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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee Required]
For the transition period from to
Commission File Number: 0-4597
FOREST OIL CORPORATION
(Exact name of registrant as specified in its charter)
State of incorporation: New York I.R.S. Employer Identification No. 25-0484900
1500 Colorado National Building
950 - 17th Street
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-592-2400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
-------------------
Common Stock, Par Value $.10 Per Share
Warrants to purchase shares of Common Stock
$.75 Convertible Preferred Stock, Par Value $.01 Per Share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by persons other than
officers and directors of the registrant was approximately $60,298,023 as of
March 31, 1995 (based on the last sale price of such stock as quoted on the
National Market System of NASDAQ System).
There were 28,250,647 shares of the registrant's Common Stock, Par Value
$.10 Per Share outstanding as of March 31, 1995.
Document incorporated by reference: Proxy Statement of Forest Oil
Corporation relative to the Annual Meeting of Shareholders, which is
incorporated into Part III of this Form 10-K.
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TABLE OF CONTENTS
Page No
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PART I
Item 1. Business 1
Item 2. Properties 7
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of
Security Holders 13
Item 4A. Executive Officers of Forest 13
Item 4B. Directors of Forest 15
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 16
Item 6. Selected Financial and Operating Data 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 21
Item 8. Financial Statements and Supplementary Data 35
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures 35
PART III
Item 10. Directors and Executive Officers of the Registrant 65
Item 11. Executive Compensation 65
Item 12. Security Ownership of Certain Beneficial
Owners and Management 65
Item 13. Certain Relationships and Related Transactions 65
Part IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 65
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PART I
ITEM 1. BUSINESS
THE COMPANY
Forest Oil Corporation and its subsidiaries (Forest or the Company) are engaged
in the acquisition and exploitation of, exploration for and development and
production of oil and natural gas. The Company was incorporated in New York in
1924, the successor to a company formed in 1916, and has been a publicly held
company since 1969. The Company is active in several of the major exploration
and producing areas in and offshore the United States. Forest's principal
reserves and producing properties are located in the Gulf of Mexico and in
Texas, Oklahoma and Wyoming.
The Company operates from production offices located in Lafayette, Louisiana and
Denver, Colorado. Its corporate offices are located in Denver, Colorado. On
December 31, 1994, Forest had 200 employees, of whom 143 were salaried and 57
were hourly. On March 31, 1995, primarily as a result of a reduction in force,
Forest had 175 employees, of whom 117 were salaried and 58 were hourly.
OPERATING STRATEGY
In 1991, Forest adopted its current operating strategy which is focused
primarily on acquiring domestic reserves that have significant exploitation
potential, increasing production from existing fields through the application of
the Company's technical and operating expertise and participating in exploration
through farmout arrangements. The Company believes that it has competitive
advantages with respect to acquiring and exploiting properties because of its
technical and operating expertise, its seismic data base and its ability to
operate both onshore and offshore. The Company seeks to acquire interests in
properties in which it would have a significant working interest and which it
can operate. Since 1991, pursuant to its operating strategy, the Company has
acquired estimated proved reserves of approximately 189 BCF of natural gas and 8
million barrels of oil and condensate at an average property acquisition cost of
$1.08 per MCFE. (An MCF is one thousand cubic feet of natural gas. MMCF is
used to designate one million cubic feet of natural gas and BCF refers to one
billion cubic feet of natural gas. MCFE means thousands of cubic feet of
natural gas equivalents, using a conversion ratio of one barrel of oil to 6 MCF
of natural gas. With respect to oil, the term BBL means one barrel of oil
whereas MBBLS is used to designate one thousand barrels of oil.)
During 1994, the Company's activities were directed primarily toward
development, exploitation and exploration of properties that were acquired in
the latter part of 1993. Acquisitions of proved reserves in 1994 totaled 8.2
BCF of natural gas and 17,000 barrels of oil, a significant decrease compared to
the two preceding years. The Company has not changed its strategy with respect
to acquisitions, and intends to continue to pursue its strategy of acquiring
additional reserves which satisfy its investment criteria and capital
constraints. Forest continues to evaluate potential acquisitions, as well as
various types of business combinations and joint ventures.
The Company's operating strategy also includes exploitation activities in the
areas of reservoir management and development drilling. Reservoir management
involves the effort to enhance value by a combination of reduced costs and the
use of such techniques as workovers to increase hydrocarbon recovery. The
Company engages in development drilling for additional reserves that offset
existing production with the objective of either increasing the density in which
wells are drilled or extending reservoirs. The Company believes that it can
increase production from, and otherwise enhance the value of, existing fields by
utilizing its technical expertise to undertake selective workovers,
recompletions and development drilling. Such projects undertaken in 1994
resulted in net daily production increases of approximately 12,263 MCF and 220
barrels of oil and condensate, based upon capacity increases immediately after
stabilization of production. Such results are not necessarily indicative of
anticipated future results of the Company's workover and development projects.
The Company participates in exploration activities through selective drilling
for its own account, as well as through farmout arrangements. During 1994 the
Company undertook exploratory projects for its own account
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which resulted in net daily production increases of approximately 12,920 MCF and
439 barrels of oil and condensate, based upon capacity increases immediately
after stabilization of production. Such results are not necessarily indicative
of anticipated future results of the Company's exploration projects.
Farmouts enable Forest to participate in its exploration prospects without
incurring additional exploration costs, although with a reduced ownership in
each prospect. During 1994, the Company entered into farmout agreements
covering 15 prospects. For further information concerning the Company's farmout
activity, see Item 2. Properties.
As a part of its operating strategy, the Company also conducts an ongoing
disposition program of its non-strategic assets. Assets with little value or
which are not consistent with the Company's ongoing operating strategy are
identified for sale or trade. During 1994, the Company disposed of properties
with estimated proved reserves of approximately 4.3 BCF of natural gas and
170,000 barrels of oil for total net proceeds of $8,317,000.
The Company intends to pursue its acquisition and exploitation strategy while
continuing its efforts to improve its balance sheet and liquidity, reduce the
commodity price risk exposure of its investments in oil and gas properties,
reduce overhead on a per-unit basis of production and increase operating
efficiencies. For further information concerning the Company's acquisitions and
operations, see Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Consolidated Financial Statements
and Notes thereto.
SALES AND MARKETS
Forest's production is generally sold at the wellhead to oil and natural gas
purchasing companies in the areas where it is produced. Crude oil and
condensate are typically sold at prices which are based upon posted field
prices. For the month of March 1995, approximately 68% of the Company's natural
gas was committed to both interstate and intrastate natural gas pipeline
companies, primarily under volumetric production payment agreements and long-
term contracts. The remainder of the Company's natural gas was sold at the
wellhead at spot market prices. The term "spot market" as used herein refers to
contracts with a term of six months or less or contracts which call for a
redetermination of sales prices every six months or earlier.
For much of the past decade, the markets for oil and natural gas have been
volatile. The Company anticipates that such markets will continue to be
volatile over the next year. Price fluctuations in the natural gas spot market
have a significant impact on the Company's business because most of the
Company's reserves are attributable to natural gas, most of its current
production consists of natural gas and a large portion of its natural gas
production is sold in the spot market. At December 31, 1994, approximately 85%
of Forest's estimated proved reserves, including volumes attributable to
volumetric production payments, consisted of natural gas on an MCFE basis.
During 1994, 84% of the Company's total production on the same basis consisted
of natural gas. Approximately 65% of such 1994 natural gas production was sold
in the spot market.
In order to attempt to minimize the product price volatility to which the
Company is subject, the Company, from time to time, enters into energy swap
agreements and other financial arrangements with third parties to attempt to
reduce the Company's exposure to anticipated fluctuations in future oil and
natural gas prices. The volumetric production payments that the Company has
entered into further minimize the price volatility to which the Company is
subject. For further information concerning market conditions, production
payments and energy swap agreements, see Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations and Notes 4, 5 and 13
of Notes to Consolidated Financial Statements.
Demand for natural gas is highly seasonal, with demand generally higher in the
colder winter months and in hot summer months. As a result, the price received
for spot market natural gas may vary significantly between seasonal periods. To
date, the Company generally has been able to sell all of its available spot
market natural gas at prevailing spot market prices; thus, the volumes sold by
the Company have not fluctuated materially with seasonality. There is no
assurance, however, that the Company will be able to continue to achieve this
result.
The Company believes that the loss of one or more of its current natural gas
spot purchasers should not have a material adverse effect on the Company's
business because any individual spot purchaser could be readily replaced by
another spot purchaser who would pay approximately the same sales price.
Substantially all of Forest's oil is
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sold under short-term contracts at prices which are based upon posted field
prices. For information concerning sales to major customers, see Note 14 of
Notes to Consolidated Financial Statements.
COMPETITION
The oil and natural gas industry is intensely competitive. Competition is
particularly intense in the acquisition of prospective oil and natural gas
properties and oil and gas reserves. Forest's competitive position depends on
its geological, geophysical and engineering expertise, on its financial
resources, its ability to develop its properties and its ability to select,
acquire and develop proved reserves. Forest competes with a substantial number
of other companies having larger technical staffs and greater financial and
operational resources. Many such companies not only engage in the acquisition,
exploration, development and production of oil and natural gas reserves, but
also carry on refining operations, generate electricity and market refined
products. The Company also competes with major and independent oil and gas
companies in the marketing and sale of oil and gas to transporters, distributers
and end users. There is also competition between the oil and natural gas
industry and other industries supplying energy and fuel to industrial,
commercial and individual consumers. Forest also competes with other oil and
natural gas companies in attempting to secure drilling rigs and other equipment
necessary for drilling and completion of wells. Such equipment may be in short
supply from time to time, although there is no current shortage of such
equipment. Finally, companies not previously investing in oil and natural gas
may choose to acquire reserves to establish a firm supply or simply as an
investment. Such companies will also provide competition for Forest.
Forest's business is affected not only by such competition, but also by general
economic developments, governmental regulations and other factors that affect
its ability to market its oil and natural gas production. The prices of oil and
natural gas realized by Forest are both highly volatile and generally dependent
on world supply and demand. Declines in crude oil prices or natural gas prices
adversely impact Forest's activities. The Company's financial position and
resources may also adversely affect the Company's competitive position. Lack of
available funds or financing alternatives will prevent the Company from
executing its operating strategy and from deriving the expected benefits
therefrom. For further information concerning the Company's financial position,
see Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
REGULATION
Various aspects of the Company's oil and natural gas operations are regulated by
administrative agencies under statutory provisions of the states where such
operations are conducted and by certain agencies of the Federal government for
operations on Federal leases. The Federal Energy Regulatory Commission (FERC)
regulates the transportation and sale for resale of natural gas in interstate
commerce pursuant to the Natural Gas Act of 1938 (NGA) and the Natural Gas
Policy Act of 1978 (NGPA). In the past, the Federal government has regulated
the prices at which oil and gas could be sold. While sales by producers of
natural gas, and all sales of crude oil, condensate and natural gas liquids can
currently be made at uncontrolled market prices, Congress could reenact price
controls in the future. Deregulation of wellhead sales in the natural gas
industry began with the enactment of the NGPA in 1978. In 1989, Congress
enacted the Natural Gas Wellhead Decontrol Act (the Decontrol Act). The
Decontrol Act removed all NGA and NGPA price and nonprice controls affecting
wellhead sales of natural gas effective January 1, 1993.
Commencing in April 1992, the FERC issued Order Nos. 636, 636-A, and 636-B
(Order No. 636), which require interstate pipelines to provide transportation
separate, or "unbundled", from the pipelines' sales of gas. Also, Order No. 636
requires pipelines to provide open-access transportation on a basis that is
equal for all gas supplies. Although Order No. 636 does not directly regulate
the Company's activities, the FERC has stated that it intends for Order No. 636
to foster increased competition within all phases of the natural gas industry.
It is unclear what impact, if any, increased competition within the natural gas
industry under Order No. 636 will have on the Company's activities. Although
Order No. 636, assuming it is upheld in its entirety, could provide the Company
with additional market access and more fairly applied transportation service
rates, Order No. 636 could also subject the Company to more restrictive pipeline
imbalance tolerances and greater penalties for violation of those tolerances.
3
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As of early 1995, the FERC had issued final orders accepting most pipelines'
Order No. 636 compliance filings, and had commenced a series of one year reviews
of individual pipeline implementations of Order No. 636. Numerous parties have
filed petitions for review of Order No. 636, as well as orders in individual
pipeline restructuring proceedings. Upon such judicial review, these orders may
be remanded or reversed in whole or in part. With Order No. 636 subject to
court review, and pending ongoing FERC reviews of individual pipeline
restructurings, it is difficult to predict with precision its ultimate effects.
The FERC has recently announced its intention to re-examine certain of its
transportation-related policies, including the appropriate manner in which
interstate pipelines release transportation capacity under Order No. 636, and
the use of market-based rates for interstate gas transmission. While any
resulting FERC action would affect the Company only indirectly, these inquiries
are intended to further enhance competition in natural gas markets.
Commencing in October 1993, the FERC issued a series of rules (Order Nos. 561
and 561-A) establishing an indexing system under which oil pipelines will be
able to change their transportation rates, subject to prescribed ceiling levels.
The indexing system, which allows pipelines to make rate changes to track
changes in the Producer Price Index for Finished Goods, minus one percent,
became effective January 1, 1995. The FERC's decision in this matter is
currently the subject of various petitions for judicial review. The Company is
not able at this time to predict the effects of Order Nos. 561 and 561-A, if
any, on the transportation costs associated with oil production from the
Company's oil producing operations.
The Outer Continental Shelf Lands Act (OCSLA) requires that all pipelines
operating on or across the Outer Continental Shelf (the OCS) provide open-
access, non-discriminatory service. Although the FERC has opted not to impose
the regulations of Order No. 509, in which the FERC implemented the OCSLA, on
gatherers and other non-jurisdictional entities, the FERC has retained the
authority to exercise jurisdiction over those entities if necessary to permit
non-discriminatory access to service on the OCS. If the FERC were to apply
Order No. 509 to gatherers in the OCS, eliminate the exemption of gathering
lines, and redefine its jurisdiction over gathering lines, then these acts could
result in a reduction of available pipeline capacity for existing shippers in
the Gulf of Mexico, such as the Company.
In December 1992, the FERC issued Order No. 547, governing the issuance of
blanket marketer sales certificates to all natural gas sellers other than
interstate pipelines. The order eliminates the need for natural gas producers
and marketers to seek specific authorization under Section 7 of the NGA from the
FERC to make sales of natural gas for resale. The FERC intends Order No. 547,
in tandem with Order No. 636, to foster a competitive market for natural gas by
giving natural gas purchasers access to multiple supply sources at market-driven
prices. Order No. 547 may increase competition in markets in which the
Company's natural gas is sold.
Certain operations the Company conducts are on federal oil and gas leases, which
the Minerals Management Service (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
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, and has recently proposed
additional safety-related regulations concerning the design and operating
procedures for OCS production platforms and pipelines. The MMS also has
regulations restricting the flaring or venting of natural gas, and has recently
proposed to amend such regulations to prohibit the flaring of liquid
hydrocarbons and oil without prior authorization. Similarly, the MMS has
promulgated other 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 the Company can continue to obtain
bonds or other surety in all cases.
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In addition, the MMS is conducting an inquiry into certain contract agreements
from which producers on MMS leases have received settlement proceeds that are
royalty bearing and the extent to which producers have paid the appropriate
royalties on those proceeds. The Company believes that this inquiry will not
have a material impact on its financial condition, liquidity or results of
operations.
Additional proposals and proceedings that might affect the oil and gas industry
are pending before the FERC and the courts. The Company cannot predict when or
whether any such proposals may become effective. In the past, the natural gas
industry has been heavily regulated. There is no assurance that the regulatory
approach currently pursued by the FERC will continue indefinitely.
Notwithstanding the foregoing, the Company does not anticipate that compliance
with existing federal, state and local laws, rules and regulations will have a
material or significantly adverse effect upon the capital expenditures, earnings
or competitive position of the Company or its subsidiaries. No material portion
of Forest's business is subject to renegotiation of profits or termination of
contracts or subcontracts at the election of the Federal government.
OIL SPILL FINANCIAL RESPONSIBILITY REQUIREMENTS
In August 1993, the MMS published an advance notice of its intention to adopt a
rule under the Oil Pollution Act of 1990 (OPA 90) that would require owners and
operators of oil and gas facilities located on or adjacent to waters of the
United States to establish $150 million in financial responsibility to cover oil
spill related liabilities. The Company cannot predict the final form of the
rule that will be adopted, but such a rule has the potential to result in the
imposition of substantial additional annual costs on the Company or otherwise
materially adversely affect the Company. The impact of the rule should not be
any more adverse to the Company than it will be to other similarly situated or
less capitalized owners or operators in the Gulf of Mexico and other affected
regions. However, there is substantial opposition to the proposed rule
throughout the oil and gas industry, and the MMS has informally indicated that
it will not move forward with the adoption of the rule until the United States
Congress has had an opportunity to reconsider the financial responsibility
requirements imposed under OPA 90.
OPERATING HAZARDS AND ENVIRONMENTAL MATTERS
The oil and gas business involves a variety of operating risks, including the
risk of fire, explosions, blow-outs, pipe failure, casing collapse, abnormally
pressured formations and environmental hazards such as oil spills, gas leaks,
ruptures and discharges of toxic gases, the occurrence of any of which could
result in substantial losses to the Company due to injury or loss of life,
severe damage to or destruction of property, natural resources and equipment,
pollution or other environmental damage, clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. In addition, the
Company currently operates offshore and is subject to the additional hazards of
marine operations, such as capsizing, collision and adverse weather and sea
conditions. Such hazards may hinder or delay drilling, development and on-line
production operations.
Extensive federal, state and local laws govern oil and natural gas operations
regulating the discharge of materials into the environment or otherwise relating
to the protection of the environment. Numerous governmental departments issue
rules and regulations to implement and enforce such laws which are often
difficult and costly to comply with and which carry substantial penalties for
failure to comply. Some laws, rules and regulations relating to protection of
the environment may, in certain circumstances, impose "strict liability" for
environmental contamination, rendering a person liable for environmental damages
and cleanup costs without regard to negligence or fault on the part of such
person. Other laws, rules and regulations may restrict the rate of oil and
natural gas production below the rate that would otherwise exist. The
regulatory burden on the oil and natural gas industry increases its cost of
doing business and consequently affects its profitability. These laws, rules
and regulations affect the operations of the Company. Compliance with
environmental requirements generally could have a material adverse effect upon
the capital expenditures, earnings or competitive position of Forest and its
subsidiaries. The Company believes that it is in substantial compliance with
current applicable environmental laws and regulations and that continued
compliance with existing requirements will not have a material adverse impact on
the Company. Nevertheless, changes in environmental law have the potential to
adversely affect the Company's operations. For instance, at least two separate
courts have recently ruled that certain wastes associated with the production of
crude oil may be classified as hazardous substances under the Comprehensive
Environmental Response, Compensation, and Liability Act (commonly called
"Superfund") and thus the Company could become
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subject to the burdensome cleanup and liability standards established under the
federal Superfund program if significant concentrations of such wastes were
determined to be present at the Company's properties or to have been produced as
a result of the Company's operations.
The Company has established guidelines to be followed to comply with
environmental laws, rules and regulations. The Company has designated a
compliance officer whose responsibility is to monitor regulatory requirements
and their impacts on the Company and to implement appropriate compliance
procedures. The Company also employs an environmental manager whose
responsibilities include causing Forest's operations to be carried out in
accordance with applicable environmental guidelines and implementing adequate
safety precautions.
Although the Company maintains insurance against some, but not all, of the risks
described above, including insuring the costs of clean-up operations, public
liability and physical damage, there is no assurance that such insurance will be
adequate to cover all such costs or that such insurance will continue to be
available in the future or that such insurance will be available at premium
levels that justify its purchase. The occurrence of a significant event not
fully insured or indemnified against could have a material adverse effect on the
Company's financial condition and operations.
FOREIGN OPERATIONS
In 1992, the Company sold substantially all of its Canadian operations to
CanEagle Resources Corporation (CanEagle). In June 1994, CanEagle sold a
significant portion of its oil and gas properties in Canada to a third party. In
conjunction with this transaction, the Company exchanged its investment in
CanEagle for preferred shares of a newly formed entity, Archean Energy, Ltd.
(Archean). Forest's investment in the Canadian oil and gas industry is through
its investment in Archean. For further information concerning this investment,
see Note 3 of Notes to Consolidated Financial Statements.
Canadian governmental regulations may have a material effect on the economic
parameters for engaging in oil and gas activities in Canada and may have a
material effect on the advisability of investments in such activities.
Forest considers, from time to time, certain oil and gas opportunities in other
foreign countries. Foreign oil and natural gas operations are subject to
certain risks, such as nationalization, confiscation, terrorism, renegotiation
of existing contracts and currency fluctuations. Forest monitors the political,
regulatory and economic developments in any foreign countries in which it
operates.
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ITEM 2. PROPERTIES
Forest's principal reserves and producing properties are oil and gas properties
located in the Gulf of Mexico and in Texas, Oklahoma, and Wyoming.
RESERVES
Information regarding the Company's proved and proved developed oil and gas
reserves and the standardized measure of discounted future net cash flows and
changes therein is included in Note 16 of Notes to Consolidated Financial
Statements.
Since January 1, 1994, Forest has not filed any oil or natural gas reserve
estimates or included any such estimates in reports to any Federal or foreign
governmental authority or agency, other than the Securities and Exchange
Commission (SEC), the MMS and the Department of Energy (DOE). The reserve
estimate report filed with the MMS related to Forest's Gulf of Mexico reserves
and there were no differences between the reserve estimates included in the MMS
report, the SEC report, the DOE report and those included herein, except for
production and additions and deletions due to the difference in the "as of" date
of such reserve estimates.
PRODUCTION
The following table shows net oil and natural gas production for Forest and its
wholly-owned subsidiaries for the years ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
Net Oil and Natural Gas Production (1)
--------------------------------------
1994 (2) 1993 1992
---- ---- ----
<S> <C> <C> <C>
United States:
Natural Gas (MMCF) 48,048 41,114 27,814
Oil (MBBLS) 1,543 1,493 1,308
Canada:
Natural Gas (MMCF) -- -- 1,360
Oil (MBBLS) -- -- 142
<FN>
(1) Includes amounts delivered pursuant to volumetric production payments. See
Notes 5 and 16 of Notes to Consolidated Financial Statements.
(2) Effective January 1, 1994 the Company changed its method of accounting for
oil and gas sales from the sales method to the entitlements method. See
Note 1 of Notes to Consolidated Financial Statements.
</TABLE>
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AVERAGE SALES PRICES AND PRODUCTION COSTS PER UNIT OF PRODUCTION
The following table sets forth the average sales prices per MCF of natural gas
and per barrel of oil and condensate and the average production cost per
equivalent unit of production for the years ended December 31, 1994, 1993 and
1992 for Forest and its wholly-owned subsidiaries:
<TABLE>
<CAPTION>
United States Canada
------------------------------- ------
1994 1993 1992 1992
------ ------ ------ ------
<S> <C> <C> <C> <C>
Average Sales Prices:
Natural Gas
Production under long-term fixed
price contracts (MMCF) (1) 16,656 19,065 9,689 --
Average contract sales price (per MCF) $ 1.78 1.65 1.67 --
Production sold on the spot market (MMCF) 31,392 22,049 18,125 1,360
Spot sales price received (per MCF) (2) $ 1.90 2.21 1.83 1.12
Effects of energy swaps (per MCF) (3) .06 (.13) (.07) --
------ ------ ------ -----
Average spot sales price (per MCF) (2) $ 1.96 2.08 1.76 1.12
Total production (MMCF) 48,048 41,114 27,814 1,360
Average sales price (per MCF) $ 1.90 1.88 1.73 1.12
Oil and Condensate (1) (4)
Total production (MBBLS) 1,543 1,493 1,308 142
Average sales price (per BBL) $ 14.83 16.97 18.19 17.61
Average production cost (per MCFE) (5) (6) $ .39 .39 .36 .61
- - - -------------------------------
<FN>
(1) Production under long-term fixed price contracts includes scheduled
deliveries under volumetric production payments, net of royalties. For
further information concerning volumes and prices recorded under volumetric
production payments, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Notes 5 and 16 of Notes
to Consolidated Financial Statements.
(2) The 1992 amounts exclude $1.15 per MCF attributable to the settlement of
gas contract litigation with ONEOK, Inc. (the ONEOK settlement). Including
such amount, the spot sales price received and the average spot sales price
for natural gas were $2.98 and $2.91 per MCF, respectively.
(3) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuation. Hedged volumes were 12,184 MMCF, 8,057 MMCF and
4,691 MMCF for the years ended December 31, 1994, 1993 and 1992,
respectively.
(4) Oil and condensate production is sold primarily on the spot market. An
immaterial amount of production is covered by long-term fixed price
contracts, including scheduled deliveries under volumetric payments.
(5) Production costs were converted to common units of measure using a
conversion ratio of one barrel of oil to six MCF of natural gas. Such
production costs exclude all depreciation, depletion and provision for
impairment associated with property and equipment.
(6) The 1992 amount excludes $.04 per MCF equivalent attributable to the ONEOK
settlement. Including such amount, the average production cost per unit of
production was $.40 per MCF equivalent.
</TABLE>
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PRODUCTIVE WELLS
The following summarizes total gross and net productive wells of the Company and
its wholly-owned subsidiaries at December 31, 1994, all of which are in the
United States:
<TABLE>
<CAPTION>
Productive Wells (A)
---------------------
Gross (B) Net (C)
---------------------
<S> <C> <C>
Oil 200 133.8
Gas 416 137.9
---- ------
Totals (D) 616 271.7
---- ------
---- ------
<FN>
(A) Productive wells are producing wells and wells capable of production,
including wells that are shut-in.
(B) A gross well is a well in which a working interest is owned. The number of
gross wells is the total number of wells in which a working interest is
owned.
(C) A net well is deemed to exist when the sum of fractional ownership working
interests in gross wells equals one. The number of net wells is the sum of
the fractional working interests owned in gross wells expressed as whole
numbers and fractions thereof.
(D) Includes 60 dual completions. Dual completions are counted as one well.
If one completion is an oil completion, the well is classified as an oil
well.
</TABLE>
DEVELOPED AND UNDEVELOPED ACREAGE
Forest and its wholly-owned subsidiaries held acreage as set forth below at
December 31, 1994 and 1993. A majority of the developed acreage is subject to a
mortgage lien securing either the Company's bank indebtedness or its nonrecourse
secured debt. A portion of the developed acreage is also subject to production
payments. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations and Notes 4 and 5 of Notes to Consolidated
Financial Statements.
<TABLE>
<CAPTION>
Developed Acreage (A) Undeveloped Acreage (B)
-------------------- ----------------------
Gross (C) Net (D) Gross (C) Net (D)
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Louisiana Offshore 180,108 72,689 108,174 69,028
Oklahoma 63,779 22,891 5,976 1,321
Texas Onshore 126,330 59,502 26,991 19,210
Texas Offshore 51,142 31,175 47,298 42,078
Wyoming 12,803 8,797 24,676 20,334
Other 30,883 9,017 6,615 3,592
------- ------- ------- -------
Total acreage at December 31, 1994 465,045 204,071 219,730 155,563
------- ------- ------- -------
------- ------- ------- -------
Total acreage at December 31, 1993 427,139 180,735 338,387 230,858
------- ------- ------- -------
------- ------- ------- -------
<FN>
(A) Developed acres are those acres which are spaced or assigned to productive
wells.
(B) Undeveloped acres are considered to be those acres on which wells have not
been drilled or completed to a point that would permit the production of
commercial quantities of oil or natural gas, regardless of whether such
acreage contains proved reserves. It should not be confused with undrilled
acreage held by production under the terms of a lease.
(C) A gross acre is an acre in which a working interest is owned. The number
of gross acres is the total number of acres in which a working interest is
owned.
(D) A net acre is deemed to exist when the sum of the fractional ownership
working interests in gross acres equals one. The number of net acres is
the sum of the fractional working interests owned in gross acres expressed
as whole numbers and fractions thereof.
</TABLE>
9
<PAGE>
During 1994, the Company's gross developed acreage increased approximately 9%
and net developed acreage increased 13%, primarily as a result of producing
property acquisitions. The Company's gross and net undeveloped acreage
decreased 35% and 33%, respectively, primarily due to reductions in acreage as a
result of reclassifications to developed acreage, lease expirations and the
Company's decision not to renew certain leases which were located primarily
offshore Louisiana and in Texas.
Approximately 49% of the Company's total net undeveloped acreage is under leases
that have terms expiring in 1995, if not held by production, and another
approximately 9% of net undeveloped acreage will expire in 1996 if not also held
by production.
DRILLING ACTIVITY
Forest and its wholly-owned subsidiaries owned interests in net exploratory and
net development wells for the years ended December 31, 1994, 1993 and 1992 as
set forth below. This information does not include wells drilled under farmout
agreements.
<TABLE>
<CAPTION>
United States
----------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net Exploratory Wells: (A)
Dry (B) 2.0 1.2 1.0
Productive (C) 1.3 .3 --
--- --- ---
3.3 1.5 1.0
--- --- ---
--- --- ---
Net Development Wells: (A)
Dry (B) -- -- --
Productive (C) 2.1 3.0 1.6
--- --- ---
2.1 3.0 1.6
--- --- ---
--- --- ---
<FN>
(A) A net well is deemed to exist when the sum of fractional ownership working
interests in gross wells equals one. The number of net wells is the sum of
the fractional working interests owned in gross wells expressed as whole
numbers and fractions thereof.
(B) A dry well (hole) is a well found to be incapable of producing either oil
or natural gas in sufficient quantities to justify completion as an oil or
natural gas well.
(C) Productive wells are producing wells and wells capable of production,
including wells that are shut-in.
</TABLE>
A net development well drilled in Canada in 1992 was completed prior to the
September 30, 1992 sale of Canadian operations to CanEagle. This well, in which
the Company's ownership interest was .2, was included in properties sold.
FARMOUT AGREEMENTS
Forest entered into farmout agreements with respect to 15 exploration prospects
during 1994, including two prospects related to an exploration agreement entered
into in 1993. Under these agreements, outside parties undertake exploration
activities using prospects owned by Forest. This enables the Company to
participate in the exploration prospects without incurring additional capital
costs, although with a substantially reduced ownership interest in each
prospect. Seven of the farmouts cover onshore prospects and eight cover
prospects located in the Gulf of Mexico.
Four of the prospects were drilled during 1994, resulting in two properties
capable of producing, both of which are in the same prospect, two dry holes and
one well that is currently being tested. Forest retained overriding royalty
interests in the 15 prospects ranging from 1.6% to 9.4% before payout,
increasing up to a 33.3% net working interest after payout. Five additional
wells reached total depth in 1995, resulting in one property capable of
10
<PAGE>
production, one dry hole and three wells currently being tested. The Company
anticipates that four of the remaining six undrilled farmouts will be drilled
during 1995.
During 1994, the Company entered into an exploration agreement with a third
party, covering ten blocks (approximately 50,000 acres) leased by the Company in
the Gulf of Mexico, offshore Texas and Louisiana. Under the terms of the
agreement, the third party will utilize 3-D seismic to evaluate and identify
potential drilling opportunities over an 18-month period. Upon completion of
the evaluations, the third party must elect to either commence drilling at no
expense to the Company, or return the leases. The Company retains the option to
back-in for a 35% working interest at casing point with no payout requirements
or to retain a 12.5% overriding royalty. In 1995 the third party drilled one of
these prospects, which is currently being tested, and continues to evaluate the
remaining acreage.
PRESENT ACTIVITIES
At December 31, 1994, Forest and its wholly owned subsidiaries had two
development wells and one exploratory well that were in the process of being
drilled. One of these two development wells was determined to be productive in
January, 1995 and the other was a dry hole. The exploratory well reached total
depth during January 1995. It was subsequently sidetracked and is currently
being tested. There were also three wells being drilled under farmout
agreements at year-end, all of which are currently being tested as discussed
above.
DELIVERY COMMITMENTS
At December 31, 1994 Forest and its wholly-owned subsidiaries were obligated to
deliver, or to make cash settlement with respect to, approximately 19.1 BCF of
natural gas and 261,000 barrels of oil under the terms of volumetric production
payments. The delivery commitments cover approximately 26% and 9% of the
estimated net proved reserves of natural gas and oil, respectively, attributable
to the subject properties. The production payments are nonrecourse to other
properties owned by the Company. The Company is further obligated to deliver
approximately .9 BCF of natural gas under existing long-term contracts. For
further information concerning the Company's volumetric production payment
agreements, see Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations and Notes 5 and 16 of Notes to Consolidated
Financial Statements.
11
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company had two natural gas sales contracts with Columbia Gas Transmission
Corp. (Transmission), a subsidiary of Columbia Gas System (CGS). On July 31,
1991, CGS and Transmission filed Chapter 11 bankruptcy petitions with the United
States Bankruptcy Court for the District of Delaware. Both contracts have been
rejected pursuant to the bankruptcy proceedings. The Company has filed a proof
of claim in the bankruptcy proceeding consisting of a secured claim of
$1,600,000 based on Louisiana vendor lien laws and an unsecured claim relating
to the rejection of the contracts. The secured claim arises from Transmission's
failure to pay the contract price for a period of time prior to rejection of the
contracts. The unsecured claim was calculated on an undiscounted basis and
without any assumption of mitigation of damages through spot market sales. No
prediction can be given as to when or how these matters will ultimately be
concluded.
On April 13, 1995 Forest sold to a bank a participation interest in Forest's
claim evidenced by that certain proof of claim dated March 16, 1992 filed by
Forest on March 17, 1992 against Transmission in connection with the Chapter 11
proceeding described above. Consideration received consisted of a $4,000,000
nonrecourse loan, in exchange for which the bank will receive, solely from the
proceeds of the bankruptcy claim, an amount equal to the loan principal plus
accrued interest at 16.5% per annum plus 25% of the excess, if any, of the
proceeds over the loan principal and interest. The Company may, under certain
conditions, limit the overall cost of financing to 23.5% per annum by exercising
its option to repurchase the bank's interest in the bankruptcy claim prior to
receipt of any proceeds of the claim.
The Company, in the ordinary course of business, is a party to various other
legal actions. In the opinion of management, none of these actions, including
those discussed above, either individually or in the aggregate, will have a
material adverse effect on the Company's financial condition, liquidity or
results of operations.
12
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 4A. EXECUTIVE OFFICERS OF FOREST
The following information with respect to the executive officers of Forest is
furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
<TABLE>
<CAPTION>
Years with
Name (A) Age Forest Office (B)
------- --- ----------- -----------
<S> <C> <C> <C>
William L. Dorn* 46 23 Chairman of the Board and Chairman of the
Executive Committee since July 1991. Member
of the Executive Committee since August 1988.
President from February 1990 until November
1993 and Chief Executive Officer since
February 1990. Executive Vice President from
August 1989 until February 1990. Member of
the Royalty Bonus Committee since August 1991
and Chairman since May 1994.
Robert S. Boswell* 45 5 President since November 1993. Vice
President from May 1991 until November 1993
and Chief Financial Officer since May 1991.
Financial Vice President from September 1989
until May 1991. Member of the Executive
Committee since July 1991 and member of the
Royalty Bonus Committee since August 1991.
V. Bruce Thompson 48 0 Vice President and General Counsel since
August 1994. Vice President - Legal of Mid-
America Dairymen, Inc. from November 1993 to
August 1994. Chief of Staff for Oklahoma
Congressman James M. Inhofe from February
1990 to November 1993.
Bulent A. Berilgen 46 10 Vice President of Operations since December
1993. Prior thereto Vice President -
Engineering and Development since January
1992. Prior thereto Regional Reservoir
Engineer.
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Years with
Name (A) Age Forest Office (B)
------- --- ----------- -----------
<S> <C> <C> <C>
Kenton M. Scroggs 42 11 Vice President since December 1993 and
Treasurer since May 1988. Member of the
Company's Employee Benefits Committee, which
assumed the duties of the Trustees of the
Pension Trust and of the Administrative
Committee of the Retirement Savings Plan in
August 1994.
Forest D. Dorn 40 17 Vice President since February 1991 and
General Business Manager since December 1993.
Prior thereto General Manager - Operations
since January 1992. Prior thereto Assistant
Division Manager of the Southern Division.
David H. Keyte 39 7 Vice President and Chief Accounting Officer
since December 1993. Prior thereto Corporate
Controller since January 1989. Chairman of
the Company's Employee Benefits Committee,
which assumed the duties of the Trustees of
the Pension Trust and of the Administrative
Committee of the Retirement Savings Plan in
August 1994.
Daniel L. McNamara 49 23 Secretary and Corporate Counsel since January
1991. Prior thereto Assistant Secretary and
Associate Corporate Counsel. Member of the
Company's Employee Benefits Committee, which
assumed the duties of the Trustees of the
Pension Trust and of the Administrative
Committee of the Retirement Savings Plan in
August 1994.
Joan C. Sonnen 41 5 Controller since December 1993. Prior
thereto Director of Financial Accounting and
Reporting since April 1991 and Manager of
Financial Systems and Reporting since July
1989.
<FN>
- - - --------------------
*Also a Director
(A) William L. Dorn and Forest D. Dorn are brothers, and they are nephews of
John C. Dorn, a director of the Company.
(B) The term of office of each officer is one year from the date of his or her
election immediately following the last annual meeting of shareholders and
until the officer's respective successor has been elected and qualified or
until his or her earlier death, resignation or removal from office
whichever occurs first. Each of the named persons has held the office
indicated since the last annual meeting of shareholders, except as
otherwise indicated.
</TABLE>
14
<PAGE>
ITEM 4B. DIRECTORS OF FOREST
<TABLE>
<CAPTION>
Years with
Name (A) Age Forest Principal Occupation
------- --- ----------- --------------------
<S> <C> <C> <C>
Donald H. Anderson 46 2 President, Chief Executive Officer and
Director of Associated Natural Gas
Corporation, a wholly owned subsidiary of
Panhandle Eastern Corporation.
Austin M. Beutner 35 2 President, Chief Executive Officer and
Director of the Fund for Large Enterprises in
Russia.
Robert S. Boswell 45 10 President of Forest.
Richard J. Callahan 53 2 Executive Vice President of US WEST, Inc.
Dale F. Dorn 52 28 Private investments.
John C. Dorn 67 45 Retired executive officer of Forest.
William L. Dorn 46 23 Chairman of the Board and Chief Executive
Officer of Forest.
Harold D. Hammar 71 10 Financial Consultant.
James H. Lee 46 4 Managing Partner, Lee, Hite & Wisda Ltd.
Jeffrey W. Miller 43 7 Independent Biologist.
Jack D. Riggs 70 41 Retired executive officer of Forest.
Michael B. Yanney 61 3 Chairman and Chief Executive Officer of
America First Companies, L.L.C.
</TABLE>
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Forest Oil Corporation has one class of common equity securities outstanding.
The Common Stock, par value $.10 per share, has one vote per share. During
1993, each share of the Class B Stock, par value $.10 per share, which had 10
votes per share, was reclassified into 1.1 shares of Common Stock pursuant to a
vote of the shareholders. In the event of dissolution, liquidation or
insolvency, holders of Common Stock share ratably in the net assets of Forest,
subject to the liquidation rights of the holders of the $.75 Convertible
Preferred Stock.
The Company also has outstanding Warrants to purchase shares of its Common
Stock. Each Warrant entitles the holder to purchase one share of Common Stock
at a price of $3.00, is non-callable and expires on October 1, 1996.
As of March 31, 1995, 28,250,647 shares of Common Stock were held by 2,060
recordholders and 1,244,715 Warrants were held by 80 recordholders.
Subject to the prior right of the holders of Forest's $.75 Convertible Preferred
Stock, the only restrictions on its present or future ability to pay dividends
are (i) the provisions of the New York Business Corporation Law (NYBCL), (ii)
certain restrictive provisions in the Indenture executed in connection with
Forest's 11 1/4% Senior Subordinated Notes due September 1, 2003 pursuant to
which the Company is currently prohibited from paying any cash dividends other
than on its $.75 Convertible Preferred Stock, and (iii) the Company's Credit
Agreement dated December 1, 1993 with The Chase Manhattan Bank (National
Association), as agent, under which the Company is restricted in amounts it may
pay as dividends (other than dividends payable in common stock). Under the
dividend restrictions in the Credit Agreement, the Company is prohibited from
paying cash dividends on its $.75 Convertible Preferred Stock after the February
1, 1995 dividend. While these restrictions are effective, subsequent dividends,
when and as declared, will be paid in shares of Forest Oil Corporation Common
Stock. There is no assurance that Forest will pay any dividends. For further
information on Forest's ability to pay dividends on its Common Stock and $.75
Convertible Preferred Stock, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations and Notes 4, 7 and 8 of Notes to
Consolidated Financial Statements.
The Company has one class of preferred stock outstanding. Annual dividends on
the $.75 Convertible Preferred Stock are cumulative and are payable quarterly
each February 1, May 1, August 1 and November 1, when and as declared.
Dividends may be paid in cash or, at the Company's election, in shares of Common
Stock or in a combination of cash and Common Stock. As described above, the
Company is prohibited from paying cash dividends on its $.75 Convertible
Preferred Stock after the February 1, 1995 dividend, due to restrictions
contained in the Credit Agreement with its lending banks. While these
restrictions are effective, subsequent dividends, when and as declared, will be
paid in shares of Forest Oil Corporation Common Stock.
Whenever dividends on the $.75 Convertible Preferred Stock have not been paid,
the amount of the deficiency, plus an amount equal to the accumulated dividend
for the then current quarterly dividend period, must be fully paid, or declared
and set apart for payment, before any dividend may be declared and paid or set
apart for payment upon the Common Stock, except for dividends paid in shares of
Common Stock.
Whenever $.75 Convertible Preferred Stock dividends are in arrears in an amount
equivalent to six full quarterly dividends, the holders of the $.75 Convertible
Preferred Stock, voting separately as a class and with one vote per share, will
have the right to elect two directors. If two consecutive dividend payments are
in arrears, the holder of each share of $.75 Convertible Preferred Stock will be
entitled to a penalty conversion right enabling such holder to convert each such
share, plus accumulated dividends, into a share of Common Stock during a two-day
period 30 days after the second dividend payment date at a conversion price of
75% of the average of the last reported sales prices of the Common Stock during
the period from such second dividend payment date to five trading days prior to
the conversion date.
The holder of each share of $.75 Convertible Preferred Stock has the right to
convert each such share into 3.5 shares of Common Stock at any time. The
conversion rate is subject to adjustment in certain events.
16
<PAGE>
The $.75 Convertible Preferred Stock may be redeemed at the option of the
Company, in whole or in part, upon notice duly given, at any time after the
earlier of (i) July 1, 1996, and (ii) the date on which the last reported sales
price of the Common Stock will have been $7.50 or higher for at least 20 of the
prior 30 trading days, at the redemption prices set forth below, in each case
with an amount equal to dividends (whether or not declared) accrued to the date
fixed for redemption and remaining unpaid:
<TABLE>
<CAPTION>
Redemption
Price Per
Redemption Period Share
----------------------------- ----------
<S> <C>
July 1, 1994 to June 30, 1995 $10.33
July 1, 1995 to June 30, 1996 $10.17
July 1, 1996 and thereafter $10.00
</TABLE>
As of March 31, 1995, 2,880,973 shares of $.75 Convertible Preferred Stock were
held by 92 recordholders.
Forest's Common Stock is traded on the National Market System of the National
Association of Securities Dealers, Inc., Automated Quotation System
(NASDAQ/NMS). The High and Low sales prices of the Common Stock for each
quarterly period of the years presented as reported by the NASDAQ/NMS are listed
in the chart below. The Class B Stock was not traded in any public trading
market. There were no dividends on Common Stock or Class B Stock in 1993, 1994
or in the first quarter of 1995.
<TABLE>
<CAPTION>
High Low
---- ---
1993
----
<S> <C> <C>
First Quarter $ 4-1/2 $ 2-7/8
Second Quarter 5-13/16 4
Third Quarter 5-13/16 4-1/4
Fourth Quarter 5-7/16 3-5/16
1994
----
First Quarter $ 4-3/4 $ 3-7/16
Second Quarter 4-9/16 3-7/16
Third Quarter 4-7/16 3-5/16
Fourth Quarter 3-7/16 2-1/8
1995
----
First Quarter (through March 31) $ 2-3/8 $ 1-1/2
</TABLE>
On March 31, 1995, the last reported sales price of the Common Stock as quoted
on the NASDAQ/NMS was $2-5/16 per share.
17
<PAGE>
The Warrants are traded on the NASDAQ/NMS. The High and Low sales prices of the
Warrants for each quarterly period of the years presented as reported by the
NASDAQ/NMS are listed in the chart below.
<TABLE>
<CAPTION>
High Low
---- ---
1993
----
<S> <C> <C>
First Quarter $ 2-3/8 $ 1-1/8
Second Quarter 3-5/8 2-1/16
Third Quarter 3-5/8 2-5/8
Fourth Quarter 3 1-3/4
1994
----
First Quarter $ 2-3/4 $ 1-7/8
Second Quarter 2-1/2 1-3/4
Third Quarter 2-1/8 1-5/8
Fourth Quarter 1-5/8 1/2
1995
----
First Quarter (through March 31) $ 5/8 $ 3/8
</TABLE>
On March 31, 1995, the last reported sales price of the Warrants as quoted on
the NASDAQ/NMS was $3/8 per Warrant.
The $.75 Convertible Preferred Stock is traded on the NASDAQ/NMS. The High and
Low sales prices of the $.75 Convertible Preferred Stock for each quarterly
period of the years presented as reported by the NASDAQ/NMS are listed in the
chart below.
<TABLE>
<CAPTION>
Dividends
High Low Paid (A)
1993 ---- --- ----------
----
<S> <C> <C> <C>
First Quarter $15-3/4 $ 10-3/4 0.068587
Second Quarter 20-1/8 14-1/4 0.057176
Third Quarter 20-5/8 15-1/2 0.038513
Fourth Quarter 18-3/4 12 0.044563
1994
----
First Quarter $17 $ 13-1/2 $ .1875
Second Quarter 16-1/2 13-1/4 .1875
Third Quarter 16 12-1/2 .1875
Fourth Quarter 13 8-3/4 .1875
1995
----
First Quarter (through March 31) $ 9-1/8 $ 6-1/2 $ .1875
<FN>
(A) In 1993 the dividends on the $.75 Convertible Preferred Stock were paid in
shares of Common Stock at the above stated rates. In 1994, the dividends
on the $.75 Convertible Preferred Stock were paid in cash. On February 1,
1995, a cash dividend of $.1875 was paid to holders of record on January
10, 1995. On February 23, 1995 the Board of Directors declared a dividend
payable in shares of Common Stock on May 1, 1995 to holders of record on
April 10, 1995. The number of shares of Common Stock to be issued per
share of the $.75 Convertible Preferred Stock will be 0.094693, determined
in accordance with the formula for determining dividends payable.
</TABLE>
On March 31, 1995, the last reported sales price of the $.75 Convertible
Preferred Stock as quoted on the NASDAQ/NMS was $9-1/8 per share.
18
<PAGE>
In October 1993, the Board of Directors adopted a shareholders' rights plan.
The Company issued a dividend of a preferred stock purchase right (the "Rights")
on each outstanding share of Common Stock of the Company, which, after the
Rights become exercisable, entitles the holder to purchase 1/100th of a share of
a newly issued series of the Company's preferred stock at a purchase price of
$30 per 1/100th of a preferred share, subject to adjustment. The Rights expire
on October 29, 2003 unless extended or redeemed earlier. The Rights will become
exercisable (unless previously redeemed or the expiration date of the Rights has
occurred) following a public announcement that a person or group (an "Acquiring
Person") has acquired 20% or more of the Common Stock or has commenced (or
announced an intention to make) a tender offer or exchange offer for 20% or more
of the Common Stock. In certain circumstances each holder of Rights (other than
an Acquiring Person) will have the right to receive, upon exercise, (i) shares
of Common Stock of the Company having a value significantly in excess of the
exercise price of the Rights, or (ii) shares of Common Stock of an acquiring
company having a value significantly in excess of the exercise price of the
Rights.
19
<PAGE>
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected data regarding the Company as of and for
each of the years in the five-year period ended December 31, 1994. This data
should be read in conjunction with Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations and the Consolidated Financial
Statements and Notes thereto.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1994(1) 1993 1992(2) 1991 1990
---- ---- ---- ---- ----
(In Thousands Except per Share Amounts and Volumes)
<S> <C> <C> <C> <C> <C>
FINANCIAL DATA
Revenue $115,947 105,148 113,186 69,897 84,824
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings (loss) before cumulative effects of
changes in accounting principles and
extraordinary items $(67,853) (9,355) 7,298 (34,850) (75,549)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings (loss) before extraordinary items $(81,843) (10,478) 7,298 (34,850) (75,549)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net earnings (loss) $(81,843) (21,213) 7,298 (25,348) (75,549)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Weighted average number of common shares
outstanding 28,097 21,997 13,774 12,494 12,307
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net earnings (loss) attributable to
common stock $(84,004) (23,463) 4,950 (30,557) (85,395)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Primary earnings (loss) per share: (3)
Earnings (loss) before cumulative effects of
changes in accounting principles and
extraordinary items $(2.49) (.53) .36 (3.21) (6.94)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings (loss) before extraordinary items $(2.99) (.58) .36 (3.21) (6.94)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net earnings (loss) attributable to common
stock $(2.99) (1.07) .36 (2.45) (6.94)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total assets $324,832 426,755 378,532 296,189 339,676
Long-term obligations
and redeemable preferred stock 271,128 288,588 250,672 203,136 220,508
Shareholders' equity 6,086 88,156 59,881 54,840 58,457
OPERATING DATA
Annual production (4):
Gas (MMCF) 48,048 41,114 29,174 23,877 31,415
Oil (MBBLS) 1,543 1,493 1,450 847 912
Average price received (4):
Gas (per MCF) $1.90 1.88 1.70 1.84 2.06
Oil (per Barrel) 14.83 16.97 18.14 25.31 23.19
Capital expenditures $42,544 170,821 106,627 35,664 65,466
Overhead Costs $18,719 19,561 18,760 23,292 41,176
Proved Reserves (4):
Gas (MMCF) 246,996 273,382 194,655 193,471 205,013
Oil (MBBLS) 7,532 8,198 7,560 5,315 6,559
Standardized measure of discounted future
net cash flows relating to proved oil and gas
reserves, including amounts attributable
to volumetric production payments $230,149 299,053 227,009 188,069 241,303
Standardized measure of discounted future net
cash flows relating to proved oil and gas
reserves, exclusive of amounts attributable
to volumetric production payments $207,463 258,917 187,761 157,921 241,303
Average spot price received at end of year
Gas (per MCF) $1.77 2.48 2.38 2.01 2.32
Oil (per barrel) 15.50 12.00 18.00 17.75 27.60
<FN>
(1) Effective January 1, 1994 the Company changed its method of accounting for
oil and gas sales from the sales method to the entitlements method. See
Note 1 of Notes to Consolidated Financial Statements.
(2) The results for 1992 include the effects of the ONEOK settlement.
(3) Fully diluted earnings (loss) per share was the same as primary earnings
(loss) per share in all years except 1992. In 1992, fully diluted earnings
per share was $.29.
(4) Includes amounts attributable to required deliveries under volumetric
production payments. See Notes 5 and 16 of Notes to Consolidated Financial
Statements.
</TABLE>
20
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto.
RESULTS OF OPERATIONS
NET EARNINGS (LOSS). The Company's net loss was $81,843,000 in 1994 compared to
a net loss of $21,213,000 in 1993 and net earnings of $7,298,000 in 1992. There
would have been a net loss of $16,745,000 in 1992 excluding the effects of the
settlement of gas contract litigation with ONEOK Inc. (the ONEOK settlement).
Earnings from operations (consisting of total revenue less oil and gas
production expense and expensed general and administrative costs) increased in
1994 compared to 1993 as a result of increased natural gas production from
acquisitions made throughout 1993; however, this increase was more than offset
by a $58,000,000 writedown of the book value of the Company's oil and gas
properties due to a ceiling test limitation and a charge of $13,990,000 to
reflect the cumulative effects of a change in the Company's method of accounting
for oil and gas sales from the sales ("takes") method to the entitlements
method. Earnings from operations increased in 1993 compared to the 1992 results
(excluding the effects of the ONEOK settlement) as a result of the acquisition
of properties; however, this increase was more than offset by higher
depreciation and depletion expense, an extraordinary loss of $10,735,000 (net of
tax benefit of $4,652,000) recorded as a result of the redemption or purchase of
all of the Company's 12 3/4% Senior Secured Notes and long-term subordinated
debt and a charge of $1,123,000 to reflect the cumulative effects of changes in
accounting principles related to postretirement benefits and income taxes.
The Company changed its method of accounting for oil and gas sales from the
sales method to the entitlements method effective January 1, 1994. As a result,
earnings from operations for 1994 increased by $3,584,000. Earnings from
operations for 1993 and 1992, on a pro forma basis, would have been higher by
$5,393,000 and $8,868,000, respectively, as a result of this change in
accounting method. The 1993 and 1992 amounts presented herein are not required
to be restated to show the effects of this change.
21
<PAGE>
The ONEOK settlement in 1992 had a significant impact on the Company's reported
revenue, expense and net earnings. A summary of the Company's income and
expenses for 1992, before and after the amounts recorded as a result of the
ONEOK settlement, is as follows:
<TABLE>
<CAPTION>
Year ended
Effects of December 31, 1992
Year ended ONEOK excluding ONEOK
December 31, 1992 settlement settlement
----------------- ---------- -----------------
(In Thousands)
<S> <C> <C> <C>
REVENUE:
Oil and gas sales $ 99,239 22,392 76,847
Miscellaneous, net 13,947 15,149 (1,202)
------ ------ ------
Total revenue 113,186 37,541 75,645
EXPENSES:
Oil and gas production 15,865 1,589 14,276
General and administrative 11,611 (477) 12,088
Interest 27,800 - 27,800
Depreciation and depletion 46,624 - 46,624
------ ------ ------
Total expenses 101,900 1,112 100,788
------- ------ -------
Earnings (loss) before income taxes 11,286 36,429 (25,143)
Income tax expense
Current 435 - 435
Deferred expense (benefit) 3,553 12,386 (8,833)
------ ------ -----
3,988 12,386 (8,398)
------ ------ -----
Net earnings $ 7,298 24,043 (16,745)
------ ------ ------
------ ------ ------
</TABLE>
The inclusion of the effects of the ONEOK settlement in a discussion of the
Company's results of operations distorts the trends which would otherwise be
reported. In the discussion which follows, results for 1992 exclude the effects
of the ONEOK settlement in order to more meaningfully compare and discuss the
Company's results of operations for 1994, 1993 and 1992.
REVENUE. Total revenue increased 10% to $115,947,000 in 1994 from $105,148,000
in 1993, and increased 39% in 1993 from $75,645,000 in 1992.
Oil and gas sales increased to $114,541,000 from $102,883,000, or by
approximately 11%, in 1994 compared to 1993 due primarily to increased natural
gas production from properties acquired throughout 1993 and the effects of the
change in method of accounting for oil and gas sales, partially offset by normal
production declines. In 1994, natural gas production volumes were up 17%
compared to 1993 while oil production volumes were 3% higher. The increase in
revenue attributable to increased production was partially offset by a 13%
decrease in the average sales price for oil. The average sales price for
natural gas in 1994 did not differ significantly from the 1993 price.
Oil and gas sales increased to $102,883,000 from $76,847,000, or by
approximately 34%, in 1993 compared to 1992 due primarily to increased
production from newly-acquired properties and an 11% increase in the average
sales price for natural gas. In 1993, oil production volumes were up 3% and
natural gas production volumes were up 41% compared to 1992. The increase in
revenue attributable to the increased production was partially offset by a 6%
decrease in the average sales price for oil.
22
<PAGE>
The production volumes and average sales prices for the years ended December 31,
1994, 1993 and 1992 for Forest and its wholly-owned subsidiaries were as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1994 1993 1992
---- ---- ----
NATURAL GAS
<S> <C> <C> <C>
Production under long-term fixed price
contracts (MMCF) (1) 16,656 19,065 9,689
Average contract sales price (per MCF) $ 1.78 1.65 1.67
Production sold on the spot market (MMCF) 31,392 22,049 19,485
Spot sales price received (per MCF) (2) $ 1.90 2.21 1.78
Effects of energy swaps (per MCF) (3) .06 (.13) (.07)
------ ------ ------
Average spot sales price (per MCF) (2) $ 1.96 2.08 1.71
Total production (MMCF) 48,048 41,114 29,174
Average sales price (per MCF) $ 1.90 1.88 1.70
OIL AND CONDENSATE (1)(4)
Total production (MBBLS) 1,543 1,493 1,450
Average sales price (per BBL) $ 14.83 16.97 18.14
<FN>
- - - ------------------
(1) Production under long-term fixed price contracts includes scheduled
deliveries under volumetric production payments, net of royalties. For
further information concerning volumes and prices recorded under volumetric
production payments, see "Liquidity and Capital Resources -- Volumetric
Production Payments" and Notes 5 and 16 of Notes to Consolidated Financial
Statements.
(2) The 1992 amounts exclude $1.15 per MCF attributable to the ONEOK
settlement. Including such amount, the spot sales price received and the
average spot sales price for natural gas were $2.93 and $2.86 per MCF,
respectively.
(3) Energy swaps were entered into to hedge the price of spot market volumes
against price fluctuation. Hedged volumes were 12,184 MMCF, 8,057 MMCF and
4,691 MMCF for the years ended December 31, 1994, 1993 and 1992,
respectively.
(4) Oil and condensate production is sold primarily on the spot market. An
immaterial amount of production is covered by long-term fixed price
contracts, including scheduled deliveries under volumetric production
payments.
</TABLE>
23
<PAGE>
Natural gas delivered pursuant to volumetric production payment agreements and
other long-term fixed price contracts represented approximately 35% of total
production in 1994 versus 46% in 1993 and 33% in 1992. In recent years, the
industry trend has been for more natural gas to be sold on the spot market as
long-term contracts expire. The overall increase experienced by Forest in
natural gas sold under long-term fixed price contracts over the three year
period presented herein was the result of the Company entering into volumetric
production payments.
Miscellaneous net revenue of $1,406,000 in 1994 included income from the sale of
miscellaneous pipeline systems and equipment and the reversal of an accounts
receivable reserve, partially offset by a reserve for settlement of a royalty
dispute and a payment of deferred maintenance costs of a real estate complex
used for general business purposes. Miscellaneous net revenue of $2,265,000 in
1993 included $1,380,000 of interest income on short-term investments and an
adjustment to reduce accrued severance taxes based on discussions with the
applicable state taxing authorities. The net expense of $1,202,000 in 1992 was
primarily attributable to a $926,000 provision for future rent payments on
vacated office space.
OIL AND GAS PRODUCTION EXPENSE. Oil and gas production expense increased 15% to
$22,384,000 in 1994 compared to $19,540,000 in 1993 due primarily to increased
natural gas production as a result of property acquisitions throughout 1993,
partially offset by a decrease in workover expenses and a general decrease in
expenses due to the sale of properties. Oil and gas production expense
increased 37% to $19,540,000 in 1993 compared to $14,276,000 in 1992, due
primarily to increased production from newly acquired properties and increased
workover expense. In 1994 and 1993, production expense was approximately $.39
on an MCFE basis compared to $.38 in 1992.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
decreased 7% to $11,166,000 in 1994 compared to $12,003,000 in 1993. Decreases
in salaries, wages and burden from the termination of executives and middle
level managers and increases in production operation credits were partially
offset by increases in insurance and office and storage rental expenses.
General and administrative expense for 1993 was $12,003,000 compared to
$12,088,000 in 1992. Increases attributable to severance and employee
relocation costs and the effects of the postretirement medical benefit accrual
in 1993 were more than offset by lower office and storage rentals and lower
professional services expense. The capitalization rate remained relatively
constant from 1992 to 1994.
Total overhead costs, including amounts related to exploration and development
activities, were $18,719,000 in 1994, $19,561,000 in 1993 and $19,237,000 in
1992. Excluding the severance and employee relocation costs in 1993 described
below, total overhead costs were approximately 8% higher in 1994 than in 1993.
This increase is primarily due to an increase in storage rentals and higher
insurance expense attributable to a larger asset base, partially offset by a
decrease in salaries, wages and burden from the termination of executives and
middle level managers as described below. The increase in 1993 from 1992 was
only 2% despite charges amounting to $2,300,000 for severance and employee
relocation costs and $480,000 for postretirement medical benefits; without
these charges, total overhead costs would have decreased by approximately 13%
in 1993 compared to 1992. Severance and employee relocation costs of
approximately $2,300,000 in 1993 resulted from the termination of 10 executives
and middle level managers and a loss incurred on an employee's former residence
in accordance with the Company's relocation policy. The following table
summarizes the total overhead costs incurred during the periods:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1994 1993 1992
----- ----- -----
(In Thousands)
<S> <C> <C> <C>
Overhead costs capitalized $ 7,553 7,558 7,149
General and administrative costs expensed 11,166 12,003 12,088
------ ------ ------
Total overhead costs $ 18,719 (A) 19,561 (B) 19,237
------ ------ ------
------ ------ ------
<FN>
(A) Includes $510,000 for postretirement medical benefits.
(B) Includes approximately $2,300,000 of severance and employee relocation costs and
$483,000 for postretirement medical benefits.
</TABLE>
24
<PAGE>
RETIREMENT BENEFITS FOR EXECUTIVES AND DIRECTORS. In December 1990, the Company
entered into retirement agreements with seven executives and directors
("Retirees") pursuant to which the Retirees will receive supplemental retirement
payments totalling approximately $1,127,700 per year through 1996, $1,087,400 in
1997, $938,400 in 1998 and approximately $740,400 per year in 1999 and 2000.
The liability to the Retirees was recorded in 1990 and 1991.
INTEREST EXPENSE. Interest expense of $26,773,000 increased $3,044,000 or 13%
compared to 1993 due to higher loan balances as a result of recent capital
spending. Interest expense of $23,729,000 in 1993 decreased $4,071,000 or 15%
compared to 1992, primarily due to redemptions or purchases of certain of the
Company's subordinated debentures and 12 3/4% Senior Secured Notes in 1993,
partially offset by the interest expense incurred in connection with the
Company's new 11 1/4% Senior Subordinated Notes.
DEPRECIATION AND DEPLETION EXPENSE. Depreciation and depletion expense
increased 8% to $65,468,000 in 1994 from $60,581,000 in 1993 due to increased
production in the 1994 period as a result of property acquisitions.
Depreciation and depletion expense increased 30% to $60,581,000 in 1993 from
$46,624,000 in 1992 due to increased production in the 1993 period as a result
of property acquisitions and workovers. The depletion rate was $1.13 per MCFE
for U.S. production in 1994 compared to corresponding rates of $1.19 for U.S.
production in 1993 and $1.21 for U.S. production and $1.19 for Canadian
production in 1992.
IMPAIRMENT OF OIL AND GAS PROPERTIES. The Company recorded a writedown of its
oil and gas properties of $58,000,000 in 1994 due primarily to a decrease in
spot market prices for natural gas. The Company could have chosen to lessen or
completely eliminate the need for a writedown by entering into financial
derivatives (swaps) and locking in future natural gas prices. The Company would
have had to contract a significant portion of its natural gas reserve base to
avoid the entire writedown. Company management decided not to enter into such
contracts because it believes the natural gas market is now at a cyclical low,
and such arrangements would ultimately be detrimental to the Company's
shareholders. In addition, the Company considered but chose not to adopt
successful efforts accounting. It is management's belief that full cost
accounting remains the most appropriate method of accounting for the Company's
current mix of operations, despite the quarterly ceiling test requirement.
Additional writedowns of the full cost pool may be required if prices decrease,
undeveloped property values decrease, estimated proved reserve volumes are
revised downward or costs incurred in exploration, development, or acquisition
activities exceed the discounted future net cash flows from the additional
reserves, if any.
The average Gulf Coast spot price received by the Company for natural gas
declined from $1.77 per MCF at December 31, 1994 to $1.59 per MCF at April 1,
1995. The West Texas Intermediate price for crude oil increased from $15.50 per
barrel at December 31, 1994 to $17.25 per barrel at April 1, 1995. Based on
April 1, 1995 prices the standardized measure of discounted future net cash
flows, exclusive of amounts attributable to volumetric production payments,
would have been approximately $193,600,000 at December 31, 1994.
CHANGES IN ACCOUNTING
The Company changed its method of accounting for oil and gas sales from the
sales method to the entitlements method effective January 1, 1994. Under the
sales method previously used by the Company, all proceeds from production
credited to the Company were recorded as revenue until such time as the Company
had produced its share of related reserves. Under the entitlements method,
revenue is recorded based upon the Company's share of volumes sold, regardless
of whether the Company has taken its proportionate share of volumes produced.
Under the entitlements method, the Company records a receivable or payable to
the extent it receives less or more than its proportionate share of the related
revenue. The Company believes that the entitlements method is preferable
because it allows for recognition of revenue based on the Company's actual share
of jointly owned production and provides a better matching of revenue and
related expenses.
The cumulative effect of the change for the periods through December 31, 1993,
was a charge of $13,990,000. The effect of this change on 1994 was an increase
in earnings from operations of $3,584,000 and an increase in
25
<PAGE>
production volumes of 1,555,000 MCF. There were no related income tax effects
in 1994. As the Company adopted this change in the fourth quarter of 1994,
previously reported 1994 quarterly information has been restated to reflect the
change effective January 1, 1994. See Note 15 for restated selected quarterly
financial data.
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," (SFAS No. 106) required the
Company to accrue expected costs of providing postretirement benefits to
employees and the employees' beneficiaries and covered dependents. The Company
adopted the provisions of SFAS No. 106 in the first quarter of 1993. The
estimated accumulated postretirement benefit obligation as of January 1, 1993
was approximately $4,822,000. This amount, reduced by applicable income tax
benefits, was charged to operations in the first quarter of 1993 as the
cumulative effect of a change in accounting principle. The annual net
postretirement benefit cost (included in total overhead costs) was approximately
$510,000 for 1994 and $483,000 for 1993.
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (SFAS No. 109), required the Company to adopt the liability method of
accounting for income taxes. The Company adopted such method on a prospective
basis as of January 1, 1993 and, as such, prior periods have not been restated.
The cumulative effect of adopting SFAS No. 109 as of January 1, 1993 resulted in
a reduction of the net amount of deferred income taxes recorded as of December
31, 1992 of approximately $2,060,000. This amount was credited to operations in
the first quarter of 1993 as the cumulative effect of a change in accounting
principle.
LIQUIDITY AND CAPITAL RESOURCES
RECENT DEVELOPMENTS
On April 17, 1995, the Company signed letters of intent with The Anschutz
Corporation (Anschutz) and with Joint Energy Development Investments Limited
Partnership (JEDI), an affiliate of Enron Corp., in each case as described
below.
The Anschutz letter of intent contemplates that Anschutz will purchase
18,800,000 shares of the Company's common stock and shares of newly-issued
preferred stock that are convertible into 6,200,000 additional shares of
common stock for a total consideration of $45,000,000, or $1.80 per share. The
preferred stock will have a liquidation preference and will receive dividends
ratably with the common stock. The investment will be made in two closings.
In the first closing, expected to occur in late April 1995, Anschutz will loan
the Company $9,900,000 for a term of 9 months. The loan will bear interest at
8% per annum for 16 weeks and at 12.5% per annum thereafter. The loan will be
secured by unencumbered oil and gas properties owned by the Company, the
preferred stock of Archean Energy Ltd. and certain other assets acceptable to
Anschutz. The loan may be converted into 5,500,000 shares of Forest's common
stock at Anschutz's election, but the loan must be so converted at the second
closing. At the second closing, expected to occur by July 1995 following
receipt of shareholder approval of the transactions then contemplated by the
letters of intent, Anschutz will purchase 13,300,000 shares of common stock
and the convertible preferred stock. In connection with this purchase, Anschutz
will agree to certain voting, acquisition, and transfer limitations regarding
shares of common stock for five years after the second closing, including
(a) a limit on voting, subject to certain exceptions, that would require
Anschutz to vote all shares of common stock acquired by Anschutz in the
transaction in excess of an amount equal to 19.99% of the shares of common stock
then outstanding in the same proportion as all other shares of common stock are
voted, (b) a limit on the number of persons associated with Anschutz that may at
any time be elected as directors of the Company and (c) a limit on the
acquisition of additional shares of common stock by Anschutz (whether pursuant
to the exercise of the $2.10 warrants or the option received from JEDI, each as
described below, or otherwise), subject to certain exceptions, that would
prohibit any acquisition by Anschutz that would result in Anschutz owning 40% or
more of the shares of common stock then issued and outstanding. While the
foregoing limitations are in effect, Anschutz will have a minority
representation on the board of directors.
The JEDI letter of intent contemplates that, at the second closing referred to
above, Forest and JEDI will restructure JEDI's existing loan currently having a
principal balance of approximately $62,100,000. In exchange for certain
warrants referred to below, JEDI will relinquish the net profits interest that
it holds in certain Forest properties and will reduce the interest rate relating
to the loan. As a result of the loan restructuring and the issuance of the
warrants, the Company anticipates a reduction of the recorded amount of the
related liability to approximately $45,000,000 and a reduction of interest
expense of approximately $2,100,000 per annum. In addition, beginning 18 months
after the second closing, the Company may prepay the loan at any time and may
tender its interest in the underlying properties in full satisfaction of the
loan.
