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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
(Mark One) FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number: 0-7062
Noble Affiliates, Inc.
(Exact name of registrant as specified in its charter)
Delaware 73-0785597
(State of incorporation) (I.R.S. employer identification number)
110 West Broadway 73401
Ardmore, Oklahoma
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(405) 223-4110
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ----------------
Common Stock, $3.33-1/3 par value New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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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
-----
Aggregate market value of Common Stock held by nonaffiliates as of
March 10, 1997: $2,066,000,000.
Number of shares of Common Stock outstanding as of March 10, 1997:
56,854,308.
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents parts of which are incorporated herein by
reference and the part of this report into which the document is incorporated:
(1) 1996 Annual Report to the stockholders - Parts I and II.
(2) Proxy statement for the 1997 annual meeting of stockholders -
Part III.
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TABLE OF CONTENTS
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PAGE
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PART I
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
EDC Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Oil and Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Exploration Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Acquisitions of Unproved Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Production Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Regulation and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Oil and Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . . . . 13
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . 13
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . . . 13
Item 10. Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . . . . 14
Item 13. Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . 14
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PART I
ITEM 1. BUSINESS.
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GENERAL
Noble Affiliates, Inc. is a Delaware corporation organized in 1969. The
Registrant is principally engaged, through its subsidiaries, in the
exploration, production and marketing of oil and gas.
In this report, unless otherwise indicated or the context otherwise
requires, the "Company" or the "Registrant" refers to Noble Affiliates, Inc.
and its subsidiaries, "Samedan" refers to Samedan Oil Corporation and its
subsidiaries, "EDC" refers to Energy Development Corporation and its
subsidiaries, and "NGM" refers to Noble Gas Marketing, Inc. and its subsidiary.
Samedan's subsidiaries include EDC from and after July 31, 1996. In this
report, quantities of oil are expressed in barrels ("bbls"), and quantities of
natural gas are expressed in thousands of cubic feet ("Mcf"), millions of cubic
feet ("MMcf") or billions of cubic feet ("Bcf").
EDC ACQUISITION
Pursuant to its stated business strategy, on July 31, 1996, Samedan
purchased all of the outstanding common stock of EDC, a wholly owned indirect
subsidiary of Public Service Enterprise Group Incorporated, for approximately
$768 million in cash. EDC is an independent energy company which has been
principally engaged in the exploration for and production of crude oil and
natural gas since 1972. Samedan estimated the total proved reserves of EDC at
July 31, 1996 at approximately 35.7 million bbls of oil and 417.3 Bcf of gas.
EDC's major properties are located domestically in the Gulf of Mexico and
onshore Louisiana and Texas, and internationally in Argentina and the U.K.
Sector of the North Sea.
OIL AND GAS
The Registrant's wholly owned subsidiary, Samedan, has been engaged in
the exploration for and production of oil and gas since 1932. Samedan conducts
its exploration and production operations throughout the major basins in the
United States, including the Gulf of Mexico, as well as international
operations primarily in the U.K. Sector of the North Sea, Equatorial Guinea,
Argentina and Canada. For information regarding Samedan's oil and gas
properties, see "Item 2. Properties -- Oil and Gas" on pages 7 through 11 of
this report.
The Registrant's wholly owned subsidiary, NGM, markets the Company's
natural gas as well as third-party gas. For more information regarding NGM's
operations, see "Item 1. Business -- Oil and Gas -- Marketing" on page 5 of
this report. The Registrant's wholly owned subsidiary, Noble Trading, Inc.
("NTI"), markets a portion of the Company's oil as well as third-party oil.
For more information regarding NTI's operations, see "Item 1. Business -- Oil
and Gas -- Marketing" on page 5 of this report.
Exploration Activities
Samedan, by itself or through various arrangements with others,
investigates potential oil and gas properties, seeks to acquire exploration
rights in areas of interest and conducts exploratory activities, including
geophysical and geological evaluation and exploratory drilling, where
appropriate, on properties for which it acquired such exploration rights.
Samedan has been engaged in exploration and development of oil and gas
reserves in federal and state waters offshore Texas and Louisiana since 1968
and has remained active in these areas of the Gulf of Mexico throughout the
past 28 years during which it has drilled, or participated in the drilling of
(through December 31, 1996), 761 gross wells. In 1996, Samedan drilled or
participated in the drilling of 26 exploratory wells (12.9 net) and 33
development wells (16.5 net) in federal and state waters offshore Texas and
Louisiana. Of the 59 gross wells drilled, 44 (21.1 net) were completed as
productive wells and 15 (8.3 net) were abandoned as dry holes. The Registrant
intends to remain active in these areas of the Gulf of Mexico. As of December
31, 1996, the Registrant
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had 141 undeveloped leases in the Gulf of Mexico, with expiration dates ranging
from 1997 to 2005, in which the Registrant currently intends to conduct future
exploration activities.
The following paragraphs in this "Exploration Activities" section
describe significant domestic activities in 1996.
Gulf of Mexico
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Development facilities are currently being designed on Samedan's 50
percent owned Main Pass 261 block. Samedan drilled two wells on the block
during 1996. The #1 well encountered 200 feet of oil and gas pay in multiple
zones. The #2 well encountered 140 feet of oil and gas pay from multiple
zones, testing combined flow rates of 48 MMcf of gas and 911 bbls of oil per
day from two of the zones. Production is expected to commence in late 1997.
