SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) March 29, 1995
MAYNARD OIL COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 0-5704 75-1362284
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
8080 N. Central Expressway, Suite 660, Dallas, Texas 75206
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Registrant's telephone number, including area code: (214) 891-8880
INFORMATION TO BE INCLUDED
IN THE REPORT
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of business acquired
(1) Report of Independent Accountants
(2) Historical Financial Summaries of The Interests in the
Oil and Gas Revenues and Direct Operating Expenses of the
Properties Acquired by Maynard Oil Company from Pennzoil
Exploration and Production Company for the years ended
December 31, 1994 and 1993
(3) Notes to Historical Financial Summaries of The Interests
in the Oil and Gas Revenues and Direct Operating Expenses
of the Properties Acquired by Maynard Oil Company from
Pennzoil Exploration and Production Company for the years
ended December 31, 1994 and 1993.
(4) Supplementary Oil and Gas Information (Unaudited)
(b) Pro Forma Financial Information.
(1) Pro Forma Condensed Consolidated Statement of Operations
(Unaudited) Year Ended December 31, 1994.
(2) Pro Forma Condensed Consolidated Statement of Operations
(Unaudited) Three Months Ended March 31, 1995
(3) Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
(4) Supplementary Oil and Gas Information (Unaudited)
(c) Exhibits
See Index to Exhibits
SIGNATURES
Pursuant to the requirements 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.
MAYNARD OIL COMPANY
BY: /s/ Kenneth W. Hatcher
_________________________
Kenneth W. Hatcher
Vice President of Finance
Dated: June 12, 1995
INDEX TO EXHIBITS
Exhibit No. Description of Document
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2.1 Purchase and Sale Agreement with Pennzoil Exploration and
Production Company dated February 1, 1995 (together with a
list briefly identifying the contents of all omitted exhibits,
schedules and appendices thereto). The Registrant agrees to
provide copies of such exhibits, schedules and appendices to
the Commission upon request.
23 Independent Auditors' Consent
99.1 Report of Independent Accountants
99.2 Historical Financial Summaries of The Interests in the Oil and
Gas Revenues and Direct Operating Expenses of the Properties
Acquired by Maynard Oil Company from Pennzoil Exploration and
Production Company for the years ended December 31, 1994 and
1993
99.3 Notes to Historical Financial Summaries of The Interests in
the Oil and Gas Revenues and Direct Operating Expenses of the
Properties Acquired by Maynard Oil Company from Pennzoil
Exploration and Production Company for the years ended
December 31, 1994 and 1993
99.4 Supplementary Oil and Gas Information (Unaudited)
99.5 Unaudited Pro Forma Condensed Financial Statements
EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, dated as of February 1, 1995 is between PENNZOIL
EXPLORATION AND PRODUCTION COMPANY, a Delaware corporation (hereinafter
referred to as "Seller"), with offices at 700 Milam, Houston, Texas 77002,
and MAYNARD OIL COMPANY, a Delaware corporation (hereinafter referred to as
"Buyer") with offices at 8080 North Central Expressway, Suite 660, Dallas,
Texas 75206.
WHEREAS, Seller desires to sell, and Buyer desires to purchase, upon and
subject to the terms and conditions hereinafter set forth, Seller's interest
in and to those properties described on Exhibit "A" attached hereto, being
(i) all of Seller's right, title and interest in the oil and gas leases,
mineral interests, royalty interests, or overriding royalty interests
including a like interest in all formations, depths and unit rights described
on Exhibit "A" insofar and only insofar as described therein (the "Leases"),
(ii) all of Seller's right, title and interest in all wells (known or
unknown, plugged or unplugged), equipment, materials, fixtures and facilities
and other personal property used or useful in connection with the production,
gathering, storing, measuring, treating, operating, maintaining, marketing or
transportation of production from the Leases or lands pooled or unitized
therewith, but excluding those items expressly set out on Exhibit "A" which
are to be retained by Seller (the "Equipment"), (iii) all of Seller's right,
title and interest in all contracts and contractual rights insofar and only
insofar as they relate to the Leases and Equipment including without
limitation, unit agreements, surface leases, oil and gas leases and/or
subleases and assignments, mineral deeds, royalty deeds, operating
agreements, easements, right of ways, farmout and farmin agreements, and all
similar rights leased or owned by Seller, and oil and gas sales, purchase,
exchange and processing contracts and agreements, whether of record or not
(the "Contracts"). Seller's interest in the Leases, Equipment and Contracts
shall hereinafter together be called the "Interests".
THEREFORE, in consideration of the above recitals and of the covenants
and agreements herein contained, Seller and Buyer agree as follows:
1. SALE AND PURCHASE. Subject to and upon all of the terms and
conditions hereinafter set forth, Seller shall sell, transfer, assign, convey
and deliver the Interests to Buyer, and Buyer shall purchase, receive, pay
for and accept the Interests from Seller, effective January 1, 1995 at 7
a.m., local time, said time to be determined for each locality in which the
Interests are located in accordance with the time generally observed in said
locality (the "Effective Time").
2. SALE PRICE. (a) The sale price for the Interests shall be
$11,300,000.00 ("Sale Price"), subject only to any applicable price
adjustment as provided for hereinbelow.
(b) Upon execution of this Agreement, Buyer shall pay to Seller an
earnest money deposit ("Earnest Money") in the amount of $1,130,000.00. In
the event that the Closing (as hereinafter defined) does not occur, the
Earnest Money shall be refunded to Buyer without interest, unless such
Closing fails to occur as a result of Buyer's breach of any material term of
this Agreement. Otherwise, the Earnest Money shall be credited against the
Sale Price at Closing.
3. ALLOCATED VALUES. Buyer and Seller herein agree upon the allocation
of the Sale Price among the Interests (the "Allocated Value"). Such
Allocated Values are made a part of this Agreement and are shown on Exhibit
"A.2" which is attached hereto.
4. SELLER'S REPRESENTATIONS. Seller represents and warrants to Buyer
that as of the Closing Date:
(a) Seller is a duly organized corporation validly existing and in
good standing under the laws of the State of Delaware, is duly qualified to
carry on its business in the state in which the Interests are located, has
full power and authority to enter into and perform under this Agreement
according to its terms and this Agreement has been duly executed and
delivered by each Seller and constitutes a legal, valid, and binding
obligation on it, enforceable against it in accordance with its terms;
(b) Seller's execution, delivery and performance of this Agreement
has been duly authorized by all necessary corporate action and will not
violate or conflict with any agreement, law, rule, regulation, charter, or
other instruments governing either Seller's organization, management,
business affairs or instrument to which Seller is a party or is bound; and
(c) Seller shall have disclosed all material known third party
claims or demands ("Claims") with regard to the Interests. For purposes of
this representation, the term Claims shall be deemed to mean those claims,
which would affect the aggregate of the Allocated Values associated with the
Interests in excess of $150,000.00.
