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial owners in a
Global Certificate may be transferred in accordance with the rules and
procedures of the Depository. Physical Certificates shall be transferred to all
beneficial owners in exchange for their beneficial interests in a Global
Certificate if, and only if, either (1) the Depository notifies the Company that
it is unwilling or unable to continue as Depository for the Global Certificate
and a successor Depository is not appointed by the Company within 90 days of
such notice, (2) an Event of Default has occurred and is continuing and the
Security Registrar has received a request from the Depository to issue Physical
Certificates in lieu of all or a portion of the Global Certificate (in which
case the Company shall deliver Physical Certificates within 30 days of such
request) or (3) the Company determines not to have the Securities represented by
a Global Certificate.
In connection with any transfer of a portion of the beneficial
interest in a Global Certificate to beneficial owners pursuant to this Section,
the Registrar shall reflect on its books and records the date and a decrease in
the principal amount of the Global Certificate in an amount equal to the
principal amount of the beneficial interest in the Global Certificate to be
transferred, and the Company shall execute, and the Trustee upon receipt of a
Company Order for the authentication and delivery of Physical Certificates shall
authenticate and deliver, one or more Physical Certificates of like tenor and
amount.
In connection with the transfer of an entire Global Certificate to
beneficial owners pursuant to this Section, the Global Certificate shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each
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<PAGE>
beneficial owner identified by the Depository in exchange for its beneficial
interest in the Global Certificate, an equal aggregate principal amount of
Physical Certificates of authorized denominations.
The registered holder of a Global Certificate may grant proxies and
otherwise authorize any person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
Section 2.08 Mutilated, Destroyed, Lost and Stolen Securities.
If (i) any mutilated Security is surrendered to the Trustee or (ii)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company and the Trustee such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute, and upon Company Order the Trustee shall authenticate and
deliver, in exchange for any such mutilated Security or in lieu of any such
destroyed, lost or stolen Security, a new Security of like tenor and principal
amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 2.09 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such
15
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interest at the office or agency of the Company maintained for such purpose
pursuant to Section 4.02 hereof.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date shall forthwith cease to
be payable to the Holder on the Regular Record Date by virtue of having been
such Holder, and such defaulted interest and (to the extent lawful) interest on
such defaulted interest at the rate borne by the Securities (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
may be paid by the Company, at its election in each case, as provided in clause
(a) or (b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
money when deposited shall be held in trust for the benefit of the Persons
entitled to such Defaulted Interest as in this clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the receipt by
the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date, and in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given in the
manner provided for in Section 10.02 hereof, not less than 10 days prior to such
Special Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been so given, such Defaulted
Interest shall be paid to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business on
such Special Record Date and shall no longer be payable pursuant to the
following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
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Section 2.10 Paying Agent.
The Company shall also maintain an office or agency where Securities
may be presented for payment ("Paying Agent"). The Company may appoint one or
more additional paying agents. The term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent without notice to any
Holder. The Company shall notify the Trustee in writing of the name and address
of any Paying Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Paying Agent, the Trustee shall act as
such. The Company or any of its Subsidiaries may act as Paying Agent.
The Company initially appoints the Trustee to act as the Paying Agent
with respect to the Global Certificates.
Section 2.11 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent (other than the Trustee)
to agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest, on the Securities, and shall notify the
Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
sole Paying Agent for the Securities.
Section 2.12 Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Security Registrar, the Trustee and any agent of the
Company, or the Trustee may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of (and premium, if any, on) and (subject to Section 2.09 hereof)
interest on such Security and for all other purposes whatsoever, whether or not
such Security be overdue, and none of the Company, the Security Registrar, the
Trustee or any agent of the Company, or the Trustee shall be affected by notice
to the contrary.
Section 2.13 Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S)312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each Interest Payment Date and at such other times as the
Trustee may request
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in writing, a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of the Holders of Securities and
the Company shall otherwise comply with TIA (S)312(a).
Section 2.14 Outstanding Securities.
The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Certificate
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.15 hereof, a Security does not cease to be outstanding because the Company, a
Subsidiary or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.08 hereof, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Securities payable on that date, then on and after that date
such Securities shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Section 2.15 Treasury Securities.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, a Subsidiary or by any Affiliate of the Company shall be
considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that the Trustee actually knows
are so owned shall be so disregarded.
Section 2.16 Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Securities so delivered shall be
promptly cancelled by the Trustee. No Securities shall be authenticated in lieu
of or in exchange for any Securities cancelled as provided in this Section,
except as expressly permitted by this Indenture. All cancelled Securities held
by the
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Trustee shall be destroyed and a certificate of their destruction delivered
to the Company unless by a Company Order the Company shall direct that cancelled
Securities be returned to it.
Section 2.17 Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
ARTICLE III
REDEMPTION
Section 3.01 Notices to Trustee.
If the Company elects to redeem Securities pursuant to the redemption
provisions of Section 3.07, it shall furnish to the Trustee, at least 45 days
but not more than 60 days before a Redemption Date, an Officers' Certificate
setting forth the Section of this Indenture pursuant to which the redemption
shall occur, the Redemption Date, the principal amount of Securities to be
redeemed and the Redemption Price.
Section 3.02 Selection of Securities to be Redeemed.
If less than all of the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed by such method as the Trustee in its
sole discretion shall deem fair and appropriate. The particular Securities to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 days nor more than 60 days prior to the Redemption Date by the Trustee from
the outstanding Securities not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemption, the principal amount thereof to be redeemed. Securities and
portions of them selected shall be in amounts of $1,000 or whole multiples of
$1,000. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
Section 3.03 Notices to Holders.
(a) At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail in conformity with Section 10.02 a notice of
redemption to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
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(i) the Redemption Date;
(ii) the Redemption Price;
(iii) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the Redemption
Date, upon surrender of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion will be issued;
(iv) the name and address of the Paying Agent;
(v) that Securities called for redemption must be surrendered to
the Paying Agent at the address specified in such notice to collect the
Redemption Price;
(vi) that unless the Company defaults in making the redemption
payment, interest on Securities called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is to
receive payment of the Redemption Price upon surrender to the Paying Agent of
the Securities;
(vii) the paragraph of the Securities pursuant to which the
Securities are being redeemed; and
(viii) the aggregate principal amount of Securities being redeemed.
(b) At the Company's request, the Trustee shall give the notice
required in Section 3.03(a) in the Company's name; provided, however, that the
Company shall deliver to the Trustee, at least 45 days prior to the Redemption
Date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in Section
3.03(a).
Section 3.04 Effect of Notice of Redemption.
Once notice of redemption is mailed pursuant to Section 3.03,
Securities called for redemption become due and payable on the Redemption Date
at the Redemption Price. Upon surrender to the Paying Agent, such Securities
shall be paid out at the Redemption Price.
Section 3.05 Deposit of Redemption Price.
One Business Day prior to the Redemption Date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
Redemption Price of all Securities to be redeemed on that date. The Trustee or
the Paying Agent shall return to the Company any money not required for that
purpose.