The JEDI letter of intent also contemplates that, at the second closing, JEDI
will receive warrants to purchase 11,250,000 shares of the Company's common
stock for $2.00 per share and warrants to purchase 19,444,444 shares of common
stock at $2.10 per share. The $2.00 warrants expire on the earlier of either
the payment in full of the JEDI loan or December 31,2002, but no sooner than
18 months after the Second closing, except that the Company may terminate the
warrants at any time beginning 18 months after the second closing if the average
closing price of the common stock for 90 days preceding the termination is in
excess of $2.50 per share. For the first 18 months after the second closing,
the $2.00 warrants may be exercised only on the dates and in the respective
numbers of shares required to be delivered by JEDI to Anschutz pursuant to the
exercise of the option granted by JEDI to Anschutz, as described below. The
$2.10 warrants are exercisable during the first 18 months after the second
closing, subject to extension in certain circumstances to 36 months after the
second closing. The letters of intent also contemplate that, at the second
closing, JEDI will assign to Anschutz the $2.10 warrants and will grant to
Anschutz an option to purchase up to 11,250,000 shares of common stock during
the first 18 months after the second closing.
The letters of intent require the Company to pay Anschutz and JEDI certain
fees and expenses in connection with the letters of intent and the transactions
contemplated thereby in certain circumstances. The Anschutz letter of intent
requires the Company to pay to Anschutz a fee (called a subsequent event fee) of
up to $2,500,000 upon the occurence of certain events prior to the second
closing (or, if the second closing does not occur, April 17, 1996), such as a
merger, consolidation or
26
<PAGE>
other business combination between the Company and a person other than Anschutz.
In the Anschutz letter of intent, the Company has agreed not to solicit
proposals for transactions that would require the Company to pay a subsequent
event fee and to keep Anschutz generally informed regarding the receipt and
disposition by the Company of proposals regarding such transactions made by
other persons.
The transactions contemplated by the letters of intent are subject to, among
other things, the preparation and execution of definitive documentation
satisfactory to the parties and to the approval of Forest's board of directors
and certain of its creditors. The purchase by Anschutz of common stock at the
second closing, the restructure of JEDI's existing loan and the transactions
between Anschutz and JEDI described above are also subject to, among other
things, the prior approval of Forest's shareholders and Hart-Scott-Rodino
clearance. While the Company's short-term and long-term liquidity would be
significantly improved by the conclusion of the transactions described above,
and although management believes the conditions to the closing of the
transactions can be satisfied, there can be no assurance that the transactions
will close on the terms and on the dates referred to above, or at all.
SHORT-TERM LIQUIDITY. During 1994 and the first quarter of 1995, the Company's
operating cash flows and working capital were adversely affected by a severe
industry-wide decline in the price of natural gas. The prices the Company
receives for its future oil and natural gas production will significantly impact
future operating cash flows. No prediction can be made as to the prices the
Company will receive for its future oil and gas production.
Since December 31, 1994, the Company has taken steps and committed to certain
actions to address its short-term liquidity needs, including the recent
developments described above. Key short-term actions taken and committed to
are set forth below.
The Company has reduced its budgeted general and administrative expenditures for
1995 principally through a workforce reduction in March 1995. As a result,
total overhead for 1995 is expected to decrease by approximately $4,000,000
compared to 1994 or by approximately 20%.
In response to current market conditions, the Company has reduced its budgeted
capital expenditures to those required to maintain its producing oil and gas
properties as well as certain essential development, drilling and other
activities. The Company's 1995 budgeted expenditures for exploration and
development are approximately $5,700,000, and $12,300,000, respectively,
including capitalized overhead of $2,300,000 and $3,600,000, respectively. The
planned levels of capital expenditures could be further reduced if the Company
experiences lower than anticipated net cash provided by operations or other
liquidity needs.
The Company has a secured credit facility (the Credit Facility) with The Chase
Manhattan Bank, NA. (Chase) as agent for a group of banks. Under the Credit
Facility, the Company may borrow up to $17,500,000 for acquisition or
development of proved oil and gas reserves and up to $32,500,000 for working
capital and general corporate purposes, subject to semi-annual redetermination
at the banks' discretion. The total borrowing capacity of the Company under the
Credit Facility is $50,000,000. In March 1995, the banks completed their most
recent semi-annual redetermination of the Credit Facility and advised the
Company that the maximum borrowing capacity would be maintained at $50,000,000.
However, the amount of the maximum borrowings under the Credit Facility is at
the discretion of the banks and is subject to change at any time.
The Credit Facility is secured by a lien on, and a security interest in, a
majority of the Company's proved oil and gas properties and related assets
(subject to prior security interests granted to holders of volumetric production
payment agreements), a pledge of accounts receivable, material contracts and the
stock of material subsidiaries, and a negative pledge on remaining assets. The
maturity date of the Credit Facility is December 31, 1996. Under the terms of
the Credit Facility, the Company is subject to certain covenants and financial
tests (which may from time to time restrict the Company's activities), including
restrictions or requirements with respect to working capital, net cash flow,
additional debt, asset sales, mergers, cash dividends on capital stock and
reporting responsibilities. At December 31, 1994 the outstanding balance under
this facility was $33,000,000, and the Company was in compliance with the
covenants of the Credit Facility. The Company currently anticipates that it may
not meet the Credit Facility's working capital and/or interest coverage ratio
tests during 1995. Management believes that any instances of noncompliance
can be cured within the period of time permitted or that waivers can be obtained
from the banks, although there can be no assurance that this will be the case.
At March 31, 1995, the outstanding balance under the Credit Facility was
$45,000,000. The Company has used the facility for a $1,500,000 letter of
credit, leaving an available borrowing capacity of $3,500,000, which the
Company intends to use to meet monthly cash flow requirements.
On April 13, 1995 Forest sold to a bank a participation interest in Forest's
claim in a bankruptcy proceeding as described in Item 3. Legal Proceedings.
Consideration received consisted of a $4,000,000 nonrecourse loan, in exchange
for which the bank will receive, solely from the proceeds of the bankruptcy
claim, an amount equal to the loan principal plus accrued interest at 16.5% per
annum plus 25% of the excess, if any, of the proceeds over the loan principal
and interest. The Company may, under certain conditions, limit the overall cost
of financing to 23.5% per annum by exercising its option to repurchase the
bank's interest in the bankruptcy claim prior to receipt of any proceeds of the
claim. Proceeds from this sale will be used for working capital needs.
Based on the Company's actions taken to date and its plans, including the
recent developments described above, management believes the Company
will have adequate sources of short-term liquidity to meet its working capital
needs, fund capital expenditures at reduced levels, and meet its current debt
service obligations.
CASH FLOW. Historically, one of the Company's primary sources of capital has
been funds provided by operations, which has varied dramatically in prior
periods depending upon factors such as natural gas contract settlements and
price fluctuations which are difficult to predict.
27
<PAGE>
The following summary table reflects comparative cash flows for the Company for
the periods ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
----- ------ -----
(In Thousands)
<S> <C> <C> <C>
Funds provided by operations (A) $ 60,987 52,667 24,433 (B)
Net cash provided by operating activities 42,546 41,722 45,991 (C)
Net cash used by investing activities (32,307)(D) (170,134) (83,354)
Net cash provided (used) by financing activities (14,231) 71,886 30,846
<FN>
(A) Funds provided by operations consists of net cash provided by operating
activities adjusted for the change in working capital and non-cash items.
(B) Excludes $36,429,000 of net proceeds associated with the ONEOK settlement.
(C) Excludes $51,250,000 of revenue associated with the ONEOK settlement in
1992.
(D) Includes approximately $4,400,000 representing repayment of an advance by
the Company's Canadian affiliate.
</TABLE>
LONG-TERM LIQUIDITY. The Company has historically addressed its long-term
liquidity needs through the use of nonrecourse production-based financing and
through issuance of debt and common stock when market conditions permit.
Significant events affecting the Company's long-term liquidity over the past
few years are discussed below.
In December, 1992, the Company received gross proceeds of $51,250,000 as a
result of the ONEOK settlement. The net proceeds, after payment of related
royalties and production taxes, were approximately $36,429,000. Pursuant to the
terms of its 12 3/4% Senior Secured Notes, the Company was required to make an
offer to purchase $16,000,000 principal amount of the 12 3/4% Senior Secured
Notes at a purchase price of 100% of their principal amount plus accrued
interest to the date of purchase. Pursuant to such offer, the Company purchased
approximately $3,926,000 principal amount of 12 3/4% Senior Secured Notes in
February, 1993. The remainder of the net proceeds were used for general
corporate purposes, including working capital, debt reduction and the
acquisition of oil and gas properties.
On June 15, 1993, the Company issued 11,080,000 shares of Common Stock for $5.00
per share in a public offering. The net proceeds from the issuance of the
shares totalled approximately $51,506,000 after issuance costs and underwriting
fees, of which the Company used approximately $30,300,000 to purchase or redeem
a portion of its 12 3/4% Senior Secured Notes. The remainder of the net
proceeds was used for general corporate purposes, including working capital,
debt reduction and the acquisition of oil and gas properties.
On September 8, 1993, the Company completed a public offering of $100,000,000
aggregate principal amount of 11-1/4% Senior Subordinated Notes due September 1,
2003. The 11 1/4% Senior Subordinated Notes were issued at a price of 99.259%
yielding 11.375% to the holders. On October 13, 1993 the Company used the net
proceeds from the sale of the 11 1/4% Senior Subordinated Notes of approximately
$95,827,000, together with approximately $19,400,000 of available cash, to
redeem all of its outstanding 12 3/4% Senior Secured Notes and long-term
subordinated debentures.
On November 9, 1993, the Company purchased $308,000 principal amount of its 5
1/2% Convertible Subordinated Debentures. The remaining $7,171,000 principal
amount of the 5 1/2% Debentures was redeemed February 1, 1994.
On December 30, 1993, the Company entered into a nonrecourse secured loan
agreement (the Enron loan) arranged by Enron Finance Corp., an affiliate of
Enron Gas Services. For a further discussion of the Enron loan, see
"Nonrecourse Secured Loan and Dollar-Denominated Production Payment" below.
This financing provided acquisition capital, and capital to execute Forest's
exploitation strategy.
28
<PAGE>
Many of the factors which may affect the Company's future operating performance
and long-term liquidity are beyond the Company's control, including, but not
limited to, oil and natural gas prices, governmental actions and taxes, the
availability and attractiveness of properties for acquisition, the adequacy and
attractiveness of financing and operational results. The Company continues to
examine alternative sources of long-term liquidity, including public and private
issuances of equity and refinancing debt with equity.
VOLUMETRIC PRODUCTION PAYMENTS. Through December 31, 1994, the Company received
approximately $139,058,000 (net of fees) from the sale of volumetric production
payments and, in return, committed to deliver from the subject properties
approximately 80.1 BCF of natural gas and 770,000 barrels of oil to entities
associated with Enron Corp. (Enron). As of December 31, 1994, the volumes
remaining to be delivered were approximately 19.1 BCF of natural gas and 261,000
barrels of oil. Amounts received for volumetric production payments are
recorded as deferred revenue, which is amortized as sales are recorded based
upon the scheduled deliveries under the production payment agreements.
The Company is required to deliver the scheduled volumes from the subject
properties or to make a cash payment for volumes produced but not delivered, in
combination not to exceed a specified percentage of monthly production. If
production levels are not sufficient to meet scheduled delivery commitments, the
Company must account for and make up such shortages, at market-based prices,
from future production.
The purchaser of a volumetric production payment determines the amount paid to
the Company for the production payment by calculating the net present value of
the scheduled deliveries priced using the purchaser's assumed future prices.
However, the sales price per MCFE recorded by the Company upon delivery of
production payment volumes is determined by dividing the net proceeds from the
sale of the production payment by the total volumes scheduled to be delivered.
This price is therefore fixed at the inception of the production payment and
does not change. There is no interest expense recorded with respect to a
volumetric production payment, the interest factor having been effectively
netted against the calculated sales price. In addition, the Company must pay
applicable royalties on volumes delivered and is responsible for production-
related costs associated with operating the properties subject to the production
payment agreements. These accounting treatments should be considered when
assessing the Company's financial statements and related information, including
information presented with respect to cash flows and average prices for volumes
sold under fixed contracts.
Deferred revenue relating to production payments was $35,908,000 as of December
31, 1994. The annual amortization of deferred revenue and the corresponding
delivery and net sales volumes are set forth below:
<TABLE>
<CAPTION>
Net sales volumes
Volumes required to be attributable to production
delivered to Enron payment deliveries (1)
---------------------- --------------------------
Annual amortization Natural Natural
of deferred revenue Oil Gas Oil Gas
(In Thousands) (MBBLS) (MMCF) (MBBLS) (MMCF)
------------------- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C>
1995 $ 20,770 174 11,045 145 8,899
1996 7,546 87 3,721 74 2,998
1997 2,439 -- 1,410 -- 1,136
1998 1,593 -- 892 -- 719
Thereafter 3,560 -- 1,994 -- 1,606
----- -- ----- -- -----
$ 35,908 261 19,062 219 15,358
------ --- ------ --- ------
------ --- ------ --- ------
<FN>
(1) Represents volumes required to be delivered to Enron net of estimated
royalty volumes.
</TABLE>
NONRECOURSE SECURED LOAN AND DOLLAR-DENOMINATED PRODUCTION PAYMENT. Under the
terms of the Enron loan agreement and the dollar-denominated production payment,
the Company is required to make payments based on the net proceeds, as defined,
from certain subject properties. The terms of the Enron loan will be
restructured based on the terms of a letter of intent as described in "Recent
Developments."
29
<PAGE>
The Enron loan, which bears annual interest at the rate of 12.5%, was recorded
at a discounted amount to reflect the conveyance to the lender of a 20% interest
in the net profits, as defined, of properties located in south Texas. At
December 31, 1994 the principal amount of the loan was $61,717,000 and the
recorded liability was $57,840,000. Under the terms of the Enron loan,
additional funds may be advanced to fund a portion of the development projects
which will be undertaken by the Company on the properties pledged as security
for the loan. Payments of principal and interest under the Enron loan are due
monthly and are equal to 90% of total net operating income from the secured
properties, reduced by 80% of allowable capital expenditures, as defined. The
Company's current estimate, based on expected production and prices, budgeted
capital expenditure levels and expected discount amortization, is that 1995
payments will reduce the recorded liability by approximately $524,000.
Estimated liability reductions, including required principal payments, for 1996
through 1999, under the same production, pricing, capital expenditure and
discount scenario are approximately $11,280,000, $18,741,000, $15,119,000 and
$9,113,000, respectively. Payments, if any, under the net profits conveyance
will commence upon repayment of the principal amount of the Enron loan and will
cease when the lender has received an internal rate of return, as defined, of
18% (15.25% through December 31, 1995). Properties to which approximately 22%
of the Company's estimated proved reserves are attributable, on an MCFE
equivalent basis, are dedicated to repayment of the Enron loan.
Under the provisions of the Enron loan, the Company is required to make
periodic principal payments, beginning in February 1996, if the outstanding
balance of the loan exceeds specified balances and the cash flow (as defined)
from the mortgaged properties is less than specified minimums. Based upon
current projections, the Company anticipates that these provisions will require
a significant principal payment in February 1996 to avoid an event of default.
As described above, the Company has signed a letter of intent to restructure
the loan.
The original amount of the dollar-denominated production payment was
$37,550,000, which was recorded as a liability of $28,805,000 after a discount
to reflect a market rate of interest. At December 31, 1994 the remaining
principal amount was $23,373,000 and the recorded liability was $18,534,000.
Under the terms of this production payment, the Company must make a monthly cash
payment which is the greater of a base amount or 85% of the net proceeds from
the subject properties, as defined, except that the amount required to be paid
in any given month shall not exceed 100% of the net proceeds from the subject
properties. The Company retains a management fee equal to 10% of sales from the
properties, which is deducted in the calculation of net proceeds. The Company's
current estimate, based on expected production and prices, budgeted capital
expenditure levels and expected discount amortization, is that 1995 payments
will reduce the recorded liability by approximately $1,112,000. Estimated
liability reductions for 1996 through 1999, under the same production, pricing,
capital expenditure and discount scenario are approximately $811,000,
$1,177,000, $2,988,000 and $4,220,000, respectively. Properties to which
approximately 8% of the Company's estimated proved reserves are attributable, on
an MCFE basis, are dedicated to this production payment financing through July
1999.
HEDGING PROGRAM. In addition to the volumes of natural gas and oil dedicated to
volumetric production payments, the Company has also used energy swaps and other
financial agreements to hedge against the effects of fluctuations in the sales
prices for oil and natural gas. In a typical swap agreement, the Company
receives the difference between a fixed price per unit of production and a price
based on an agreed upon third-party index if the index price is lower. If the
index price is higher, the Company pays the difference. The Company's current
swaps are settled on a monthly basis. At December 31, 1994, the Company had
natural gas swaps and collars for an aggregate of approximately 27.5 BBTU
(billion British Thermal Units) per day of natural gas during 1995 at fixed
prices (NYMEX basis) ranging from $1.90 to $2.38 per MMBTU (million British
Thermal Units) and an aggregate of approximately 16.7 BBTU per day of natural
gas during 1996 at fixed prices and floors ranging from $1.96 to $2.37 per
MMBTU. At December 31, 1994 the Company had oil swaps for an aggregate of
approximately 1,300 barrels per day of oil during 1995 at fixed prices ranging
from $16.70 to $17.75 (NYMEX basis) and an aggregate of approximately 1,000
barrels per day of oil from January, 1996 through June, 1996 at fixed prices
ranging from $16.70 to $17.75 per barrel.
30
<PAGE>
OPTION AGREEMENT. In 1993, under another agreement (the Option Agreement), the
Company paid a premium of $516,000 in conjunction with the closing of the Enron
loan agreement. The payment of this premium gave Forest the right to set a
floor price of $1.70 per MMBTU on a total of 18,400 BBTU of natural gas over a
five year period commencing January 1, 1995. In order to exercise this right to
set a floor, the Company must pay an additional premium of 10 CENTS per MMBTU,
effectively setting the floor at $1.60 per MMBTU. The option agreement is
broken into five calendar year periods with the option for each calendar year
expiring four trading days prior to the last trading day for the January NYMEX
contract for that year. The Company was able to sell its 1995 option, covering
approximately 4,300 BBTU, for $25,000 a few days prior to expiration when the
1995 swap price was approximately $1.73 per MMBTU. The options for calendar
years 1996 through 1999 remain in place.
SUMMARY OF CASH FLOW CONSIDERATIONS AND EXPOSURE TO PRICE AND RESERVE RISK.
Pursuant to certain of the Company's financing arrangements, significant amounts
of production are contractually dedicated to production payments and the
repayment of nonrecourse debt over the next five years (dedicated volumes). The
dedicated volumes decrease over the next five years and also decrease as a
percentage of the Company's total production during this period. The production
volumes not contractually dedicated to repayment of nonrecourse debt
(undedicated volumes) are relatively stable but increase as a percentage of the
Company's total production over the next five years. This relative stability of
undedicated volumes is due to the fact that the decrease in dedicated volumes
corresponds generally to the Company's estimates of the decrease in its total
production. In the Company's opinion, the relative stability of undedicated
volumes should provide a more constant level of cash flow available for
corporate purposes other than debt repayment. The following table presents, on
a percentage basis, the Company's estimates of dedicated and undedicated volumes
as a percentage of estimated total production:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Dedicated volumes 47% 44% 38% 39% 39% 18% 33%
Undedicated volumes 53 56 62 61 61 82 67
--- --- --- --- --- --- ---
Total production 100% 100% 100% 100% 100% 100% 100%
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
</TABLE>
As a result of volumetric production payments, energy swaps and fixed contracts,
the Company currently estimates that approximately 59% of its natural gas
production and 51% of its oil production will not be subject to price
fluctuations from January 1995 through December 1995. It is estimated that
existing volumetric production payments, energy swaps, collars and fixed
contracts currently cover approximately 41% (including the option to purchase
the $1.70 floor described above) of the Company's natural gas production and 23%
of its oil production for the year ending December 31, 1996. Currently, it is
the Company's intention to commit no more than 75% of its anticipated total
production and no more than 85% of its anticipated undedicated production to
such arrangements at any point in time. See "Hedging Program" above.
The Company's hedging strategy for dedicated volumes differs from that for
undedicated volumes. The Company believes that hedging of dedicated volumes
provides for greater assurance of debt repayment and decreased financial risk.
The Company believes that hedging undedicated volumes is also warranted in order
to facilitate its short-term planning and budgeting. The Company has not hedged
significant amounts of undedicated volumes beyond 36 months. The Company may
consider long-term hedging of undedicated volumes in the future if product
prices rise to significantly higher levels. The Company believes that stability
of cash flow should be considered by separately reviewing its hedge position
relative to dedicated volumes and undedicated volumes. The following table
reflects the estimated hedge position as a percentage of the Company's
undedicated volumes:
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Volumes not hedged 61% 79% 84% 99% 99% 100% 91%
Volumes hedged 39 21 16 1 1 0 9
-- -- -- -- -- --- --
Total undedicated volumes 100% 100% 100% 100% 100% 100% 100%
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
</TABLE>
31
<PAGE>
The Company believes it is important to hedge volumes dedicated to production
payments or required to repay debt. The following table reflects the estimated
hedge position as a percentage of the Company's dedicated volumes. (Volumes
attributable to volumetric production payments are treated as hedged for
purposes of this presentation):
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Volumes not hedged 21% 39% 49% 69% 74% 91% 55%
Volumes hedged 79 61 51 31 26 9 45
-- -- -- -- -- -- --
Total dedicated volumes 100% 100% 100% 100% 100% 100% 100%
--- --- --- --- --- --- ---
--- --- --- --- --- --- ---
</TABLE>
Estimates of commercially recoverable oil and gas reserves and of the future net
cash flows therefrom are based upon a number of variable factors and
assumptions, such as historical production from the subject properties,
comparison with other producing properties, the assumed effects of regulation by
governmental agencies and assumptions concerning future oil and gas prices and
future operating costs, severance and excise taxes, abandonment costs,
development costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. All such estimates are to some degree
speculative. Actual production, revenues, severance and excise taxes,
development expenditures, workover and remedial expenditures, abandonment
expenditures and operating expenditures with respect to the Company's reserves
will likely vary from such estimates, and such variances may be material.
32
<PAGE>
CAPITAL EXPENDITURES. The Company's expenditures for property acquisition,
exploration and development for the past three years, were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1994 1993 1992
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Property acquisition costs:
Proved properties $ 9,553 121,882 70,466
Undeveloped properties 209 23,034 18,306
------ ------- -------
9,762 144,916 88,772
Exploration costs:
Direct costs $15,229 4,923 1,391
Overhead capitalized 464 510 906
------ ------- -------
15,693 5,433 2,297
Development costs:
Direct costs $10,000 13,424 9,315
Overhead capitalized 7,089 7,048 6,243
------ ------- -------
17,089 20,472 15,558
------ ------- -------
$42,544 170,821 106,627
------ ------- -------
------ ------- -------
</TABLE>
In 1994, the Company's property acquisition expenditures of $9,762,000 resulted
in proved reserve additions of an estimated 8.2 BCF of natural gas and 17,000
barrels of oil, as measured at the closing dates of the acquisitions for
financial accounting purposes. In 1993, the Company's property acquisition
expenditures of $144,916,000 resulted in proved reserve additions of an
estimated 94.7 BCF of natural gas and 1.7 million barrels of oil, as measured at
the closing dates, as well as eight exploitation prospects and three exploratory
offshore blocks. In 1992, the Company's property acquisition expenditures, as
measured at the closing dates, of $88,772,000 resulted in proved reserve
additions of an estimated 63 BCF of natural gas and 5.8 million barrels of oil,
including reserves acquired as a result of gas balancing settlements.
The Company's 1995 budgeted expenditures for exploration and development are
approximately $5,700,000, and $12,300,000, respectively, including capitalized
overhead of $2,300,000 and $3,600,000, respectively.
During 1995, the Company intends to continue a strategy of acquiring reserves
that meet its investment criteria; however, no assurance can be given that the
Company can locate or finance any property acquisitions. In order to finance
future acquisitions, the Company is exploring many options including, but not
limited to: a variety of debt instruments; sale of production payments or
other nonrecourse financing; the issuance of net profits interests; sales of
non-strategic properties, prospects and technical information or joint venture
financing. Availability of these sources of capital and, therefore, the
Company's ability to execute its operating strategy will depend upon a number
of factors, some of which are beyond the control of the Company. If adequate
sources of liquidity are not available to the Company in 1995, the amount
invested in exploration, development and reserve acquisitions may be reduced due
principally to the desire of the Company to protect its capital in the event of
inadequate liquidity.
OTHER MATTERS
GAS BALANCING. The Company changed its method of accounting for oil and gas
sales from the sales method to the entitlements method effective January 1,
1994. Under the sales method previously used by the Company, all proceeds from
production credited to the Company were recorded as revenue until such time as
the Company had produced its share of related reserves. Under the entitlements
method, revenue is recorded based upon the Company's share of volumes sold,
regardless of whether the Company has taken its proportionate share of volumes
33
<PAGE>
produced. Under the entitlements method, the Company records a receivable or
payable to the extent it receives less or more than its proportionate share of
the related revenue.
As of December 31, 1994 the Company had produced approximately 8.4 BCF more than
its entitled share of production. The undiscounted value of this imbalance is
approximately $14,260,000, of which $5,735,000 is reflected on the balance sheet
as a short-term liability and the remaining $8,525,000 is reflected on the
balance sheet as a long-term liability.
UNFUNDED PENSION LIABILITIES. In 1994, in response to market conditions, the
Company increased from 7.5% to 9% the discount rate used in determining the
actuarial present value of the projected benefit obligations under its qualified
defined benefit trusteed pension plan and its supplemental executive retirement
plan. As a result of the change in the discount rate, the Company reduced the
liability representing the unfunded liabilities of these plans by approximately
$1,570,000 with a corresponding increase in capital surplus. The Company does
not expect the change in discount rate to have a significant impact on future
expense due to a pension plan curtailment effected May 31, 1991. The Company
currently is not required to make a contribution to the pension plan under the
minimum funding requirements of ERISA, but may choose to do so or may be
required to do so in the future.
NATURAL GAS SALES CONTRACTS. The Company had two natural gas sales contracts
with Columbia Gas Transmission Corp. (Transmission), a subsidiary of Columbia
Gas System (CGS). On July 31, 1991, CGS and Transmission filed Chapter 11
bankruptcy petitions with the United States Bankruptcy Court for the District of
Delaware. Both contracts have been rejected pursuant to the bankruptcy
proceedings. The Company has filed a proof of claim in the bankruptcy
proceeding consisting of a secured claim of $1,600,000 based on Louisiana vendor
lien laws and an unsecured claim relating to the rejection of the contracts.
The secured claim arises from Transmission's failure to pay the contract price
for a period of time prior to rejection of the contracts. The unsecured claim
was calculated on an undiscounted basis and without any assumption of mitigation
of damages through spot market sales. No prediction can be given as to when or
how these matters will ultimately be concluded. The Company sold a
participation interest in the claim to a bank on April 13, 1995, as discussed
above under "Liquidity and Capital Resources".
NET OPERATING LOSS AND TAX CREDIT CARRYFORWARDS. At December 31, 1994, the
Company estimated that for United States federal income tax purposes, it had
consolidated net operating loss carryforwards of $57,044,000, depletion
carryforwards of approximately $19,879,000 and investment tax credit
carryforwards of approximately $3,674,000. The availability of some of these tax
attributes to reduce current and future taxable income of the Company is subject
to various limitations under the Internal Revenue Code of 1986, as amended (the
Code). In particular, the Company's ability to utilize such tax attributes
could be severely restricted due to the occurrence of an "ownership change"
within the meaning of Section 382 of the Code resulting from the 1991
recapitalization. At December 31, 1994, the Company estimated that net
operating loss and investment tax credit carryforwards would be limited to
offset current taxable income to the extent described below.
Approximately $46,000,000 of the net operating loss carryforwards are not
subject to the provisions of Section 382 as they were generated subsequent to
the ownership change. Even though the Company is limited in its ability to use
the remaining net operating loss carryforwards under the general provisions of
Section 382, it may be entitled to use these net operating loss carryovers to
offset (a) gains recognized in the five years following the ownership change on
the disposition of certain assets, to the extent that the value of the assets
disposed of exceeds its tax basis on the date of the ownership change or (b) any
item of income which is properly taken into account in the five years following
the ownership change but which is attributable to periods before the ownership
change ("built-in gain"). The ability of the Company to use these net operating
loss carryovers to offset built-in gain first requires that the Company have
total built-in gains at the time of the ownership change which are greater than
a threshold amount. In addition, the use of these net operating loss
carryforwards to offset built-in gain cannot exceed the amount of the total
built-in gain.
The Company believes that due to the amount of built-in gain as of the date of
ownership change, and the recognition of such gain through December 31, 1994,
that there will be no significant limitation on the Company's ability to use
these net operating loss carryforwards or investment tax credit carryforwards.
34
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information concerning this Item begins on the following page.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
35
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Forest Oil Corporation:
We have audited the accompanying consolidated balance sheets of Forest Oil
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Forest Oil
Corporation and subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for oil and gas sales from the sales method to
the entitlements method effective January 1, 1994.
As discussed in Notes 6 and 10 of Notes to Consolidated Financial Statements,
the Company adopted the provisions of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" and Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" in 1993.
KPMG PEAT MARWICK LLP
Denver, Colorado
March 30, 1995, except as to Note 17
which is as of April 17, 1995
36
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1993
---- ----
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,869 6,949
Accounts receivable 20,418 25,257
Other current assets 2,231 3,309
---------- ----------
Total current assets 25,518 35,515
Property and equipment, at cost:
Oil and gas properties - full cost accounting method (Note 2) 1,171,887 1,140,656
Buildings, transportation and other equipment 12,649 12,420
---------- ----------
1,184,536 1,153,076
Less accumulated depreciation, depletion and valuation allowance 907,927 787,380
---------- ----------
Net property and equipment 276,609 365,696
Investment in and advances to affiliate (Note 3) 11,652 16,451
Other assets 11,053 9,093
---------- ----------
$ 324,832 426,755
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 4,445 3,894
Current portion of long-term debt (Notes 4 and 17) 1,636 11,542
Current portion of gas balancing liability 5,735 --
Accounts payable 26,557 28,348
Retirement benefits payable to executives and directors (Note 10) 630 553
Accrued expenses and other liabilities:
Interest 4,318 3,817
Other 4,297 1,857
---------- ----------
Total current liabilities 47,618 50,011
Commitments and contingencies (Notes 10 and 12)
Long-term debt (Notes 4 and 17) 207,054 194,307
Retirement benefits payable to executives and directors (Note 10) 3,505 4,135
Gas balancing liability 8,525 --
Other liabilities 16,136 22,918
Deferred revenue (Note 5) 35,908 67,228
Shareholders' equity (Notes 4, 7, 8 and 17):
Preferred stock 15,845 15,845
Common stock 2,829 2,825
Capital surplus 190,074 193,717
Accumulated deficit (199,499) (117,656)
Foreign currency translation (1,337) (785)
Treasury stock, at cost (1,826) (5,790)
---------- ----------
Total shareholders' equity 6,086 88,156
---------- ----------
$ 324,832 426,755
---------- ----------
---------- ----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
37
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993 1992
------- ------- -------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C>
Revenue:
Oil and gas sales:
Gas $ 91,309 77,249 72,011
Oil and condensate 22,874 25,341 26,299
Products and other 358 293 929
------- ------- -------
114,541 102,883 99,239
Miscellaneous, net 1,406 2,265 13,947
------- ------- -------
Total revenue 115,947 105,148 113,186
Expenses:
Oil and gas production 22,384 19,540 15,865
General and administrative 11,166 12,003 11,611
Interest 26,773 23,729 27,800
Depreciation and depletion 65,468 60,581 46,624
Provision for impairment of oil and gas properties 58,000 -- --
------- ------- -------
Total expenses 183,791 115,853 101,900
------- ------- -------
Earnings (loss) before income taxes, cumulative effects of changes in
accounting principles and extraordinary item (67,844) (10,705) 11,286
Income tax expense (benefit) (Note 6):
Current 9 254 435
Deferred -- (1,604) 3,553
------- ------- -------
9 (1,350) 3,988
------- ------- -------
Earnings (loss) before cumulative effects of changes in
accounting principles and extraordinary item (67,853) (9,355) 7,298
Cumulative effects of changes in accounting principles:
Oil and gas sales (Note 1) (13,990) -- --
Postretirement benefits, net of income tax benefit of $1,639,000 (Note 10) -- (3,183) --
Income taxes (Note 6) -- 2,060 --
------- ------- -------
(13,990) (1,123) --
Earnings (loss) before extraordinary item (81,843) (10,478) 7,298
Extraordinary item - extinguishment of debt, net of income tax benefit of
$4,652,000 in 1993 (Note 4) -- (10,735) --
------- ------- -------
Net earnings (loss) $ (81,843) (21,213) 7,298
------- ------- -------
------- ------- -------
Weighted average number of common shares outstanding 28,097 21,997 13,774
------- ------- -------
------- ------- -------
Net earnings (loss) attributable to common stock $ (84,004) (23,463) 4,950
------- ------- -------
------- ------- -------
Pro forma amounts assuming the change in accounting for
oil and gas sales is applied retroactively:
Earnings (loss) before cumulative effects of changes in
accounting principles and extraordinary item $ (3,962) 13,151
------- -------
------- -------
Net earnings (loss) (15,820) 13,151
------- -------
------- -------
</TABLE>
(continued on following page)
See accompanying Notes to Consolidated Financial Statements.
38
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993 1992
-------- ------- -------
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C>
Primary earnings (loss) per common share (1):
Earnings (loss) before cumulative effects of changes in accounting
principles and extraordinary item $ (2.49) (.53) .36
Cumulative effects of changes in accounting principles (.50) (.05) --
-------- ------- -------
Earnings (loss) before extraordinary item (2.99) (.58) .36
Extraordinary item - extinguishment of debt -- (.49) --
-------- ------- -------
Net earnings (loss) attributable to common stock $ (2.99) (1.07) .36
-------- ------- -------
-------- ------- -------
Pro forma amounts assuming the change in accounting for oil and
gas sales is applied retroactively:
Primary earnings (loss) per common share:
Earnings (loss) before cumulative effects of changes in
accounting principles and extraordinary item $ (.28) .78
------- -------
------- -------
Net earnings (loss) attributable to common stock $ (.82) .78
------- -------
------- -------
Fully diluted earnings (loss) per common share:
Earnings (loss) before cumulative effects of changes in
accounting principles and extraordinary item $ (.28) .51
------- -------
------- -------
Net earnings (loss) attributable to common stock $ (.82) .51
------- -------
------- -------
<FN>
(1) Fully diluted earnings (loss) per share was the same as primary earnings
(loss) per share in all years except 1992. In 1992, fully diluted earnings
per share was $.29.
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
39
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
$.75
CONVERTIBLE
PREFERRED COMMON CLASS B CAPITAL
STOCK STOCK STOCK SURPLUS
---------- ---------- --------- ---------
(In Thousands)
<S> <C> <C> <C> <C>
Balance December 31, 1991 $ 17,280 951 375 149,069
Net earnings -- -- -- --
$.75 Convertible Preferred Stock dividends
paid in Common Stock (Note 7) -- 153 -- (153)
Conversions of $.75 Convertible Preferred
Stock to Common Stock (66) 4 -- 62
Issuance of Common Stock in payment of
executive retirement liability (Note 10) -- 16 -- 173
Treasury stock contributed to the
Retirement Savings Plan and other -- 10 (10) (3,758)
Foreign currency translation -- -- -- --
--------- ------ ------ -------
Balance December 31, 1992 $ 17,214 1,134 365 145,393
Net loss -- -- -- --
Common Stock issued, net of
offering costs (Note 8) -- 1,108 -- 50,398
$.75 Convertible Preferred Stock dividends
paid in Common Stock (Note 7) -- 64 -- (64)
Conversions of $.75 Convertible Preferred
Stock to Common Stock (1,369) 87 -- 1,282
Reclassification of Class B to Common
Stock (Note 8) -- 396 (360) (36)
Exercise of employee stock options (Note 8) -- 13 -- 383
Stock issued to the Retirement Savings Plan
for profit sharing contributions (Note 10) -- 18 -- 597
Unfunded pension liability (Note 10) -- -- -- (3,038)
Treasury stock contributed to the
Retirement Savings Plan and other -- 5 (5) (1,198)
Foreign currency translation -- -- -- --
--------- ------ ------ -------
Balance December 31, 1993 $ 15,845 2,825 -- 193,717
Net loss -- -- -- --
Exercise of employee stock options (Note 8) -- 3 -- 102
$.75 Convertible Preferred Stock dividends
paid in cash (Note 7) -- -- -- (2,161)
Treasury stock issued to the Retirement
Savings Plan for profit sharing
contributions (Note 10) -- -- -- (824)
Treasury stock contributed to the
Retirement Savings Plan and other -- 1 -- (760)
Foreign currency translation -- -- -- --
--------- ------ ------ -------
Balance December 31, 1994 $ 15,845 2,829 -- 190,074
--------- ------ ------ -------
--------- ------ ------ -------
<CAPTION>
ACCUMU- FOREIGN
LATED CURRENCY TREASURY
DEFICIT TRANSLATION STOCK
--------- ------------- ---------
(In Thousands)
<S> <C> <C> <C>
Balance December 31, 1991 (103,741) 2,476 (11,570)
Net earnings 7,298 -- --
$.75 Convertible Preferred Stock dividends
paid in Common Stock (Note 7) -- -- --
Conversions of $.75 Convertible Preferred
Stock to Common Stock -- -- --
Issuance of Common Stock in payment of
executive retirement liability (Note 10) -- -- --
Treasury stock contributed to the
Retirement Savings Plan and other -- -- 4,215
Foreign currency translation -- (2,903) --
-------- ----- -------
Balance December 31, 1992 (96,443) (427) (7,355)
Net loss (21,213) -- --
Common Stock issued, net of
offering costs (Note 8) -- -- --
$.75 Convertible Preferred Stock dividends
paid in Common Stock (Note 7) -- -- --
Conversions of $.75 Convertible Preferred
Stock to Common Stock -- -- --
Reclassification of Class B to Common
Stock (Note 8) -- -- --
Exercise of employee stock options (Note 8) -- -- --
Stock issued to the Retirement Savings Plan
for profit sharing contributions (Note 10) -- -- --
Unfunded pension liability (Note 10) --
Treasury stock contributed to the
Retirement Savings Plan and other -- -- 1,565
Foreign currency translation -- (358) --
-------- ----- -------
Balance December 31, 1993 (117,656) (785) (5,790)
Net loss (81,843) -- --
Exercise of employee stock options (Note 8) -- -- --
$.75 Convertible Preferred Stock dividends
paid in cash (Note 7) -- -- --
Treasury stock issued to the Retirement
Savings Plan for profit sharing
contributions (Note 10) -- -- 1,035
Treasury stock contributed to the
Retirement Savings Plan and other -- -- 2,929
Foreign currency translation -- (552) --
-------- ----- -------
Balance December 31, 1994 (199,499) (1,337) (1,826)
-------- ----- -------
-------- ----- -------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
40
<PAGE>
FOREST OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993 1992
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings (loss) before cumulative effects of changes in
accounting principles and extraordinary item $ (67,853) (9,355) 7,298
Adjustments to reconcile earnings (loss) before cumulative effects of
changes in accounting principles and extraordinary item
to net cash provided by operating activities:
Depreciation and depletion 65,468 60,581 46,624
Provision for impairment of oil and gas properties 58,000 -- --
Deferred Federal income tax expense (benefit) -- (1,604) 3,553
Other, net 5,372 3,045 3,387
-------- -------- --------
60,987 52,667 60,862
Net changes in working capital and non-cash items:
(Increase) decrease in accounts receivable 4,839 2,264 (3,447)
(Increase) decrease in other current assets 1,078 375 (1,903)
Increase (decrease) in accounts payable 4,021 (12,668) 13,090
Increase (decrease) in accrued expenses and other liabilities 2,941 (1,078) 1,772
Proceeds from volumetric production payments 4,353 40,468 45,057
Amortization of deferred revenue (35,673) (40,306) (18,190)
-------- -------- --------
Net cash provided by operating activities 42,546 41,722 97,241
Cash flows from investing activities:
Capital expenditures for property and equipment (42,780) (171,166) (107,425)
Proceeds of sales of property and equipment, net 12,941 2,997 25,730
Increase in other assets, net (2,468) (1,965) (1,659)
-------- -------- --------
Net cash used by investing activities (32,307) (170,134) (83,354)
Cash flows from financing activities:
Proceeds of long-term bank debt 31,500 25,000 9,623
Repayments of long-term bank debt (23,500) -- (9,623)
Proceeds of nonrecourse secured loan 1,400 57,400 --
Proceeds of production payment -- -- 28,805
Repayments of production payment (2,771) (5,980) (1,520)
Proceeds of common stock offering, net of offering costs -- 51,506 --
Issuance of senior subordinated notes, net of offering costs -- 95,827 --
Redemptions and repurchases of subordinated debentures and secured notes (7,171) (148,918) (1,115)
Payment of preferred stock dividends (2,161) -- --
Deferred debt and exchange offer costs (772) (1,336) (285)
Increase (decrease) in cash overdraft 551 (1,347) 2,963
Increase (decrease) in other liabilities, net (11,307) (266) 1,998
-------- -------- --------
Net cash provided (used) by financing activities (14,231) 71,886 30,846
Effect of exchange rate changes on cash (88) (12) (110)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (4,080) (56,538) 44,623
Cash and cash equivalents at beginning of year 6,949 63,487 18,864
-------- -------- --------
Cash and cash equivalents at end of year $ 2,869 6,949 63,487
-------- -------- --------
-------- -------- --------
Cash paid during the year for:
Interest $ 23,989 23,123 26,079
-------- -------- --------
-------- -------- --------
Income taxes $ 9 452 177
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
41
<PAGE>
FOREST OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- - - --------------------------------------------------------------------------------
BASIS OF CONSOLIDATION - The consolidated financial statements include the
accounts of Forest Oil Corporation (the Company) and its wholly-owned
subsidiaries. Significant intercompany balances and transactions are
eliminated.
CASH EQUIVALENTS - For purposes of the statements of cash flows, the Company
considers all debt instruments with original maturities of three months or less
to be cash equivalents.
PROPERTY AND EQUIPMENT - The Company uses the full cost method of accounting for
oil and gas properties. Presently, the Company's operations are conducted in
the United States. All costs incurred in the acquisition, exploration and
development of properties (including costs of surrendered and abandoned
leaseholds, delay lease rentals, dry holes and overhead related to exploration
and development activities) are capitalized. Capitalized costs are depleted
using the units of production method. A reserve is provided for estimated
future costs of site restoration, dismantlement and abandonment activities as a
component of depletion. Unusually significant investments in unproved
properties, including related capitalized interest costs, are not depleted
pending the determination of the existence of proved reserves. As of
December 31, 1994, 1993 and 1992, there were undeveloped property costs of
$30,441,000, $41,216,000 and $18,306,000, respectively, in the United States
which were not being depleted.
Depletion per unit of production was determined based on conversion to common
units of measure using one barrel of oil as an equivalent to six MCF of natural
gas. Depletion per unit of production (MCFE) for each of the Company's cost
centers was as follows:
<TABLE>
<CAPTION>
UNITED STATES CANADA
------------- ------
<S> <C> <C>
1994 $1.13 -
1993 1.19 -
1992 1.21 1.19
</TABLE>
Capitalized costs less related accumulated depletion and deferred income taxes
may not exceed the sum of (1) the present value of future net revenue from
estimated production of proved oil and gas reserves; plus (2) the cost of
properties not being amortized, if any; plus (3) the lower of cost or estimated
fair value of unproved properties included in the costs being amortized, if any;
less (4) income tax effects related to differences in the book and tax basis of
oil and gas properties. As a result of this limitation on capitalized costs,
the accompanying financial statements include a provision for impairment of oil
and gas property costs of $58,000,000 in 1994. There was no impairment of oil
and gas property costs in 1993 or 1992.
Gain or loss is recognized only on the sale of oil and gas properties involving
significant reserves.
Buildings, transportation and other equipment are depreciated on the straight-
line method based upon estimated useful lives of the assets ranging from five to
forty-five years.
OIL AND GAS SALES - The Company changed its method of accounting for oil and gas
sales from the sales method to the entitlements method effective January 1,
1994. Under the sales method previously used by the Company, all proceeds from
production credited to the Company were recorded as revenue until such time as
the Company had produced its share of related reserves. Under the entitlements
method, revenue is recorded based upon the Company's share of volumes sold,
regardless of whether the Company has taken its proportionate share of volumes
produced.
42
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D):
- - - --------------------------------------------------------------------------------
Under the entitlements method, the Company records a receivable or payable to
the extent it receives less or more than its proportionate share of the related
revenue. The Company believes that the entitlements method is preferable
because it allows for recognition of revenue based on the Company's actual share
of jointly owned production and provides a better matching of revenue and
related expenses.
The cumulative effect of the change for the periods through December 31, 1993
was a charge of $13,990,000. The effect of this change on 1994 was an increase
in earnings from operations of $3,584,000 and an increase in production volumes
of 1,555,000 MCF. There were no related income tax effects in 1994. As the
Company adopted this change in the fourth quarter of 1994, previously reported
1994 quarterly information has been restated to reflect the change effective
January 1, 1994. See Note 15 for restated selected quarterly financial data.
The pro forma amounts shown on the consolidated statements of operations have
been adjusted for the effect of the retroactive application of the change and
related income taxes.
As of December 31, 1994 the Company had produced approximately 8.4 BCF more than
its entitled share of production. The estimated value of this imbalance is
approximately $14,260,000, which is reflected on the accompanying balance sheet
as a short-term liability of $5,735,000 and a long-term liability of $8,525,000.
HEDGING TRANSACTIONS - In order to minimize exposure to fluctuations in oil and
natural gas prices, the Company hedges the price of future oil and natural
gas production by entering into certain contracts and financial arrangements.
Gains and losses related to these hedging transactions are recognized as
adjustments to revenue recorded for the related production. Costs associated
with the purchase of certain hedge instruments are deferred and amortized
against revenue related to hedged production.
INCOME TAXES - The adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS No. 109), effective January 1, 1993
changed the Company's method of accounting for income taxes from the deferred
method to an asset and liability method. Previously, the Company deferred the
tax effects of timing differences between financial reporting and taxable
income. The asset and liability method requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between financial accounting bases and tax bases of assets and
liabilities.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities related to Canadian
investments are generally translated at current exchange rates, and related
translation adjustments are reported as a component of shareholders' equity.
Income statement accounts are translated at the average rates during the period.
EARNINGS (LOSS) PER SHARE - Primary earnings (loss) per share is computed by
dividing net earnings (loss) attributable to common stock by the weighted
average number of common shares and common share equivalents outstanding during
each period, excluding treasury shares. Net earnings (loss) attributable to
common stock represents net earnings (loss) less preferred stock dividend
requirements of $2,161,000 in 1994, $2,250,000 in 1993 and $2,348,000 in 1992.
Common share equivalents include, when applicable, dilutive stock options using
the treasury stock method and warrants using the if converted method.
Fully diluted earnings per share is computed assuming, in addition to the above,
(i) that convertible debentures were converted at the beginning of each period
or date of issuance, if later, with earnings being increased for interest
expense, net of taxes, that would not have been incurred had conversion taken
place, (ii) that convertible preferred stock was converted at the beginning of
each period or date of issuance, if later, and (iii) any additional dilutive
effect of stock options and warrants. The effects of these assumptions were
anti-dilutive in 1994 and 1993. The weighted average number of shares
outstanding on a fully-diluted basis was 26,515,000 for the year ended December
31, 1992.
RECLASSIFICATIONS - Certain amounts in the 1993 and 1992 financial statements
have been reclassified to conform to the 1994 financial statement presentation.
43
<PAGE>
(2) ACQUISITIONS:
- - - --------------------------------------------------------------------------------
During 1994, the Company completed acquisitions totaling $9,762,000, including
additional interests in properties acquired in 1993. In order to finance one of
the acquisitions, the Company sold a volumetric production payment for
approximately $4,353,000 (net of fees).
In May and December, 1993, the Company purchased interests in properties from
Atlantic Richfield Company (ARCO) for approximately $60,862,000. In conjunction
with the ARCO acquisitions, the Company sold volumetric production payments from
certain of the ARCO properties for approximately $40,468,000 (net of fees). In
December 1993, the Company purchased interests in offshore properties for
approximately $24,050,000 and interests in properties in south Texas for
approximately $59,458,000. In conjunction with these acquisitions, the Company
entered into a nonrecourse secured loan agreement for $51,600,000.
In February 1992, Forest I Development Company, a wholly-owned subsidiary of the
Company, purchased substantially all of the assets of Harbert Energy Corporation
and its associated entities in an acquisition accounted for as a purchase. The
purchase price of $40,400,000 was funded primarily through the sale of a dollar-
denominated production payment which was recorded at its present value of
$28,805,000. In July 1992, the Company purchased Transco Exploration and
Production Company (TEPCO) for approximately $45,000,000. In conjunction with
the acquisition, the Company sold a volumetric production payment from certain
of the TEPCO properties for approximately $38,500,000 (net of fees).
The Company's results of operations for the year ended December 31, 1993 include
the effects of the first ARCO acquisition since May 1, 1993 and the offshore
properties and the second ARCO acquisition since December 1, 1993. The
Company's results of operations for the year ended December 31, 1992 include the
effects of the Harbert and TEPCO acquisitions since February 1, 1992 and August
1, 1992, respectively.
(3) INVESTMENT IN AND ADVANCES TO AFFILIATE:
- - - --------------------------------------------------------------------------------
In May 1992, the Company transferred substantially all of its Canadian oil and
gas properties to a wholly-owned Canadian subsidiary, Forest Canada I
Development Ltd. (FCID). In September 1992, FCID sold its Canadian assets and
related operations to CanEagle Resources Corporation (CanEagle) for
approximately $51,250,000 in Canadian funds ($41,000,000 U.S.). CanEagle was
formed for the purpose of acquiring the assets and related operations of FCID.
In the transaction, FCID received cash of approximately $28,000,000 CDN
($22,400,000 U.S.), net of expenses, and provided financing in the aggregate
principal amount of $22,000,000 CDN ($17,600,000 U.S.). On June 24, 1994,
CanEagle sold a significant portion of its oil and gas properties in Canada to a
third party. In conjunction with this transaction, the Company received payment
of $6,124,000 CDN ($4,400,000 U.S.) representing principal and unpaid interest
on a CanEagle subordinated debenture held by the Company. In addition, the
Company exchanged its remaining investment in CanEagle for preferred shares of a
newly formed entity, Archean Energy, Ltd. (Archean).
The Company has accounted for the proceeds from the aforementioned transactions
as reductions in the carrying value of its investment in and advances to its
Canadian affiliates. The Company accounts for its investment in Canadian
affiliates in a manner analagous to equity accounting. Losses will be
recognized to the extent that the Canadian affiliates' losses are attributable
to the Company's interest. Earnings will be recognized only if realization is
assured. No earnings or losses attributable to the investment in Canadian
affiliates have been recognized in 1994, 1993 or 1992.
44
<PAGE>
(4) LONG-TERM DEBT:
- - - --------------------------------------------------------------------------------
Long-term debt at December 31, 1994 and 1993 consists of the following:
<TABLE>
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
Bank debt $ 33,000 25,000
Nonrecourse secured loan 57,840 53,101
Production payment obligation 18,534 21,305
11-1/4% Subordinated debentures 99,316 99,272
5-1/2% Subordinated debentures - 7,171
-------- -------
208,690 205,849
Less current portion (1,636) (11,542)
-------- -------
Long-term debt $207,054 194,307
-------- -------
-------- -------
</TABLE>
BANK DEBT:
The Company has a secured credit facility (The Credit Facility) with The
Chase Manhattan Bank, NA. (Chase) as agent for a group of banks. Under the
Credit Facility, the Company may borrow up to $17,500,000 for acquisition or
development of proved oil and gas reserves, and up to $32,500,000 for working
capital and general corporate purposes, subject to semi-annual redemption at the
banks' discretion. The total borrowing capacity of the Company under the Credit
Facility is $50,000,000. In March, 1995, the banks completed their most recent
semi-annual redetermination of the Credit Facility and advised the Company that
the maximum borrowing capacity would be maintained at $50,000,000. However,
the amount of the maximum borrowings under the Credit Facility is at the
discretion of the banks and is subject to change at any time.
The Credit Facility is secured by a lien on, and a security interest in, a
majority of the Company's proved oil and gas properties and related assets
(subject to prior security interests granted to holders of volumetric production
payment agreements), a pledge of accounts receivable, material contracts and the
stock of material subsidiaries, and a negative pledge on remaining assets. The
maturity date of the Credit Facility is December 31, 1996. Under the terms of
the Credit Facility, the Company is subject to certain covenants and
financial tests (which may from time to time restrict the Company's
activities), including restrictions or requirements with respect to working
capital, net cash flow, additional debt, asset sales, mergers, cash dividends
on capital stock and reporting responsibilities. At December 31, 1994 the
outstanding balance under the Credit Facility was $33,000,000 at interest rates
ranging from 7.255% to 8.875% and the Company was in compliance with the
covenants of the Credit Facility. The Company currently anticipates that it may
not meet the working capital and/or interest coverage ratio tests during 1995.
Management believes, however, that any instances of noncompliance can be cured
within the period of time permitted or that waivers can be obtained from the
banks.
NONRECOURSE SECURED LOAN:
On December 30, 1993, the Company entered into a nonrecourse secured loan
agreement arranged by Enron Finance Corp., an affiliate of Enron Gas Services
(the Enron loan). Advances under the loan agreement bear annual interest at the
rate of 12.5%. Approximately $51,600,000 was advanced on December 30, 1993 to
provide financing for acquisitions. Another $5,800,000 of the available balance
was advanced on December 30, 1993 to fund a portion of the development projects
which will be undertaken by the Company on the properties pledged as security
for the loan. Under the terms of the Enron loan, additional funds may be
advanced to fund additional development projects which will be undertaken by the
Company on the properties pledged as security for the loan.
The loan was recorded at a discount to reflect conveyance to the lender of a 20%
interest in the net profits, as defined, of properties located in south Texas.
This discount of $4,299,000 is being amortized over the life of the
loan using the effective interest method. At December 31, 1994 the principal
amount of the loan was $61,717,000 and the recorded liability was $57,840,000.
Payments of principal and interest under the Enron loan are due monthly and are
equal to 90% of total net operating income from the secured properties, reduced
by 80% of allowable capital expenditures, as defined. The
45
<PAGE>
(4) LONG-TERM DEBT (CONT'D):
- - - --------------------------------------------------------------------------------
Company's current estimate, based on expected production and prices, budgeted
capital expenediture levels and expected discount amortization, is that 1995
payments will reduce the recorded liability by approximately $524,000. This
amount is included in current liabilities. Estimated liability reductions,
including required principal payments, for 1996 through 1999, under the same
production, pricing, capital expenditure and discount scenario, are
approximately $11,280,000, $18,741,000, $15,119,000 and $9,113,000,
respectively. Payments, if any, under the net profits conveyance will commence
upon repayment of the principal amount of the Enron loan and will cease when the
lender has received an internal rate of return, as defined, of 18% (15.25%
through December 31, 1995). The Company has signed a letter of intent to
restructure the loan as described in Note 17.
PRODUCTION PAYMENT OBLIGATION:
The original principal amount of the dollar-denominated production payment was
$37,550,000, which was recorded as a liability of $28,805,000 after a discount
to reflect a market rate of interest of 15.5%. At December 31, 1994 the
remaining principal amount was $23,373,000 and the recorded liability was
$18,534,000. Under the terms of this production payment, the Company must make
a monthly cash payment which is the greater of a base amount or 85% of net
proceeds from the subject properties, as defined, except that the amount
required to be paid in any given month shall not exceed 100% of the net proceeds
from the subject properties. The Company retains a management fee equal to 10%
of sales from the properties, which is deducted in the calculation of net
proceeds. The Company's current estimate, based on expected production and
prices, budgeted capital expenditure levels and expected discount amortization,
is that 1995 payments will reduce the recorded liability by approximately
$1,112,000; this amount is included in current liabilities. Estimated liability
reductions for 1996 through 1999, under the same production, pricing, capital
expenditure and discount scenario, are $811,000, $1,177,000, $2,988,000 and
$4,220,000, respectively.
11-1/4% SUBORDINATED DEBENTURES:
On September 8, 1993 the Company completed a public offering of $100,000,000
aggregate principal amount of 11-1/4% Senior Subordinated Notes due September 1,
2003. The Senior Subordinated Notes were issued at a price of 99.259% yielding
11.375% to the holders. The Company used the net proceeds from the sale of the
Senior Subordinated Notes of approximately $95,827,000, together with
approximately $19,400,000 of available cash, to redeem all of its outstanding
Senior Secured Notes and long-term subordinated debentures. The redemptions
resulted in a net loss of $15,387,000 which was recorded as an extraordinary
loss of $10,735,000 (net of income tax benefit of $4,652,000).
The Senior Subordinated Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after September 1, 1998 initially at a
redemption price of 105.688%, plus accrued interest to the date of redemption,
declining at the rate of 1.896% per year to September 9, 2000 and at 100%
thereafter. In addition, the Company may, at its option, redeem prior to
September 1, 1996 up to 30% of the initially outstanding principal amount of the
Notes at 110% of the principal amount thereof, plus accrued interest to the date
of redemption, with the net proceeds of any future public offering of its Common
Stock.
Under the terms of the Senior Subordinated Notes, the Company must meet certain
tests before it is able to pay cash dividends (other than dividends on the
Company's $.75 Convertible Preferred Stock) or make other restricted payments,
incur additional indebtedness, engage in transactions with its affiliates, incur
liens and engage in certain sale and leaseback arrangements. The terms of the
Senior Secured Notes also limit the Company's ability to undertake a
consolidation, merger or transfer of all or substantially all of its assets. In
addition, the Company is, subject to certain conditions, obligated to offer to
repurchase Senior Subordinated Notes at par value plus accrued and unpaid
interest to the date of repurchase, with the net cash proceeds of certain sales
or dispositions of assets. Upon a change of control, as defined, the Company
will be required to make an offer to purchase the Senior Subordinated Notes at
101% of the principal amount thereof, plus accrued interest to the date of
purchase.
5-1/2% SUBORDINATED DEBENTURES:
At December 31, 1993 the 5-1/2% Convertible Subordinated Debentures had a
remaining balance of $7,171,000 which was paid in full on the February 1, 1994
due date.
46
<PAGE>
(5) DEFERRED REVENUE:
- - - --------------------------------------------------------------------------------
From April 1991 through May 1993, the Company entered into four volumetric
production payments with entities associated with Enron Corp. (Enron) for net
proceeds of $121,498,000. Under the terms of these production payments, the
Company was required to deliver 70.1 BCF of natural gas and 770,000 barrels of
oil over periods ranging from three to six years.
Effective November 1, 1993, the four separate volumetric payment financings
described above between the Company and Enron were consolidated into one
production payment. The delivery schedules from the previously separate
production payments were not adjusted; however, delivery shortfalls on any
property can now be made up from excess production from any other property which
is dedicated to the production payment obligation. The consolidation also
provided that certain acreage previously committed to the production payments
was released and can be developed by the Company unburdened by the delivery
obligations of the production payment.
In connection with the purchase of interests in properties from ARCO in December
1993, a volumetric production payment from certain of the ARCO properties was
sold to Enron for net proceeds of $13,207,000. This production payment covered
approximately 7.3 BCF of natural gas to be delivered over 8 years.
In July 1994, the Company purchased additional interests in the properties
acquired from ARCO in December 1993. In connection with this transaction, a
volumetric production payment was sold to Enron for net proceeds of $4,353,000.
This production payment covered approximately 2.7 BCF of natural gas to be
delivered over 8 years.
The Company is required to deliver the scheduled volumes from the subject
properties or to make a cash payment for volumes produced but not delivered, in
combination not to exceed a specified percentage of monthly production. If
production levels are not sufficient to meet scheduled delivery commitments, the
Company must account for and make up such shortages, at market-based prices,
from future production.
The Company is responsible for royalties and for production costs associated
with operating the properties subject to the production payment agreements. The
Company may grant liens on properties subject to the production payment
agreements, but it must notify prospective lienholders that their rights are
subject to the prior rights of the production payment owner.
Amounts received were recorded as deferred revenue. Volumes associated with
amortization of deferred revenue for the years ended December 31, 1994, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
Net sales volume
attributable to production
Volumes delivered (1) payment deliveries (2)
----------------------- --------------------------
Natural Natural
Oil Gas Oil Gas
(MBBLS) (MMCF) (MBBLS) (MMCF)
------- ------- ------- ------
<S> <C> <C> <C> <C>
1994 218 19,985 182 16,005
1993 221 23,392 185 18,731
1992 70 11,689 59 9,117
<FN>
(1) Amounts settled in cash in lieu of volumes were $1,611,381, $3,138,628 and
$7,965,945, for the years ended December 31, 1994, 1993 and 1992,
respectively.
(2) Represents volumes required to be delivered to Enron net of estimated
royalty volumes.
</TABLE>
47
<PAGE>
(5) DEFERRED REVENUE (CONT'D):
- - - --------------------------------------------------------------------------------
Future amortization of deferred revenue, based on the scheduled deliveries under
the production payment agreements, is as follows:
<TABLE>
<CAPTION>
Net sales volumes
Volumes required to be attributable to production
delivered to Enron payment deliveries (1)
------------------------- --------------------------
Annual Natural Gas Oil Natural Gas Oil
Amortization (MMCF) (MBBLS) (MMCF) (MBBLS)
------------ ------ ------- ------ -------
(In Thousands)
<S> <C> <C> <C> <C> <C>
1995 $ 20,770 11,045 174 8,899 145
1996 7,546 3,721 87 2,998 74
1997 2,439 1,410 - 1,136 -
1998 1,593 892 - 719 -
Thereafter 3,560 1,994 - 1,606 -
-------- --------- ---- -------- -----
$35,908 19,062 261 15,358 219
-------- --------- ---- -------- -----
-------- --------- ---- -------- -----
<FN>
- - - -----------
(1) Represent volumes required to be delivered to Enron net of estimated
royalty volumes.
</TABLE>
(6) INCOME TAXES:
- - - --------------------------------------------------------------------------------
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," (SFAS No. 109) on a prospective basis effective
January 1, 1993. The cumulative effect of this change in accounting for income
taxes of $2,060,000 was determined as of January 1, 1993 and was reported
separately in the Consolidated Statement of Operations for the year ended
December 31, 1993.
The income tax expense (benefit) is different from amounts computed by applying
the statutory Federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Tax expense (benefit) at 35% (34% for 1992)
of earnings (loss) before income taxes, cumulative
effects of changes in accounting principles and
extraordinary item $(23,749) (3,747) 3,837
Change in the balance of the valuation
allowance for deferred tax assets
attributable to loss before income taxes,
cumulative effects of changes in accounting
principles and extraordinary item 23,220 2,034 -
Expiration of tax carryforwards 455 318 -
Other 83 45 151
-------- -------- --------
Total income tax expense (benefit) $ 9 (1,350) 3,988
-------- -------- --------
-------- -------- --------
</TABLE>
The Omnibus Budget Reconciliation Act of 1993 increased the Federal corporate
tax rate from 34% to 35% retroactively to January 1, 1993. As a result of this
tax increase, the tax benefits at December 31, 1994 and December 31, 1993,
respectively, on the losses from continuing operations were approximately
$677,000 and $167,000 less than such amounts would have been without such
increase in the tax rate. However, due to limitations on the recognition of
deferred tax assets, the total tax benefit at December 31, 1994 and December 31,
1993, including the tax benefit on the cumulative effect of the change in
accounting method in 1994 and on the extraordinary loss on extinguishment of
debt in 1993, is unaffected by the tax rate increase. The impact of the tax
rate increase will be recognized when future taxable income allows the
unrecognized deferred tax asset to be realized.
Deferred income taxes generally result from recognizing income and expenses at
different times for financial and tax reporting. These differences result from
recording proceeds from the sale of properties in the full cost pool,
capitalization of certain development, exploration and other costs under the
full cost method of accounting and the provision for impairment of oil and gas
properties for financial accounting purposes.
48
<PAGE>
(6) INCOME TAXES (CONT'D):
- - - --------------------------------------------------------------------------------
The components of the net deferred tax liability, computed in accordance with
SFAS No. 109 are as follows:
<TABLE>
<CAPTION>
December 31, 1994 January 1, 1994
----------------- ---------------
(In Thousands)
<S> <C> <C>
Deferred tax assets:
Accounts receivable, due to allowance for doubtful accounts $ 289 468
Current and long term liabilities due to accrual for retirement benefits 1,475 1,641
Current and long term liabilities due to accrual for medical benefits 2,040 1,857
Current and long term liabilities due to accrual for sales recorded
on the entitlements method 3,642 -
Net operating loss carryforward 19,965 13,990
Depletion carryforward 6,958 6,958
Contribution carryforward 106 348
Investment tax credit carryforward 3,674 3,885
Alternative minimum tax credit carryforward 2,206 2,206
Other 94 96
--------- ---------
Total gross deferred tax assets 40,449 31,449
Less valuation allowance (36,258) (8,142)
--------- ---------
Net deferred tax assets 4,191 23,307
Deferred tax liabilities:
Full cost pool, due principally to capitalized expenditures (4,191) (23,307)
--------- ---------
Net deferred tax liability $ - -
--------- ---------
--------- ---------
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1994 was
$8,142,000. The net change in the total valuation allowance for the tax year
ended December 31, 1994 was an increase of $28,116,000. The total increase in
the valuation allowance includes $4,896,000 resulting from the cumulative effect
of the change in accounting for oil and gas sales from the sales method to the
entitlements method.
The Alternative Minimum Tax (AMT) credit carryforward available to reduce future
Federal regular taxes aggregated $2,206,000 at December 31, 1994. This amount
may be carried forward indefinitely. Regular and AMT net operating loss
carryforwards at December 31, 1994 were $57,044,000 and $55,387,000,
respectively, and will expire in the years indicated below:
<TABLE>
<CAPTION>
REGULAR AMT
------- ---
(In Thousands)
<S> <C> <C>
2000 $ 2,665 4,143
2005 8,307 -
2008 28,999 31,800
2009 17,073 19,444
------- ------
$57,044 55,387
------- ------
------- ------
</TABLE>
AMT net operating loss carryforwards can be used to offset 90% of AMT income in
future years.
Investment tax credit carryforwards available to reduce future Federal income
taxes aggregated $3,674,000 at December 31, 1994 and expire at various dates
through the year 2001. Percentage depletion carryforwards available to reduce
future Federal taxable income aggregated $19,879,000 at December 31, 1994. This
amount may be carried forward indefinitely. The net operating loss and
investment tax credit carryforwards have been recognized as a deferred tax
asset, subject to a valuation allowance.
49
<PAGE>
(6) INCOME TAXES (CONT'D):
- - - --------------------------------------------------------------------------------
The availability of some of these tax attributes to reduce current and future
taxable income of the Company is subject to various limitations under the
Internal Revenue Code. In particular, the Company's ability to utilize such tax
attributes could be severely restricted due to the occurrence of an "ownership
change" within the meaning of Section 382 of the Internal Revenue Code resulting
from the Company's 1991 recapitalization. At December 31, 1994, the Company
estimated that net operating loss and investment tax credit carryforwards would
be limited to offset current taxable income to the extent described below.
The net operating loss carryforwards which expire in 2008 and 2009 are not
subject to the provisions of Section 382 as they were generated subsequent to
the ownership change. Even though the Company is limited in its ability to use
the remaining net operating loss carryovers under the general provisions of
Section 382, it may be entitled to use these net operating loss carryovers to
offset (a) gains recognized in the five years following the ownership change on
the disposition of certain assets, to the extent that the value of the assets
disposed of exceeds its tax basis on the date of the ownership change or (b) any
item of income which is properly taken into account in the five years following
the ownership change but which is attributable to periods before the ownership
change ("built-in gain"). The ability of the Company to use these net operating
loss carryovers to offset built-in gain first requires that the Company have
total built-in gains at the time of the ownership change which are greater than
a threshold amount. In addition, the use of these net operating loss
carryforwards to offset built-in gain cannot exceed the amount of the total
built-in gain.
The Company believes that due to the amount of built-in gain as of the date of
ownership change, and the recognition of such gain through December 31, 1994,
there is no significant limitation on the Company's ability to use these net
operating loss carryforwards or investment tax credit carryforwards.
(7) PREFERRED STOCK:
- - - --------------------------------------------------------------------------------
The Company has 10,000,000 shares of $.75 Convertible Preferred Stock
authorized, par value $.01 per share, of which there were 2,880,973 shares
outstanding at December 31, 1994 and 1993, with an aggregate liquidation
preference of $28,809,730 at December 31, 1994 and 1993. This stock is
convertible at any time, at the option of the holder, at the rate of 3.5 shares
of Common Stock for each share of $.75 Convertible Preferred Stock, subject to
adjustment upon occurrence of certain events. During 1994, no shares of $.75
Convertible Preferred Stock were converted into shares of Common Stock. The
$.75 Convertible Preferred Stock is redeemable, in whole or in part, at the
option of the Company, at any time after the earlier of (i) July 1, 1996 or (ii)
the date on which the last reported sales price of the Common Stock will have
been $7.50 or higher for at least 20 of the prior 30 trading days, at a
redemption price of $10.33 per share during the twelve-month period which began
July 1, 1994 and declining ratably to $10.00 per share at July 1, 1996 and
thereafter, including accumulated and unpaid dividends. Cumulative annual
dividends of $.75 per share are payable quarterly, in arrears, on the first day
of February, May, August and November, when and as declared. Until December 31,
1993, the Company paid such dividends in shares of Common Stock. After such
date, dividends may be paid in cash or, at the Company's election, in shares of
Common Stock or in a combination of cash and Common Stock. However, the Company
is prohibited from paying cash dividends on its $.75 Convertible Preferred Stock
after the February 1, 1995 dividend due to restrictions contained in the Credit
Agreement with its lending banks. Common Stock delivered in payment of dividend
will be valued for dividend payment purposes at between 75% and 90%, based on
trading volume, of the average last reported sales price of the Common Stock
during a specified period prior to the record date for the dividend payment.
During any period in which dividends on preferred stock are in arrears, no
dividends or distributions, except for dividends paid in shares of Common Stock,
may be paid or declared on the Common Stock, nor may any shares of Common Stock
be acquired by the Company.