Samedan participated in 1996 with a 50 percent working interest in
drilling two wells on its Eugene Island 322 prospect. Two successful wells
were drilled encountering oil and gas pay of 110 feet and 263 feet,
respectively. Development plans are being formulated and production is
expected to commence in October 1997.
During the fourth quarter of 1996, Samedan participated with a 30 percent
working interest in an oil discovery on Eugene Island 254. The discovery well
encountered 80 feet of pay and tested at the rate of 1,970 bbls of oil and 3.8
MMcf of gas per day. Development plans were being formulated at year end 1996.
Two wells were drilled on Samedan's 25 percent owned East Cameron 371/381
in 1996. The 371 #4 well encountered 40 feet of gas pay in one zone. The 381
#1 well encountered 127 feet of gas pay in two zones. Development plans for
the field were being evaluated at year end 1996.
During 1996, Samedan drilled and logged 291 feet of pay in eight zones in
its High Island A-549 #1 well in which Samedan owns a 50 percent interest. The
well came on line at year end 1996 at the rate of 12 MMcf of gas and 30 bbls of
oil per day.
Two additional development wells were drilled during 1996 on Samedan's
East Cameron 331/332 field. The #A-12 well, in which Samedan owns a 52.8
percent working interest, logged 45 feet of gas and oil pay in multiple zones.
The #A-13 well, in which Samedan owns a 70.4 percent working interest, logged
126 feet of gas and oil pay in multiple zones. Completion operations were
underway at year end 1996.
Immediately north of the East Cameron 331/332 field, Samedan owns an 85
percent interest in the East Cameron 320 field. During 1996, three wells were
completed and tied into the production facilities. The wells were producing 22
MMcf of gas and 1,500 bbls of oil per day at year end 1996.
During 1996, Samedan drilled three wells and installed production
facilities on its 55 percent owned Eugene Island 286 field. The field
commenced production in August 1996 and was producing approximately 35 MMcf of
gas per day at year end 1996.
Samedan completed four wells and installed production facilities on its
67 percent owned Vermillion 362 field during 1996. The field commenced
production in October 1996 and was producing approximately 2,500 bbls of oil
and 23 MMcf of gas per day at year end 1996.
During 1996, Samedan purchased an additional 25 percent working interest
in the Vermillion 279 field, increasing its interest to 50 percent. At year
end 1996, two wells had been completed and were producing approximately 1,200
bbls of oil and 4.2 MMcf of gas per day. Six additional wells are expected to
be drilled in the field during 1997.
During 1996, Samedan also commenced production on its 100 percent owned
High Island A-325 and West Cameron 599 properties. At year end 1996, A-325 was
producing approximately 25 MMcf of gas per day from two wells and 599 was
producing 32.5 MMcf of gas and 570 bbls of condensate per day from one well.
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Domestic Onshore
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Samedan participated in drilling seven horizontal wells with interests
ranging from 3 to 30 percent in its Cedar Creek and Horse Creek prospects in
Bowman County, North Dakota during 1996. The wells were completed at rates
ranging from 65 to 521 bbls of oil per day from the Red River formation.
Samedan owns an interest in 5,120 gross acres on the prospects.
During 1996, Samedan acquired an interest in 40,789 gross acres in Dawson
County, Montana and participated in drilling the Guelff #41-35H well
approximately 4,700 feet horizontally. The well was completed in early 1997 at
the rate of 85 bbls of oil per day. A second horizontal well, the Ekland
#41-26, commenced drilling in February 1997.
Samedan participated in four wells on its 13,400 gross acre prospect in
Beckham County, Oklahoma. The four wells in which Samedan owns interests
ranging from 25 to 40 percent logged pay thicknesses ranging from 100 to 180
feet.
In October 1996, Samedan started injecting water into its 94 percent
owned Remus Waterflood Unit in Pottawatomie County, Oklahoma. The unit
encompasses 700 gross acres and includes seven producing wells and three water
injection wells.
In Noble County, Oklahoma, Samedan is participating with a 33 percent
working interest in the N.E. Perry Waterflood Unit. The unit encompasses 1,533
gross acres and water injection is expected to commence in March 1997.
In Duval County, Texas, Samedan drilled the Barrera #1 well in which it
owns the full working interest. The well logged 16 feet of pay in the Yegua
formation and began production in November 1996 at 1.3 MMcf of gas and 52 bbls
of oil per day.
In Vermillion Parish, Louisiana, Samedan drilled the Romero #3 well in
which it owns an 81 percent interest. The well logged 14 feet of Camerina gas
pay and 35 feet of pay in the shallower Marg Howeii Zone. Production commenced
in January 1997 at 2.4 MMcf of gas and 137 bbls of oil per day.
International
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U.K. Sector of the North Sea. Operations in the North Sea are conducted
by a wholly owned indirect subsidiary of the Company, Brabant Petroleum, Ltd.
("Brabant"), which was acquired in the EDC acquisition. At year end 1996, the
Company was producing, net to its interest, approximately 2,795 bbls of oil and
11 MMcf of gas per day from nine fields.
During 1996, Brabant participated with a 15 percent interest in a
successful exploratory well on North Sea Block 20/5c. The well tested 8,647
bbls of oil per day through a two-inch choke. Appraisal drilling is scheduled
for 1997 with future development plans to be determined subsequent to drilling
and testing results.