5. BUYER'S REPRESENTATIONS. Buyer represents and warrants to Seller
that as of the Closing Date:
(a) Buyer is a duly organized corporation validly existing and in
good standing under the laws of the State of Delaware, is duly qualified to
carry on its business in the state in which the Interests are located, has
full power and authority to enter into and perform under this Agreement
according to its terms, and this Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid, and binding obligation on
it, enforceable against it in accordance with its terms.
(b) Buyer's execution, delivery and performance of this Agreement
has been duly authorized by all necessary corporate action and will not
conflict with or violate any agreement, law, rule, regulation, ordinance,
charter or other instruments governing either Buyer's organization,
management, business affairs or instrument to which Buyer is a party or by
which Buyer is bound.
6. ACCESS TO RECORDS. After execution of this Agreement, Seller shall
give Buyer and its authorized representatives, during regular business hours,
at Buyer's sole risk, cost and expense, access, with copying privileges, to
all raw geological, geophysical, production, engineering and other technical
data and records, and to all contract, land, title and lease records, to the
extent such data and records are in Seller's possession and relate to the
Interests and such other information relating to the Interests as Buyer may
reasonably request; provided, however, Seller shall have no obligation to
provide Buyer such access to any data or information which Seller considers
proprietary or confidential to it or to which access Seller cannot legally
provide Buyer because of third-party restrictions on Seller, but Seller
agrees to use its best efforts to obtain the consent of any such third-party
to furnish such information to Buyer. Buyer shall keep all materials and
data obtained confidential and shall return any and all materials and data
including Buyer's notes and work papers as to any properties not purchased at
Closing.
7. TITLE DEFECTS. For the purpose of this Agreement, a "Title Defect"
shall mean any material deficiency in one (or more) of the following
respects, to-wit:
(a) Seller's title at the Effective Time and at Closing, as to one
or more properties, is subject to an outstanding mortgage, deed of trust,
lien or security interest;
(b) Seller owns less than the net revenue interest shown on
Exhibit "A.2" or is obligated to bear a share of the costs of operation
greater than the working interest shown on Exhibit "A.2" without a
corresponding increase in net revenue interest;
(c) Seller's rights and interests have been or are subject to
being reduced by virtue of the exercise by a third party reversionary or
back-in interest, farm-out of other than wellbore rights, or other similar
right not reflected on Exhibit "A.2";
(d) Seller is in default under some material provision of a lease,
farmout agreement, or other contract or agreement affecting the Interests;
(e) Seller is in breach of any representations or warranties made
herein;
(f) Changes in the gas balancing amounts from that set out on
Exhibit A.3; or
(g) A material adverse environmental condition exists with respect
to the Leases or Equipment.
8. PREFERENTIAL RIGHTS. If any of the Interests are subject to
preferential purchase rights, rights of first refusal, consents to assign,
Lessor's approvals, or similar rights (collectively, "preferential rights"),
Seller shall promptly upon the execution of this Agreement by the parties
hereto notify all holders of preferential rights of its intention to sell the
leases affected thereby, and of the corresponding Allocated Values. Seller
shall promptly notify Buyer if the preferential rights are exercised, or if
the requisite period has elapsed without said rights having been exercised.
9. PHYSICAL AND ENVIRONMENTAL INSPECTION. After the execution of this
Agreement Buyer and its authorized representatives shall have physical
access to the Interests at Buyer's sole cost, risk and expense for the
purpose of inspecting the Interests, conducting such tests, examination,
investigations and assessments as may be reasonable and necessary or
appropriate to evaluate the environmental and physical conditions of the
Interests, including the identification of wetlands. For those Interests
which are not operated by Seller, Buyer shall obtain permission from the
operator to conduct such inspections. Buyer shall defend and indemnify
Seller from any and all liability, claims, causes of action, injury to
Buyer's employees, agents or contractors or to Buyer's property, and/or
injury to Seller's property, employees, agents or contractors which may arise
out of Buyer's inspections, but only to the extent of Buyer's negligence.
Buyer agrees to provide to Seller, upon request, a copy of any environmental
assessments, including any reports, data, and conclusions. Buyer and Seller
shall keep any and all data or information acquired by all such examinations
and results of all analysis of such data and information strictly
confidential and not disclose same to any person or agency without the prior
written approval of both Buyer and Seller. The foregoing obligation of
confidentiality shall survive Closing or termination of this Agreement
without Closing.
If Buyer discovers a material environmental condition which would
adversely affect the value of the Interests by $50,000.00 or more per defect
net to Seller's interest in the affected property and Seller is not in
compliance with environmental laws, rules, and regulations with respect to
such property ("Environmental Defect") Buyer shall give Seller written notice
thereof not later than ten (10) business days prior to Closing together with
the basis for such assertion and data in support thereof, and shall furnish
Seller with any proposed reduction in the Sales Price attributable to each
such matter. Environmental Defects shall be resolved under the provisions of
paragraph 10.
10. SALE PRICE ADJUSTMENTS. Buyer may, by delivery of written notice
in good faith to Seller of the existence of a Title Defect, request reduction
of the Sale Price for the property affected. Seller may in good faith
request an increase in the Sale Price of a property by delivery to Buyer of
written notice that the net revenue interest actually owned by Seller therein
is greater than that shown on Exhibit "A.2".
Any such notice by Buyer or Seller shall include appropriate evidence to
substantiate its position and shall be delivered to the other party on or
before ten (10) business days prior to Closing. After said date Buyer shall
be deemed to have fully inspected and accepted the Interests "as is" in their
then current physical and environmental condition and the Interests shall be
deemed to be free of Title Defects except for those noticed as above
provided.
Upon timely delivery of a notice by Buyer of a Title Defect or
Environmental Defect , Seller at Seller's option may remove the defective
property from the sale, attempt to cure the defect at Seller's sole cost and
expense within one hundred twenty (120) days after the notice, agree to a
mutually acceptable purchase price reduction or terminate this Agreement
without liability to Buyer except for return of any Earnest Money without
interest, provided that Seller may not terminate this Agreement unless the
aggregate value of Title Defects and Environmental Defects in good faith
exceeds twenty percent (20%) ($2,260,000.00). If Seller elects to attempt to
cure, then Closing as to such property shall proceed without adjustment to
the Sale Price. If Seller is unable to cure the defect to Buyer's reasonable
satisfaction within said one hundred twenty (120) days the Allocated Value
shall be refunded to Buyer and the defective property reassigned to Seller
effective as of the Effective Time. Price adjustments to resolve Title
Defects shall be based on the Allocated Value, if any, and to the extent
possible shall be determined in good faith and in accordance with the
following guidelines:
(a) If a Title Defect is based upon Buyer's notice that Seller
owns a lesser net revenue interest or greater working interest without
corresponding increase in revenue interest, or the notice is from Seller to
the effect that Seller owns a greater net revenue interest, than that shown
on Exhibit "A.2", then the value for the portion of the Interests affected
shall be reduced or increased (as the case may be) in the same proportion
that the actual net revenue interest bears to the net revenue interest shown
on Exhibit "A.2", and the Sale Price shall be reduced or increased
accordingly.