50
<PAGE>
(8) COMMON STOCK:
- - - --------------------------------------------------------------------------------
The Company has 112,000,000 shares of Common Stock authorized, par value $.10
per share, of which there were 28,295,209 and 28,250,445 shares issued at
December 31, 1994 and 1993, respectively, with 105,940 and 335,813 shares held
by the Company at December 31, 1994 and 1993, respectively. The Common Stock is
entitled to one vote per share. Prior to May 1993 the Company also had Class B
stock which had superior voting rights to the Company's Common Stock, had
limited transferability and was not traded in any public market but was
convertible at any time into shares of Common Stock on a share-for-share basis.
At the Company's Annual Meeting of Shareholders on May 12, 1993, the
shareholders adopted amendments to the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
112,000,000 and to reclassify each share of Class B Stock into 1.1 shares of
Common Stock.
On June 15, 1993, the Company issued 11,080,000 shares of Common Stock for $5.00
per share in a public offering. The net proceeds from the issuance of the
shares totalled approximately $51,506,000 after deducting issuance costs and
underwriting fees.
On October 29, 1993 the Company paid a dividend distribution of one Preferred
Share Purchase Right on each outstanding share of the Company's Common Stock.
The Rights are exercisable only if a person or group acquires 20% or more of the
Company's Common Stock or announces a tender offer which would result in
ownership by a person or group of 20% or more of the Common Stock. Each Right
initially entitles each shareholder to buy 1/100th of a share of a new series of
Preferred Stock at an exercise price of $30.00, subject to adjustment upon
certain occurrences. Each 1/100th of a share of such new Preferred Stock that
can be purchased upon exercise of a Right has economic terms designed to
approximate the value of one share of Common Stock. The Rights will expire on
October 29, 2003, unless extended or terminated earlier.
The Company has Warrants outstanding which permit holders thereof to purchase
1,244,715 shares of Common Stock at an exercise price of $3.00 per share. The
Warrants are noncallable by the Company and expire on October 1, 1996. The
exercise price is payable in cash.
In March 1992, the Company adopted the 1992 Stock Option Plan under which non-
qualified stock options may be granted to key employees and non-employee
directors. The aggregate number of shares of Common Stock which the Company may
issue under options granted pursuant to this plan may not exceed 10% of the
total number of shares outstanding or issuable at the date of grant pursuant to
outstanding rights, warrants, convertible or exchangeable securities or other
options. The exercise price of an option may not be less than 85% of the fair
market value of one share of the Company's Common Stock on the date of grant.
The options vest 20% on the date of grant and an additional 20% on each grant
anniversary date thereafter. The Company may, in its discretion, grant each
optionee a cash bonus upon the exercise of each granted option.
A summary of stock option activity related to the Plan is as follows:
<TABLE>
<CAPTION>
Option Price
Shares Per Share
----------- -----------
<S> <C> <C>
Options granted during 1992 and outstanding at
December 31, 1992 1,740,000 $ 3.00
Granted 1,525,000 5.00
Exercised (132,000) 3.00
Cancelled or surrendered (79,000) 3.00
----------- -----------
Options outstanding at December 31, 1993 3,054,000 3.00-5.00
Granted 310,000 5.00
Exercised (35,000) 3.00
Cancelled or surrendered (35,000) 5.00
----------- -----------
Options outstanding at December 31, 1994 3,294,000 $ 3.00-5.00
----------- -----------
----------- -----------
Options exercisable at December 31, 1994 1,860,400 $ 3.00-5.00
----------- -----------
----------- -----------
</TABLE>
51
<PAGE>
(9) GAS PURCHASE CONTRACT SETTLEMENT:
- - - --------------------------------------------------------------------------------
On December 17, 1992, the Company and ONEOK, Inc. (ONEOK) agreed to settle the
case styled Forest Oil Corporation v. ONEOK, Inc. (Number 71,582) and its
companion case styled Forest Oil Corporation v. ONEOK, Inc. (Case No. C-89-53).
The cases involved take-or-pay damages relating to a natural gas purchase
contract between the Company and ONEOK. The settlement encompassed all disputed
contracts, claims and future claims. The cash proceeds of $51,250,000 were
received by the Company on December 24, 1992. Proceeds after deducting related
royalties and production taxes were approximately $36,429,000. The ONEOK
settlement increased the Company's net earnings for 1992 by approximately
$24,043,000 or $1.75 per share.
(10) EMPLOYEE BENEFITS:
- - - --------------------------------------------------------------------------------
PENSION PLANS:
The Company has a qualified defined benefit pension plan (Pension Plan). The
Company has effected a curtailment of the Pension Plan pursuant to which all
benefit accruals were suspended effective May 31, 1991.
The benefits under the Pension Plan are based on years of service and the
employee's average compensation during the highest consecutive sixty-month
period in the fifteen years prior to retirement. No contribution was made in
1994, 1993 or 1992. The following table sets forth the Pension Plan's funded
status and amounts recognized in the Company's consolidated financial statements
at December 31:
<TABLE>
<CAPTION>
1994 1993
---- ----
(In Thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits of
$23,953,000 in 1994 and $28,484,000 in 1993 $(23,953) (28,484)
-------- --------
-------- --------
Projected benefit obligation for service rendered to date $(23,953) (28,484)
Plan assets at fair market value, consisting primarily of listed stocks, bonds
and other fixed income obligations 23,443 25,576
-------- --------
Plan assets in excess of projected benefit obligation (unfunded pension liability) (510) (2,908)
Unrecognized net loss from past experience different from that assumed and
effects of changes in assumptions 1,468 3,642
-------- --------
Pension asset recognized in the balance sheet $ 958 734
-------- --------
-------- --------
</TABLE>
For 1994 the discount rate used in determining the actuarial present value of
the projected benefit obligation was 9% and the expected long-term rate of
return on assets was 9%. For 1993, the discount rate used in determining the
actuarial present value of the projected benefit obligation was 7.5% and the
expected long-term rate of return on assets was 9%. For 1992, the discount rate
used in determining the actuarial present value of the projected benefit
obligation was 9% and the expected long-term rate of return on assets was 9%.
The components of net pension expense (benefit) for the years ended December 31,
1994, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(In Thousands)
<S> <C> <C> <C>
Net pension expense (benefit) included the following components:
Interest cost on projected benefit obligation $ 1,976 2,039 2,074
Actual return on plan assets (245) (3,534) (1,890)
Net amortization and deferral (1,955) 1,441 (240)
------- ------- -------
Net pension expense (benefit) $ (224) (54) (56)
------- ------- -------
------- ------- -------
</TABLE>
52
<PAGE>
(10) EMPLOYEE BENEFITS (CONT'D):
- - - --------------------------------------------------------------------------------
The Company has a non-qualified unfunded supplementary retirement plan that
provides certain officers with defined retirement benefits in excess of
qualified plan limits imposed by Federal tax law. Benefit accruals under this
plan were suspended effective May 31, 1991 in connection with suspension of
benefit accruals under the Company's Pension Plan. At December 31, 1994 the
projected benefit obligation under this plan totaled $480,000, which is included
in other liabilities in the accompanying balance sheet. The projected benefit
obligation is determined using the same discount rate as is used for
calculations for the Pension Plan.
In 1993 as a result of the change in the discount rate for the Pension Plan and
the supplementary retirement plan, the Company recorded a liability of
$3,038,000 representing the unfunded pension liability and a corresponding
decrease in capital surplus. As a result of the increase in the discount rate
for the Pension Plan and the supplementary retirement plan in 1994, the Company
reduced the liability representing the unfunded pension liability by
approximately $1,570,000 with a corresponding increase in capital surplus.
RETIREMENT SAVINGS PLAN:
The Company sponsors a qualified tax deferred savings plan in accordance with
the provisions of Section 401(k) of the Internal Revenue Code. Employees may
defer up to 10% of their compensation, subject to certain limitations. The
Company matches the employee contributions up to 5% of employee compensation.
In 1994, 1993 and 1992, Company contributions were made using treasury stock.
The expense associated with the Company's contribution was $516,000 in 1994,
$367,000 in 1993 and $454,000 in 1992.
Effective January 1, 1992 the plan was amended to include profit-sharing
contributions by the Company. In 1994, the Company did not make any profit
sharing contributions. The Company's profit-sharing contributions were made
using Company stock valued at $276,000 and $465,000 for 1993 and 1992,
respectively.
ANNUAL INCENTIVE PLAN:
The Forest Oil Corporation Annual Incentive Plan (the Incentive Plan), which
became effective January 1, 1992, permits participating employees to earn annual
bonus awards payable in cash or in shares of the Company's Common Stock,
generally based in part upon the Company attaining certain levels of
performance. In 1994, no bonuses were awarded. In 1993 and 1992, the Company
accrued bonuses of $426,000 and $930,000, respectively, under the Incentive
Plan. Amounts awarded will be disbursed in equal annual installments over the
succeeding three-year period.
EXECUTIVE RETIREMENT AGREEMENTS:
The Company entered into Agreements in December 1990 (the Agreements) with
certain executives and directors (the Retirees) whereby each executive retired
from the employ of the Company as of December 28, 1990. Pursuant to the terms
of the Agreements, the Retirees are entitled to receive supplemental retirement
payments from the Company in addition to the amounts to which they are entitled
under the Company's retirement plan. In addition, the Retirees and their
spouses are entitled to lifetime coverage under the Company's group medical and
dental plans, tax and other financial services, and payments by the Company in
connection with certain club membership dues. The Retirees will also continue
to participate in the Company's royalty bonus program until December 31, 1995.
The Company has also agreed to maintain certain life insurance policies in
effect at December 1990, for the benefit of each of the Retirees.
Six of the Retirees have subsequently resigned as directors. One of the
Retirees continues to serve as a director and will be paid the customary non-
employee director's fee. Pursuant to the terms of the retirement agreements,
the former directors and any other Retiree who ceases to be a director (or his
spouse) will be paid $2,500 a month until December 2000.
The Company's obligation to one retiree under a revised retirement agreement is
payable in Common Stock or cash, at the Company's option, in May of each year
from 1993 through 1996 at approximately $190,000 per year with the balance of
$149,000 payable in May 1997. The retirement agreements for the other six
Retirees, one of
53
<PAGE>
(10) EMPLOYEE BENEFITS (CONT'D):
- - - --------------------------------------------------------------------------------
whom received in 1991 the payments scheduled to be made in 1999 and 2000,
provide for supplemental retirement payments totalling approximately $938,400
per year through 1998 and approximately $740,400 per year in 1999 and 2000.
The present value of the amounts due under the agreements, discounted at 13%,
has been recorded as retirement benefits payable to executives and directors.
LIFE INSURANCE:
The Company provides life insurance benefits for certain key employees and
retirees under split dollar life insurance plans. The premiums paid for the
life insurance policies were $916,000, $861,000, and $995,000 in 1994, 1993 and
1992, respectively, including $831,000, $766,000 and $765,000 paid for policies
for retired executives. Under the life insurance plans, the Company is assigned
a portion of the benefits which is designed to recover the premiums paid.
HEALTH AND DENTAL INSURANCE:
The Company provides health and dental insurance to all of its employees,
eligible retirees and eligible dependents. The Company provides these benefits
at nominal cost to employees and retirees who are required to contribute an
estimated 50% of the cost of dependent coverage. In 1994, 1993 and 1992 the
costs of providing these benefits for both active and retired employees totalled
$1,714,000, $1,350,000 and $1,359,000, respectively. The 1994 cost includes
$1,384,000 related to 191 participating active employees and 4 employees on
long-term disability and $330,000 related to 115 eligible retirees. The 1993
cost includes $993,000 related to 184 participating active employees and 4
employees on long-term disability and $357,000 related to 125 eligible retirees.
The 1992 cost includes $1,011,000 related to 183 participating active employees
and $348,000 related to 119 eligible retirees.
POSTRETIREMENT BENEFITS:
The Company accrues expected costs of providing postretirement benefits to
employees, their beneficiaries and covered dependents in accordance with
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," (SFAS No. 106). The Company
adopted the provisions of SFAS No. 106 in the first quarter of 1993. The
estimated accumulated postretirement benefit obligation as of January 1, 1993
was approximately $4,822,000. This amount, reduced by applicable income tax
benefits, was charged to operations in the first quarter of 1993 as the
cumulative effect of a change in accounting principle. The annual net
postretirement benefit cost was approximately $510,000 for 1994 and $483,000 in
1993.
At December 31, 1994, December 31, 1993 and January 1, 1993 the discount rates
used in determining the actuarial present value of the accumulated
postretirement benefit obligation were 9%, 7.5% and 8.5%, respectively.
(11) RELATED PARTY TRANSACTIONS:
- - - --------------------------------------------------------------------------------
During 1994, the Company used a real estate complex (the Complex) owned directly
or indirectly by certain stockholders and members of the Board of Directors for
Company-sponsored seminars, the accommodation of business guests, the housing of
personnel attending corporate meetings and for other general business purposes.
In 1994, in connection with the Company's termination of usage, the Company paid
$662,000 on account of the business use of such property, and an additional
$300,000 as a partial reimbursement of deferred maintenance costs. The Company
incurred expenses for its use of the Complex of $635,000 in 1993 and $611,000 in
1992.
John F. Dorn resigned as an executive officer and director of the Company in
1993. The Company agreed to pay John F. Dorn his salary at time of resignation
through September 30, 1996. In addition, the Company provided certain other
benefits and services to Mr. Dorn. The present value of the severance package
was estimated at $500,000, which amount was recorded as an expense and a
liability at December 31, 1993.
54
<PAGE>
(11) RELATED PARTY TRANSACTIONS (CONT'D):
- - - --------------------------------------------------------------------------------
In March 1994, the Company sold certain non-strategic oil and gas properties to
an entity controlled by John F. Dorn and another former executive officer of the
Company for net proceeds, after costs of sale and purchase price adjustments, of
$3,661,000. The Company established the sales price based upon an opinion from
an independent third party. The purchasers financed 100% of the purchase price
with a loan bearing interest at the rate of prime plus 1%. The loan was secured
by a mortgage on the properties and personal guarantees of the purchasers. The
Company participated as a lender in the loan in the amount of approximately
$800,000. In addition, the Company agreed to subordinate to the other lender
its right of payment of principal on default. The purchasers have separately
agreed with the Company that certain options to purchase company stock will be
cancelled to the extent that the Company's participation in the loan is not
repaid in full. Collectively, the purchasers have options to purchase 275,000
shares of the Company's Common Stock at $3.00 per share and 275,000 shares at
$5.00 per share.
(12) COMMITMENTS AND CONTINGENCIES:
- - - --------------------------------------------------------------------------------
Future rental payments for office facilities and equipment under the remaining
terms of noncancelable leases are $1,619,000, $1,138,000, $961,000, $969,000 and
$1,002,000 for the years ending December 31, 1995 through 1999, respectively.
Net rental payments applicable to exploration and development activities and
capitalized in the oil and gas property accounts aggregated $851,000 in 1994,
$688,000 in 1993 and $874,000 in 1992. Net rental payments charged to expense
amounted to $3,512,000 in 1994, $3,098,000 in 1993 and $3,112,000 in 1992.
Rental payments include the short-term lease of vehicles. None of the leases
are accounted for as capital leases.
The Company, in the ordinary course of business, is a party to various legal
actions. In the opinion of management, none of these actions, either
individually or in the aggregate, will have a material adverse effect on the
Company's financial condition, liquidity or results of operations.
(13) FINANCIAL INSTRUMENTS:
- - - --------------------------------------------------------------------------------
The Company is exposed to off-balance-sheet risks associated with energy swap
agreements arising from movements in the prices of oil and natural gas and from
the unlikely event of non-performance by the counterparty to the swap
agreements.
In order to hedge against the effects of declines in oil and natural gas prices,
the Company enters into energy swap agreements with third parties and accounts
for the agreements as hedges based on analogy to the criteria set forth in
Statement of Financial Accounting Standards No. 80, "Accounting for Futures
Contracts." In a typical swap agreement, the Company receives the difference
between a fixed price per unit of production and a price based on an agreed-upon
third party index if the index price is lower. If the index price is higher,
the Company pays the difference. The Company's current swaps are settled on a
monthly basis. For the years ended December 31, 1994, 1993 and 1992, the
Company incurred swap gains (losses) of $1,810,000, $(2,050,000) and
$(1,642,000), respectively.
The following table indicates outstanding energy swaps of the Company which were
in place at December 31, 1994:
<TABLE>
<CAPTION>
Fixed
Product Volume Price Duration
----------- ------------------ ----------- -----------
<S> <C> <C> <C>
Natural Gas 5,000 MMBTU/day $1.90-$2.38 1/95-12/95
Natural Gas 194 to 16,275 MMBTU/day $2.06-$2.535 1/95-12/99
Natural Gas 10,000 MMBTU/day $2.00-$2.37 1/95-12/97
Natural Gas 10 to 350 MMBTU/day $2.12-$3.003 1/95-12/02
Natural Gas 5,000 MMBTU/day $2.25 1/95-2/95
Natural Gas 850 to 1,377 MMBTU/day $2.255 1/95-9/95
Oil 657 BBLS/day $16.70 1/95-4/96
Oil 657 BBLS/day $17.75 1/95-6/96
</TABLE>
55
<PAGE>
(13) FINANCIAL INSTRUMENTS:
- - - --------------------------------------------------------------------------------
OPTION AGREEMENT. In 1993, under another agreement (the Option Agreement), the
Company paid a premium of $516,000 in conjunction with the closing of the Enron
loan agreement. The payment of this premium gave Forest the right to set a
floor price of $1.70 per MMBTU on a total of 18,400 BBTU of natural gas over a
five year period commencing January 1, 1995. In order to exercise this right to
set a floor, the Company must pay an additional premium of 10CENTS per MMBTU,
effectively setting the floor at $1.60 per MMBTU. The option agreement is
broken into five calendar year periods with the option for each calendar year
expiring four trading days prior to the last trading day for the January NYMEX
contract for that year. The premium of $516,000 related to the Option Agreement
was recorded as a long-term asset and will be amortized as a reduction to oil
and gas income beginning in 1995 based on the volumes involved.
Set forth below is the estimated fair value of certain on and off-balance sheet
financial instruments, along with the methods and assumptions used to estimate
such fair values as of December 31, 1994:
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLES AND ACCOUNTS PAYABLE:
The carrying amount of these instruments approximates fair value due to their
short maturity.
NONRECOURSE SECURED LOAN:
The fair value of the Company's nonrecourse secured loan has been estimated as
approximately $58,684,000 by discounting the projected future cash payments
required under the agreement by 14.45%.
PRODUCTION PAYMENT OBLIGATION:
The fair value of the Company's production payment obligation has been estimated
as approximately $17,405,000 by discounting the projected future cash payments
required under the agreement by 12.5%.
SENIOR SUBORDINATED NOTES
The fair value of the Company's 11 1/4% Subordinated Notes was approximately
$91,000,000, based upon quoted market prices for the same or similar issues.
ENERGY SWAP AGREEMENTS:
The fair value of the Company's energy swap agreements was approximately
$7,673,000, based upon the estimated net amount the Company would receive to
terminate the agreements.
(14) MAJOR CUSTOMERS:
- - - --------------------------------------------------------------------------------
The Company's sales of oil and natural gas to individual customers which
exceeded 10% of the Company's total sales (exclusive of the effects of energy
swaps and hedges) were:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Enron Affiliates (A) $58,805 63,075 12,646
Chevron USA Production Company 12,829 -- --
ONEOK Exploration Company (B) -- -- 22,392
<FN>
(A) The amount shown for Enron Affiliates includes oil and natural gas sales to
Enron Gas Marketing Inc., Enron Oil & Gas Company, EOTT Energy Corporation,
Cactus Funding Corporation, Cactus Hydrocarbon III Limited Partnership,
Enron Gas Services Corporation and Enron Reserve Acquisition.
Approximately $29,046,000, $32,702,000 and $14,081,000 represent sales
recorded for deliveries under volumetric production payments in the years
ended December 31, 1994, 1993 and 1992, respectively.
(B) The amount shown for ONEOK Exploration Company represents the amount
recorded as a result of the gas purchase contract settlement described in
Note 9.
</TABLE>
56
<PAGE>
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(In Thousands Except Per Share Amounts)
1994 (A)
- - - --------
<S> <C> <C> <C> <C>
Revenue $ 32,543 32,977 28,207 22,220
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings from operations $ 24,241 23,600 19,387 13,763
--------- --------- --------- ---------
--------- --------- --------- ---------
Income (loss) before cumulative effects of changes in
accounting principles and extraordinary item $ 236 (265) (32,873) (34,951)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss $ (13,754) (265) (32,873) (34,951)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss attributable to common stock $ (14,294) (805) (33,414) (35,491)
--------- --------- --------- ---------
--------- --------- --------- ---------
Primary and fully diluted loss per share before
cumulative effects of changes in accounting
principles and extraordinary item $ (.01) (.03) (1.19) (1.26)
--------- --------- --------- ---------
--------- --------- --------- ---------
Primary and fully diluted loss per share $ (.51) (.03) (1.19) (1.26)
--------- --------- --------- ---------
--------- --------- --------- ---------
<FN>
(A) Amounts have been restated to give retroactive effect to the change in
accounting for oil and gas sales as discussed in Note 1. Restated amounts
for the first quarter reflect increases of $1,473,000 in Revenue and in
Earnings from operations and $1,131,000 in Income (loss) before cumulative
effects of changes in accounting principles and extraordinary item; an
increase of $12,859,000 in Net loss and in Net loss attributable to common
stock; a decrease of $.04 in Primary and fully diluted loss per share
before cumulative effects of changes in accounting principles and
extraordinary item; and an increase of $.46 in Primary and fully diluted
loss per share. Restated amounts for the second quarter reflect increases
of $1,220,000 in Revenue and in Earnings from operations; decreases of
$993,000 in Loss before cumulative effects of changes in accounting
principles and extraordinary item, Net loss and Net loss attributable to
common stock; and decreases of $.03 in the per share losses presented.
Restated amounts for the third quarter reflect increases of $1,147,000 in
Revenue and in Earnings from operations; decreases of $866,000 in Loss
before cumulative effects of changes in accounting principles and
extraordinary item, Net loss and Net loss attributable to common stock; and
decreases of $.03 in the per share losses presented.
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(In Thousands Except Per Share Amounts)
1993
- - - ----
<S> <C> <C> <C> <C>
Revenue $25,126 27,975 26,214 25,833
--------- --------- --------- ---------
--------- --------- --------- ---------
Earnings from operations $16,949 21,029 18,275 15,087
--------- --------- --------- ---------
--------- --------- --------- ---------
Loss before cumulative effects of changes in changes in
accounting principles and extraordinary item $(1,266) (938) (2,353) (4,798)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss $(2,389) (938) (13,102) (4,784)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss attributable to common stock $(2,976) (1,508) (13,653) (5,326)
--------- --------- --------- ---------
--------- --------- --------- ---------
Primary and fully diluted loss per share before
cumulative effects of changes in accounting
principles and extraordinary item $(.12) (.09) (.11) (.19)
--------- --------- --------- ---------
--------- --------- --------- ---------
Primary and fully diluted loss per share $(.20) (.09) (.50) (.19)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
57
<PAGE>
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES
(UNAUDITED):
The following information is presented in accordance with Statement of Financial
Accounting Standards No. 69, "Disclosure about Oil and Gas Producing
Activities," (SFAS No. 69).
(A) COSTS INCURRED IN OIL AND GAS EXPLORATION AND DEVELOPMENT ACTIVITIES - The
following costs were incurred in oil and gas exploration and development
activities during the years ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
United
States Canada Total
------ ------ -----
(In Thousands)
1994
- - - ----
<S> <C> <C> <C>
Property acquisition costs (undeveloped
leases and proved properties) $ 9,762 - 9,762
Exploration costs 15,693 - 15,693
Development costs 17,089 - 17,089
-------- -------- --------
Total $ 42,544 - 42,544
-------- -------- --------
-------- -------- --------
1993
- - - ----
Property acquisition costs (undeveloped leases and
proved properties) $ 144,916 - 144,916
Exploration costs 5,433 - 5,433
Development costs 20,472 - 20,472
-------- -------- --------
Total $ 170,821 - 170,821
-------- -------- --------
-------- -------- --------
1992
- - - ----
Property acquisition costs (undeveloped leases and
proved properties) $ 88,770 2 88,772
Exploration costs 2,171 126 2,297
Development costs 14,828 730 15,558
-------- -------- --------
Total $ 105,769 858 106,627
-------- -------- --------
-------- -------- --------
</TABLE>
(B) AGGREGATE CAPITALIZED COSTS - The aggregate capitalized costs relating to
oil and gas activities were incurred as of the dates indicated:
<TABLE>
<CAPTION>
December 31,
1994 1993 1992
------ ------ ------
(In Thousands)
<S> <C> <C> <C>
Costs related to proved properties $ 1,109,158 1,079,164 928,890
Costs related to unproved properties:
Costs subject to depletion (including wells in progress) 32,288 20,276 24,785
Costs not subject to depletion 30,441 41,216 18,306
---------- ---------- ----------
1,171,887 1,140,656 971,981
Less accumulated depletion and valuation allowance 895,335 778,226 717,444
---------- ---------- ----------
$ 276,552 362,430 254,537
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
58
<PAGE>
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS ACTIVITIES (UNAUDITED) (CONT'D):
- - - --------------------------------------------------------------------------------
(C) RESULTS OF OPERATIONS FROM PRODUCING ACTIVITIES - Results of operations
from producing activities for 1994, 1993 and 1992 are presented below. Income
taxes are different from income taxes shown in the Consolidated Statements of
Operations because this table excludes general and administrative and interest
expense.
<TABLE>
<CAPTION>
United
States Canada Total
-------- ------- ------
(In Thousands)
1994
- - - ----
<S> <C> <C> <C>
Oil and gas sales $ 114,541 - 114,541
Production expense 22,384 - 22,384
Depletion expense 64,883 - 64,883
Provision for impairment of oil and
gas properties 58,000 - 58,000
Income tax benefit (A) - - -
--------- --------- ---------
145,267 - 145,267
--------- --------- ---------
Results of operations from producing activities $ (30,726) - (30,726)
--------- --------- ---------
--------- --------- ---------
1993
- - - ----
Oil and gas sales $ 102,883 - 102,883
Production expense 19,540 - 19,540
Depletion expense 59,759 - 59,759
Income tax expense (B) - - -
--------- --------- ---------
79,299 - 79,299
--------- --------- ---------
Results of operations from producing activities $ 23,584 - 23,584
--------- --------- ---------
--------- --------- ---------
1992
- - - ----
Oil and gas sales $ 94,289 (C) 4,950 99,239 (C)
Production expense 14,516 (D) 1,349 15,865 (D)
Depletion expense 43,052 2,625 45,677
Income tax expense 12,615 332 12,947
--------- --------- ---------
70,183 4,306 74,489
--------- --------- ---------
Results of operations from producing activities $ 24,106 644 24,750
--------- --------- ---------
--------- --------- ---------
<FN>
(A) No income tax benefit has been recognized as it has not been realized by the Company.
(B) No income tax expense was reflected in results of operations from producing
activities in 1993 because of the availability of tax loss, percentage
depletion and credit carryforwards.
(C) Includes $22,392,000 attributable to the ONEOK settlement.
(D) Includes $1,589,000 attributable to the ONEOK settlement.
</TABLE>
59
<PAGE>
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
(CONT'D):
- - - --------------------------------------------------------------------------------
(D) ESTIMATED PROVED OIL AND GAS RESERVES - The Company's estimate of its
proved and proved developed future net recoverable oil and gas reserves and
changes for 1992, 1993 and 1994 follows. Such estimates are inherently
imprecise and may be subject to substantial revisions.
The Company's presentation of estimated proved oil and gas reserves has been
restated to exclude quantities attributable to future deliveries required under
volumetric production payments for each of the years presented. The Company has
also presented, as supplemental information, proved oil and gas reserves
including quantities attributable to future deliveries required under volumetric
production payments. These changes were made following discussions with the
Staff of the Securities and Exchange Commission.
Proved oil and gas reserves are the estimated quantities of crude oil, natural
gas and natural gas liquids which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions; i.e., prices and
costs as of the date the estimate is made. Prices include consideration of
changes in existing prices provided only by contractual arrangement, including
energy swap agreements (see Note 13), but not on escalations based on future
conditions.
Proved developed oil and gas reserves are reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.
Additional oil and gas expected to be obtained through the application of fluid
injection or other improved mechanisms of primary recovery are included as
"proved developed reserves" only after testing by a pilot project or after the
operation of an installed program has confirmed through production response that
increased recovery will be achieved.
60
<PAGE>
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
(CONT'D):
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OIL AND CONDENSATE GAS
------------------------------- --------------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991,
including amounts attributable to
volumetric production payments 3,131 2,184 5,315 169,719 23,752 193,471
Revisions of previous estimates (139) 33 (106) (9,837) (219) (10,056)
Extensions and discoveries 9 - 9 1,127 - 1,127
Production (1,308) (142) (1,450) (27,814) (1,360) (29,174)
Sale of reserves in place - (2,075) (2,075) (1,883) (22,173) (24,056)
Purchases of reserves in place 5,867 - 5,867 63,343 - 63,343
------- ------- ------- ------- ------- -------
Balance at December 31, 1992,
including amounts attributable to
volumetric production payments 7,560 - 7,560 194,655 - 194,655
Less amounts attributable to
volumetric production payments (587) - (587) (30,234) - (30,234)
------- ------- ------- ------- ------- -------
Balance at December 31, 1992,
exclusive of amounts attributable to
volumetric production payments 6,973 - 6,973 164,421 - 164,421
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Balance at December 31, 1992,
including amounts attributable to
volumetric production payments 7,560 - 7,560 194,655 - 194,655
Revisions of previous estimates 507 - 507 17,874 - 17,874
Extensions and discoveries 201 - 201 8,395 - 8,395
Production (1,493) - (1,493) (41,114) - (41,114)
Sales of reserves in place (281) - (281) (1,158) - (1,158)
Purchases of reserves in place 1,704 - 1,704 94,730 - 94,730
------- ------- ------- ------- ------- -------
Balance at December 31, 1993,
including amounts attributable to
volumetric production payments 8,198 - 8,198 273,382 - 273,382
Less amounts attributable to
volumetric production payments (401) - (401) (29,286) - (29,286)
------- ------- ------- ------- ------- -------
Balance at December 31, 1993,
exclusive of amounts attributable to
volumetric production payments 7,797 - 7,797 244,096 - 244,096
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Balance at December 31, 1993,
including amounts attributable to
volumetric production payments 8,198 - 8,198 273,382 - 273,382
Revisions of previous estimates 989 - 989 7,848 - 7,848
Extensions and discoveries 41 - 41 9,894 - 9,894
Production (1,543) - (1,543) (48,048) - (48,048)
Sale of reserves in place (170) - (170) (4,300) - (4,300)
Purchases of reserves in place 17 - 17 8,220 - 8,220
------- ------- ------- ------- ------- -------
Balance at December 31, 1994,
including amounts attributable to
volumetric production payments 7,532 - 7,532 246,996 - 246,996
Less amounts attributable to
volumetric production payments (219) - (219) (15,358) - (15,358)
------- ------- ------- ------- ------- -------
Balance at December 31, 1994,
exclusive of amounts attributable to
volumetric production payments 7,313 - 7,313 231,638 - 231,638
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
<FN>
Purchases of reserves in place represent volumes recorded on the closing dates
of the acquisitions for financial accounting purposes. The revisions of
previous estimates for natural gas in 1994 include 5,833 MMCF for an adjustment
related to the change in accounting for oil and gas sales from the sales method
to the entitlements method.
</TABLE>
61
<PAGE>
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
(CONT'D):
- - - --------------------------------------------------------------------------------
(D) ESTIMATED PROVED OIL AND GAS RESERVES (CONT'D)
<TABLE>
<CAPTION>
OIL AND CONDENSATE GAS
-------------------------------- --------------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
-------- ------ ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Proved developed reserves, including
amounts attributable to volumetric
production payments at:
December 31, 1991 2,903 1,824 4,727 153,395 20,807 174,202
December 31, 1992 6,418 -- 6,418 176,282 -- 176,282
December 31, 1993 6,778 -- 6,778 216,820 -- 216,820
December 31, 1994 6,994 -- 6,994 194,932 -- 194,932
OIL AND CONDENSATE GAS
--------------------------------------------------------------------
(MBBLS) (MMCF)
UNITED UNITED
STATES CANADA TOTAL STATES CANADA TOTAL
-------- -------- ------- -------- -------- -------
Proved developed reserves, exclusive
of amounts attributable to volumetric
production payments at:
December 31, 1991 2,903 1,824 4,727 132,434 20,807 153,241
December 31, 1992 5,831 -- 5,831 146,048 -- 146,048
December 31, 1993 6,377 -- 6,377 187,534 -- 187,534
December 31, 1994 6,775 -- 6,775 179,574 -- 179,574
</TABLE>
(E) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS - The standardized
measure of discounted net cash flows is calculated in accordance with the
provisions of SFAS No. 69.
The Company's presentation of the standardized measure of discounted future net
cash flows has been restated to exclude amounts attributable to future
deliveries required under volumetric production payments for each of the years
presented. The Company has also presented, as supplemental information, the
standardized measure of discounted future net cash flows including amounts
attributable to future deliveries required under volumetric production payments.
These changes were made following discussions with the Staff of the Securities
and Exchange Commission.
Future oil and gas sales and production and development costs have been
estimated using prices and costs in effect at the end of the years indicated,
except in those instances where the sale of oil and natural gas is covered by
contracts, energy swap agreements or volumetric production payments. In the
case of contracts, the applicable contract prices, including fixed and
determinable escalations, were used for the duration of the contract.
Thereafter, the current spot price was used. Prior to December 31, 1993 the
contracts included natural gas sales contracts with a company which is involved
in Chapter 11 bankruptcy proceedings. Subsequent to December 31, 1993 the
volumes applicable to this contract were priced at spot prices. Future oil and
gas sales include the estimated effects of existing energy swap agreements as
discussed in Note 13.
Future income tax expenses are estimated using the statutory tax rate of 35%.
Estimates for future general and administrative and interest expenses have not
been considered.
62
<PAGE>
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
(CONT'D):
- - - --------------------------------------------------------------------------------
Changes in the demand for oil and natural gas, inflation and other factors make
such estimates inherently imprecise and subject to substantial revision. This
table should not be construed to be an estimate of the current market value of
the Company's proved reserves. Management does not rely upon the information
that follows in making investment decisions.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1994 1993 1992
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Future oil and gas sales $ 531,207 716,663 549,643
Future production and development costs (199,711) (254,407) (200,432)
-------- -------- --------
Future net revenue 331,496 462,256 349,211
10% annual discount for estimated timing of cash flows (100,480) (138,917) (103,636)
-------- -------- --------
Present value of future net cash flows before income taxes 231,016 323,339 245,575
Present value of future income tax expense (867) (24,286) (18,566)
-------- -------- --------
Standardized measure of discounted future net cash flows
including amounts attributable to volumetric
production payments $ 230,149 299,053 227,009
Less amounts attributable to volumetric production payments (22,686) (40,136) (39,248)
-------- -------- --------
Standardized measure of discounted future net cash flows,
exclusive of amounts attributable to volumetric
production payments $ 207,463 258,917 187,761
-------- -------- --------
-------- -------- --------
</TABLE>
Undiscounted future income tax expense was $1,348,000 at December 31, 1994,
$35,028,000 at December 31, 1993 and $32,718,000 at December 31, 1992.
63
<PAGE>
(16) SUPPLEMENTAL FINANCIAL DATA - OIL AND GAS PRODUCING ACTIVITIES (UNAUDITED)
(CONT'D):
- - - --------------------------------------------------------------------------------
(E) STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (CONT'D)
CHANGES IN THE STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING
TO PROVED OIL AND GAS RESERVES - An analysis of the changes in the standardized
measure of discounted future net cash flows during each of the last three years
is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(In Thousands)
<S> <C> <C> <C>
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves, including amounts attributable to
volumetric production payments, at beginning of year $ 299,053 227,009 188,069
Changes resulting from:
Sales of oil and gas, net of production costs (92,156) (83,343) (62,572)
Net changes in prices and future production costs (78,085) (23,189) 15,076
Net changes in future development costs 7,432 (18,724) (2,444)
Extensions, discoveries and improved recovery 10,817 15,322 2,122
Previously estimated development costs incurred during the period 10,000 13,424 9,315
Revisions of previous quantity estimates 16,840 25,262 (11,450)
Sales of reserves in place (7,972) (2,964) (42,354)
Purchases of reserves in place 8,467 127,418 113,567
Accretion of discount on reserves at beginning of year before
income taxes 32,334 24,558 20,392
Net change in income taxes 23,419 (5,720) (2,712)
------- ------- -------
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves, including amounts attributable to
volumetric production payments, at end of year $ 230,149 299,053 227,009
Less amounts attributable to volumetric production payments (22,686) (40,136) (39,248)
------- ------- -------
Standardized measure of discounted future net cash flows relating
to proved oil and gas reserves, exclusive of amounts attributable to
volumetric production payments, at end of year $ 207,463 258,917 187,761
------- ------- -------
------- ------- -------
</TABLE>
As of April 1, 1995 the Company was receiving an average price of $1.59 per MCF
and $17.25 per barrel. Based on these prices the standardized measure of
discounted future net cash flows, exclusive of amounts attributable to
volumetric production payments, would have been approximately $193,600,000 at
December 31, 1994.
(17) SUBSEQUENT EVENTS
On April 13, 1995 the Company sold to a bank a participation interest in the
Company's claim in a bankruptcy proceeding. Consideration received consisted
of a $4,000,000 nonrecourse loan, in exchange for which the bank will
receive, solely from the proceeds of the bankruptcy claim, an amount equal to
the loan principal plus accrued interest at 16.5% per annum plus 25% of the
excess, if any, of the proceeds over the loan principal and interest. The
Company may, under certain conditions, limit the overall cost of financing to
23.5% per annum by exercising its option to repurchase the bank's interest in
the bankruptcy claim prior to receipt of any proceeds of the claim.
On April 17, 1995, the Company signed letters of intent with The Anschutz
Corporation (Anschutz) and with Joint Energy Development Investments Limited
Partnership (JEDI), an affiliate of Enron Corp., in each case as described
below.
The Anschutz letter of intent contemplates that Anschutz will purchase
18,800,000 shares of the Company's common stock and shares of newly-issued
preferred stock that are convertible into 6,200,000 additional shares of
common stock for a total consideration of $45,000,000, or $1.80 per share. The
preferred stock will have a liquidation preference and will receive dividends
ratably with the common stock. The investment will be made in two closings.
In the first closing, expected to occur in late April 1995, Anschutz will loan
the Company $9,900,000 for a term of 9 months. The loan will bear interest at
8% per annum for 16 weeks and at 12.5% per annum thereafter. The loan will be
secured by unencumbered oil and gas properties owned by the Company, the
preferred stock of Archean Energy Ltd. and certain other assets acceptable to
Anschutz. The loan may be converted into 5,500,000 shares of Forest's common
stock at Anschutz's election, but the loan must be so converted at the second
closing. At the second closing, expected to occur by July 1995 following
receipt of shareholder approval of the transactions then contemplated by the
letters of intent, Anschutz will purchase 13,300,000 shares of common stock
and the convertible preferred stock. In connection with this purchase, Anschutz
will agree to certain voting, acquisition, and transfer limitations regarding
shares of common stock for five years after the second closing, including
(a) a limit on voting, subject to certain exceptions, that would require
Anschutz to vote all shares of common stock acquierd by Anschutz in the
transaction in excess of an amount equal to 19.99% of the shares of common stock
then outstanding in the same proportion as all other shares of common stock are
voted, (b) a limit on the number of persons associated with Anschutz that may at
any time be elected as directors of the Company and (c) a limit on the
acquisition of additional shares of common stock by Anschutz (whether pursuant
to the exercise of the $2.10 warrants or the option received from JEDI, each as
described below, or otherwise), subject to certain exceptions, that would
prohibit any acquisition by Anschutz that would result in Anschutz owning 40% or
more of the shares of common stock then issued and outstanding. While the
foregoing limitations are in effect, Anschutz will have a minority
representation on the board of directors.
The JEDI letter of intent contemplates that, at the second closing referred to
above, Forest and JEDI will restructure JEDI's existing loan currently having a
principal balance of approximately $62,100,000. In exchange for certain
64
<PAGE>
warrants referred to below, JEDI will relinquish the net profits interest that
it holds in certain Forest properties and will reduce the interest rate relating
to the loan. As a result of the loan restructuring and the issuance of the
warrants, the Company anticipates a reduction of the recorded amount of the
related liability to approximately $45,000,000 and a reduction of interest
expense of approximately $2,100,000 per annum. In addition, beginning 18 months
after the second closing, the Company may prepay the loan at any time and may
tender its interest in the underlying properties in full satisfaction of the
loan.
The JEDI letter of intent also contemplates that, at the second closing, JEDI
will receive warrants to purchase 11,250,000 shares of the Company's common
stock for $2.00 per share and warrants to purchase 19,444,444 shares of common
stock at $2.10 per share. The $2.00 warrants expire on the earlier of either
the payment in full of the JEDI loan or December 31,2002, but no sooner than
18 months after the Second closing, except that the Company may terminate the
warrants at any time beginning 18 months after the second closing if the average
closing price of the common stock for 90 days preceding the termination is in
excess of $2.50 per share. For the first 18 months after the second closing,
the $2.00 warrants may be exercised only on the dates and in the respective
numbers of shares required to be delivered by JEDI to Anschutz pursuant to the
exercise of the option granted by JEDI to Anschutz, as described below. The
$2.10 warrants are exercisable during the first 18 months after the second
closing, subject to extension in certain circumstances to 36 months after the
second closing. The letters of intent also contemplate that, at the second
closing, JEDI will assign to Anschutz the $2.10 warrants and will grant to
Anschutz an option to purchase up to 11,250,000 shares of common stock during
the first 18 months after the second closing.
The letters of intent require the Company to pay Anschutz and JEDI certain
fees and expenses in connection with the letters of intent and the transactions
contemplated thereby in certain circumstances. The Anschutz letter of intent
requires the Company to pay to Anschutz a fee (called a subsequent event fee) of
up to $2,500,000 upon the occurence of certain events prior to the second
closing (or, if the second closing does not occur, April 17, 1996), such as a
merger, consolidation or other business combination between the Company and a
person other than Anschutz. In the Anschutz letter of intent, the Company has
agreed not to solicit proposals for transactions that would require the
Company to pay a subsequent event fee and to keep Anschutz generally informed
regarding the receipt and disposition by the Company of proposals regarding such
transactions made by other persons.
The transactions contemplated by the letters of intent are subject to, among
other things, the preparation and execution of definitive documentation
satisfactory to the parties and to the approval of Forest's board of directors
and certain of its creditors. The purchase by Anschutz of common stock at the
second closing, the restructure of JEDI's existing loan and the transactions
between Anschutz and JEDI described above are also subject to, among other
things, the prior approval of Forest's shareholders and Hart-Scott-Rodino
learance. While the Company's short-term and long-term liquidity would be
significantly improved by the conclusion of the transactions described above,
and although management believes the conditions to the closing of the
transactions can be satisfied, there can be no assurance that the transactions
will close on the terms and on the dates referred to above, or at all.
PART III
For information concerning Item 10 - Directors and Executive Officers of the
Registrant, Item 11 - Executive Compensation, Item 12 - Security Ownership of
Certain Beneficial Owners and Management and Item 13 - Certain Relationships
and Related Transactions, see the definitive Proxy Statement of Forest Oil
Corporation relative to the Annual Meeting of Shareholders, which will be
filed with the Securities and Exchange Commission, which information is
incorporated herein by reference. For information concerning Item 10 -
Executive Officers of Registrant, see Part I - Item 4A hereof.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a). (1) FINANCIAL STATEMENTS
1. Independent Auditors' Report
2. Consolidated Balance Sheets - December 31, 1994 and 1993
3. Consolidated Statements of Operations - Years ended December 31,
1994, 1993 and 1992
4. Consolidated Statements of Shareholders' Equity - Years ended
December 31, 1994, 1993 and 1992
5. Consolidated Statements of Cash Flows - Years ended December 31,
1994, 1993 and 1992
6. Notes to Consolidated Financial Statements - Years ended
December 31, 1994, 1993 and 1992
(2) FINANCIAL STATEMENT SCHEDULES
All schedules have been omitted because the information is either not
required or is set forth in the financial statements or the notes
thereto.
(3) Exhibits - Forest shall, upon written request to Daniel L. McNamara,
Corporate Secretary of Forest, addressed to Forest Oil Building,
Bradford, Pennsylvania 16701, provide copies of each of the following
Exhibits:
Exhibit 3(i) Restated Certificate of Incorporation of Forest Oil
Corporation dated October 14, 1993, incorporated herein by reference to
Exhibit 3(i) to Form 10-Q for Forest Oil Corporation for the quarter ended
September 30, 1993 (File No. 0-4597).
65
<PAGE>
Exhibit 3(ii) Restated By-Laws of Forest Oil Corporation as of May 9,
1990, Amendment No. 1 to By-Laws dated as of April 2, 1991, Amendment No. 2
to By-Laws dated as of May 8, 1991, Amendment No. 3 to By-Laws dated as of
July 30, 1991, Amendment No. 4 to By-Laws dated as of January 17, 1992,
Amendment No. 5 to By- Laws dated as of March 18, 1993 and Amendment No. 6 to
By-Laws dated as of September 14, 1993, incorporated herein by reference to
Exhibit 3(ii) to Form 10-Q for Forest Oil Corporation for the quarter ended
September 30, 1993 (File No. 0-4597).
Exhibit 3(ii)(a) Amendment No. 7 to By-Laws dated as of December 3, 1993,
incorporated herein by reference to Exhibit 3(ii)(a) to Form 10-K for Forest
Oil Corporation for the year ended December 31, 1993 (File No. 0-4597).
Exhibit 3(ii)(b) Amendment No. 8 to By-Laws dated as of February 24, 1994,
incorporated herein by reference to Exhibit 3(ii)(b) to Form 10-K for Forest
Oil Corporation for the year ended December 31, 1993 (File No. 0-4597).
Exhibit 4.1 Indenture dated as of September 8, 1993 between Forest Oil
Corporation and Shawmut Bank Connecticut, National Association, incorporated
herein by reference to Exhibit 4.1 to Form 10-Q for Forest Oil Corporation
for the quarter ended September 30, 1993 (File No. 0-4597).
Exhibit 4.2 Credit Agreement dated as of December 1, 1993 between
Forest Oil Corporation and Subsidiary Borrowers and Subsidiary Guarantors and
The Chase Manhattan Bank (National Association), as agent, incorporated
herein by reference to Exhibit 4.2 to Form 10-K for Forest Oil Corporation
for the year ended December 31, 1993 (File No. 0-4597).
Exhibit 4.3 Amendment No. 1 dated as of December 28, 1993 relating to
Exhibit 4.2 hereof, incorporated herein by reference to Exhibit 4.3 to Form
10-K for Forest Oil Corporation for the year ended December 31, 1993 (File
No. 0-4597).
Exhibit 4.4 Amendment No. 2 dated as of January 27, 1994 relating to
Exhibit 4.2 hereof, incorporated herein by reference to Exhibit 4.4 to Form
10-K for Forest Oil Corporation for the year ended December 31, 1993 (File
No. 0-4597).
Exhibit 4.5 Amendment No. 3 dated as of June 3, 1994 relating to
Exhibit 4.2 hereof, incorporated herein by reference to Exhibit 4.1 to Form
10-Q for Forest Oil Corporation for the quarter ended June 30, 1994 (File No.
0-4597).
Exhibit 4.6 Security Agreement dated as of December 1, 1993 between
Forest Oil Corporation and The Chase Manhattan Bank (National Association),
as agent, incorporated herein by reference to Exhibit 4.5 to Form 10-K for
Forest Oil Corporation for the year ended December 31, 1993 (File No. 0-4597).
Exhibit 4.7 Amendment No. 1 dated as of June 28, 1994 relating to
Exhibit 4.6 hereof, incorporated herein by reference to Exhibit 4.2 to Form
10-Q for Forest Oil Corporation for the quarter ended June 30, 1994 (File No.
0-4597).
Exhibit 4.8 Amendment No. 2 dated as of August 31, 1994 relating to
Exhibit 4.6 hereof, incorporated herein by reference to Exhibit 4.1 to Form
10-Q for Forest Oil Corporation for the quarter ended September 30, 1994
(File No. 0-4597).
*Exhibit 4.9 Deed of Trust, Mortgage, Security Agreement, Assignment of
Production, Financing Statement (Personal Property including Hydrocarbons),
and Fixture Filing dated as of June 3, 1994 between Forest Oil Corporation
and The Chase Manhattan Bank (National Association), as agent.
*Exhibit 4.10 Amendment No. 1 entered into as of June 3, 1994 relating
to Exhibit 4.9 hereof.
Exhibit 4.11 Loan Agreement between Forest Oil Corporation and Joint
Energy Development Investments Limited Partnership dated as of December 28,
1993, incorporated herein by reference to Exhibit 4.1 to Form 8- K for Forest
Oil Corporation dated December 30, 1993 (File No. 0-4597).
Exhibit 4.12 First amendment dated as of December 28, 1993 relating to
Exhibit 4.11 hereof, incorporated herein by reference to Exhibit 4.3 to Form
10-Q for Forest Oil Corporation for the quarter ended June 30, 1994 (File
No. 0-4597).
66
<PAGE>
Exhibit 4.13 Deed of Trust, Assignment of Production, Security Agreement
and Financing Statement dated as of December 28, 1993 by and between Forest
Oil Corporation and Joint Energy Development Investments Limited Partnership,
incorporated herein by reference to Exhibit 4.2 to Form 8-K for Forest Oil
Corporation dated December 30, 1993 (File No. 0-4597).
Exhibit 4.14 First Amendment dated as of June 15, 1994 relating to
Exhibit 4.13 hereof, incorporated herein by reference to Exhibit 4.4 to Form
10-Q for Forest Oil Corporation for the quarter ended June 30, 1994 (File
No. 0-4597).
Exhibit 4.15 Act of Mortgage, Assignment of Production, Security
Agreement and Financing Statement dated as of December 28, 1993 between
Forest Oil Corporation and Joint Energy Development Investments Limited
Partnership, incorporated herein by reference to Exhibit 4.3 to Form 8-K for
Forest Oil Corporation dated December 30, 1993 (File No. 0-4597).
Exhibit 4.16 Warrant Agreement dated as of December 3, 1991 between
Forest Oil Corporation and The Chase Manhattan Bank (National Association),
as Warrant Agent (including Form of Warrant), incorporated herein by
reference to Exhibit 4.7 to Form 10-K for Forest Oil Corporation for the year
ended December 31, 1991 (File No. 0-4597).
Exhibit 4.17 Rights Agreement between Forest Oil Corporation and Mellon
Securities Trust Company, as Rights Agent dated as of October 14, 1993,
incorporated herein by reference to Exhibit 4.3 to Form 10-Q for Forest Oil
Corporation for the quarter ended September 30, 1993 (File No. 0-4597).
No other instruments regarding long-term debt are filed because the
amount of the securities authorized thereunder do not, in any case, exceed
10% of the total assets of Forest Oil Corporation on a consolidated basis,
but a copy of such instruments will be furnished to the Commission upon
request.
+Exhibit 10.1 Description of Employee Overriding Royalty Bonuses,
incorporated herein by reference to Exhibit 10.1 to Form 10-K for Forest Oil
Corporation for the year ended December 31, 1990 (File No. 0-4597).
+Exhibit 10.2 Description of Executive Life Insurance Plan, incorporated
herein by reference to Exhibit 10.2 to Form 10-K for Forest Oil Corporation
for the year ended December 31, 1991 (File No. 0-4597).
*+Exhibit 10.3 Executive Deferred Compensation Plan.
+Exhibit 10.4 Form of non-qualified Supplemental Executive Retirement
Plan, incorporated herein by reference to Exhibit 10.4 to Form 10-K for
Forest Oil Corporation for the year ended December 31, 1990 (File No. 0-4597).
+Exhibit 10.5 Form of Executive Retirement Agreement, incorporated herein
by reference to Exhibit 10.5 to Form 10-K for Forest Oil Corporation for the
year ended December 31, 1990 (File No. 0-4597).
+Exhibit 10.6 Forest Oil Corporation 1992 Stock Option Plan and Option
Agreement, incorporated herein by reference to Exhibit 10.7 to Form 10-K for
Forest Oil Corporation for the year ended December 31, 1991 (File No. 0-4597).
+Exhibit 10.7 Letter Agreement with Richard B. Dorn relating to a
revision to Exhibit 10.5 hereof, incorporated herein by reference to Exhibit
10.11 to Form 10-K for Forest Oil Corporation for the year ended December 31,
1991 (File No. 0-4597).
+Exhibit 10.8 Forest Oil Corporation Annual Incentive Plan effective as
of January 1, 1992, incorporated herein by reference to Exhibit 10.8 to Form
10-K for Forest Oil Corporation for the year ended December 31, 1992 (File
No. 0-4597).
67
<PAGE>
+Exhibit 10.9 Form of Executive Severance Agreement, incorporated herein
by reference to Exhibit 10.9 to Form 10-K for Forest Oil Corporation for the
year ended December 31, 1993 (File No. 0-4597).
+Exhibit 10.10 Form of Settlement Agreement and General Release between
John F. Dorn and Forest Oil Corporation dated March 7, 1994, incorporated
herein by reference to Exhibit 10.10 to Form 10-K for Forest Oil Corporation
for the year ended December 31, 1993 (File No. 0-4597).
*Exhibit 11 Forest Oil Corporation and Subsidiaries - Calculation of
Earnings per Share of Common Stock.
*Exhibit 18 Letter on change in accounting principles.
*Exhibit 24 Independent Auditors' Consent.
*Exhibit 25 Powers of Attorney of the following Officers and Directors:
Donald H. Anderson, Austin M. Beutner, Robert S. Boswell,
Richard J. Callahan, Dale F. Dorn, John C. Dorn, William L.
Dorn, Harold D. Hammar, David H. Keyte, James H. Lee,
Daniel L. McNamara, Jeffrey W. Miller, Jack D. Riggs and
Michael B. Yanney.
*Exhibit 27 Financial Data Schedule.
**Exhibit 28 Form 11-K of the Retirement Savings Plan of Forest Oil
Corporation for the year ended December 31, 1994.
* Filed with this report.
** To be filed by amendment.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report.
(b). REPORTS ON FORM 8-K
No reports on Form 8-K were filed by Forest during the last quarter of
1994.
68
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FOREST OIL CORPORATION
(Registrant)
Date: April 17, 1995 By: /s/ Daniel L. McNamara
------------------------
Daniel L. McNamara
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
William L. Dorn* Chairman of the Board and April 17, 1995
(William L. Dorn) Chief Executive Officer
(Principal Executive Officer)
Robert S. Boswell* President and Chief Financial April 17, 1995
(Robert S. Boswell) Officer
(Principal Financial Officer)
David H. Keyte* Vice President and Chief April 17, 1995
(David H. Keyte) Accounting Officer
(Principal Accounting Officer)
Donald H. Anderson*
(Donald H. Anderson)
Austin M. Beutner*
(Austin M. Beutner)
Robert S. Boswell*
(Robert S. Boswell)
Directors of the Registrant April 17, 1995
Richard J. Callahan*
(Richard J. Callahan)
Dale F. Dorn*
(Dale F. Dorn)
John C. Dorn*
(John C. Dorn)
69
<PAGE>
Signatures Title Date
---------- ----- ----
William L. Dorn*
(William L. Dorn)
Harold D. Hammar*
(Harold D. Hammar)
James H. Lee*
(James H. Lee)
Directors of the Registrant April 17, 1995
Jeffrey W. Miller*
(Jeffrey W. Miller)
Jack D. Riggs*
(Jack D. Riggs)
Michael B. Yanney*
(Michael B. Yanney)
*By /s/ Daniel L. McNamara April 17, 1995
-----------------------
Daniel L. McNamara
(as attorney-in-fact for
each of the persons indicated)
70
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- - - ------- -----------
4.9 Deed of Trust, Mortgage, Security Agreement, Assignment of
Production, Financing Statement (Personal Property including
Hydrocarbons), and Fixture Filing dated as of June 3, 1994
between Forest Oil Corporation and the Chase Manhattan Bank
(National Association), as agent.
4.10 Amendment No. 1 entered into as of June 3, 1994 relating to
Exhibit 4.9 hereof.
10.3 Executive Deferred Compensation Plan.
11 Forest Oil Corporation and Subsidiaries - Calculation of Earnings
per Share of Common Stock.
18 Letter on change in accounting principles.
24 Independent Auditors' Consent.
25 Powers of Attorney of the following Officers and Directors:
Donald H. Anderson, Austin M. Beutner, Robert S. Boswell,
Richard J. Callahan, Dale F. Dorn, John C. Dorn, William L. Dorn,
Harold D. Hammar, David H. Keyte, James H. Lee, Daniel L.
McNamara, Jeffrey W. Miller, Jack D. Riggs and Michael B. Yanney.
27 Financial Data Schedule.
71
<PAGE>
DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT
(PERSONAL PROPERTY INCLUDING HYDROCARBONS),
AND FIXTURE FILING
THIS DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
PRODUCTION, FINANCING STATEMENT (PERSONAL PROPERTY INCLUDING HYDROCARBONS), AND
FIXTURE FILING (this "Instrument"), dated as of June 3, 1994 at 9:00 a.m.,
Mountain Time (the "Effective Date"), is given by FOREST OIL CORPORATION, a New
York corporation (the "Mortgagor"), with an address at 1500 Colorado National
Building, 950 17th Street, Denver, Colorado 80202 to:
1. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), with an address
at One Chase Manhattan Plaza, New York, New York 10081, as agent for each
bank referred to below (in such capacity, the "Agent") (the Agent,
together with its successors in such capacity, is hereinafter referred to
as the "Secured Party"), as to any and all portions of the Collateral (as
hereinafter defined) EXCEPT those portions of the Collateral which (i) are
located in the State of Texas or in offshore waters adjacent to the State
of Texas and subject to the laws of the State of Texas and (ii) constitute
interests in or to real property under the law of the State of Texas (the
"DT Collateral"); and
2. Bettylou J. Robert, with an address at 1 Chase Manhattan Plaza,
New York, New York 10081, as trustee (in such capacity, together with her
successors and assigns in such capacity, the "Trustee"), but only as to the
DT Collateral.
A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT. IN CERTAIN STATES, A POWER
- - - -------------------------------------------------------------------------------
OF SALE MAY ALLOW THE SECURED PARTY TO TAKE THE COLLATERAL AND SELL IT WITHOUT
- - - -------------------------------------------------------------------------------
GOING TO COURT IN A FORECLOSURE ACTION UPON DEFAULT BY THE MORTGAGOR UNDER THIS
- - - -------------------------------------------------------------------------------
INSTRUMENT.
- - - -------------------------------------------------------------------------------
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS.
TO COMPLY WITH THE REQUIREMENTS OF THE UNIFORM COMMERCIAL CODE IN SEVERAL
STATES, (A) THE NAMES OF THE MORTGAGOR AND THE SECURED PARTY, THE MAILING
ADDRESS OF THE SECURED PARTY FROM WHICH INFORMATION CONCERNING THE SECURITY
INTEREST MAY BE OBTAINED, THE MAILING ADDRESS OF THE MORTGAGOR AND OTHER
RELEVANT INFORMATION ARE SET FORTH IN THE INTRODUCTORY PARAGRAPHS HEREOF AND
SECTION 8.06 HEREOF AND (B) A STATEMENT INDICATING THE TYPES, OR DESCRIBING THE
ITEMS, OF COLLATERAL IS SET FORTH IN RECITAL 3 HEREOF.
PORTIONS OF THE COLLATERAL ARE GOODS WHICH ARE OR ARE TO BECOME AFFIXED TO OR
FIXTURES ON THE LAND DESCRIBED IN OR
<PAGE>
REFERRED TO IN EXHIBIT A HERETO. THIS FINANCING STATEMENT IS TO BE FILED FOR
RECORD OR RECORDED, AMONG OTHER PLACES, IN THE REAL ESTATE RECORDS OF EACH
COUNTY (OR, TO THE EXTENT SIMILAR RECORDS ARE MAINTAINED AT THE CITY OR TOWN
LEVEL INSTEAD OF THE COUNTY LEVEL, EACH SUCH CITY OR TOWN) IN WHICH SAID LAND OR
ANY PORTION THEREOF IS LOCATED. THE MORTGAGOR IS THE OWNER OF RECORD INTEREST IN
THE REAL ESTATE CONCERNED. THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF
FINANCING STATEMENTS.
THIS INSTRUMENT SECURES PAYMENT OF FUTURE ADVANCES, IT BEING CONTEMPLATED THAT
THE MORTGAGOR MAY HEREAFTER BECOME INDEBTED TO THE SECURED PARTY IN FURTHER SUM
OR SUMS.
PURSUANT TO THE PROVISIONS OF SECTION 8.13 HEREOF, THOSE PORTIONS OF THE
COLLATERAL WHICH ARE HYDROCARBONS OR OTHER SUBSTANCES OF VALUE WHICH MAY BE
EXTRACTED FROM THE EARTH (INCLUDING, WITHOUT LIMITATION, OIL AND GAS), AND THE
ACCOUNTS RELATING THERETO, WILL BE FINANCED AT THE WELLHEADS OF THE WELLS
LOCATED ON THE LAND DESCRIBED OR REFERENCED TO IN EXHIBIT A ATTACHED HERETO
WHICH IS INCORPORATED HEREIN AND MADE A PART HEREOF BY THIS REFERENCE.
THE AMOUNT INVOLVED IS $200 OR MORE.
RECITALS
1. Pursuant to the terms of the Credit Agreement dated as of December
1, 1993, as amended by Amendment No. 1 dated as of December 28, 1993, Amendment
No. 2 dated as of January 27, 1994 and Amendment No. 3 dated as of June 3, 1994
among the Mortgagor, certain banks (collectively, the "Banks"), the Subsidiary
Borrowers, the Subsidiary Guarantors and the Secured Party (as amended,
supplemented and otherwise modified and in effect from time to time, the "Credit
Agreement"), the Banks have agreed to make loans from time to time under a
revolving credit facility to the Mortgagor and the aggregate principal or stated
amount of which shall not exceed $50,00,000.00 at any one time (maturing
December 31, 1996), and issue or acquire participation interests in letters of
credit for the account of the Mortgagor.
2. The Secured Party, for the benefit of itself and the Banks, is
intended to have the benefit of the security provided hereby and of the proceeds
hereinafter assigned. The Secured Party is to act hereunder for the benefit of
itself and the Banks and the Trustee is to act hereunder for the benefit of the
Secured Party in accordance with the terms of this Instrument.
3. The following are hereinafter collectively referred to as the
"Collateral":
A. All rights, titles and interest of the Mortgagor (but at a
minimum the undivided interests specified in Exhibit A attached hereto and
incorporated herein by this reference) in and to the oil and gas
<PAGE>
leases, the oil, gas and mineral leases and other mineral properties or
interests described in Exhibit A hereto (collectively, the "Leases") and in
the lands and premises covered or affected thereby (the "Lands"), except
the rights, titles and interests of the Mortgagor expressly excluded in
Exhibit A hereto;
B. without limitation of the foregoing, all other right, title
and interest of the Mortgagor of whatever kind or character in and to the
Leases and Lands described in Exhibit A hereto, or lands which are
otherwise described in any of the Leases or other instruments described in
Exhibit A hereto, even though such lands may be incorrectly described in,
or omitted from, Exhibit A hereto, except the rights, titles and interests
of the Mortgagor expressly excluded in Exhibit A hereto;
C. all rights, titles, interests and estates owned by the
Mortgagor in and to (i) the properties now or hereafter pooled or unitized
with the Leases; (ii) all presently existing or future unitization,
communitization, pooling agreements, orders and/or declarations of pooled
units and the units created thereby (including, without limitation, all
units created under orders, regulations, rules or other official acts of
any Federal, state or other governmental body or agency having jurisdiction
and so called "working interest units" crated under operating agreements,
surface use agreements, support agreements or otherwise) which may affect
all or any portion of the Leases including, without limitation, those units
which may be described or referred to in Exhibit A hereto; and (iii) all
operating agreements, farmout agreements, farmin agreements, development
agreements, participation agreements, area of mutual interest agreements,
equipment leases, purchase agreements, sale agreements, option agreements
and other agreements which cover, affect or otherwise relate to any of the
Leases or Lands or interests in the Leases or Lands described or referred
to herein or in Exhibit A hereto or to the production, sale, purchase,
exchange, processing, handling, storing, transporting or marketing of the
Hydrocarbons (as defined in Section 6.02 hereof) produced from or
attributable to such Leases or Lands or interests therein;
D. any property that may from time to time hereafter, by
delivery or by writing of any kind, be subjected to the lien and security
interest hereof by the Mortgagor or by anyone on the Mortgagor's behalf;
and the Secured Party on behalf of the Banks is hereby authorized to
receive the same at any time as additional security hereunder;
E. all of the rights, titles and interests of every nature
whatsoever now owned by the Mortgagor (as the same may be enlarged by the
removal of any prior Encumbrance) in and to the Lands, Leases, rights,
titles, interests and estates and every part and parcel
<PAGE>
thereof, including, without limitation, the Lands, Leases, rights, titles,
interests and estates as the same may be enlarged by the discharge of any
payments out of production or by the removal of any charges or Encumbrances
(as defined in Section 2.02 hereof) to which any of the Lands, Leases,
rights, titles, interests or estates are subject, or otherwise; together
with any and all renewals and extensions of any of the Lands, Leases,
rights, titles, interest or estates; all contracts and agreements
supplemental to or amendatory of or in substitution for the contracts and
agreements described or mentioned above; and any and all additional
interests of any kind hereafter acquired by the Mortgagor in and to such
Lands, Leases, rights, titles, interests and estates, excluding any
additional undivided interests in such Lands, Leases, rights, titles,
interests and estates, hereafter acquired by the Mortgagor;
F. all tenements, hereditaments, appurtenances and properties
in any way appertaining, belonging, affixed or incidental to the Lands,
Leases, rights, titles, interests and estates described or referred to in
paragraphs A, B, C, D and E above, which are now owned or, except with
respect to any additional undivided interests as provided in paragraph E
above, which may hereafter be acquired (by operation of law or otherwise)
by the Mortgagor, including, without limitation, any and all property, real
or personal, equipment, improvements, fixtures and other property now owned
or hereafter acquired and situated upon, used, held for use, or useful in
connection with the operating, working or development of any of the Leases
or the lands covered thereby or pooled or unitized therewith including,
without limitation, any and all of the Mortgagor's rights, titles and
interests in oil wells, gas wells, injection wells or other wells
(including, without limitation, the wells described in Exhibit A hereto) or
well equipment, buildings, structures, field separators, liquid extraction
plants, plant compressors, pumps, pumping units, pipelines, sales and flow
lines, gathering lines, field gathering systems, salt water disposal
facilities, tanks and tank batteries, fixtures, valves, fittings, machinery
and parts, engines, boilers, meters, apparatus, equipment, appliances,
tools, implements, cables, wires, towers, casing, tubing and rods, power,
telephone and telegraph lines, surface leases, rights-of-way, easements,
servitudes and other surface rights situated upon, used, held for use or
useful in connection with the operation and development of the Leases and
the Lands covered thereby or pooled or unitized therewith, together with
all additions, substitutions, replacements, accessions and attachments to
any and all of the foregoing properties (the foregoing rights, interests,
and properties described in paragraphs A, B, C, D, E and this paragraph F
above, and all rights, estates, powers and privileges appurtenant thereto
are referred to herein collectively as the "Mortgaged Properties": and,
individually, as a "Mortgaged
<PAGE>
Property"); and
G. all rights, titles, interests and estates now owned by the
Mortgagor in and to all Hydrocarbons in and under and which may be produced
from or attributable to the Leases and the Lands or lands pooled or
unitized therewith including, without limitation, all natural gas in tanks
and all rents, issues, profits, proceeds (including without limitation, any
prepayment for production not taken or payments in lieu of production),
products, revenues and other income from or attributable to the Leases and
the Lands covered thereby or pooled or unitized therewith which are
subjected or required to be subjected to the liens and security interests
of this Instrument; and further including, without limitation, any and all
liens and security interests in the Hydrocarbons securing payment of
proceeds from the sale of Hydrocarbons.
To secure the performance of the Obligations (as hereinafter defined)
and for and in consideration of the Loans made, and the Letters of Credit
issued, pursuant to the Credit Agreement, the Mortgagor hereby:
A. GRANTS, BARGAINS, SELLS, ASSIGNS, TRANSFERS, PLEDGES,
MORTGAGES, WARRANTS and CONVEYS, and grants a security interest in, the
Collateral other than the DT Collateral to the Secured Party WITH POWER OF
SALE pursuant to this Instrument and applicable law, for the benefit and
security of the Secured Party, subject to the rights of the Secured Party
under the assignment made in paragraph D below;
B. GRANTS, BARGAINS, SELLS, ASSIGNS, TRANSFERS and CONVEYS the
DT Collateral to the Trustee, IN TRUST, WITH POWER OF SALE pursuant to this
Instrument and applicable law, for the benefit of the Secured Party; and
C. without limiting the grant in paragraph A above, grants to
the Secured Party a security interest in those portions of the Collateral
which (i) are located in the State of Texas or in offshore waters adjacent
to the State of Texas and subject to the laws of the State of Texas and
(ii) do not constitute DT Collateral;
TO HAVE AND TO HOLD the Collateral other than the DT Collateral unto the
Secured Party, its successors and assigns, forever, and TO HAVE AND TO HOLD
the DT Collateral unto the Trustee, its successors and assigns, forever, in
trust, subject to all of the terms, conditions, covenants and agreements
herein set forth, for the security and benefit of the Secured Party and
its successors and assigns as holders of the Obligations (as hereinafter
defined); and
D. UNCONDITIONALLY AND ABSOLUTELY ASSIGNS, CONVEYS, TRANSFERS
and SETS OVER to the Secured Party
<PAGE>
any and all of the Mortgagor's rights in respect of the Hydrocarbons,
including, without limitation, all severed and extracted Hydrocarbons and
other minerals produced from or attributable to the Mortgaged Property,
including, without limitation, all of the proceeds thereof.