The Company also participated in an offshore gas discovery on North Sea
Block 48/12d. Brabant owns a 25 percent interest in the well which logged 248
feet of pay in one zone. The well tested at the rate of 30 MMcf of gas per
day.
The Windermere gas field, in which the Company owns a 20 percent
interest, is expected to commence production in the second quarter of 1997.
This offshore field is projected to deliver approximately 45 MMcf of gas per
day from two wells.
Argentina. The EDC acquisition included a 14 percent interest in the El
Tordillo oil field, which is located in the southern portion of Argentina. At
year end 1996, the field was producing approximately 2,620 bbls of oil per day,
net to the Company's interest, at an average price of $21.09 per bbl.
3
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During 1996, 14 infill wells were drilled in the field. In October 1996,
a second rig was contracted in order to accelerate the drilling program. The
Company anticipates that approximately 20 infill wells will be drilled in 1997,
one of which is expected to be drilled to test a deeper horizon that has not
been previously penetrated.
Equatorial Guinea. During 1996, Samedan participated in two exploratory
wells. The first was a dry hole on the South Luba Prospect, which was a
shallow oil objective. The second well is a deep test on the East Luba
Prospect. At year end 1996, the well was drilling at 12,200 feet. As of March
1997, the well had a depth of 13,860 feet and the Company is evaluating its
production potential.
Samedan has completed a 3-D seismic program over 244,000 acres of the
exploration license. During 1997, Samedan expects to drill the Riaba Prospect
and any additional appraisal wells occurring as a result of the East Luba test
well.
Construction of a Liquid Petroleum Gas (LPG) plant in the Alba Field, in
which the Company owns a 35 percent interest, was completed and came on line in
early 1997. When fully operational, the plant is expected to recover 2,400
bbls of LPG and 400 additional bbls of condensate per day. The Company owns a
28 percent revenue interest in the LPG plant.
Canada. During 1996, Samedan Oil of Canada, Inc., a wholly owned
subsidiary of Samedan ("Samedan-Canada"), made an apparent oil discovery in
Alberta Province on the Little Bow Prospect. Samedan-Canada owns a 50 percent
interest in the well and 640 gross acres on the prospect. The well was
completed at approximately 125 bbls of oil per day. Additional drilling is
planned for 1997.
The Company produced 1,478 bbls of oil and 8.3 MMcf of gas per day in
Alberta and British Columbia. Average oil and gas prices received for 1996
were $18.63 U.S. per bbl and $1.14 U.S. per Mcf, respectively.
Ecuador. In July 1996, EDC was granted an 864,126 gross acre exploration
license in the Amistad gas field, located approximately 80 miles southwest of
the port city of Guayaquil, in 120 feet of water. Five wells were drilled in
the 1970's to define the field but the field was not developed. The wells
previously tested at rates from 11 to 31.4 MMcf of gas per day. During 1997,
the Company plans to conduct a 3-D seismic program and review various options
to develop the field.
China. EDC owns a 33 percent interest in a 154,400 gross acre
exploration license, offshore China, in the Bo Hai Bay. An exploratory well is
scheduled to be drilled on the Lao Hai Prospect within the Laopu Block during
1997.
Portugal. EDC owns a 45 percent interest in a 349,000 gross acre
exploration license onshore Portugal. A seismic program has been conducted
over a portion of the acreage and is being evaluated.
Australia. During 1996, a dry hole was drilled on a 1,878,000 gross acre
exploration license offshore Australia, in which EDC owns a 39.75 percent
interest.
Tunisia. Samedan has sold its interest in the various concessions and
exploration licenses formerly held in Tunisia with the exception of a five
percent working interest in the Jeffara exploration license. An exploratory
well may be drilled on the acreage in 1997.
Acquisitions of Unproved Properties
In 1996, Samedan spent approximately $46.4 million on acquisitions of
unproved properties. These properties were acquired primarily through the EDC
acquisition, domestic onshore lease acquisitions, various offshore lease sales
and Canadian land sales.
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Production Activities
As of December 31, 1996, Samedan owned approximately 2,046 net producing
oil and gas wells in the United States and approximately 124.4 net producing
oil and gas wells internationally. Net production of oil (including condensate
and natural gas liquids), excluding royalty sales, totaled 12,357,932 bbls in
1996 compared to 9,136,312 bbls in 1995. Net production of natural gas,
excluding royalty sales, totaled 167,739,986 Mcf in 1996 compared to 96,984,816
Mcf in 1995.
Samedan operates approximately 28 percent of the gross oil and gas wells
in which it has an interest, with the remainder operated by others under
operating agreements customarily used in the industry.
Marketing
NGM seeks opportunities to enhance the value of the Company's gas by
marketing directly to end users and accumulates gas to be sold to gas marketers
and pipelines. NGM is also actively involved in the purchase and sale of gas
from other producers. Such third-party gas may be purchased from non-operators
who own working interests in the Company's wells, or from other producers'
properties in which the Company may not own an interest. NGM, through its
wholly owned subsidiary, Noble Gas Pipelines, Inc., engages in the
installation, purchase and operation of gas gathering systems.
Samedan has a gas sales contract with NGM, whereby Samedan is paid an
index price for all gas sold to NGM. NGM records sales, including hedging
transactions, as gathering, marketing and processing revenues. NGM records as
cost of sales in gathering, marketing and processing costs, the amount paid to
Samedan and third parties. All intercompany sales and costs are eliminated in
the Company's consolidated financial statements.