(b) If a Title Defect is a lien, encumbrance or other charge upon
a property which is liquidated in amount, then the sum necessary to be paid
to the obligee to remove the Title Defect from the affected property shall be
deducted from the Sale Price. If a Title Defect represents an obligation or
burden upon the affected property for which the economic detriment to Buyer
is not liquidated but can be estimated with reasonable certainty, the
adjustment shall be the sum necessary to compensate Buyer at Closing for the
adverse economic effect which such Title Defect will have on the affected
property. If there is a lien or encumbrance in the form of a judgment
secured by a supersedeas bond or other security approved by the court issuing
such order, it shall not be considered a Title Defect under this Agreement.
The parties shall reach an agreement as to the existence of all Title
and Environmental Defects no later than five (5) business days prior to
Closing.
In the event a third party exercises an applicable preferential right to
purchase, the Sale Price shall be reduced by the value allocated to the
portion of the Interests affected and Closing shall occur as to the remainder
of the Interests.
Excluding Sale Price adjustments attributable to exercise of any
preferential rights to purchase, in the event the net amount of the Sale
Price adjustments downward exceeds twenty percent (20%) ($2,260,000.00), then
Seller or Buyer may, upon written notice to the other, cancel this Agreement
and the same shall be of no further force and effect and in such event Seller
shall promptly refund to Buyer the Earnest Money without interest.
11. WARRANTY OF TITLE. In all conveyances executed and delivered
hereunder, Seller shall specially warrant to Buyer and its successors and
assigns that it has not previously conveyed the Interests and warrant and
defend title to the Interests against the claims and demands of all persons
whomsoever claiming the same or any part thereof by, through or under Seller,
but not otherwise. Seller makes no other warranty or representation as to
the quantity or quality of title to the Interests.
12. CONDITIONS OF CLOSING BY BUYER. The obligation of Buyer to close
is subject to the satisfaction of the following conditions:
(a) Buyer shall have had reasonable access during normal business
hours to all data and records obligated to be provided Buyer as provided
herein;
(b) Buyer shall have had reasonable access to the Leases and
Equipment included in the Interests to conduct an inspection for all
purposes, including environmental condition;
(c) All representations and warranties of Seller contained in this
Agreement shall be true, correct, and not misleading in all material
respects, and Seller shall have performed and satisfied all agreements and
covenants in all material respects required by this Agreement to be performed
and satisfied by Seller.
(d) Seller shall have obtained and delivered to Buyer (i) all
prerequisite waivers of preferential rights of purchase and (ii) all
necessary consents for transfer of the Interests, except those which by their
nature cannot be requested or obtained until after Closing, or Buyer and
Seller shall have adjusted the Sale Price in accordance with the provisions
of this Agreement;
(e) No suit or other proceeding shall be pending or threatened
before any court or governmental agency seeking to restrain, prohibit, or
declare illegal, or seeking substantial damages in connection with the
transaction contemplated hereby; and
(f) No material adverse change in the condition of or title to the
Interests shall have occurred subsequent to the Effective Time, except
depletion through normal production within authorized allowables, ordinary
changes in rates of production, and depreciation of equipment through
ordinary wear and tear.
13. CONDITIONS OF CLOSING BY SELLER. The obligation of Seller to close
is subject to the satisfaction of the following conditions:
(a) All representations and warranties of Buyer contained in this
Agreement shall be true, correct, and not misleading in all material
respects, and Buyer shall have performed and satisfied all agreements and
covenants in all material respects required by this Agreement to be performed
and satisfied by Buyer.
(b) No suit or other proceeding shall be pending or threatened
before any court or governmental agency seeking to restrain, prohibit, or
declare illegal, or seeking substantial damages in connection with the
transaction contemplated hereby.
Neither party shall be obligated to close until all necessary filings
have been made and all waiting periods have expired under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. The parties agree that
each shall prepare its own filing and submit it to the proper agency promptly
after execution of this Agreement and each shall bear its own cost of filing
and any fees or expenses associated therewith.
14. PRELIMINARY CLOSING STATEMENT. Seller shall prepare and furnish to
Buyer at least three (3) days prior to Closing a preliminary closing
statement setting forth the adjustments to the Sale Price to be paid by Buyer
at Closing. Such statement shall reflect each adjustment and the calculation
used to determine such amount. The preliminary adjusted Sale Price shall
mean the Sale Price adjusted as provided herein, including but not limited to
Earnest Money, title defects, interest variances, gas imbalances, operating
expense and revenues attributable to the Interests being conveyed on and
after the Effective Time. Insofar as concerns operating expenses and
revenues attributable to the Interests subject to Closing for the period from
the Effective Time through Closing, for purposes of the preliminary closing
statement, Buyer shall receive a net adjustment for estimated operating
expense and revenues for those periods which the actual amounts cannot be
determined at Closing. Final adjustments to the actual gas balancing,
expense incurred and revenues received shall be taken into account on the
Final Settlement Statement.
15. CLOSING. The Closing shall occur on or before March 29, 1995, at
9:00 a.m., at the offices of Seller at 700 Milam, Houston, Texas, or at such
other place as Seller may designate, or at such other time and place as
Seller and Buyer may mutually agree in writing. If the transaction fails to
close by said date for any reason whether or not the fault of Seller, Seller
shall have the unilateral right and option to either extend the Closing Date
for not more than 30 additional days or to terminate the Purchase and Sale
Agreement without liability to the Buyer except for return of the Earnest
Money without interest. At Closing the following will occur:
(a) Seller shall execute, acknowledge and deliver an Assignment
and Bill of Sale substantially in the form and substance of Exhibit "B"
attached hereto, covering all of the Interests to be sold pursuant hereto;
(b) Buyer shall deliver to Seller by wire transfer the total Sale
Price as adjusted hereunder, subject to further adjustment after Closing as
provided for herein;
(c) On or before Closing, Seller and Buyer shall execute all
necessary forms to be filed with the appropriate regulatory authorities
concerning the change of ownership and operatorship of the Interests, and
Buyer shall submit same for approval to such regulatory authorities at
Buyer's expense, and Buyer shall deliver to Seller evidence of the
appropriate state and federal plugging bond, surety letter, or letter of
credit acceptable to such authority to authorize Buyer's right to conduct
operations, if applicable;
(c) Seller shall, subject to the terms of any applicable operating
agreements, deliver to Buyer exclusive possession of the Interests, effective
as of the Effective Time;
(d) Seller shall promptly after Closing provide Buyer at Buyer's
sole expense any maps, reports and other written material relating to the
Interests, including without limitation, lease files, property records,
contract files, operations files, copies of tax and accounting records and
files, well files, geological and geophysical maps, core analyses and
hydrocarbon analyses, well logs, mud logs, core data and field studies
("Records"); however, Seller shall have no obligation to furnish Buyer any
data or information which Seller cannot provide Buyer because of third-party
restrictions. Buyer agrees to maintain the Records and allow Seller
reasonable access thereto for a period of six (6) years after Closing; and
(e) In compliance with Section 1445 of the Internal Revenue Code,
Seller shall execute and deliver to Buyer a Nonforeign Affidavit in the form
of Exhibit "C" attached hereto.