AND, in furtherance thereof, the Mortgagor warrants, represents,
covenants and agrees as follows:
ARTICLE I
OBLIGATIONS SECURED
Section 1.01 Obligations. This Instrument is executed, acknowledged
and delivered by the Mortgagor to secure and enforce the following obligations
(herein collectively called the "Obligations"):
A. Payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on the Loans
made by the Banks and evidenced by the Notes held by the Banks and all
other amounts (including, without limitation, Reimbursement Obligations)
from time to time owing to, and obligations to be performed in favor of,
the Secured Party and the Banks by the Mortgagor under the Credit
Agreement, the Notes and under any of the other Basic Documents (any
reborrowings, future advances, readvances, modifications, extensions,
substitutions, exchanges and renewals shall enjoy the same priority as the
initial advances evidenced by the Notes);
B. Payment of all sums advanced and costs and expenses
(including, without limitation, all legal and engineering fees) incurred by
the Secured Party (whether directly or indirectly on behalf of itself and
any of the Banks) in connection with the Obligations or any part thereof,
any reborrowing, future advance, readvance, modification, extension,
substitution, exchange and renewal of the Obligations or any part thereof,
or the acquisition or perfection of the security therefor, whether such
advances, costs and expenses were made or incurred at the request of the
Mortgagor or the Secured Party; and
C. Payment of all other indebtedness and liabilities and
performance of all other obligations of the Mortgagor to the Secured Party
or the Trustee arising pursuant to this Instrument or in connection
herewith, including without limitation all sums advanced by the Secured
Party or the Trustee to protect the Collateral, each of which Obligation
(unless otherwise specified in the writing creating such Obligation) shall
be due and payable five days after demand for payment is made upon the
Mortgagor by the Secured Party and shall bear interest at the Post-Default
Rate.
<PAGE>
ARTICLE II
WARRANTIES, REPRESENTATIONS AND COVENANTS
The Mortgagor hereby represents, warrants and covenants as follows:
Section 2.01 Performance of Obligations. The Mortgagor shall pay
when due the principal of and the interest on the Obligations as the same shall
become due and payable in accordance with the terms hereof and the Credit
Agreement.
Section 2.02 Warranty of Title.
(a) The Mortgagor has good and marketable title in and to the
undivided interests specified as fractional, percentage or decimal interest in
Exhibit A hereto in the Lands and Leases identified in Exhibit A hereto. Any
fractional, percentage or decimal interest specified in Exhibit A in referring
to Mortgagor's interests in the Mortgaged Property are solely for the purposes
of the representations and warranties set forth herein and shall in no manner
limit the quantum of the interests of the Mortgagor in the Mortgaged Property
mortgaged and pledged by the Mortgagor hereunder. All Leases are valid,
subsisting and in full force and effect, none of such Leases is in default and
no event has occurred and is continuing, and no condition exists that, after
notice or the passage of time or both could become a default under any such
Lease.
(b) The Collateral is free and clear of (i) all Liens, and (ii)
except as otherwise disclosed to Agent in writing prior to the date hereof, any
and all preferential purchase rights or other rights, restrictions or
limitations of any nature or kind (herein collectively called "Encumbrances");
other than (A) Permitted Liens described in Section 9.06 of the Credit
Agreement, (B) the Liens in favor of the Trustee and the Secured Party created
or provided herein and (C) any other Liens or Encumbrances that would not,
either individually or in the aggregate, reduce the value or impair the
marketability of the Mortgaged Properties or interfere with the use or operation
of the Mortgaged Properties in the ordinary course of business of the Mortgagor.
(c) Except as set forth in Exhibit A, none of the existing
Encumbrances include "take or pay", "gas balancing" or other comparable
obligations in accordance with which Hydrocarbons have heretofore been or may
hereafter be produced and delivered from the Mortgaged Property without the
Mortgagor then or thereafter having the right to receive full payment therefor,
except as otherwise disclosed by any contractual or other arrangements whereby
payment for production from such Mortgaged Property is to be deferred for a
substantial period after the month in which such production is delivered (i.e.,
in the case of oil, not in
<PAGE>
excess of 60 days, and in the case of gas, not in excess of 90 days), other than
any suspension of payments that is customary in the industry. No Mortgaged
Property is subject to any contractual or other arrangement for the sale of
crude oil that (i) provides for the sale of crude oil at a price that does not
adjust from time to time at reasonable intervals to reflect currently prevailing
crude oil prices in the market in which crude oil severed from such Mortgaged
Property is sold and (ii) cannot be canceled upon 90 days (or less) notice. No
Mortgaged Property is subject to a gas sales contract that contains terms which
are not customary in the industry, which terms either individually or in the
aggregate, reduce the value or impair the marketability of the Mortgaged
Properties or the gas produced therefrom. No Mortgaged Property is subject to
any contractual or other arrangement for the sale of oil or gas to any affiliate
of Mortgagor. No Mortgaged Property is subject at the present time to any
regulatory refund obligation and, to the best of the Mortgagor's knowledge, no
facts exist which might cause the same to be imposed.
(d) Except as set forth on Exhibit A, no Lien or Encumbrance on the
Mortgaged Properties would cause the Mortgagor's (i) share of production from
the wells or Leases and Lands described in Exhibit A to be less than the net
revenue interest ("NRI") (expressed as a fraction, percentage or decimal) set
forth in Exhibit A in connection with said wells or Leases and Lands or (ii)
share of expenses of development, production and operation with respect to said
well or Leases to be more than the working interest ("WI") (expressed as a
fraction, percentage or decimal) set forth in Exhibit A in connection with said
wells or Leases (unless there is also a proportionate increase in NRI).
Section 2.03 Power to Create Lien and Security Interest. The
Mortgagor has full power and lawful authority to grant, bargain, sell, assign,
transfer, mortgage, and convey a security interest in all of the Collateral in
the manner and form herein provided and without obtaining the authorization,
approval, consent or waiver of any lessor, sublessor, governmental or regulatory
authority or agency or other party or parties whomsoever.
Section 2.04 Defense of Title to Collateral. Subject to Section
2.02(b) hereof, the Mortgagor will warrant and defend the title to the
Collateral against the claims and demands of all other persons whomsoever and
will maintain and preserve the Lien created hereby so long as any of the
Obligations secured hereby remain unpaid. If the title, interest or Lien, as the
case may be, of the Mortgagor or the Secured Party to the Collateral (or the
Trustee to the DT Collateral) or any part thereof, or the security of this
Instrument, or the rights or powers of the Secured Party or the Trustee
hereunder, shall be attacked, either directly or indirectly, or if any legal
proceedings are commenced involving the Mortgagor or its properties, the
Mortgagor shall promptly give written notice thereof to the Secured Party (and
the Trustee, if the Collateral is DT Collateral) and at the Mortgagor's own
expense shall take
<PAGE>
all reasonable steps diligently to defend against any such attack or
proceedings, employing attorneys reasonably acceptable to the Secured Party; and
the Secured Party and the Trustee may take such independent action in connection
therewith as either of them may in their respective discretion deem advisable,
and all reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees and legal expenses, incurred by the Secured Party and by the
Trustee in connection therewith shall be a part of the Obligations described in
Section 1.01.C. above. Such obligation shall be payable on demand and shall bear
interest from the date of demand therefor until paid at a per annum rate of
interest equal to the Post-Default Rate, but in no event to exceed the maximum
nonusurious rate allowed by applicable law.
Section 2.05 First Lien. Except for Liens permitted under Section
9.06 of the Credit Agreement this Instrument is, and the Mortgagor will ensure
this Instrument is kept as, a direct and first Lien and security interest upon
the Collateral and the Mortgagor will not create, incur, assume or suffer to be
created or permit to exist any other Lien upon the Collateral or any part
thereof or upon the rents, issues, revenues, profits and other income therefrom.
Section 2.06 Identify; Chief Office. The Mortgagor will not change
its employer identification number, the location of its chief executive office,
its principal place of business or the place where it keeps its books and
records concerning the Collateral (including, particularly, the proceeds from
the sale of Hydrocarbons) without notifying the Secured Party or the Trustee of
such change in writing at least 60 days prior to the effective date of such
change.
Section 2.07 Further Assurances; Recordation. The Mortgagor shall
promptly and, insofar as not contrary to applicable law, at Mortgagor's own
expense, file and refile, or cause to be filed or refiled, in such offices, at
such times and as often as may be necessary, this Instrument and every other
instrument in addition or supplemental hereto, including, without limitation,
applicable financing statements, as may be necessary to create, perfect,
maintain and preserve the Lien intended to be created hereby and the rights and
remedies of the Secured Party and of the Trustee hereunder, and shall promptly
furnish to the Secured Party evidence satisfactory to the Secured Party of all
such filings and refilings and otherwise shall do or cause to be done all things
necessary or expedient to be done to effectively create, perfect, maintain and
preserve the Lien intended to be created hereby as a first Lien on the real
property and (in each case, except for Liens permitted under Section 9.06 of the
Credit Agreement), as a first and prior security interest in the personal
property which constitute the Collateral and to create, perfect, maintain and
preserve the assignments made in paragraph D of the granting clause of this
Instrument. The Mortgagor shall execute, acknowledge and deliver to the Secured
Party such other and further instruments and do such other acts as in the
<PAGE>
reasonable opinion of the Secured Party may be necessary or desirable to more
fully identify and subject to the Lien and assignment created hereby, any
property intended by the terms hereof to be covered hereby, to assure the first
priority thereof (except for liens permitted under Section 9.06 of the Credit
Agreement), and otherwise to effect the intent of this Instrument, promptly upon
request of the Secured Party and at the Mortgagor's expense.
Section 2.08 Maintenance and Operations. The Mortgagor will promptly
pay and discharge or cause to be paid and discharged all rentals, delay rentals,
royalties and indebtedness accruing under, and perform or cause to be performed
each and every act, matter or thing required by, each and all of the
assignments, deeds, subject leases, subleases, contracts and agreements
described or referred to herein or affecting the Mortgagor's interests in the
Collateral, and will do or cause to be done all other things necessary to keep
unimpaired the Mortgagor's interests in the Collateral, and will do or cause to
be done all other things necessary to keep unimpaired the Mortgagor's rights
with respect thereto and prevent any intentional forfeiture thereof or default
with respect thereof other than a default which might occur as a result of
cessation of production thereunder. The Mortgaged Property (and properties
unitized therewith) have been, to the extent the same could adversely affect the
ownership or operations of the Collateral after the Effective Date, maintained,
operated and developed in full repair, working order and efficiency;
specifically in this connection, (i) no Mortgaged Property is subject to having
allowable production after the Effective Date reduced below the full and regular
allowable (including, without limitation, the maximum permissible tolerance)
because of any over production (whether or not the same was permissible at the
time) prior to the Effective Date and (ii) none of the wells located on the
Mortgaged Property (or properties unitized therewith) are deviated from the
vertical more than the maximum permitted by applicable laws, regulations, rules
and orders, and such wells are, in fact, bottomed under and are producing from,
and the well bores are wholly within, the Mortgaged Property (or, in the case of
wells located on properties pooled or unitized therewith, such pooled or
unitized properties). The Mortgagor will operate the Mortgaged Property in a
careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
with all applicable spacings proration and conservation laws of the jurisdiction
in which the Mortgaged Property is situated, and all applicable laws, rules and
regulations of every other agency and authority from time to time constituted to
regulate the development and operation of the Mortgaged Property and the
production and sale of Hydrocarbons and other minerals produced therefrom. The
Mortgagor will do or cause to be done, or shall participate in, such development
work as may be reasonably necessary to the prudent and economical operation of
the Mortgaged Property in accordance with the approved practices of prudent
operators in the industry, including, without limitation, all to be done that
may be appropriate to protect from diminution the productive capacity of the
<PAGE>
Mortgaged Property and each producing well thereon. Upon the request of either
the Secured Party or the Trustee, the Mortgagor will (a) permit the Secured
Party or the Trustee, as the case may be, and its respective designated
representatives to enter upon any part of the Mortgaged Property under the
control of the Mortgagor, and (b) use its best efforts to cause the operator of
any part of the Mortgaged Property not under the control of the Mortgagor to
permit the Secured Party or Trustee, as the case may be, and its designated
representatives to enter upon the same (to the extent and subject to the
conditions under which the Mortgagor may so enter), for the purposes of
inspecting the condition and operation thereof.
Section 2.09 Abandonment; Sales or Dispositions.
(a) Notwithstanding anything contained herein to the contrary, the
Mortgagor shall not abandon or permit to be abandoned all or any portion of the
Mortgaged Properties, except to the extent that the production and sale of
Hydrocarbons therefrom, under then current market conditions and using
production techniques then customary in the oil and gas industry for wells of
such type, have ceased to be produced in paying quantities.
(b) The Mortgagor will not sell, lease, assign, transfer or
otherwise dispose of any part of the Mortgaged Property except as permitted by
the Credit Agreement or this Instrument. The Mortgagor will not sell, lease,
assign, transfer or otherwise dispose of, or create, incur, assume or suffer to
exist any Lien upon, the Mortgagor's interest in any Hydrocarbon transmission
lines and any gas processing plants not constituting Mortgaged Property used,
necessary or intended to be used in connection with the production or marketing
of any Hydrocarbons from the Mortgaged property or lands pooled or unitized
therewith, except Liens which would be Permitted Liens if such transmission
lines or gas processing plants were Mortgaged Property and dispositions or Liens
which do not impair the deliverability of any Hydrocarbons utilizing such
transmission liens or gas processing plants.
Section 2.10 Maintenance of Insurance. The Mortgagor shall purchase
and maintain in full force and effect policies of insurance in such form and
amounts covering such risks, and issued by such companies, in each case in the
manner and to the extent required pursuant to Section 9.04 of the Credit
Agreement. The Secured Party or the Trustee shall have the right to collection,
and the Mortgagor hereby assigns to the Secured Party or the Trustee, any and
all monies that may become payable under any such policies of insurance by
reason of damage, loss or destruction of any of the Mortgaged Property, and the
Secured Party to the Trustee may apply all or any part of the sums so collected,
as the Secured Party or the Trustee elects, toward payment of the Obligations,
whether or not such Obligation is then due and payable, in such manner as the
Secured Party or the Trustee may elect.
Section 2.11 Reporting. In addition to the
<PAGE>
reporting requirements of Section 9.01 of the Credit Agreement, the Mortgagor
will, upon request of either the Secured Party on behalf of any Bank or the
Trustee, furnish or cause to be furnished to the Secured Party or the Trustee,
as the case may be, reports prepared by or for the Mortgagor concerning the
expediency of any change in methods of treatment or operation of all or any well
included in the Mortgaged Property; any new drilling or development; any
abandonment or proposed abandonment of any well; any plugging of any well or
reopening of same at a different level and any method of repressuring in the
field or any other action with respect to the Mortgaged Property.
Section 2.12 Expenses; Indemnification. The Mortgagor will promptly
upon demand by the Secured Party pay all reasonable costs and expenses
heretofore or hereafter incurred by the Secured Party for legal, engineering,
geological or accounting services rendered to the Banks in connection with the
enforcement of any of the rights hereunder. The Mortgagor will indemnify the
Secured Party and the Trustee and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred by any of them arising out of
or by reason of any investigation or litigation or proceeding (including any
threatened investigation or litigation or other proceeding) on account of or in
connection with any bodily injury or death or property damage occurring in or
upon or in the vicinity of the Collateral through any cause whatsoever or
asserted against them on account of any act performed or omitted to be performed
hereunder or on account of any transaction arising out of or in any way
connected with the Collateral or with this Instrument (but excluding any such
losses, liabilities, claims, damages, or expenses incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified). Any
amount to be paid hereunder by the Mortgagor shall be a demand obligation owing
by the Mortgagor and shall bear interest from the date such obligation is due
until such obligation is paid, at a per annum rate of interest equal to the
Post-Default Rate.
Section 2.13 Non-Operated Interests. All or portions of the
Collateral may be comprised of interests in the Leases or Lands or lands pooled
or unitized therewith which are other than working interests or which may be
operated by a party or parties other than the Mortgagor and with respect to all
such portions of the Collateral, the Mortgagor's covenants as expressed in this
Article II are modified to require that the Mortgagor use its best efforts to
obtain compliance with such covenants by the working interest owners or the
operator or operators of such Leases, Lands or properties.
Section 2.14 Failure to Perform. The Mortgagor agrees that if the
Mortgagor fails to perform any act or to take any action which the Mortgagor is
required to perform or take hereunder or pay any money which the Mortgagor is
required to pay hereunder, each of the Secured Party and the
<PAGE>
Trustee in the Mortgagor's name or its or their own name may, but shall not be
obligated to, perform or cause to perform such act or take such action or pay
such money, and any expenses so incurred by either of them and any money so paid
by either of them shall be a demand obligation owing by the Mortgagor to the
Secured Party or the Trustee, as the case may be, and each of the Secured Party
and the Trustee, upon making such payment, shall be subrogated to all of the
rights of the person, corporation or body politic receiving such payment. Each
amount due and owing by Mortgagor to each of the Secured Party and the Trustee
pursuant to this Instrument shall bear interest from the date of such
expenditure or payment or other occurrence which gives rise to such amount being
owed to such Person until paid at the Post-Default Rate, and all such amounts
together with such interest thereon shall be a part of the Obligations described
in Section 1.01.C. hereof.
Section 2.15 Compliance with Environmental Laws. The Mortgagor will
not cause or permit the Collateral to be in violation of, or do anything or
permit anything to be done which will subject the Collateral to, any remedial
obligations under any Environmental Law. The Mortgagor will not use the
Collateral in a manner which will result in (i) the disposal or other release of
any solid waste or hazardous substance on or to the Collateral, (ii) a release
of a hazardous substance on or to the Collateral in a quantity equal to or
exceeding that quantity which requires reporting pursuant to Section 103 of
CERCLA, or (iii) the release of any hazardous substance on or to the Collateral
so as to pose an imminent and substantial endangerment to public health or
welfare or the environment and covenants and agrees to keep or cause the
Collateral to be kept free of any hazardous waste or contaminants and to remove
the same (or if removal is prohibited by law, to take whatever action is
permitted by law), promptly upon discovery and at its sole expense. In the
event the Mortgagor fails to do so, after notice to the Mortgagor, the Secured
Party upon the request of the Majority Banks may either declare an Event of
Default under this Instrument and exercise any and all remedies hereunder or
cause the Collateral to be freed from the hazardous waste or contaminants (or if
removal is prohibited by law, to take whatever action is permitted by law), and
the cost of the removal or such other action shall be a demand obligation owing
by the Mortgagor to the Secured Party (or the Trustee) pursuant to this
Instrument and shall bear interest at the Post-Default Rate. The Mortgagor
grants to the Secured Party and the Trustee and its agents and employees access
to the Collateral and the license to remove the hazardous waste or contaminants
(or if removal is prohibited by law, to take whatever action is required by law)
and agrees to indemnify and save the Secured Party and the Trustee harmless from
all costs and expense involved and from all claims (including, without
limitation, consequential damages) asserted or proven against the same by any
party in connection therewith. From time to time, but not more frequently than
once during any period of twelve calendar months unless at the time a Default
shall have occurred and be continuing, upon the reasonable request of the
Secured Party, the Mortgagor will provide at the
<PAGE>
Mortgagor's sole expense an inspection or audit of the Collateral from an
engineering or consulting firm selected by the Mortgagor and approved by the
Agent, which approval shall not be unreasonably withheld, indicating the
presence or absence of such substances on the Collateral. If the Mortgagor
fails to provide same after 10 days' notice, the Secured Party may order same,
and the Mortgagor grants to the Secured Party and its employees and agents
access to the Collateral and a license to undertake the testing. The cost of
such tests shall be a demand obligation owing by the Mortgagor to the Secured
Party pursuant to this Instrument and shall bear interest at the Post-Default
Rate.
Section 2.16 Environmental Indemnity. The Mortgagor agrees to
indemnify the Secured Party and the Trustee and their respective shareholders,
directors, officers, employees and agents from, and hold each of them harmless
against, any and all losses, liabilities, claims, damages or expenses
(including, without limitation, attorneys' fees and court costs), asserted
against or incurred by any of the Secured Party and the Trustee at any time and
from time to time by reason of or arising out of (a) the breach of any
representation or warranty of the Mortgagor set forth in Section 8.13 of the
Credit Agreement, (b) the failure of the Mortgagor to perform any obligation
herein required to be performed by the Mortgagor regarding Environmental Laws,
(c) any violation on or before the Release Date (as hereinafter defined) of any
Environmental Law in effect on or before the Release Date, and (d) any act,
omission, event or circumstance existing or occurring on or prior to the Release
Date (including, without limitation, the presence on the Collateral or release
from the Collateral of hazardous substances or solid wastes disposed of or
otherwise released on or prior to the Release Date), resulting from or in
connection with the ownership, construction, occupancy, operation, use and/or
maintenance of the Collateral, regardless of whether the act, omission, event or
circumstance constituted a violation of any Environmental Law at the time of its
existence or occurrence. The foregoing indemnity shall not apply with respect
to matters solely caused by or arising out of the gross negligence or willful
misconduct of any of the Secured Parties and the Trustee. As used in this
paragraph, the terms "Secured Party" and "the Trustee" shall collectively mean
and include not only the Secured Party or the Trustee respectively described
herein but also any Bank, and any respective persons or entities owned or
controlled by or affiliated with the Secured Party or the Trustee. The "Release
Date" as used herein shall mean the earlier of: (i) the date on which the
Obligations secured hereby have been irrevocably paid and performed in full and
this Instrument has been released and (ii) the date on which the lien of this
Instrument is foreclosed or a deed in lieu of such foreclosure is fully
effective. The provisions of this paragraph shall survive the Release Date and
shall continue thereafter in full force and effect.
Section 2.17 Action during Event of Default. To the fullest extent
that it lawfully may, the Mortgagor hereby agrees that, during the continuance
of an Event of
<PAGE>
Default, the Secured Party or the Trustee shall be entitled at any time or from
time to time to exercise all of the rights, remedies, powers and privileges
vested in the Mortgagor under the releases, contracts and Properties comprising
the Collateral, and to give or withhold or make all consents, directions,
notices, approvals and waivers required or permitted therein which the Mortgagor
would otherwise be entitled to give or withhold.
ARTICLE III
COLLECTION OF PRODUCTION AND PROCEEDS
Section 3.01 Assignment of Hydrocarbons. Pursuant to the
assignment made by the Mortgagor in paragraph D of the granting clause of this
Instrument, the Secured Party is entitled to receive all of the Hydrocarbons
(other than such portion of the Hydrocarbons that are subject to Volumetric
Production Payments permitted under the Credit Agreement) in and under which may
be produced and saved from or attributable to the Mortgaged Properties, together
with all of the proceeds thereof, effective as of the date of this Instrument at
9:00 a.m., Mountain Time. The Mortgagor acknowledges and agrees that said
assignment is intended to be an absolute and unconditional assignment and not
merely a pledge of or creation of a security interest therein or assignment as
additional security. The Mortgagor hereby authorizes and directs any owner,
lessor or party to a lease or other contract comprising or affecting the
Collateral and their respective successors and assigns (herein collectively
called "Payors") to treat and regard the Secured Party as the party entitled, in
the Mortgagor's place and stead, to receive said Hydrocarbons and proceeds and
to exercise all rights of the Mortgagor with respect thereto; and said parties
shall be fully protected in so treating and regarding the Secured Party and
shall be under no obligation to see to the application by the Secured Party of
any such proceeds received by it. For its convenience, the Secured Party may,
with respect to any or all such Hydrocarbons or proceeds, permit the Mortgagor
to receive such Hydrocarbons or proceeds until the occurrence of and during the
continuance of any Event of Default. The exercise of the rights granted to the
Secured Party hereunder to permit the Mortgagor to receive such Hydrocarbons
prior to the occurrence and continuance of an Event of Default shall not in any
way waive the right of the Secured Party to demand and receive such Hydrocarbons
and proceeds thereafter attributable to the Collateral and shall not in any way
diminish the absolute and unconditional right of the Secured Party to receive
all of the said Hydrocarbons and proceeds and cash proceeds not theretofore
expended or distributed by the Mortgagor. Notwithstanding the above, Agent
hereby represents to Mortgagor that it will not make any demand to receive any
such Hydrocarbons or proceeds unless and until an Event of Default has occurred.
The Mortgagor hereby agrees that upon (i) written notice from the Secured Party
or (ii) the occurrence and during the continuance of an Event of Default,
whichever shall first
<PAGE>
occur all cash, proceeds, instruments and other property, of whatever kind or
character, received by the Mortgagor on account of the Collateral, whether
received by the Mortgagor in the exercise of its collection rights hereunder or
otherwise, shall be remitted to the Secured Party or deposited to an account
with the Secured Party in the form received (properly assigned or endorsed to
the order of the Secured Party or for collection and in accordance with the
Secured Party's instructions) not later than the first banking business day
following the day of receipt, to be applied as provided in Section 3.02 hereof
and, until so applied, may be held by the Secured Party in a separate account
under the dominion and control of the Secured Party on which the Mortgagor may
not draw. The Mortgagor agrees not to commingle any such property, following
the occurrence of any such Event of Default, with any of its other funds or
property and agrees to hold the same upon an express trust for the Secured Party
until remitted to the Secured Party.
Section 3.02 Application of Proceeds. All of the proceeds received
by the Secured Party pursuant to Section 3.01 hereof during a particular
calendar quarter shall be promptly applied by the Secured Party in satisfaction
of Obligations during that calendar quarter, in such order of application as the
Secured Party shall determine in its sole and absolute discretion, on the date
of the due date of such Obligations or the date of receipt of such proceeds.
Any proceeds received by the Secured Party pursuant to Section 3.01 hereto
shall, pending the application thereof in satisfaction of the Obligations, be
deposited in an interest bearing account and any interest earned thereon shall
likewise be applied by Secured Party in satisfaction of the Obligations. If an
Event of Default has occurred and is continuing, any balance remaining after
such application of such proceeds as set forth in Section 5.11.A. and B. shall
be applied first to the creation of such reserves for the satisfaction of
Obligations to become due within the next two succeeding calendar quarters as
the Secured Party reasonably determines to be necessary to satisfy such
Obligations as they become due (provided that to the extent the proceeds are set
aside for the satisfaction of Obligations which, at the time such reserves are
created, are not reasonably anticipated to be due within the next succeeding
calendar quarter, such proceeds shall be invested in one or more certificates of
deposit of one or more banks or financial institutions having capital surplus or
undivided profits of at least $500,000,000, and shall be held to maturity, and
all interest accruing thereon shall be applied by the Secured Party to
Obligations as they become due); and the remainder, if any, shall be paid to the
Mortgagor. If no Event of Default has occurred and is continuing, any such
balance shall be paid to the Mortgagor.
Section 3.03 Status of Hydrocarbons after Sale of Collateral. Upon
any sale of any of the Collateral by the Secured Party for the benefit of the
Banks pursuant to Article V, the Hydrocarbons thereafter produced from and
attributed to the part of the Collateral so sold, and the proceeds thereof,
shall be included in such sale and shall pass to the purchaser free and clear of
the provisions of
<PAGE>
this Article.
Section 3.04 No Liability of Agent and Trustee. The Secured Party
and the Trustee are hereby absolved from all liability for failure to enforce
collection of any such proceeds and from all other responsibility in connection
therewith, except the responsibility to account to the Mortgagor for proceeds
actually received.
Section 3.05 Indemnification of Agent and Trustee. The Mortgagor
shall indemnify the Secured Party and the Trustee and their respective
shareholders, directors, officers, employees and agents against all claims,
actions, liabilities, judgments, costs, attorneys' fees and other charges of
whatsoever kind or nature (herein called "Claims") made against or incurred by
any of them as a consequence of the assertion, either before or after the
payment in full of the Obligations, that the Secured Party and the Trustee
received Hydrocarbons or proceeds pursuant to this Article which were claimed by
or due to third persons. The Secured Party and the Trustee shall have the right
to employ attorneys and to defend against any Claims, and unless furnished with
reasonable indemnity, the Secured Party or the Trustee, in the case of claims
asserted against the Trustee, shall have the right to pay or compromise and
adjust all Claims. The Mortgagor shall indemnify and pay to the Secured Party
and the Trustee all such amounts as may be paid in respect thereof or as may be
successfully adjudicated against the Secured Party or the Trustee. The
liabilities of the Mortgagor as set forth in this Section shall survive the
termination of this Instrument.
Section 3.06 Right to Receive Payments. The Secured Party shall
have the immediate and continuing right pursuant to the assignment made in
Section 3.01 above, to demand, collect, receive and receipt for all production,
proceeds and payments assigned hereunder, and the Secured Party is hereby
irrevocably appointed agent and attorney-in-fact of the Mortgagor for the
purpose of executing any release, receipt, division order, transfer order,
relinquishment or other instrument that the Secured Party deems necessary in
order for the Secured Party to collect and receive such production, proceeds and
payments from any of the Payors. In addition, the Mortgagor agrees that upon
the Secured Party's request made in accordance with the terms of this Article
III it will promptly execute and deliver to the Secured Party such transfer
orders, payment orders, division orders and other instruments as the Secured
Party may deem necessary, convenient or appropriate in connection with the
payment and delivery directly to the Secured Party pursuant to the rights of
Secured Party granted in the first sentence of this Section 3.06 of all
proceeds, production, and payments assigned hereunder. The Mortgagor hereby
authorizes and directs that, upon the request of the Secured Party, all of the
Payors shall, until the Secured Party directs otherwise, pay and deliver such
proceeds, production or amounts directly to the Secured Party for the account of
the Banks at the Secured Party's address set forth in the introduction to this
Instrument, or in such other manner as the Secured Party may direct such
<PAGE>
parties in writing, and this authorization shall continue until this Instrument
is released. The Mortgagor agrees that all division orders, transfer orders,
receipts and other instruments that the Secured Party may from time to time
execute and deliver for the purpose of collecting and receipting for such
proceeds, production or payments may be relied upon in all respects, and that
the same shall be binding upon the Mortgagor and its successors and assigns. No
Payor making payments to the Secured Party at its request under the assignment
contained herein shall have any responsibility to see to the application of any
of such funds, and any party paying or delivering proceeds, production or
amounts to the Secured Party under such assignment shall be released thereby
from any and all liability to the Mortgagor to the full extent and amount of all
payments, production or proceeds so delivered. The Mortgagor agrees to
indemnify and hold harmless any and all parties making payments to the Secured
Party, at the Secured Party's request under the assignment contained herein,
against any and all liabilities, actions, claims, judgments, costs, charges and
attorneys' fees resulting from the delivery of such payments to the Secured
Party. The indemnity agreement contained in the previous sentence is made for
the direct benefit of and shall be enforceable by all such persons. Should the
Secured Party bring suit against any third party for collection of any amount or
sums included within this assignment (and the Secured Party shall have the right
to bring any such suit), it may sue either in its own name, in the names of the
Banks or in the name of the Mortgagor, or any of the foregoing. As used in this
paragraph, the terms "Secured Party" and "the Trustee" shall collectively mean
and include not only the Secured Party or the Trustee respectively described
herein but also any Bank, and any respective persons or entities owned or
controlled by or affiliated with the Secured Party or the Trustee.
Section 3.07 No Assumption of Mortgagor's Duties. Nothing in this
Instrument shall be deemed or construed to create a delegation to or assumption
by the Secured Party or the Trustee, of the duties and obligations of the
Mortgagor under any agreement or contract relating to the Collateral or any
portion thereof, and all of the parties to any such contract shall continue to
look to the Mortgagor for performance of all covenants and other obligations and
the satisfaction of all representations and warranties of the Mortgagor
thereunder, notwithstanding the assignment of production and proceeds herein
made or the exercise by the Secured Party or by the Trustee, prior to
foreclosure, of any of its rights hereunder or under applicable law.
Section 3.08 No Limitation of Remedies. The assignment of
production and proceeds herein made shall not be construed to limit in any way
the Secured Party's other rights hereunder, including, without limitation, its
right to accelerate the indebtedness evidenced by the Obligations upon an Event
of Default. Monies received under the assignments herein made shall not be
deemed to have been applied in payments of Obligations unless and until such
monies actually are applied thereto by the Secured Party, but such monies shall
be applied by the Secured Party as
<PAGE>
required by and provided for in the Credit Agreement. The assignment of
production made pursuant to this Instrument is limited to the rights, if any, of
the Mortgagor, whether now owned or hereafter acquired, in and to such
production.
ARTICLE IV
TERMINATION
If all of the Obligations of the Mortgagor shall be paid or performed
in full pursuant to the terms and conditions of this Instrument and the
instruments evidencing the Obligations and the Credit Agreement terminated, the
Secured Party shall, upon the request of the Mortgagor, execute, acknowledge and
deliver to the Mortgagor proper instruments evidencing the termination of this
Instrument. The Mortgagor shall pay all reasonable legal fees and other
reasonable expenses incurred by the Secured Party for preparing and reviewing
such instruments of termination and the execution and delivery thereof, and the
Secured Party may require payment of the same prior to delivery of such
instruments. Otherwise, this Instrument shall remain and continue in full force
and effect.
ARTICLE V
DEFAULT
Section 5.01 Nature of Events. Any of the following events shall
constitute an "Event of Default" under this Mortgage (individually, an "Event of
Default," and collectively, "Events of Default") (whether such event be
voluntary or involuntary or occur or be effected by operation of law or
otherwise):
A. A default under Sections 2.03 through 2.16 inclusive shall
occur and shall continue unremedied for a period of ten days; or
B. Any Event of Default (as such term is defined in the Credit
Agreement), other than an event described in paragraph A of this Section
5.01, shall occur.
Section 5.02 Fixtures. Upon the occurrence and during the
continuance of an Event of Default, the Secured Party or the Trustee may, to the
extent permitted under applicable law, elect to treat the fixtures included in
the Collateral either as real property or as personal property, or both, and
proceed to exercise such rights as apply thereto. With respect to any sale of
real property included in the Collateral made under the powers of sale herein
granted and conferred, the Secured Party or the Trustee may, to the extent
permitted by applicable law, include in such sale any personal property and
fixtures included in the Collateral and relating to such real property.
<PAGE>
Section 5.03 Rights and Powers of Trustee and Secured Party
Generally.
(a) Upon the occurrence and during the continuance of an Event of
Default, in addition to all other rights and remedies herein conferred, the
Secured Party shall have all of the rights and remedies of a mortgagee (the
power of sale permitted and provided by applicable statute being hereby
expressly granted by the Mortgagor to the Secured Party) as to all of the
Collateral other than the DT Collateral granted, conferred or permitted by
applicable law, and the Trustee shall have all of the rights and remedies of a
mortgagee and trustee under a deed of trust as to the DT Collateral granted,
conferred or permitted by applicable law, and the Secured Party shall have all
of the rights of a beneficiary thereunder. The Secured Party (and the Trustee,
with respect to the DT Collateral) shall, to the extent permitted by applicable
law, have the right and power, but not the obligation, to enter upon and take
immediate possession of the real property included in the Collateral or any part
thereof, to exclude the Mortgagor therefrom, to hold, use, operate, manage and
control such real property, to make all such repairs, replacements, alterations,
additions and improvements to the same as the Secured Party may deem proper, and
to demand, collect and retain the proceeds of production of several Hydrocarbons
as provided in Article III hereof.
(b) Upon the occurrence and during the continuance of an Event of
Default, in addition to all other powers, rights and remedies herein granted or
by law or equity conferred, the Secured Party shall have all of the rights and
remedies of an assignee and secured party granted by applicable law, including
the Uniform Commercial Code, and shall, to the extent permitted by applicable
law, have the right and power, but not the obligation, to take possession of the
personal property included in the Collateral, and for that purpose the Secured
Party may enter upon any premises on which any or all of such personal property
is located and take possession of and operate such personal property or remove
the same therefrom. The Secured Party may require the Mortgagor to assemble
such personal property and make it available to the Secured Party at a place to
be designated by the Secured Party which is reasonably convenient to both
parties. The following presumptions shall exist and shall be deemed conclusive
with regard to the exercise by the Secured Party of any of its remedies with
respect to personal property:
(i) If notice is required by applicable law, five days' prior written
notice (unless applicable otherwise specifies) of the time and place of any
public sale or of the time after which any private sale or any other
intended disposition thereof is to be made shall be reasonable notice to
the Mortgagor. No such notice is necessary if such property is perishable,
threatens to decline speedily in value or is of a type customarily sold on
a recognized marked.
<PAGE>
(ii) Without in any way limiting the rights and authority of the
Secured Party to sell or otherwise dispose of Collateral in a commercially
reasonable manner, the following, or any of them, shall be considered
commercially reasonable: (A) the Secured Party may hold a public sale of
the Collateral at such place or places and otherwise in such manner as the
Trustee may elect, after having provided the Mortgagor with five days'
notice of such sale; (B) the Collateral may be sold for cash; and (C) the
Secured Party, any Bank or any other person owning, directly or
indirectly, any interest in any of the Obligations may be a purchaser at
such sale.
(iii) If the Secured Party in good faith believes that the Securities
Act of 1933 or any other state or Federal law prohibits or restricts the
customary manner of sale or distribution of any of such property, the
Secured Party may sell such property privately or in any other manner
deemed advisable by the Secured Party at such price or prices as the
Secured Party determines in the reasonable discretion of the Secured Party.
The Mortgagor recognizes that such prohibition or restriction may cause
such property to have less value than it otherwise would have and that,
consequently, such sale or disposition by the Secured Party may result in a
lower sales price than if the sale were otherwise held.
Section 5.04 Election of Remedies. Upon the occurrence of any of
the Events of Default, or at any time thereafter, the Secured Party (and the
Trustee with respect to the DT Collateral), in lieu of or in addition to
exercising any other power, right or remedy herein granted or by law or equity
conferred (including, without limitation, as provided by law for the foreclosure
of mortgage on real property), may, without notice, demand or declaration of
default, which are hereby waived by the Mortgagor, (A) enter, take possession of
and operate the Mortgaged Property in accordance with Section 5.03(a) hereof or
(B) proceed by an action or actions in equity or at law (i) for the seizure and
sale of the real property included in the Collateral or any part thereof, (ii)
for the specific performance of any covenant or agreement herein contained or in
aid of the execution of any power, right or remedy herein granted or by law or
equity conferred, (iii) for the foreclosure or sale of such real property or any
part thereof under the judgment or decree of any court of competent
jurisdiction, (iv) for the appointment of a receiver pending any foreclosure
hereunder or the sale of such real property or any part thereof or (v) for the
enforcement of any other appropriate equitable or legal remedy.
Section 5.05 Sale of Collateral. Upon the occurrence of any of the
Events of Default, or at any time thereafter, the Secured Party may, with
respect to all or any portion of the Collateral other than the DT Collateral and
the Trustee shall, with respect to all or any part of
<PAGE>
the DT Collateral, in response to the Secured Party's or any Bank's requests
(which the Mortgagor agrees shall be presumed to have been made), subject to any
mandatory requirements of applicable law, sell or have sold the Collateral or
any part thereof at one or more sales, as an entirety or in parcels, at such
place or places and otherwise in such manner and upon such notice as may be
required by law or by this Instrument, or, in the absence of any such
requirement, as the Secured Party (or the Trustee, as regards the DT Collateral)
may reasonably deem appropriate. The Secured Party (or the Trustee, as regards
the DT Collateral) shall make a conveyance to the purchaser or purchasers
thereof, and the Mortgagor shall warrant title thereto to such purchaser or
purchasers. The Secured Party (or the Trustee, as regards the DT Collateral)
may postpone the sale of such Collateral or any part thereof by public
announcement at the time and place of such sale, and from time to time
thereafter may further postpone such sale by public announcement made at the
time of sale fixed by the preceding postponement. Sale of a part of such
Collateral or any defective or irregular sale hereunder will not exhaust the
power of sale, and sales may be made from time to time until all such Collateral
is sold without defect or irregularity or the Obligations are paid in full. The
Secured Party (or the Trustee) shall have the right to appoint one or more
substitute Trustee or attorneys-in-fact to act in conducting the foreclosure
sale and executing a deed to the purchaser. It shall not be necessary for any
of the Collateral at any such sale to be physically present or constructively in
the possession of the Secured Party (or the Trustee, as regards the DT
Collateral) and the Mortgagor shall deliver all of the Collateral to the
purchaser at such sale on the date of sale, and if it should be impossible or
impracticable to take actual delivery of the Collateral, then the title and
right of possession to the Collateral shall pass to the purchaser at such sale
as completely as if the same had been actually present and delivered.
Section 5.06 Secured Party and Banks as Purchasers. The Secured
Party and any Bank (or any other person owning, directly or indirectly, any
interest in any of the Obligations) shall have the right to become the purchaser
at any sale made pursuant to the provisions of this Article V and shall have the
right to credit upon the amount of the bid made therefor the amount payable to
it out of the net proceeds of such sale. Recitals contained in any conveyance
to any purchaser at any sale made hereunder will conclusively establish the
truth and accuracy of the matters therein stated, including, without limitation,
non-payment of the Obligations and advertisement and conduct of such sale in
manner provided herein or provided by law. The Mortgagor does hereby ratify and
confirm all legal acts that the Secured Party and the Trustee may do in carrying
out the provisions of this Instrument.
Section 5.07 Mortgagor's Cooperation Required. Any sale of the
Collateral or any part thereof pursuant to the provisions of this Article V will
operate to divest all right, title, interest, claim and demand of the Mortgagor
in and to the property sold and will be a perpetual bar against
<PAGE>
the Mortgagor. Nevertheless, if requested by the Secured Party so to do, the
Mortgagor shall join in the execution, acknowledgement and delivery of all
proper conveyances, assignments and transfers of the property so sold. Any
purchaser at a foreclosure sale will receive immediate possession of the
property purchased, and the Mortgagor agrees that if the Mortgagor retains
possession of the property or any part thereof subsequent to such sale, the
Mortgagor will be considered a tenant at sufferance of the purchaser, and will,
if the Mortgagor remains in possession after demand to remove, be guilty of
forcible detainer and will be subject to eviction and removal, forcible or
otherwise, with or without process of law, and all damages to the Mortgagor by
reason thereof are hereby expressly waived by the Mortgagor.
Section 5.08 Mortgagor's Waiver of Rights. The Mortgagor
acknowledges that it is aware of and has had the advice of counsel of its choice
with respect to its rights, under applicable law, with respect to this
Instrument, the Obligations and the Collateral. Nevertheless, the Mortgagor
hereby waives and relinquishes, to the maximum extent permitted by law, and
subject to any mandatory requirements of applicable law, and the Mortgagor
hereby agrees that the Mortgagor shall not at any time hereafter have or assert,
any right under any law pertaining to: marshalling, whether of assets or liens,
the sale of property in the inverse order of alienation, the exemption of
homesteads, the administration of estates of decedents, appraisement, valuation,
stay, extension, redemption, the maturing or declaring due of the whole or any
part of the Obligations, notice (whether of defaults, advances, the creation,
existence, extension or renewal of Obligations, or otherwise), subrogation, or
abatement, suspension, deferment, diminution or reduction of any of the
Obligations (including, without limitation, setoff), now or hereafter in force.
The Mortgagor hereby waives appraisement, or does not waive appraisement, at the
option of the Secured Party, to be exercised at any time prior to or at entry of
judgment in any action to foreclose this Instrument. The Mortgagor expressly
agrees that the Trustee may offer the Collateral as a whole or in such parcels
or lots as the Secured Party, in its sole discretion elects, regardless of the
manner in which the Collateral may be described.
Section 5.09 Additional Remedies. Upon the occurrence of an Event
of Default, the Secured Party may exercise its rights of enforcement with
respect to the Collateral under the Uniform Commercial Code in force in any
state (to the extent the same is applicable law) and in conjunction with, in
addition to or in substitution for those rights and remedies:
A. the Secured Party may enter upon the Mortgagor's premises to
take possession of, assemble and collect the Collateral or to render it
unusable;
B. the Secured Party may require the Mortgagor to assemble the
Collateral and make it available at a place the Secured Party designates
which
<PAGE>
is mutually convenient to allow the Secured Party to take possession or
dispose of the Collateral;
C. any sale made pursuant to the provisions of this section
shall be deemed to have been a public sale conducted in a commercially
reasonable manner if held contemporaneously with and upon the same notice
as required for the sale of the Mortgaged Properties under power of sale
as provided for in this Instrument;
D. in the event of a foreclosure sale, whether made by the
Trustee under the terms hereof, or under judgment of a court, the
Collateral and the Mortgaged Properties may, at the option of the Secured
Party, be sold as a whole;
E. prior to application of proceeds of disposition of the
Collateral to the secured indebtedness, such proceeds shall be applied to
the reasonable fees and expenses of retaking, holding, preparing for sale
or lease, selling, leasing and the like and the reasonable attorneys' fees
and legal expenses incurred by the Secured Party;
F. any and all statements of fact or other recitals made in any
bill of sale or assignment or other instrument evidencing any foreclosure
sale hereunder as to nonpayment of the secured indebtedness or as to the
occurrence of any default, or as to the Secured Party having declared all
of such indebtedness to be due and payable, or as to notice of time, place
and terms of sale and of the properties to be sold having been duly given,
or as to any other act or thing having been duly done by the Secured Party,
shall be taken as prima facie evidence of the truth of the facts so stated
and recited; and
G. the Secured Party may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any
sale held by the Trustee, including the sending of notices and the conduct
of the sale, but in the name and on behalf of the Trustee.
Section 5.10 Costs and Expenses. All reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees, legal expenses,
filing fees, and mortgage, transfer, stamp and other excise taxes) incurred by
the Secured Party and by the Trustee in perfecting, protecting and enforcing its
rights hereunder, whether or not an Event of Default shall have occurred, shall
be a part of the Obligations described in Section 1.01.C. hereof.
Section 5.11 Proceeds of Sale of Collateral. The proceeds of any
sale of the Collateral or any part thereof made pursuant to this Article V shall
be applied as follows:
A. First, to the payment of all costs and expenses of such
collateral, sale or other realization, including reasonable out-of-pocket
costs and expenses
<PAGE>
of the Secured Party and the Trustee and the fees and expenses of their
respective agents and counsel, and all expenses incurred and advances made
by the Secured Party and the Trustee in connection therewith; and
B. Next, to the payment in full of the Obligations, equally
and ratably in accordance with the amounts thereof due and owing or as of
the Banks holding the same may otherwise agree, and/or prepayment of the
Obligations, in such order as the Secured Party shall elect; and
C. Finally, to the payment to the Mortgagor or its successors
or assigns any surplus then remaining.
As used in this Article 5, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of any debt of the Mortgagor or any issuer of or obligor on any of
the Collateral.
Section 5.12 Protection of Purchasers. Upon any sale made under the
powers of sale herein granted and conferred, the receipt of the Trustee will be
sufficient discharge to the purchaser or purchasers at any sale for the purchase
money, and such purchaser or purchasers and the heirs, devisees, personal
representatives, successors and assigns thereof will not, after paying such
purchase money and receiving such receipt of the Trustee be obligated to see to
the application thereof or be in any way answerable for any loss, misapplication
or non-application thereof.
Section 5.13 Foreclosure Rights. The Secured Party shall, to the
extent permitted by applicable law, have the option to proceed with foreclosure
or the exercise by the Trustee of the power of sale in satisfaction of any part
of the Obligations without declaring the whole of the Obligations as immediately
mature, and such foreclosure or sale may be made subject to the unmatured part
of the Obligations, and it is agreed that such foreclosure, if so made, shall
not in any manner affect the unmatured part of the Obligations, but as to such
unmatured part of the Notes, this Instrument and the Credit Agreement shall
remain in full force and effect just as though no foreclosure or sale had been
made. Several foreclosures or sales may be made without exhausting the right of
foreclosure or the power of sale for any unmatured part of the Obligations, it
being the purpose to provide for a foreclosure and sale of the security for any
matured portion of the Obligations without exhausting the power of foreclosure
and the power to sell the Collateral for any other part of the Obligations.
Section 5.14 Resignation of Operator. In addition to all rights
and remedies under the Basic Documents, at law and in equity, if any Event of
Default shall occur and the Trustee or the Agent shall exercise any remedies
under the Security Documents with respect to any portion of the Collateral (or
the Mortgagor shall transfer
<PAGE>
any Collateral "in lieu of" foreclosure), the Agent or the Trustee shall have
the right to request that any operator of any Mortgaged Property which is either
the Mortgagor or any Affiliate of the Mortgagor resign as operator under the
joint operating agreement applicable thereto, and no later than 60 days receipt
by the Mortgagor of any such request, the Mortgagor shall resign (or cause such
other party to resign) as operator of such Mortgaged Property.
ARTICLE VI
DEFINITIONS
Section 6.01 Certain Definitions. Terms defined in the Credit
Agreement are used herein as defined therein, unless otherwise defined herein.
Section 6.02 Additional Definitions. As used herein, the following
terms shall have the following meanings (all terms defined in this Section 6.02
or in other provisions of this Instrument in the singular to have the same
meanings when used in the plural and vice versa):
"Agent" shall have the meaning given to such term in the second
paragraph on page 1 hereof.
"Banks" shall mean those banks listed on the signature pages of the
Credit Agreement and all assignees thereof as provided in Section 12.06 of the
Credit Agreement.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, and as further amended from time to time.
"Chase" shall mean The Chase Manhattan Bank (National Association).
"Collateral" shall have the meaning given to such term in Recital 3
hereof.
"Credit Agreement" shall have the meaning given to such term in
Recital 1 hereof.
"DT Collateral" shall have the meaning given to such term in the
second paragraph on page 1 hereof.
"Effective Date" shall have the meaning given to such term in the
first paragraph on page 1 hereof.
"Encumbrances" shall have the meaning given to such term in Section
2.02.
"Event of Default" shall have the meaning given to such term in
Section 5.01 hereof.
<PAGE>
"Hydrocarbons" shall mean, collectively, oil, gas, casinghead gas,
condensate, natural gas liquids, finished and unfinished petroleum products and
other liquid or gaseous hydrocarbons (including, without limitation, all
liquefiable hydrocarbons and other products that may be extracted from gas and
gas condensate by processing thereof in a gas processing plant).
"Instrument" shall have the meaning given to such term in the first
paragraph on page 1 hereof.
"Leases" shall have the meaning given to such term in Recital 3
hereof.
"Mortgage" shall mean this Instrument.
"Mortgaged Property" shall have the meaning given to such term in
Recital 3 hereof.
"Mortgagor" shall have the meaning given to such term in the first
paragraph on page 1 hereof.
"Obligations" shall have the meaning given to such term in Section
1.01 hereof.
"Payors" shall have the meaning given to such term in Section 3.01
hereof.
"Secured Party" shall mean the party so designated in the second
paragraph on page 1 hereof.
"Trustee" shall mean the party so designated in the second paragraph
on page 1 hereof.
"Volumetric Production Payments" shall mean production payment
obligations of the Mortgagor which are payable from a specified share of
production from specific Mortgaged Properties, together with all undertakings
and obligations in connection therewith.
ARTICLE VII
TRUSTEE
Section 7.01 Resignation or Removal of the Trustee. The Trustee may
resign in writing addressed to the Secured Party or be removed at any time with
or without cause by an instrument in writing duly executed by the Secured Party.
In case of the death, resignation or removal of the Trustee, a successor Trustee
may be appointed by the Secured Party without formality other than an
appointment and designation in writing, unless otherwise required by applicable
law. Such appointing and designation will be full evidence of the right and
authority to make the same and of all facts therein recited, and upon the making
of any such appointment and designation, this Instrument will vest in the named
successor trustee all the right, title and interest of the Trustee in all of the
DT Collateral, and
<PAGE>
said successor will thereupon succeed to all the rights, powers, privileges,
immunities and duties hereby conferred upon the Trustee; provided that the
Secured Party may at its option, appoint and designate several successor
trustees, and in such manner, appoint and designate a different successor
trustee for each state wherein a portion of the DT Collateral is located, as
described in such written appointment and designation, and upon the making of
any such appointment and designation, this Instrument will vest in each such
named successor trustee all of the right, title and interest of the Trustee in
that portion of the DT Collateral ascribed to such named successor trustee, and
each such named successor trustee will thereupon succeed to all the rights,
powers, privileges, immunities and duties hereby conferred upon the Trustee in
that portion of the DT Collateral ascribed to such named successor trustee. All
references herein to the Trustee will be deemed to refer to the trustee or
trustees from time to time acting hereunder.
Section 7.02 The Trustee's Powers. At any time, or from time to
time without liability therefor and without notice, upon written request of the
Secured Party and presentation of this Instrument and the Notes secured hereby
for endorsement, and without affecting the personal liability of any person for
payment of the Obligations secured hereby or the effect of this Instrument upon
the remainder of the Collateral, the Trustee may (a) reconvey any part of the DT
Collateral, (b) consent in writing to the making of any map or plat thereof, (c)
join in granting any easement thereon, or (d) join in any extension agreement or
any agreement subordinating the lien or charge hereof.
Section 7.03 Collateral Other Than DT Collateral. The signature of
the Trustee shall not be necessary on any instrument affecting Collateral other
than the DT Collateral, including any instrument evidencing the partial or full
release or reconveyance of the lien of this Instrument on Collateral other than
DT Collateral and the Trustee's signature shall be necessary on any instruments
affecting the DT Collateral, including any instrument evidencing the partial or
full release or reconveyance of the lien of this Instrument on the DT
Collateral, only to the extent required by applicable law.
Section 7.04 Indemnification of the Trustee. The Secured Party
shall indemnify the Trustee and its shareholders, directors, officers, employees
and agents against all claims, actions, liabilities, judgments, costs, attorneys
fees or other charges of whatsoever kind or nature made against or incurred by
any of them, and arising out of the performance by the Trustee of the duties of
the Trustee hereunder.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Lien on Remaining Collateral. No
<PAGE>
failure on the part of the Secured Party or the Trustee to exercise and no delay
in exercising, and no course of dealing with respect to, any right, power or
privilege under this Instrument shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under this
Instrument preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
Section 8.02 Cumulative Rights; Waivers; Modifications. Each and
every right, power and remedy hereby granted to the Secured Party (or to the
Trustee) shall be cumulative (but not duplicative) and not exclusive, and each
and every right, power and remedy whether specifically hereby granted or
otherwise existing may be exercised from time to time and as often and in such
order as may be deemed expedient by the Secured Party (or by the Trustee, as the
case may be), and the exercise of any such right, power or remedy will not be
deemed a waiver of the right to exercise, at the same time or thereafter, any
other right, power or remedy. No delay or omission by the Secured Party (or by
the Trustee, as the case may be) in the exercise of any right, power or remedy
will impair any such right, power or remedy or operate as a waiver thereof or of
any other right, power or remedy then or thereafter existing. Any and all
covenants of the Mortgagor in this Instrument may from time to time, by
instrument in writing signed by the Secured Party, be waived to such extent and
in such manner as the Secured Party may desire, but no such waiver will ever
affect or impair the rights of the Secured Party (or the Trustee) hereunder,
except to the extent specifically stated in such written instrument. All changes
to and modifications of this Instrument must be in writing and signed by the
Mortgagor and the Secured Party.
Section 8.03 Severability of Provisions. If any provision hereof
or of any of the other documents constituting, evidencing or creating all or any
part of the Obligations is invalid or unenforceable in any jurisdiction, the
other provisions hereof or of said documents shall remain in full force and
effect in such jurisdiction and the remaining provisions hereof will be
liberally construed in favor of the Secured Party and the Trustee in order to
carry out the provisions hereof and of such other documents. The invalidity of
any provision of this Instrument in any jurisdiction will not affect the
validity or enforceability of any such provision in any other jurisdiction. Any
reference herein contained to a statute or law of a state in which no part of
the Collateral is situated will be deemed inapplicable to, and not used in, the
interpretation hereof. If any lien, encumbrance or security interest evidenced
or created by this Instrument is invalid or unenforceable, in whole or in part,
as to any part of the Obligations or Collateral, such portion, if any, of the
Obligations as is not secured by the Collateral hereunder shall be paid prior to
the payment of the secured portion of the Obligations, and all payments made on
the Obligations (including, without limitation, cash and/or property received in
connection with
<PAGE>
sales of Collateral pursuant to Article V hereof) shall, unless prohibited by
applicable law or unless the Secured Party, in its sole and absolute discretion,
otherwise elects, be deemed and considered to have been first paid on and
applied to payment in full of the unsecured or partially secured portion of the
Obligations, and the remainder to the secured portion of the Obligations.
Section 8.04 Substitution and Subrogation. This Instrument is made
with full substitution and subrogation of the Secured Party and of the Trustee
in and to all covenants and warranties by others heretofore given or made in
respect of the Collateral or any part thereof. To the extent that proceeds of
any Note are owed to pay any outstanding lien, charge or encumbrance against the
Collateral, such proceeds have been or will be advanced by the Secured Party at
the Mortgagor's request and the Secured Party shall be subrogated to any and all
rights and liens held by any owner or holder of such outstanding liens, charges
and prior encumbrances, irrespective of whether said liens, charges or
encumbrances are released.
Section 8.05 Nature of Instrument. This Instrument will be deemed
to be and may be enforced from time to time as an assignment, chattel mortgage,
contract, deed of trust, financing statement, real estate mortgage, or security
agreement, and from time to time as any one or more thereof, as is appropriate
under applicable state law. A carbon, photographic or other reproduction of
this Instrument or any financing statement in connection herewith shall be
sufficient as a financing statement for any and all purposes.
Section 8.06 Financing Statement; Fixture Filing. This Instrument
shall be effective as a financing statement filed as a fixture filing with
respect to all fixtures included within the Collateral and is to be filed for
record in the real estate records of each county where any part of the
Collateral (including said fixtures) are situated. This Instrument shall also
be effective as a financing statement covering minerals or the like (including
oil and gas and all other substances of value which may be extracted from the
ground) and accounts financed at the wellhead or minehead of wells or mines
located on the properties subject to the Uniform Commercial Code as enacted in
any other state where the Collateral is situated and is to be filed for record
in the real estate records of each county where any part of the Collateral is
situated. In addition, the Mortgagor shall execute and deliver to the Secured
Party, upon the Secured Party's request, any financing statements or amendments
thereof or continuation statements thereto that the Secured Party may require to
perfect a security interest in said items or types of property. The Mortgagor
shall pay all costs of filing such instruments. In that regard, the following
information is provided:
Name of Debtor: FOREST OIL CORPORATION, a New York state corporation
Address of Debtor: See introductory paragraph of this
<PAGE>
Instrument
County of Residence/
Principal Place of
Business of Debtor: 1500 Colorado
National Bank
950 17th Street
Denver, Colorado 80202
Tax I.D. Number of
Debtor: 25-0484900
Name of Secured
Party: THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)
Address of
Secured Party: See introductory paragraph of this Instrument
Tax I.D. Number of
Secured Party: 13-2633613
Owner of Record
of Real Property: FOREST OIL CORPORATION, a New York state corporation
Address of Owner
of Record of
Real Property: See introductory paragraph of this Instrument
Description of
Real Property: See Exhibit A of this Instrument
Section 8.07 Interest. All interest required hereunder and under
the Obligations shall be calculated as provided in the Credit Agreement and
governed by the laws of the State of New York (excluding choice of law and
conflict of law rules). Notwithstanding anything to the contrary contained
herein, no rate of interest required hereunder or under the Obligations shall
exceed the maximum legal rate under applicable law, and, in the event any such
rate is found to exceed such maximum legal rate, the Mortgagor shall be required
to pay only such maximum legal rate and any such excess shall be refunded to the
Mortgagor. All agreements between the Mortgagor and the Secured Party are
hereby expressly limited so that in no contingency or event whatsoever shall the
amount paid, or agreed to be paid, to the Mortgagor for the use, forbearance, or
detention of the money due under the Note secured hereby exceed the maximum
amount permissible under applicable law. If, due to any circumstances
whatsoever, fulfillment of any provision shall be due, shall involve
transcending the limit of validity prescribed by law, then the obligation to be
fulfilled shall be reduced to the limit of such validity.
SECTION 8.08 GOVERNING LAW. INSOFAR AS PERMITTED BY OTHERWISE
APPLICABLE LAW, THIS INSTRUMENT AND THE OBLIGATIONS SHALL BE CONSTRUED UNDER AND
GOVERNED BY THE
<PAGE>
LAWS OF THE STATE OF NEW YORK (EXCLUDING CHOICE OF LAW AND CONFLICT OF LAW
RULES); PROVIDED, HOWEVER, THAT, WITH RESPECT TO ANY PORTION OF THE COLLATERAL
LOCATED OUTSIDE OF THE STATE OF NEW YORK THE LAWS OF THE PLACE IN WHICH SUCH
PROPERTY IS LOCATED IN, OR OFFSHORE ADJACENT TO (AND STATE LAW MADE APPLICABLE
AS A MATTER OF FEDERAL LAW), SHALL APPLY TO THE EXTENT OF PROCEDURAL AND
SUBSTANTIVE MATTERS RELATING ONLY TO THE CREATION, PERFECTION, FORECLOSURE OF
LIENS AND ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE COLLATERAL. THE
MORTGAGOR HEREBY IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE JURISDICTION OF
THE STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND EACH OTHER STATE WHERE
THE COLLATERAL IS LOCATED AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE
MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS INSTRUMENT, THE BASIC
DOCUMENTS OR THE OBLIGATIONS IN THE CASE OF A PROCEEDING IN ANY OF SUCH STATES,
BY SERVING THE SECRETARY OF STATE OF SUCH STATE IN ACCORDANCE WITH ANY
APPLICABLE PROVISIONS OF SUCH STATE'S LAW GOVERNING SERVICE OF PROCESS UPON
FOREIGN CORPORATIONS OR ENTITIES.
Section 8.09 Counterparts. This Instrument may be executed in
several original counterparts. To facilitate filing and recording, there may be
omitted from certain counterparts parts of Exhibit A containing specific
descriptions which relate to land under the jurisdiction of offices or located
in counties other than the office or county in which the particular counterpart
is to be filed or recorded; provided that the description of all lands located
in, or offshore adjacent to, the State of Louisiana shall be filed in the Parish
of St. Bernard. As to counterparts to be filed in certain states, the
signatures and acknowledgments by the Agent, the Secured Party or the Trustee
may be omitted if not required by applicable law. Each counterpart shall be
deemed to be an original for all purposes, and all counterparts shall together
constitute but one and the same instrument.
Section 8.10 Recording References. Unless otherwise specified in
Exhibit A, all recording references in Exhibit A are to the official real
property records of the county or parish in which the affected land is located
or is adjacent thereto. The reference in Exhibit A to liens, encumbrances and
other burdens shall not be deemed to recognize or create any rights in third
parties.
Section 8.11 Notices. All notices, demands, consents, requests or
other communications (collectively, "notices") permitted or required to be given
by any party to any other hereunder shall be in writing and given in the manner
specified in Section 12.02 of the Credit Agreement; provided that notices to the
Trustee shall be addressed to the Trustee at its office set forth on page 1
hereof.
Section 8.12 Successors and Assigns. This Instrument applies to,
inures to the benefit of and binds the parties hereto and their respective
successors and assigns and shall run with the Properties.
Section 8.13 Financing of Extracted Minerals.
<PAGE>
The above described minerals or other substances of value which may be extracted
from the earth (including, without limitation, oil and gas), and the accounts
relating thereto will be financed at the wellhead of the wells or wells located
on the Mortgaged Property or on lands pooled or unitized therewith. This
Instrument is to be filed for record in, among other places, the real estate
records of each county in which the Mortgaged Property is located; to wit, all
of those listed in Exhibit A.
Section 8.14 Enforcement by the Agent. The Secured Party shall be
entitled to enforce payment of any indebtedness and performance of any other of
the Obligations secured hereby and to exercise all rights and powers under this
Instrument or under any other Basic Documents or any laws now or hereafter in
force, notwithstanding the fact that some or all of said indebtedness and other
Obligations secured hereby may now or hereafter be otherwise secured, whether by
mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the
acceptance of this Instrument nor its enforcement, whether by court action or
pursuant to the power of sale or other powers herein contained shall prejudice
or in any manner affect the Secured Party's right to realize upon or enforce any
other security now or hereafter held by the Secured Party, it being agreed that
the Secured Party shall be entitled to enforce this Instrument and any other
security now or hereafter held by the Secured Party in such order and manner as
it may in its absolute discretion determine.
Section 8.15 Agent as Attorney-in-Fact. Upon the occurrence and
during the continuance of an Event of Default hereunder, the Mortgagor hereby
irrevocably designates the Secured Party as its attorney-in-fact and grants to
the Secured Party appropriate powers of attorney to act for and on behalf of the
Mortgagor with the Department of Interior and all other agencies, departments
and subdivisions of the United States of America and of all states, in all
transactions relating to the Collateral or any part thereof. The Mortgagor
hereby authorizes and directs all such agencies, departments and subdivisions to
rely upon any writing from the Secured Party asserting that an Event of Default
hereunder has occurred, without inquiry into whether or not such Event of
Default actually occurred, and the Mortgagor agrees that the exercising by the
Secured Party of such powers of attorney may be relied upon in all respects and,
as between the Mortgagor and such agency, department or subdivision, shall be
binding upon the Mortgagor.
Section 8.16 Request of Notice of Sale. The Mortgagor hereby
requests that a copy of any notice of sale hereunder be mailed to it at the
address of the Mortgagor set forth in the Credit Agreement with a second copy
mailed to it at 78 Main Street, Bradford, PA 16701, Attention: Daniel McNarara,
Esq. and telecopied to it (telecopier number 814-362-5142).
Section 8.17 Captions. The captions or headings at the beginning of
Articles and Sections hereof are for the convenience of the parties and are not
a part of this
<PAGE>
Instrument.
Section 8.18 Attorneys' Fees. If any Event of Default occurs and is
continuing, the Mortgagor promises to pay all reasonable costs of enforcement
and collection, including, but not limited to, attorneys' fees, whether or not
such enforcement and collection includes the filing of a lawsuit.
Section 8.19 Interpretation. In this Instrument the singular shall
include the plural and the masculine shall include the feminine and neuter and
vice versa, if the context so requires.
Section 8.20 Purpose of the Loans. The loans evidenced by the Notes
secured by this Instrument have been or will be obtained for business or
commercial purposes, and the proceeds thereof will not be used for personal,
family, leasehold or agricultural purposes.
Section 8.21 Relationship of Parties. The relationship between the
Mortgagor and the Secured Party is that of debtor and creditor only and neither
the Mortgagor nor the Secured Party is, nor shall it hold itself out to be, the
agent, employee, joint venturer or partner of the other.
Section 8.22 The Secured Party's Powers. Without affecting the
liability of any other person liable for the payment of any obligation herein
mentioned, and without affecting the lien or charge of this Instrument upon any
portion of the Premises not then or theretofore released as secured for the full
amount of all unpaid Obligations, the Secured Party may, from time to time and
without notice, (a) release any persons liable, (b) extend the maturity or alter
any of the terms of any such obligation, (c) grant other indulgences, (d)
release or reconvey, or cause to be released or reconveyed at any time at the
Secured Party's option any parcel, portion or all of the Collateral, (e) take or
release any other or additional security for any obligation herein mentioned, or
(f) make compositions or other arrangements with debtors in relation thereto.
Section 8.23 Rule Against Perpetuities. Notwithstanding any other
provision contained herein, if any property interest granted by this Instrument
does not vest on the execution and delivery of this Instrument, it shall vest,
if at all, no later than 20 years and 364 days after the death of the last
surviving descendant of George Herbert Walker Bush (41st President of the United
States) who is alive on the execution and delivery of this Instrument.
Section 8.24 Limitation on Collateral. To the extent any of the
Collateral in which a lien, pledge, security interest or other encumbrance is
purported to be granted hereby consists of leases from the United States of
America (the "Federal Leases") or any Indian tribal leases ("Tribal Leases"),
the grant of any such purported lien, pledge, security interest or other
encumbrance in such Federal Leases or Tribal Leases pursuant to the terms hereof
<PAGE>
shall be effective to the extent permissible under the Mineral Leasing Act of
1920 Section 30 U.S.C. 181, et seq., all rules and regulations promulgated
thereunder, 43 C.F.R. 3000, et seq., the Outer Continental Shelf Lands Act, 43
U.S.C., 1331 et seq., all rules and regulations promulgated thereunder, 30
C.F.R. Part 250, et seq., or other applicable law.
ARTICLE IX
SPECIAL LOUISIANA PROVISIONS
9.01 Collateral. Insofar as any portion of the Collateral situated
in or offshore the State of Louisiana is concerned, or as to which the laws of
the State of Louisiana would be applicable, (i) the general language of
conveyance and hypothecation to the Secured Party in this Instrument is intended
and shall be construed as words of mortgage and hypothecation and the granting
of a security interest in favor of the Secured Party; and (ii) the maximum
amount of the Obligations that may be outstanding at any time and from time to
time that this Instrument secures is fixed at $100,000,000.00.
9.02 Keeper. The Secured Party shall have the right to appoint a
keeper of the Collateral pursuant to the terms and provisions of La. R.S. 9:5131
et seq. and 9:5136 et seq.
9.03 Confession of Judgment. For purposes of executory process the
Mortgagor acknowledges the Obligations secured hereby, whether now existing or
to arise hereafter, and confesses judgment thereon if not paid when due. Upon
the occurrence of an Event of Default and any time thereafter so long as the
same shall be continuing, and in addition to all other rights and remedies
granted the Secured Party hereunder, it shall be lawful for and the Mortgagor
hereby authorizes the Secured Party without making a demand or putting the
Mortgagor in default, a putting in default being expressly waived, to cause all
and singular the Collateral to be seized and sold after due process of law, the
Mortgagor waiving the benefit of any and all laws or parts of laws relative to
appraisement of Collateral seized and sold under executor process or other legal
process, and consenting that the Collateral be sold without appraisement, either
in its entirety or in lots or parcels, as the Secured Party may determine, to
the highest bidder for cash or on such other terms as the plaintiff in such
proceedings may direct. The Secured Party shall be granted all rights and
remedies granted it hereunder as well as all rights and remedies granted a
secured party under Louisiana law including the Uniform Commercial Code then in
effect in Louisiana.