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If the Company complies with the preceding paragraph, interest on the
Securities or portions thereof to be redeemed (whether or not such Securities
are presented for payment) will cease to accrue on the applicable Redemption
Date. If any Security called for redemption shall not be so paid upon surrender
because of the failure of the Company to comply with the preceding paragraph,
then interest will be paid on the unpaid principal and premium, if any, from the
Redemption Date until such principal and premium are paid and, to the extent
lawful, on any interest not paid on such unpaid principal, in each case at the
rate provided in the Securities and in Section 4.01.
Section 3.06 Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee shall authenticate for the Holder, at the expense of
the Company, a new Security equal in principal amount to the unredeemed portion
of the Security surrendered.
Section 3.07 Optional Redemption.
The Securities may be redeemed at any time, at the option of the
Company, in whole or from time to time in part, at the Redemption Price
specified in the Securities.
Any redemption pursuant to this Section 3.07 shall be made, to the
extent applicable, pursuant to the provisions of Sections 3.01 through 3.06.
ARTICLE IV
COVENANTS
Section 4.01 Payment of Securities.
The Company shall pay the principal of, and premium, if any, and
interest on the Securities on the dates and in the manner provided in the
Securities. Principal, premium and interest shall be considered paid on the
date due if the Paying Agent, other than the Company or a Subsidiary of the
Company, holds on that date money deposited by the Company designated for and
sufficient to pay all principal, premium and interest then due.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal, and premium, if
any, at a rate equal to the then applicable interest rate on the Securities to
the extent lawful; and it shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
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Section 4.02 Maintenance of Office or Agency.
The Company will maintain, in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee, the
Registrar or the Paying Agent) where Securities may be presented for
registration of transfer or exchange and where Securities may be presented for
payment. Unless otherwise designated by the Company by written notice to the
Trustee, such office or agency shall be the Corporate Trust Office of the
Trustee. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations
may be made at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency. The
Company hereby designates the Corporate Trust Office of the Trustee as one such
office or agency of the Company in accordance with Section 2.02.
Section 4.03 SEC Reports; Financial Statements.
(a) The Company shall file with the Trustee, within 15 days after it
files the same with the SEC, copies of the annual reports and the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) that the Company is required
to file with the SEC pursuant to Section 13 or 15 (d) of the Exchange Act. If
the Company is not subject to the requirements of such Section 13 or 15(d), the
Company shall file with the Trustee, within 15 days after it would have been
required to file the same with the SEC, financial statements, including any
notes thereto (and with respect to annual reports, an auditors' report by a firm
of established national reputation), and a "Management's Discussion and Analysis
of Financial Condition and Results of Operations," both comparable to that which
the Company would have been required to include in such annual reports,
information, documents or other reports if the Company had been subject to the
requirements of such Section 13 or 15 (d). The Company shall also comply with
the provisions of TIA (S) 314 (a).
(b) If the Company is required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall cause any
annual report furnished to its stockholders generally and any quarterly or other
financial reports furnished by it to its stockholders generally to be filed with
the Trustee and mailed to the Holders at their addresses appearing in the
Security Register. If the Company is not required to furnish annual or
quarterly reports to its stockholders pursuant to the Exchange Act, the Company
shall cause its financial statements referred to in Section 4.03 (a), including
any notes thereto (and with respect to annual reports, an auditors'
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report by a firm of established national reputation), and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" to be
so mailed to the Holders within 90 days after the end of each of the Company's
fiscal years and within 60 days after the end of each of the Company's first
three fiscal quarters.
(c) The Company shall provide the Trustee with a sufficient number of
copies of all reports and other documents and information that the Trustee may
be required to deliver to Holders under this Section.
Section 4.04 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers of the Company with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof,
without regard to any grace period or requirement of notice required by this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which such Officer may have knowledge
and what action the Company, is taking or proposes to take with respect thereto)
and that to the best of his knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of, or
premium, if any, or interest, if any, on the Securities are prohibited or, if
such event has occurred, a description of the event and what action the Company
is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 shall be accompanied by a written
statement of the Company's independent public accountants (who shall be a firm
of established national reputation) that in making the examination necessary for
certification of such financial statements nothing has come to their attention
that would lead them to believe that the Company has violated any provisions of
Articles 4 or 5 of this Indenture (to the extent such provisions relate to
accounting matters) or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, forthwith upon any Officer of the Company
becoming aware of any Default or Event of Default under this Indenture, an
Officers' Certificate specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto.
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Section 4.05 Corporate Existence.
The Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and the
corporate, partnership and other existence of each of its Subsidiaries and all
rights (charter and statutory) and franchises of the Company and its
Subsidiaries, provided that the Company shall not be required to preserve the
corporate existence of any Subsidiary of the Company or any such right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
the Restricted Subsidiaries and that the loss thereof would not have a material
adverse effect on the business, prospects, assets or financial condition of the
Company and its Subsidiaries taken as a whole and would not have any material
adverse effect on the payment and performance of the obligations of the Company
under the Securities and this Indenture.
Section 4.06 Maintenance of Properties.
The Company shall cause all properties owned by the Company or any of
its Subsidiaries or used or held for use in the conduct of its business or the
business of any such Subsidiary to be maintained and kept in good condition,
repair and working order (reasonable wear and tear excepted) and supplied with
all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any such Subsidiary and not disadvantageous in
any material respect to the Holders.
Section 4.07 Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon the property of the Company or
any of its Subsidiaries; provided that the Company shall not be required to pay
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate proceedings.
Section 4.08 Limitation on Sale/Leaseback Transactions.
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale/Leaseback Transaction with any Person (other than the
Company or a Restricted Subsidiary) unless:
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(a) the Company or such Restricted Subsidiary would be entitled to
incur Indebtedness, in a principal amount equal to the Attributable Indebtedness
with respect to such Sale/Leaseback Transaction, secured by a Lien on the
property subject to such Sale/Leaseback Transaction pursuant to Section 4.09
without equally and ratably securing the Securities pursuant to such Section;
(b) after the Issue Date and within a period commencing six months
prior to the consummation of such Sale/Leaseback Transaction and ending six
months after the consummation thereof, the Company or such Restricted Subsidiary
shall have expended for property used or to be used in the ordinary course of
business of the Company and the Restricted Subsidiaries (including amounts
expended for the exploration, drilling or development thereof, and for
additions, alterations, repairs and improvements thereto) an amount equal to all
or a portion of the Net Proceeds of such Sale/Leaseback Transaction and the
Company shall have elected to designate such amount as a credit against such
Sale/Leaseback Transaction (with any such amount not being so designated to be
applied as set forth in clause (c) below); or
(c) the Company, during the 12-month period after the effective date
of such Sale/Leaseback Transaction, shall have applied to the voluntary
defeasance or retirement of Securities or any Pari Passu Indebtedness an amount
equal to the greater of the Net Proceeds of the sale or transfer of the property
leased in such Sale/Leaseback Transaction and the fair value, as determined by
the Board of Directors, of such property at the time of entering into such
Sale/Leaseback Transaction (in either case adjusted to reflect the remaining
term of the lease and any amount expended by the Company as set forth in clause
(b) above), less an amount equal to the principal amount of Securities and Pari
Passu Indebtedness voluntarily defeased or retired by the Company within such
12-month period and not designated as a credit against any other Sale/Leaseback
Transaction entered into by the Company or any Restricted Subsidiary during such
period.