16. RESERVATIONS AND EXCEPTIONS. Sale and purchase of the Interests is
made subject to all reservations, exceptions, limitations, contracts and
other burdens or instruments which are of record or of which Buyer has actual
or constructive notice.
17. ASSUMPTION OF LIABILITIES AND INDEMNITIES. As used in this
paragraph and the subparagraphs hereunder "claims" shall include claims,
demands, causes of action, liabilities, damages, penalties and judgments of
any kind or character and all costs and fees in connection therewith,
including attorney's fees.
(a) The Interests have been used for exploring, developing and
producing oil and gas. Spills of wastes, crude oil, produced water,
hazardous substances, and other materials may have occurred in the past on
the Leases or in connection with the Interests. There is a possibility that
there are currently unknown, abandoned wells, plugged wells, pipelines and
other equipment on or underneath the property subject to the Interests. It
is the intent of Buyer and Seller that all liability associated with the
above matters as well as any liability to plug or replug such wells in
accordance with the applicable rules, regulations and requirements of
governmental agencies be passed to the Buyer at Closing and that Buyer shall
assume all liability for such matters and all claims related thereto.
Additionally, the Interests may contain asbestos, hazardous substances, or
Naturally Occurring Radioactive Material ("NORM"). NORM may affix or attach
itself to the inside of wells, materials, and equipment as scale or in other
forms; wells, materials and equipment located on the Leases or included in
the Interests may contain NORM; and NORM containing material may have been
buried or otherwise disposed of on the Leases. Special procedures may be
required for remediating, removing, transporting and disposing of asbestos,
NORM, hazardous substances and other materials from the Interests, and Buyer
assumes all liability for any assessment, remediation, removal,
transportation, and disposal of these materials and associated activities in
accordance with the applicable rules, regulations and requirements of
governmental agencies.
(b) Buyer shall, (i) at Closing assume, and be responsible for and
comply with all duties and obligations of Seller, express or implied arising
on or after the Effective Time, with respect to the Interests, including,
without limitation, those arising under or by virtue of any lease, contract,
agreement, document, permit, applicable statute or rule, regulation or order
of any governmental authority, (specifically including, without limitation,
any governmental request or requirement to plug, re-plug and/or abandon any
well of whatsoever type, status or classification, or take any clean-up or
other action with respect to the property or premises, including hazardous
waste cleanup costs under the Resource and Recovery Act (RCRA), 42 U.S.C.
6901-6991, the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), 42 U.S.C. 9601-9675 or similar laws, rules or
regulations) and (ii) defend, indemnify and hold Seller harmless from any and
all claims arising out of or in connection therewith.
(c) Buyer shall defend, indemnify and hold Seller harmless from
any and all claims for personal injury, death or damage to property or to the
environment, or for any other relief, arising directly or indirectly from, or
incident to, the use, occupation, operation, maintenance or abandonment of
any of the Interests, or condition of the property or premises, whether
latent or patent, and whether arising from or contributed to by the
negligence in any form of Seller, its agents, employees or contractors, and
asserted against Buyer and/or Seller after the Effective Time, whether or not
any such claims result from conditions, actions or inactions at or before the
Effective Time; provided that, except for any claims relating to the
environmental condition of the Interests (including contamination of the
Interests or other properties by naturally occurring radio active materials
or toxic or hazardous substances), Seller shall for a period of two (2) years
after the Effective Time defend, indemnify and hold Buyer harmless from any
and all claims, for personal injury, death, damage to property or for any
other relief, arising directly or indirectly from, or incident to, the use,
occupation, operation, maintenance or abandonment of any of the Interests,
only insofar as such claims are attributable to times prior to the Effective
Time.
(d) The indemnities in this paragraph shall inure to the benefit
of Buyer and Seller and the officers, directors, employees, agents,
successors and assigns of each of them.
18. TAXES. All ad valorem taxes, real property taxes, and similar
obligations with respect to the tax period in which the Effective Time occurs
(the "current tax period") shall be apportioned between Seller and Buyer as
of the Effective Time.
18. ACCOUNTING. All proceeds (including proceeds held in suspense or
escrow) from the sale of production actually sold and delivered by Seller
prior to the Effective Time attributable to the Interests shall belong to
Seller and all proceeds from the sale of production actually sold and
delivered after the Effective Time attributable to the Interests shall belong
to Buyer. All oil, condensate or liquid hydrocarbons and any products
(liquid, gas or solid) separated or processed therefrom (hereinafter in this
paragraph called "oil") in storage shall be measured or gauged and all gas
meter charts shall be replaced at the Effective Time. Buyer shall pay Seller
for such oil at the posted field price currently prevailing for oil of like
grade and gravity in the field, provided that Buyer shall not pay Seller for
oil in storage below the level of the tank cut off valve (tank bottoms). Any
gas imbalance shall be accounted for between Buyer and Seller as follows:
Buyer and Seller agree that the net gas imbalance attributable to the
Interests as of the Effective Date is believed to be that which is set forth
on Exhibit "A.3" (the "Agreed Imbalance"), notwithstanding that the actual
imbalance may be less or greater. Buyer and Seller shall verify the actual
net gas imbalance in the Post-Closing accounting and any imbalance shall be
accounted for between the parties at the price of $1.00 per MCF but only as
to those volumes which exceed or are less than the Agreed Imbalance.
Provided that if an applicable operating or gas balancing agreement requires
cash balancing upon conveyance of the Interests, the adjustment price shall
equal the greater of $1.00 per MCF or the price received in the cash
balancing. Such settlement shall be final and neither party thereafter shall
make claim upon the other concerning the gas balances of the Interests.
Buyer assumes all rights and liabilities relating to gas imbalances
discovered after the Post-Closing settlement including any revenue adjustment
caused by such subsequently discovered imbalance.
Except as otherwise specifically provided in this Agreement, all costs,
expenses and obligations relating to the Interests which accrue prior to the
Effective Time shall be paid and discharged by Seller regardless of when
invoices for such costs, expenses and obligations are received and all costs,
expenses and obligations relating to the Interests which accrue after the
Effective Time shall be paid and discharged by Buyer.
The foregoing adjustments shall be made by debits and credits between
the parties at Post-Closing, as provided for hereinafter.
To the extent necessary to comply with requirements of the Securities
and Exchange Commission (the "SEC"), Buyer shall have the right to audit
Seller's business and financial records, including without limitation
property detail, standardized measure data and reserve information prepared
by Netherland, Sewell and Associates, Inc., maintained in connection with the
Interests (except for income tax records) for all periods for which audited
financials are required by the SEC to be prepared and filed by Buyer.