9.04 Waivers. The Mortgagor hereby waives:
(a) The benefit of appraisement provided for in
<PAGE>
articles 2332, 2336, 2723 and 2724 of the Louisiana Code of
Civil Procedure and all other laws conferring the same;
(b) The demand and three (3) days notice of
demand as provided in articles 2629 and 2721 of the
Louisiana Code of Civil Procedure;
(c) The notice of seizure provided by articles
2293 and 2721 of the Louisiana Code of Civil Procedure; and
(d) The three (3) days delay provided for in
articles 2331 and 2722 of the Louisiana Code of Civil
Procedure.
IN WITNESS WHEREOF, the Mortgagor, has, on the date set forth in the
acknowledgment hereto, effective as of the date and time first above written
caused this Instrument to be duly executed before me, the undersigned Notary
Public in and for the County of Denver, State of Colorado, in the presence of
competent witnesses, after due reading of the whole.
MORTGAGOR:
FOREST OIL CORPORATION,
a New York corporation
ATTEST:
By: /s/Kenton M. Scroggs
/s/Richard W. Schelin -------------------------------
- - - ------------------------ Name: Kenton M. Scroggs
Asst. Secretary Title: Vice President & Treasurer
WITNESSES:
/s/Michele M. Daily
- - - ------------------------
/s/Marti Valentine
- - - ------------------------
/s/Teresa J. Marano
--------------------------
Notary Public
My Commission Expires:
August 11, 1996
--------------------------
<PAGE>
- - - -----------------------------------------------------------------
ACKNOWLEDGMENT
STATE OF COLORADO
COUNTY OF DENVER
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on June 2, 1994 there personally appeared before
me, the following person, being the designated officer of the corporation set
opposite his name, and such corporation being a party to the foregoing
Instrument:
Kenton M. Scroggs, the Vice President & Treasurer of Forest Oil
Corporation,
This instrument was acknowledged before me on this 2nd day of June,
1994 by Kenton M. Scroggs, Vice President & Treasurer of Forest Oil Corporation,
a New York corporation, on behalf of said corporation.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the
designated officer of said corporation described in and which executed the
foregoing Instrument, that he signed his name thereto by order of the Board of
Directors of said corporation, and acknowledged to me that he executed the same
for the purposes and consideration therein expressed, in the capacity therein
stated, and as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official notarial
seal, in the County of Denver, State of Colorado, this 2nd day of June, 1994.
/s/Teresa J. Marano
----------------------------------
Notary Public, State of Colorado
Notary's Printed Name:
Teresa J. Marano
My commission Expires: Aug. 11, 1996
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
OPERATOR: EXXON CORPORATION
FOC GWI: 0.05497370 (FROM ARCO)
FOC NRI: 0.04712300
All of Mortgagor's interest in and to the following listed Oil, Gas and Mineral
Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000008-001 Security Trust Company John H. Wynne 06/06/33 Bk 61 P 591 W 1/2 of Section 99, Block 1, H&TC R.R. Co.
Waller Survey, Waller County, Texas, containing 320
acres of land, more or less.
42-473-000011-001 August Kridner, et al W.S. McDowell 03/10/34 Bk 63 P 443 Being 20 acres of land out of the Southwest
Waller corner of the hereinafter described tract, said
20 acres to be taken in as near a square as
possible, said tract being described, as follows:
Know as the W 1/2 of Section 99, originally
granted to the H&TC R.R. Certificate No. 250,
BEGINNING at the Northwest corner of Section 9,
same being Northeast corner of Section 80, gas
pipe from which Cane Island brs. South .67-3/4
East a clump of trees at Leslies Station brs.
South 35 West and tall pine South of Pine Grove
brs. .73 West; THENCE South 1901 vrs to the
Southwest corner Section 99 and the Northeast
corner of Section 77; THENCE East 950 vrs to
corner; THENCE North 1901 vrs. to corner; THENCE
West 950 vrs. to place of beginning, being same
land described in deed recorded in Vol. 27, Page
155 Deed Records Waller County,including the 120
acres shown by deed recorded in Vol.32,Page 605,
Deed Records of Waller County to which reference
is here made.And being the same property reserved
in Deed dated Sept. 3, 1921, from August Kridner,
et al to M.P. Rochow, recorded in Vol.47,Page 105
Deed Records, Waller County,Texas,to which refer-
ence is also hereby made.
42-473-000012-001 W.E. Freeman, et ux S.G. Harrison 05/27/33 Bk 59 P 433 All of the NE 1/4 of Section 99, Abstract 167 in
Waller H&TC R.R. Block 1 containing 160 acres more or
less of land situated in Waller County,.Texas and
being all the land owned by lessors in said
Section or survey.It is agreed if oil is produced
on said land that the increase on taxes 1/8 being
paid by lessors and lessee to pay 1/8.
42-473-000013-001 Claude W. Thorp, et al Sam G. Harrison 05/25/33 Bk 60 P 53 The E 1/2 and the SW 1/4 of Section 100, Abstract
Waller 280,patented to J.M.Bennett,containing 480 acres,
<PAGE>
more or less, of land in Waller County,Texas,and
being all the land owned by Lessors in said
Section.
</TABLE>
_________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000014-001 The Illinois National Humble Oil & 05/27/38 Bk 73 P 489 All of the S 1/2 of the NW 1/4 of Section 100,
Bank of Springfield, Refining Company Waller H&TC R.R.Survey, Block 1, Waller County, Texas,
Illinois, as Trustee for containing 80 acres of land, more or less, and
et al being all of the land owned by the above named
lessors in the said survey.
42-473-000015-001 Mrs.William H.Hargrave, J. H. Meek, Jr. 09/02/33 Bk 62 P 359 The E 1/2 of Section110,T.S.Reese Survey,Block 1,
et vir Waller containing 320 acres,more or less,Waller County,
Texas.
42-473-000016-001 Albert B. Cohee, et al W. O. Allen 01/12/34 Bk 63 P 291 The SW 1/4 of Section 109, Block 1 originally
Waller granted to the Houston & Texas Central R.R.Co. by
the State of Texas, by virtue of land scrip Cert.
No. 255, issued by the commissioner of claim
March 5, 1857, and more particularly described by
metes and bounds as follows, to-wit: BEGINNING at
a stake the Northwest corner of Section 110;
THENCE North 950.5 varas to the Northwest corner
of this tract; THENCE East 950.5 varas to the
Northeast corner of this tract;THENCE South 950.5
varas to the Southeast corner of this tract;
THENCE West 950.5varas to the place of beginning,
containing 160 acres of land.
42-473-000019-001 George J. Mellinger, W. E. O'Neall 09/25/33 Bk 62 P 472 W 1/2 of Section 110, Block 1,surveyed for Public
et al Waller School Fund of Texas by virtue of H&TC R.R. Co.,
Cert. 255, patented by State of Texas to E.S. and
D. Arwine by Patent No. 604, Vol. 1.
42-473-000024-001 Doris C. McMains, Stanolind Oil& 03/14/38 Bk 73 P 452 The N 1/2 of the SE 1/4 of Section 109, H&TC R.R.
et al Gas Company Waller Co. Survey, Block 1.
42-473-000026-001 Lelia Estelle Diddel, A.T. Jones 12/21/37 Bk 72 P 449 320 acres, more or less, in H&TC R.R. Survey,
Waller Section 103,Abstract 169,and being more particu-
larly described as follows: Bounded on north by
land of Allsup heirs and/or public road; East by
H&TC R.R. Co. Survey, Section 107, Abstract 170;
South by Section 104,Abstract 292,patented J.G.
Bennett;West by lands of A.L. Short,George Lahey
<PAGE>
and O.R. Salmans and/or I.R. Spencer, and being
all the land ownedby the Lessors in said Section.
</TABLE>
__________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000029-001 American Rice Milling Sam G. Harrison 04/29/33 Bk 58 P 345 All of Section 68, Abstract 289, patented to
Company, Inc. Waller J.G. Bennett, containing 640 acres, more or less,
of land; All of H&TC R.R. Section 69, Abstract
152, containing 640 acres, more or less, of land;
All of H&TC R.R.Section79,Abstract 157,containing
640 acres,more or less,of land;All of Section 82,
Abstract 290,patented to J.G. Bennett, containing
640 acres, more or less, of land;All of the above
four sections containing 2,560acres,more or less,
of land, Waller County, Texas.
42-473-000030-001 Lila S. Loucks, et al A. T. Jones 12/11/37 Bk 72 P 440 The W1/2 of Section 97,Block 1 H&TC R.R. Survey,
Waller Waller County,State of Texas,containing 320acres,
more or less.
42-473-000031-001 L.E. Morrison, et ux Sam G. Harrison 02/17/38 Bk 73 P 277 All of the E 1/2 of Section 97, Block 1,H&TC R.R.
Waller Co. Survey,containing 320 acres,more or less,of
land, and being all the land owned by lessor in
said Section.
42-473-000032-001 Ruth Steves, et vir Humble Oil & 05/15/33 Bk 62 P 59 The E 1/2 of Section 112, Block 1, H&TC R.R. Co.
Refining Company Waller lands, located in the County of Waller, State of
Texas: ALSO the W 1/2 of Section 111, Block 1,
H&TC R.R. Co. lands, situated in the County of
Waller, State of Texas; Said lands being the same
Waller County lands devised to said Ruth Steves
by will of her mother Vinnie T. Rorick, admitted
to probate in San Diego County,CA,March 17, 1935.
42-473-000033-001 John W. Lamparter, Sam G. Harrison 03/23/38 Bk 73 P 432 All of the W 1/2 of Section 121 Block 1,H&TC R.R.
et al Waller Survey,containing 320 acres,more or less,of land,
and being allthe land owned or claimed by lessors
in said Section, situated in Waller County,Texas.
42-473-000034-001 A.T. Jones, et al Sam G. Harrison 11/04/37 Bk 73 P 84 SE 1/4 of H&TC R.R. Co.,Section 121,Abstract 201,
Waller Waller County, Texas.
42-473-000035-001 M.A. Beckendorff, et ux A. T. Jones 01/06/38 Bk 74 P 15 An undivided 1/2 interest in and to the N 1/2 of
Waller Section 127, Block 1, H&TC R.R. Survey, in Waller
and Harris Counties, Texas, containing 320 acres,
more or less, and being all the land owned by
<PAGE>
- - - ------------------------------------------------------------------------------------------------------------------------------------
lessor in said Section.
42-473-000035-002 Texas Osage W. W. Fife 11/25/38 Bk 75 P 192 All our right, title and interest in and to the
Cooperative Royalty Waller N 1/2 of Section 127, Block 1, H&TC R.R. Survey,
Pool, et al in Waller and Harris Counties, Texas, containing
320 acres, more or less, and being all the land
owned by lessor in said Section.
</TABLE>
__________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000036-001 Erwin T. V. Weinmann J. F. Taylor 10/28/38 Bk 74 P 556 Being 280acres of land,more or less,and described
Waller as follows,to-wit:Being the East 120 acres of the
S 1/2 of Section 122, T.S.Reese Survey and the SW
1/4 of Section 127, H&TC R.R. Survey, Block 1 of
Waller County, Texas.
42-473-000036-002 Myra Weinmann J. F. Taylor 10/28/38 Bk 74 P 559 Being 280acres of land,more or less,and described
Sumner, et vir Waller as follows, to-wit: Being the East 120 acres of
the S 1/2 of Section 122, T.S. Reese Survey and
the SW 1/4 of Section 127, H&TC R.R. Survey,
Block 1 of Waller County, Texas.
42-473-000036-003 P. G. Weinmann, et al J. F. Taylor 10/28/38 Bk 74 P 563 Being 280acres of land,more or less,and described
Waller as follows, to-wit: Being the East 120 acres of
the S 1/2 of Section 122, T.S. Reese Survey and
the SW 1/4 of Section 127, H&TC R.R. Survey,
Block 1 of Waller County, Texas.
42-473-000037-001 Louise M. Schlipf Ralph A.Johnston 6/11/38 Bk 73 P 569 All of the NE 1/4 of Section 122, H&TC R.R. Co.
Waller Survey, Block 1, patented to R.S.Reese,and being
the same land described in Deed from Lon M. Ash
and wife,Dollie Ash to Louise M. Schlipf,recorded
in Vol.45,Page 272 of the Deed Records of Waller
County,Texas,to which instrument and the record
thereof reference is hereby made for all purposes
42-473-000038-001 Carl F. Schlipf, et ux Ralph A.Johnston 6/11/38 Bk 74 P 123 NW 1/4 of Section 122, H&TC R.R. Co. Survey,
Waller Waller County, Texas.
42-473-000039-001 Ben Taub, et al Gillette Hill 11/29/39 Bk 77 P 575 Being 284.3 acres of land out of Section 128,H&TC
Waller R.R. Co. Survey, Block 1, Waller County,Texas and
to H.F.Sartwelle,et al recorded Vol.49,Page 491,
Waller County, Texas Deed Records.
42-473-000040-001 Pauline Dorothy Wright John H. Wynne 05/22/40 Bk 79 P 179 The Northeast 80 acres out of the NE 1/4 of the
Waller Fred Eule Survey, Section 128, Block 1 of the
<PAGE>
Public School Lands,Cert. No. 7,Abstract 376, in
Waller County, Texas;being described by metes and
bounds in Deed from Wm. Eule and wife to J.H.
Wright, dated Nov. 18, 1918, and recorded in Vol.
45,Page 447,of the Deed Records of Waller County,
Texas; said tract containing 80 acres of land,
more or less.
</TABLE>
__________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000041-001 Mrs.J.A.Kimball,et vir Bert Winston 03/15/37 Bk 70 P 578 Being a tract of 40 acres of land, more or less,
Waller out of the North part of the H&TC R.R.Co. Survey,
Section 128, Abstract 376, Waller County, Texas,
& being the same land described in Deed of Trust
dated Sept.15, 1923,and recorded in Vol. P, Page
409 of the MortgageRecords of Waller County, TX.
42-473-000042-001 C.H. Stockdick, et ux Ralph A.Johnston 07/24/40 Bk 79 P 403 Being all of the NW 1/4 of Section 125, Block 1,
Waller H&TC R.R. Co. Survey, Abstract 203,containing 160
acres of land, more or less.
42-473-000042-002 Peerless Oil and Gas Humble Oil & 07/08/40 Bk 79 P 518 Being all of the NW 1/4 of Section 125, Block 1,
Company, et al Refining Company Waller H&TC R.R. Co. Survey, Abstract 203,and containing
160 acres of land, more or less.
42-473-000043-001 Lion Oil Refining B. L. Allen 08/13/40 Bk 79 P 621 Being the W 1/2 of Section 80, Block 1,H&TC R.R.
Company Waller Co. Survey,Cert. 240,Abstract 331,containing 320
acres of land, more or less, and being the same
land described in a deed dated March 12,1906,from
W.M. Weller to M.V. Conklin, recorded in Vol.28,
Page 492,of the Deed Records of Waller County,TX,
to which reference is made, the interest hereby
conveyed being the same interest conveyed by Mae
C. Kelly,a widow,H.G.Conklin and Ruth G.Conklin,
sometimes called Ruth G.Brown,as grantors,to C.V.
Lisman, as grantee, by deed dated Nov. 29, 1935,
recorded in Vol. __,Page __,of the Deed Records
of Waller County, Texas.
42-473-000043-002 The Ohio Oil Company C.W. Krouse 08/27/40 Bk 79 P 570 W 1/2 of Section 80 of the H&TC R.R. Co. Survey,
Waller Block 1.
42-473-000043-003 The North Central Texas Humble Oil & 08/06/40 Bk 79 P 508 An undivided 1/8 interest in 320 acres,being the
Oil Company, Inc. Refining Company Waller W 1/2 of Section 80, H&TC R.R. Co. Survey,
Abstract 331.
<PAGE>
42-473-000043-004 Mae C. Kelly, et al J. F. Taylor 06/02/38 Bk 73 P 581 An undivided 1/2 interest in and to the following
Waller described land: The W 1/2 of Section 80,Block 1,
H&TC R.R. Co. Survey, Cert. No. 240,Abstract No.
331, and being the same land described in deed
dated March 12, 1906, from W.H. Weller to M.V.
Conklin, recorded in Vol. 128, Page 492, of the
Deed Records of Waller County, Texas, and being
all the land owned by lessors in said Survey.
</TABLE>
__________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000043-005 Mae C. Kelly, et al Humble Oil & 07/29/41 Bk 82 P 57 An undivided 1/2 interest in and to 40 acres of
Refining Company Waller land in Waller County,Texas,described as follows,
to-wit:The S 1/2 of the S 1/2 of the S 1/2 of the
W 1/2 of H&TC R.R. Co. Section 80, Abstract 331.
42-473-000044-001 Lucius C. Bains, et ux Sam G. Harrison 05/11/40 Bk 79 P 426 All that certain tract & parcel of land situated
Waller in Waller County,Texas, & being a part of Houston
& Texas Central R.R. Co. Survey No. 126 contained
within the following boundaries, viz: BEGINNING
at a stake at the Northeast corner of Survey No.
107 in the South line of Survey No.124 a distance
of 683varas East of the Southwest corner ofSurvey
124,which beginning point is the Northwest corner
of a tract of 324 1/2 acres patented to W.W.Bains
Feb. 11, 1920,by patent No. 526,Vol. 5-A recorded
in Vol.46,Page 361,of Waller County Deed Records;
and from said beginning point run thence East1190
varas with the North line of said W.W. Bains 324
1/2acre tract and the South lines of Surveys Nos.
124and125 to a stake for Northeast corner of said
Bains 324 1/2 acre tract,which is also the North-
west corner of the Stockdick 120 acre tract in
said H&TC R.R.Co. Survey No.126;THENCE South with
the East line of said W.W. Bains 324 1/2 acres to
the Northedge ofthe right-of-way of the Missouri,
Kansas & Texas R.R. Co.; THENCE in a westerly
direction approximately 1190 varas with the North
edge of said right- of-way to a point where the
North edge of said right-of-way intersects the
West boundary line of said W.W.Bains 324 1/2 acre
tract;THENCE North with said West boundary line
of said Bains 324 1/2 acre tract to the PLACE OF
BEGINNING, and including within said boundaries
all of that part of said 324 1/2 acres patented
to W.W.Bains as aforesaid which lies North of the
<PAGE>
North edge of said MK&T R.R. right-of-way which
boundaires include that part of the public road
or highway which is North of and adjoining said
MK&T R.R. right-of-way running Easterly and West-
erly across said Bains 324 1/2 acre tract.
</TABLE>
__________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000044-002 J. L. Farb Harmenah Oldacre 01/31/41 Bk 81 P 100 All of my undivided 1/4th interest in and to the
Waller following described tract of land, to-wit: All
that certain tract and parcel of land situated in
Waller County, Texas, and being a part of Houston
& Texas Central R.R. Co. Survey No. 126 contained
within the following boundaries, viz: BEGINNING
at a stake at the Northeast corner of Survey No.
107 in the South line of Survey No.124 a distance
of 683 varas East of the Southwest corner of
Survey 124,which beginning point is the Northwest
corner of a tract of 324 1/2 acres patented to
W.W. Bains Feb. 11, 1920, by patent.
42-473-000044-003 Harmenah Oldacre Sam G. Harrison 01/10/43 Bk 89 P 553 All of my undivided 6/32nds interest in & to the
Waller following described tract of land,to-wit:All that
certain tract & parcel of land situated in Waller
County,Texas,and being a part of Houston & Texas
Central R.R. Co. Survey No. 126 contained within
the following boundaries,viz:BEGINNING at a stake
at the Northeast corner of Survey No. 107 in the
South line of Survey No. 124 a distance of 683
varas East of the Southwest corner of Survey 124,
which beginning point is the Northwest corner of
a tract of 324 1/2 acres patented to W.W. Bains
Feb. 11, 1920,by patent No. 526, Vol. 5-A record-
ed in Vol. 46,Page 361,of Waller County Deed Rec-
ords; & from said beginning point run thence East
1190 varas with the North line of said W.W. Bains
324 1/2acres tract and the South lines of Surveys
Nos.124and125 to a stake for Northeast corner of
said Bains 324 1/2 acre tract, which is also the
Northwest corner of the Stockdick 120 acre tract
in said H&TC R.R. Co. Survey No. 126;THENCE South
with the East line of said W.W.Bains 324 1/2acres
to the North edge of the right-of-way of the
Missouri, Kansas & Texas R.R. Co.; THENCE in a
Westerly direction approximately 1190 varas with
the North edge of said right- of-way to a point
<PAGE>
where the North edge of said right-of-way inter-
sects the West boundary line of said W.W. Bains
324 1/2 acre tract; THENCE North with said West
boundary line of said Bains 324 1/2 acre tract to
the PLACE OF BEGINNING, and including within said
boundaries all of that part of said 324 1/2 acres
patented to W.W. Bains as aforesaid which lies
North of the North edge of said MK&T R.R. right-
of-way which boundaries include that part of the
public road or highway which is North of and ad-
joining said MK&T R.R. right-of-way running East-
erly and Westerly across said Bains 324 1/2 acre
tract. This lease covers and includes all of my
right, title and interest in and to the above
described tract of land.
42-473-000044-004 Robert B. Perkins Harmenah Oldacre 01/10/41 Bk 80 P 480 All of my undivided 1/16th interest in and to the
Waller following described tract of land, to-wit: All
that certain tract and parcel of land situated in
Waller County, Texas, and being a part of Houston
& Texas R.R. Co. Survey No. 126 contained within
the following boundaries,viz:BEGINNING at a stake
at the Northeast corner of Survey No. 107 in the
South line of Survey No. 124 a distance of 683
varas East of the Southwest corner of Survey124,
which beginning point is the Northwest corner of
a tract of 324 1/2 acres patented to W.W. Bains
Feb. 11,1920,by patent No. 526,Vol. 5-A recorded
in Vol.46,Page 361,of Waller County Deed Records;
and from said beginning point run thence East1190
varas with the North line of said W.W. Bains 324
1/2acre tract and the South lines of Surveys Nos.
124and125 to a stake for Northeast corner of said
Bains 324 1/2 acre tract,which is also the North-
west corner of the Stockdick 120 acre tract in
said H&TC R.R.Co. Survey No.126;THENCE South with
the East line of said W.W. Bains 324 1/2 acre to
the North edge of the right-of-way of the
Missouri, Kansas & Texas R.R. Co.; THENCE in a
Westerly direction approximately 1190 varas with
the North edge of said right-of-way to a point
where the North edge of said right-of-way inter-
sects the West boundary line of said Bains 324
1/2 acre tract to the PLACE OF BEGINNING, and
including within said boundaries all of that part
of said 324 1/2 acres patented to W.W. Bains as
aforesaid which lies North of the North edge of
said MK&T R.R. right-of-way which boundaries
include that part of the public road or highway
which is North of and adjoining said MK&T R.R.
right-of-way running Easterly and Westerly across
said Bains 324 1/2 acre tract. This lease covers
and includes all of my right, title and interest
in and to the above described tract of land.
42-473-000045-001 Francis Young, et ux E.A. Showers 03/01/40 Bk 78 P 329 The South 120acres out of the East 254 acre tract
Waller owned by Lessors, out of Survey No. 124, Block 1,
H&TC R.R. Co. Survey, Cert. No. 2,Patent No. 358,
Vol.23, Waller County,TX,the same constituting a
solid rectangular Block, 120 acres in area.
</TABLE>
<PAGE>
__________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000046-001 Atlantic Oil Humble Oil & 07/16/40 Bk 80 P 18 All that certain lot,tract or parcel of land being
Investment Corporation Refining Company Waller a part of Section107,H&TC R.R.Co. Survey,Block 1,
and being more particularly described as follows:
BEGINNING at the Northwest corner of the 300 acre
tract of land in said Survey heretofore conveyed
to John Alt by W.B. Peck, said 300 acre tract of
land being the South 300acres of said Section107;
THENCE North with the west line of said Section
107 to a stake in the South line of the right-of-
way of the MK&T R.R.; THENCE South 88' 52" East
1606 varas along the said South right-of-way line
to the East boundary line of said Section 107;
THENCE South with the East line of said Section
107 to the Northeast corner of the 300 acre tract
conveyed to John Alt as aforesaid; THENCE West
with the North line of the said John Alt 300 acre
tract 1604 varas to the place of BEGINNING, con-
taining 298.17 acres, more or less, and being the
same property conveyed to Mrs. A.M. Peck by W.B.
Peck by deed dated July 10, 1920, and recorded in
Vol. 46, Page 515, of the Deed Records of Waller
County,Texas,reference to which is here made for
all purposes.
42-473-000046-002 Peerless Oil and Gas Humble Oil & 07/08/40 Bk 79 P 515All that certain lot,tract or parcel of land being
Company, et al Refining Company Waller a part of Section107,H&TC R.R.Co. Survey,Block 1,
and being more particularly described as follows:
BEGINNING at the Northwest corner of the 300 acre
tract of land in said Survey heretofore conveyed
to John Alt by W.B. Peck, said 300 acre tract of
land being the South300 acres of said Section107;
THENCE North with the west line of said Section
107 to a stake in the South line of the right-of-
way of the MK&T R.R.; THENCE South 88' 52" East
1606 varas along the said South right-of-way line
to the East boundary line of said Section 107;
THENCE South with the East line of said Section
107 to the Northeast corner of the 300 acre tract
conveyed to John Alt as aforesaid; THENCE West
with the North line of the said John Alt 300 acre
tract 1604 varas to the place of BEGINNING, con-
taining 298.17 acres, more or less, and being the
same property conveyed to Mrs. A.M. Peck by W.B.
<PAGE>
Peck by deed dated July 10, 1920 and recorded in
Vol. 46, Page 515, of the Deed Records of Waller
County,Texas,reference to which is here made for
all purposes.
</TABLE>
__________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000046-003 Mrs. A. M. Peck T. S. Mabry 10/05/39 Bk 77 P 288 Being the North 250 acres of land out of a 298.17
Waller acre tract of land out of H&TC R.R. Co. Survey,
No.107, Block 1,and being the same land described
in a deed from W.B. Peck to Mrs. A.W. Peck, dated
July 10, 1920, recorded in Vol. 46, Page 515 of
the Deed Records of Waller County,Texas,to which
deed reference is here made for all purposes.
42-473-000047-001 Hattie I. Gass, et al C.C. McSpadden 10/01/36 Bk 69 P 617
Waller
42-201-000048-001 H. L. Sears, et ux J. C. Vaughan 06/06/33 Bk 61 P 4 187.5 a part of Section 125, H&TC R.R. Co. land,
Waller and the P.M.Cuny Survey No. 126, and this being
the same identical land which was conveyed to
H.L. Sears by Frank Alt and wife by deed dated on
or about October, 1918, and the said deed is of
record in Deed Records of Waller County, Texas.
To the said deed & the records thereof reference
is here made for description of the land herein
leased.
42-473-000049-001 Charles W. W. Delbert Morrison 06/12/33 Bk 59 P 230 Being all of the J.G.Bennett Survey,Abstract 291,
Stoutenborough, et al Waller known as Section 102, containing 640 acres, more
or less, together with 18.36 acres adjoining in
the H&TC R.R. Survey, Abstract 169, Section 103,
and 6.58 acres adjoining the H&TC R.R. Survey,
Abstract 168,Section 101,containing in all 664.94
acres, more or less.
42-473-000050-001 Francis Young, et ux Sun Oil Company 12/05/39 Bk 78 P 350 80acres of land out of Section 124, patented to
Waller W.W.Bains, Assignee of T.S.Reese, Patent No.358,
described as follows: BEGINNING at the Southeast
corner of that certain 54 acre tract of land
described in oil, gas and mineral lease from
Francis Young and wife, Frances Young, to W.E.
O'Neall, dated August 31, 1933, on file in the
office of the County Clerk of Waller County,
Texas; which said 54 acres is off the North end
of the East 254 acres of said section and which
<PAGE>
said beginning point is located in the East line
of said Section; THENCE West 2095.5 feet along
the South line of said 54acre tract to the South-
west corner thereof in the West line of the 254
acre tract described in a deed from Katy State
Bank to Francis Young and wife, Frances Young,
recorded in Vol. 47, Page 517, Deed Records of
Waller County, Texas; THENCE South along the West
line of said 254 acre tract a sufficient distance
from the Southwest corner of said 54acre tract to
a point in the West line of said 254acre tract so
that a line run East parallel to the South line
of said 54 acre tract to a point in the East line
of said Section 124 and thence North to the place
of beginning will contain exactly 80 acres;THENCE
East parallel to the South line of said 54 acre
tract to a point in the East line of said Section
124; THENCE North along the East line of Section
124 to the place of beginning.
42-473-000051-001 John Alt, et al Sun Oil Company 04/02/37 Bk 71 P 86
Waller
42-473-000052-001 Harold M. Allsup, W. Delbert Morrison 06/12/33 Bk 61 P 632 Being all of the E.B. Conch Survey, Abstract 295,
et al Waller and known as Section 108, containing 640 acres,
more or less,together with 16 acres,more or less,
of the H&TC R.R. Survey,Abstract 169 Section 103,
and 23 acres,more or less,of the H&TC R.R.Survey,
Abstract 170, Section 107, making a total of 679
acres, more or less.
42-473-000053-001 Edward P. Seymour, Sam G. Harrison 05/26/33 Bk 62 P 362 All of the E 1/2 of Section 80, Abstract 331,
et al Waller patented to T.S.Reese, containing 320 acres,more
or less, of land in said Waller County,Texas,and
being all the land owned by Lessors in said
Survey, H&TC R.R. Block 1.
42-473-000054-001 C. J. McCarty, et al Stanolind Oil & 12/30/38 Bk 75 P 143 First Tract:The N 1/2 of the SE 1/4 of Section99,
Gas Company Waller H&TC R.R. Co. Survey, Block 1.
Second Tract:The S 1/2 of the SE 1/4 of Section
99, H&TC R.R. Co. Survey, Block No. 1.
The land is estimated to comprise 160 acres,
whether it actually comprises more or less.
42-473-000055-001 A. W. Robertson, et al Charles Mabry 09/16/33 Bk 62 P 386 All of Section 123, Block 1, H&TC R.R. Survey.
Waller
42-473-000056-001 Mrs. J. M. Stewart Arnett C. Smith 11/20/39 Bk 77 P 523 155.7 acres of land, more or less, out of H&TC
Waller R.R. Co. Survey, Block 1, Waller County, Texas
(said survey being also known as the Fred Eule
Survey), described by tracts as follows:
First Tract: Beginning at the Northwest corner
of Section 128 (the same being the Northwest
corner of said Fred Eule Survey and the Northwest
corner of said H&TC R.R. Co. Survey); THENCE east
with the north line of said Section 2112 feet to
an iron stake; THENCE south 1650 feet to a stake
for corner;THENCE west 2112 feet to an iron stake
for corner;THENCE north 1650 feet to the place of
<PAGE>
beginning, and containing 80 acres of land, being
the same land described in deed from M. Hillboldt
and wife to J.M. Stewart dated Nov. 22, 1918, and
recorded in Vol. 45, Page 449, Deed Records of
Waller County, Texas.
Second Tract: 75.7 acres of land, more or less,
out of Section 128, H&TC R.R.Co. Survey,Block 1,
Waller County, Texas(said survey being also known
as the Fred Eule Survey), described as follows:
Beginning at a stake in the center of a 50 foot
graded road on the west line of Section 129, 1650
feet south of its northwest corner; THENCE east
1866.9 feet to a stake; THENCE south 1763.2 feet
to the Northeast corner of the Wright 80 acre
tract; THENCE west along its north line 1866.8
feet to its northwest corner and center of said
graded road;THENCE north 1763.2 feet to the place
of beginning, being the same land described in .
deed from Wm. Eule and wife to J.M. Stewart,dated
Nov. 18, 1918, recorded in Vol.45, Page 449, Deed
Records of Waller County, Texas.
42-473-000057-001 Francis Young, et ux W. E. O'Neall 08/31/33 Bk 60 P 633 254acres out of Section 124,the T.S.Reese Survey,
Waller described in three tract:
First Tract:All that certain 195 acres described
in a deed from Katy State Bank to Francis Young,
recorded in Vol.48, Page 590, Deed Records,Waller
County, Texas;
Second Tract: All that certain 5 acres described
in deed from said Bank to Francis Young, recorded
in Vol. 47, Page 588, said Deed Records;
Third Tract: The North 54 acres of a certain 254
acre tract described in deed from Katy State Bank
to Francis Young, recorded in Vol.47, Page 517 of
said Deed Records, all of said three tracts to be
adjacent to each other & aggregating a total 254
acres, in Block 1, H&TC R.R. Co. Survey.
42-473-000058-001 W.C. Stockdick, T. S. Mabry 10/19/39 Bk 77 P 520 First Tract: That South 186 acres of the West 386
et al, Trustees Waller acres of Section 124,Abstract 334,T.S.Reese Orig-
inal Grantee, H&TC R.R. Co. Survey, Block 1;
Second Tract:A part of Section 107, H&TC R.R. Co.
Survey,Block 1,being the last tract described in
deed from John F. Snover to the Katy State Bank,
dated June 22, 1920,recorded in Vol.46,Page 466,
Deed Records of said County,being 14 acres,more
or less;a total in both tracts of 200 acres,more
or less.
</TABLE>
__________________________________________________
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000059-001 Oscar H. Kleeman J. F. Taylor 10/21/38 Bk 74 P 484 Being the NE 1/4 of Section 77,Block 1, H&TC R.R.
Waller Co. Survey, Waller County, Texas, containing 160
acres of land, more or less. Subject to all the
provisions and effect of an oil lease to Sam G.
Harrison and mineral deeds to J.F.Taylor and S.M.
Taylor heretofore given by grantor.
42-473-000060-001 J. C. Wright, et ux W. C. Nelson 09/07/33 Bk 62 P 198 The SW 1/4 of Section 128, Block 1, H&TC R.R. Co.
Waller Survey, Patented to W.I. Williams.
42-473-000061-001 W. D. Parker J. F. Taylor 07/10/39 Bk 80 P 46 Being 288 acres of land,more or less,and being
Waller that portion of the W.W. Baines Survey South of
Bk 183 P 280 the MK&T R.R. and being a portion of the same
Ft. Bend land described in a Patent to W.W. Baines dated
Feb. 46, Page 361 of the Deed Records of Waller
County,Texas,to which reference is hereby made
for all legal purposes hereafter,and containing
288 acres, more or less.
42-473-000062-001 Carrie G. Hocker, Ralph A. Johnston 08/19/33 Bk 63 P 409 The N 1/2 of the NW 1/4 of Section 100, Block 1,
et vir Waller H&TC Survey in Waller County, Texas, containing
80 acres, more or less.
42-473-000063-001 Judith Givens, Gulf Oil Corporation 07/14/38 Bk 74 P 155 The Mrs. M.J. Givens' Estate 320 acre tract of
et al Waller land, being the W 1/2 of School Land Survey No.
112, Block 1, surveyed and located by virtue of
Cert. No. 256, issued to the H&TC R.R. Co., SAVE
AND EXCEPT the Northwest 20acres out of the above
described 320 acre tract,said 20acres so excepted
being cut off in the form of a square out of the
Northwest corner of said 320 acre tract.
42-473-000065-001 Missouri-Kansas-Texas Humble Oil & 12/23/41 Bk 83 P 569 BEGINNING at a point in the North right-of-way
Railroad Company of Refining Company Waller line where said right-of-way line would intersect
Texas the south projection of the west line of the J.G.
Bennett H.R. said point being 50 feet at right
angles northerly from center line of Railroad
Company's Houston Division Main Line Track at
chaining station 20831 plus 30; THENCE East
parallel with and distant 50 feet northerly from
center line of said main line track, across a
portion of H&TC R.R. Section 101, all of Section
103 and 107, the W.W. Bains H.R.;and a portion of
the P.M. Cuny H.R., 18,600 feet to a point in
said north right-of-way line opposite main line
chaining station 21017 plus 30; THENCE South 100
feet to a point in the south right-of-way line
distant 50 feet at right angles southerly from
center line of main line track opposite chaining
station 21017 plus 30; THENCE West parallel with
and distant 50 feet southerly from center line of
main line track across a portion of the P.M. Cuny
H.R.; all of the W.W. Bains, H.R.; H&TC R.R.
<PAGE>
Sections107 and 103 and a portion of H&TC Section
101 to a point in the south right-of-way line in
the projection of the west line of the J.G.
Bennett H.R. due south of the southwest corner of
same; THENCE North in the projection of the west
line of the J.G. Bennett H.R. 100 feet, more or
less, to the point of beginning, containing 42.7
acres, more or less.
42-473-000066-001 Judith Givens, et al Humble Oil & 04/01/42 Bk 87 P 11 20acres in the form of a square out of the North-
Refining Company Waller west corner of 320 acres, being the W 1/2 of
Section 112,Block 1,H&TC R.R. Co. Survey,Abstract
373, Waller County, Texas.Said 20 acres being all
of the W 1/2 of said Section 112 except that
certain 300 acres described in a lease dated July
14, 1938 between Judith Givens, et al as lessor
and Gulf Oil Corp. as lessee and recorded in Vol.
74,Page 155 of the Deed Records of Waller County,
Texas.
42-473-025080-000 Mrs. Caroline Schlipf, Houston Oil Co. 06/06/38 Bk 73 P 530 200 acres, more or less, of land lying and being
et al of Texas Waller situated in the Southwest part of Section No.122,
H&TC R.R. Co., Block 1, and being the same land
deeded by Theo. Kellar to Chris Schlipf Oct. 1,
1900, said deed being of record in Vol. 22 Pages
42-43,of the Deed Records of Waller County,Texas.
42-473-000521-099 Mrs. Carrie G. Humble Oil & 04/08/43 Bk 89 P 326 The N 1/2 of the NW 1/4 of Section 100, Block 1,
Simpson, et vir Refining Company Waller H&TC Survey in Waller County,Texas, containing 80
acres, more or less.
</TABLE>
__________________________________________________
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT I
INSOFAR AND ONLY INSOFAR as the above described leasehold is located within the
current boundaries of the Katy Gas Field Unit I containing 11,285.35 acres of
land, the outside boundaries of which are shown by that hatched line on
Exhibit B attached to that certain Pooling Agreement dated 5/16/41 and a
counterpart of which is recorded in Volume 84,Page 432 Deed Records of Waller
County, Texas AND INSOFAR AND ONLY INSOFAR as said leasehold pertains to gas and
gas liquids only from the subsurface strata below the Cockfield V Formation,
being the subsurface interval, or its correlative equivalent, as determined from
electric logs of each of the following wells: Katy Gas Field Unit I, Well
No. 3 - 7,640'; Katy Gas Field Unit I, Well No. 8 - 7,650'; Katy Gas Field
Unit I, Well No. 23 - 7,682'; Katy Gas Field Unit I, Well No. 43 - 7,925'; Katy
Gas Field Unit I, Well No. 44 - 7,975'.
FOOTNOTES:
1. Joint Operating Contract (AR-16574) dated 9/12/40 by and between Humble Oil
& Refining Company and the Atlantic Refining Company, et al, as amended.
2. Pooling Agreement dated 5/16/41 by and between Humble Oil & Refining
<PAGE>
Company and the Royalty Holders of the Katy Gas Field recorded in Volume
84, Page 480 of the Deed Records of Waller County, Texas, as amended.
3. Assignment of Gas Rights in Leases Subject to the Katy Joint Operating
Contract dated 11/25/41, by and between Amerada Petroleum Corporation, et al.
4. Second Processing Agreement dated 8/15/44 by and between Stanolind Oil &
Gas Company, as Seller and Amerada Corporation, et al, as Buyers, as amended
and superseded.
5. Assignment dated 11/25/41 by and between Amerada Petroleum Corporation, et
al and each other, recorded in Volume 85, Page 193, Deed Records of Waller
County, Texas.
6. Supplemental Assignment dated 8/1/42 by and between Amerada Petroleum
Corporation, et al and each other, recorded in Volume 88, Page 435, Deed
Records of Waller County, Texas.
7. Second Supplemental Assignment dated 9/1/43 by and between Houston Oil
Company of Texas, et al and each other, recorded in Volume 95, Page 148,
Deed Records of Waller County, Texas.
8. Deed dated 6/24/43 by and between Humble Oil & Refining Company and Houston
Oil Company of Texas, et al recorded in Volume 93, Page 4, Deed Records of
Waller County, Texas.
9. Deed dated 2/25/42 by and between John Byers, as Grantor and Humble Oil &
Refining Company, et al, as Grantee recorded in Volume 109, Page 140, Deed
Records, Waller County, Texas.
10.Assignment dated 8/6/48 by and between The Atlantic Refining Company, as
Assignor and Houston Oil Company of Texas, as Assignee recorded in
Volume ___, Page ___, Deed Records, Waller County, Texas.
11."Additional Royalties Contract" dated 12/15/41 by and between Humble Oil &
Refining Company and "Royalty Holders" a counterpart of which is recorded in
Volume 85, Page 354, Deed Records, Waller County, Texas.
12.The obligations set out in the above described leases.
13.Conveyance of Overriding Royalty to Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993. Recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
14.Production and Delivery Agreement with Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993, recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
15.Gas Purchase Contract with Enron Gas Marketing, Inc. termed July 1, 1994 to
December 31, 1994.
__________________________________________________
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
OPERATOR: EXXON CORPORATION
FOC GWI: 0.28180479 (FROM ARCO)
FOC NRI: 0.24628218
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000092-001 C. G. Daniel, Jr., et ux Sam G. Harrison 10/30/36 Bk 69 P 116 The SE 1/4 of Section 119, Abstract #200, H&TC
Waller R.R. Survey, Waller County, Texas, containing
160 acres, more or less, and being all of the
land owned by lessor in said Section or Survey.
42-473-000093-001 T. S. Ehlert, et al C. M. Frost 04/25/39 Bk 76 P 189 156 acres of land, more or less, being commonly
Waller known as the Ehlert farms, & is the N 1/4 of the
H&TC R.R. Co. Survey,Section 71,out of Block 1.
42-201-000057-001 Jesse A. Tucker, et vir J. F. Taylor 05/25/42 Bk 410 P 629 Being 120 acres of land, more or less,out of the
Harris SE 1/4 of Section 80, in Block 2, H&TC R.R. Co.
Survey in Harris County,Texas,Cert. 144,Abstract
1416, being decribed by metes and bounds in that
certain deed dated Dec. 28, 1915, from A.
Stockdick, et ux to Jessie A. Tucker which is
recorded in Vol. 355, Page 308, Harris County,
Deed Recrds.
42-473-025681-000 Missouri-Kansas-Texas Houston Oil 10/13/42 Bk 87 P 638 Tract No. 1
Railroad Company of Company of Texas Waller BEGINNING at a point on the Railroad Company's
Texas Bk 207 P 433 Houston Division Southerly right-of-way line
Ft Bend where said right-of-way line would intersect the
south projection of the Easterly line of the
H&TC R.R. Section 77,said point being 50 feet at
right angles Southerly from center line of Rail-
road Company's Houston Division Main Line at
Chaining station 20831 plus 30.
THENCE westerly parallel with and distant 50feet
southerly from center line of said Main line
along Railroad Company's southerly right of way
line across a portion of the H&TC R.R. Section
101 a distance of 2474 feet,more or less,to the
westerly line of said Section 101. THENCE
northerly along said westerly line of Section
101-208 feet, more or less, to a point in the
southerly line of H&TC R.R. Section 77. THENCE
easterly along said southerly line of H&TC R.R.
Section 77 2479 feet,more or less to the south-
east corner of same.THENCE southerly in the pro-
jection of the Easterly line of said H&TC R.R.
Section 77 - 270 feet more or less to the point
of beginning. Said tract containing an area of
13.57 acres more or less.
<PAGE>
Tract No. 2
Beginning at a point in the Railroad Company's
Houston Division Southerly right-of-way at its
intersection with the Easterly line of the J.W.
McCutcheon H.R. H&TC R.R. Section 44,said point
being 50 feet at right angles southerly from
center line of Railroad Company's Houston Divi-
sion Main Line at chaining station 21162 plus 95.
THENCE westerly across all of the J.W. McCutcheon
H.R. - H&TC R.R. Section 44; the J.J. Crawford
R.W.; the J.C. Paul H.R.; H&TC R.R. Section 126
and a portion of the P.M. Cuny H.R. - H&TC R.R.
Section 126 along the Railroad Company's Houston
Division Main Line southerly right of way line as
follows: Distant 50 feet southerly and parallel
with said Main Line 4869 feet to a point; THENCE
southerly at right angles 100 feet to a point;
THENCE Westerly parallel with and distant 150feet
southerly from center line of Main Line 1655 feet
to a point; THENCE Northerly at right angles 100
feet to a point distant 50feet southerly at right
angles from center line of Main Line; THENCE
westerly parallel with & distant 50feet souther-
ly from center line of Main Line 8041 feet to a
point; THENCE northerly at right angles 100 feet
to a point on the Railroad Company's northerly
right-of-way line; THENCE easterly across a por-
tion of the P.M. Cuny H.R. - H&TC R.R. Section
126, all of the J.C.Paul H.R.-H&TC R.R. Section
126; J.J. Crawford H.R. and the J.W. McCutcheon
H.R. - H&TC R.R. Section 44 along Railroad Com-
pany's said Northerly right-of-way line as
follows; Distant 50 feet Northerly and parallel
with said Main Line 8041 feet to a point; THENCE
northerly at right angles 50 feet to a point
distant 100 feet at right angles Northerly from
center of Main Line;THENCE Easterly parallel with
& distant 100 feet Northerly from center line of
Main Line 1665 feet to a point; THENCE southerly
at right angles 50feet to a point distant feet at
right angles northerly from center line of Main
Line; THENCE Easterly parallel with and distant
50 feet northerly from center line of Main Line
4859 feet, more or less, to the point of begin-
ning.Containing an area of 39.1 acres, more or
less.
</TABLE>
__________________________________________________
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-157-025669-000 F. E. Hoyt, et al J. F. Taylor 06/10/42 Bk 205 P 147 Being the west 60 acres out of that certain
Ft Bend tract containing 123.4 acres of land, more or
less,and being a part of the same land describ-
ed in a Partition Deed from F.E. Hoyt et al to
Emma J. Hoyt McClintock, dated July 20, 1917,
recorded in Vol.74,Page 635 of the Deed Records
of Fort Bend County, Texas, to which deed and
the reference thereof is hereby made for all
legal purposes here-after.
42-473-025671-000 C. H. Stockdick, et al R.J. St.Germain 02/02/39 Bk 75 P 294 The SW 1/4 of the SW 1/4 of Section No. 103,
Waller H&TC R.R. Co.Survey,Block No. 1,Waller County,
Texas. Said tract being described by metes and
bounds in a certain deed recorded in Vol. 32,
Page 12, of the Deed Records of Waller County,
Texas,from C.J. Smith and F.L. Smith to Richard
J. Molyneaux, to which deed reference is hereby
made for all descriptive purposes.
42-201-025672-000 H. E. Romack Houston Oil 07/31/42 Bk 88 P 120 Lots 1,2,3,4,5,6,9,10, 11 and 12 in Block 21;
Company of Texas Waller all of Block 22; and all of Block 23 except the
Bk 415 P 578 W 1/2 of the N 1/2 of Block 23; all in the town
Harris of Katy, Texas.
42-157-025674-000 Mae Alexander, et al Houston Oil 08/06/42 Bk 206 P 228 Beginning at a point 100 feet south and 404 feet
Company of Texas Ft Bend east of where the west line of the said J.J.
Crawford Survey crosses the south line of the
Right-of-Way of the M.K. & T R.R. Co. of Texas;
THENCE south 290 feet to a stake for corner;
THENCE east 300 feet to a stake for corner;
THENCE north 290 feet to a stake for corner;
THENCE west parallel with State Highway No. 73,
a distance of 300 feet to the place of begin-
ning, containing 2 acres more or less;and being
the same land conveyed to H.H.Alexander by E.C.
Stockdick et al, recorded in Vol. 161, Page 84
of the Deed Records of Fort Bend County, Texas.
42-473-025676-000 J. M. Momeny, et al J. F. Taylor 07/01/35 Bk 66 P 470 All that certain tract or parcel of land con-
Waller taining 120 acres, more or less, situated in
Waller County, Texas, and being a part of the
H&TC R.R. Survey, Section No. 77, Block No. 1,
and described as follows, to-wit:Being the East
140 acres out of the SE 1/4 of Section 77,
Block 1; SAVE AND EXCEPT herefrom a 20 acre
tract sold to the Shell Pipe Line Company.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-025677-000 Mrs. J.H.Gibson,et vir Houston Oil 09/15/42 Bk 87 P 443 Lots 1,2,3,4, and 5 in Block 25, all such logs
Company of Texas Waller and blocks being in the town of Katy, Texas, as
Bk 399 P 688 shown by Map filed on Page 38 Vol.2 of the Plat
Harris or Map records in the office of the County Clerk
of Harris County, Texas; All our right title and
interest in and to any other lots,blocks,outlots
and/or acreage in the J.J. Crawford Survey in
Harris, Fort Bend and Waller Counties, Texas. It
is the intention that this lease shall cover and
include all land owned or claimed by Lessor
herein in the said J.J. Crawford Survey in
Harris, Fort Bend and Waller Counties, Texas.
42-473-025678-000 Mrs. Jas. T. Crysup J. F. Taylor 02/28/34 Bk 63 P 416 A certain 180 acre tract of land in Section 77,
Waller H&TC R.R. Survey,Waller County,Texas, and being
more particularly described as the SW 1/4 of
said section and the West 20 acres of the SE 1/4
of said Section.For further description of the
above described lands, reference is hereby made
to deed conveyed by Mrs. L.L. Cobb, to T.L.
McNeill, and said deed being recorded in Vol.
52, Page 174, of the Deed Records of Waller
County, Texas.Less and except the E 1/2 of the
SW 1/4 of said Section 77.
42-473-025679-000 Fred Lohmann, et ux Houston Oil 07/14/42 Bk 88 P 144 All our undivided interest in and to two five
Company of Texas Waller acre tracts in the northwest portion of the J.
Crawford Survey, such interest being that
retained by us in deed to John Cope dated Feb.
20, 1918,and recorded in Vol. 45, Page 366, of
the Deed Records of Waller County, Texas, to
which recording reference is here made for all
purposes.
42-473-025679-000 E. S. Hamilton Edward White 05/20/44 Bk 95 P 286 Tract No. 1
Waller All that tract of land of 5 acres, more fully
described as follows: Joining the townsite of
Katy, lying and being in Waller County, Texas,
and in the Northwest corner of the 46-acre tract
of J.O. Thomas and a part of the North addition
of J.O. Thomas to the town of Katy to and a
fractional part of the J.J.Crawford Survey, said
Map is recorded in the County Clerk's office of
Harris County, Texas, said five acres of land
begins in the Northwest corner of the 46-acres
of J.O.Thomas tract, running along the West line
south 381 feet to the Southwest corner; THENCE
East 571 feet 8 in. to the Southeast corner;
THENCE 381 feet 8 in. to the Northeast corner to
the North line;THENCE 571 feet 8in. to the place
of beginning, containing 5 acres of land.
Tract No. 2
Five acres of land being described by metes and
<PAGE>
bounds as follows: BEGINNING at the Southwest
corner of said J.O. Thomas 46-acre tract; THENCE
running North along its West line 381feet to the
Southwest corner of a 5-acre tract sold to Fred
Lohman; THENCE East along the South line of said
5acre tract 571feet 8in. to the Southeast corner
of said 5-acre tract;THENCE South 381feet to the
South line of said 46-acre tract; THENCE West
along said South line 571feet 8 in. to the place
of beginning.
42-157-025650-000 Eunice Riddle, et al J. F. Taylor 06/01/42 Bk 205 P 569 All that certain tract or parcel of land situat-
Ft Bend ed in Fort Bend County,TX and known as the John
Osborn place, and more particularly described as
follows to wit:Beginning at an iron pipe in the
West line of the tract of land that John Osborn
sold to C.D. Hoyt, at a point 2183 feet south of
the Northwest corner of said land,which point is
also the Southeast corner of the John Cope tract
of land;THENCE west 3186feet to an iron pipe for
a corner in the West line of the R.T. Van Slyke
survey; THENCE south with the west line of the
Van Slyke survey 911 feet to corner; THENCE West
with the line of the Van Slyke survey 2066 feet
to corner; THENCE south 1450 feet to stake for
corner, crossing the line of the Van Slyke and
Jesse Burdett surveys; THENCE East 683 feet to
stake for corner;THENCE South 648feet to corner
of fence; THENCE East with fence line 4584 feet
to the southwest corner of the said Hoyt tract
of land in the South line of the Jesse Burdett
survey; THENCE North along the West line of the
Hoyt tract of land 3000 feet to place of begin-
ning, containing 307.6 acres of land, and being
partly out of the Thomas Cresop Survey, Abstract
No. 369, partly out of the Jesse Burdett Survey,
Abstract No. 383, partly out of the R.T. Van
Slyke Survey, Abstract No. 395, and partly out
of the C.W. Schrimpf Survey, Abstract No. 412,
situated in Fort Bend County, Texas, the above
being the same tract of land described in an
Application of Guardian to Sell Real Estate in
the Estate of Lawrence Osborn, a minor, said
Application appearing of record in Vol. T, Pages
124 et seq., of the Probate Minutes of Fort Bend
County, Texas. The above described tract of land
is composed of that certain 800.2 acre tract of
land described in a Deed from J.B. McCloy and
wife, Mary McCloy, to John Osborn,dated Feb. 25,
1909, and appearing of record in Vol. 45, Pages
200 et seq., of the Deed Records of Fort Bend
County, Texas, SAVE AND EXCEPT, that certain
tract of land, containing 492.6 acres of land
(including roads) described in a Deed from John
Osborn to C.D. Hoyt, dated Jan. 25, 1912, and
appearing of record in Vol.64,Pages 131 et seq.,
of the Deed Records of Fort Bend County, Texas,
to which instruments and their respective
records reference is here made for all purposes.
<PAGE>
42-473-025660-000 J. C. Powell,et ux W. E. Belt 06/25/42 Bk 87 P 256 BEGINNING at the S.W.corner of said 25acre tract
Waller of land;THENCE North 360 feet to a stake; THENCE
East 420 feet to a stake;THENCE South 223.7 feet
to a stake; THENCE East 1128 feet to a stake on
the East line of said 25 acre tract;THENCE South
136.3 feet to the S.E. corner of said 25 acre
tract;THENCE West with the South line of said 25
acre tract 1548 feet to the place of beginning,
containing 7 acres of land.
42-473-025647-000 Fred A. Hoyt, et al W. E. Belt 06/20/42 Bk 87 P 215 Being 33- 1/4 acres of land,more or less, out of
Waller the J.J.Crawford Survey of 320acres of land,
Bk 205 P 337 Abstract 155 Patent #242 Vol. #1 and being more
Ft Bend particularly described in a certain deed from
C.E. Smith and wife to C.F. Hoyt said deed being
filed for record in Vol. 66, Page 5, of the Deed
Records of Fort Bend County, Texas, to which
instrument and the record thereof reference is
hereby made for all purposes.
42-473-025666-000 Arthur L. Short, et ux Hubert E. Clift 06/29/42 Bk 87 P 90 East 12.32 acres, more or less of West 112.32
Waller acres,more or less,out of NW 1/4 of Section 103,
H&TC R.R. Co. Waller County, Texas, of Arthur L.
Short land. Under date of April 19, 1917, Arthur
L. Short and wife, Viola G. Short deeded to A.J.
Diddel 32acres in a North and South strip off of
the East side of 144.32 acres, said 144.32 acres
being described as follows: BEGINNING at a point
in West line of Section 103, 97.5 vrs. South of
NW 1/4 of said Section 103, and said beginning
point being on the South line of the right-of-
way of said MK&T right-of-way;THENCE South with
said West line 717.12vrs. to a stake for corner;
THENCE East 1154 vrs. to stake for corner;THENCE
North to South line of the said right-of-way of
the said MK&T right-of-way; THENCE westerly with
right-of-way of the MK&T right-of- way to the
place of beginning.
Under date of July 13, 1933, Arthur L. Short and
wife, Viola G. Short executed an oil, gas and
mineral lease in favor of A.J.Schuhsler covering
West 100 acres, said oil, gas and mineral lease
was recorded in Vol. 61, Page 409, Deed Records
of Waller County, Texas, leaving Arthur L. Short
and wife, Viola G. Short 12.32 acres said 12.32
acres more or less described as East 12.32 acres
of West 112.32 acres.
42-201-035668-000 V. D. Avera, et ux Houston Oil 07/15/42 Bk 413 P 668 All that certain tract or parcel of land,
Company of Texas Harris described as follows, to wit: Being a part of
Section No. 78 in Block No. 2, H&TC R.R. Survey,
described as follows, to wit: W 1/2 of the SW
1/4 of said Section 78 in Block No. 2, H&TC R.R.
Survey, containing 80 acres, more or less, being
the same land conveyed to V.D. Avera by E.P.
Campbell et al by Deed dated January 12, 1940,
and recorded in Vol. 1153, Page 404 of Deed
Records of Harris County, Texas,to which refer-
ence is here made for all purposes.
<PAGE>
42-473-025665-000 Arthur L. Short, et ux Houston Oil 04/20/43 Bk 90 P 144 West 50 acres of the West 100 acres of a 112.32
Company of Texas Waller acre tract out of that part of the NW 1/4 of
Section 103, H&TC R.R. Co. Survey, Abstract 169,
Waller County, Texas, lying South of the MK&T
R.R.Co. right-of-way,containing 50acres of land,
more or less.
42-473-025632-000 Rollie Robertson, et al Adam Bijbijian 03/18/42 Bk 87 P 6 First: The west 187.3 acres, more or less, out
Waller of H&TC R.R. Co. Surveys, being J.W. McCutcheon
Bk 409 P 353 Section 44,Abstract No.306,in Waller and Harris
Harris Counties,Texas,and being the same land conveyed
by Eunice T. Chapley, widow, to A.K. Robertson,
by deed dated 7/8/1909, of record in Vol. 33,
Page 493, of the Deed Records of Waller County,
Texas, & less 5 acres used as cemetery in N.W.
corner of this tract.
Second: 290.9 acres, more or less, out of HT&C
R.R. Co. Section 43, Block 1, in Waller County,
Texas,and being the same land conveyed by Burton
Crawford to A.K. Robertson, by deed dated
12/26/16,of record in Vol. 44,Page 447,of Deed
Records of Waller County, Texas. Reference is
here made to the deeds and the records thereof
hereinabove set out as well as Power of Attorney
from G.L. Robertson et al to Rollie Robertson et
al, dated Sept. 10, 1938, of record in Vol. 74,
Page 397, of the Deed Records of Waller County,
Texas, for all pertinent purposes,and containing
473.2acres, more or less.
42-157-025656-00B F. E. Hoyt, et al Houston Oil 06/20/42 Bk 205 P 354All our undivided interest in and to that certain
Company of Texas Ft Bend tract or parcel of land containing 60 acres, out
of the Jesse Burdette and C.W. Schrimpf Surveys
in Fort Bend County,TX,and being same 60 acres
awarded to C.F. Hoyt and wife, Irene K. Hoyt by
partition deed from the Estate of C.D. Hoyt to
S.E. Hoyt as shown in Vol. 74, Page 635 et seq.
of the Deed Records of Fort Bend County, Texas,
to which deed reference is here made for all
purposes.
42-473-025661-000 H. E. Wilson, et al W. E. Belt 06/26/42 Bk 87 P 261 All those two certain tracts or parcels of land
Waller out of and being a part of J.J.Crawford Survey,
Bk 415 P 588 Waller and Harris Counties, Texas, Abstract 205.
Harris
First Tract: BEGINNING at a point in the West
line of the said J.J. Crawford Survey, which is
the Southwest corner of the J.O. Thomas 46 acre
tract; THENCE South 89 degrees 10 min. East with
and along the South line of the said J.O. Thomas
46 acre tract, at 750 feet cross Buffalo Bayou,
to the northwest corner of Block 23 of the town
of Katy, for the Northeast corner of this tract;
THENCE South to the center of Buffalo Bayou and
continuing down said Bayou with its meanders to
its intersection with the West line of Lot 6
Block 10 of the town of Katy; THENCE with the
West line of said Lot 6, Block 10, to its South-
<PAGE>
west corner, for the Southeast corner of the
tract hereby conveyed which corner is on the
North line of the E. Muncy tract; THENCE North
89 degrees, 10 mins. West with the North line of
the said Muncy tract to a point in the West line
of the J.J. Crawford Survey for the Southwest
corner of the tract hereby conveyed & which is
also the Northwest corner of the said Muncy
tract;THENCE North 0 degress 10 mins.East,along
the West line of the said J.J. Crawford Survey
to the place of beginning, & containing 25acres,
more or less. Being the same land described in
deed from R.M. Cash to Edmund Gaul recorded in
Vol. 28 Page 614 of the Deed Records of Waller
County, Texas.
LESS,HOWEVER,7acres sold to J.C.Powell described
as follows: BEGINNING at the Southwest corner of
said 25 acre tract of land;THENCE North 360 feet
to a stake;THENCE East 420feet to a stake;THENCE
South 223.7 feet to a stake;THENCE East 1128feet
to a stake on the East line of said 25 acre
tract;THENCE South 136.3 feet to the Southeast
corner of said 25acre tract;THENCE West with the
South line of said 25acre tract 1548 feet to the
place of beginning, containing 7 acres of land.
Said deed being recorded in Vol. 85, Page 19 of
the Deed Records of Waller County,TX. Reference
being made to said records for all purposes.
Second Tract: Being the same land described in
deed to Edmund Gaul, said deed being recorded in
Vol. 286, Page 514 of the Deed Records of Harris
County, Texas.Said to contain 1.00 acres of land
and being all or part of Block 23 of the town of
Katy, Harris County, Texas.
42-201-025662-000 R. H. Peck, et ux Houston Oil 07/08/42 Bk 413 P 544 Lots 1,2,11, and 12 in Block 25; Lots 6,7,8,9,
Company of Texas Harris 10,11,and 12 in Block 24;Lots 7,and 8 in Block
Bk ___ P ___ 21 of the Townsite of Katy,Harris County,Texas,
Waller as per official map of said Townsite of Katy,
Harris County, Texas, of record in the map
records of Harris County,Texas to which map and
record thereof reference is made for further
description, and said Lots being a part of the
J.J. Crawford Survey; and being the same land
conveyed to Roy H. Peck by Southwestern Drug
Corporation, by deed dated January 7, 1935, and
recorded in Vol. 1020, Page 567, of the Deed of
Records of Harris County, Texas.
Also Lots 3,4,5 & 6 in Block25,of the Townsite
of Katy, Harris County,Texas,and being apart of
the J.J. Crawford survey, and being the same
land conveyed to R.H. Peck by Gladys Robertson
and husband, Clay Robertson by deed dated Dec.
5, 1923, and recorded in Vol. 560, Page 150, of
the Deed of Records of Harris County, Texas.
Also Lot 11, Block 3 of the Townsite of Katy,
<PAGE>
Harris County,TX,and being a part of the J.J.
Crawford Survey,& being the same land conveyed
to R.H. Peck by Katy Mercantile Co. by deed
dated March 6, 1924, and recorded in Vol. 567,
Page 303, of the Deed of Records of Harris
County, Texas.
42-201-025663-000 Lucy A. Waterbury Houston Oil 07/10/42 Bk 416 P 49 All that certain tract or parcel of land lying
Company of Texas Harris and being in the town of Katy,County of Harris,
State of Texas, and being known and designated
as Lots 1, 2, 3,4,13,14,15, & 16 out of Block 3
of North Thomas Addition to said town of Katy,
according to the map or plat of said addition
as it appears of record of deeds, maps, etc. of
Harris County, Texas, said Lots being the N 1/2
of said Block 3, & being the same land conveyed
to Lucy Waterbury by J.M. Gaul and wife,
Genevieve G. Gaul by deed dated Sept. 17, 1940,
and recorded in Vol. 1180,Page 140,of the Deed
Records of Harris County, Texas.
42-201-025664-000 A. C. Neel, et ux L. E. Pryor 08/16/38 Bk 324 P 404 100 acres of land out of the Southwest 200acres
Harris out of Section 64 H&TC R.R. Co. Survey in Block
2, Harris County, Texas, and more particularly
described as follows: BEGINNING 30 feet to the
north and 20 feet to the east of the Southwest
corner of said Section 64 and the east line of
the Katy and Hockley County Road; THENCE north
along said Road 3416 feet to the North line of
said 200 acres tract; THENCE east 1275 feet to
an iron bolt for corner;THENCE south 3416 feet
to the north line of the Roberts Road an iron
bolt for corner; THENCE west along said Road
1275feet to the place of beginning and contain-
ing full 100 acres of land being the same
property described in deed from P.H. Nichols et
al to A.C. Neel dated April 9, 1912, and
recorded in Vol. 286, Page 325.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-025657-000 A. D. Parker W. E. Belt 06/25/42 Bk 88 Pg 40 S 1/2 of that certain tract or parcel of land
Waller known as Section101 in the H&TC R.R.Co. Survey,
Abstract No. 168, consisting of 308 acres, more
or less, including all lands which Lessor may
now own, claim to own, or hereafter acquire in
said S 1/2 of said Section; but not including,
<PAGE>
however,any land leased by A.D. Parker and wife
to Continental Oil Company under lease dated
January 30, 1939.
42-201-025651-000 Millard C. Morrison, W. E. Belt 06/24/42 Bk 87 P 63 All of Blocks 6,7,10 and 11 of the North Thomas
et ux Waller Addition to the original townsite of the town
Bk 417 P 61 of Katy;being a part of the J.J.Crawford Survey
Harris of Harris and Waller Counties, State of Texas;
and containing 8-1/3 acres, more or less.
42-473-025652-000 Millard C. Morrison, W. E. Belt 06/20/42 Bk 88 P 20 The NW 1/4 of the SW 1/4 of Section No. 103,
et al Waller Block No. 1, H&TC R.R. Co. Survey in Waller
County, Texas; Being the same land conveyed to
the Katy State Bank by D.J.Jacquemin, dated
Sept. 22,1923, and recorded in Vol.48, Page 75,
of the Deed Records of Waller County, Texas;to
which Deed reference is made for all purposes.
42-473-025653-000 Harry W. Lahey, et al W. E. Belt 06/23/42 Bk 87 P 68 All of the NE 1/4 of the SW 1/4 of Section 103,
Waller Block No.1, H&TC R.R. Co. Survey,Waller County,
TX;containing 36.74 acres of land,more or less.
42-201-025654-000 Frederick William W. E. Belt 07/02/42 Bk 412 P 447 Being all of Lot2 of the Subdivision of part of
Lammert, et ux Harris Section 44,H&TC R.R. Co. Survey,Abstract #1348,
according to the plat recorded in Vol. 141,Page
428, Deed Records of Harris County, Texas;being
the same property described in deed dated the
25th day of January, A.D.1940 from Harvey Edwin
Romack and wife, Buelah Viola Romack to the
Lessor herein.
42-157-025655-000 T. T. Player Houston Oil 07/03/42 Bk 205 P 314 Tract 1: Being the E 1/2 of that certain 60.85
Company of Texas Ft Bend acres of land described as follows, to-wit:
Beginning at an iron pipe for corner which is
west .3677 feet and south 40 feet from the East
corner of the upper half of the D.A. Conner
Survey, this beginning corner being the North-
west corner of Lot No.3 & the Northeast corner
of Lot No.2 of the Hoyt Subdivision; THENCE
South 2019 feet with the east line of Lot No.2
to an iron pipe for corner;THENCE East 1312.4
feet to an iron pipe for corner; THENCE North
2019 feet to an iron pipe for corner in the
North line of the Hoyt tract of land; THENCE
west with the North line of the Hoyt land and
the south line of a 40 foot road 1312 feet to
the place of beginning,containing 60.85 acres
of land, same being 12 acres out of the Thomas
Cresop Survey, 2 acres out of the C.W. Schrimpf
Survey and 46.85 acres out of the D.A. Conner
survey.The tract herein conveyed contains 30.42
acres and is the E 1/2of the tract described by
metes and bounds above,which was deeded to A.D.
Hoyt in the partition deed between the heirs of
C.D. Hoyt; and being the same land conveyed to
W.R. Gilpin and wife, Sallie Gilpin, to T.T.
Player, as recorded in Vol. 125, Page 361, of
the Deed Records of Fort Bend County, Texas.
Tract 2: Being 2 acres of land out of the D.A.
<PAGE>
Conner Survey, in Fort Bend County, Texas, and
being the South 2acres of that certain tract of
land partitioned to C.F. Hoyt in that Partition
Deed, dated Nov. 25, 1914, the same being filed
in Vol. 69,Page 432,in the Deed Records of Fort
Bend County, Texas, and here referred to for
certainty and description and all purposes. The
said 2acres herein conveyed being more particu-
larly described as follows:Beginning at an iron
pipe at the southwest corner of Lot No.4 of the
Hoyt Subdivision, which is also the southeast
corner of Lot No. 3 of said Subdivision;THENCE
East 297 feet along the south line of said Lot
No. 4, to an iron pipe in the East line of the
Hoyt place; THENCE North 44-1/4 degrees east
with the east line of said Hoyt tract 304 feet
for corner;THENCE west 215 feet from & parallel
to the south line of Lot No. 4 of the said Hoyt
Subdivision, approximately 512 feet to a point
in the dividing line between Lots 3 and 4, of
the before mentioned Hoyt Subdivision; THENCE
South 215 feet to the place of beginning, and
being the south 215 feet of Lot 4 of the Hoyt
Subdivision, and containing 2 acres of land,
more or less; and being the same land conveyed
by C.F. Hoyt to T.T. Player,as recorded in Vol.
140, Page 542 of the Deed Records of Fort Bend
County, Texas.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-157-025656-00A Otto Karnaky Adam Bijbijian 06/20/42 Bk 205 P 318 Tract or parcel of land containing 60 acres,out
Ft Bend of the Jesse Burdette and C.W. Schrimpf Surveys
in Fort Bend County, Texas, and being same 60
acres awarded to C.F. Hoyt and wife, Irene K.