Oil produced by the Company is sold to various purchasers in the United
States, Canada and other foreign locations at various prices depending on the
location and quality of the oil. The Company has no long-term contracts with
purchasers of its oil production. Crude oil and condensate are distributed
through pipelines and trucks to gatherers, transportation companies and end
users. NTI markets a portion of the Company's oil as well as certain
third-party oil. The Company records all of NTI's sales as gathering,
marketing and processing revenues. All intercompany sales and expenses are
eliminated in the Company's consolidated financial statements.
Oil prices are affected by a variety of factors that are beyond the
control of the Company. The principal factors influencing the prices received
by producers of domestic crude oil continue to be the pricing and production of
the members of the Organization of Petroleum Exporting Countries. The
Company's average per bbl oil price increased from $16.78 in 1995 to $18.28 in
1996. The Company's average oil price reflected a reduction of $2.35 per bbl
in 1996 and included an increase of $.16 per bbl in 1995, from hedging oil
production.
Substantial competition in the natural gas marketplace continued in 1996.
Gas prices, which were once determined largely by governmental regulations, are
now being influenced to a greater extent by the marketplace. The Company's
average gas price increased from $1.72 per Mcf in 1995 to $2.17 per Mcf in
1996. The Company's average gas price for 1996 and 1995 reflected a reduction
of $.33 and $.004 per Mcf, respectively, from hedging gas production.
The largest single customer for the Company's oil in 1996 purchased
approximately 23 percent of its oil production, and the five largest purchasers
accounted for approximately 55 percent of total oil production. The largest
single customer for the Company's gas in 1996 purchased approximately 8 percent
of its gas production, and the five largest purchasers accounted for
approximately 31 percent of total gas production. The Company does not believe
that its loss of a major oil or gas customer would have a material adverse
effect on the Company.
Regulation and Risks
General. Exploration for and production and sale of oil and gas are
extensively regulated at the national, state and local levels. Oil and gas
development and production activities are subject to various state laws and
regulations (and orders of regulatory bodies pursuant thereto) governing a wide
variety of matters, including allowable rates
5
<PAGE> 8
of production, marketing, pricing, prevention of waste and pollution, and
protection of the environment. Laws affecting the oil and gas industry are
under constant review for amendment or expansion and frequently increase the
regulatory burden on companies. Numerous governmental departments and agencies
are authorized by statute to issue rules and regulations binding on the oil and
gas industry. Many of these governmental bodies have issued rules and
regulations that are often difficult and costly to comply with, and that carry
substantial penalties for failure to comply. These laws, regulations and
orders may restrict the rate of oil and gas production below the rate that
would otherwise exist in the absence of such laws, regulations and orders. The
regulatory burden on the oil and gas industry increases its costs of doing
business and consequently affects its profitability.
Natural Gas. The natural gas industry has been regulated under the
Natural Gas Act and the Natural Gas Policy Act of 1978 (the "NGPA"). Under the
Natural Gas Wellhead Decontrol Act of 1989, price ceilings have been eliminated
over a transition period which ended on January 1, 1993.
Certain Risks. In Samedan's exploration operations, losses may occur
before any accumulation of oil or gas is found. If oil or gas is discovered,
no assurance can be given that sufficient reserves will be developed to enable
Samedan to recover the costs incurred in obtaining the reserves or that
reserves will be developed at a rate sufficient to replace reserves currently
being produced and sold. Samedan's international operations are also subject
to certain political, economic and other uncertainties including, among others,
risks of war, expropriation, renegotiation or modification of existing
contracts, taxation policies, foreign exchange restrictions, international
monetary fluctuations and other hazards arising out of foreign governmental
sovereignty over areas in which Samedan conducts operations.
Environmental Matters. As a developer, owner and operator of oil and gas
properties, Samedan is subject to various federal, state, local and foreign
country laws and regulations relating to the discharge of materials into, and
the protection of, the environment. The release or discharge of oil from
Samedan's domestic onshore or offshore facilities could subject Samedan to
liability under federal laws and regulations, including the Oil Pollution Act
of 1990, the Outer Continental Shelf Lands Act and the Clean Water Act, for
pollution cleanup costs, damage to the environment, civil or criminal
penalties, and orders or injunctions requiring the suspension or cessation of
operations in affected areas. The liability under these laws for a substantial
release or discharge of oil, subject to certain specified limitations on
liability, may be extraordinarily large. If any oil pollution was caused by
willful misconduct, willful negligence or gross negligence, or was caused
primarily by a violation of federal regulations, such limitations on liability
may not apply. Certain of Samedan's facilities are subject to regulations of
the United States Environmental Protection Agency, including regulations that
require the preparation and implementation of spill prevention control and
countermeasure plans relating to the possible discharge of oil into navigable
water.
The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), also known as "Superfund", imposes liability on certain classes of
persons that contributed to the release or threatened release of a hazardous
substance into the environment or that own or operate facilities or vessels
onto or into which hazardous substances are disposed. The Resource
Conservation and Recovery Act ("RCRA") and regulations promulgated thereunder
regulate hazardous waste, including its treatment, storage and disposal.
CERCLA currently exempts crude oil, and RCRA currently exempts certain oil and
gas exploration and production drilling materials, such as drilling fluids and
produced waters, from the definitions of hazardous substances and hazardous
wastes. Samedan's operations, however, may involve the use or handling of
other materials that may be classified as hazardous substances or hazardous
wastes, and therefore, these statutes and regulations promulgated under them
would apply to Samedan's generation, handling and disposal of these materials.