20. SALES TAX. The Sale Price provided for hereunder excludes any
sales taxes or other taxes in connection with the sale of property pursuant
to this Agreement. If a determination is ever made that a sales tax or other
transfer tax applies, Buyer shall be liable for such tax as well as any
applicable conveyance, transfer and recording fees, and real estate transfer
stamps or taxes imposed on any transfer of property pursuant to this
Agreement. Buyer shall defend and hold Seller harmless with respect to the
payment of all such taxes, if any, including any interest or penalties
assessed thereon.
21. POST-CLOSING ADJUSTMENTS. As soon as practicable after Closing,
but in any event within one hundred eighty (180) days thereafter, Seller
shall prepare, in accordance with this Agreement and (where applicable) in
accordance with generally accepted accounting principles consistently
applied, a final settlement statement (herein called the "Final Statement")
setting forth each adjustment or payment which was not finally determined as
of the Closing Date, and showing the calculation of the final settlement
price based on such Final Statement (the "final settlement price"). Seller
shall submit the Final Statement to Buyer and shall afford Buyer access to
Seller's records pertaining to the computations contained in the Final
Statement. As soon as practicable after receipt of the statement, Buyer
shall deliver to Seller a written report containing any changes which Buyer
proposes be made to the Final Statement. The parties shall agree with
respect to the amounts due pursuant to such Post-Closing adjustment not later
than thirty (30) days after Buyer's receipt of Seller's Final Statement. The
date upon which such agreement is reached shall be herein called the
"Settlement Date". In the event that (i) the final settlement price is more
than the amount previously paid to Seller, Buyer shall pay to Seller in
immediately available funds the amount of such difference; or (ii) the final
settlement price is less than the amount previously paid to Seller, Seller
shall pay to Buyer in immediately available funds the amount of such
difference.
22. BROKERS' FEE. Each of Seller and Buyer represents and warrants to
the other that it has not incurred liability, contingent or otherwise, for
brokers' or finders' fees in respect of this Agreement or the transactions
contemplated hereby.
23. NOTICES. All communications required or permitted under this
Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been fully made if actually delivered, or if mailed
by registered or certified mail, postage prepaid, to the address as set forth
below:
SELLER
PENNZOIL EXPLORATION AND PRODUCTION COMPANY
700 MILAM
HOUSTON, TEXAS 77002
ATTENTION: STEPHEN G. MCNALLY
PHONE: (713) 546-8361
FAX: (713) 546-6486
BUYER
MAYNARD OIL COMPANY
8080 NORTH CENTRAL EXPY, STE 660
DALLAS, TEXAS 75206
ATTENTION: CASSONDRA FOSTER, LAND MANAGER
PHONE: ( 214) 891-8461
24. FURTHER ASSURANCE. After Closing each of the parties shall
execute, acknowledge and deliver to the other such further instruments, and
take such other actions as may be reasonably necessary to carry out the
provisions of this Agreement. However, Buyer shall assume all responsibility
for notifying the purchaser of oil and gas production from the Interests, and
such other designated persons who may be responsible for disbursing payments
for the purchase of such production, of the change of ownership of the
Interests. Buyer shall take all actions necessary to effectuate the transfer
of such payments to Buyer. After the final post-closing settlement,
additional proceeds received by or expenses paid by either Buyer or Seller on
behalf of the other shall be settled by invoicing the other party for
expenses paid or remitting to the other party any proceeds received.
25. DISCLAIMER OF WARRANTIES. EXCEPT AS PROVIDED IN PARAGRAPH 11
HEREOF, ANY INSTRUMENT OF CONVEYANCE OR SALE EXECUTED PURSUANT HERETO SHALL
BE EXECUTED WITHOUT ANY WARRANTY OF TITLE, EITHER EXPRESS, IMPLIED,
STATUTORY, OR OTHERWISE, WITHOUT ANY EXPRESS OR IMPLIED WARRANTY OR
REPRESENTATION AS TO THE MERCHANTABILITY OF ANY OF THE EQUIPMENT OR OTHER
PERSONAL PROPERTY INCLUDED IN THE INTERESTS OR ITS FITNESS FOR ANY PARTICULAR
PURPOSE, AND WITHOUT ANY OTHER EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION
WHATSOEVER. IT IS UNDERSTOOD AND AGREED THAT BUYER SHALL HAVE INSPECTED THE
INTERESTS FOR ALL PURPOSES, INCLUDING WITHOUT LIMITATION FOR THE PURPOSE OF
DETECTING THE PRESENCE OF NATURALLY OCCURRING RADIOACTIVE MATERIAL
(HEREINAFTER REFERRED TO AS "NORM") AND MAN MADE MATERIAL FIBERS (HEREINAFTER
REFERRED TO AS "MMMF") AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND
ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT
LIMITED TO CONDITIONS RELATED TO THE PRESENCE, RELEASE, OR DISPOSAL OF
HAZARDOUS SUBSTANCES, AND THAT BUYER IS RELYING SOLELY UPON THE RESULTS OF
SUCH INSPECTION OF THE INTERESTS AND SHALL ACCEPT ALL OF THE SAME IN THEIR
"AS IS, WHERE IS" CONDITION. SELLER DISCLAIMS ALL LIABILITY ARISING IN
CONNECTION WITH THE PRESENCE OF NORM OR MMMF ON THE INTERESTS AND IF TESTS
HAVE BEEN CONDUCTED BY SELLER FOR THE PRESENCE OF NORM OR MMMF, SELLER
DISCLAIMS ANY WARRANTY RESPECTING THE ACCURACY OF SUCH TESTS OR RESULTS. IN
ADDITION, SELLER SHALL MAKE NO WARRANTY OR REPRESENTATION, EXPRESS OR
IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, INFORMATION OR
MATERIALS HERETOFORE OR HEREAFTER FURNISHED BUYER IN CONNECTION WITH THE
INTERESTS, OR AS TO THE QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE INTERESTS OR THE ABILITY OF THE INTERESTS TO PRODUCE
HYDROCARBONS. ANY AND ALL SUCH DATA, INFORMATION AND OTHER MATERIALS
FURNISHED BY SELLER IS PROVIDED TO BUYER AS A CONVENIENCE AND ANY RELIANCE ON
OR USE OF THE SAME SHALL BE AT BUYER'S SOLE RISK. BUYER EXPRESSLY WAIVES THE
PROVISIONS OF CHAPTER XVII, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63,
INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), VERNON'S TEXAS
CODE ANNOTATED, BUSINESS AND COMMERCE CODE (THE "DECEPTIVE TRADE PRACTICES
ACT") AND BUYER ACKNOWLEDGES THAT THIS EXPRESS WAIVER SHALL BE CONSIDERED A
MATERIAL AND INTEGRAL PART OF THIS SALE AND THE CONSIDERATION THEREOF; AND
ACKNOWLEDGES THAT THIS WAIVER HAS BEEN BROUGHT TO THE ATTENTION OF BUYER AND
EXPLAINED IN DETAIL AND THAT BUYER HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO
THIS WAIVER. ALL INSTRUMENTS OF CONVEYANCE TO BE DELIVERED BY SELLER AT
CLOSING SHALL EXPRESSLY SET FORTH THE DISCLAIMERS OF REPRESENTATIONS AND
WARRANTIES CONTAINED IN THIS PARAGRAPH.