Hoyt by partition deed from the Estate of C.D.
Hoyt to S.E. Hoyt as shown in Vol. 74, Page 635
et seq. of the Deed Records for Fort Bend
County,TX,to which deed reference is here made
for all purposes.
42-473-028319-000 T. J. Hudgins Houston Oil 03/13/42 Bk 85 P 581 All the oil,gas and other minerals in and under
Company of Texas Waller that certain 151.5 acres of land out of Section
72,Block 1,H&TC R.R. Survey, in Waller County,
Texas, being out of the E 1/2 of said section,
& said 151.5 acres of land being more particu-
larly described in a certain correction deed
<PAGE>
from Guy E. Bains and wife, Sallie Helon Bains
to T. Cleveland,dated Dec. 21,1934,and recorded
in Vol.66,Page 46,of the Deed Records of Waller
County, Texas, to which deed and the record
thereof,reference is here made for all purposes
42-473-025079-000 John W. Harris, et al J. F. Taylor 06/01/38 Bk 73 P 527 Being the South 320 acres of the J.M. Bennett
Waller Survey No. 86, Abstract No. 282, Cert. No. 243,
the boundary to be formed by running a line East
and West through said Survey parallel with the
South line and intersecting the East and West
lines at such points so as to include 320 acres
in the tract herein leased.
42-157-025640-000 Gerald J. Bartlett,et ux J. F. Taylor 05/20/42 Bk 204 P 442 Tract 1: 60.85 acres of land out of the Hoyt
Ft Bend place in Fort Bend County, Texas, out of the
Thomas Cresop & C.W.Schrimpf Surveys described
as follows:BEGINNING at an iron pipe for corner
which is West 6302 feet and south 40 feet from
the East corner of the upper half of the D.A.
Conner Survey,this beginning corner is also the
Northwest corner of the said Hoyt place; THENCE
south with the west line of the Hoyt tract of
land 2019feet to an iron pipe for corner;THENCE
East 1312.4 feet to an iron pipe for corner;
THENCE North 2019 feet to an iron pipe in the
North line of the Hoyt place; THENCE West with
the North line of the Hoyt place and the south
line of a 40 foot road 1312.4 feet to place of
beginning, and containing 60.85 acres of land
and being Lot No. 1 in the subdivision of the
Hoyt 486.88 acres,and being 59.85 acres in the
Thomas Cresop Survey and 1 acre in the C.W.
Schrimpt Survey.
Tract 2: Beginning at an iron pipe for corner
which is west 4990 feet and south 40 feet from
the East corner of the upper one half of the
D.A. Conner Survey; this beginning corner is
the Northwest corner of Lot No.2 & the North-
east corner of Lot No. 1 of this subdivision;
THENCE South with the East line of Lot No. 1,
2019 feet to an iron pipe for corner; THENCE
East 1312.4 feet to an iron pipe for corner;
THENCE North 2019 feet to an iron pipe for
corner in the North line of the Hoyt tract of
land; THENCE West with the North line of the
Hoyt tract of land and the south line of a 40
foot road 1312.4feet to the place of beginning,
containing 60.85 acres of land and being 38
acres out of the Thomas Cresop, 2 acres out of
the D.A. Conner, and 20.85 acres out of the
C.W. Schrimpf Surveys.
42-473-025642-000 C. K. Weinmann, et ux Houston Oil 06/09/42 Bk 86 P 627 The E 1/2 of the SE 1/4 of H&TC R.R.Co.,Section
Company of Texas Waller 127, Block 1, Abstract No. 205, Waller County,
Texas.
42-473-025643-000 C. K. Weinmann, et ux D. A. Snyder 06/19/40 Bk 79 P 318 80 acres of land, being the W 1/2 of the SE 1/4
Waller of Section 127,Block1 H&TC R.R. Survey,Abstract
<PAGE>
No. 205, Waller County, Texas, and the said 80
acres being more particularly described as fol-
lows, to-wit: Being the West 80 acres of that
certain 160 acre tract,described in deed of the
Wm. G. Weinmann Heirs, Myra Weinmann Sumner et
al., to C.K. Weinman, dated July 18, 1933, re-
corded in Vol. 61, Pages 412 et seq., of the
Deed Records of Waller County, Texas, to which
reference is heremade for all purposes,and said
eighty acres described as follows: Beginning at
the Northwest corner of said 160 acre tract as
set out above; THENCE East with the North line
thereof, a sufficient distance, so that a line
drawn from such point south and parallel to the
West line of said 160 acre tract and running to
the south line of said 160 acre tract; THENCE
running West with the South line of said 160
acre tract to the southwest corner of same;
THENCE running North with the West line of said
160 acre tract to the place of beginning, shall
include and embrace 80 acres of land.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-157-025644-000 F. E. Hoyt, et ux J. F. Taylor 06/10/42 Bk 205 P 153 Being the East 63.4 acres of land out of that
Ft Bend certain tract of 123.4 acres of land, more or
less, & being a part of the same land described
in a Partition Deed from F.E. Hoyt et al to
Emma J. Hoyt McClintock, dated July 20,1917,
recorded in Vol.74 at Page 635 of the Deed Rec-
ords of Fort Bend County, Texas, to which deed
& the reference thereof is hereby made for all
legal purposes hereafter.
Being the intention to lease All of the 123.4
acres, SAVE AND EXCEPT the West 60 acres out of
the 123.4 acres.
42-157-025648-000 F. A. Hoyt, et al Houston Oil 06/30/42 Bk 205 P 343 Tract 1:All of Lot 4 in the subdivision of the
Company of Texas Ft Bend Hoyt 486.88 acres, less approximately 2 acres
heretofore conveyed from the extreme South por-
tion of said Lot 4, which Lot 4 is described as
follows: BEGINNING at an iron pipe for corner
which is West 2367 feet and South 40 feet from
the East corner of the upper half of the D.A.
Conner Survey; this beginning corner is the
Northwest corner of Lot No. 4 and the Northeast
corner of Lot No. 3 of this subdivision; THENCE
<PAGE>
South with the East line of Lot No. 3 2019 feet
to an iron pipe for corner;THENCE East 297 feet
to an iron pipe for corner in the East line of
the Hoyt place;THENCE North 44-1/4 degrees East
with the East line of the Hoyt place 2863 feet
to the Northeast corner of the said Hoyt tract
of land;THENCE West with the North line of the
Hoyt place and the South line of the 40 feet
read 2327 feet to the place of beginning and
containing 60.85 acres of land and being out of
the D.A. Conner Survey.
Tract 2: BEING all of our undivided interest
inherited by us through our grandmother, Mrs.
Sarah E. Hoyt,and through our father,C.F. Hoyt,
same being an undivided 1/12th interest in and
to: 60.85 acres of land out of the Hoyt place
in Fort Bend County, Texas, out of the Thomas
Cresop and C.W. Schrimpf Surveys described as
follows: BEGINNING at an iron pipe for corner
which is West 6302 feet and South 40 feet from
the East corner of the upper half of the D.A.
Conner Survey,this beginning corner is also the
Northwest corner of the said Hoyt place; THENCE
South with the West line of the Hoyt tract of
land 2019 feet to an iron pipe for corner;
THENCE East 1312.4 feet to an iron pipe for
corner; THENCE North 2019 feet to an iron pipe
in the North line of the Hoyt place;THENCE West
with the North line of the Hoyt place and the
South line of a 40 foot road 1312.4 feet to the
place of beginning, and containing 60.85 acres
of land and being Lot No. 1 in the subdivision
of the Hoyt 486.88 acres, and being 59.85 acres
in the Thomas Cresop Survey and one acre in the
C.W. Schrimpf Survey.
42-157-025646-000 Perry A. Poorman, J. F. Taylor 06/01/42 Bk 205 P 158 West 20 acres of N 1/2 et ux of N 1/2 of S 1/2
Ft Bend of D.A. Connor Survey, Abstract 169.
42-201-025649-000 Annie R. Cabaniss Adam Bijbijian 06/30/42 Bk 412 P 440 Lot No. 3 containing 10 acres more or less, in
Harris Section 44 H&TC R.R. Co. Survey, patented to
Branch Masterson by patent No. 391, Vol. 14,
Cert. No. 222, and being that certain Katy
Outlot more fully described in a deed from R.M.
Cash and L.C. Luckel to Annie R. Cabaniss dated
Dec. 20, 1902, recorded Vol.150, Page 31,Harris
County, Deed Records, said deed and the record
thereof being made a part hereof by reference.
42-201-025641-000 Emma A. Waterwall, Houston Oil 06/08/42 Bk 87 P 36 W 1/2 of the SW 1/4 of H&TC Survey Section
et al Company of Texas Waller No. 80, Block No. 2, Cert. No. 144
Bk 415 P 439
Harris
42-201-025675-000 R. L. Sills, et al Houston Oil 08/15/42 Bk 212 P 548 Lots 1,2,3,4,5,15, 16 and 17 in Block 8; Lots 1
Company of Texas Ft Bend to 6 inclusive in Block 9;Lots 1 to 6 inclusive
Bk 91 P 585 in Block 10;and Lots 1 to 12 inclusive in Block
Waller 11, all such lots and blocks being in the Town
Bk 425 P 190 of Katy, Texas, as shown by map filed on Page
Harris 38, Vol. 2 of the Plat or Map Records in the
<PAGE>
office of the County Clerk of Harris County,
Texas; and
All our right title and interest in and to any
other lots, blocks, outlots, and/or acreage in
the J.J. Crawford Survey in Harris, Fort Bend,
and Waller Counties, Texas.
It is the intention of the parties hereto that
this lease shall cover and include all land
owned or claimed by lessor herein in the said
J.J. Crawford Survey in Harris, Fort Bend, and
Waller Counties, Texas.
42-473-025633-000 E. C. Stockdick, et al J. F. Taylor 04/21/42 Bk 86 P 412 The N 1/2 of Section 118, Block 1, Cert. 259,
Waller Abstract 1594,387 and 378,H&TC R.R. Co. Survey,
Bk 410 P 672 all in Waller County, Texas, except 30 acres
Harris covered by Abstract 1594, lying and being
situated in Harris County, Texas, and being the
same land conveyed to A. Stockdick, et al by
deed dated June 16, 1919, and recorded in Vol.
45,Page27 of the Deed Records of Waller County,
Texas, and being all of Section 118, save and
except the S 1/2 of said Section leased to J.F.
Taylor on the 22nd day of August A.D. 1941.
42-473-025658-000 A. D. Parker Houston Oil 07/07/42 Bk 88 P 37 N 1/2 of that certain tract of parcel of land
Company of Texas Waller known as Section 101 in the H&TC R.R.Co.Survey,
Abstract #168, consisting of 308 acres, more or
less, including all lands which Lessor may now
own, claim to own or hereafter acquire in the
N 1/2 of said section, this being the same land
as heretofore leased to Continental Oil Company
under date of Jan. 30, 1939.
42-473-025659-000 T. C. Alderson, et al Fohs Oil Company 6/08/42 Bk 86 P 462 27-7/8 acres of land, a part of Section 126,
Waller Block No. 1, of the H&TC R.R. Co. Surveys, and
being a part of the P.M. Cuny Survey, Abstract
No. 355, in said Section 126, and bounded and
described as follows, viz: BEGINNING at the
Southeast corner of Section 125 H&TC R.R. Co.
Surveys;THENCE South 460 feet to the North line
of the right-of-way of MK&T R.R.; THENCE West
along said North line 2640 feet; THENCE North
to the South line of Section No. 125; THENCE
East along said line to the place of beginning,
and being the same tract of land conveyed by
John C. Morrison to W.J.Alderson by deed dated
Jan. 27, 1906,of record in Vol.28,Page 255-256,
of the Deed Records of Waller County, Texas.
42-157-025667-000 John Cope, et al Mrs. Gertrude B. 9/28/39 Bk 185 P 579 Being 880 acres, more or less, in the Counties
Whitehead Ft Bend of Fort Bend and Waller,in the State of Texas,
Bk 77 P 457 out of the J.C. Paul, P.M. Cuny and W.W. Bains
Waller Surveys, all in Section 126, Block 1, H&TC R.R.
Co., the Thos. Cresap Survey, Patent 218,
Abstract 369, the R.T. Van Slyke Survey, Patent
361, the Daniel A. Conner Survey, Patent 630,
the Jesse Thompson Survey, Patent 336, and the
J.J. Crawford Survey,Patent 241, all as is more
<PAGE>
particularly described in the lease which is
recorded in Vol.77,Page 457 of the Deed Records
of Waller County, Texas, to which reference is
hereby made for all purposes.
42-473-025670-000 Houston Lighting & Houston Oil Co. 07/20/42 Bk 87 P 189 All that certain tract or parcel of land con-
Power Company of Texas Waller taining 2-1/2 acres out of Section No. 126 of
the H&TC R.R. Co. Survey, Block No. 1, Cert.
No. 4,said Section No. 126 being located partly
in Waller County & partly in Fort Bend County,
Texas, said 2 1/2 acres being out of that part
of said Section No. 126 that lies in Waller
County,said 2 1/2acres being described by metes
and bounds as follows: BEGINNING at a point in
the North line of the Katy-Brookshire Public
Road where the East line of Section No. 125 of
said H&TC R.R. Co. Survey extended would inter-
sect said Katy-Brookshire Public Road; THENCE
North with the East line of said Section No.125
extended a distance of 400feet to a point;
THENCE East parallel with the North line of
said Katy-Brookshire Public Road and 400 feet
distant North there from a distance of 272.25
feet to a point;THENCE South parallel with said
East line of said Section No. 125 extended and
272.25 feet distant East therefrom a distance
of 400 feet to a point in the Northline of said
Katy-Brookshire Public Road; THENCE West with
the North line of said Katy-Brookshire Public
Road a distance of 272.25 feet to the place of
beginning;being that tract of land conveyed by
John Cope et al, to Houston Lighting and Power
Company, said deed being recorded in Vol.52,
Page 403, of the Deed Records of Waller County,
Texas, to which reference is herein made for
all purposes.
42-473-000113-001 Floid B. Brian, et ux National Standard 4/08/37 Bk 71 P 177 The West 60 acres of the following real estate:
Oil Corporation Waller All that certain tract and parcel of land known
and described as 160 acres of land out of the
Northwest corner of Section 77,in Block1 of the
lands originally granted to the Houston and
Texas Central Railway Company by the State of
Texas by virtue of Cert. No. 239, and more
particularly described as the NW 1/4 of said
Survey, bounded as follows, to-wit: Beginning
at a gas pipe, the Southwest corner of Survey
No. 102; THENCE West 1900 varas to a gas pipe
2 inches in diameter, the Southwest corner of
Survey No. 77; THENCE North 950 varas for a
beginning point, being the Southwest corner of
the land herein leased; THENCE North 950 varas
to the Northwest corner of Survey No. 77, the
same being the Northwest corner of the land
herein leased; THENCE East 950 varas; THENCE
South 950 varas; THENCE West 950 varas to the
beginning point of the 160 acres herein leased,
situated in the County of Waller, in the State
of Texas, being the same land conveyed by
Warranty Deed by Bardwell D. Phenix and Gale J.
<PAGE>
Phenix, his wife, to Floid B. Brian, on May 9,
1927, which deed is recorded in Waller County,
Texas, in Vol. 50, Page 229.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000114-001 Floid B. Brian, et al J. F. Taylor 02/02/40 Bk 78 P 378 Being the East 100 acres of land, more or less
Waller out of the NW 1/4 of Section 77, of the H&TC
R.R. Co. Survey, Block No. 1, of Waller County,
Texas; and being all of the unleased land owned
by the lessor in said Section.
42-473-000079-001 Arthur L. Short, et ux Humble Oil & 04/20/43 Bk 89 P 436 East 50 acres of the West 100 acres of a 112.32
Refining Company Waller acre tract out of that part of the NW 1/4 of
Section 103,H&TC R.R. Co. Survey, Abstract 169,
Waller County, Texas, lying South of the MK&T
R.R. Co. right-of-way, containing 50 acres of
land, more or less.
42-473-000074-001 E. C. Stockdick, et al A. C. Felt 10/01/42 Bk 91 P 574 The SE 1/4 of the SW 1/4 of Section 103, H&TC
Waller R.R. Co. Survey, Block 1, Waller County, Texas,
and being more particularly described as
follows: BEGINNING at the southwest corner of
said Survey; THENCE South 88 degress 52 feet
east along said south line of said Survey 577
varas to a stake for corner;THENCE north paral-
lel with the west line of said survey 358.625
varas to a stake for corner; THENCE south 88
degrees 52 feet east parallel with the south
line of said Survey 577 varas to a stake for
corner;THENCE south parallel with the west line
of said Survey 358.625 varas to the south line
of said Survey and stake for corner; THENCE
north 88 degrees 52 feet west along the south
line of said Survey 577 varas, containing 36.25
acres of land, more or less.
42-473-000075-001 E. C. Stockdick, et al A. C. Felt 09/28/42 Bk 88 P 201 58 acres of land, more or less, in the J.C.
Waller Bennett Survey, Abstract 292, Waller County,
Texas,described by metes and bounds as follows:
BEGINNING at the northeast corner of a tract of
142 acres out of Survey 104 belonging to the
Estate of William Baldwin,deceased;THENCE south
with the east line of said Baldwin tract, 721
varas to the northwest corner of the Jesse
Thompson tract;THENCE east on the north line of
said Thompson tract 459 varas to a stake for
the corner of this tract;THENCE north 721 varas
<PAGE>
to a stake on the north line of said Section
104;THENCE west with the north line of said
Section 104, 459 varas to the place of begin-
ning; Being the same land described in a deed
from Isaac Wampler et ux to A.Stockdick dated
May 20, 1919, of record in Vol.45,Page 623 of
the Deed Records of Waller County, Texas.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000046-001 Atlantic Oil Investment Humble Oil & 07/16/40 Bk 80 P 18 All that certain lot, tract or parcel of land
Corporation Refining Company Waller being a part of Section 107, H&TC R.R. Co.
Survey, Block No.1, and being more particularly
described as follows:BEGINNING at the Northwest
corner of the 300 acre tract of land in said
Survey heretofore conveyed to John Alt by W.B.
Peck, said 300 acre tract of land being the
South 300 acres of said Section 107; THENCE
North with the west line of said Section 107 to
a stake in the South line of the right-of-way
of the MK&T R.R.;THENCE South 88 feet,52 inches
East 1606 varas along the said South right-of-
way line to the East boundary line of said Sec-
tion 107; THENCE South with the East line of
said Section 107 to the Northeast corner of the
300 acre tract conveyed to John Alt as afore-
said; THENCE West with the North line of the
said John Alt 300 acre tract 1604 varas to the
place of BEGINNING, containing 298.17 acres,
more or less, and being the same property con-
veyed to Mrs. A.M. Peck by W.B. Peck by deed
dated July 10, 1920, and recorded in Vol. 46,
Page 515, of the Deed Records of Waller County,
Texas, reference to which is here made for all
purposes.
42-473-000046-002 Peerless Oil & Gas Humble Oil & 07/08/40 Bk 79 P 515 All that certain lot, tract or parcel of land
Company, et al Refining Company Waller being a part of Section 107,H&TC R.R.Co.Survey,
Block No.1, & being more particularly described
as follows:BEGINNING at the northwest corner of
the 300 acre tract of land in said Survey here-
tofore conveyed to John Alt by W.B. Peck, said
300acre tract of land being the South 300 acres
of said Section 107; THENCE North with the west
line of said Section107 to a stake in the South
line of the right-of-way of the MK&T R.R.;
THENCE South 88 feet 52 inches East1606 varas
along the said South right-of-way line to the
<PAGE>
East boundary line of said Section 107; THENCE
South with the east line of said Section 107 to
the Northeast corner of the 300 acre tract con-
veyed to John Alt as aforesaid;THENCE West with
the North line of the said John Alt 300 acre
tract 1604 varas to the place of BEGINNING,
containing 298.17 acres, more or less, & being
the same property conveyed to Mrs. A.M.Peck by
W.B.Peck by deed dated July 10,1920 & recorded
in Vol. 46, Page 515, of the Deed Records of
Waller County, Texas, reference to which is
here made for all purposes.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000115-001 E. A. Showers, et al Humble Oil & 07/08/40 Bk 79 P 523 Being all of the SE 1/4 of Section 125,Block 1,
Refining Company Waller H&TC R.R.Co. Survey,Abstract 203,and containing
160 acres, more or less.
42-473-000115-003 T. C. Alderson, Humble Oil & 07/02/42 Bk 87 P 73 An undivided 1/8 interest in and to the SE 1/4
Individually and as Refining Company Waller of Section 125,Block 1,H&TC R.R. Co.Survey,
Independent Executor of Abstract 203, Waller County, Texas, containing
the Estate of W. J. 160 acres, more or less.
Alderson, deceased
42-473-000115-002 E. C. Stockdick, et al Humble Oil & 06/18/42 Bk 86 P 512 An undivided 3/8 interest in and to the SE 1/4
Refining Company Waller of Section 125,Block No.1,H&TC R.R. Co. Survey,
Abstract 203, Waller County, Texas, containing
160 acres more or less.
42-157-000029-001 E. C. Stockdick, et al A. C. Felt 09/28/42 Bk 207 P 464 20 acres of 251.54 acres being 14 acres in the
Ft Bend J.J. Crawford Survey, Abstract 155 and 6 acres
in the Jesse Thompson Survey, Abstract 393.
42-473-000116-001 Mrs. Caroline Shreve, Humble Oil & 07/01/42 Bk 88 P 76 Tract 1: 42.5 acres of land more or less in the
et al Refining Company Waller northwest part of the J.J. Crawford Survey,
Bk 415 P 460 Abstract #113 in Waller and Harris Counties,
Harris Texas,and being the same land described by mete
and bounds in that certain deed from J.D. Hart
to L.R.Shreve recorded in Vol. 214, Page 207 of
the Deed Records of Harris County, Texas;
Tract 2: All of the N 1/2 of the North Thomas
Addition to the town of Katy, Harris and Waller
Counties, Texas, same being all of Block Nos.
1,4,5,8,9,12 and 13 except Lots 1to8 inclusive
in Block No.1 of said North Thomas Addition, as
shown by plat of said addition of record in Vol
<PAGE>
3, Page 31 of the Map Records of Harris County,
Texas,and being the same land described in that
certain deed dated February 27, 1919, from W.B.
Thomas to L.R. Shreve recorded in Vol.419, Page
38 of the Deed Records of Harris County, Texas,
except Lots 7 and 8 of Block No.1 of said North
Thomas Addition.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-000065-001 Mrs. Sarah R. Brand Gillette Hill 06/23/42 Bk 413 P 344 Being 24.15 acres, more or less, out of the
Harris northeast corner of the H&TC R.R. Co.,Section
44, Abstract 1348 (also known as the J.W.
McCutcheon Survey), being the same land
described in that certain deed dated May 15,
1911, from W.T. Brand to T.E.W. Brand,which is
recorded in Vol. 285, Page 630, Harris County,
Texas Deed Records.
42-201-000066-001 Elmer G.Stockdick,et al Gillette Hill 05/01/42 Bk 97 P 55 Being 100 acres of land, more or less, out of
Waller the southeast corner of H&TC R.R. Co., Section
Bk 409 P 655 43,Block 1,Harris County,Texas,being described
Harris by metes and bounds in that certain deed dated
October 13, 1917, from Edwin S. Jackson et ux
to S.H. Friday, which is recorded Vol. 388,
Page 366, Harris County Deed Records.
42-201-000067-001 Jennie B. Sevier J. T. Mackey 04/21/42 Bk 402 P 735 Being 87.15 acres of land out of the extreme
Harris northeast portion of H&TC R.R. Co. Section 43,
Harris County, Texas, Abstract No. (Harris
County, 2002; Waller County, 196), being the
same land described in that certain deed from
George P. Blair to Jennie B. Rauch, which is
recorded Vol. 98, Page 450, Harris County Deed
Records.
42-201-000068-001 Perry V. Cook Gillette Hill 04/20/42 Bk 403 P 730 Being 80 acres of land,more or less,out of the
Harris Emma Jenkins Survey, Abstract 1567, Harris
County,Texas,and being the same land described
in that certain deed dated February 28, 1940,
from W.S. Ginn to Perry V. Cook, recorded Vol.
1153, Page 650, Harris County Deed Records.
42-201-000069-001 Frank P. Wilkinson, A. C. Felt 07/14/42 Bk 415 P 237 Being 80 acres of land,more or less out of H&TC
et ux Harris R.R. Co. Survey 79, Block 2, Abstract 464 and
being described as all of the NE 1/4 thereof
says and except the west 80 acres of said NE
1/4 which is described in that certain deed
<PAGE>
dated June 15, 1935 from Frank P. Wilkinson to
E.C. Stockdick et al which is recorded in Vol.
989 at Page 24, Harris County Deed Records.
42-201-000070-005 Willie Beckendorff, A. C. Felt 07/15/42 Bk 412 P 471 Undivided 1/2 interest in and to south 10 acres
et ux Harris of W 1/2 SE 1/4 of Section 78, H&TC R.R. Co.,
Abstract 1366.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-000070-004 M. A. Beckendorff, A. C. Felt 07/16/42 Bk 414 P 433 All that certain tract of 80 acres of land out
et al Harris of and being a part of H&TC R.R. Co. Survey
Block 2, Harris County, Texas being designated
as being E 1/2 of S 1/4 of Section 78, Block 2,
and being a part of the same tract of land
described in instrument recorded in Vol. 213,
Pages 612-613 of the Deed Records of Harris
County, Texas. Reference being made to said
records for all purposes.
42-201-000070-003 J. P. Beckendorff, A. C. Felt 07/16/42 Bk 416 P 70 All that certain 160 acres of land described as
et ux Harris follows being the NW 1/4 of Section 78 H&TC
R.R. Co. Survey,Block 2,Harris County, TX, and
being the same lands described in those two
certain Deeds recorded Vol. 402, Page 375 and
Vol. 214, Page 593 of Deed Records of Harris
County, Texas, reference being made to said
records for all purposes.
42-201-000070-002 Flag Oil Company Humble Oil & 07/18/42 Bk 415 P 410 Undivided 1/8 interest in and to NW 1/4, except
of Texas Refining Company Harris the West 25 acres of S 1/2 S 1/2 NW 1/4,Section
78,Block 2, H&TC R.R. Co. Survey,Abstract 1366;
Undivided 1/8 interest in & to NE 1/4 of E 1/2
SW 1/4(20 acres)& W 1/2 SE 1/4,less and except
the South 10 acres, Section 78, Block 2, H&TC
R.R. Co. Survey, Abstract 1366; Undivided 1/8
interest in and to 95 acres, being the West 25
acres of the S 1/2 S 1/2 NW 1/4; W 1/2 and SE
1/4 of the E 1/2 SW 1/4; and South 10 acres of
W 1/2 SE 1/4, Section 78, Block 2, H&TC R.R.
Co. Survey, Abstract 1366.
42-201-000070-001 Texas Osage Humble Oil & 07/18/42 Bk 414 P 514 Undivided 3/8 interest in and to NW 1/4, except
Cooperative Royalty Refining Company Harris the West 25 acres of S 1/2 S 1/2 NW 1/4,Section
Pool, Inc. 78,Block 2,H&TC R.R. Co. Survey, Abstract 1366;
Undivided 3/8 interest in and to 90 acres, more
or less,being the NE 1/4 E 1/2 SW 1/4 and W 1/2
SE 1/4 except the South 10 acres, Section 78,
<PAGE>
Block 2, H&TC R.R. Co. Survey, Abstract 1366;
Undivided 3/8 interest in and to 95 acres,being
West 25 acres of S 1/2 S 1/2 NW 1/4; W 1/2 and
SE 1/4 of E 1/2 SW 1/4 and South 10 acres of W
1/2 SE 1/4 of Section 78,Block 2, H&TC R.R. Co.
Survey, Abstract 1366.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000117-001 H. Laas, et al Humble Oil & 03/31/44 Bk 95 P 131 All of our undivided interest in and to the
Refining Company Waller South 340 acres of land, more or less, of
Section 95, Block 1, H&TC R.R. Co. Survey,
Abstract 165, Waller County, Texas, and being
the same land conveyed to J.L. Hollenbeck by
Eugenia H. Freeland et al by deed dated July
29, 1916, of record in Vol. 44, Page 420 of the
Deed Records of Waller County, Texas.
42-473-000073-002 John Bollinger, et ux Humble Oil & 01/29/43 Bk 88 P 469 Lessor's undivided interest in and to all of
Refining Company Waller Section 84, Block 1, H&TC R.R. Co. Survey,
Abstract 281, patented to J.M. Bennett, Waller
County, Texas, containing 640 acres of land,
more or less.
42-473-000118-011 Lila Schaad Linder, Humble Oil & 01/31/43 Bk 89 P 29 All of the SW 1/4 of Section 83, Abstract 159,
et vir Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-009 William Schaad Humble Oil & 01/31/43 Bk 88 P 584 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-012 John C. Schaad Humble Oil & 01/31/43 Bk 89 P 36 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-002 Elizabeth Fielden Humble Oil & 01/31/43 Bk 88 P 576 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-008 Letha K. Hurdle, et vir Humble Oil & 01/31/43 Bk 88 P 580 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-001 Christine S. Wallbaum Humble Oil & 01/31/43 Bk 88 P 592 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
<PAGE>
42-473-000118-006 William During Humble Oil & 01/31/43 Bk 89 P 47 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000118-005 Albert During Humble Oil & 01/31/43 Bk 90 P 1 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-003 Frank E. Schumann Humble Oil & 01/31/43 Bk 89 P 33 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-004 A. W. Schumann Humble Oil & 01/31/43 Bk 88 P 588 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-010 Frank T. Schaad Humble Oil & 01/31/43 Bk 89 P 70 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000118-007 John G. During Humble Oil & 01/31/43 Bk 89 P 370 All of the SW 1/4 of Section 83, Abstract 159,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000119-001 Clifford A. Pontious Humble Oil & 01/31/43 Bk 88 P 525 All of the N 1/2 and the SE 1/4 of Section 83,
Refining Company Waller Abstract 159, Block 1, H&TC R.R. Co. Survey,
Waller County, Texas, containing 480 acres of
land, more or less.
42-473-000120-001 H. Hebert, et ux Sam G. Harrison 02/08/38 Bk 72 P 552 The North 160 acres of Section 113, Block 1,
Waller H&TC R.R. Co.Survey,Abstract 173,Waller County,
Texas, the North, West and East lines of said
160 acres being the North, West and East lines
of said Section 113, and the South line being
parallel with and a sufficient distance South
from the North line so as to include exactly
160 acres of land.
42-473-000121-001 Grace B. Scharff,et vir L.C.Oldham, Jr. 07/21/38 Bk 74 P 152 All of Survey No. 130,in Block No. 1,Cert. No.
Waller 236,issued to Houston & Texas Central Ry. Co.,
Bk 319 P 649 Patent No. 264,to Branch T.Masterson, assignee,
Harris in Harris and Waller Counties,Texas, this tract
being sometimes known as the J. W. McCutcheon
Survey, and containing 640 acres, more or less.
</TABLE>
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000122-001 A. T. Jones, et al Humble Oil & 04/01/42 Bk 86 P 61 The NE 1/4 of Section 121, Block 1, Cert. 1,
Refining Company Waller H&TC R.R. Co. Survey,situated in Waller County,
Texas, containing 160 acres, more or less.
42-473-000123-001 American Rice Sam G. Harrison 04/01/33 Bk 60 P 178 H&TC R.R. Section 81, in said Waller County,
Milling Company Waller Texas, containing 640 acres more or less, and
all of Section 98, patented to J.M. Bennett,
less 250 acres owned by E.H. Wilpitz, in said
Section, leaving 390 acres, more or less, in
said Waller County,Texas. The said two tracts
containing 1,030 acres, more or less.
42-473-000029-001 American Rice Sam G. Harrison 04/29/33 Bk 58 P 345 All of Section 68, Abstract 289, patented to
Milling Company Waller J.G.Bennett, containing 640 acres, more or less
of land; All of H&TC R.R. Section 69, Abstract
152,containing 640 acres,more or less, of land.
All of H&TC R.R. Section 79, Abstract 157, con-
taining 640 acres, more or less, of land. All
of Section 82, Abstract 290, patented to J.G.
Bennett, containing 640 acres, more or less of
land. All of the above four sections containing
2,560 acres, more or less, of land, Waller
County, Texas.
42-473-000032-001 Ruth Steves, et vir Humble Oil & 05/15/33 Bk 62 P 59 The E 1/2 of Section 112 in Block 1, H&TC R.R.
Refining Company Waller Co. lands, located in the County of Waller,
State of Texas;ALSO the W 1/2 of Section 111 in
Block 1, H&TC R.R. Co. lands, situated in the
County of Waller, State of Texas. Said lands
being the same Waller County lands devised to
said Ruth Steves by Will of her mother Vinnie
T. Rorick, admitted to probate in San Diego
County, Calif., March 17, 1933.
42-473-000126-001 Alice M. Morrison, Humble Oil & 08/27/42 Bk 87 P 326 Being 160 acres of land,more or less,and being
et al Refining Company Waller all of the E 1/2 of Section 111, Block 1, H&TC
R.R.Co. Survey, Waller County, Texas, save and
except the south 160acres of said E 1/2 of said
Section 111 described in that certain oil, gas
and mineral lease dated July 5,1938 from Martin
A. Morrison et al to Tide Water Associated Oil
Co., recorded in Vol. 74, Page 167 of the Deed
Records of Waller County, Texas.
42-473-000127-001 Riley F. Woods, et ux Humble Oil & 07/16/42 Bk 87 P 439 The E 1/2 of Section 120, in Waller County, all
Refining Company Waller of Section 129, in Waller and Harris Counties,
<PAGE>
in Block 1, H&TC R.R. Co. Survey,
Bk 415 P 414 and the S 1/2 of Section 88, Harris and Waller
Harris Counties, Block 2, H&TC R.R. Co. Survey, in the
State of Texas.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000127-002 Pamelia W. Muhleman, Humble Oil & 07/16/42 Bk 87 P 435 The E 1/2 of Section 120, in Waller County, all
et vir Refining Company Waller of Section 129, in Waller and Harris Counties,
in Block 1, H&TC R.R. Co. Survey,
Bk 414 P 569 and the S 1/2 of Section 88, Harris and Waller
Harris Counties, Block 2, H&TC R.R. Co. Survey, in the
State of Texas.
42-473-000127-003 Wyndham W. Hewitt, Humble Oil & 07/16/42 Bk 87 P 431 The E 1/2 of Section 120, in Waller County, all
et ux Refining Company Waller of Section 129, in Waller and Harris Counties,
in Block 1, H&TC R.R. Co. Survey,
Bk 415 P 465 and the S 1/2 of Section 88, Harris and Waller
Harris Counties, Block 2, H&TC R.R. Co. Survey, in the
State of Texas.It is lessors'intention to lease
all of his 1/3 interest in the above described
acreage.
42-201-000071-001 Blake H. Alexander Humble Oil & 02/01/43 Bk 417 P 555
Refining Company Harris
42-201-000072-001 E. C. Stockdick, et al A. C. Felt 07/17/42 Bk 415 P 341 Being the W 1/2 of the NE 1/4 of Section 79 in
Harris Block 2, H&TC R.R. Co. Survey, Abstract 464, in
Harris County, TX containing 80 acres of land.
42-473-000128-001 J. E. Craft, Trustee, Humble Oil & 01/30/43 Bk 88 P 610 All of the SW 1/4 of Section 120, Abstract 375,
et al Refining Company Waller Block 1, H&TC R.R. Co. Survey, patented to Fred
Eule, in Waller County, Texas, containing 160
acres of land more or less.
42-473-000129-003 Flag Oil Company Humble Oil & 02/05/43 Bk 88 P 624 All of the NE 1/4 of Section 127, Abstract 205,
of Texas Refining Company Waller Block1, H&TC R.R. Co. Survey, Waller and Harris
Bk 455 P 236 Counties, Texas, containing 160 acres of land,
Harris more or less.
42-473-000129-001 M. A. Beckendorff Humble Oil & 02/01/43 Bk 88 P 519 All of the NE 1/4 of Section 127, Abstract 205,
Refining Company Waller Block 1, H&TC R.R. Co. Survey, in Waller and
Bk 417 P 555 Harris Counties, Texas, containing 160 acres of
Harris land, more or less.
42-473-000129-002 Texas Osage Humble Oil & 02/03/43 Bk 88 P 618 All of the NE 1/4 of Section 127, Abstract 205,
Cooperative Royalty Refining Company Waller Block 1,H&TC R.R. Co. Survey, Waller and Harris
Pool, Inc. Bk 455 P 241 Counties, Texas, containing 160 acres of land,
Harris more or less.
</TABLE>
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-000073-001 LeRoy Wilkinson, et ux A. T. Jones 10/07/43 Bk 425 P 579 30 acres of land,being the W 1/2 of 60 acres of
Harris land, a part of Section 64, Block 2, Cert. 136,
by metes and bounds as follows, to-wit: BEGIN-
NING at the Northwest corner of said Section64;
THENCE East along the North line of said Sec-
tion 910.29/100 varas for a corner, the same
forming & being the Northeast corner of the
tract; THENCE South 375.82/100 varas for a cor-
ner, the same forming and being the Southeast
corner of the tract; THENCE West 910.29/100
varas for corner, the same forming and being
the Southwest corner of the tract;THENCE North
375.82/100 varas to the place of beginning,
containing 60 acres, more or less, and being
the same land conveyed to Leroy Wilkinson and
Carrie Emily Wilkinson by Frank P. Wilkinson,
et al, by Deed dated August 10, 1942, and re-
corded in Vol. 1257, Page 127, of the Deed
Records of Harris County, Texas.
42-201-000074-001 E. C. Stockdick, et al Humble Oil & 10/08/43 Bk 425 P 406 All of the following described portion of
Refining Company Harris Section 64, Block 2, Cert. No. 136, H&TC R.R.
Co. Survey, Patent No. 449, Vol. 42 in Harris
County, Texas, to-wit: BEGINNING at a point
375.82 varas south of the northwest corner of
said Section 64; said point forming and being
the northwest corner of tract being described:
THENCE East 910.29 varas for corner, the same
forming and being the northeast corner of the
tract; THENCE South 375.82 varas for corner,
the same forming and being the southeast corner
of the tract; THENCE West 910.29varas for cor-
ner, the same forming and being the southwest
corner of the tract; THENCE North 375.82 varas
to the place of beginning, containing 60 acres
more or less;being the same tract set apart and
conveyed to Frank P. Wilkinson and wife, Mary
Olive Wilkinson by the partition deed executed
by them & Leroy Wilkinson and wife Carrie Emily
Wilkinson dated August 10,1942,recorded in Vol.
1257, Page 128 of the Deed Records of Harris
County,TX, and being the S 1/2 of that certain
tract of land containing 120 acres more or less
which is described in and conveyed by deed from
<PAGE>
J.J. Mathis & wife to the said Frank P.Wilkin-
son and Leroy Wilkinson dated January 26, 1920
recorded in Vol. 436, Page 578 of said Deed Re-
cords,to the record of both of which deeds ref-
erence is hereby made for all purposes.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-000075-001 Kittie V. Stockdick, Humble Oil & 10/13/43 Bk 428 P 432 All of outlot No.1 containing 4 1/2 acres, more
et al Refining Company Harris or less, to the town of Katy, out of the Subdi-
vision of Section 44, Block 2, H&TC R.R. Co.
Survey (commonly known as the J.W. McCutcheon
Survey), in Harris County, Texas, according to
the map of said Subdivision recorded in Vol.
144, Page 428 of the Deed Records of said Coun-
ty; being the same land conveyed to H.E. Romack
by deed from J.E. Wood, dated Feb. 21, 1940.
42-473-000026-001 Lelia Estelle Diddel, A. T. Jones 12/21/37 Bk 72 P 449 320 acres, more or less, of land in H&TC R.R.
et al Waller Co. Survey, Section 103, Abstract 169, & being
more particularly described as follows: Bounded
on north by land of Allsup heirs and/or public
road; East by H&TC R.R. Co. Survey,Section 107,
Abstract 170;South by Section 104,Abstract 292,
patented J.G. Bennett; West by lands of A.L.
Short, George Lahey & O.R. Salmans and/or I.R.
Spencer, and being all the land owned by the
Lessors in said section.
42-473-000130-001 Dan Williams Kirby Petroleum 09/06/33 Bk 62 P 491 The S 1/4 of Section 119, Block 1, of grant to
Beckwith, et al Company Waller H&TC R.R. Co. by virtue of Cert. No. 260.
42-201-000076-001 W. F. Sorrels, et ux Kirby Petroleum 08/08/38 Bk 318 P 309 Being all that certain tract or parcel of land
Company Harris lying and being situated in Harris and Waller
Bk ___ P ___ Counties, State of Texas, and being 80 acres
Waller out of the East portion of Section 43,H&TC R.R.
Co. Survey, and described by metes and bounds
as follows, to-wit: BEGINNING at a corner on a
public road, same being the southeast corner of
that certain 160 acre tract conveyed to M.A.
McDonald by A.M. Williams, by deed dated Dec.
12, 1922, and recorded in Vol. 537, Page 464 of
the Deed Records of Harris County, Texas;
THENCE West 2903.6 feet to the center of Cane
Island Branch of Buffalo Bayou; THENCE with the
meanders of same as follows: North 25 45' West
110.5 feet;North 20 45' East 100 feet;North 88
30' East 163.2 feet;N 9 55' East 142 feet;North
<PAGE>
46 West 138 feet; N 30 30' East 352 feet; N 88
East 95 feet;N 25 45' East 127 feet;THENCE East
2417.4 feet to corner of West side of road;
THENCE South with said public road 1292.2 feet
to place of beginning, and containing 80 acres
of land, more or less.
42-473-000117-003 Twyman W. Harper Kirby Petroleum 09/09/42 Bk 87 P 377 Being all of my undivided 1/4 interest in & to
Company Waller 340 acres of & in the South part of Section or
Survey 95, Block 1, H&TC R.R. Survey, Waller
County, TX, more particularly described as fol-
lows: BEGINNING at the southeast corner of said
Survey 95; THENCE West with the South line of
said Survey 1901 varas to the Southwest corner
of the same; THENCE North with the West line of
said Survey 1010 varas to corner; THENCE East
1901 varas to corner in the East line of said
Survey; THENCE South with the said East line
1010 varas to the place of beginning,containing
340acres of land;& being the same land conveyed
to J.L. Hollenbeck by Eugenia H. Freeland & Mag-
gie Freeland by deed dated July 29, 1916 and
recorded in Vol.44,Page 420 of the Deed Records
of Waller County, Texas.
42-473-000117-002 Lucy M. Davidson Kirby Petroleum 03/05/43 Bk 89 P 331 Being all of my undivided 1/4 interest in & to
Company Waller 340acres ofland out of Section 95,Abstract 165,
H&TC R.R. Survey,Block 1,and being the same 340
acres of land conveyed by the Long Beach Sav-
ings Bank&Trust Co. to Perry V. Cook,deed dated
July 17, 1919, and recorded in Vol. 46, Page 71
of the Waller County Deed Records.
42-201-000077-001 W. M. Wiggins, et ux Navarro Oil Co. 11/05/41 Bk 395 P 699 Out of the East portion or part of the Houston
Harris &Texas Central Railway Co. Survey, Section 43,
Bk 83 P 387 in Block 1,and which said Section43 is situated
Waller partly in Harris County, Texas and partly in
Waller County, Texas, the said tract of land
hereby conveyed being the North 80 of that
certain 160 acre tract conveyed by A.M.Williams
to M.A.McDonald by deed dated Dec. 12, 1922 and
recorded in Vol. 537, Pages 464 et seq., of the
Deed Records of Harris County, Texas, the said
tract of land hereby conveyed being more par-
ticularly described by metes and bounds as fol-
lows, to-wit:BEGINNING at a stake in the fence
corner in the center line of Cane Island Branch
same being the Northwest corner of said 160acre
tract conveyed by said A.M. Williams to said
M.A.McDonald by said deed recorded as aforesaid
in Vol. 537, Pages 464 et seq., Harris County
Deed Records; THENCE east with fence line along
the north line of said 160 acre tract 2430 feet
to a stake in fence corner on the West line of
a county road, said corner being the northeast
corner of the said 160 acre tract; THENCE south
with fence line along the west side of said
county road 1372 feet to a stake for corner,
same being the northeast corner of the south 80
acre tract out of the said 160 acre tract, and
<PAGE>
which said south 80 acre tract out of the said
160 acre tract was conveyed by M.A.McDonald and
wife,Allie J.cDonald, to W.F. Sorrells by deed
dated on or about Jan. 1, 1925, and recorded in
Vol. 603, Pages 9 et seq., Harris County Deed
Records; THENCE West along the north line of
the said south 80 acres out of said 160 acre
tract 2471 feet to a corner in the center line
of said Cane Island Branch, which said last
mentioned corner is the northwest corner of
said south 80 acre tract out of said 160 acre
tract; THENCE north along the center line of
said Cane Island Branch with all of its mean-
ders to the place of beginning, and containing
80 acres of land,together with all improvements
thereon situated; and being the same tract of
land conveyed to the said William R. Gilpin by
F.M. Lucore by deed dated on or about May 1,
1929, & recorded in Vol. 798,Pages 244 et seq.,
Deed Records of Harris County, Texas, and the
same tract of land conveyed by said M.A. McDon-
ald and wife to F.M. Lucore by deed dated April
19, 1926 and recorded in Vol. 657, Pages 79 et
seq., of the Deed Records of Harris County,
Texas, and by a corrected deed from said M.A.
McDonald and wife to the said F.M. Lucore dated
May 12, 1927 and recorded in Vol. 800,Pages 194
et seq., of the Deed Records of Harris County,
Texas.
42-473-000132-001 Elizabeth Carr Adam Bijbijian 04/04/41 Bk 81 P 314 160 acres, being the S 1/2 of a 320 acre tract
Ainsworth, et al Waller of land known and described as the E 1/2 of
Section 70, Block 1, surveyed for the Public
Free School Fund by virtue of Cert. No. 235,
issued to the Houston & Texas Railway Co. and
patented to E.S. & D. Arwine June 1, 1895, and
being the same land conveyed to David Carr,
formerly of Cass County, Illinois, by J.F. Rob-
inson by Warranty Deed dated Jan. 13, 1903,
and recorded Jan. 17, 1903, in Vol. 24, Page
450, of the Deed Records of said Waller County,
Texas.
42-473-000133-001 E. H. Martin,et ux Adam Bijbijian 09/28/40 Bk 80 P 143 Being the S 1/2 of the NE 1/4 of Section 71,
Waller Block 1, H&TC R.R. Co. Survey, Waller County,
Texas, and being the same land deeded to E.H.
Martin by deed dated Sept. 29,1921 and recorded
in Vol.47,Page109 of the Deed Records of Waller
County, Texas.
42-473-000228-001 Adda F. Smock, et al The Ohio Oil Co. 05/22/39 Bk 78 P 1 All of Section 93,Block 1,H&TC R.R.Co., Survey,
Waller Waller Sounty,Texas, containing 640 acres, more
or less.This lease also covers and includes all
land owned or claimed by Lessor adjacent or
contiguous to the land particularly described
above whether the same be in said survey or
surveys or in adjacent surveys,although not
included within the boundaries of the land
particularly described above.
<PAGE>
42-473-000228-002 Esther Dawson, The Ohio Oil Co. 11/27/39 Bk 78 P 82 An undivided 1/96 interest in Section93,Block1,
Guardian of the Estate Waller H&TC R.R. Co. Survey, in Waller County, Texas.
of Jean Manor, a minor This lease covers & includes all land owned or
claimed by Lessor adjacent or contiguous to the
land particularly described above, whether the
same by in said survey or surveys or in ad-
jacent surveys,although not included within the
boundaries of the land particularly described
above.
42-473-000228-003 Robert E. Shoup, The Ohio Oil Co. 05/20/40 Bk 79 P 259 An undivided 1/120 interest in Section 93,Block
Guardian of the Estate Waller 1,H&TC R.R.Co.Survey. This lease also covers &
of Richard L. Shoup, a includes all land owned or claimed by Lessor
person of unsound mind adjacent or contiguous to the land particularly
described above, whether the same be in said
survey or surveys or in adjacent surveys, al-
though not included within the boundaries of
the land particularly described.
42-473-000009-001 E. H. Wilpitz, et ux Adam Bijbijian 09/08/42 Bk 87 P 404 Being the East 125 acres of the North 250 acres
Waller of Section 98 H&TC R.R. Co. Survey, Block 1,
Cert. No. 249, Waller County, Texas.
42-473-000073-001 Rycade Oil Corporation, Stanolind Oil & 01/13/43 Bk 88 P 459 All of Section 84, Block No. 1, H&TC R.R. Co.
et al Gas Company Waller Survey, patented to J.M. Bennett and his
assignees.
42-201-000078-001 Mrs. Mary E. Hagler, Stanolind Oil & 10/10/38 Bk 324 P 573 All of the NE 1/4 of Section 30,Block 2,of the
et al Gas Company Harris H&TC R.R. Co. Survey,Abstract No.1427,in Harris
County, Texas,and containing 160 acres of land,
more or less, and being the same property con-
veyed to C.E.Hagler by J.L.Church by deed which
is now of record in Vol.319,Page45 Deed Records
of Harris County, Texas.
42-201-000078-002 Mrs. Bertha Sible, M. M. Johnson 10/13/43 Bk 425 P 222 All of our undivided interest in the NE 1/4 Sec-
et vir Harris tion 80,Harris County,Texas and containing 160
acres of land, more or less, and being the same
land conveyed to C.E. Hagler by J.L. Church by
deed which is now recorded in Vol. 319,Page 45,
of Deed Records of Harris County, Texas.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-000079-001 William J. Justman, Stanolind Oil & 11/04/38 Bk 328 P 261 The SW 1/4 of the SE 1/4 of Section 80,Block 2,
et ux Gas Company Harris H&TC R.R.Co. Survey, Abstract No. 1416, Harris
County, Texas,being the same property conveyed
by Paul H. Nichols to Wm. J. Justman by deed
<PAGE>
which is of record in Vol. 278, Page 145, Deed
Records of Harris County, Texas.
42-473-000046-004 R. H. Peck, et al Arnett C. Smith 08/01/42 Bk 87 P 349 298.17 acres of land, more or less, out of H&TC
Waller R.R. Co. Survey No. 107, Block 1, described in
deed executed by W.B. Peck to Mrs. A.M. Peck,
dated July 10, 1920, filed Sept. 9, 1920, and
recorded Vol.46,Page 515,Deed Records of Waller
County, Texas, to which deed reference is here
made for further description, SAVE AND EXCEPT,
however, the following two tracts:
Tract 1: 1 1/3 acres, more or less, described
in a deed by W.B. Peck and wife, A.M. Peck, to
John Alt,dated Dec. 30, 1927,recorded Vol. 51,
Page 166, Deed Records of Waller County, Texas.
Tract 2: 250 acres described in Oil, Gas and
Mineral Lease from Mrs. A.M. Peck to T.S.Mabry,
dated Oct. 5, 1939, recorded Vol. 77, Page 288,
Deed Records of Waller County, Texas.
42-473-000134-001 Hub Muske, et ux John H. Wynne 04/02/36 Bk 67 P 480 The North 300 acres, more or less, out of the
Waller South 500 acres of land owned by Hub Muske in
Section 116, Abstract 377, patented to J.H.
Garrett, H&TC R.R. Co. Survey, Waller County,
Texas, said 300 acres being bounded on the
North by land of Hub Muske under oil lease to
Stanolind-Amerada Companies; on the East by
Section 117; on the South by land of Hub Muske
under oil lease to Sam G. Harrison; and on the
West by Section 93.
42-473-000135-001 Mary P. Bingham, et al Stanolind Oil & 12/23/42 Bk 88 P 386 All of Sections 91, 94, 96, 67, North 300 acres
Gas Company, et al Waller of Section 95; all of Section 92, 39, and the
North 105.9 acres of Section50, all in Block 1,
H&TC R.R. Co. Survey,containing 4245.9 acres of
land more or less.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000072-001 Hub Muske, et ux Sam G. Harrison 12/31/35 Bk 67 P 178 The South 200acres of Section 116,Abstract 377,
Waller patented to J.H. Garrett, H&TC R.R. Co. Survey,
said 200 acres having for its South boundary
line Section 113; having for its West boundary
line Section 93; having for its East boundary
line Section 117; and having for its North
boundary line a line running parallel with the
<PAGE>
South line of said Section 116 at a sufficient
distance North of said South line so as to in-
clude exactly 200 acres of land.
42-473-000136-001 J. P. Pitts, et al Sun Oil Company 06/19/39 Bk 342 P 48 The West 240 acres out of the N 1/2 of Section
Harris 88, Block 2, H&TCR.R. Co.Survey, Abstract 1421.
Bk ___ P ___
Waller
42-157-000030-001 Loris A. Hoyt, et al Sun Oil Company 10/15/43 Bk 214 P 462 Being 90.42 acres, more or less, described as:
Ft Bend All that certain tract or parcel of land known
as the W 1/2 of that 60.85 acres described as
follows: BEGINNING at an iron pipe for corner
which is west 3677 feet and south 40 feet from
the east corner of the upper half of the D.A.
Conner survey, this beginning corner is the
Northwest corner of Lot No. 3 and the Northeast
corner of Lot No. 2 of the Hoyt Subdivision;
THENCE south 2019 feet with the east line of
Lot No. 2, to an iron pipe for corner; THENCE
east 1312.4 feet to an iron pipe for corner;
THENCE north 2019 feet to an iron pipe for
corner in the north line of the Hoyt tract of
land; THENCE west with the north line of the
Hoyt land and the south line of a 40 foot road
1312.4 feet to the place of beginning, contain-
ing 60.85 acres and being 12 acres out of the
Thomas Cresop, 2 acres out of the C.W. Schrimp
and 46.85 acres out of the D.A. Conner surveys,
the land here conveyed containing 30.42 acres,
this land being situated in Ft. Bend County,
Texas and being the W 1/2 of the tract of land
deeded to A.D. Hoyt in the partition deed be-
tween the heirs of C.D. Hoyt deceased,and being
the same tract of land described in the deed
from Mrs. Sarah E. Hoyt to A.D. Hoyt,which deed
is recorded in the Deed Records of Ft. Bend
County, Texas, in Vol. 130, Page 98; and also
60 acres off of the east end of Block 5 of the
subdivision of the Hoyt land in the D.A. Con-
ner,Thomas Cresop, Jesse Burdett and the C.W.
Schrimp surveys in Fort Bend County, Texas the
plat of said subdivision being recorded in the
Deed Records of Fort Bend County, Texas in Vol.
69, Page 432 and being the same tract of land
conveyed to A.D. Hoyt by F.E. Hoyt and wife,
May Hoyt, Emma J. Hoyt McClintock and husband,
Robert McClintock, by deed which is recorded in
the Deed Records of Fort Bend County, Texas, in
Vol. 74, Page 635.
42-201-000080-001 John C. Townes, J. F. Taylor 09/29/41 Bk 394 P 623 Being all of those 2 certain adjoining tracts
Individually and as Harris or parcels of land comprising 160acres of land,
Independent Executor Bk 87 P 102 more or less, and lying and being situated in
of the Estate of Helen Waller the NW 1/4 of Section 80, Block 2, H&TC R.R.
M. Townes, deceased Survey, Harris County, Texas; said tracts being
described as follows:
Tract 1:Being the N 1/2 of the NW 1/4 of Sec-
tion 80, Block 2, H&TC R.R.Survey, Harris
<PAGE>
County,Texas, comprising 80 acres of land, more
or less,& being the same land described in deed
from H.L. Sears to Gus H. Moore dated Sept. 23,
1918 & recorded in Vol. 420, Pages 45-46 of the
Deed Records of Harris County, Texas, to which
deed and record thereof reference is here made
for all purposes including description.
Tract 2: Being the S 1/2 of the NW 1/4 of Sec-
tion 80,Block 2,H&TC R.R.Survey,Harris County,
Texas,containing 80 acres of land,more or less,
and being the same land described in deed from
O.C. Bailey to Gus H. Moore and John C. Townes,
Jr., dated May 15, 1917, and recorded in Vol.
383, Page 319 of the Deed Records of Harris
County, Texas, to which deed and record thereof
reference is here made for all purposes includ-
ing description.
42-473-000137-001 Margaret A. Callahan J. F. Taylor 09/19/41 Bk 86 P 494 Being the NE 1/4 of Section 119, H&TC R.R. Co.
Waller Survey, Block1, Abstract No.200, Waller County,
TX, containing 160 acres of land,more or less.
42-473-000138-001 Mrs. J. M. Stewart J. F. Taylor 09/04/41 Bk 86 P 491 NW 1/4 of Section 119, Block 1, H&TC R.R.
Waller Company Survey.
42-473-000139-001 E. C. Stockdirk, et al J. F. Taylor 08/22/41 Bk 86 P 496 The S 1/2 of Section 118, Block 1, Cert. 259,
Waller Abstracts Nos. 1594, 387 and 378, H&TC R.R. Co.
Survey, all in Waller County, Texas, except 30
acres covered by Abstract No. 1594, lying and
being situated in Harris County,Texas,and being
the same land conveyed to A.Stockdick, et al by
deed dated June 16, 1919, said deed being filed
for record and recorded in Vol. 45, Page 27, of
the Deed Records of Waller County, Texas, to
which instrument and the record thereof refer-
ence is hereby made for all purposes.
42-473-00140-001 C. H. Stockdirk, et al J. F. Taylor 06/16/42 Bk 87 P 76 All that certain parcel of land described as
Waller follows: Being 27-1/3 acres out of Section 114,
Block 1, Cert. No. 257, H&TC R.R. Co. Survey,
in Waller County, Texas; and being the W 1/2 of
the following described real estate, to wit:
BEGINNING at the Northwest corner of Survey No.
114,Block 1,Surveyed for the Public Free School
Fund of the State of Texas, by virtue of Cert.
No. 257, issued to the H&TC R.R. Co., and being
the same property conveyed to C.H. Stockdick by
Guy G. Swan and Robert S. Swan by Warranty Deed
dated April 21, 1933, recorded May 5, 1933, in
Book 57, Page 640 of the Deed Records of Waller
County, Texas; and being part of the W 2/3 par-
titioned between Emma E. Price and Guy G. Swan,
et al;THENCE east along North line of said sur-
vey 692.6varas to the Northwest corner of a 27-
1/3 acre tract (partitioned to Guy G. Swan) for
corner;THENCE South along the West line of said
tract 446.8varas to corner;THENCE West at right
angle with the East line hereof and parallel
with the North line of this survey 692.6 varas
<PAGE>
to the West line of said survey; THENCE North
446.8 varas to the place of beginning; contain-
ing 54-2/3 acres.
42-473-000142-001 Paul C. Cullom, et al J. F. Taylor 04/16/42 Bk 88 P 7 The E 1/3 of Section 114,Block 1,H&TC R.R. Co.
Waller Survey, in Waller County, Texas;containing 213-
1/3 acres.
42-473-000143-001 Rex Dunbar Frazier, J. F. Taylor 03/20/42 Bk 86 P 95 Being 27.33 acres of land, more or less, out of
et al Waller Section 114,Block 1,of the H&TC R.R. Co. Survey,
Cert. No. 257, Waller County, Texas, and being
the same land as described in a deed dated Au-
gust 14, 1916 from Guy G. Swan, et al, to K.S.
Frazier, said deed recorded in Vol. 45, Page 7
of the Deed Records of Waller County, Texas, to
which deed reference is hereby made for all
legal purposes.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000144-001 H. L. Stelzig, et ux J. F. Taylor 03/20/42 Bk 87 P 1 Being 27- 1/3 acres of land, more or less, out
Waller of the H&TC R.R.Co. Survey,Section 114,Block 1,
Cert. No. 257, Waller County, Texas and being
the same land as that described in a deed from
Charles E. Swan to H.L. Stelzig,dated August 2,
1933 and is recorded in Vol. 60, Page 239 of
the Deed Records of Waller County, Texas to
which deed & its references is referred to for
all legal description hereafter.
42-473-000145-001 Millard C. Morrison J. F. Taylor 06/16/42 Bk 87 P 195 BEGINNING at the Northwest corner of Survey No.
Waller 114,Block 1,surveyed by virtue of Cert.No. 257,
issued to the H&TC R.R. Co. for the Public Free
School Fund of the State of Texas,and being the
same property conveyed to Geo. C. Cullom,Guy G.
Swan and Nat P. Claybaugh by Carrol W. Allen,by
deed dated at Houston, Texas, the 17th day of
Jan., 1903, and being a part of the W 2/3 of
said Section partitioned between Guy G. Swan,et
al & Emma E. Price; THENCE East along the North
line of said Survey 1038.68 varas for corner of
the North line of said survey;THENCE continuing
along the North line of said survey 227.98varas
for corner, the same being the Northeast corner
of the W 2/3 and the Northeast corner of the E
1/3,as partitioned between Geo. C. Cullom,Emma
E. Price, Guy G. Swan and Milton Swan; THENCE
South along said dividing line 446.8 varas to
<PAGE>
the Southeast corner of the 100 acres deeded to
Guy G. Swan,et al in the partition deed of Emma
E.Price;THENCE West along the South line of the
100 acres 227.89 varas and being parallel with
the North line of said survey; THENCE North
446.8 varas parallel with the East line hereof
to the place of beginning,containing 18acres of
land, more or less.
42-473-000146-001 T. B. Tucker, et ux J. F. Taylor 04/22/42 Bk 87 P 601 326 2/3 acres of land, being a part of Section
Waller 114,Block 1,surveyed for the Public Free School
Funds of the State of Texas by virtue of Cert.
No. 257, issued to the H&TC R.R. Co., described
by metes and bounds as follows:BEGINNING at the
Southwest corner of said survey; THENCE North
1454 varas to the Southwest corner of the 100
acre tract heretofore conveyed to Guy G. Swan,
et al; THENCE East 1266-2/3 varas; THENCE South
1454 varas to South line of said survey; THENCE
West 1266-2/3 varas to the place of beginning;
and being the same land conveyed to T.B. Tucker
by Ada Catherton, et al by deed dated Dec. 20,
1920, and recorded in Vol. 47, Page 23 of the
Deed Records of Waller County, Texas.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000147-001 John Alt, et al Sun Oil Company 04/02/37 Bk 210 P 306 301.5acres of land more or less,part of Section
Ft Bend 107, H&TC R.R. Co. Survey, described in two
Bk 71 P 86 tracts as follows:
Waller
Tract 1:300 acres, being same land conveyed to
John Alt by W.B.Peck and wife A.M. Peck by deed
dated Oct. 18, 1912, recorded Vol. 39, Page 40,
Deed Records of Waller County, Texas.
Tract 2:1-1/3 acres,being same land conveyed to
John Alt by W.B.Peck and wife A.M.Peck,by deed
dated Dec. 30, 1927, and recorded in Vol. 51,
Page 166, Deed Records of Waller County, Texas.
42-473-000148-001 Francis Young, et ux Edwin B. Cox & 09/15/42 Bk 201 P 346 Tract 1: 316 acres of land, more or less, being
Jake L. Hamon Ft Bend all of the Jesse Thompson Survey,Patent No.562,
Bk 87 P 557 Vol. 5,Abstract 394, and described by metes and
Waller bounds as follows: BEGINNING at a stake the
Southwest corner of a survey for R.T. VanSlyke,
Schrimps White House bears East about 2 miles;
THENCE North 522 varas to the lower Northwest
corner in the South line of No. 107, H&TC R.R.
<PAGE>
Co. Survey; THENCE West 1114 varas to a stake
an interior corner of Survey No. 104; THENCE
South with its line 1044 varas to the North-
west corner of J.F. Vermillion Survey; THENCE
East with the North boundary line of said Ver-
million Survey 2312 varas to a stake in the
North boundary line of Ames Survey;THENCE North
522 varas to a stake in the South boundary line
of said VanSlyke Survey; THENCE West 1198 varas
to the place of BEGINNING.
Tract 2: 88 acres of land, more or less, out of
the West end of the R.T. VanSlyke, Patent 361,
Vol. 45, Abstract 395, described by metes and
bounds as follows: COMMENCING at an iron stake
in the Southeast corner of the Houston Texas
Central R.R.Co. Survey No. 107,in said County,
Running; THENCE South 522 varas to iron stake
in the North line of the East Ell of the Jesse
Thompson Survey;THENCE West with the North line
of the East Ell of the Jesse Thompson Survey
about 952varas to an iron stake in the interior
corner of the Jesse Thompson Survey; THENCE
North 522 varas to an iron stake in the South
line of the H&TC R.R. Co. Survey, Section 107;
THENCE East about 952 varas to place of BEGIN-
NING.
42-157-000031-001 George J. Mellinger, Sun Oil Company, 11/08/43 Bk 216 P 377 167.9 acres of land, more or less, out of the
et al et al Ft Bend J.D. Vermillion Survey, described as follows:
BEGINNING at an iron pipe at the Northwest
corner of said survey; THENCE South 320 feet to
stake for corner; THENCE North 89 degrees 40
feet East 311.14 feet to stake for corner;
THENCE South 1682.8 feet to iron pipe for cor-
ner; THENCE North 89 degrees 40 feet East
3602.48 feet to an iron pipe for corner;THENCE
North 0 degrees 1 foot East 2002.8 feet to iron
pipe inthe North line of said Survey to corner;
THENCE South 89 degrees 40 feet West with the
North boundary line of said Survey 3913.6 feet
to the place of BEGINNING, containing within
said boundaries 167.9 acres, more or less. An
undivided 1/2 interest in 12acres out of said
J.D. Vermillion Survey; described as follows:
BEGINNING at a stake 320 feet South of the
Northwest corner of said Survey for the begin-
ning point; THENCE North 89 degrees 40 feet
East 311.14 feet to stake for corner; THENCE
South 2682.8 feet to an iron pipe for corner,
being the Southwest corner of the 167.9acres
described in subparagraph above; THENCE South
89 degrees 40 feet West 311.14 feet to stake
for corner; THENCE North 1682.8 feet to the
place of BEGINNING, containing within said
boundaries 12 acres, more or less.
42-157-000032-001 Joseph Matela, et ux T. J. Hudgins 06/08/42 Bk 204 P 526 The East 100acres out of a tract of 279.6 acres
Ft Bend out of the North end of the J.D. Vermillion 1/3
lg., Patent 197, Vol. 21, in Fort Bend County,
<PAGE>
Texas; the tract hereby conveyed beginning at
the Northeast corner of said 279.6 acre tract;
Running THENCE West with the North line thereof
such a distance that a line; THENCE running
South to the South line of said 279.6 acre
tract;
THENCE East with the South line thereof to a
point in the East line thereof and;THENCE North
with the East line thereof to the place of be-
ginning will contain 100 acres; and being same
land described in deed recorded in Vol. 85,Page
361 of the Deed Records of Fort Bend County,
Texas, to which deed reference is here made for
all purposes.
42-473-000149-001 Harry Hebert, et ux Adam Bijbijian 05/11/40 Bk 79 P1 29 The SE 1/4 of Section 113, H&TC R.R.Co. Survey,
Waller Block 1, Abstract 173, containing 160 acres,
more or less.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000150-001 Diedrich Schwengels, J. F. Taylor 06/14/39 Bk 76 P 574 Being the SE 1/4 of Section 71,H&TC R.R.Survey,
et ux Waller Block 1, Waller County, Texas, containing 160
acres of land.
42-473-000150-001 Diedrich Schwengels, Tide Water 02/05/44 Bk 94 P 366 The SE 1/4 of Section 71,H&TC R.R. Survey,Block
et ux Associated Oil Company Waller 1, Waller County, Texas,containing 160 acres of
land.
42-473-000151-001 E. C. Stockdick, et al Adam Bijbijian 05/10/40 Bk 79 P 133 The S 1/2 of the N 1/2 of Section 113, Block 1,
Waller H&TC R.R. Co. Survey,Cert. No.257, Abstract No.
173, in the County of Waller, State of Texas;
and the SW 1/4 of said Section 113, Block 1,
H&TC R. R. Co. Survey, Cert. No. 257, Abstract
No. 173,in the County of Waller,State of Texas;
the two tracts, together, containing 320 acres,
more or less;this being a part of the same land
described in a certain deed from W.C. Stockdick
and C.H. Stockdick, et al, to Harry Hebert and
wife, dated Feb. 24, 1930, and recorded in Vol.
54, Page 510 of the Deed Records of Waller
County, Texas; to which Deed and the records
thereof reference is here made for all
purposes.
42-473-000152-001 T. A. Tomlin, et ux Tide Water 08/26/38 Bk 74 P 358 All of the NW 1/4 of Section 120, Block 1, H&TC
Associated Oil Company Waller R.R. Co. Survey,Abstract No. 375,containing 160
acres of land, more or less.
<PAGE>
42-473-000152-001 Frank B. Tomlin, et al Tide Water 01/23/43 Bk 88 P 465 All of the NW 1/4 of Section 120, Block 1, H&TC
Associated Oil Company Waller R.R. Co. Survey,Abstract No. 375,containing 160
acres of land, more or less.
42-473-000153-001 E. H. Wilpitz, et ux Tide Water 12/06/43 Bk 94 P 62 Being the West 125 acres of the North 250 acres
Associated Oil Company Waller of Section 98, Block 1, H&TC R.R. Survey, Waller
County, Texas. The above land being more par-
ticularly described in that certain deed dated
Nov. 4, 1918, and recorded in Vol.45, Page 435,
of the Deed Records of Waller County, Texas.
42-473-000154-001 Martin A. Morrison, Tide Water 07/05/38 Bk 74 P 167 The SE 1/4 of Section 111,Block 1,H&TC R.R. Co.
et ux Associated Oil Company Waller Survey, Abstract No. 172, Waller County, Texas,
containing 160 acres, more or less.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-000061-001 W. D. Parker J. F. Taylor 07/10/39 Bk 183 P 280 BEING 288 acres of land, more or less,and being
Ft Bend that portion of the W.W. Baines Survey South of
Bk 80 P 46 the MK&T R.R. and being a portion of the same
Waller land described in a Patent to W.W. Baines dated
Feb. 11, 1920,Patent No. 526, Vol. 5-a,recorded
in Vol. 46, Page 361 of the Deed Records of
Waller County, Texas, to which reference is
hereby made for all legal purposes hereafter,
and containing 288 acres, more or less.