Section 4.09 Limitation on Liens.
No provision of this Indenture or the Securities shall in any way
restrict or prevent the Company or any Restricted Subsidiary from issuing,
assuming, guaranteeing or otherwise incurring any Indebtedness; provided,
however, that the Company shall not, and shall not permit any Restricted
Subsidiary to, issue, assume or guarantee any Indebtedness for borrowed money
secured by any Lien on any property or asset now owned or hereafter acquired by
the Company or such Restricted Subsidiary without making effective provision
whereby any and all Securities then or thereafter outstanding will be secured by
a Lien equally and ratably with any and all other obligations thereby secured
for so long as any such obligations shall be so secured. Notwithstanding the
foregoing, the Company or any Restricted Subsidiary may, without so securing the
Securities, issue, assume or guarantee Indebtedness secured by the following
Liens:
(a) Liens existing on the Issue Date or provided for under the terms
of agreements existing on the Issue Date (including, without limitation, the
Lien provided for pursuant to Section 7.07);
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(b) Liens on property securing (i) all or any portion of the cost of
exploration, drilling or development of such property, (ii) all or any portion
of the cost of acquiring, constructing, altering, improving or repairing any
property or assets, real or personal, or improvements used or to be used in
connection with such property or (iii) Indebtedness incurred by the Company or
any Restricted Subsidiary to provide funds for the activities set forth in
clauses (i) and (ii) above;
(c) Liens securing Indebtedness owed by a Restricted Subsidiary to the
Company or to any other Restricted Subsidiary;
(d) Liens on property existing at the time of acquisition of such
property by the Company or a Subsidiary or Liens on the property of any Person
existing at the time such Person becomes a Restricted Subsidiary of the Company
or is merged with the Company in compliance with Article V hereof and in either
case not incurred as a result of (or in connection with or in anticipation of)
the acquisition of such property or such Person becoming a Restricted Subsidiary
of the Company or being merged with the Company, provided that such Liens do not
extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries other than the property so acquired;
(e) Liens on any property securing (i) Indebtedness incurred in
connection with the construction, installation or financing of pollution control
or abatement facilities or other forms of industrial revenue bond financing or
(ii) Indebtedness issued or guaranteed by the United States or any State thereof
or any department, agency or instrumentality of either;
(f) any Lien extending, renewing or replacing (or successive
extensions, renewals or replacements of) any Lien of any type permitted under
clauses (a) through (e) above, provided that such Lien extends to or covers only
the property that is subject to the Lien being extended, renewed or replaced;
(g) any Ordinary Course Lien arising, but only so long as continuing,
in the ordinary course of business of the Company and the Restricted
Subsidiaries;
(h) any Lien resulting from the deposit of moneys or evidences of
Indebtedness in trust for the purpose of defeasing Indebtedness of the Company
or any Subsidiary; or
(i) Liens (exclusive of any Lien of any type otherwise permitted under
clauses (a) through (h) above) securing Indebtedness of the Company or any
Restricted Subsidiary in an aggregate principal amount which, together with the
aggregate amount of Attributable Indebtedness deemed to be outstanding in
respect of all Sale/Leaseback Transactions entered into pursuant to clause (a)
of Section 4.08 (exclusive of any such Sale/Leaseback Transactions otherwise
permitted under clauses (a) through (h) above), does not at the time such
Indebtedness is incurred exceed 5% of the Consolidated Net Tangible Assets of
the Company (as shown in the most recent audited consolidated balance sheet of
the Company and its Subsidiaries).
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Notwithstanding the foregoing, nothing in this Section 4.09 shall be
deemed to prohibit or otherwise limit the following types of transactions:
(1) the sale, granting of Liens with respect to, or other transfer of,
crude oil, natural gas or other petroleum hydrocarbons in place for a period of
time until, or in an amount such that, the transferee will realize therefrom a
specified amount (however determined) of money or of such crude oil, natural gas
or other petroleum hydrocarbons;
(2) the sale or other transfer of any other interest in property of
the character commonly referred to as a production payment, overriding royalty,
forward sale or similar interest;
(3) the entering into of Hedging Obligations although Liens securing
any Indebtedness for borrowed money that is the subject of any Hedging
Obligations shall not be permitted hereby unless permitted under clauses (a)
through (i) above; or
(4) the granting of Liens required by any contract or statute in order
to permit the Company or any Restricted Subsidiary to perform any contract or
subcontract made by it with or at the request of the United States or any State
thereof or any department, agency or instrumentality of either, or to secure
partial, progress, advance or other payments to the Company or any Restricted
Subsidiary by such governmental unit pursuant to the provisions of any contract
or statute.
ARTICLE V
SUCCESSORS
Section 5.01 Limitations on Mergers and Consolidations.
The Company shall not consolidate or merge with or into any Person, or
sell, lease, convey or otherwise dispose of all or substantially all of its
assets, or assign any of its obligations hereunder or under the Securities, to
any Person, unless:
(a) the Person formed by or surviving such consolidation or merger (if
other than the Company), or to which such sale, lease, conveyance or other
disposition or assignment shall be made (collectively, the "Successor"), is a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia, and the Successor assumes by
supplemental indenture in a form satisfactory to the Trustee all of the
obligations of the Company, under this Indenture and the Securities;
(b) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and
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(c) the Company shall have delivered to the Trustee prior to the
consummation of the proposed transaction an Officers' Certificate and an Opinion
of Counsel, each stating that the proposed transaction and such supplemental
indenture comply with this Indenture.
Section 5.02 Successor Corporation Substituted.
Upon any consolidation or merger of the Company with or into any
Person, or any sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company or any assignment of the
obligations of the Company under this Indenture or the Securities in accordance
with Section 5.01, the Successor formed by such consolidation or into or with
which the Company is merged or to which such sale, lease, conveyance or other
disposition or assignment is made shall succeed to, and be substituted for, and
may exercise every right and power of, the Company, under this Indenture and the
Securities with the same effect as if such Successor had been named as the
Company herein and the predecessor Company in the case of a sale, lease,
conveyance or other disposition or assignment, shall be released from all
obligations under this Indenture and the Securities.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.01 Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and the Default continues for a
period of 30 days;
(2) the Company defaults in the payment of the principal of or
premium, if any, on any Security when the same becomes due and payable
at Stated Maturity, upon acceleration or otherwise;
(3) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities, or this Indenture and
such failure continues for the period and after the notice specified
in the last paragraph of this Section 6.01;
(4) any default shall occur which results in the acceleration of the
maturity of any Indebtedness of the Company or any Restricted
Subsidiary (other than the Securities) having an outstanding principal
amount of $5 million or more individually or, taken together with all
other such Indebtedness that has been so accelerated, in the
aggregate; or any default shall occur in the payment of any principal
or interest in respect of any Indebtedness of the Company or any
Restricted Subsidiary (other than the Securities) having an
outstanding
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principal amount of $5 million or more individually or, taken together
with all other such Indebtedness with respect to which any such
payment has not been made, in the aggregate and such default shall be
continuing for a period of 30 days without the Company or such
Restricted Subsidiary, as the case may be, effecting a cure of such
default;
(5) failure by the Company or any Restricted Subsidiary to pay final,
non-appealable judgments aggregating in excess of $10 million, which
judgments are not paid, discharged or stayed for a period of 60 days;
(6) the Company or any Restricted Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors; or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company or any Restricted Subsidiary as
debtor in an involuntary case,
(b) appoints a Custodian of the Company or any Restricted Subsidiary
or a Custodian for all or substantially all of the property of the Company or
any Restricted Subsidiary, or
(c) orders the liquidation of the Company or any Restricted
Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
The term "Custodian" means any receiver, trustee, assignee, liquidator
or similar official under any Bankruptcy Law.