In addition, there can be no assurance that such exemptions will be preserved
in future amendments of such acts, if any, or that more stringent laws and
regulations protecting the environment will not be adopted.
Certain of Samedan's facilities may also be subject to other federal
environmental laws and regulations, including the Clean Air Act with respect to
emissions of air pollutants. Certain state or local laws or regulations may
impose liabilities in addition to or restrictions more stringent than those
described herein. The environmental laws, rules and regulations of foreign
countries are generally less stringent than those of the United States, and
therefore, the requirements of such jurisdictions do not generally impose an
additional compliance burden on Samedan.
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Samedan has made and will continue to make expenditures in its efforts to
comply with environmental requirements. The Company does not believe that it
has to date expended material amounts in connection with such activities or
that compliance with such requirements will have a material adverse effect upon
the capital expenditures, earnings or competitive position of the Company.
Although such requirements do have a substantial impact upon the energy
industry, generally they do not appear to affect the Company any differently or
to any greater or lesser extent than other companies in the industry.
Insurance. Samedan believes that it has such insurance coverages as are
customary in the industry and that it is adequately protected by public
liability and physical damage insurance.
Competition
The oil and gas industry is highly competitive. Since many companies and
individuals are engaged in exploring for oil and gas and acquiring oil and gas
properties, a high degree of competition for desirable exploratory and
producing properties exists. A number of the companies with which Samedan
competes are larger and have greater financial resources than Samedan.
The availability of a ready market for Samedan's oil and gas production
depends on numerous factors beyond its control, including the level of consumer
demand, the extent of worldwide oil and gas production, the costs and
availability of alternative fuels, the costs of and proximity of pipelines and
other transportation facilities, regulation by state and federal authorities
and the costs of complying with applicable environmental regulations.
EMPLOYEES
The total number of employees of the Company increased from 550 at
December 31, 1995 to 563 at December 31, 1996.
ITEM 2. PROPERTIES.
- ------- -----------
OFFICES
The principal executive office of the Company is located at 110 West
Broadway, Ardmore, Oklahoma 73401. The principal executive office of Samedan
is in Ardmore, Oklahoma, and Samedan also maintains division offices in
Oklahoma City, Houston, Denver and Calgary, Canada. Samedan maintains three
separate offices in Houston for its international, offshore and onshore oil and
gas operations. The principal executive office of NGM is located in Houston.
OIL AND GAS
The estimated proved and proved developed oil and gas reserves of
Samedan, as of December 31, 1996, 1995 and 1994 and the standardized measure of
discounted future net cash flows attributable thereto at December 31, 1996,
1995 and 1994 are included in Note 10 of Notes to Consolidated Financial
Statements appearing on pages 34 through 37 of the Registrant's 1996 annual
report to stockholders, which Note is incorporated herein by reference ("Note
10").
There are numerous uncertainties inherent in estimating quantities of
proved oil and gas reserves. Oil and gas reserve engineering is a subjective
process of estimating underground accumulations of oil and gas that cannot be
precisely measured, and estimates of engineers other than Samedan's might
differ materially from the estimates set forth herein. The accuracy of any
reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of drilling,
testing and production subsequent to the date of the estimate may justify
revision of such estimate. Accordingly, reserve estimates are often different
from the quantities of oil and gas that are ultimately recovered.
Note 10 also includes Samedan's net production (including royalty and
working interest production) of oil and natural gas for the three years ended
December 31, 1996. Royalty production of both oil and gas (stated in oil bbl
7
<PAGE> 10
equivalents) is included in the "Crude Oil & Condensate" presentation in Note
10. Samedan has no oil or gas applicable to long-term supply or similar
agreements with foreign governments or authorities in which Samedan acts as
producer.
Since January 1, 1996, no oil or gas reserve information has been filed
with, or included in any report to, any federal authority or agency other than
the Securities and Exchange Commission and the Energy Information
Administration (the "EIA"). Samedan files Form 23, including reserve and other
information, with the EIA.
The following table sets forth for each of the last three years the
average sales price (including transfers) per unit of oil produced and per unit
of natural gas produced, and the average production (lifting) cost per unit of
production.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1996 1995 1994
------------ ----------- ------------
<S> <C> <C> <C>
Average sales price per bbl of oil (1):
United States . . . . . . . . . . . . . . . . . . . $ 17.83 $ 16.80 $ 14.76
International . . . . . . . . . . . . . . . . . . . $ 20.32 $ 15.57 $ 15.66
Combined (2) . . . . . . . . . . . . . . . . $ 18.78 $ 16.78 $ 14.90
Average sales price per Mcf of natural gas (1):
United States . . . . . . . . . . . . . . . . . . . $ 2.18 $ 1.75 $ 1.99
International . . . . . . . . . . . . . . . . . . . $ 1.90 $ 1.02 $ 1.47
Combined (3) . . . . . . . . . . . . . . . . $ 2.17 $ 1.72 $ 1.97
Average production (lifting) cost per unit of oil and
natural gas production, excluding depreciation
(per bbl)(4):
United States . . . . . . . . . . . . . . . . . . . $ 3.45 $ 4.17 $ 3.64
International . . . . . . . . . . . . . . . . . . . $ 6.47 $ 4.70 $ 4.43
Combined . . . . . . . . . . . . . . . . . . $ 3.70 $ 4.21 $ 3.71
</TABLE>
_________________
(1) Net production amounts used in this calculation include royalties.