42-473-000155-001 Ida Clarey J. F. Taylor 09/23/39 Bk 77 P 509 Being 1/2 acres of land, more or less, out of
Waller Section 104, J.G. Bennett, H&TC R.R. Survey and
bound as follows: Bound on the North by the
North line of said Section104 which is also the
South line of Section 103; bound on the East by
the East line of said Section and the Stockdick
58 acres of land out of said section; bound on
the South and West by the E.M.Huggins 444 acre
tract out of said section and being the same
land described in a deed from M. Clarey to Ida
Clarey, which deed is recorded in the Deed Rec-
ords of Waller County, Texas.
42-473-000156-001 E. M. Huggins, et ux R. E. Beamon 02/18/37 Bk 70 P 510
Waller
Bk 215 P 230
Ft Bend
42-473-000157-001 J. D. Woods, et ux Gulf Oil Corp. 03/17/39 Bk 76 P 52 287.97 acres,more or less,out of the T.S. Reese
Waller Survey No.78,Abstract 330,and being all fo the
E 1/2 of said Survey as allotted to J.D.Woods
<PAGE>
in Partition Deed dated Feb. 5 1935,executed by
and between J.D. Woods,et ux,and P. Ray Woods,
of record in Vol.64,Page561 of the Deed Records
of Waller County, Texas, SAVE AND EXCEPT 4.70
acres in the Northern portion of said E 1/2 of
said Survey comprising the right-of- way of the
MK&T R.R., said 4.70 acres being a part of the
land conveyed by H. Masterson to MK&T R.R. Co.
by deed dated June 26, 1894, of record in Vol.
14, Page 614 of the Deed Records of Waller
County, Texas, leaving 287.97 acres, more or
less, covered hereby.
42-473-000158-001 Shell Oil Company, Inc. R. L. Trott 01/03/44 Bk 94 P 411 BEGINNING at a stake set in the East line of
Waller Section 77, Block 1, H&TC R.R. Co. Survey,
Waller County, Texas, 837 feet North of an
iron pin for the Southeast corner of said
Section, Block, and Survey; THENCE West 660
feet to a stake for corner;
THENCE North 1320feet to a stake for corner;
THENCE East 660 feet to a stake for corner;
THENCE South 1320 feet to the place of begin-
ning, containing within said limits 20 acres
of land out of Section 77, Block 1, H&TC R.R.
Co. Survey, Waller County, Texas.
42-157-025710-000 L. D. Brown, et ux American Republics 5/11/42 Bk 204 P 266 Being the North 160 acres of land,more or less,
Corporation Ft Bend out of the Thos. Caraway Survey of Fort Bend
County, texas, and is described as follows,
to-wit: Bounded on the North by the North line
of the said Survey. Bounded on the east by the
east line of said Survey. Bounded on the west
by the west line of said Survey, and bounded on
the south by a line a sufficient distance south
of the North line so as to embrace 160 acres of
land. For a more complete description of the
above described land a reference is hereby made
to the Deed Records of Fort Bend County, Texas,
for all legal purposes hereafter.
42-473-000159-001 Barton W.Freeland,et al Humble Oil & 01/17/44 Bk 94 P 321 25 acres of land,being the West 25 acres of the
Refining Company Waller East 225 acres of the N 1/2 of Section 82, H&TC
R.R. Co. Survey, Abstract 290, Waller County,
Texas.
42-473-000160-001 Magnolia Cemetary Humble Oil & 06/28/44 Bk 100 P 97 5 acres of land,more or less,out of the North-
Association Refining Company Waller west corner of Section 44,Block 1,H&TC R.R.Co.
Survey, Abstract 306,Waller County,Texas,being
the same land conveyed by Eunice T. Shapley and
husband,George W. Shapley,to Magnolia Cemetery
Association, Katy, Texas, by deed dated Aug. 7,
1900.
42-201-000081-001 Lalla R. Gordon James I. Riddle 03/10/44 Bk 428 P 190 All of Katy outlots Nos. 4 and 5 in Section 44,
Harris H&TC R. R. Co. H&TC R. R. Co. Survey, Abstract
1348.
42-157-000034-001 Eva S. McMillian,et vir Sun Oil Company, 4/19/44 Bk 219 P 292 The North 170 acres of that certain tract of
et al Ft Bend 66.48 acres more or less, known as the William
Ames Survey & being more particularly describ-
<PAGE>
ed in a deed from Perry V. Cook to Mrs. Eva S.
McMillian dated June 17, 1932, recorded in Vol.
138, Page 376, of the Deed Records of Fort Bend
County,Texas, which said tract lies immediately
south of and adjoins the land of Francis Young
and the land of the John Osborn Esate; said 170
acres to be cut off the North end of said tract
of 662.48 acres,more or less,by a line extend-
ing from the West line of said tract to the
East line thereof, parallel to the North line
thereof and far enough south from said North
line to cut off exactly 170 acres.
42-473-000161-001 Harry Hebert, et al Sam G. Harrison 1/28/42 Bk 86 P 447 All of our undivided interest in & to the W 1/2
Waller of Section or Survey No. 117, Cert. No. 259, in
Bk 403 P 710 Block 1 out of the land originally granted the
Harris H&TC R.R. Co., situated in Harris and Waller
Counties,Texas,about 9 miles Northwest from the
town of Katy, Texas, and more particularly de-
scribed as follows: BEGINNING at a gas pipe, the
Northeast corner of this survey;THENCE West 1901
varas; THENCE South 1901 varas; THENCE East 1901
varas; THENCE North 1901 varas, to the PLACE OF
BEGINNING, containing 640 acres, more or less,
of land. Being the same land deeded to Sam G.
Harrison, by C. Rufus Smith, et ux, on April 16,
1934, said deed being recorded in Vol. 63, Page
594, Deed Records of Waller County,Texas,and in
Vol. 946,Page 578,of the Deed Records of Harris
County, Texas.
42-473-000161-002 Sam G. Harrison Union Producing 02/10/43 Bk 89 P 127 All of my undivided interest in and to the W 1/2
Company Waller of Section or Survey No. 117, Cert. No. 259, in
Bk 419 P 210 Block 1 out of the land originally granted the
Harris H&TC R.R. Co., situated in Harris and Waller
Counties,Texas,about nine miles Northwest from
the town of Katy, Texas, and more particularly
described as follows: BEGINNING at a gas pipe,
the Northeast corner of this survey;THENCE West
1901 varas; THENCE South 1901 varas;THENCE East
1901 varas;THENCE North 1901 varas,to the PLACE
OF BEGINNING,containing 640 acres,more or less,
of land. Being the same land deeded to Sam G.
Harrison by C. Rufus Smith, et ux, on April 16,
1934, said deed being recorded in Vol. 63, Page
594, Deed Records of Waller County, Texas, and
in Vol. 946, Page 578, of the Deed Records of
Harris County, Texas.
42-201-000082-001 Nellie Eudora Fraser, Gillette Hill 07/18/42 Bk 414 P 639 Being 640 acres all of Section 77 in Block 2,
et al Harris H&TC R.R. Survey, Abstract 463.
</TABLE>
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-000083-001 B. F. Beckendorff, A. C. Felt 07/15/42 Bk 416 P 66 All that certain 80 tract of land out of H&TC
et ux Harris R.R. Co.Survey No. 78,Block 2, Harris County,
Texas, being designated as W 1/2 of the NE
1/4 of said Section, and being the same land
described in deed recorded Vol. 214, Page 592
of Deed Records of Harris County, Texas, refer-
ence being made to said records for all pur-
poses,it being the intent that this shall cover
and include all the land claimed or owned by me
in said Section.
42-201-000084-001 E. M. Bennett, et al A. C. Felt 07/14/42 Bk 412 P 466 All that certain tract or parcel of land out of
Harris and being a part of H&TC R.R. Survey No. 78,
Block 2, Abstract 1366, Harris County, Texas.
Being designated as the E 1/2 of the SE 1/4 of
said Survey. Said to contain 80 acres of land
and being all the land we own in said Survey.
42-201-000085-001 E. W. Peek, et ux A. C. Felt 07/17/42 Bk 416 P 74 Being 106.66 acres of land, more or less,out of
Harris the W 1/2 of H&TC, Section 66,Block 2,Abstract
1329, the same land described in that certain
deed from H.R. Peek to E.W. Peek, which is re-
corded Vol. 743, Page 91, Harris County Deed
Records.
42-201-000086-001 Mary E. Peek, et al A. C. Felt 07/24/42 Bk 414 P 643 106.66 acres of land more or less, out of H&TC
Harris R.R. Co. Survey No. 66, Block 2, Abstract No.
1329, Harris County, Texas and being the South
106.66 acres of the W 1/2 of said Section 66
and being the same land awarded to C.L. Peek
deceased, in that certain partition suit No.
128733 styled A.J. Peek, et al vs. Mrs. Etta
Peek Rutledge, et al, District Court, Harris
County, Texas.
42-201-000087-001 E. A. Thompson, et ux A. C. Felt 07/15/42 Bk 415 P 198 Being 320 acres of land, more or less, out of
Harris H&TC Section 65, Block 2, Abstract No. 452,
Harris County, Texas, being described as the
N 1/2 of said Section, further described in
that certain deed dated Dec. 3,1940,Mrs. Sadie
Gertrude Hubbert, et al to A.E. Thompson,et ux,
which is recorded Vol. 1187, Page 398, Harris
County Deed Records.
42-201-000087-002 Sadie Gertrude Hubbert, A. C. Felt 07/19/42 Bk 413 P 608 The N 1/2 of Section 65,Block2 of the H&TC R.R.
et al Harris Survey in Harris County, Texas, Patent No. 371,
Abstract No. 452, containing 340 acres of land,
more or less,and being the same land more fully
described in that certain deed from sadie
Gertrude Hubbert,et al to A.E.Thompson and wife
which deed is dated Dec. 3,1940 and is recorded
in Vol. 1187, Page 398 of the Deed Records of
Harris County, Texas.
</TABLE>
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-000087-003 T. T. Player A. C. Felt 07/18/42 Bk 415 P 345 Being 320 acres of land, more or less, out of
Harris H&TC Section 65,Block 2,Abstract No. 452,Harris
County, Texas, being described as the N 1/2 of
said Section, further described in that certain
deed dated Dec. 3, 1940, Mrs. Sadie Gertrude
Hubbert, et al to A.E. Thompson, et ux, which
is recorded Vol. 1187, Page 398, Harris County
Deed Records.
42-201-000088-001 J. P. Pitts, et al A. C. Felt 07/15/42 Bk 413 P 591 Being 80 acres of land, more or less, and being
Harris described as all of the N 1/2 of Section 88,
Block 2,H&TC R.R. Co. Survey,Abstract No. 1421,
SAVE AND EXCEPT the West 240acres thereof which
is described in that certain oil and gas lease
dated June 16, 1933, W.C. Pitts, et al to T. J.
Hudgins which is duly recorded in the Harris
County Texas contract records.
42-201-000089-001 Texas Osage Humble Oil & 07/28/44 Bk 443 P 684 All of our undivided interest in and to the West
Cooperative Royalty Refining Company Harris 20 acres of the SW 1/4 of Section 65, H&TC R.R.
Pool, Inc., et al Co. Survey, Abstract 452, Harris County, Texas.
42-201-000089-002 Maggie Mansell, et al Sun Oil Company 08/05/44 Bk 434 P 98 Being all of our undivided 5/12 interest in the
Harris SW 1/4 of Section 65, Block 2, H&TC R.R. Co.
Survey, Patent 371, Cert. 137, Abstract 452,
Harris County, Texas.
42-201-000089-003 R. D. Mansell, et al Sun Oil Company 08/05/44 Bk 434 P 527 Being all of our undivided 1/12th interest in
Harris the SW 1/4 of Section 65, Block 2,H&TC R.R. Co.
Survey, Patent 371, Cert. 137, Abstract 452,
Harris County, Texas.
42-201-025634-000 T. T. Player, et al Houston Oil 04/28/42 Bk 414 P 41 The S 1/2 of H&TC R.R.Co., Section 87,Abstract
Company of Texas Harris No. 455, containing 320 acres, more or less.
42-473-025827-000 John W. Harris, et al Humble Oil & 09/23/47 Bk 109 P 164 The N 1/2 of the J.M. Bennett Survey, Section
Refining Company Waller 86, Abstract 282, containing 320 acres, more or
less.
42-473-025828-000 John M. Coulter, et al A. T. Jones 10/06/47 Bk 107 P 550 All of Section 85, H&TC R.R. Co. Survey, A-160,
Waller containing 640 acres, more or less.
42-201-026973-00A A. E. Thompson, et ux A. C. Felt 01/08/53 Bk 733 P 441 Being 275 acres of land, more or less, out of
Harris H&TC R.R.Co. Survey,Section 65,Block 2,Abstract
452, and being further described as all of the
N 1/2 of said Section, SAVE AND EXCEPT the West
45 acres thereof,which is held under production
by Katy Gas Unit No. 24.
</TABLE>
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-026973-00B Donald B. Hubbert, et al A. C. Felt 01/26/53 Bk 733 P 436 Being 275 acres of land, more or less, out of
Harris H&TC R.R. Co., Section 65, Block 2, Abstract
452, and being further described as all of the
N 1/2 of said Section; SAVE AND EXCEPT the West
45 acres thereof,which is held under production
by Katy Gas Unit No. 24.
42-201-026973-00C Carita Green Player, A. C. Felt 02/11/53 Bk 733 P 443 Being 275 acres of land, more or less, out of
et al Harris H&TC R.R. Co. Section 65, Block 2, Abstract 452,
and being further described as all of the N 1/2
of said Section; SAVE AND EXCEPT the West 45
acres thereof,which is held under production by
Katy Gas Unit No. 24.
42-201-026978-000 Doris Kaiser Harding, A. C. Felt 01/19/53 Bk 733 P 439 Being 106.666 acres of land, more or less, out
et vir Harris of H&TC R.R.Co.Survey, & being further describ-
ed as the Northwest corner of Section 66, Ab-
stracts 1329 and 1497, Harris County,Texas,and
being the same land described in that certain
deed from Frank A. Warden, et ux to J.E. Kaiser
dated Aug. 10, 1938, which is recorded in Vol.
1095, Page 706, Harris County Deed Records.
42-201-026979-000 Ethel Prather, et al A. C. Felt 02/03/53 Bk 733 P 434 Being 160 acres of land,more or less, and being
Harris further described as all of the SW 1/4 of
Section 67, H&TC R.R. Co. Survey, Block 2,
Abstract 453, Harris County, Texas.
42-201-026980-000 Frank P. Wilkinson, Humble Oil & 02/20/53 Bk 736 P 662 10 acres of land,more or less,being all of the
et ux Refining Company Harris NE 1/4 of the NE 1/4 of the NE 1/4 of H&TC R.R.
Co. Survey Section 79, Abstract 464, Harris
County, Texas.
42-201-026981-000 P. C. Pitts, et al A. C. Felt 01/23/54 Bk 786 P 234 Being 60 acres of land,more or less,out of H&TC
Harris R.R. Co. Survey Section 88, Block 2, Abstract
1421, the said 60 acres being described as fol-
lows: Being the North 45 acres of the East 80
acres of the N 1/2 of said Section,and 15 acres
which is described as the North 15 acres of the
W 1/2 of the NE 1/4 of said Section, it being
the intention to cover & include by this lease
all of the land owned by Lessors in said Sec-
tion 88, SAVE AND EXCEPT that portion now held
by production under Katy Outside Unit No. 25.
</TABLE>
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-027030-00A Iona Robertson, et al A. C. Felt 03/20/53 Bk 741 P 622 Being 320 acres of land,more or less,and being
Harris further described as all of the E 1/2 of Sec-
tion 66, Abstract 1497, H&TC R.R. Co. Survey,
Block No. 2.
42-201-027030-00B Jake Robertson, A. C. Felt 08/12/55 Bk 888 P 39 An undivided 12/110 interest in the oil,gas and
Guardian of the Estate Harris other minerals in and under 320 acres of land,
of Effie Elizabeth more or less, being the E 1/2 of Section 66,
Robertson Block 2, H&TC R.R. Co. Survey, Abstract 1497,
Harris County, Texas, it being the intention of
the parties to include all the Ward's interest
in said described land.
42-201-026983-000 William A. Fraser,et al E. J. Barragy 04/01/53 Bk 738 P 713 A tract of land comprising all of Section 77,
Harris H&TC R.R. Co. Survey, Block 2, Abstract 463,
EXCEPT 90 acres in the form of a rectangle out
of the southwest corner, as described in the
Deed Records of Harris County, Texas: A 90 acre
tract in the form of a rectangle out of the
southwest corner of this section (approximately
2,640 feet north and south by 1,485 feet east
and west is held by a previous oil and gas
lease and thus excluded from this lease.
42-201-026984-000 E. W. Peek, et ux E. J. Barragy 02/03/53 Bk 737 P 529 The middle or central 1/3 of a Subdivision of
Harris the W 1/2 of Section 66, Abstract 1329, H&TC
R.R. Co. Survey, Block 2,Harris County,Texas,
containing 106.66 acres, more or less, SAVE AND
EXCEPT the West 25 acres thereof,the land being
leased hereunder containing 81.66 acres, more
or less.
42-201-026985-000 E. M. Bennett, et al E. J. Barragy 02/03/53 Bk 737 P 513 The East 60 acres(approximately 2640feet North-
Harris South by 990 feet,East-West)of the E 1/2 of the
SE 1/4 of Section 78,H&TC R.R. Co. Survey,Block
2, Abstract 1366, as shown by the Deed Records
of Harris County, Texas, (this lease does not
include a 20 acre strip on the west side of the
E 1/2 of the SE 1/4 of Section 78,which is held
by a previous oil and gas lease).
42-201-026986-000 Ross E. Peek, et al E. J. Barragy 02/03/53 Bk 769 P 382 The S 1/3 of a Subdivision of the W 1/2 of
Harris Section 66,Abstract 1329,Block 2, H&TC R.R. Co.
Survey, Harris County, Texas, containing 106.66
acres,more or less,SAVE AND EXCEPT the West 35
acres, the land leased hereunder containing
71.66 acres, more or less.
</TABLE>
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-201-026987-000 B. F. Beckendorff E. J. Barragy 02/03/53 Bk 737 P 526 25 acres of land, being the North 25 acres of
Harris the W 1/2 of the NE 1/4 of Section 78, Block 2,
H&TC R.R. Co. Survey, Abstract 1366, as shown
by the Deed Records of Harris County, Texas.
42-201-026988-000 R. M. Hill, et ux E. J. Barragy 02/03/53 Bk 737 P 523 320 acres of land,more or less,being the NW 1/4
Harris and the NE 1/4 of Section 67,H&TC R.R. Co. Sur-
vey, Block 2, Abstract 453, as recorded in the
Deed Records of Harris County, Texas.
42-201-026989-000 Mrs. Pearl Bennett E. J. Barragy 02/03/53 Bk 737 P 520 80 acres of land, more or less, being the E 1/2
Harris of the NE 1/4 of Section78 H&TC R.R.Co. Survey,
Block 2, Abstract 1366, as shown by the Deed
Records of Harris County, Texas.
42-201-027359-00A Maggie Mansell, et al T. S. Mabry 05/15/53 Bk 752 P 465 Being the East 140 acres of the W 1/2 of the S
Harris 1/2 of H&TC R.R. Co. Survey No. 65, Block 2,
Abstract 452,said W 1/2 of S 1/2 of said Survey
being the same land described in that certain
deed from R.E. Hooker and wife Maude Fussell
Hooker to Maggie Mansell by deed dated April
20, 1922, recorded in Vol. 504, Page 129 of the
Deed Records of Harris County, Texas, to which
deed and its record, reference is here made for
all purposes.
42-201-027359-00B Texas Osage T. S. Mabry 05/26/53 Bk 751 P 108 140 acres of land, more or less, described as
Cooperative Royalty Harris follows: The SW 1/4 of Section 65, Block 2,
Pool H&TC R.R. Co. Survey, Abstract 452, LESS the
West 20 acres.
42-201-027359-00C Flag Oil Corporation Broaddus Honeycutt 1/31/55 Bk 851 P 233 Being the East 140 acres of the W 1/2 of the
of Delaware Harris S 1/2 of H&TC R.R. Co. Survey No. 65, Block 2,
Abstract 452.Said W 1/2 of S 1/2 of said Survey
being the same land described in that certain
deed from R.E.Hooker & wife Aude Fussel Hooker
to Maggie Mansell by deed dated April 20, 1922,
recorded in Vol. 504, Page 129 of the Deed
Records of Harris County, Texas, to which deed
and its record, reference is here made for all
purposes.
42-473-026977-00A Barton W. Freeland, A. C. Felt 04/09/54 Bk 135 P 638 Tract 1: Being 150 acres of land, more or less,
et al Waller & being all of Section 81, H&TC R.R.Co. Survey,
<PAGE>
Abstract No. 158; SAVE AND EXCEPT therefrom the
North 40 acres of the West 190 acres and that
portion of said Section held by production
under Katy Gas Unit No. 2 in said county.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-026977-00B Mrs. Elaine Gottschalk A. C. Felt 08/03/54 Bk 137 P 569 An undivided 1/48 interest and an additional
Olsen, Guardian of the Waller undivided 1/72 interest for the life of Mrs.
Estate of Ransom Andrew Stella Generes Freeland, or until such time
Nockton, III prior to her death or she remarries, in and
to the minerals under the following described
tracts of land situated in Waller County,
Texas:
Tract 1: Being 150 acres of land, more or less,
and being all of Section 81,H&TC R.R.Co.Survey,
Abstract No. 158, SAVE AND EXCEPT therefrom the
North 40 acres of the West 190 acres and that
portion of said section held by production
under Katy Gas Unit No. 2 in said county.
Tract 2: Being 200 acres of land, more or less,
situated in the western portion of Section 82
J.G. Bennett Survey, Abstract No. 290,and being
all of said Section 82, SAVE & EXCEPT therefrom
that portion thereof in said section held by
production under Katy Gas Units Nos. 1 and 2 in
said county.
42-473-027393(A) Barton W. Freeland A. C. Felt 08/29/55 Bk 141 P 495 North 40acres of the West 190 acres out of H&TC
Waller Section 81,Abstract 158, Waller County, Texas.
42-473-027393(B) Mrs. Elaine Gottschalk A. C. Felt 01/16/56 Bk 143 P 537 North 40 acres out of 190 acres out of H&TC
Olsen, Guardian of the Waller Section 81, Abstract 158, Waller County, Texas.
Estate of Ransom Andrew
Nockton, III
42-201-027802-000 Albert William Grace Oil Co. 02/03/53 Bk 1000 P 86 The SE 1/4 of Section 67, Block 2, originally
Thompson, et ux Harris granted to Houston & Texas City R.R. Co. by
virtue of Cert. 138, being the same property
more fully described in deed from R.Lena Spain,
Trustee,et al to Albert William Thompson dated
Jan. 29, 1949, recorded in Vol. 1883, Page 630,
Deed Records of Harris County,Texas, reference
to which is hereby made for all purposes.
42-473-028696-000 Bessie M. Stockdick, A. C. Felt 08/27/58 Bk 1101 P 368 Being 290 acres of land,more or less,and being
<PAGE>
et al Harris further described as follows:
Bk 154 P 644
Waller
Tract 1: Being 225 acres of land,more or less,
out of H&TC R.R. Co. Survey, Section 118, Block
1, Abstract 378, being the same land described
in that certain Oil and Gas Lease dated Jan.25,
1954, from E.E. Stockdick, et al to T.S. Mabry,
which is recorded in Vol. 134, Page 534, Waller
County Deed Records.
Tract 2: Being 65 acres of land, more or less,
out of H&TC R.R. Co. Survey, Section 118, Block
1, Abstract 378, and being all of the S 1/2 of
said section that is not now included in Katy
Gas Unit No. II.
42-473-028897-000 Elenora Muske Menke, Humble Oil & 03/13/60 Bk 160 P 493 Being 140 acres of land, more or less, out of
et al Refining Company Waller H&TC R.R. Co. Survey, Abstract 377, Section
116, Waller County, Texas, and being the North
140 acres thereof, it being the intention to
lease by this instrument all of the land owned
by lessors in said Section 116,EXCEPT that now
held by production under Katy Gas Field Unit
No. 2.
42-473-029572A Sam G. Harrison Humble Oil & 04/14/66 Bk 1353 P 386 57.23 acres out of the SW 1/4 of the H&TC R.R.
Refining Company Harris Section 77,A-199 Waller and A-1716 Harris
County, included in Katy Outside Unit 29, as
described in certain instrument dated Nov. 21,
1960, executed by Clarion Oil Co., et al.
42-473-029572-00B Harry Hebert, et al Sam G. Harrison 01/22/58 Bk 152 P 571 All of our undivided 5/8ths interest in and to
Waller Section No. 117, H&TC R.R. Co. Survey, Abstract
199, SAVE AND EXCEPT the West 15 acres of the
South 80 acres of the W 1/2 of said Section,
which 15 acres is a part of the Katy Gas Field
Unit No. 2.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD UNIT II
INSOFAR AND ONLY INSOFAR as the above described leasehold is located within the
current boundaries of the Katy Gas Field Unit II containing 20,565.485 acres of
land, the outside boundaries of which are delineated by hatched line as Tract
No. 2 on the plat attached as Exhibit "A-1" to that certain Assign- ment and
Bill of Sale dated effective 10/1/90 by and between Sun Operating Limited
Partnership, as Assignor and Atlantic Richfield Company, as Assignee and
recorded in Volume 451, Page 172, Deed Records, Waller County, Texas AND INSOFAR
AND ONLY INSOFAR as said leasehold pertains to gas and gas liquids only from the
subsurface strata below the Cockfield V Formation, being the subsurface
interval, or its correlative equivalent, as determined from electric logs of
each of the following wells: Katy Gas Field Unit I, Well No. 3 - 7,640'; Katy
Gas Field Unit I, Well No. 8 - 7,650'; Katy Gas Field
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
KATY GAS FIELD CONSOLIDATED UNIT
OPERATOR: EXXON CORPORATION
FOC GWI: 0.00637265 (FROM ELAND)
FOC NRI: 0.00551800
FOC GWI: .11295894 (FROM ARCO)
FOC NRI: .09883907
All of Mortgagor's interest in and to the following listed Oil, Gas and Mineral
Leases, viz:
This unit is comprised of a consolidation of all leases in the Katy I and Katy
II Units.
INSOFAR AND ONLY INSOFAR as the above described leasehold is located within the
current boundaries of the Katy Gas Field Consolidated Unit as shown on Exhibit
"B" of that Certain Unit Agreement dated 5/2/66 a counterpart of which is
recorded in Volume 203, Page 638, Deed Records of Waller County, Texas, AND
INSOFAR AND ONLY INSOFAR as said leasehold pertains to gas and gas liquids only
from the surface of the earth to the base of the Cockfield V Formation, being
the subsurface interval, or its correlative equivalent, as determined from
electric logs of each of the following wells: Katy Gas Field Unit I, Well No. 3
- - - - 7,640'; Katy Gas Field Unit I, Well No. 8 - 7,650'; Katy Gas Field Unit I,
Well No. 23 - 7,682'; Katy Gas Field Unit I, Well No. 43 - 7,925'; Katy Gas
Field Unit I, Well No. 44 - 7,975'.
FOOTNOTES:
1. Unit Operating Agreement for the Katy Gas Field Consolidated Unit (AR-
30521) dated 5/2/66 by and between Humble Oil & Refining Company, et al
and each other as amended and supplemented.
2. Unit Agreement dated 5/2/66 by and between Humble Oil & Refining Company,
et al as Working Interest Owners and Royalty Owners a counterpart of which
is recorded in Volume 203, Page 638, Deed Records of Waller County, Texas.
3. Third Processing Agreement dated 5/2/66 by and between Humble Oil &
Refining Company, et al, as Producers and Pan American Corporation, et al,
as Processors.
4. Letter Agreements dated 8/18/60 and 4/14/66 by and between Humble Oil &
Refining Company and Sam G. Harrison pertaining to the hereinabove
referenced ARCO Lease Nos. 42-473-029572-00A and 42-473-029572-00B.
5. Partial Assignment of Oil, Gas and Mineral Leases, dated 11/25/85 by and
between Atlantic Richfield Company, as Assignor and Occidental Energy
Company, as Assignee.
<PAGE>
6. The obligations set out in the above described leases.
7. That portion of Forest Oil Corporation interest which was acquired from
ARCO is subject to the following
a. Conveyance of Overriding Royalty to Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993. Recorded in Volume ____, Page
____ Deed Records, Waller County, Texas.
b. Production and Delivery Agreement with Cactus Hydrocarbon III
Limited Partnership dated December 10, 1993, recorded in Volume ____,
Page ____ Deed Records, Waller County, Texas.
c. Gas Purchase Contract with Enron Gas Marketing, Inc. termed July 1,
1994 to December 31, 1994.
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
NORTH KATY GAS UNIT NO. 1
OPERATOR: EXXON CORPORATION
FOC GWI: 0.11851000 (FROM ARCO)
FOC NRI: 0.09528889
All of Mortgagor's interest in and to the following listed Oil, Gas and Mineral
Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-473-070163-000 T. E. Sparks, et ux Exxon Corp. 05/10/76 Bk 265 P 668 BEING 640 acres of land,more or less,being All
Waller of the H&TC R.R. Co. Section 115, Block 1,
Abstract 174, Waller County, Texas.
42-473-072067-000 Elenora Muske Menke, Exxon Corp. 04/28/80 Bk 313 P 225 136.50 acres of land, more or less, being the
et al Waller North 140 acres of land, more or less, out of
Section 116, Block 1, H&TC R.R. Co. Survey
A-377, Waller County, Texas, SAVE AND EXCEPT
3.50 acres, more or less, now held by product-
ion under Katy Gas Field Consolidated Unit.
Said acreage also being part of the same land
described in Deed from Blake H. Alexander, W.T.
Wolfe and Nettie Alexander to Hub Muske, dated
Dec. 27, 1918, and recorded in Vol. 45,Page 493
of the Deed Records of Waller County, Texas, to
which record reference is hereby made for all
purposes.
INSOFAR AND ONLY INSOFAR as the above described leasehold is located within the
North Katy Gas Unit No. 1 as described by Unit Designator dated 1/9/81,
<PAGE>
recorded in Volume 323, Page 220 of the Deed Records of Waller County, Texas,
AND INSOFAR AND ONLY INSOFAR as said leasehold pertains to unitized substances
and intervals therein.
<FN>
1. Operating Agreement (AR-61960) dated April 11, 1980, covering the "North
Katy" Contract Area by and between Exxon Corporation, as Operator, and
Amerada Hess Corporation, et al, as Non-Operators.
2. Letter Agreement dated February 24, 1981 and accepted March 5, 1981 by and
between Exxon Company, USA and Atlantic Richfield Company.
3. Unit Designation dated 1/9/81 recorded in Volume 323, Page 220, Deed
Records of Waller County, Texas. (Counterparts of a Ratification of Unit
Designation are recorded in Volume 323, Page 227 through 332, Deed Records
of Waller County, Texas).
4. The obligations set out in the above described leases.
5. Conveyance of Overriding Royalty to Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993. Recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
6. Production and Delivery Agreement with Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993, recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
7. Gas Purchase Contract with Enron Gas Marketing, Inc. termed July, 1994 to
December 31, 1994.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
SOUTH KATY GAS FIELD UNIT I
OPERATOR: EXXON CORPORATION
FOC GWI: 0.00503802 (FROM ELAND)
FOC NRI: 0.00431900
All of Mortgagor's interest in and to the following listed Oil, Gas and Mineral
Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-157-072222-000 Don F. McMillian Exxon Corp. 4/17/78 V. 808, P203 INSOFAR AND ONLY INSOFAR as lease
Ft. Bend covers 492.48 acres in the Wm. Ames Survey,
A-104, Fort Bend County, Texas, being all that
portion of said lease held by production from
the Don F. McMillian B #1 Well.
<PAGE>
INSOFAR AND ONLY INSOFAR AS the above listed leases cover unitized formations
and zones in the following Units:
1. South Katy Gas Unit I
<FN>
1. Gas Purchase Contract with Enron Gas Marketing, Inc. termed July 1, 1994
to December 31, 1994.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
SOUTH KATY GAS FIELD UNIT I
OPERATOR: EXXON CORPORATION
FOC GWI: 0.19249800 (FROM ARCO)
FOC NRI: 0.15876700
All of Mortgagor's interest in and to the following listed Oil, Gas and Mineral
Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-157-072178-000 Don F. McMillian Exxon Corp. 04/17/78 Bk 808 P 197 Being 310.36 acres of land,more or less,out of
Ft Bend the Thomas Carraway Survey, Abstract 156, and
the Day Land and Cattle Survey, and being the
same land described in that certain deed from
Est. of L.D. Brown,deceased to D. F. McMillian,
dated March 10, 1972, and recorded in Vol. 562,
Page108 of the Deed Records of Fort Bend County,
Texas. This lease also covers and includes all
roadways and canals owned or claimed by Lessor
contingous to said 310.36 acres, whether or not
in said surveys.
42-157-072222-000 Don F. McMillian Exxon Corp. 04/17/78 Bk 808 P 203 662.48 acres of land, more or less, being all
et al Ft Bend of the William Ames Survey, A-104, Fort Bend
County, Texas, being the same land described in
deed from Perry V.Cook to Mrs. Eva S.McMillian,
dated June 17, 1932, and recorded in Vol. 138,
Page 376 of the Deed Records of Fort Bend
County,TX,SAVE & EXCEPT the North 170 acres of
said 662.48 acre tract herein above described,
said excepted 170 acres being the same tract
under which the minerals were reserved by Eva
S. McMillian and husband, Earl T. McMillian in
deed dated June 1, 1951, recorded in Vol. 283,
Page 212 of the Deed Records of Fort Bend
County, TX, and which excepted tract is more
particularly described as being 170 acres to be
separated from the remainder of said 662.48acre
<PAGE>
tract by a line extended from the West line of
said 662.48 acre tract to the East line by a
line extended from the West line of said 662.48
acre tract to the East line thereof parallel to
the North line thereof & of sufficient distance
South from said North line to separate exactly
170acres of land from the remainder said 662.48
acre tract of land, leaving a remaining 492.48
acres of land, more or less.
42-157-077319-00A Gerald Bartlett, Fred Prickett 03/08/79 Bk 838 P 294 All our undivided interest in and to 20acres of
et ux Ft Bend land, more or less, out of the Jessee Burdette
Survey, A-385 and the C.W. Schrimph Survey,
A-412, and being the same land awarded to C.F.
Hoyt,et ux,Irene K. Hoyt by Partition Deed from
estate of C.D. Hoyt, et al as shown in Vol. 74,
Page 635, et seq., Deed Records of Ft. Bend
County, TX, to which deed and its record ref-
erence is hereby made for all purposes.SAVE AND
EXCEPT,that portion of the above described land
that is held by production and part of Katy Gas
Unit II.
42-157-077321-00A Helen Hoyt Fred Prickett 10/06/80 Bk 943 P 791 All of my undivided interest in and to 20 acres
Ft Bend of land,more or less,out of the Jessee Burdette
Survey,A-385 & the C.W. Schrimph Survey,A-412,
& being the same land awarded to C.F. Hoyt, et
ux, Irene K. Hoyt by Partition Deed from Estate
of C.D.Hoyt,et al as shown in Vol. 74,Page 635,
et seq., Deed Records of Ft. Bend County, Texas
to which deed & its record reference is hereby
made for all purposes. SAVE & EXCEPT that por-
tion of the above described land that is held
by production and part of Katy Gas Unit II.
42-157-077321-00B Loris A. Hoyt Fred Prickett 10/06/80 Bk 943 P 789 All of my undivided interest in and to 20 acres
Ft Bend of land,more or less,out of the Jessee Burdette
Survey,A-385 and the C.W.Schrimph Survey,A-412,
and being the same land awarded to C.F. Hoyt,et
ux, Irene K. Hoyt by Partition Deed from Estate
of C.D. Hoyt,et al as shown in Vol.74 Page 635,
et seq., Deed Records of Ft. Bend County, Texas
to which deed & its record reference is hereby
made for all purposes. SAVE & EXCEPT that por-
tion of the above described land that is held
by production and part of Katy Gas Unit II.
42-157-077321-00C Kathryn Hoyt Pierce Fred Prickett 03/08/79 Bk 838 P 291 All of my undivided interest in and to 20 acres
Ft Bend of land,more or less,out of the Jessee Burdette
Survey,A-385 & the C.W. Schrimph Survey,A-412,
& being the same land awarded to C.F. Hoyt, et
ux, Irene K. Hoyt by Partition Deed from Estate
of C.D. Hoyt,et al as shown in Vol.74,Page 635,
et seq., Deed Records of Ft. Bend County, Texas
to which deed & its record reference is hereby
made for all purposes. SAVE & EXCEPT that por-
tion of the above described land that is held
by production and part of Katy Gas Unit II.
42-157-077321-00D Otto Karnaky Fred Prickett 03/02/79 Bk 838 P 288 20 acres of land,more or less,and being the 60
<PAGE>
Ft Bend acres, more or less, out of the Jessee Burdette
Survey,A-383 and the C.W. Schrimph Survey,A-412
and being the same land described in the deed
dated Jan. 27, 1938 from S.J. Hindman, et ux to
Otto Karnaky, recorded in Vol. 172, Page 528-9
of the Deed Records of Fort Bend County, Texas,
to which deed & its record reference is hereby
made for all purposes. SAVE & EXCEPT 40 acres,
more or less, out of the above described land
which is held by production & is a part of the
Katy Gas Unit II.
A portion of the subject unit, containing 10 acres, more or less (and being more
particularly described as Tract No. 2 in Exhibit "B" of that certain Unit
Designation dated 1/4/82 and recorded in Volume 1019, Page 582, Deed Records of
Fort Bend County, Texas), is located within the current boundaries of the Katy
Gas Field Unit II. Reference is herein made to said Katy Gas Field Unit II and
any amendments, enlargements, etc., for a more complete description of the area
included therein, the lands, minerals, royalty interests pooled and combined
thereby, as well as for all other purposes.
INSOFAR AND ONLY INSOFAR as the above described leasehold is located within the
current boundaries of the South Katy Gas Field Unit I containing 352.0 acres of
land, and described more fully in that certain Unit Designation dated 1/4/82
recorded in Volume 1019, Page 582, Deed Records of Fort Bend County, Texas,
INSOFAR AND ONLY INSOFAR as said leasehold pertains to gas rights for the depths
of 7,905'-10,261' as seen in the Exxon D. F. McMillian Well No. 1.
<FN>
1. Joint Operating Agreement (AR-62011) dated 2/12/81 by and between Exxon
Corporation, as Operator, and Amerada Hess Corporation, et al, as
Non-Operators, as amended by Letter Agreements dated 12/7/81 and 1/4/82.
2. Unit Designation dated 1/4/82 recorded in Volume 1019, Page 582, Deed
Records of Fort Bend County, Texas.
3. Joint Operating Agreement dated 5/27/81 by and between Exxon Corporation,
as Operator and Atlantic Richfield Company, et al, as Non-Operator, as
amended.
4. Second Joint Operating Contract (AR-16575) dated 2/14/44, by and between
Humble Oil & Refining Company, et al, as amended and supplemented.
5. The obligations set out in the above described leases.
6. Conveyance of Overriding Royalty to Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993. Recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
7. Production and Delivery Agreement with Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993, recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
8. Gas Purchase Contract with Enron Gas Marketing, Inc. termed July 1, 1994
to December 31, 1994.
</TABLE>
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
SOUTH KATY GAS FIELD UNIT II
OPERATOR: MURPHY H. BAXTER
FOC GWI: 0.11555400 (FROM ARCO)
FOC NRI: 0.09737700
All of Mortgagor's interest in and to the following listed Oil, Gas
and Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-157-072222-000 Don F. McMillian, et al Exxon Corp. 04/17/78 Bk 808 P 202 662.48 acres of land,more or less, being all of
Ft Bend the William Ames Survey,A-104,Fort Bend County,
Texas, being the same land described in deed
from Perry V. Cook to Mrs. Eva S. McMillian,
dated June 17, 1932, and recorded in Vol. 138,
Page 376 of the Deed Records of Fort Bend
County,TX, SAVE & EXCEPT the North 170 acres of
said 662.48 acres tract herein above described,
said excepted 170 acres being the same tract
which the minerals were reserved by Eva S.
McMillian and husband,Earl T. McMillian in deed
dated June 1, 1951, recorded in Vol. 283, Page
212 of the Deed Records of Fort Bend County,
Texas, and which excepted tract is more partic-
ularly described as being 170 acres to be sep-
arated from the remainder of said 662.48 acre
tract by a line extended from the West line of
said 662.48 acre tract to the East line thereof
parallel to the North line thereof and of suf-
ficient distance South from said North line to
separate exactly 170 acres of land from the re-
mainder said 662.48 acre tract of land, leaving
a remaining 492.48 acres of land, more or less.
A portion of the subject unit containing 84.93 acres, more or less (and being
more particularly described as Tract No. 7 in Exhibit B of that certain Unit
Designation dated 7/13/82 and recorded in Volume ____, Page ____, Deed Records
of Fort Bend County, Texas), is contained within the current boundaries of the
Katy Gas Field Unit II. Reference is herein made to said Katy Gas Field Unit II
and any amendments, enlargements, etc., for a more complete description of the
area included therein, the lands, leases, minerals, royalty interests pooled and
combined thereby, as well as for all other purposes.
INSOFAR AND ONLY INSOFAR as the above described leasehold is located within the
current boundaries of the South Katy Gas Field Unit II containing 350.0 acres of
land, and described more fully in that certain Unit Designation dated
<PAGE>
7/13/82 recorded in Volume ____, Page ____, Deed Records of Fort Bend County,
Texas, INSOFAR AND ONLY INSOFAR as said leasehold pertains to gas rights for the
depths of 7,905'-10,500' as seen in the Exxon D. F. McMillian Well No. 1.
<FN>
1. Joint Operating Agreement (AR-62155) dated 6/14/82 by and between Murphy
H. Baxter, as Operator, and Exxon Corporation, et al, as Non-Operators.
2. Unit Designation dated 7/13/82 recorded in Volume ____, Page ____, Deed
Records of Fort Bend County, Texas.
3. Second Joint Operating Contract (AR-16575) dated 2/14/44, by and between
Humble Oil & Refining Company, et al, as amended and supplemented.
4. The obligations set out in the above described lease.
5. Conveyance of Overriding Royalty to Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993. Recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
6. Production and Delivery Agreement with Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993, recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
7. Gas Purchase Contract with Enron Gas Marketing, Inc. termed July 1, 1994
to December 31, 1994.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER,FT. BEND & HARRIS
KATY FIELD PROSPECT
DON F. McMILLIAN "B"
OPERATOR: EXXON CORPORATION
FOC GWI: 0.00503802 (FROM ELAND)
FOC NRI: 0.00414600
All of Mortgagor's interest in and to the following listed Oil, Gas
and Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-157-072222-000 Don F. McMillian Exxon Corp. 4/17/78 V. 808, P203 INSOFAR AND ONLY INSOFAR as lease
Fort Bend covers 492.48 acres in the Wm. Ames Survey,
A-104, Fort Bend County, Texas, being all that
portion of said lease held by production from
the Don F. McMillian B #1 Well.
<PAGE>
INSOFAR AND ONLY INSOFAR AS the above listed leases cover unitized formation and
zones in the following Unit:
1. Don F. McMillan "B"
<FN>
1. Gas Purchase Contract with Enron Gas Marketing, Inc. termed July 1, 1994
to December 31, 1994.
</TABLE>
EXHIBIT A
STATE OF TEXAS
COUNTIES OF WALLER, FT. BEND & HARRIS
KATY FIELD PROSPECT
DON F. McMILLIAN "B"
OPERATOR: EXXON CORPORATION
FOC GWI: 0.19249800 (FROM ARCO)
FOC NRI: 0.15840964
All of Mortgagor's interest in and to the following listed Oil, Gas
and Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<S> <C> <C> <C> <C> <C>
42-157-072222-000 Don F. McMillian, et al Exxon Corp. 04/17/78 Bk 808 P 202 662.48 acres of land,more or less,being all of
Ft Bend the William Ames Survey,A-104,Fort Bend County,
TX, being the same land described in deed from
Perry V. Cook to Mrs. Eva S. McMillian, dated
June 17, 1932, and recorded in Vol. 138, Page
376 of the Deed Records of Fort Bend County,
Texas, SAVE AND EXCEPT the North 170 acres of
said 662.48 acre tract herein above described,
said excepted 170 acres being the same tract
under which the minerals were reserved by Eva
S. McMillian and husband, Earl T. McMillian in
deed dated June 1, 1951, recorded in Vol. 283,
Page 212 of the Deed Records of Fort Bend
County, Texas, and which excepted tract is
more particularly described as being 170 acres
to be separated from the remainder of said
662.48 acre tract by a line extended from the
West line of said 662.48 acre tract to the East
line thereof parallel to the North line thereof
& of sufficient distance South from said North
line to separate exactly 170 acres of land from
the remainder said 662.48 acre tract of land,
leaving a remaining 492.48 acres of land, more
or less.
<PAGE>
INSOFAR AND ONLY INSOFAR as the above described leasehold contains 352.54 acres
of land being described as all of said leasehold that is located outside current
boundaries of the South Katy Gas Field Unit I and the South Katy Gas Field Unit
II. The South Katy Gas Field Unit I contains 352.0 acres (14.77 acres of the
subject leasehold) and is described more fully in that certain Unit Designation
dated 1/4/82 recorded in Volume 1019, Page 582, Deed Records of Fort Bend
County, Texas. The South Katy Gas Field Unit II contains 350.0 acres (125.17
acres of the subject leasehold) and is described more fully in that certain Unit
Designation dated 7/13/82, recorded in Volume ____, Page ____, Deed Records of
Fort Bend County, Texas.
<FN>
1. Operating Agreement dated 5/27/81 by and between Exxon Corporation, as
Operator and Atlantic Richfield Company, et al, as Non-Operators, as
amended.
2. The obligations set out in the above described lease.
3. Conveyance of Overriding Royalty to Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993. Recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
4. Production and Delivery Agreement with Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993, recorded in Volume ____, Page ____
Deed Records, Waller County, Texas.
5. Gas Purchase Contract with Enron Gas Marketing, Inc. termed July 1, 1994
to Deecember 31, 1994.
</TABLE>
<PAGE>
EXHIBIT A
Surface Fee
Katy Field Compression Satellite Stations
1. 10.0 acres described in that certain Warranty Deed dated April 24, 1967 by
and between J. Raymond Dollins, Jr., et ux, as Grantors, and Humble Oil &
Refining Company, as Grantee, recorded in Volume 200, Page 360 of the Deed
Records of Waller County, Texas. Subject to the following: Deed dated
6/15/70 by and between Humble Oil & Refining Company, as Grantor, and
Amerada Hess Corporation, et al, as Grantees, recorded in Volume 221, Page
262, Deed Records of Waller County, Texas.
2. 10.0 acres described in that certain Warranty Deed dated January 24, 1967
by and between Cecil Beckendorff, as Grantor, and Humble Oil & Refining
Company, as Grantee, recorded in Volume 198, Page 370 of the Deed Records
of Waller County, Texas. Subject to the following: Deed dated 6/15/70 by
and between Humble Oil & Refining Company, as Grantor, and Amerada Hess
Corporation, et al, as Grantees, recorded in Volume 221, Page 257, Deed
Records of Waller County, Texas.
3. 10.0 acres described in that certain Deed dated March 16, 1967 and between
John H. Woods, et al, as Grantors, and Humble Oil & Refining Company, as
Grantee, recorded in Volume 200, Page 119 of the Deed Records of Waller
County, Texas. Subject to the following: Deed dated 6/15/70 by and between
Humble Oil & Refining Company, as Grantor, and Amerada Hess Corporation, et
al, as Grantees, recorded in Volume 221, Page 251, Deed Records of Waller
County, Texas.
4. 10.67 acres described in that certain Warranty Deed dated May 20, 1967 by
and between Judith Givens, et al, as Grantors, and Humble Oil & Refining
Company, as Grantee, recorded in Volume 201, Page 276 of the Deed Records
of Waller County, Texas. Subject to the following: Deed dated 6/15/70 by
and between Humble Oil & Refining Company, as Grantor, and Amerada Hess
Corporation, et al, as Grantees, recorded in Volume 221, Page 245, Deed
Records of Waller County, Texas.
5. 10.0 acres described in that certain Warranty Deed dated February 10, 1967
by and between Eba Hebert, et ux, as Grantor, and Humble Oil & Refining
Company, as Grantee, recorded in Volume 198, Page 624 of the Deed Records
of Waller County, Texas. Subject to the following: Deed dated 6/15/70 by
and between Humble Oil & Refining Company, as Grantor, and Amerada Hess
Corporation, et al, as Grantees, recorded in Volume 221, Page 238, Deed
Records of Waller County, Texas.
--------------------------------------------------------------------------
<PAGE>
EXHIBIT A
STATE OF TEXAS
COUNTY OF CHAMBERS
BARBERS HILL PROSPECT
BARBER, A. E./A/TG FIELD
OPERATOR: ARCO OIL AND GAS COMPANY
FOC GWI: 1.00000000 (FROM ARCO)
FOC NRI: 0.83333333
All of Mortgagor's interest in and to the following listed Oil, Gas and Mineral
Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
42-071-005506-001 Arthur E. Barber, et ux F. N. Bullock 03/18/21 Bk 14 P 465 Seventy three (73) acres of land in the
Henry Griffith League described as follows:
Beginning at the Southeast corner of Survey
made for Celina Thompson in said league;
THENCE South 30 degrees 20' East 1310 feet
to stake on North line of tract owned by
Winfree; THENCE South 59 degrees 20' West
with said Winfree North line 2413 feet to
a stake in West line of Henry Griffith
league; THENCE North 31 degrees West 1214
fee to Southwest corner of Celina Thompson
tract; THENCE North 59 degrees 30' East with
said Thompson South line 2427 feet to place
of beginning.
<FN>
1. The obligations set out in the above described lease.
2. Oil contract with ARCO. Termed July 1, 1994 to December 31, 1994.
NYMEX based.
</TABLE>
---------------------------------------------------
EXHIBIT A
STATE OF TEXAS
COUNTY OF CHAMBERS
BARBERS HILL PROSPECT
FITZGERALD, L.E. UNIT TG
OPERATOR: ARCO OIL AND GAS COMPANY
FOC GWI: 1.00000000 (FROM ARCO)
FOC NRI: 0.86733100
All of Mortgagor's interest in and to the following listed Oil, Gas and
<PAGE>
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
42-071-005500-001 Mrs. Alma A. Vacuum Oil 10/29/26 Bk 23 P 83 Lots 4 & 5, each containing 4.75 acres of
Eberspacher, et vir, Company land out of the F.M. Fitzgerald Subdivision
et al of the Henry Griffith League, in Chambers
County, Texas, according to the map or plat
of said Subdivision, of record and on file
in the office of the County Clerk of Chambers
County, Texas, to which map and plat or the
record thereof reference is made for more
particular description of, said land; the
tract herein conveyed containing 9.50 acres
of land.
42-071-005501-001 Sarah E. Morgan, et vir, Humphreys 10/28/29 Bk 29 P 395 Tract 1: Being a tract of land out of the F.M.
et al Corporation 10/25/30 Bk 32 P 35 Fitzgerald lands in the Henry Griffith League
in Chambers County, Texas, known and designated
as Lot 2 out of the home tract, and described
as follows: BEGINNING at the Southwest corner
of the home tract No. 1; THENCE North 40' East
along the line between tracts Nos. 1 and 2, 526
varas to the South line of prairie Lot No. 1;
THENCE West 51 varas; THENCE South 40' West
along the line of tracts 2 and 3, 536.8 varas;
THENCE North 89 degrees 5 feet East, 51 varas,
to the place of beginning,containing 4.75 acres
of land, and being the same tract of land
awarded to Sarah E. Morgan in the partition of
the Fitzgerald lands dated March 20, 1918 and
described in said partition as Lot 2-A.
Tract 2: A tract of land out of the F.M.
Fitzgerald lands of the Henry Griffith League
in Chambers County, Texas, known and designated
as follows, to-wit: BEGINNING at the Southwest
corner of home tract No.2;THENCE North 40' East
along the line between tracts Nos. 2 and 3,
526.8 varas to the South line of Prairie tract
No. 1; THENCE West 51 varas; THENCE South 40'
West along the line between tracts Nos. 3 and
4, 527.6 varas; THENCE North 89 degress 5 feet
East, 51 varas, to the place of beginning,
containing 4.75 acres of land and being the
identical tract of land awarded to A.M.
Fitzgerald in the aforesaid partition of the
Fitzgerald land, said tract being described in
said partition as Lot 3-C.
</TABLE>
---------------------------------------------------
EXHIBIT A
<PAGE>
STATE OF TEXAS
COUNTY OF CHAMBERS
BARBERS HILL PROSPECT
FITZGERALD, L.E. UNIT TG
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
42-071-005502-001 Anna Davis, et vir Humphreys 03/31/30 Bk 30 P 625 Being Lot 6 out of the F.M. Fitzgerald Survey
Corporation in the Henry Griffith League, and known and
designated as Home Tract #6 in the subdivision
of said F.M.Fitzgerald lands,and being described
as follows to-wit: BEGINNING at the Southwest
corner of Tract 5; THENCE North 40' East along
the line between tracts 5 and 6, 529.2 varas to
the South line of prairie tract No. 1; THENCE
West 51 varas; THENCE South 40' West along the
line between tract 6 and 7, 546 varas to the
Northerly line of oil tract No. 2; THENCE North
60 degrees 20' East along the Northerly line of
oil tracts Nos. 1 and 2, 35 varas; THENCE South
19 degrees 30' East, 10.2 varas to the South
line of F.M. Fitzgerald land; THENCE South 18
degrees 35' East along the line between tracts
6 and 7, 398 varas to the South line of said
Fitzgerald's land; THENCE North 60 degrees 20'
East, 23.44 varas to the place of beginning,
containing 4.75 acres of land. There is ex-
cepted from the above described tract a strip of
land across the West end of said lot containing
1/4 of an acre, now under lease to the Superior
Oil Producing Co.
42-071-005503-001 T. C. Fitzgerald, Humphreys 05/15/30 Bk 31 P 119 Lots 8,9 and 10, designated as Home Tracts out
et ux, et al Corporation Bk 33 P 168 of the F.M. Fitzgerald Subdivision in Henry
Griffith League, and more fully described in
that certain partition deed dated March 20,1918,
C&C Minutes, Book A, Pages 143, et seq.,Chambers
County Deed Records, and containing 14.25 acres,
more or less.
42-071-005504-001 Mary O. Scott, et vir Humphreys 06/25/30 Bk 31 P 285 Known as Home Tract No. 1, a part of the Henry
Corporation 08/20/42 Bk 75 P 610 Griffith League, Chambers County, Texas, and
described as follows, to-wit: BEGINNING at the
West corner of the J.M. Fitzgerald 50 acre tract
at an iron pipe; THENCE North 40' East with the
West line of said J.M. Fitzgerald tract 525.2
varas to the Northerly corner of said Fitzgerald
tract; THENCE West 51 varas; THENCE South 40'
West along the line between home tracts Nos. 1
and 2, 526 varas;THENCE North 89 degrees 5' East,
51 varas to the place of beginning, containing
4.75 acres of land, more or less,SAVE AND EXCEPT
2 acres off of the North end of the above
described tract now under lease to the Superior
<PAGE>
Oil Production Company.
</TABLE>
---------------------------------------------------
EXHIBIT A
STATE OF TEXAS
COUNTY OF CHAMBERS
BARBERS HILL PROSPECT
FITZGERALD, L.E. UNIT TG
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ ____________ ____________________________________
<C> <S> <C> <C> <C> <C>
42-071-005505-001 F. M. Fitzgerald, et al S. J. Hindman, 10/30/26 Bk 23 P 40 The tracts of land to which this lease applies
Trustee are situated in Chambers County, Texas,and out
of the F.M. Fitzgerald lands out of the Henry
Griffith League in the said Chambers County,
Texas,according to partition of said land made
in the Cause No. 157, styled T.S. Fitzgerald,
et al vs. F.M.Fitzgerald,et al in the District
Court of Chambers County, Texas, and according
to a plat of said partition recorded in BookA,
Page 154 of the Minutes of the 75th Judicial
District Court of Chambers County, Texas,
to-wit: Lot Nos. 6 and 7,containing each 4.75
acres of land,out of what is designated as the
Home Tracts, making a total of 9-1/2 acres
herein conveyed by this lease. Said decree of
partition and the plat above referred to are
made a part hereof as fully as though incor-
porated herein for description of said prop-
erty hereinbefore set forth.
<FN>
1. That certain Pooling Agreement dated February 5, 1936, between Anna A.
Davis, et al, recorded in Volume 51, Page 52, Deed Records, Chambers
County, Texas.
2. That certain Pooling Agreement dated February 22, 1941, between K. M.
Fitzgerald, et al, Lessors and Texas Gulf Producing Company, Lessee,
recorded in Volume 70, Page 528, Deed Records, Chambers County, Texas.
3. The obligations set out in the above described leases.
4. Oil contract with ARCO. Termed July 1, 1994 to December 31, 1994.
NYMEX based.
</TABLE>
<PAGE>
---------------------------------------------------
EXHIBIT A
STATE OF TEXAS
COUNTY OF CHAMBERS
BARBERS HILL PROSPECT
KIRBY/A/TG
OPERATOR: ARCO OIL AND GAS COMPANY
FOC GWI: 1.00000000 (FROM ARCO)
FOC NRI: 0.83333333
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
42-071-005512-001 Kirby Petroleum Mills Bennett 01/19/26 Bk 21 P 271 73 acres of land out of the Henry Griffith
Company League, being the Second Tract described in
deed from Celina Thompson and husband to Old
River Rice Irrigation Co., 12/12/22, recorded
Vol. 3,Page 249,Deed Records Chambers County,
Texas, here referred to and described by metes
and bounds as follows:BEGINNING at the Northwest
corner of the said Griffith League; THENCE North
59 degrees 30' East, 2420' to a stake; THENCE
South 31 degrees 20' East 1306' to a stake at
the Northeast corner of a 68.6 acre tract owned
by A.E. Barber;THENCE South 59 degrees 20' West
with the said Barber's North line 2427.5' to the
Northwest corner; THENCE North 31 degrees West
1211' to the place of beginning.
<FN>
1. The obligations set out in the above described lease.
2. Oil contract with ARCO. Termed July 1, 1994 to December 31, 1994.
NYMEX based.
</TABLE>
---------------------------------------------------
EXHIBIT A
STATE OF TEXAS
COUNTY OF CHAMBERS
BARBERS HILL PROSPECT
KIRBY/B/TG
OPERATOR: ARCO OIL AND GAS COMPANY
FOC GWI: 1.00000000 (FROM ARCO)
FOC NRI: 0.83333333
<PAGE>
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
42-071-005513-002 Kirby Petroleum Mills Bennett 04/10/26 Bk 21 P 399 Tract 1: A portion of that certain 382.2
Company, et al Production 08/28/26 Bk 22 P 560 acres in the Henry Griffith League
Company described as the 35th tract in Deed of conveyance from
Old River Co. to the Kirby Petroleum Co. dated Dec. 6,
1923, recorded in Vol. 17, Page 581, Chambers County Deed
Records;
Tract 2: Approximately 21.5 acres of land out of the South
part of said Henry Griffith League and being a part of the
150 acres described as the 36th tract in the above mentioned
conveyance from Old River Co. to Kirby Petroleum Co. and
being all of the said 150 acre tract lying West of that
certain 50 acre tract mentioned in said 36th tract as the
Chas. E. Lawrence land, being the same 50 acres described in
deed from D.J. Lawrence to C.E. Lawrence, dated Jan. 27,
1898, recorded in Vol. J, Page 160, Chambers County Deed
Records,said 150 acres of land being the same land described
in a deed from D. J. Lawrence and A. M. Lawrence to A. J.
Sheffield, Trustee,recorded in the Deed Records of Chambers
County, Texas,in Vol. 6,Page 345 et seq., to which reference
is here made for a more particular description; said 150
acres of land being the S 1/2 of the 350 acre tract conveyed
by B.F. Wilburn and H. Wilburn to D.J. Lawrence on May 4,
1871,by deed recorded in Vol.B,Page 333 of the Deed Records
of Chambers County, Texas.
<FN>
1. The obligations set out in the above described lease.
2. Oil contract with ARCO. Termed July 1, 1994 to December 31, 1994.
NYMEX based.
</TABLE>
---------------------------------------------------
EXHIBIT A
STATE OF TEXAS
COUNTY OF CHAMBERS
BARBERS HILL PROSPECT
KIRBY/C/TG
OPERATOR: ARCO OIL AND GAS COMPANY
FOC GWI: 1.00000000 (FROM ARCO)
FOC NRI: 0.83333333
<PAGE>
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
42-071-005514-001 John Shearer C.A. Kelly 10/25/26 Bk 22 P 508 An undivided 5acres out of that certain 30
acres excepted out of 382.2acres in the Henry
Griffith League, described as the 35th tract in
Deed of Conveyance from Old River Co. to Kirby
Petroleum Co. dated Dec. 16, 1923, recorded in
Vol. 17, Page 381,Chambers County Deed
Records,and being the 30 acres excepted out of
the First Tract described in lease from Kirby
Petroleum Co., et al, to Mills Bennett
Production Co., the said 30 acres hereby
granted, leased and let being particularly
described as follows to-wit: Said 30 acres
being at the most Southerly corner of said
382.2 acre tract being the Southeast corner of
the Y.A. Lawrence tract in the North line of
the R.B. Lawrence tract; THENCE Northeasterly
with the South line of said 382.2 acre tract to
a point therein at the Northeast corner of the
said C.E. Lawrence 50 acre tract described in
deed from D.J.Lawrence to C.E.Lawrence dated
Jan. 28, 1898, recorded in Vol. J,Page 160,
Chambers County Deed Records; THENCE North 24
degrees 30 min. West 450 feet to a point for
corner; THENCE in a Southwesterly direction in
a course parallel with the South line of said
382.2 acre tract and at all points 450 foot
distant therefrom to a point in the West line
of said 382.2 acre tract 450 feet North 24
degrees 30 min. West from the beginning point;
THENCE South 24 degrees 30 min. East 450 feet
to the place of beginning.
42-071-005514-002 Kirby Petroleum Gulf Production 11/04/26 Bk 23 P 135 Undivided 5/6 interest in a certain 15acre
tract Company, et al Company of land, being
part of the 30 acre tract of land described in
the above mentioned oil, gas and mineral lease,
which said 15 acres is more particularly
described in said lease from Kirby Petroleum
Co.,et al,to Gulf Production Co.,which said
lease is recorded in Vol. 23, Pages 135, et
seq., of the Deed Records of Chambers County,
Texas.
<FN>
1. The obligations set out in the above described lease.
2. Oil Contract with ARCO. Termed July 1, 1994 to December 31, 1994.
NYMEX based.
</TABLE>
<PAGE>
---------------------------------------------------
EXHIBIT A
STATE OF TEXAS
COUNTY OF CHAMBERS
BARBERS HILL PROSPECT
WINFREE, O.K. TG
OPERATOR: ARCO OIL AND GAS COMPANY
FOC GWI: 1.00000000 (FROM ARCO)
FOC NRI: 0.83333333
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
42-071-005520-001 O.K. Winfree, et ux Humphreys 02/21/29 Bk 27 P 586 Being a part of the William D. Smith 1/4 League
Corporation on Cedar Bayou and described by metes and bounds
as follows: BEGINNING at the Northeast corner
of a tract of land owned by John Smith on Cedar
Bayou and Crosby public road; THENCE South 30
degrees East 1715 varas to corner on North line
of William Bloodgood League; THENCE North 9-1/2
degrees West 864varas to intersect the West line
of the Griffith League; THENCE North 30 degrees
West on said line 802 varas to corner; THENCE
South 80-1/2 degrees West 328 varas to beginning
corner, embracing 73 acres of land; SAVING AND
EXCEPTING from said 73 acres 10 acres of land
heretofore conveyed to E.H.Winfree, as evidenced
by deed of record in the Deed Records of Cham-
bers County, TX. There is also excepted from the
73 acre tract of land above described that
certain 20 acres of land off of the South end of
said 73 acre tract, described as second tract in
that certain lease from the lessors herein to
Sun Oil Co. dated June 6, 1925, recorded in Vol.
19, Page 554 of the Deed Records of Chambers
County, Texas. The land covered by this lease to
said Humphreys Corporation is all of said 73 acre
tract of land owned by Lessor, save & except the
two tracts of 10 acres & 20 acres,respectively,
referred to above.
<FN>
1. The obligations set out in the above described lease.
2. Oil contract with ARCO. Termed July 1, 1994 to December 31, 1994.
NYMEX based.
</TABLE>
<PAGE>
---------------------------------------------------
EXHIBIT A
OFFSHORE TEXAS
BRAZOS 507
OPERATOR: W & T OFFSHORE
FOC ORRI = 12.5% BPO
FOC ORRI = 12.5% APO
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
TO-192215-000001 USA OCS-G 13301 Transco Exploration 10/1/91 Serial No. All of Block 507, Brazos Area, as shown on OCS
& Prod. Co. OCS-G 13301 Leasing Map,Texas Map No. 5 containing 5,760
acres, more or less, INSOFAR AND ONLY INSOFAR
as said lease lies within the confines of the
following described aliquots: W/2 of SW/4 of
NE/4; NE/4 of NE/4 of SW/4; N/4 of NW/4 of SE/4;
E/2 of SE/4 of NE/4 of Block 507.Limited to 100'
above the stratigraphic equivalent of the top of
the L. Big Hum Sand at 7292' MD as seen in
OCS-G-13301 #1 down to 100' below the base of
the stratigraphic equivalent of the L. Big Hum
Sand at 7334' MD as seen in the OCS-G-13301 #1.
<FN>
1. Subject to Participation Agreement PA00321-P dated 1/1/93 by and between
Forest Oil Corporation and W&T Offshore wherein Forest Oil Corporation
agreed to convey 100% of its Operating Rights from surface to 100' below
total depth drilled to W&T Offshore.
2. Designation of Operator dated 6/17/93 designates W&T Offshore as Operator.
3. Assignment effective 10/6/93 conveying 100% of Forest Oil Corporation
Operating Rights from the surface to 100' below the stratigraphic
equivalent of 7,500' as found in the W&T OCS-G 13301 No. 1 Well.
4. Gas Purchase Contract with Enron Gas Marketing, Inc. termed April 1, 1994
through October 1, 1994.
</TABLE>
---------------------------------------------------
EXHIBIT A
STATE OF LOUISIANA
PARISH OF ST. BERNARD
<PAGE>
CHANDELEUR SOUND BLOCK 32
OPERATOR: FOREST OIL CORPORATION
FOC GWI: .3000000 (FROM DAVIS)
FOC NRI: .2300000
FOC GWI: .7000000 (FROM ARCO)
FOC NRI: .5600000
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
17-000-36192-000 State of Louisiana Atlantic Richfield 06/12/91 COB 504, 543 Entire Tract No. 25925 being described as
(SL 14055) Company MLB 85, 98 follows: Tract 25925 - Portion of Block 32,
Chandeleur Sound Area, St. Bernard Parish,
Louisiana, and more particularly described as
follows: BEGINNING at the Northwest corner of
Block 32, Chandeleur Sound Area, having
Coordinates of X = 2,753,350.00 and Y =
440,330.00; THENCE East 14,750.00 feet;THENCE
South 7,375.00 feet; THENCE West 14,750.00
feet; THENCE North 7,375.00 feet to the point
of beginning,containing approximately 2,497.27
acres, as shown outlined in red on a plat on
file in the Off. of the Secretary, Department
of Natural Resources.
17-000-36193-000 State of Louisiana Atlantic Richfield 06/12/91 COB 504, 558 Entire Tract No. 25928, said Tract No. 25928
(SL 14056) Company MLB 85, 99 being described as follows: Tract 25928 -
Portion of Block 32, Chandeleur Sound Area,
St. Bernard Parish, Louisiana, and more par-
ticularly described as follows: BEGINNING at
the Southwest corner of Block 32, Chandeleur
Sound Area, having Coordinates of X =
2,753,350.00 and Y = 425,580.00; THENCE North
7,375.00 feet; THENCE East 14,750.00 feet;
THENCE South 7,375.00 feet; THENCE West
14,750.00 feet to the point of beginning, con-
taining approximately 2,497.27 acres, as shown
outlined in red on a plat on file in the Off.
of the Secretary, Department of Natural
Resources.
<FN>
1. That certain Well Participation Agreement (AR-102210) by and between
Atlantic Richfield Company and Davis Petroleum Corp., dated November 3,
1992, covering the entirety of Block 32, Chandeleur Sound Area, St.
Bernard Parish, Louisiana, with a form of Operating Agreement (AR-102211)
attached as Exhibit "II" thereto.
2. The obligations set out in the above described leases.
3. That portion of Forest Oil Corporation interest which was acquired from
ARCO is subject to the following:
<PAGE>
a. Conveyance of Overriding Royalty to Cactus Hydrocarbon III Limited
Partnership dated December 10, 1993. Recorded in Volume ____, Page
____, ________ Parish, Louisiana
b. Production and Delivery Agreement with Cactus Hydrocarbon III
Limited Partnership dated December 10, 1993, recorded in Volume ____,
Page ____, ________ Parish, Louisiana.
c. A portion of the interest acquired from ARCO will be termed from
July 1, 1994 through May 31, 1996. 2,500 MMBTU/D for 1994. 1,500
MMBTU/D for 1995. 1,000 MMBTU/D for 1996. NYMEX based pricing.
Purchaser is Chevron.