A Default under clause (3) is not an Event of Default until the
Trustee notifies the Company or the Holders of at least 25% in principal amount
of the then outstanding Securities notify the Company, and the Trustee, of the
Default, and the Company does not cure the Default within 60 days after receipt
of the notice. The notice must specify the Default, demand that it be remedied
and state that the notice is a "Notice of Default."
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Section 6.02 Acceleration.
If an Event of Default (other than an Event of Default specified in
clauses (6) or (7) of Section 6.01) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of the
then outstanding Securities by notice to the Company and the Trustee, may
declare the principal of and premium, if any, and accrued and unpaid interest on
all then outstanding Securities to be due and payable immediately. Upon any
such declaration the amounts due and payable on the Securities, as determined in
accordance with the next succeeding paragraph, shall be due and payable
immediately. If an Event of Default specified in clause (6) or (7) of Section
6.01 occurs, such amounts shall ipso facto become and be immediately due and
payable without any declaration, notice or other act on the part of the Trustee
or any Holder. The Holders of a majority in principal amount of the then
outstanding Securities by written notice to the Trustee may rescind an
acceleration and its consequences (other than nonpayment of principal of, or
premium, if any, or interest on the Securities) if the rescission would not
conflict with any judgment or decree and if all existing Events of Default have
been cured or waived.
In the event that the maturity of the Securities is accelerated
pursuant to this Section 6.02, 100% of the principal amount thereof shall become
due and payable plus accrued interest to the date of payment.
Section 6.03 Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal of, or premium,
if any, or interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
Section 6.04 Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of a majority in
principal amount of the then outstanding Securities by notice to the Trustee may
waive an existing Default or Event of Default and its consequences (including
waivers obtained in connection with a tender offer or exchange offer for
Securities or a solicitation of consents in respect of Securities, provided that
in each case such offer or solicitation is made to all Holders of then
outstanding Securities on equal terms), except a continuing Default or Event of
Default in the payment of the principal of, or premium, if any, or interest on
any Security. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture;
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but no such waiver shall extend to any subsequent or other Default or impair any
right consequent thereon.
Section 6.05 Control by Majority.
The Holders of a majority in principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it hereunder. However, the Trustee may refuse to follow any
direction that conflicts with applicable law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of other Holders, or that may
involve the Trustee in personal liability.
Section 6.06 Limitations on Suits.
Subject to Section 6.07, a Holder may pursue a remedy with respect to
this Indenture or the Securities only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60 day period the Holders of a majority in principal
amount of the then outstanding Securities do not give the Trustee a
direction inconsistent with the request.
Another Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.
Section 6.07 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal of, and premium, if
any, and interest on the Security, on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of the Holder.
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Section 6.08 Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(1) or (2) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the amount of principal,
premium, if any, and interest remaining unpaid on the Securities, and interest
on overdue principal and premium, if any, and, to the extent lawful, interest on
overdue interest, and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09 Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents and to take such actions, including participating as a member, voting
or otherwise, of any committee of creditors, as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Holders allowed in any judicial proceedings relative to the
Company or its creditors or properties and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 out of the estate in any such proceeding, shall be
denied for any reason, payment of the same shall be secured by a Lien on, and
shall be paid out of, any and all distributions, dividends, money, securities
and other properties which the Holders of the Securities may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10 Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
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Second: to Holders for amounts due and unpaid on the Securities for
principal, premium, if any, and interest ratably, without preference or priority
of any kind, according to the amounts due and payable on the Securities for
principal, premium, if any, and interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Article.
Section 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the then outstanding Securities.
ARTICLE VII
TRUSTEE
Section 7.01 Duties of Trustee.
(1) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in such exercise, as
a prudent man would exercise or use under the circumstances in the conduct
of his own affairs.
(2) Except during the continuance of an Event of Default:
(a) the Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture. However, the
Trustee shall examine such certificates and opinions to determine whether or not
they appear to conform to the requirements of this Indenture.
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(3) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) this paragraph does not limit the effect of paragraph (2) of this
Section;
(b) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by
it pursuant to Section 6.05.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to
paragraphs (1), (2) and (3) of this Section.
(5) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee may refuse to
perform any duty or exercise any right or power unless it receives
indemnity satisfactory to it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money
held in trust by the Trustee need not be segregated from other funds
except to the extent required by law. All money received by the Trustee
shall, until applied as herein provided, be held in trust for the payment
of the principal of, and premium, if any, and interest on the Securities.
Section 7.02 Rights of Trustee.
(1) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee
may consult with counsel of its choice and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon.
(3) The Trustee may act through agents and attorneys and shall not be
responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
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(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
(6) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty, and the Trustee shall
not be answerable for other than its negligent action, negligent
omission or its willful misconduct.
(7) The Trustee shall not be charged with knowledge of any Event of
Default under Section 6.01 (other than an Event of Default under Section
6.01(a) or (b) if the Trustee is also the Paying Agent with respect to
the Securities) hereof or the existence of any Subsidiary of the Company
unless either (1) a Trust Officer of the Trustee shall have actual
knowledge thereof or (2) the Trustee shall have received notice thereof
in accordance with Section 10.02 hereof from the Company or a Holder.
Section 7.03 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, or any
of its Affiliates with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
Section 7.04 Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities or any money paid to the Company or upon
the Company's direction under any provision hereof, it shall not be responsible
for the use or application of any money received by any Paying Agent other than
the Trustee and it shall not be responsible for any statement or recital herein
or any statement in the Securities other than its certificate of authentication.
Section 7.05 Notice of Defaults.
If a Default or Event of Default occurs and is continuing and it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment of principal of, or premium, if any, or
interest on any Security, the Trustee may withhold the notice if and so long as
the board of directors, the executive committee or a trust committee of
directors and/or Trust Officers of the Trustee in good faith determines that
withholding the notice is in the interests of Holders.
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Section 7.06 Reports by Trustee to Holders.
Within 60 days after each January 31, beginning with January 31, 1998,
and in any event on or before April 1 in each year, the Trustee shall mail to
Holders a brief report dated as of such January 31 that complies with TIA (S)
313 (a); provided, however, that if no event described in TIA (S) 313 (a) has
occurred within the twelve months preceding the reporting date, no report need
be transmitted. The Trustee also shall comply with TIA (S) 313 (b). The
Trustee shall also transmit by mail all reports as required by TIA (S) 313 (c).