26. OPERATIONS BY SELLER. Seller will operate the Seller-operated
Interests until the later of Closing, the Effective Time, or the time the
applicable operating agreement or plan of unitization may require, at which
time operations will be turned over to, and become the responsibility of,
Buyer, unless a third party is elected Operator under such agreement. Seller
makes no representation that Buyer will be elected or appointed Operator of
any property included within the Interests.
(a) RISK. The risk of casualty loss relating to the Interests
will pass from Seller to Buyer as of the later of the Closing Date or the
Effective Time.
(b) OPERATIONS AFTER EFFECTIVE TIME. Operations conducted by
Seller after the Effective Time with respect to the Interests will be
conducted on behalf of Buyer, and Buyer will pay Seller for operation,
protection and maintenance of the Interests as follows:
(1) Buyer will pay Seller a fixed monthly rate per
active producing well for operation and maintenance expenses
(excluding workover costs, plugging and abandonment costs, and
major costs). Such fixed monthly rate will be based on the average
cost per active producing well on Seller's accounting lease basis
for the three months prior to the Effective Time;
(2) Buyer will reimburse Seller for all workover costs,
plugging, abandoning and reabandoning costs, and other major costs
that Seller incurs after the Effective Time, on an actual-cost
basis; and
(3) Buyer will pay operation and administrative overhead
to Seller at a rate equal to twenty-five percent (25%) of the sum
of the operation and maintenance expenses, as described in
paragraph (b) (1), and major costs, as described in paragraph (b)
(2), actually charged to Buyer.
These charges will be included in the Final Statement as
provided in this Agreement.
(c) SELECTION OF OPERATOR. Seller may poll the parties to any
applicable operating agreement or plan of unitization before Closing to
select a successor Operator. The poll may stipulate that the parties'
selection of a successor Operator will not be effective unless Closing
occurs. If Seller does not poll, then Buyer will do so. Buyer's selection
as Operator is not a condition to Buyer's performance of its obligations
under this Agreement.
(d) NOTICE OF CHANGE OF OWNERSHIP AND OPERATORSHIP. Buyer will
take all necessary steps to ensure that Buyer is recognized as the owner and,
if elected, Operator of the Interests by all appropriate parties, including
any regulatory commission, body, or board with jurisdiction. If Seller is
the principal on any financial assurance (including a bond) relating to the
Interests, which financial assurance is required by any law, rule or
regulation, then Buyer will secure replacement financial assurance in the
required amount and deliver it to the regulatory body requiring such
assurance, to the end that Seller's financial assurance is released and
discharged.
(e) REMOVAL OF SIGNS. Seller may either remove its name and signs
from the Seller-operated Interests or require Buyer to do so. Buyer grants
Seller a right of access to the Interests to remove Seller's signs and name
from all wells, facilities and Leases, or to confirm that Buyer has done so.
If Seller's name or signs remain on the Interests after Closing, Buyer will
promptly, but no later than required by applicable rules and regulations or
forty-five (45) days after Closing, whichever is earlier, remove all
remaining signs and references to Seller and erect or install signs complying
with applicable rules and regulations, including signs showing the Buyer as
Operator of the Interests.
27. SECURITIES LAWS. The solicitation of offers and the sale of the
Interests by Seller have not been registered under any securities laws.
Buyer represents that at no time has it been presented with or solicited by
or through any public promotion or any form of advertising in connection with
this transaction. Buyer represents that it intends to acquire the Interests
for its own benefit and account and that it is not acquiring the Interests
with the intent of distributing fractional, undivided interests that would be
subject to regulation by federal or state securities laws, and that if it
sells, transfers, or otherwise disposes of the Interests or fractional,
undivided interests, it will do so in compliance with applicable federal and
state securities laws.
28. DUE DILIGENCE. Buyer represents that it has performed, or will
perform prior to Closing, sufficient review and due diligence with respect to
the Interests, which includes reviewing well-data, title, and other files,
and performing necessary evaluations, assessments, and other tasks involved
in evaluating the Interests, to satisfy its requirements completely and to
enable it to make an informed decision to acquire the Interests under the
terms of this Agreement.
29. BASIS OF BUYER'S DECISION. Buyer represents that by reason of its
knowledge and experience in the evaluation, acquisition, and operation of oil
and gas properties, Buyer has evaluated the merits and risks of purchasing
the Interests from Seller and has formed an opinion based solely on Buyer's
knowledge and experience and not on any representations or warranties by
Seller. BUYER REPRESENTS THAT IT HAS NOT RELIED AND WILL NOT RELY ON ANY
STATEMENTS BY SELLER OR ITS REPRESENTATIVES IN MAKING ITS DECISION TO ENTER
INTO THIS AGREEMENT OR TO CLOSE THIS TRANSACTION.
30. MATERIAL FACTOR. Buyer acknowledges that Buyer's representations
under paragraphs 27 through 29 are a material inducement to Seller to enter
into this Agreement with, and close the sale to, Buyer.
31. PRESS RELEASE. There shall be no press release or public
communication concerning this purchase and sale by either party, except as
required by law or with the written consent of the party not originating said
release or communication. Parties will endeavor to consult each other in a
timely manner on all press releases required by law.
32. ENTIRE AGREEMENT. This instrument states the entire agreement
between the parties and may be supplemented, altered, amended, modified or
revoked by writing only, signed by both parties. This Agreement supercedes
any prior agreements between the parties concerning sale of the Interests,
except that any confidentiality agreement shall terminate at Closing. The
headings are for guidance only and shall have no significance in the
interpretations of this Agreement.
33. TAX REPORTING. Seller and Buyer agree that this transaction is not
subject to the reporting requirement of Section 1060 of the Internal Revenue
Code of 1986, as amended, and that, therefore, IRS Form 8594, Asset
Acquisition statement, is not required to be and will not be filed for this
transaction. In the event the parties mutually agree that a filing of Form
8594 is required, the parties will confer and cooperate in the preparation
and filing of their respective forms to reflect a consistent reporting of the
agreed upon allocation.
34. ASSIGNABILITY. This Agreement and the rights and obligations
hereunder shall not be assignable or delegable by either party hereto without
the prior written consent of the other party unless such assignment occurs by
merger, reorganization or sale of all of a party's assets.
35. SURVIVAL. Unless expressly limited, all of the representations,
warranties, and agreements of or by the parties hereto shall survive the
execution and delivery of the Assignment and Bill of Sale.