(2) Reflects a reduction of $2.35 per bbl in 1996 and includes $.16 per
bbl in 1995 from hedging.
(3) Reflects a reduction per Mcf of $.33 in 1996 and $.004 in 1995 from
hedging.
(4) Gas production is converted to oil bbl equivalents based on the
average sales prices per bbl of oil and per Mcf of gas. Net
production amounts used in the calculation of average sales prices
for purposes of computing the conversion ratio excludes royalties.
Conversion ratios for 1996, 1995 and 1994 are set forth below:
<TABLE>
<CAPTION>
United States International
---------------- ----------------
<S> <C> <C>
1996 8.12 to 1 10.66 to 1
1995 9.61 to 1 16.43 to 1
1994 7.44 to 1 8.53 to 1
</TABLE>
8
<PAGE> 11
The number of productive oil and gas wells in which Samedan had interests
and the developed acreage held as of December 31, 1996, were as follows:
<TABLE>
<CAPTION>
Productive Wells(1)(2) Developed Acreage(3)(4)
---------------------------------------------------- -------------------------
Oil Gas
------------------------ -------------------------
Location Gross Net Gross Net Gross Acres Net Acres
- -------- ---------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
United States
(onshore) . . . . . 4,607.0 860.8 1,476.0 847.2 805,003 439,532
United States
(offshore) . . . . 343.0 151.1 530.0 186.9 1,028,999 402,061
International . . . . 629.0 91.8 89.0 32.6 579,358 154,351
--------- --------- ---------- --------- ----------- -----------
Total . . . . . . . . 5,579.0 1,103.7 2,095.0 1,066.7 2,413,360 995,944
========= ========= ========== ========= =========== ===========
</TABLE>
__________________
(1) Productive wells are producing wells and wells capable of production. 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. 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.
(2) One or more completions in the same bore hole is counted as one well.
Included in the table and counted as one gross well each are 21.0 oil
wells (14.4 net) and 47.0 gas wells (23.6 net) that are multiple
completions. Also included in the table are 1,086.0 gross oil wells
(136.7 net) and 63.5 gross gas wells (32.0 net) that were not producing
at December 31, 1996 because such wells were awaiting additional action
or pipeline connections.
(3) Developed acreage is acreage spaced or assignable to productive wells.
(4) A gross acre is an acre in which a working interest is owned. A net acre
is deemed to exist when the sum of 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.
9
<PAGE> 12
The undeveloped acreage (including both leases and concessions) that
Samedan held as of December 31, 1996, is as follows:
<TABLE>
<CAPTION>
Undeveloped Acreage (1)(2)
---------------------------------
Location Gross Acres Net Acres
- -------- ---------------- ---------------
<S> <C> <C>
United States Onshore
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,363 4,493
California . . . . . . . . . . . . . . . . . . . . . . . . . . 30,173 16,294
Colorado . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,493 52,875
Kansas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,822 17,549
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . 19,326 11,250
Michigan . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,028 3,090
Mississippi . . . . . . . . . . . . . . . . . . . . . . . . . 13,080 6,167
Montana . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,345 45,213
New Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . 154,207 128,752
North Dakota . . . . . . . . . . . . . . . . . . . . . . . . . 29,197 14,703
Oklahoma . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,703 17,327
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285,575 112,743
Wyoming . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,118 15,321
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,377 5,207
---------------- ---------------
Total United States Onshore . . . . . . . . . . . . . . 815,807 450,984
---------------- ---------------
United States Offshore (Federal Waters)
Alabama . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,280 70,930
California . . . . . . . . . . . . . . . . . . . . . . . . . . 79,678 8,625
Louisiana . . . . . . . . . . . . . . . . . . . . . . . . . . 418,761 238,418
Mississippi . . . . . . . . . . . . . . . . . . . . . . . . . 28,800 24,960
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,158 97,304
---------------- ---------------
Total United States Offshore (Federal Waters) . . . . . 839,677 440,237
---------------- ---------------
International
Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . 84,229 10,978
Australia . . . . . . . . . . . . . . . . . . . . . . . . . . 1,877,960 746,489
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356,703 211,449
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,376 51,459
Ecuador . . . . . . . . . . . . . . . . . . . . . . . . . . . 864,126 864,126
Ireland . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,799 105,520
Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,750 156,938
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . 943,963 269,502
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . 777,278 32,063
---------------- ---------------
Total International . . . . . . . . . . . . . . . . . . 5,671,184 2,448,524
---------------- ---------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 7,326,668 3,339,745
================ ===============
</TABLE>
__________________
(1) Undeveloped acreage is considered to be those lease acres on which wells
have not been drilled or completed to a point that would permit the
production of commercial quantities of oil and gas regardless of whether
or not such acreage contains proved reserves. Included within undeveloped
acreage are those lease acres (held by production under the terms of a
lease) that are not within the spacing unit containing, or acreage
assigned to, the productive well so holding such lease.
(2) A gross acre is an acre in which a working interest is owned. A net acre
is deemed to exist when the sum of 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.