</TABLE>
---------------------------------------------------
EXHIBIT A
OFFSHORE LOUISIANA
VERMILION 101
OPERATOR: FOREST OIL CORPORATION
FOC GWI: 0.2361000 (FROM ZILKHA)
FOC NRI: 0.1967000
FOC GWI: 763900 (From TEPCO)
FOC NIR: 6365833
All of Mortgagor's interest in and to the following listed Oil, Gas and Mineral
Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
LO-192211-000001 USA OCS-G 10658 TXP Operating Co., 7/1/89 Serial No. All of Block 101, Vermilion Area, as shown on OCS
et al OCS-G 10658 Leasing Map, Louisiana Map No. 3 containing 4531.63
acres, more or less, INSOFAR AND ONLY INSOFAR as
said lease lies within the confines of the follow-
ing described aliquots:SW/4 of SE/4 of NW/4,E/2 of
NW/4 of SW/4, NW/4 of NE/4 of SW/4 of Block 101.
Limited to 100' above the stratigraphic equivalent
of the top of the 9300' Sand at 8496' MD as seen
in OCS-G-10658 #1 (B-1) down to 100' below the base
of the stratigraphic equivalent of the 9,300' Sand
at 8,710' MD as seen in the OCS-G-10658 #1 (B-1).
E/2 of NW/4 of SW/4, NW/4 of NE/4 of SW/4 of Block
101. Limited to the stratigraphic equivalent of
100' above the 10,300' Sand at 9,076' MD as seen in
OCS-G-10658 #1 (B-1) down to 100' below the base
of the stratigraphic equivalent of the 10,300' Sand
at 9,136' MD as seen in OCS-G-10658 #1 (B-1).
W/2 of NW/4 of SW/4 of Block 101. Limited to 100'
above the stratigraphic equivalent of the top of
<PAGE>
the 9300' Sand at 10,156' MD as seen in OCS-G 8645
#1 down to 100' below the base of the stratigraphic
equivalent of the 9300' Sand at 10,380' MD as seen
in OCS-G 8645 #1.
<FN>
Subject to the following:
1. Program Agreement dated June 30, 1987, effective as of March 1, 1987,
between TXP Operating Company and Zilkha Energy Company.
2. Agreement to Purchase and Sale dated June 1, 1989, by and between TXP
Operating Company and Transco Exploration and Production Company.
3. Offshore Operating Agreement dated effective July 1,1989, by and between
Transco Exploration and Production Company, Operator, and Zilkha Energy
Company, Non-Operator.
4. Assignment dated effective July 1, 1989, by and between TXP Operating
Company, Assignor, and Transco Exploration and Production Company,
Assignee, at Entry No. 9011228, Conveyance Records, Vermilion Parish and
at Entry No. 220739, Conveyance Records, Cameron Parish, Louisiana.
5. Assignment dated effective July 1, 1989, by and between Transco
Exploration and Production Company, Assignor, and Zilkha Energy Company,
Assignee, at Entry No. 9011229, Conveyance Records, Vermilion Parish and
at Entry No. 220740, Conveyance Records, Cameron Parish, Louisiana.
6. Letter Agreement dated September 26, 1990, by and between Zilkha Energy
Company and Transco Exploration and Production Company, covering the
sales of natural gas from East Cameron Block 109 and Vermilion Block 101.
That portion of Forest Oil Corporation interest which was acquired from TEPCO
is subject to the following:
1. Conveyance of Production Payment (amended and restated) to Cactus
Hydrocarbon III Limited Partnership dated Novmeber 9, 1993 recorded in
Volume ____, Page ____ of the records of Cameron Parish, Louisiana.
2. Production and Delivery Agreement (amended and restated) with Cactus
Hydrocarbon III Limited Partnership dated November 9, 1993 recorded in
Volume ____, Page ____ of the records of Cameron Parish, Louisiana.
3. Amendment to and Restatement of Conveyance of Production Payment to Enron
Reserve Acquisition Corp. dated November 9, 1993, recorded in Volume
______, Page ____ of the records of Cameron Parish, Louisiana.
</TABLE>
---------------------------------------------------
EXHIBIT A
OFFSHORE LOUISIANA
VERMILION 102
OPERATOR: BRITISH BORNEO EXPLOR.
FOC ORRI = 10% BPO
FOC WI = 40% APO (UPON ELECTION)
<PAGE>
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
LO-193008-000001 USA OCS-G 3393 CNG Producing Co., 1/1/77 Serial No. All of Block 102, Vermilion Area, as shown on OCS
Ocean Production Co., OCS-G 3393 Official Leasing Map,Louisiana Map No.3 containing
4587.70 acres, more or less, INSOFAR AND ONLY
INSOFAR as said lease lies within the confines of
the following described aliquot: NW/4 of SW/4 of
Block 102. Limited to 100' above the stratigraphic
equivalent of the M-1 Sand top at 9472' MD as seen
in OCS-G-3393 #7 down to 100'below the base of the
stratigraphic equivalent of the M-1.8 Sand at
10,543' MD as seen in the OCS-G-3393 #7.
<FN>
1. Subject to Farmout Agreement F/O 9300801 dated 8/26/93 by and between
Forest Oil Corporation and British Borneo Exploration.
2. Designation of Operator form dated 10/20/93 designates British Borneo
Exploration as Operator of certain aliquots under Vermilion Block 102.
</TABLE>
---------------------------------------------------
EXHIBIT A
OFFSHORE LOUISIANA
VERMILION 255
OPERATOR: FOREST OIL CORPORATION
FOC GWI: .2000000
FOC NRI: .1666667
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
LO-162014-000001 USA OCS-G 1152 Forest Oil Corp. 6/1/62 Serial No. All of Block 255,Vermilion Area,South Addition,as
OCS-G-1152 shown on Official Leasing Map La No. 3B, Outer
Continental Shelf Leasing Map, Louisiana Offshore
Operations containing 5,000 acres, more or less,
INSOFAR AND ONLY INSOFAR as said lease lies within
the confines of the following described aliquots:
SE/4 of SW/4 of NW/4, SW/4 of SE/4 of NW/4, NW/4
<PAGE>
of SW/4, W/2 of NE/4 of SW/4, NE/4 of SW/4 of SW/4
of Block 255. Limited to 100' above the strati-
graphic equivalent of the top of the EH-5 Sand at
10,694' MD as seen in OCS-G-1152 #A-3 S/t and down
to 100' below the base of the stratigraphic equiva-
lent of the EH-5 Sand at 10,780' MD as seen in OCS-
G-1152 #A-3 S/T.
<FN>
1. Subject to Operating Agreement dated 5/17/61 by and between Forest Oil
Corporation as Operator and CNG Producing as Non-Operator.
2. Oil Contract with Phibro termed July 1, 1994 to December 31, 1994.
</TABLE>
---------------------------------------------------
EXHIBIT A
OFFSHORE LOUISIANA
VERMILION 256
OPERATOR: FOREST OIL CORPORATION
FOC GWI: .2500000
FOC NRI: .2083333
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
LO-162014-000002 USA OCS-G 1153 Forest Oil Corp. 9/1/70 Serial No. All of Block 256, Vermilion Area, South Addition, as
OCS-G 1153 shown on Official Leasing Map LA No. 3B, Outer
Continental Shelf Leasing Map, Louisiana Offshore
Operations containing 5,000 acres, more or less,
INSOFAR AND ONLY INSOFAR as said lease lies within
the confines of the following described aliquots:
S/2 of NW/4 of SW/4, SW/4 of NE/4 of SW/4, S/2 of
SW/4, SW/4 of SW/4 of SE/4 of Block 256. Limited to
the stratigraphic equivalent of 100' above the top of
the K-1 Sand at 9710' MD as seen in OCS-G-1977 #C-2
down to 100' below the base of the stratigraphic
equivalent of the K-1 Sand at 10,100' MD as seen in
OCS-G-1977 #C-2.
<FN>
1. Oil Contract with Phibro termed July 1, 1994 to December 31, 1994.
</TABLE>
---------------------------------------------------
<PAGE>
EXHIBIT A
OFFSHORE LOUISIANA
VERMILION 267
OPERATOR: FOREST OIL CORPORATION
FOC GWI: .2500000
FOC NRI: .2083333
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
LO-162014-000003 USA OCS-G 1977 Forest Oil Corp. 9/1/70 Serial No. N 1/2 of Block 267, Vermilion Area, South Addition,
OCS-G 1977 as shown on Official Leasing Map, Louisiana Map No.
3B containing 2,500 acres, more or less, INSOFAR &
ONLY INSOFAR as said lease lies within the confines
of the following described aliquots:NE/4 of NW/4 of
NW/4, NE/4 of NW/4, NE/4 of SE/4 of NW/4, NE/4 of
Block 267. Limited to the stratigraphic equivalent
of 100' above the top of the K-1 Sand at 9710' MD
as seen in OCS-G-1977 #C-2 down to 100' below the
base of the stratigraphic equivalent of the K-1
Sand at 10,100' MD as seen in OCS-G-1977 #C-2.
<FN>
1. Subject to Operating Agreement dated 9/1/70 by and between Forest Oil
Corporation as Operator and CNG Producing as Non-Operator.
2. Oil Contract with Phibro termed July 1, 1994 to December 31, 1994.
</TABLE>
---------------------------------------------------
EXHIBIT A
OFFSHORE LOUISIANA
EAST CAMERON 109 & 110
OPERATOR: FOREST OIL CORPORATION
FOC GWI: .2361000 (FROM ZILKHA)
FOC NRI: .1967500
FOC GWI: .7639000 (FROM TEPCO)
FOC NRI: .6365833
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording
Lease No. Lessor Lessee Date Data Description of Properties
<PAGE>
_________ ______ ______ ____ __________ ____________________________________
<C> <S> <C> <C> <C> <C>
LO-192208-000001 USA OCS-G 8645 Transco Exploration 6/1/87 Serial No. All of Blocks 109 and 110, East Cameron Area, as
& Prod. Co. OCS-G-8645 shown on OCS Leasing Map, Louisiana Map No. 2
containing 4284.10 acres, more or less, INSOFAR
AND ONLY INSOFAR as said lease lies within the
confines of the following described aliquots:
SE/4 of SE/4 of Block 109, NE/4 of NE/4 of NE/4
of Block 110. Limited to 100' above the strati-
graphic equivalent of the top of 7,700' Sand at
7,930' MD as seen in OCS-G-8645 #2 ST-A down to
100' below the base of the stratigraphic equiva-
lent of the 7,700' Sand at 7,990' MD as seen in
OCS-G-8645 #2 ST-A.
SE/4 of NE/4 and N/2 of NE/4 of SE/4 of Block109.
Limited to 100'above the stratigraphic equivalent
of the top of the 9,300' Sand at 10,156' MD as
seen in OCS-G-8645 #1 down to 100' below the base
of the stratigraphic equivalent of the 9,300'Sand
at 10,380'MD as seen in OCS-G-8645 #1,and limited
to 100' above the stratigraphic equivalent of the
10,300' Sand at 10,552' MD as seen in OCS-G-8645
#3 and 100' below the base of the stratigraphic
equivalent of the 10,300' Sand at 10,645' MD as
seen in OCS-G-8645 #3.
<FN>
That portion of Forest Oil Corporation interest which was acquired from TEPCO
is subject to the following:
1. Conveyance of Production Payment (amended and restated) to Cactus
Hydrocarbon III Limited Partnership dated Novmeber 9, 1993 recorded in
Volume ____, Page ____ of the records of Cameron Parish, Louisiana.
2. Production and Delivery Agreement (amended and restated) with Cactus
Hydrocarbon III Limited Partnership dated November 9, 1993 recorded in
Volume ____, Page ____ of the records of Cameron Parish, Louisiana.
3. Amendment to and Restatement of Conveyance of Production Payment to Enron
Reserve Acquisition Corp. dated November 9, 1993, recorded in Volume
______, Page ____ of the records of Cameron Parish, Louisiana.
4. Amendment to and Restatement of Production and Delivery Agreement dated
November 9, 1993, recorded in Volume ____, Page ____ of the records of
Cameron Parish, Louisiana.
5. Gas Purchase contract with Enron Gas Marketing, Inc. termed April 1, 1994
to October 1, 1994.
That portion of Forest Oil Corporation interest which was acquired from Zilkha
is subject to the following:
1. Program Agreement dated June 30, 1987, effective as of March 1, 1987,
between TXP Operating Company and Zilkha Energy Company.
2. Offshore Operating Agreement dated effective June 1, 1987, by and between
<PAGE>
TXP Operating Company, Operator, and Zilkha Energy Company, Non-Operator.
3. Ratification and Amendment of Offshore Operating Agreement dated
effective June 1, 1989, by and between Transco Exploration and Production
Company and Zilkha Energy Company.
4. Assignment dated effective June 1, 1987, by and between TXP Operating
Company,signor, and Zilkha Energy Company, Assignee.
5. Letter Agreement dated September 26, 1990, by and between Zilkha Energy
Company and Transco Exploration and Production Company, covering the
sales of natural gas from East Cameron Block 109 and Vermilion Block 101.
</TABLE>
---------------------------------------------------
<PAGE>
AMENDMENT NO. 1 TO DEED OF TRUST, MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT
(PERSONAL PROPERTY INCLUDING HYDROCARBONS),
AND FIXTURE FILING
THIS AMENDMENT NO. 1 TO DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF PRODUCTION, FINANCING STATEMENT (PERSONAL PROPERTY INCLUDING
HYDROCARBONS) AND FIXTURE FILING (this "Amendment") is entered into as of June
3, 1994 at 9:00 a.m., Mountain Time (the "Effective Date") by and between FOREST
OIL CORPORATION, a New York corporation with an address for notice hereunder of
1500 Colorado National Building, 950 17th Street, Denver, Colorado 80202
("Mortgagor") to:
1. THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), with an
address at One Chase Manhattan Plaza, New York, New York 10081, as
agent for each bank referred to below (in such capacity, the "Agent")
(the Agent, together with its successors in such capacity, is
hereinafter referred to as the "Secured Party"), as to any and all
portions of the Collateral EXCEPT those portions of the Collateral
which (i) are located in the State of Texas or in offshore waters
adjacent to the State of Texas and subject to the laws of the State of
Texas and (ii) constitute interests in or to real property under the
law of the State of Texas (the "DT Collateral"); and
2. Bettylou J. Robert, with an address at One Chase Manhattan
Plaza, New York, New York 10081, as trustee (in such capacity,
together with her successors and assigns in such capacity, the
"Trustee"), but only as to the DT Collateral.
R E C I T A L S
A. Mortgagor, certain banks (collectively, the "Banks"), the
Subsidiary Borrowers, the Subsidiary Guarantors and the Agent have entered into
a Credit Agreement dated as of December 1, 1993, as amended by Amendment No. 1
dated as of December 28, 1993, Amendment No. 2 dated as of January 27, 1994 and
Amendment No. 3 dated as of June 3, 1994 (as amended, the "Credit Agreement").
B. The Credit Agreement is secured by, among other things, that
certain Deed of Trust, Mortgage, Security Agreement, Assignment of Production,
Financing Statement (Personal Property Including Hydrocarbons), and Fixture
Filing dated as of December 1, 1993 from Mortgagor to Secured Party and Trustee
(the "Deed of Trust").
C. The Deed of Trust was duly recorded as set forth on Schedule 1
attached hereto with, in the case of the Deed of Trust recorded in the States of
Oklahoma and Wyoming, the property descriptions set forth in Exhibit A hereto.
<PAGE>
D. Mortgagor and Secured Party now desire to amend the Deed of
Trust.
NOW, THEREFORE, in view of the foregoing, Mortgagor and Secured
Party do hereby agree as follows:
1. All capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Deed of Trust.
2. All references in the Deed of Trust to "this Instrument", as
defined in the opening paragraph of the Deed of Trust shall mean the Deed of
Trust as amended hereby and as the same may from time to time be further amended
or supplemented.
3. The Deed of Trust is hereby amended by deleting Recital 1 in its
entirety and substituting the following therefor:
"1. Pursuant to the terms of the Credit Agreement dated as
of December 1, 1993 among the Mortgagor, certain banks (collectively,
the "Banks"), the Subsidiary Borrowers, the Subsidiary Guarantors and
the Secured Party (as amended, supplemented and otherwise modified and
in effect from time to time, the "Credit Agreement"), the Banks have
agreed to make loans from time to time under a revolving credit
facility to the Mortgagor the aggregate principal or stated amount of
which shall not exceed $50,000,000.00 at any one time (maturing
December 31, 1996), and issue or acquire participation interests in
letters of credit for account of the Mortgagor."
4. Mortgagor hereby confirms that is has heretofore absolutely and
unconditionally granted, bargained, sold, assigned, transferred and conveyed the
DT Collateral to the Trustee and granted to the Secured Party a security
interest in those portions of the Collateral which (i) are located in the State
of Texas or in offshore waters adjacent to the State of Texas and subject to the
laws of the State of Texas and (ii) do not constitute DT Collateral.
5. Mortgagor hereby confirms that is has heretofore absolutely and
unconditionally granted, bargained, sold, assigned, transferred, pledged,
mortgaged, warranted and conveyed to the Secured Party any and all of the
Mortgagor's rights in respect of the Hydrocarbons, including, without
limitation, all severed and extracted Hydrocarbons and other minerals produced
from or attributable to the Mortgaged Property, including, without limitation,
all of the proceeds thereof.
6. The parties hereto hereby acknowledge and agree that except as
specifically amended, changed or modified hereby, the Deed of Trust shall remain
in full force and effect in accordance with its terms. None of the rights,
titles and interests existing and to exist under the
<PAGE>
Deed of Trust are hereby released, diminished or impaired, and Mortgagor hereby
reaffirms all agreements, covenants, representations and warranties made in the
Deed of Trust.
7. INSOFAR AS PERMITTED BY OTHERWISE APPLICABLE LAW, THIS AMENDMENT
SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
(EXCLUDING CHOICE OF LAW AND CONFLICT OF LAW RULES). THE MORTGAGOR HEREBY
IRREVOCABLY SUBMITS ITSELF TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS OF THE STATE OF NEW YORK AND EACH OTHER STATE WHERE THE
COLLATERAL IS LOCATED AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE
MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AMENDMENT, THE BASIC
DOCUMENTS OR THE OBLIGATIONS IN THE CASE OF A PROCEEDING IN ANY OF SUCH STATES,
BY SERVING THE SECRETARY OF STATE OF SUCH STATE IN ACCORDANCE WITH ANY
APPLICABLE PROVISIONS OF SUCH STATE'S LAW GOVERNING SERVICE OF PROCESS UPON
FOREIGN CORPORATIONS OR ENTITIES.
8. This Amendment may be executed in two or more counterparts, and
it shall not be necessary that the signatures of all parties hereto be contained
on any one counterpart hereof.
IN WITNESS WHEREOF, the mortgagor, has, on the date set forth in the
acknowledgement hereto, but effective as of the Effective Date, caused this
Amendment to be duly executed before me,the undersigned Notary public,in and for
the County of Denver,State of Colorado, in the presence of the competent
witnesses, after due reading of the whole.
MORTGAGOR:
FOREST OIL CORPORATION
By: /s/Kenton M. Scroggs
-----------------------------
Name: Kenton m. Scroggs
Title: Vice President & Treasurer
ATTEST:
/s/Richard W. Schelin
- - - -------------------------
Asst. Secretary
WITNESSES:
/s/Michele M. Daily
- - - -------------------------
/s/Marti Valentine
- - - -------------------------
/s/Teresa J. Marano
-------------------------
Notary Public
County of Denver, State of Colorado
<PAGE>
My Commission Expires: August 11, 1996
-----------------
SECURED PARTY:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By: /s/Richard F. Betz
-------------------------
Name: Richard F. Betz
Title: Vice President
ATTEST:
/s/Joseph R. Beattie
- - - -------------------------
Asst. Secretary
WITNESSES:
/s/Candice Dixon
- - - -------------------------
/s/Kan Louie
- - - -------------------------
/s/Patricia E. Martin
---------------------------
Notary Public
TRUSTEE:
By: /s/Bettylou J. Robert
--------------------------
Name: Bettylou J. Robert
Title: Vice President
WITNESSES:
/s/Candice Dixon
- - - -------------------------
/s/Kan Louie
- - - -------------------------
/s/Patricia E. Martin
---------------------------
Notary Public
- - - -----------------------------------------------------------------
<PAGE>
ACKNOWLEDGEMENT
STATE OF COLORADO )
: ss.
COUNTY OF Denver )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on June 2, 1994 there personally appeared before
me, the following person, being the designated officer of the corporation set
opposite his name, and such corporation being a party to the foregoing
Amendment:
Kenton M. Scroggs, the Vice President & Treasurer of Forest Oil
Corporation,
This Amendment was acknowledged before me on this 2nd day of June,
1994 by Kenton M. Scroggs, of Forest Oil Corporation, a New York corporation, on
behalf of said corporation.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the
designated officer of said corporation described in and which executed the
foregoing Amendment, that he signed his name thereto by order of the Board of
Directors of said corporation, and acknowledged to me that he executed the same
for the purposes and consideration therein expressed, in the capacity therein
stated, and as the free act and deed of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official notarial
seal, in the County of Denver, State of Colorado, this 2nd day of June, 1994.
/s/Teresa J. Marano
-----------------------------------
Notary Public, State of Colorado
Notary's Printed Name: Teresa J. Marano
----------------
My Commission expires: August 11, 1996
----------------
- - - -----------------------------------------------------------------
ACKNOWLEDGEMENT
<PAGE>
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and for the county and state
aforesaid, hereby certify that, on June 2, 1994 there personally appeared before
me, the following person, being the designated officer of the national banking
association set opposite his name, and such corporation being a party to the
foregoing Amendment:
Richard F. Betz, the Vice President of The Chase Manhattan Bank
(National Association),
This Amendment was acknowledged before me on this 2nd day of June,
1994 by ___________________, of The Chase Manhattan Bank (National Association),
a national banking association, on behalf of said national banking association.
LOUISIANA
Who being by me duly sworn, deposed and said that he is the
designated officer of said national banking association described in and which
executed the foregoing Amendment, that he signed his name thereto by order of
the Board of Directors of said national banking association, and acknowledged to
me that he executed the same for the purposes and consideration therein
expressed, in the capacity therein stated, and as the free act and deed of said
national banking association.
IN WITNESS WHEREOF, I have hereunto set my hand and official notarial
seal, in the County of New York, State of New York, this 2nd day of June, 1994.
/s/Patricia E. Martin
---------------------------------------
Notary Public, State of New york
Notary's Printed Name: Patricia E. Martin
My Commission expires: May 5, 1996
- - - -----------------------------------------------------------------
ACKNOWLEDGEMENT
STATE OF NEW YORK )
: ss.
COUNTY OF NEW YORK )
BE IT REMEMBERED that I, the undersigned Notary Public duly
qualified, commissioned, sworn and acting in and
<PAGE>
for the county and state aforesaid, hereby certify that, on June 2, 1994 there
personally appeared before me, the following person, being a party to the
foregoing Amendment:
This Amendment was acknowledged before me on this 2nd day of June,
1994 by Bettylou J. Robert.
LOUISIANA
Who being by me duly sworn, deposed and said that she is the Trustee
described in the foregoing Amendment, that she signed her name thereto, and
acknowledged to me that she executed the same for the purposes and consideration
therein expressed, in the capacity therein stated, and as her free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and official notarial
seal, in the County of New York, State of New York, this 2nd day of June, 1994.
/s/Patricia E. Martin
---------------------------------------
Notary Public, State of New york
Notary's Printed Name: Patricia E. Martin
My Commission expires: May 5, 1996
- - - -----------------------------------------------------------------
EXHIBIT A
STATE OF WYOMING
COUNTY OF NATRONA
AUSTIN CREEK PROSPECT
AUSTIN CREEK FIELD
All of Mortgagor's interest in and to the following listed Oil, Gas and
Mineral Leases, viz:
<TABLE>
<CAPTION>
FOC Recording Description Net Interest Footnote
Lease No. Lessor Lessee Date Data of Properties of the Mortgagor Reference
_________ ______ ______ ____ _________ _____________ ________________ _________
<S> <C> <C> <C> <C> <C> <C> <C>
WY-182029-01 USA WYW-92476 Donald T. Dodds 10/1/85 Not recorded S/2 NE/4; NW/4 .29227934 1,2,3,4,5
SE/4 of Section12, See Footnote
T-32-N, R-85-W No. 6
WY-182029-02 USA WYW-105536 Roundup Resources, 12/1/86 474490 E/2 NW/4 of Section .29227934 1,2,3,4,5
Inc. 18, T-32-N, R-84-W See Footnote
No. 6
WY-182029-03 USA WYW-98153 John Schloegel 2/1/86 402003 Lot 2 (65.70), Lot 3 .29227934 1,2,3,4,5
(65.90), Lot 4 (66.10), See Footnote
<PAGE>
SE/4 SW/4 of Section No. 6
7, T-32-N, R-84-W
WY-182029-5-A-2 J. Kent Kinniburgh Tenneco Oil Company 3/24/86 Instrument T-32-N, R-85-W, 6th P.M. .29227934 1,2,3,4,5
& Georgia K. No. 405148 Section 12: E/2 SE/4 See Footnote
Kinniburgh, husband No. 6
& wife
WY-182029-5-B-2 James B. Grieve, Tenneco Oil Company 3/26/86 Instrument T-32-N, R-85-W, 6th P.M. .29227934 1,2,3,4,5
Jr. & Gloria M. No. 405149 Section 12: E/2 SE/4 See Footnote
Grieve, husand & No. 6
wife
WY-182029-5-C-2 John B. Stressenger Tenneco Oil Company 3/24/86 Instrument T-32-N, R-85-W, 6th P.M. .29227934 1,2,3,4,5
&Helen G.Stressenger No. 405147 Section 12: E/2 SE/4 See Footnote
as Trustees of the No. 6
Helen G. Stressenger
Revocable Trust
Agreement, dated
11/25/79
WY-182029-5-D-2 Nancy Lee Grieve Tenneco Oil Company 3/25/86 Instrument T-32-N, R-85-W, 6th P.M. .29227934 1,2,3,4,5
Baker No. 414881 Section 12: E/2 SE/4 See Footnote
No. 6
WY-182029-5-E-2 Glenn James Grieve Tenneco Oil Company 3/26/86 Instrument T-32-N, R-85-W, 6th P.M. .29227934 1,2,3,4,5
and Cynthia L. No. 407193 Section 12: E/2 SE/4 See Footnote
Grieve, husband & No. 6
wife
WY-182029-5-F-2 John B. Stressenger Tenneco Oil Company 3/24/86 Instrument T-32-N, R-85-W, 6th P.M. .29227934 1,2,3,4,5
&Helen G.Stressenger, No. 405146 Section 12: E/2 SE/4 See Footnote
as Trustees of the No. 6
John B. Stressenger
Revocable Trust
Agreement, dated
11/25/79
WY-182029-5-G-2 First Interstate Bank Tenneco Oil Company 3/25/86 Instrument T-32-N, R-85-W, 6th P.M. .29227934 1,2,3,4,5
of Casper, as No. 409364 Section 12: E/2 SE/4 See Footnote
Trustee of the No. 6
"Wyoma P. Grieve
Trust #1"
WY-182029-5-H Van Irvine, Trustee Tenneco Oil Company 7/23/85 Instrument T-32-N, R-85-W, 6th P.M. .29227934 1,2,3,4,5
for the Irvine No. 395245 Section 12: E/2 SE/4 See Footnote
Mineral Trust I No. 6
<FN>
1. Subject to the Joint Exploration Agreement for the Exploration and
Development of certain lands in the Southeast Wind River Basin, County of
Natrona, State of Wyoming, dated April 30, 1987, between Tenneco Oil Company
and Exxon Corporation as amended November 28, 1989.
2. Subject to Operating Agreement dated August 5, 1988, between Exxon
Corporation, as Operator, and Tenneco Oil Company, as Non-Operator.
3. Subject to Well Operating Agreement dated December 28, 1987 between
<PAGE>
Forest Oil Corporation, as Operator, and Exxon Corporation, et al, as
Non-Operator.
4. Subject to Assignment and Bill of Sale effective May 1, 1991 by and between
TOC-Rocky Mountains, Inc. and Forest Oil Corporation as amended by Letter
Agreement dated May 1, 1991.
5. Limited to the interval comprising the stratigraphic equivalent of the top of
the Muddy (Grieve Sand) as seen in the Induction Log of the Amoco #1-12 Van
Irvin Trust at 10,790' MD to the stratigraphic equivalent of the base of the
Muddy (Grieve Sand) as seen in the Induction Log of the Amoco #1-12 Van Irvin
Trust at 10,852' MD.
6. Subject to the Austin Creek (Muddy) Unit and Unit Operating Agreement
effective 5/1/92, BLM Unit No. WYW-125235X. Mortgagor's net interest under
the Austin Creek (Muddy) Unit is .29227934.
</TABLE>
---------------------------------------------------
EXHIBIT A
STATE OF WYOMING
COUNTY OF NATRONA
GRIEVE PROSPECT
<TABLE>
<CAPTION>
FOC Serial No. Recording Description Net Interest Footnote
Lease No. Lessor Lessee and Date Data of Properties of the Mortgagor Reference
_________ ______ ______ __________ __________ _____________ ________________ _________
<S> <C> <C> <C> <C> <C> <C> <C>
WY-26 Robert Morton Raymond Chorney Patented Bk 51 P 462 T-32-N, R-85-W, 6th P.M. See Footnote #2 1,5
& Ethel Morton 4/24/53 A.C. & L. Section 15: E/2 SW/4
WY-29 State of Forest Oil Corp. Wyo. 0-12931 Not recorded T-32-N, R-85-W, 6th P.M. See Footnote #2 1,5
Wyoming 7/2/52 Section 15: SW/4 SW/4
Section 16: All
Section 22: NW/4 NW/4
WY-31 Dumbell Ranch Raymond Chorney Patented Bk 50 P 253 T-32-N, R-85-W, 6th P.M. See Footnote #2 1,5
Company 9/17/52 A.C. & L. Section 20: S/2 NE/4,
NE/4 SE/4
Section 21: SE/4 NE/4,
NW/4 SW/4
WY-33 Diamond Ring Raymond Chorney Patented Bk 50 P 251 T-32-N, R-85-W, 6th P.M. See Footnote #2 1,5
Company 9/17/52 A.C. & L. Section 23: SE/4 NW/4,
N/2 SW/4
Section 25: S/2 SW/4
Section 33: SE/4 NE/4
Section 34: NE/4 NE/4
WY-38 Robert Morton Raymond Chorney Patented Bk 50 P 249 T-32-N, R-85-W, 6th P.M. See Footnote #2 1,5
& Ethel Morton 9/18/52 A.C. & L. Section 22: E/2 NW/4,
SW/4 NW/4
WY-45 U.S.A. Forest Oil Corp. Wyo. 015824 Not recorded T-32-N, R-85-W, 6th P.M. See Footnote #2 1,5
<PAGE>
7/1/52 Section 21:NW/4, W/2 NE/4,
NE/4 NE/4
Section 22: SE/4
Section 23: S/2 SW/4
Section 26: E/2
Section 33: SW/4, S/2 NW/4
WY-47 U.S.A. Forest Oil Corp. Wyo. 015813 Not recorded T-32N, R-85-W, 6th P.M. See Footnote 1,5
7/1/52 Section 27: W/2 #2 & 3
Section 28: W/2
WY-48 U.S.A. Forest Oil Corp. Wyo. 015814 Not recorded T-32-N, R-85-W, 6th P.M. See Footnote #2&4 1,5
7/1/52 Section 27: E/2
Section 28: E/2
WY-49 U.S.A. Forest Oil Corp Wyo. 015815 Not recorded T-32-N, R-85-W, 6th P.M. See Footnote #2 1,5
7/1/52 Section 20: SE/4 SE/4,
W/2 SE/4
Section 21: SE/4, E/2 SW/4,
SW/4 SW/4
Section 22: SW/4
Section 26: W/2
Section 29: E/2E/2
Section 33: SE/4, SW/4 NE/4
Section 34: S/2, S/2 N/2
Section 35: N/2
WY-51 U.S.A. Forest Oil Corp. Wyo. 016008 Not recorded T-32-N-R-85-W, 6th P.M. See Footnote #2 1,5
7/1/52 Section 20: N/2 NE/4, W/2
Section 22: NE/4
Section 23: N/2 NW/4,
SW/4 NW/4
T-31-N, R-85-W, 6th P.M.
Section 3: Lots 1,2,3,4
To each of which leases and the respective records thereof in the A.C. & L.
Records of Natrona County, Wyoming, the Records of the U.S. Department of the
Interior, and the Records of the State of Wyoming, reference is here made for
all pertinent purposes.
<FN>
1. All of the above described lands and leases are subject to the Unit Agreement
for the Development and Operation of the Grieve Unit Area, County of Natrona,
State of Wyoming, dated December 29, 1953, recorded in Book 53 A.C. & L.,
Page 543 et seq., Records of Natrona County, Wyoming (1 Sec. No.
14-08-001-1202). (PA-5323-269)
2. Parts of the above described lands and leases are within the outline of the
Twentieth Revision of the "Muddy Participating Area" approved March 1, 1961
by the Acting Director of the United States Geological Survey effective as of
October 1, 1960. The resultant net interest of Mortgagor attributable to the
above described lands and leases in that participating area is .798536554.
The "Net Interest of Mortgagor" refers only to that portion of the lands
above described which lies within said Twentieth Revision.
3. The Net Interest of Mortgagor in the Mustang #1 well is .750346468.
<PAGE>
4. The Net Interest of Mortgagor in the Grieve Unit #48 and 49 Wells is
.751302088.
5. Entire Grieve Unit limited to the stratigraphic equivalent of the Muddy
(Grieve Sand) as seen in the induction log on the Grieve Unit #48 from 6700'
MD to 6820' MD.
</TABLE>
---------------------------------------------------
Exhibit A - Part II
Gas Balancing Schedule
Most Current Information Available
<TABLE>
<CAPTION>
Over/(Short)
MCF
____________
<S> <C>
Offshore Louisiana:
Eugene Island 190A (860)
Eugene Island 255 5,274
Eugene Island 272 0
Eugene Island 273A Unit 16,175
Eugene Island 284B 263,815
Eugene Island 285 0
Eugene Island 286I 459,671
Eugene island 287D 214,767
Eugene Island 292B 400,535
Eugene Island 293 0
Eugene Island 307E Unit 1,809,167
Eugene Island 307E Non-Unit 649,647
Eugene Island 308E Unit 30,437
Eugene Island 308E Non-Unit 21,106
Eugene Island 309C 14,799
Eugene Island 309G 1,013,044
Eugene Island 309H (519)
Eugene Island 310 #H-12 119,175
Eugene Island 314G 255,652
Eugene Island 315 0
Eugene Island 325A (10,965)
West Delta 97 0
West Delta 98 0
West Cameron 225A&B 34,188
South Marsh Island 142A Unit 1,015,295
South Marsh Island 142A Non-Unit 107,712
South Marsh Island 143B (43,910)
South Timbalier 245 0
Ship Shoal 276A 3,186
Ship Shoal 277A (4,440)
South Pelto 6 0
_________
Subtotal 6,372,951
Wyoming:
Grieve Unit 0
Grieve Unit #48 0
Grieve Unit #49 0
<PAGE>
Schloegel Federal #1-7 0
Van Irvine Trust #1-12 0
_________
Subtotal 0
</TABLE>
---------------------------------------------------
Exhibit A - Part II
Gas Balancing Schedule
Most Current Information Available
<TABLE>
<CAPTION>
Over/(Short)
MCF
____________
<S> <C>
Onshore Texas:
McAllen Ranch - Middle Lease (10,777)
McAllen Ranch - Northern Lea (2,996)
McAllen Ranch - Southern Lea 16,864
Brook State #1 (33,125)
Catfish #1 435,756
Catfish #2 0
Cutthroat #1-R (8)
Dolly Varden #1 2,369
El Paso State #1 13,041
Grayling #1 0
Rainbow State #1 1,416
Steelhead #1 43,418
Tadpole #1 0
Cora Snyder #1 0
Houston Unit #1 18,809
Lasater A #1 (187,342)
FSOC-Leon #1 62,422
_________
Subtotal 359,847
Offshore Texas:
High Island A-20 0
High Island 116 0
High Island 200 0
Galveston 223 JA-1 0
Galveston 223 JA-2 0
Galveston 418/428 (36,594)
Galveston 428 (42,797)
Matagorda 670 B-2 10,034
Matagorda 670/682 7,576
Brazos 491 (46,967)
_________
Subtotal (108,748)
</TABLE>
---------------------------------------------------
<PAGE>
Exhibit A - Part II
Gas Balancing Schedule
Most Current Information Available
<TABLE>
<CAPTION>
Over/(Short)
MCF
____________
<S> <C>
Oklahoma:
Aubrey #1-6 0
Barney 1-21 0
Chenault #1 0
Clayton 1-8 0
Dacus #1-8 (49,427)
Duree #1-36 0
Easely #1-A 131,399
Finnell #2-A 81,299
Floyd Niece #1 (4,596)
Floyd Niece #2 30,219
Haggard #2 2,434
Haggard #3 564,895
Haggard #4 86,475
Hinkle #1-28 0
Kilhoffer 1-21 (14,174)
Lambert #1 (366,674)
Leonard #1 (4,122)
Melvin #1-28 40,212
Niece #1 0
Nutly-Morgan #1 13,987
O'Donnell #1 176,948
Rogers #1 0
Rogers-Spears #1 178,337
Spradlin #1-A (86,545)
Spradlin #2 5,345
Stout #1 0
Walter Steffes 1-5 0
Walter Steffes 2-5 0
Willie Pierce #1 A 0
Whittenburg #2 263,698
Yeager #1 0
A.O. Belcher Unit #1 - (1)
Belcher #2-23 - (1)
Ft. Sill 2-1 - (1)
Ft Sill 4-2 - (1)
_________
Subtotal 1,049,710
Total 7,673,760
=========
<FN>
(1) Information not available.
</TABLE>
<PAGE>
FOREST OIL CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective Date: July 1, 1994
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
I - Definitions and Construction . . . . . . . . . I-1
II - Participation . . . . . . . . . . . . . . . . . II-1
III - Account Credits . . . . . . . . . . . . . . . . III-1
IV - In-Service Distributions . . . . . . . . . . . IV-1
V - Termination Benefits . . . . . . . . . . . . . V-1
VI - Administration of the Plan. . . . . . . . . . . VI-1
VII - Administration of Funds . . . . . . . . . . . . VII-1
VIII- Nature of the Plan . . . . . . . . . . . . . . VIII-1
IX - Adopting Entities . . . . . . . . . . . . . . . IX-1
X - Miscellaneous . . . . . . . . . . . . . . . . . X-1
<PAGE>
FOREST OIL CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
W I T N E S S E T H :
WHEREAS, FOREST OIL CORPORATION, desiring to aid certain of its employees in
making more adequate provision for their retirement, has decided to adopt the
following FOREST OIL CORPORATION EXECUTIVE DEFERRED COMPENSATION PLAN (the
"Plan");
NOW THEREFORE, the Plan is hereby adopted as follows, effective as of July
1, 1994:
<PAGE>
I.
DEFINITIONS AND CONSTRUCTION
1.1 Definitions. The capitalized words or terms used in the Plan and
which are not otherwise defined herein shall have the same meanings as such
words or terms have in the Retirement Savings Plan of Forest Oil Corporation, as
the same may be amended from time to time. Where the following words and
phrases appear in the Plan, they shall have the respective meanings set forth
below, unless their context clearly indicates to the contrary.
(1) Account: An individual account for each Member to which is credited his
Compensation deferrals pursuant to Section 3.1, the Company Deferrals made
on his behalf pursuant to Section 3.2, and which is credited for such
account's allocation of earnings as provided in Section 3.3. A Member shall
have a 100% nonforfeitable interest in his Account at all times.
(2) Affiliate: Each trade or business (whether or not incorporated) which
together with the Company would be deemed to be a "single employer" within
the meaning of subsections (b), (c), (m) or (o) of section 414 of the Code.
(3) Code: The Internal Revenue Code of 1986, as amended.
(4) Committee: The Compensation Committee of the Board of Directors of Forest
Oil Corporation.
(5) Company: Forest Oil Corporation and any other adopting entity which adopts
the Plan pursuant to the provisions of Article IX.
(6) Company Deferrals: Deferrals made by the Company on a Member's behalf
pursuant to Section 3.2.
(7) Compensation: Amounts equal to a Member's "Compensation," as such term is
defined under the Retirement Savings Plan, including amounts a Member could
have received in cash in lieu of Compensation
<PAGE>
deferrals pursuant to Section 3.1, and without regard to the maximum dollar
limitation of section 401(a)(17) of the Code.
(8) Directors: The Board of Directors of Forest Oil Corporation.
(9) Effective Date: July 1, 1994.
(10)Entry Date: The first day of each Plan Year.
(11)Incentive Plan Percentage: For each Plan Year, the percentage of "Eligible
Compensation" under the Forest Oil Corporation Annual Incentive Plan that is
used to determine the amount of the "Incentive Pool" under such plan for the
"Performance Year" under such plan that corresponds to such Plan Year.
(12)Member: Each individual who has been selected for participation in the Plan
and who has become a Member pursuant to Article II.
(13)Plan: The Forest Oil Corporation Executive Deferred Compensation Plan, as
amended from time to time.
(14)Plan Year: The twelve-consecutive month period commencing January 1 of each
year; provided, however, that the first Plan Year shall begin on the
Effective Date and shall end on December 31, 1994.
(15)Retirement Savings Plan. The Retirement Savings Plan of Forest Oil
Corporation, as amended from time to time.
(16)Trust: The trust, if any, established under the Trust Agreement.
(17)Trust Agreement: The agreement, if any, entered into between the
Company and the Trustee pursuant to Article VIII.
(18)Trust Fund: The funds and properties, if any, held pursuant to the
provisions of the Trust Agreement, together with all income, profits and
increments thereto.
(19)Trustee: The trustee or trustees appointed by the Committee who are
qualified and acting under the Trust Agreement at any time.
(20)Valuation Dates: The last day of each calendar month.
1.2 Number and Gender. Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the plural
shall be considered to include the singular. The masculine gender, where
appearing in the Plan,shall be deemed to include the feminine gender.
1.3 Headings. The headings of Articles and Sections herein are included
solely for convenience, and if there is any conflict between such headings and
the text of the Plan, the text shall control.
II.
PARTICIPATION
2.1 Participation. Prior to each Entry Date, the Committee, in its sole
discretion,shall select and notify those management or highly compensated
employees of the Company who shall be eligible to become Members as of such
<PAGE>
Entry Date. Any such eligible employee may become a Member on such Entry Date
by executing and filing with the Committee, prior to such Entry Date, the form
prescribed by the Committee. Such form shall include, among other things
prescribed by the Committee, the consent of such Member to be subject to all of
the terms and provisions of the Plan including, without limitation, the
Compensation deferral provisions set forth in Section 3.1. Subject to the
provisions of Section 2.2, a Member shall remain eligible to defer Compensation
hereunder and receive an allocation of Company Deferrals for each Plan Year
following his initial year of participation in the Plan.
2.2 Cessation of Active Participation. Notwithstanding any provision herein
to the contrary, an individual who has become a Member of the Plan shall cease
to be entitled to defer Compensation hereunder or receive an allocation of
Company Deferrals effective as of any date designated by the Committee. Any
such Committee action shall be communicated to the affected individual prior to
the effective date of such action. Further,an individual who has become a
Member of the Plan may cancel his Compensation deferrals hereunder and his right
to receive an allocation of Company Deferrals, effective as of the Entry Date of
any subsequent Plan Year,by executing and delivering to the Company the form
prescribed by the Committee prior to such Entry Date and within the time period
prescribed by the Committee. An individual described in the preceding
provisions of this Section 2.2 may again become entitled to defer Compensation
hereunder and receive an allocation of Company Deferrals beginning on any
subsequent Entry Date selected by the Committee in its sole discretion.
III.
Account Credits
3.1 Member Deferrals.
(a) For each payroll period in which a Member's Deferred Compensation
Contributions under the Retirement Savings Plan are limited as a result of the
limitations contained in section 401(a)(17) and/or 402(g) of the Code, the
Company shall withhold from such Member's Compensation for such payroll period
and the Member shall defer hereunder the amount by which such Member's Deferred
Compensation Contributions to the Retirement Savings Plan are reduced solely
because of the application of such limitations; provided, however, that any
amount withheld & deferred pursuant to this sentence shall be determined based
upon the assumption that the Member's election with respect to the percentage
rate of his Deferred Compensation Contributions under the Retirement Savings
Plan in effect during such payroll period is equal to the percentage rate of his
Deferred Compensation Contributions in effect on the first day of the Plan Year
in which such payroll period occurs.
(b) For each Plan Year in which a Member's Deferred Compensation
Contributions under the Retirement Savings Plan are limited as a result of the
limitations contained in section 401(k)(3) and/or 415 of the Code, the Company
shall withhold from such Member's Compensation and the Member shall defer here-
under an amount equal to the reduction in such Member's Deferred Compensation
Contributions to the Retirement Savings Plan as a result solely of the appli-
cation of such limitations.
(c) A Member's compensation deferrals shall become effective as of the
Entry Date which is coincident with or next following the date the Member
executes and files with the Committee the form described in Section 2.1. A
<PAGE>
Member's compensation deferrals shall remain in force and effect unless and
until such deferrals are to cease in accordance with the provisions of Section
2.2. Compensation for a Plan Year not deferred by a Member pursuant to the
above paragraphs shall be received by such Member in cash. Compensation
deferrals made by a Member shall be credited to such Member's Account as of the
date upon which the Compensation deferred would have been received by such
Member in cash had no deferral been made pursuant to this Section 3.1.
3.2 Company Deferrals.
(a) As of the last day of each calendar month, the Company shall
credit a Member's Account with an amount which equals 100% of the Compensation
deferrals made by such Member pursuant to Section 3.1(a) and (b) during such
month not in excess of 5% of such Member's Compensation for such month.
(b) As of the last day of each Plan Year, the Company shall credit a
Member's Account with an amount equal to the difference, if any, between (i)the
Incentive Plan Percentage for such Plan Year multiplied by such Member's
Compensation for such Plan Year, and (ii) the Company Profit-Sharing Contribu-
tion allocated to such Member's Company Contributions Account under the Retire-
ment Savings Plan for such Plan Year. Further, as of the last day of each Plan
Year in which the Company Matching Contributions and/or Company Profit-Sharing
Contributions under the Retirement Savings Plan on behalf of a Member are
limited as a result of the limitations contained in section 401(m)(2) and/or 415
of the Code, the Company shall credit such Member's Account with an amount equal
to the reduction in such Member's share of such contributions to the Retirement
Savings Plan as a result solely of the application of such limitations.
(c) As of the Effective Date, the Company may credit the Account of an
individual who is a Member on such date with such amount, if any, as the Company
shall determine in its sole discretion. Such credits may be made on behalf of
some of such Members but not others, and such credits may vary in amount among
such individual Members.
3.3 Earnings Credits. As of each Valuation Date, the Company shall credit
a Member's Account with an amount that equals 1% of the balance in such Account
as of the next preceding Valuation Date. So long as there is any balance in any
Account, such Account shall continue to receive credits pursuant to this
Section.
IV.
IN-SERVICE DISTRIBUTIONS
In-service distributions shall not be permitted under the Plan. Members
shall not be permitted to make withdrawals from the Plan prior to termination of
employment with the Company and it Affiliates. Members shall not, at any time,
be permitted to borrow from the Trust Fund. Following termination of employment
with the Company and its Affiliates, the amount credited to a Member's Account
shall be payable to such Member in accordance with the provisions of Article V.
V.
<PAGE>
TERMINATION BENEFITS
5.1 Amount of Benefit. Upon termination of employment of a Member with the
Company and its Affiliates for any reason, the Member, or, in the event of the
death of the Member while employed by the Company or an Affiliate, the Member's
designated beneficiary, shall be entitled to a benefit equal in value to the
balance in the Member's Account as of the Valuation Date next preceding the date
of the payment of such benefit pursuant to Section 5.2.
5.2 Time and Form of Benefit Payment. A Member's benefit under Section 5.1
shall be paid in a single lump sum, cash payment on one of the following dates
irrevocably elected by such Member in writing on the form prescribed by the
Committee on or before the date he becomes a Member of the Plan:
(1) the first day of the second calendar month following the month in
which the Member's employment with the Company and its Affiliates
terminates; or
(2) February 1 of the year following the calendar year in which the
Member's employment with the Company and its Affiliates terminates.
In the event such Member fails to timely elect the date upon which his benefit
payment is to be made, such benefit payment shall be made at the time provided
in clause (1) of the preceding sentence.
5.3 Designation of Beneficiaries.
(a) Each Member shall have the right to designate the beneficiary or
beneficiaries to receive payment of his benefit in the event of his death. Each
such designation shall be made by executing the beneficiary designation form
prescribed by the Committee and filing same with the Committee. Any such
designation may be changed at any time by execution of a new designation in
accordance with this Section.
(b) If no such designation is on file with the Committee at the time
of the death of the Member or such designation is not effective for any reason
as determined by the Committee,then the designated beneficiary or beneficiaries
to receive such benefit shall be as follows:
(1) If a Member leaves a surviving spouse, his benefit shall be
paid to such surviving spouse;
(2) If a Member leaves no surviving spouse, his benefit shall be
paid to such Member's executor or administrator, or to his heirs at law if
there if no administration of such Member's estate.
5.4 Payment of Benefits. To the extent the Trust Fund has sufficient
assets, the Trustee shall pay benefits to Members or their beneficiaries, except
to the extent the Company pays the benefits directly and provides adequate
evidence of such payment to the Trustee. To the extent the Trustee does not or
cannot pay benefits out of the Trust Fund, the benefits shall be paid by the
Company. Any benefit payments made to a Member or for his benefit pursuant to
any provision of the Plan shall be debited to such Member's Account. All
benefit payments shall be made in cash to the fullest extent practicable.
<PAGE>
5.5 Unclaimed Benefits. In the case of a benefit payable on behalf of a
Member, if the Committee is unable to locate the Member or beneficiary to whom
such benefit is payable, upon the Committee's determination thereof, such
benefit shall be forfeited to the Company. Notwithstanding the foregoing, if
subsequent to any such forfeiture the Member or beneficiary to whom such benefit
is payable makes a valid claim for such benefit, such forfeited benefit shall
be paid by the Company or restored to the Plan by the Company.
VI.
ADMINISTRATION OF THE PLAN
6.1 Committee Powers and Duties. The general administration of the Plan
shall be vested in the Committee. The Committee shall supervise the administra-
tion and enforcement of the Plan according to the terms and provisions hereof
and shall have all powers necessary to accomplish these purposes, including,
but not by way of limitation, the right, power, authority, and duty:
(a) To make rules, regulations, and bylaws for the administration of
the Plan that are not inconsistent with the terms and provisions hereof,
and to enforce the terms of the Plan and the rules and regulations promul-
gated thereunder by the Committee;
(b) To construe in its discretion all terms, provisions, conditions,
and limitations of the Plan;
(c) To correct any defect or to supply any omission or to reconcile
any inconsistency that may appear in the Plan in such manner and to such
extent as it shall deem in its discretion expedient to effectuate the
purposes of the Plan;
(d) To employ and compensate such accountants, attorneys, investment
advisors, and other agents, employees, and independent contractors as the
Committee may deem necessary or advisable for the proper and efficient
administration of the Plan;
(e) To determine in its discretion all questions relating to
eligibility;
(f) To determine whether and when there has been a termination of a
Member's employment with the Company and its Affiliates, and the reason
for such termination;
(g) To make a determination in its discretion as to the right of any
person to a benefit under the Plan and to prescribe procedures to be fol-
lowed by distributees in obtaining benefits hereunder; and
(h) To receive and review reports from the Trustee as to the financial
condition of the Trust Fund, including its receipts and disbursements.
6.2 Self-Interest of Members. No member of the Committee shall have any
right to vote or decide upon any matter relating solely to himself under the
Plan (including, without limitation, Committee decisions under Article II) or to
vote in any case in which his individual right to claim any benefit under the
Plan is particularly involved. In any case in which a Committee member is so
disqualified to act and the remaining members cannot agree,the Directors shall
appoint a temporary substitute member to exercise all the powers of the
<PAGE>
disqualified member concerning the matter in which he is disqualified.
6.3 Claims Review. In any case in which a claim for Plan benefits of a
Member or beneficiary is denied or modified, the Committee shall furnish written
notice to the claimant within ninety days (or within 180 days if additional
information requested by the Committee necessitates an extension of the
ninety-day period), which notice shall:
(a) State the specific reason or reasons for the denial or
modification;
(b) Provide specific reference to pertinent Plan provisions on which
the denial or modification is based;
(c) Provide a description of any additional material or information
necessary for the Member, his beneficiary, or representative to perfect
the claim and an explanation of why such material or information is
necessary; and
(d) Explain the Plan's claim review procedure as contained herein.
In the event a claim for Plan benefits is denied or modified, if the Member, his
beneficiary, or a representative of such Member or beneficiary desires to have
such denial or modification reviewed, he must, within sixty days following
receipt of the notice of such denial or modification, submit a written request
for review by the Committee of its initial decision. In connection with such
request, the Member, his beneficiary, or the representative of such Member or
beneficiary may review any pertinent documents upon which such denial or modi-
fication was based and may submit issues and comments in writing. Within sixty
days following such request for review the Committee shall, after providing a
full and fair review, render its final decision in writing to the Member, his
beneficiary or the representative of such Member or beneficiary stating specific
reasons for such decision and making specific references to pertinent Plan
provisions upon which the decision is based. If special circumstances require
an extension of such sixty-day period, the Committee's decision shall be
rendered as soon as possible, but not later than 120 days after receipt of the
request for review. If an extension of time for review is required, written
notice of the extension shall be furnished to the Member, beneficiary, or the
representative of such Member or beneficiary prior to the commencement of the
extension period.
6.4 Company to Supply Information. The Company shall supply full and
timely information to the Committee, including, but not limited to, information
relating to each Member's Compensation, age,retirement,death, or other cause of
termination of employment and such other pertinent facts as the Committee may
require. The Company shall advise the Trustee of such of the foregoing facts as
are deemed necessary for the Trustee to carry out the Trustee's duties under the
Plan and the Trust Agreement. When making a determination in connection with
the Plan, the Committee shall be entitled to rely upon the aforesaid information
furnished by the Company.
6.5 Indemnity. To the extent permitted by applicable law, the Company
shall indemnify and save harmless the Directors and each member of the Committee
against any and all expenses, liabilities and claims (including legal fees
incurred to defend against such liabilities and claims) arising out of their
discharge in good faith of responsibilities under or incident to the Plan.
Expenses and liabilities arising out of willful misconduct shall not be covered
under this indemnity. This indemnity shall not preclude such
<PAGE>
further indemnities as may be available under insurance purchased by the Company
or provided by the Company under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, as such indemnities are permitted under
applicable law.
VII.
ADMINISTRATION OF FUNDS
7.1 Payment of Expenses. All expenses incident to the administration of
the Plan and Trust, including but not limited to, legal, accounting, Trustee
fees, and expenses of the Committee, may be paid by the Company and, if not paid
by the Company, shall bepaid by the Trustee from the Trust Fund, if any.
7.2 Trust Fund Property. All income, profits, recoveries, contributions,
forfeitures and any and all moneys, securities and properties of any kind at any
time received or held by the Trustee, if any, shall be held for investment
purposes as a commingled Trust Fund pursuant to the terms of the Trust Agree-
ment. The Committee shall maintain one or more Accounts in the name of each
Member, but the maintenance of an Account designated as the Account of a Member
shall not mean that such Member shall have a greater or lesser interest than
that due him by operation of the Plan and shall not be considered as segregating
any funds or property from any other funds or property contained in the
commingled fund. No Member shall have any title to any specific asset in the
Trust Fund, if any.
VIII.
Nature of the Plan
The Company intends and desires by the adoption of the Plan to recognize the
value to the Company of the past and present services of employees covered by
the Plan and to encourage and assure their continued service with the Company by
making more adequate provision for their future retirement security. The
establishment of the Plan is, in part, made necessary by certain benefit
limitations which are imposed on the Retirement Savings Plan by the Code. The
Plan is intended to constitute an unfunded, unsecured plan of deferred compen-
sation for a select group of management or highly compensated employees of the
Company. Plan benefits herein provided are to be paid out of the Company's
general assets. Nevertheless, subject to the terms hereof and of the Trust
Agreement, the Company may transfer money or other property to the Trustee and
the Trustee shall pay Plan benefits to Members and their beneficiaries out of
the Trust Fund.
The Committee, in its sole discretion, may establish the Trust and direct
the Company to enter into the Trust Agreement and adopt the Trust for purposes
of the Plan. In such event, the Company shall remain the owner of all assets in
the Trust Fund and the assets shall be subject to the claims of Company
creditors if the Company ever becomes insolvent. For purposes hereof, the
Company shall be considered "insolvent" if (a) the Company is unable to pay its
debts as they become due, or (b) the Company is subject to a pending proceeding
as a debtor under the United Sates Bankruptcy Code (or any successor federal
statute). The chief executive officer of the Company and its board of directors
<PAGE>
shall have the duty to inform the Trustee in writing if the Company becomes
insolvent. Such notice given under the preceding sentence by any party shall
satisfy all of the parties' duty to give notice. When so informed, the Trustee
shall suspend payments to the Members and hold the assets forthe benefit of the
Company's general creditors. If the Trustee receives a written allegation that
the Company is insolvent, the Trustee shall suspend payments to the Members and
hold the Trust Fund for the benefit of the Company's general creditors, and
shall determine within the period specified in the Trust Agreement whether the
Company is insolvent. If the Trustee determines that the Company is not insol-
vent, the Trustee shall resume payments to the Members. No Member or benefici-
ary shall have any preferred claim to, or any beneficial ownership interest in,
any assets of the Trust Fund.
IX.
ADOPTING ENTITIES
It is contemplated that other corporations, associations, partnerships or
proprietorships may adopt this Plan and thereby become the Company. Any such
entity, whether or not presently existing, may become a party hereto by appro-
priate action of its officers without the need for approval of its board of
directors or noncorporate counterpart or of the Committee or the Directors;
provided, however, that such entity must be an Affiliate. The provisions of the
Plan shall apply separately and equally to each Company and its employees in the
same manner as is expressly provided for Forest Oil Corporation and its
employees, except that the power to appoint or otherwise affect the Trustee and
the power to amend or terminate the Plan or amend the Trust Agreement shall be
exercised by the Committee alone. Transfer of employment among Companies and
Affiliates shall not be considered a termination of employment hereunder. Any
Company may,by appropriate action of its officers without the need for approval
of its board of directors or noncorporate counterpart or the Committee or the
Directors, terminate its participation in the Plan. Moreover, the Committee
may, in its discretion, terminate a Company's Plan participation at any time.
X.
MISCELLANEOUS
10.1 Not Contract of Employment. The adoption and maintenance of the Plan
shall not be deemed to be a contract between the Company and any person or to be
consideration for the employment of any person. Nothing herein contained shall
be deemed to give any person the right to be retained in the employ of the
Company or to restrict the right of the Company to discharge any person at any
time nor shall the Plan be deemed to give the Company the right to require any
person to remain in the employ of the Company or to restrict any person's right
to terminate his employment at any time.
10.2 Alienation of Interest Forbidden. The interest of a Member or his
beneficiary or beneficiaries hereunder may not be sold, transferred, assigned,
or encumbered in any manner, either voluntarily or involuntarily, and any
attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be null and void; neither shall the benefits hereunder
<PAGE>
be liable for or subject to the debts, contracts, liabilities, engagements or
torts of any person to whom such benefits or funds are payable, nor shall they
be an asset in bankruptcy or subject to garnishment, attachment or other legal
or equitable proceedings.
10.3 Withholding. All Compensation deferrals and payments provided for
hereunder shall be subject to applicable withholding and other deductions as
shall be required of the Company under any applicable local, state or federal
law.
10.4 Amendment and Termination. The Committee may from time to time, in its
discretion, amend, in whole or in part, any or all of the provisions of the
Plan; provided, however, that no amendment may be made that would impair the
rights of a Member with respect to amounts already allocated to his Account. The
Committee may terminate the Plan at any time. In the event that the Plan is
terminated, the balance in a Member's Account shall be paid to such Member or
his designated beneficiary in a single lump sum, cash payment in full
satisfaction of all of such Member's or beneficiary's benefits hereunder.
10.5 Severability. If any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully severable
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.
10.6 Governing Laws. All provisions of the Plan shall be construed in
accordance with the laws of Colorado except to the extent preempted by federal
law.
EXECUTED this ______ day of ______________________, 1994
FOREST OIL CORPORATION
By:_______________________________
Name:
Title:
<PAGE>
Exhibit 11
FOREST OIL CORPORATION AND CONSOLIDATED SUBSIDIARIES
CALCULATION OF EARNINGS (LOSS) PER SHARE OF COMMON STOCK
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1994 1993 1992
---- ---- ----
(In Thousands Except Per Share Amounts)
<S> <C> <C> <C>
Primary earnings (loss) per share:
Net earnings (loss) $ (81,843) (21,213) 7,298
Less dividend requirements on:
$.75 Convertible Preferred Stock (2,161) (2,250) (2,348)
--------- ------- -------
Net earnings (loss) attributable to common stock
for primary earnings (loss) per share calculation $ (84,004) (23,463) 4,950
--------- ------- -------
--------- ------- -------
Weighted average number of common
shares outstanding 28,097 21,997 13,774
--------- ------- -------
--------- ------- -------
Primary earnings (loss) per share of common stock $ (2.99) (1.07) .36
--------- ------- -------
--------- ------- -------
Fully diluted earnings (loss) per share:
Net earnings (loss) attributable to common stock, as above $(84,004) (23,463) 4,950
Add:
Dividend requirements on:
$.75 Convertible Preferred Stock 2,161 2,250 2,348
Interest expense on 5-1/2% Convertible
Subordinated Debentures -- 409 470
Expenses related to the 5-1/2% Convertible
Subordinated Debentures -- 6 15
Less:
Additional Federal income taxes -- (141) (165)
--------- ------- -------
Net earnings (loss) attributable to common stock for
fully diluted earnings (loss) per share calculation $ (81,843) (20,939) 7,618
--------- ------- -------
--------- ------- -------
Common shares applicable to fully diluted calculation:
Weighted average number of common shares
outstanding, as above 28,097 21,997 13,774
Add weighted average number of shares:
Issuable upon assumed conversion of:
$.75 Convertible Preferred Stock 10,084 10,492 12,209
Issuable upon assumed conversion of 5-1/2%
Convertible Subordinated Debentures -- 612 532
--------- ------- -------
Common shares applicable to fully diluted calculation 38,181 33,101 26,515
--------- ------- -------
--------- ------- -------
Fully diluted earnings (loss) per share of common stock $(2.14)* (.63)* .29
--------- ------- -------
--------- ------- -------
<FN>
* The fully diluted loss per share for 1994 and 1993 is not presented in the
Company's financial statements because the effects of assumed exercises and
conversions were anti-dilutive.
</TABLE>
<PAGE>
Exhibit 18
April 17, 1995
Forest Oil Corporation
1500 Colorado National Building
950 Seventeenth Street
Denver, CO 80202
Ladies and Gentlemen:
We have audited the consolidated balance sheets of Forest Oil Corporation and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of
the years in the three-year period ended December 31, 1994, and have reported
thereon under date of March 30, 1995, except as to Note 17 which is as of
April 17, 1995. The aforementioned consolidated financial statements and our
audit report thereon are included in the Company's annual report on Form 10-K
for the year ended December 31, 1994. As stated in Note 1 to those financial
statements, the Company changed its method of accounting for oil and gas sales
from the sales method to the entitlements method and states that the newly
adopted accounting principle is preferable in the circumstances because the
entitlements method allows for recognition of revenue based on the Company's
actual share of jointly owned production and provides a better matching of
revenue and related expenses. In accordance with your request, we have
reviewed and discussed with Company officials the circumstances and business
judgment and planning upon which the decision to make this change in the
method of accounting was based.
With regard to the aforementioned accounting change, authoritative criteria
have not been established for evaluating the preferability of one acceptable
method of accounting over another acceptable method. However, for purposes
of Forest Oil Corporation's compliance with the requirements of the
Securities and Exchange Commission, we are furnishing this letter.
Based on our review and discussion, with reliance on management's business
judgment and planning, we concur that the newly adopted method of accounting
is preferable in the Company's circumstances.
Very truly yours,
KPMG Peat Marwick LLP
<PAGE>
Exhibit 24
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS
FOREST OIL CORPORATION:
We consent to the incorporation by reference in (i) the Registration
Statements (Nos. 2-74151, 2-76946, 33-2748 and 33-59504) on Form S-8 of
Forest Oil Corporation - Retirement Savings Plan of Forest Oil Corporation,
(ii) the Registration Statement (No. 33-48440) on Form S-8 and S-3 of Forest
Oil Corporation - 1992 Stock Option Plan of Forest Oil Corporation, (iii) the
Registration Statement (No. 33-43292) on Form S-3 of Forest Oil Corporation -
Common Stock issuable upon exercise of the Warrants of Forest Oil Corporation
and (iv) the Registration Statements (Nos. 33-47477 and 33-47478) on Forms
S-2 and S-3 of Forest Oil Corporation - Common Stock issuable to Richard Dorn
and resales thereof, of our report dated March 30, 1995, except as to Note 17
which is as of April 17, 1995, relating to the consolidated balance sheets of
Forest Oil Corporation and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended December 31,
1994, which report appears in the December 31, 1994 annual report on Form 10-K
of Forest Oil Corporation.
Our report on the consolidated financial statements refers to a change in the
method of accounting for oil and gas sales from the sales method to the
entitlements method effective January 1, 1994 and to changes in the method of
accounting for postretirement benefits and income taxes in 1993.
KPMG PEAT MARWICK LLP
Denver, Colorado
April 17, 1995
<PAGE>
Exhibit 25
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Donald H. Anderson
-------------------------
Donald H. Anderson
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
<PAGE>
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Austin M. Beutner
----------------------------
Austin M. Beutner
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Robert S. Boswell
----------------------------
Robert S. Boswell
_______________________________________________________________________________
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Richard J. Callahan
-----------------------------
Richard J. Callahan
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
<PAGE>
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Dale F. Dorn
-------------------------
Dale F. Dorn
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ John C. Dorn
-------------------------
John C. Dorn
_______________________________________________________________________________
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ William L. Dorn
---------------------------
William L. Dorn
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
<PAGE>
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Harold D. Hammar
---------------------------
Harold D. Hammar
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ David H. Keyte
--------------------------
David H. Keyte
_______________________________________________________________________________
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ James H. Lee
-------------------------
James H. Lee
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
<PAGE>
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Jeffrey W. Miller
----------------------------
Jeffrey W. Miller
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Jack D. Riggs
--------------------------
Jack D. Riggs
_______________________________________________________________________________
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Daniel L. McNamara and Linda M.
Trulick his true and lawful attorneys and agents (each with authority to act
alone), to do any and all acts and things and to execute any and all instruments
which said attorneys and agents deem necessary or advisable to enable the
Company to comply with the Securities Exchange Act of 1934, as amended, and any
rules, regulations, and requirements of the Securities and Exchange Commission
in respect thereof, in connection with the preparation and filing of the Form
10-K--Annual Report for the year ended December 31, 1994 pursuant to Section 13
of the Securities Exchange Act of 1934, including specifically, but without
limiting the generality of the foregoing, the power and authority to sign for
and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to a Form l0-K--Annual Report for the year
ended December 31, 1994 pursuant to Section 13 of the Securities Exchange Act of
1934 or to any amendment thereto filed with the Securities and Exchange
Commission and to any instrument or document filed as a part of, as an exhibit
to or in connection with said Form l0-K--Annual Report or amendment; and the
undersigned does hereby ratify and confirm as his own act and deed all that said
attorneys and agents shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Michael B. Yanney
----------------------------
Michael B. Yanney
_______________________________________________________________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or
director, or both, of FOREST OIL CORPORATION, a New York corporation (the
"Company"), does hereby constitute and appoint Linda M. Trulick his true and
lawful attorney and agent to do any and all acts and things and to execute any
and all instruments which said attorney and agent deems necessary or advisable
to enable the Company to comply with the Securities Exchange Act of 1934, as
amended, and any rules, regulations, and requirements of the Securities and
Exchange Commission in respect thereof, in connection with the preparation and
filing of the Form 10-K--Annual Report for the year ended December 31, 1994
pursuant to Section 13 of the Securities Exchange Act of 1934, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign for and on behalf of the undersigned the name of the
undersigned as officer or director, or both, of the Company to a Form
l0-K--Annual Report
<PAGE>
for the year ended December 31, 1994 pursuant to Section 13 of the Securities
Exchange Act of 1934 or to any amendment thereto filed with the Securities and
Exchange Commission and to any instrument or document filed as a part of, as an
exhibit to or in connection with said Form l0-K--Annual Report or amendment; and
the undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this _____ day of _______________, 1995.
/s/ Daniel L. McNamara
----------------------------
Daniel L. McNamara
_______________________________________________________________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The consolidated balance sheets and consolidated statements of operations on
pages 37 thru 39 of the Company's Form 10-K for the year ended December 31,
1994.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,869
<SECURITIES> 0
<RECEIVABLES> 20,418
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,518
<PP&E> 1,184,536
<DEPRECIATION> 907,927
<TOTAL-ASSETS> 324,832
<CURRENT-LIABILITIES> 47,618
<BONDS> 207,054
<COMMON> 2,829
0
15,845
<OTHER-SE> (12,588)
<TOTAL-LIABILITY-AND-EQUITY> 324,832
<SALES> 114,541
<TOTAL-REVENUES> 115,947
<CGS> 22,384
<TOTAL-COSTS> 33,550
<OTHER-EXPENSES> 123,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,773
<INCOME-PRETAX> (67,844)
<INCOME-TAX> 9
<INCOME-CONTINUING> (67,853)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (13,990)
<NET-INCOME> (81,843)
<EPS-PRIMARY> (2.99)
<EPS-DILUTED> (2.99)
</TABLE>