A copy of each report at the time of its mailing to Holders shall be filed
with the SEC and each securities exchange, if any, on which the Securities are
listed. The Company shall notify the Trustee when the Securities are listed on
any stock exchange.
Section 7.07 Compensation and Indemnity.
The Company agrees to pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company agrees to reimburse the Trustee upon
request for all reasonable disbursements, advances and expenses incurred or made
by it in accordance with any provision of this Indenture. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
Except as set forth in the next paragraph, the Company agrees to indemnify
the Trustee against any loss, liability or expense incurred by it arising out of
or in connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of defending itself against any
claim of liability in connection with the exercise or performance of any of its
duties hereunder. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The Company shall not be obligated to reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through negligence or bad
faith, as determined by a court of competent jurisdiction.
To secure the payment obligations of the Company in this Section, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal of and
premium, if any, and interest on particular Securities. Such Lien shall survive
the satisfaction and discharge of this Indenture.
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When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.08 Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign and be discharged from the trust hereby created
by so notifying the Company. The Holders of a majority in principal amount of
the then outstanding Securities may remove the Trustee by so notifying the
Trustee and the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the Trustee or
its property; or
(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Holders. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided for in Section 7.07.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
obligations of the Company under Section 7.07 shall continue for the benefit of
the retiring Trustee.
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Section 7.09 Successor Trustee by Merger, etc.
Subject to Section 7.10, if the Trustee consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall be
the successor Trustee; provided, however, that in the case of a transfer of all
or substantially all of its corporate trust business to another corporation, the
transferee corporation expressly assumes all of the Trustee's liabilities,
duties and responsibilities hereunder.
In case any Securities shall have been authenticated, but not delivered,
by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated, with the same effect as if such
successor Trustee had itself authenticated such Securities.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia and authorized under such
laws to exercise corporate trust powers, shall be subject to supervision or
examination by Federal or State (or the District of Columbia) authority and
shall have a combined capital and surplus of at least $50 million as set forth
in its most recent published report of condition.
The Indenture shall always have a Trustee who satisfies the requirements
of TIA (S)(S) 310(a) (1), 310 (a) (2) and 310 (a) (5). The Trustee is subject to
and shall comply with the provisions of TIA (S) 310 (b) during the period of
time required by this Indenture. Nothing in this Indenture shall prevent the
Trustee from filing with the SEC the application referred to in the penultimate
paragraph of TIA (S) 310(b).
Section 7.11 Preferential Collection of Claims Against Company.
The Trustee is subject to and shall comply with the provisions of TIA
(S) 311 (a), excluding any creditor relationship listed in TIA (S) 311(b). A
Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to
the extent indicated therein.
ARTICLE VIII
DISCHARGE OF INDENTURE
Section 8.01 Termination of Company's Obligations.
(1) This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.07 and the Trustee's and Paying
Agent's obligations under Section 8.03 shall survive), and the Trustee, on
demand and expense of the Company, shall
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execute proper instruments acknowledging the satisfaction and discharge of
this Indenture, when:
(a) either
(i) all outstanding Securities theretofore authenticated and
issued (other than destroyed, lost or stolen Securities that have been
replaced or paid) have been delivered to the Trustee for cancellation; or
(ii) all outstanding Securities not theretofore delivered to the
Trustee for cancellation:
(A) have become due and payable, or
(B) will become due and payable at their Stated Maturity
within one year, or
(C) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice
of redemption by the Trustee in the name, and at the expense, of
the Company,
and the Company, in the case of clause (A), (B) or (C) above, has
deposited or caused to be deposited with the Trustee as funds (immediately
available to the Holders in the case of clause (A)) in trust for the
purpose an amount which, together with earnings thereon, will be
sufficient to pay and discharge the entire indebtedness on such Securities
for principal, premium, if any, and interest to the date of such deposit
(in the case of Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(b) the Company has paid of caused to be paid all other sums payable by
it hereunder; and
(c) the Company has delivered to the Trustee an Officers' Certificate
stating that all conditions precedent to satisfaction and discharge of this
Indenture have been complied with, together with an Opinion of Counsel to the
same effect.
(2) The Company may terminate all of its obligations under this
Indenture, except as provided below, if:
(a) the Company irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations sufficient to pay principal of and interest on the
Securities to maturity, and to pay all other sums payable by it hereunder,
provided that the Trustee shall have been irrevocably instructed to apply such
money or the proceeds of such U.S. Government Obligations to the payment of said
principal and interest with respect to the Securities as the same shall become
due;
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(b) the Company delivers to the Trustee an Officers' Certificate
stating that all conditions precedent to satisfaction and discharge of this
Indenture have been complied with, and an Opinion of Counsel to the same effect;
(c) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; and
(d) the Company shall have delivered to the Trustee an Opinion of
Counsel from nationally recognized counsel acceptable to the Trustee or a tax
ruling to the effect that the Holders of the Securities will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this Section 8.01(2) and will be subject
to federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such option had not been exercised.
In such event, this Indenture shall cease to be of further effect
(except as provided in the next succeeding paragraph), and the Trustee, on
demand and expense of the Company, shall execute proper instruments
acknowledging confirmation of and discharge under this Indenture.
However, the Company's obligations in Sections 2.05, 2.06, 2.07, 2.08,
2.10, 2.11, 4.01, 7.07, 7.08 and 8.04, and the Company's, the Trustee's and
Paying Agent's obligations in Section 8.03 shall survive until the Securities
are no longer outstanding.
Thereafter, only the Company's obligations in Section 7.07 and the
Trustee's and Paying Agent's obligations in Section 8.03 shall survive.
After such irrevocable deposit made pursuant to this Section 8.01(2)
and satisfaction of the other conditions set forth herein, the Trustee upon
request and expense of the Company shall acknowledge in writing the discharge of
the Company's obligations under this Indenture except for those surviving
obligations specified above.
In order to have money available on a payment date to pay principal of
or interest on the Securities, the U.S. Government Obligations shall be payable
as to principal or interest on or before such payment date in such amounts as
will provide the necessary money. U.S. Government Obligations shall not be
callable at the issuer's option.
Section 8.02 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and premium, if
any, and interest on the Securities.
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Section 8.03 Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company
upon written request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal, premium, if any, or
interest that remains unclaimed for two years after the date upon which such
payment shall have become due; provided, however, that the Company shall have
either caused notice of such payment to be mailed to each Holder entitled
thereto no less than 30 days prior to such repayment or within such period shall
have published such notice in a financial newspaper of widespread circulation
published in The City of New York. After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Trustee and the Paying Agent with respect to such money shall
cease.
Section 8.04 Reinstatement.
If the Trustee or the Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 8.01 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the obligations of the Company under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 until such time as the Trustee or the Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01; provided, however, that if the Company has made any payment
of principal of or premium, if any, or interest on any Securities because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money or U.S.
Government Obligations held by the Trustee or the Paying Agent.
ARTICLE IX
AMENDMENTS
Section 9.01 Without Consent of Holders.