The following table sets forth for each of the last three years the
number of net exploratory and development wells drilled by or on behalf of
Samedan. An exploratory well is a well drilled to find and produce oil or gas
in an unproved area, to find a new reservoir in a field previously found to be
productive of oil or gas in another reservoir, or to extend a known reservoir.
A development well, for purposes of the following table and as defined
10
<PAGE> 13
in the rules and regulations of the Securities and Exchange Commission, is a
well drilled within the proved area of an oil or gas reservoir to the depth of
a stratigraphic horizon known to be productive. The number of wells drilled
refers to the number of wells completed at any time during the respective year,
regardless of when drilling was initiated; and "completion" refers to the
installation of permanent equipment for the production of oil or gas, or, in
the case of a dry hole, to the reporting of abandonment to the appropriate
agency.
<TABLE>
<CAPTION>
Net Exploratory Wells Net Development Wells
----------------------------------------------- -----------------------------------------------
Productive (1) Dry (2) Productive (1) Dry (2)
---------------------- ---------------------- ----------------------- ----------------------
Year Ended
December 31, U.S. International U.S. International U.S. International U.S. International
- ----------- ----- ------------- ------ ------------- ------- ------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994 . . . . 8.06 3.75 16.45 6.99 99.91 3.08 13.37 .14
1995 . . . . 12.44 .80 14.42 4.72 107.09 5.50 20.49 .14
1996 . . . . 15.40 .90 26.90 1.04 74.97 1.17 19.91 -0-
</TABLE>
__________________
(1) A productive well is an exploratory or a development well that is not a
dry hole.
(2) A dry hole is an exploratory or development well found to be incapable of
producing either oil or gas in sufficient quantities to justify
completion as an oil or gas well.
Samedan spent approximately $687 million in 1996 on the purchase of
producing oil and gas properties, of which $675 million was spent for the
proved properties acquired in the EDC acquisition. See "Item 1. Business --
EDC Acquisition." Approximately $43.7 million and $6.1 million, respectively,
were spent on such purchases in 1995 and 1994.
At February 14, 1997, Samedan was drilling 9 gross (4.6 net) exploratory
wells, and 17 gross (7.8 net) development wells. These wells are located
onshore in the United States in Colorado, Louisiana, North Dakota, Oklahoma,
Texas, Wyoming and offshore Gulf of Mexico. These wells have objectives
ranging from approximately 1,900 to 13,000 feet. The estimated drilling cost
to Samedan of these wells is approximately $16.1 million if all are dry and
approximately $20.9 million if all are completed as producing wells.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Registrant and its
subsidiaries, to which the Registrant or any of its subsidiaries is a party or
of which any of their property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
Not applicable.
11
<PAGE> 14
EXECUTIVE OFFICERS OF THE REGISTRANT
The following tabulation sets forth certain information, as of March 10,
1997, with respect to the executive officers of the Registrant.
<TABLE>
<CAPTION>
Name Age Position
---------------- ----- -----------------
<S> <C> <C>
Robert Kelley (1) 51 Chairman of the Board, President, Chief Executive
Officer, Director
George L. DeMare, Jr. (2) 51 Vice President and Operating Committee Member
of Samedan
William D. Dickson (3) 48 Vice President-Finance and Treasurer of the
Registrant and Operating Committee Member of
Samedan
Dan O. Dinges (4) 43 Vice President and Operating Committee Member
of Samedan
W. A. Poillion (5) 47 Vice President and Operating Committee Member
of Samedan
Orville Walraven (6) 52 Corporate Secretary of the Registrant and Vice
President and Operating Committee Member of
Samedan
James C. Woodson (7) 54 Vice President and Operating Committee Member
of Samedan
- ---------------------
</TABLE>
(1) Robert Kelley has served as President and Chief Executive Officer of the
Registrant since August 1, 1986, and as Chairman of the Board since
October 27, 1992. Prior to August 1986, he had served as Executive Vice
President of the Registrant from January 1986. Mr. Kelley also serves as
President and Chief Executive Officer of Samedan, positions he has held
since 1984. For more than five years prior thereto, Mr. Kelley served as
an officer of Samedan. He has served as a director of the Registrant
since 1986.
(2) George L. DeMare, Jr. has served as Vice President and Onshore Division
Manager of Samedan since January 1989. Mr. DeMare has been a member of
the Operating Committee of Samedan since January 31, 1995.
(3) William D. Dickson was elected Vice President-Finance and Treasurer of
the Registrant in October 1985. He has served as Vice President-Finance,
Treasurer and Assistant Secretary of Samedan since 1984 and as a member
of the Operating Committee of Samedan since February 9, 1994.
(4) Dan O. Dinges has served as Vice President and Division General Manager,
Offshore Division of Samedan since January 1989. Mr. Dinges has been a
member of the Operating Committee of Samedan since January 31, 1995.
(5) W. A. Poillion has served as Vice President - Production and Drilling and
a member of the Operating Committee of Samedan since November 1, 1990.
Prior thereto, he served as Manager of Offshore Production and Drilling
for Samedan from March 1, 1985 to October 31, 1990.
(6) Orville Walraven has served as Corporate Secretary of the Registrant
since January 1, 1989. He has also served as Vice President - Land of
Samedan and as a member of the Operating Committee of Samedan since
January 1, 1989.
(7) James C. Woodson has served as Vice President - Exploration of Samedan
since September 1, 1983. Mr. Woodson has been a member of the Operating
Committee of Samedan since August 1, 1986.