36. TAX DEFERRED EXCHANGE ELECTION. Seller may, at or before the
Closing, designate in writing one or more properties which Buyer will acquire
and trade to Seller for the Interests (herein collectively called the
"Exchange Property"). In the event Seller has not found a suitable Exchange
Property prior to the Closing, Seller may elect, by notice to Buyer delivered
on or before the Closing Date, to have the Sale Price paid to a qualified
intermediary until Seller has designated the Exchange Property. The Exchange
Property shall be designated by Seller and acquired by the qualified
intermediary within the time periods prescribed in Section 1031 (a)(3) of the
Internal Revenue Code of 1986, as amended (the Code), and shall thereupon be
conveyed to Seller. In the event Seller fails to designate and the qualified
intermediary fails to acquire the Exchange Property within such time periods,
the agency or trust shall terminate and the proceeds then held by the
qualified intermediary shall be paid immediately to Seller. The rights and
responsibilities of Seller, Buyer and the qualified intermediary shall be
documented with such agreements containing such terms and provisions as shall
be determined by Seller to be necessary to accomplish a tax free exchange
under Section 1031 of the Code, subject, however, to the limitations on costs
and liabilities of Buyer set forth below. If Seller makes a tax deferred
exchange election, Buyer shall not be obligated to pay any additional costs
or incur any additional obligations in the acquisition of the Interests.
37. This Agreement shall be governed by the laws of the State of Texas.
38. This Agreement may be executed in counterparts and each counterpart
shall constitute a binding agreement as if the parties had executed a single
document.
EXECUTED as of the date first above mentioned.
SELLER BUYER
PENNZOIL EXPLORATION AND MAYNARD OIL COMPANY
PRODUCTION COMPANY
By: Stephen G. McNally By: Lynn R. Moore
Its: Agent and Attorney in Fact Its: President
EXHIBIT A
Exhibit "A" (including A, A.1, A.2, A.3 and A.4) shall contain the following
information:
I. Lease Descriptions.
II. List of "material" contracts to which the properties are subject (i.e.
Joint Operating Agreements, Unitization Agreements, Pooling Agreements,
Letter Agreements, Gas Contracts, etc.).
III. List of Wells and Units, including Working and/or Net Revenue
Interests, together with the "Allocated Values".
IV. List of any Equipment to be retained by Seller.
V. List of gas imbalances as of the last known date.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 285918) of Maynard Oil Company of our report dated
June 8, 1995, which appears in the Current Report on Form 8-K of Maynard Oil
Company dated June 12, 1995.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Dallas, Texas
June 12, 1995<PAGE>
EXHIBIT 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Maynard Oil Company
In our opinion, the historical financial summaries of the interests in the
oil and gas revenues and direct operating expenses of the properties acquired
by Maynard Oil Company from Pennzoil Exploration and Production Company
present fairly, in all material respects, the oil and gas revenues and direct
operating expenses of those interests for each of the two years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles. These historical financial summaries are the responsibility of
the Company's management; our responsibility is to express an opinion on
these summaries based on our audits. We conducted our audits of these
summaries in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the historical financial summaries are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical financial summaries,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall historical financial summary
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Dallas, Texas
June 8, 1995
EXHIBIT 99.2
HISTORICAL FINANCIAL SUMMARIES OF THE INTERESTS IN THE OIL AND GAS REVENUES
AND DIRECT OPERATING EXPENSES OF THE PROPERTIES ACQUIRED BY MAYNARD OIL
COMPANY FROM PENNZOIL EXPLORATION & PRODUCTION COMPANY
(Dollars in Thousands)
(Unaudited)
Year ended Three Months ended
December 31, March 31,
1994 1993 1995 1994
---- ---- ---- ----
Oil and gas revenues $ 5,413 $ 5,663 $ 1,129 $ 1,411
Direct operating expenses 2,098 3,041 286 700
------- ------- ------- -------
Revenues in excess of
direct operating expenses $ 3,315 $ 2,622 $ 843 $ 711
======= ======= ======= =======
EXHIBIT 99.3
NOTES TO THE HISTORICAL FINANCIAL SUMMARIES OF THE INTERESTS
IN THE OIL AND GAS REVENUES AND DIRECT OPERATING EXPENSES OF THE
PROPERTIES ACQUIRED BY MAYNARD OIL COMPANY FROM PENNZOIL
EXPLORATION AND PRODUCTION COMPANY
1. BASIS OF PRESENTATION
The accompanying Historical Financial Summaries represent the interests
in the oil and gas revenues and direct operating expenses of the oil and gas
producing properties acquired March 29, 1995 by Maynard Oil Company (Company)
from Pennzoil Exploration and Production Company (Pennzoil) for cash
consideration of $10.5 million. The acquisition was effective January 1,
1995. The producing properties acquired are located in seven counties in
West Texas (Andrews, Crane, Crockett, Hall, Motley, Pecos, and Ward
Counties).
The oil and gas properties acquired by the Company were never operated
as a separate division by Pennzoil and, accordingly, full separate,
historical financial statements prepared in accordance with generally
accepted accounting principles (GAAP) do not exist. A practicable
determination of the historical general and administrative expenses and other
indirect expenses which were attributable to the properties acquired would
not be possible or indicative of the level of such expenses to be incurred by
the Company. The depreciation charges of Pennzoil associated with the
acquired properties would be based upon Pennzoil's historical costs and are
not relevant to the ongoing financial reporting of the Company, or related
investor decisions, since the properties will be depreciated over future
periods based upon the Company's acquisition costs. The presentation herein
of historical financial statements reflecting financial position, results of
operations and cash flows required by GAAP was not practicable in these
circumstances. Accordingly, the Historical Financial Summaries are presented
in lieu of the financial statements required under Rule 3-05 of Securities
and Exchange Commission Regulation S-X.
The oil and gas revenues and direct operating expenses shown in the
Historical Financial Summaries may not be representative of future
operations.
2. OIL AND GAS REVENUES
Oil and gas revenues have been based on realizations at the point of
sale using historical oil and gas prices and the revenue and working
interests purchased by the Company.
3. DIRECT OPERATING EXPENSES
Direct operating expenses include those costs incurred by Pennzoil in
respect to production up to the point of sale, including electricity, fuel,
transportation costs, chemicals, other materials and supplies, and the labor
and associated costs of employees working directly on these properties.
These expenses exclude depreciation and amortization of production facilities
and the estimated cost of abandonment of these facilities. General and
administrative expenses not incurred by the operator are also excluded.
EXHIBIT 99.4
SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
Estimated Net Quantities of Proved Developed and Undeveloped Oil and Gas
Reserves
Proved reserves are estimated quantities of crude oil and natural gas
which geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known reservoirs under existing
economic and operating conditions. Proved developed reserves are proved
reserves that can be expected to be recovered through existing wells with
existing equipment and operating methods.
The following table presents the estimated net proved developed oil and
gas reserves, estimated by the Company, attributable to the properties at
January 1, 1995. These properties are located within the United States.
Proved Developed Reserves
Crude Oil, Condensate and
Natural Gas Liquids
(Barrels) 994,365
=========
Natural Gas
(Thousands of Cubic Feet) (MCF) 6,489,229
=========
Production volumes for prior periods were added back to the above
referenced reserve amounts to arrive at reserve totals at December 31, 1993,
and 1992, respectively. There were no "new discovery" quantities considered
for the referenced disclosure.