The Company, and the Trustee may amend this Indenture or the Securities
or waive any provision hereof or thereof without the consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Section 5.01;
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(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(4) to comply with any requirement in order to effect or maintain the
qualification of this Indenture under the TIA; or
(5) to make any change that does not adversely affect the rights
hereunder of any Holder in any material respect.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors (certified by the Secretary or an Assistant Secretary of the
Company) authorizing the execution of any such supplemental indenture, and upon
receipt by the Trustee of the documents described in Section 9.06, the Trustee
shall join with the Company in the execution of any supplemental indenture
authorized or permitted by the terms of this Indenture and make any further
appropriate agreements and stipulations that may be therein contained. After an
amendment or waiver under this Section becomes effective, the Company shall mail
to the Holders of each Security affected thereby a notice briefly describing the
amendment or waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture.
Section 9.02 With Consent of Holders.
Except as provided below in this Section 9.02, the Company, and the
Trustee may amend this Indenture or the Securities with the written consent
(including consents obtained in connection with a tender offer or exchange offer
for Securities or a solicitation of consents in respect of Securities, provided
that in each case such offer or solicitation is made to all Holders of then
outstanding Securities on equal terms) of the Holders of at least a majority in
principal amount of the then outstanding Securities.
Upon the request of the Company accompanied by a resolution of the
Board of Directors (certified by the Secretary or an Assistant Secretary of the
Company) authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of the Holders as
aforesaid, and upon receipt by the Trustee of the documents described in Section
9.06, the Trustee shall join with the Company in the execution of such
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if such consent approves the substance thereof.
The Holders of a majority in principal amount of the then outstanding
Securities may waive compliance in a particular instance by the Company with any
provision of this Indenture or the Securities (including waivers obtained in
connection with a tender offer or exchange offer for Securities or a
solicitation of consents in respect of Securities, provided that in each case
such offer
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or solicitation is made to all Holders of then outstanding Securities on equal
terms). However, without the consent of each Holder affected, an amendment or
waiver under this Section may not:
(1) reduce the percentage in principal amount of outstanding
Securities whose Holders must consent to an amendment, supplement or
waiver;
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any Security;
(3) reduce the principal of or change the fixed maturity of any
Security or alter the premium or other provisions with respect to
redemption under Section 3.07 or specified in the Securities;
(4) make any Security payable in money other than that stated in the
Security;
(5) impair the right to institute suit for the enforcement of any
payment of principal of, or premium, if any, or interest on any
Security pursuant to Sections 6.06 and 6.07, except as limited by
Section 6.06;
(6) make any change in the percentage of principal amount of
Securities necessary to waive compliance with certain provisions of
this Indenture pursuant to Section 6.04 or 6.07 or this sentence of
this Section 9.02; or
(7) waive a continuing Default or Event of Default in the payment of
principal of, or premium, if any, or interest on the Securities.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of record
of any Securities with respect to which such consent is required or sought as of
a date identified by the Trustee in a notice furnished to Holders in accordance
with the terms of this Indenture.
Section 9.03 Compliance with Trust Indenture Act .
Every amendment to this Indenture or the Securities shall comply in
form and substance with the TIA as then in effect.
Section 9.04 Revocation and Effect of Consents .
Until an amendment (which includes any supplement) or waiver becomes
effective, a consent to it by a Holder of a Security is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's
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Security, even if notation of the consent is not made on any Security. However,
any such Holder or subsequent Holder may revoke the consent as to his or her
Security or portion of a Security if the Trustee receives written notice of
revocation before the date the amendment or waiver becomes effective. An
amendment or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment or
waiver. If the Company elects to fix a record date for such purpose, the record
date shall be fixed at (i) the later of 30 days prior to the first solicitation
of such consent or the date of the most recent list of Holders furnished to the
Trustee prior to such solicitation pursuant to Section 2.13, or (ii) such other
date as the Company shall designate. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to consent to such amendment or waiver
or to revoke any consent previously given, whether or not such Persons continue
to be Holders after such record date. No consent shall be valid or effective
for more than 90 days after such record date unless consents from Holders of the
principal amount of Securities required hereunder for such amendment or waiver
to be effective shall have also been given and not revoked within such 90-day
period.
After an amendment or waiver becomes effective, it shall bind every
Holder, unless it is of the type described in any of clauses (1) through (7) of
Section 9.02. In such case, the amendment or waiver shall bind each Holder of a
Security who has consented to it and every subsequent Holder of a Security that
evidences the same debt as the consenting Holder's Security.
Section 9.05 Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an amendment or
waiver on any Security thereafter authenticated. The Company in exchange for
all Securities may issue and the Trustee shall authenticate new Securities that
reflect the amendment or waiver.
Section 9.06 Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article if the amendment does not adversely affect
the rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive
and, subject to Section 7.01, shall be fully protected in relying upon, an
Officers' Certificate and Opinion of Counsel as conclusive evidence that such
amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms.
44
<PAGE>
ARTICLE X
MISCELLANEOUS
Section 10.01 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c) the imposed duties shall control.
Section 10.02 Notices.
Any notice or communication by the Company, or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by
registered or certified mail (return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
Barrett Resources Corporation
1515 Arapahoe Street, Tower 3, Suite 1000
Denver, CO 80202
Attention: General Counsel
If to the Trustee:
Bankers Trust Company
Corporate Trust and Agency Group
4 Albany Street
New York, New York 10006
Attention: Corporate Market Services
The Company, or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail, postage prepaid, to the Holder's address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.
45
<PAGE>
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 10.03 Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA (S) 312(c).
Section 10.04 Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 10.05) stating that, in the opinion of the signers,
all conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 10.05) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been complied with.
Section 10.05 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with.
46
<PAGE>
Section 10.06 Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or the Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 10.07 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized or
obligated by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
Section 10.08 No Recourse Against Others.
A director, officer, employee or stockholder of the Company, as such,
shall not have any liability for any obligations of the Company under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder by accepting a
Security waives and releases all such liability.
Section 10.09 Governing Law.
This Indenture and the Securities shall be governed by and construed
in accordance with the laws of the State of New York, without regard to
principles of conflicts of law.
Section 10.10 No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company, or any Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
Section 10.11 Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its Successor. All agreements of the Trustee in this Indenture shall
bind its successor.
Section 10.12 Severability.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
47
<PAGE>
Section 10.13 Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 10.14 Trustee as Paying Agent and Registrar.
The Company initially appoints the Trustee as Paying Agent and
Registrar.
Section 10.15 Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
BARRETT RESOURCES CORPORATION
By: ____________________________
Title: Vice President - Finance
BANKERS TRUST COMPANY, as Trustee
By: ____________________________
Title: Vice President
49
<PAGE>
EXHIBIT A
[FACE OF SECURITY]
BARRETT RESOURCES CORPORATION
____% SENIOR NOTE DUE 2007
[IF THE SECURITY IS TO BE A GLOBAL SECURITY, INSERT THE FOLLOWING - - THIS
SECURITY IS A BOOK-ENTRY SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO
A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY
OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN SUCH LIMITED
CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.]
CUSIP
No. $____________
Barrett Resources Corporation, a Delaware corporation (the "Company"), for value
received promises to pay to or registered assigns, the
principal sum of Dollars on January 15, 2007.
Interest Payment Dates: January 15 and July 15
Record Dates: __________ and __________
Reference is hereby made to the further provisions of this Security set forth on
the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.
Dated:
[SEAL] BARRETT RESOURCES CORPORATION
By:__________________________
By:__________________________
Certificate of Authentication:
Bankers Trust Company
as Trustee, certifies that this is one of
the Securities referred to in the
within-mentioned Indenture.
By:__________________________
Authorized Signature
<PAGE>
[REVERSE OF SECURITY]
BARRETT RESOURCES CORPORATION
____% SENIOR NOTE DUE 2007
1. Interest. Barrett Resources Corporation, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
___% per annum from _________, 1997 until maturity. The Company will pay
interest semiannually on January 15 and July 15 of each year (each an "Interest
Payment Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Securities will accrue from the most recent
Interest Payment Date on which interest has been paid or, if no interest has
been paid, from _________, 1997; provided, that if there is no existing Default
in the payment of interest, and if this Security is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be July 15,
1997. The Company shall pay interest on overdue principal and premium, if any,
from time to time on demand at a rate equal to the interest rate then in effect;
it shall pay interest on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Securities
(except defaulted interest) to the Persons who are registered Holders of
Securities at the close of business on the record date next preceding the
Interest Payment Date, even if such Securities are canceled after such record
date and on or before such Interest Payment Date. The Holder must surrender this
Security to a Paying Agent to collect principal payments. The Company will pay
the principal of, premium, if any, and interest on the Securities in money of
the United States of America that at the time of payment is legal tender for
payment of public and private debts. The Company, however, may pay such amounts
by check payable in such money. It may mail an interest check to a Holder's
registered address.
3. Ranking. The Securities will be senior unsecured obligations of the
Company.
4. Paying Agent and Registrar. Initially, Bankers Trust Company, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-registrar without notice to any
Holder. The Company may act in any such capacity.
5. Indenture. The Company issued the Securities under an Indenture dated as
of _________, 1997 (the "Indenture") between the Company, and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb) as in effect on the date of execution
of the Indenture. The Securities are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. The
Securities are unsecured general obligations of the Company limited to
$150,000,000 in aggregate principal amount.
<PAGE>
6. Optional Redemption. The Securities may be redeemed at any time, at the
option of the Company, in whole or from time to time in part, at a price equal
to 100% of their principal amount plus accrued and unpaid interest, if any, to
the Redemption Date plus the Make-Whole Premium, if any (the "Redemption
Price"). The amount of the Make-Whole Premium with respect to any Security (or
portion thereof) to be redeemed will be equal to the excess, if any, of:
(i) the sum of the present values, calculated as of the Redemption
Date, of:
(A) each interest payment that, but for such redemption, would
have been payable on the Security (or portion thereof) being redeemed on
each Interest Payment Date occurring after the Redemption Date (excluding
any accrued interest for the period prior to the Redemption Date); and
(B) the principal amount that, but for such redemption, would
have been payable at the final maturity of the Security (or portion
thereof) being redeemed;
over
(ii) the principal amount of the Security (or portion thereof) being
redeemed.
The present values of interest and principal payments referred to in clause (a)
above will be determined in accordance with generally accepted principles of
financial analysis. Such present values will be calculated by discounting the
amount of each payment of interest or principal from the date that each such
payment would have been payable, but for the redemption, to the Redemption Date
at a discount rate equal to the Treasury Yield plus ____ basis points. The
Make-Whole Premium shall be calculated by an Independent Investment Banker (as
defined in the Indenture).
For purposes of determining the Make-Whole Premium, "Treasury Yield" means
a rate of interest per annum equal to the weekly average yield to maturity of
United States Treasury Notes that have a constant maturity that corresponds to
the remaining term to maturity of the Securities, calculated to the nearest
1/12th of a year (the "Remaining Term"). The Treasury Yield will be determined
as of the third Business Day immediately preceding the applicable Redemption
Date. The weekly average yields of United States Treasury Notes will be
determined by reference to the most recent statistical release published by the
Federal Reserve Bank of New York and designated "H.15 (519) Selected Interest
Rates" or any successor release (the "H. I 5 Statistical Release"). If the H.15
Statistical Release sets forth a weekly average yield for United States Treasury
Notes having a constant maturity that is the same as the Remaining Term, then
the Treasury Yield will be equal to such weekly average yield. In all other
cases, the Treasury Yield will be calculated by interpolation, on a straight-
line basis, between the weekly average yields on the United States Treasury
Notes that have a constant maturity closest to and greater than the Remaining
Term and the United States Treasury Notes that have a constant maturity closest
to and less than the Remaining Term (in each case as set forth in the H.15
Statistical Release). Any weekly average yields so calculated by interpolation
will be rounded to the nearest 1/100th of 1%, with any figure of 1/200% or
<PAGE>
above being rounded upward. If weekly average yields for United States Treasury
Notes are not available in the H.15 Statistical Release or otherwise, then the
Treasury Yield will be calculated by interpolation of comparable rates selected
by the Independent Investment Banker.
Periodic interest installments with respect to which the Interest Payment
Date is on or prior to any Redemption Date will be payable to the Holders of
record at the close of business on the relevant record dates referred to herein,
all as provided in the Indenture.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Securities to be redeemed at
his registered address. Securities in denominations larger than $ 1,000 may be
redeemed in part but only in whole multiples of $1,000. On and after the
Redemption Date interest will cease to accrue on Securities or on the portions
thereof called for redemption, as the case may be.
7. Denominations, Transfer, Exchange. The Securities originally issued are
in the form of a permanent global security. Under certain circumstances
described in the Indenture, the Securities may also be issued in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Securities may be registered and Securities may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not exchange or register the transfer of any Security or portion
of a Security selected for redemption. Also, it need not exchange or register
the transfer of any Securities for a period of 15 days before a selection of
Securities to be redeemed.
8. Persons Deemed Owners. The registered Holder of a Security shall be
treated as its owner for all purposes.
9. Amendments and Waivers. Subject to certain exceptions and limitations,
the Indenture or the Securities may be amended or supplemented with the consent
of the Holders of at least a majority in principal amount of the then
outstanding Securities, and any existing Default under, or compliance with any
provision of, the Indenture may be waived (other than any continuing Default or
Event of Default in the payment of the principal of or premium, if any, or
interest on the Securities) by the Holders of at least a majority in principal
amount of the Securities then outstanding in accordance with the terms of the
Indenture. Without the consent of any Holder, the Company, and the Trustee may
amend or supplement the Indenture or the Securities to cure any ambiguity,
omission, defect or inconsistency; to provide for uncertificated Securities in
addition to or in place of certificated Securities; to provide for the
assumption of the obligations of the Company under the Indenture to Holders in
the case of the merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company ; to make any change that does
not materially adversely affect the rights of any Holder; or to comply with the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
<PAGE>
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Indenture (and the obligation of the Company to
obtain any such consent otherwise required from such Holder) may be subject to
the requirement that such Holder shall have been the Holder of record of any
Securities with respect to which such consent is required or sought as of a date
identified by the Trustee in a notice furnished to Holders in accordance with
the terms of the Indenture.