Oil Gas
(Barrels) (MCF)
--------- --------
Total as of January 1, 1995 994,365 6,489,229
1994 Production 227,579 1,264,064
Totals as of December 31, 1993 1,221,944 7,753,293
1993 Production 217,924 1,118,965
Totals as of December 31, 1992 1,439,868 8,872,258
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Reserves
The following table sets forth the computation of the standardized measure
of discounted future net cash flows relating to proved reserves attributable
to the acquired properties, estimated by the Company as of January 1, 1995.
Future cash inflows represent expected revenues from production of proved
reserves based on January 1, 1995 prices and any fixed and determinable
future escalation provided by contractual arrangements in existence at that
date. Escalation based on inflation and supply and demand are not
considered. Estimated future production and development costs related to
future production of proved reserves are based on January 1, 1995 costs.
Future income tax estimates are included based on tax rates currently in
effect. A discount rate of 10% is applied to the annual future net cash
flows.
The methodology and assumptions used in calculating the standardized
measure are those required by Statement of Financial Accounting Standards No.
69. This data is not intended to be representative of the fair market value
of the properties' proved reserves. The valuation of revenues and costs do
not necessarily reflect the amounts to be received or expended. In addition
to the valuations used, numerous other factors are considered in evaluating
known and prospective oil and gas reserves.
Dollars
in
Thousands
_________
Future cash inflows $ 23,000
Future production costs (10,311)
Future development costs --
Future income tax benefit 473
---------
Future net cash flows 13,162
Discount at 10 percent (3,304)
---------
Standardized measure of
discounted future net cash
flows from estimated
production of proved oil
and gas reserves after
income taxes $ 9,858
========
EXHIBIT 99.5
<TABLE>
<CAPTION>
MAYNARD OIL COMPANY
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
For the Year Ended December 31, 1994
Pennzoil
Property
Maynard Acquisition
Historical Historical Pro Forma Pro Forma
Amounts Amounts Adjustments Amounts
(Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales
and royalties $ 13,359 $ 5,413 $ -- $ 18,772
Costs and expenses:
Operating expenses 4,971 2,098 -- 7,069
Dry holes and abandonments 837 -- -- 837
Lease rentals and seismic 332 -- -- 332
General and administrative 1,676 -- -- 1,676
Depreciation and amortization 4,727 -- 1,790(a) 6,517
12,543 2,098 1,790 16,431
Operating profit 816 3,315 (1,790) 2,341
Other income (deductions) 380 -- (808)(b) (428)
Income before income taxes 1,196 3,315 (2,598) 1,913
Income tax expense (benefit) 253 -- (32)(c) 221
Net income $ 943 $ 3,315 $(2,566) $ 1,692
Weighted average number of common
shares outstanding 4,891,592 4,891,592
Income per common share:
Income before accounting
change $0.19 $0.35
</TABLE>
<TABLE>
MAYNARD OIL COMPANY
Pro Forma Condensed Consolidated Statements of Operations (Unaudited)
For the Three Months Ended March 31, 1995
<CAPTION>
Pennzoil
Property
Maynard Acquisition
Historical Historical Pro Forma Pro Forma
Amounts Amounts Adjustments Amounts
(Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales and royalties $ 4,264 $ 1,129 $ -- $ 5,393
Costs and expenses:
Operating expenses 1,795 286 -- 2,081
Dry holes and abandonments 67 -- -- 67
Lease rentals and seismic 10 -- -- 10
General and administrative 250 -- -- 250
Depreciation and amortization 1,456 -- 374(a) 1,830
3,578 286 374 4,238
Operating profit (loss) 686 843 (374) 1,155
Other income (deductions) 98 -- (175)(d) (77)
Income before income taxes 784 843 (549) 1,078
Income tax expense 200 -- 43(c) 243
Net income $ 584 $ 843 $ (592) $ 835
Weighted average number of common
shares outstanding 4,891,379 4,891,379
Net income per common share:
Net income $0.12 $0.17
</TABLE>
MAYNARD OIL COMPANY
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(a) Depreciation, depletion, and amortization of the Pennzoil Properties
determined by using the unit-of-production method.
(b) Recognize interest expense associated with the borrowings incurred to
fund the acquisition at an annual rate of 7.94 percent and the loss of
interest income associated with the cash utilized to fund the
acquisition at an annual rate of 4.8 percent, which would have been
incurred if the Pennzoil acquisition had occurred on January 1, 1994.
(c) Record the tax effect, at 34 percent for U.S. Federal income taxes, of
the pro forma adjustments and net income from the Pennzoil properties
for the year ended December 31, 1994 and the three months ended March
31, 1995.
(d) Recognize interest expense associated with the borrowings incurred to
fund the acquisition at an annual rate of 7.4 percent.
SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
Estimated Net Quantities of Proved Reserves
Proved reserves are estimated quantities of crude oil and natural gas
which geological and engineering data demonstrate with reasonable certainty
to be recoverable in future years from known reservoirs under existing
economic and operating conditions.
The following pro forma historical data as of December 31, 1994 gives
effect to the acquisition of the Pennzoil Properties.
Pennzoil
Properties
Company (Historical) Pro Forma
Proved Reserves
Crude Oil, Condensate and
Natural Gas Liquids
(Barrels) 6,153,100 994,365 7,147,465
Natural Gas
(Thousands of Cubic
Feet) (MCF) 14,951,400 6,489,229 21,440,629
SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
(continued)
Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Reserves
The following table sets forth the computation of the standardized measure
of discounted future net cash flows relating to proved reserves, estimated by
the Company as of December 31, 1994. Future cash inflows represent expected
revenues from production of proved reserves based on December 31, 1994 prices
and any fixed and determinable future escalation provided by contractual
arrangements in existence at that date. Escalation based on inflation and
supply and demand are not considered. Estimated future production and
development costs related to future production of proved reserves are based
on December 31, 1994 costs. Future income tax estimates are included based
on tax rates currently in effect. A discount rate of 10% is applied to the
annual future net cash flows.
The methodology and assumptions used in calculating the standardized
measure are those required by Statement of Financial Accounting Standards No.
69. This data is not intended to be representative of the fair market value
of the properties' proved reserves. The valuation of revenues and costs do
not necessarily reflect the amounts to be received or expended. In addition
to the valuations used, numerous other factors are considered in evaluating
known and prospective oil and gas reserves.
Standardized measure (in thousands of dollars):
Pennzoil
Properties
Company (Historical) Pro Forma
Future cash inflows $123,865 $23,000 $146,865
Future production costs (61,969) (10,311) (72,280)
Future development costs (2,166) -- (2,166)
Future net cash flows 59,730 12,689 72,419
Future income tax expense (benefit) (8,590) 473 (8,117)
51,140 13,162 64,302
Discount at 10 percent (16,929) (3,304) (20,233)
Standardized measure of
discounted future net
cash flows from estimated
production of proved oil
and gas reserves after
income taxes $34,211 $ 9,858 $ 44,069