Without the consent of each Holder affected, the Company may not (i) reduce
the amount of Securities whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the rate of or change the time for payment of interest,
including default interest, on any Security, (iii) reduce the principal of or
change the fixed maturity of any Security or alter the premium or other
provisions with respect to redemption, (iv) make any Security payable in money
other than that stated in the Security, (v) impair the right to institute suit
for the enforcement of any payment of principal of, or premium, if any, or
interest on, any Security (except as provided in the Indenture), (vi) make any
change in the percentage of principal amount of Securities necessary to waive
compliance with certain provisions of the Indenture or (vii) waive a continuing
Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Securities.
10. Defaults and Remedies. Events of Default include: default in payment of
interest on the Securities for 30 days; default in payment of principal of or
premium, if any, on the Securities; failure by the Company for 60 days after
written notice by the Trustee or by the Holders of at least 25% of the aggregate
principal amount of the Securities then outstanding to it to comply with any of
its other covenants or agreements in the Indenture or the Securities; the
acceleration of the maturity of any Indebtedness of the Company or any
Restricted Subsidiary (other than the Securities) that has an outstanding
principal amount of $5 million or more individually or in the aggregate; a
default in the payment of principal or interest in respect of any Indebtedness
of the Company or any Restricted Subsidiary (other than the Securities) having
an outstanding principal amount of $5 million or more individually or in the
aggregate, and such default shall be continuing for a period of 30 days without
the Company or such Restricted Subsidiary, as the case may be, effecting a cure
of such default; failure by the Company or any Restricted Subsidiary to pay
final, non-appealable judgements aggregating in excess of $10 million, which
judgements are not paid, discharged or stayed for a period of 60 days; or
certain events involving bankruptcy, insolvency or reorganization of the Company
or any Restricted Subsidiary. If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in principal amount of the then
outstanding Securities may declare the principal of, and premium, if any, and
interest on all the Securities to be immediately due and payable, except that in
the case of an Event of Default arising from certain events of bankruptcy,
insolvency or reorganization of the Company or any Restricted Subsidiary, all
outstanding Securities become due and payable immediately without further action
or notice. The amount due and payable upon the acceleration of any Security is
equal to 100% of the principal amount thereof plus accrued interest to the date
of payment. Holders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Securities may direct the Trustee in its exercise of any trust or power.
<PAGE>
The Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests. The Company must furnish an annual compliance
certificate to the Trustee.
11. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not Trustee.
12. No Recourse against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
13. Authentication. This Security shall not be valid until authenticated by
the manual signature of the Trustee.
14. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (=joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Request may be made to:
Barrett Resources Corporation
1515 Arapahoe Street, Tower 3, Suite 1000
Denver, CO 80202
Attention: General Counsel
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and transfer
this Security to
________________________________________________________________________________
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
as agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
________________________________________________________________________________
Date: Your Signature:
(Sign exactly as your name appears on the face of this Security)
________________________________________________________________________________
Signature Guarantee:
(Participant in a Recognized Signature or Medallion Program)
<PAGE>
Exhibit 5.1
[LETTERHEAD OF VINSON & ELKINS L.L.P. APPEARS HERE]
January 29, 1997
Barrett Resources Corporation
1515 Arapahoe Street
Tower 3, Suite 1000
Denver, Colorado 80202
Ladies and Gentlemen:
As set forth in the Registration Statement on Form S-3, Registration No.
333-19363 ("Registration Statement"), filed by Barrett Resources Corporation, a
Delaware corporation (the "Company"), under the Securities Act of 1933, as
amended (the "Act"), relating to $150,000,000 aggregate principal amount of ___%
Senior Notes due 2007 of the Company (the "Notes"), certain legal matters in
connection with the Notes are being passed upon for you by us. The Notes are to
be issued under an indenture (the "Indenture") between the Company and Bankers
Trust Company, as trustee (the "Trustee"). At your request, this opinion is
being furnished to you for filing as Exhibit 5.1 to the Registration Statement.
We have acted as counsel for the Company in connection with the
registration and sale of the Notes. In such capacity, we have examined the
Company's Restated Certificate of Incorporation and Bylaws, each as amended to
date, and have examined the originals, or copies certified or otherwise
identified, of corporate records of the Company, certificates of public
officials and of representatives of the Company, statutes and other records,
instruments and documents as a basis for the opinions hereinafter expressed.
Based upon our examination as aforesaid, and subject to the assumptions,
qualifications, limitations and exceptions set forth herein, we are of the
opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware.
2. When the Indenture has been duly executed and delivered by the
officers authorized by the Board of Directors of the Company or a duly
authorized committee thereof to execute and deliver the same, it will constitute
a legal, valid and binding instrument of the Company, enforceable against the
Company in accordance with its terms.
3. When (i) the Board of Directors of the Company or a duly
authorized committee thereof shall have fixed the terms thereof, (ii) the
Company's officers shall have duly executed
<PAGE>
Barrett Resources Corporation
January 29, 1997
Page 2
the Notes (manually or in facsimile) pursuant to such authorization,
(iii) the Notes shall have been duly authenticated by the Trustee under
the Indenture and sold pursuant to such authorization, and (iv) payment
of the agreed consideration for the Notes shall have been received by
the Company, the Notes will constitute legal, valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms.
The opinions as to enforceability of obligations set forth in paragraphs
2 and 3 above are each subject to the effect of such enforceability of (i)
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting creditors' rights and (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters." By giving such consent, we do not admit that we are within the
category of persons whose consent is required under Section 7 of the Securities
Act or the rules and regulations of the Commission issued thereunder.
Very truly yours,
/S/ Vinson & Elkins L.L.P.
VINSON & ELKINS L.L.P.
<PAGE>
Exhibit 23.1
CONSENT OF ARTHUR ANDERSEN LLP
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made of part of this
Registration Statement.
/s/ ARTHUR ANDERSEN & CO.
Denver, Colorado
January 29, 1997
<PAGE>
Exhibit 23.3
CONSENT OF RYDER SCOTT COMPANY
We hereby consent to the references to Ryder Scott Company Petroleum
Engineers as experts in the field of petroleum engineering in the Registration
Statement (Form S-3) and related prospectus of Barrett Resources Corporation
dated January 29, 1997 and to all references to our Firm included in this
Registration Statement
Very truly yours,
/s/ RYDER SCOTT COMPANY PETROLEUM ENGINEERS
-------------------------------------------
RYDER SCOTT COMPANY
PETROLEUM ENGINEERS
Dated: January 29, 1997
Denver, Colorado
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT PETROLEUM ENGINEERS AND GEOLOGISTS
We hereby consent to the references to Netherland, Sewell & Associates, Inc.
as experts in the field of petroleum engineering in the Registration Statement
(Form S-3) and related prospectus of Barrett Resources Corporation dated January
29, 1997 and to all references to our Firm included in this Registration
Statement.
Netherland, Sewell & Associates, Inc.
By: /s/ Frederic D. Sewell
------------------------
Frederic D. Sewell
President
Dallas, Texas
January 29, 1997