12
<PAGE> 15
The terms of office for the officers of the Registrant continue until
their successors are chosen and qualified. No officer or executive officer of
the Registrant has an employment agreement with the Registrant or any of its
subsidiaries. There are no family relationships between any of the
Registrant's officers.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
- ------- -------------------------------------------------------------
MATTERS.
--------
The Registrant's common stock is listed and traded on the New York Stock
Exchange under the symbol "NBL". The table captioned "Stock Prices and
Dividends by Quarters" appearing on page 40 of the Registrant's 1996 annual
report to stockholders contains certain information with respect to sales
prices of the common stock and cash dividends declared by the Registrant on the
common stock, and such table is incorporated herein by reference.
At December 31, 1996, there were 1,600 stockholders of record of the
Registrant.
ITEM 6. SELECTED FINANCIAL DATA.
- ------- ------------------------
Selected financial data of the Registrant is set forth on page 21 of the
Registrant's 1996 annual report to stockholders and is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS.
----------------------
Management's discussion and analysis of financial condition and results
of operations is set forth on pages 15 through 20 of the Registrant's 1996
annual report to stockholders and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
The consolidated financial statements, appearing on pages 22 through 32,
together with the report thereon of Arthur Andersen LLP dated January 24, 1997
appearing on page 33, and the unaudited information, appearing on pages 34
through 37, of the Registrant's 1996 annual report to stockholders are
incorporated herein by reference. With the exception of the aforementioned
information and the information expressly incorporated into Items 2, 5, 6 and 7
hereof, the 1996 annual report to stockholders is not deemed to be filed as
part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------- ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- ---------------------------------------------------
The section entitled "Election of Directors" in the Registrant's proxy
statement for the 1997 annual meeting of stockholders sets forth certain
information with respect to the directors of the Registrant and is incorporated
herein by reference. Certain information with respect to the executive
officers of the Registrant is set forth under the caption "Executive Officers
of the Registrant" in Part I of this report.
The section entitled "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Registrant's proxy statement for the 1997 annual meeting of
stockholders sets forth certain information with respect to compliance with
Section 16(a) of the Securities Exchange Act of 1934, as amended, and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
- -------- -----------------------
The section entitled "Executive Compensation" in the Registrant's proxy
statement for the 1997 annual meeting of stockholders sets forth certain
information with respect to the compensation of management of the Registrant,
and, except for the report of the compensation and benefits committee of the
Board of Directors and the information therein under "Executive Compensation --
Performance Graph", is incorporated herein by reference.
13
<PAGE> 16
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- ---------------------------------------------------------------
The sections entitled "Security Ownership of Certain Beneficial Owners"
and "Security Ownership of Directors and Executive Officers" in the
Registrant's proxy statement for the 1997 annual meeting of stockholders set
forth certain information with respect to the ownership of the Registrant's
common stock, and are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- -----------------------------------------------
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- -------- -----------------------------------------------------------------
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
Page In 1996
Annual Report
to Stockholders
(Incorporated
by Reference)
-----------------
<S> <C> <C>
(1) Financial Statements:
Consolidated Balance Sheet at December 31, 1996 and 1995 . . . . . . . 22
Consolidated Statement of Operations for the three years ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Statement of Cash Flows for the three years ended
December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statement of Shareholders' Equity for the three years
ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 26
Report of Independent Public Accountants . . . . . . . . . . . . . . . 33
Supplemental Oil and Gas Information (Unaudited) and Interim
Financial Information (Unaudited) . . . . . . . . . . . . . . . . 34
</TABLE>
(2) Financial Statement Schedules:
All schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
Financial statements of two 50 percent or less owned entities accounted
for by the equity method have been omitted because, in the aggregate, the
proportionate share of their profit before income taxes and total assets are
less than 20 percent of the respective consolidated amounts, and investments in
such entities are less than 20 percent of consolidated total assets of the
Registrant.
(3) Exhibits:
The exhibits required to be filed by this Item 14 are set
forth in the Index to Exhibits accompanying this report.
(b) No report on Form 8-K was filed by the Registrant during the
quarter ended December 31, 1996.
14
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NOBLE AFFILIATES, INC.
Date: March 21, 1997 By: /s/ William D. Dickson
-------------------------------------
William D. Dickson,
Vice President-Finance and Treasurer
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 and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Capacity in which signed Date
- --------- ------------------------ ----
/s/ Robert Kelley Chairman of the Board, President, March 21, 1997
- -------------------------------- Chief Executive Officer and
Robert Kelley Director (Principal Executive
Officer)
/s/ William D. Dickson Vice President-Finance and March 21, 1997
- -------------------------------- Treasurer (Principal Financial
William D. Dickson and Accounting Officer)
/s/ Alan A. Baker Director March 21, 1997
- --------------------------------
Alan A. Baker
/s/ Michael A. Cawley Director March 21, 1997
- --------------------------------
Michael A. Cawley
/s/ Edward F. Cox Director March 21, 1997
- --------------------------------
Edward F. Cox
Director
- --------------------------------
James C. Day
/s/ Harold F. Kleinman Director March 21, 1997
- --------------------------------
Harold F. Kleinman
/s/ George J. McLeod Director March 21, 1997
- --------------------------------
George J. McLeod
</TABLE>
S-1
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C> <C>
3.1 -- Certificate of Incorporation, as amended, of the Registrant as currently in effect (filed as Exhibit
3.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1987 and
incorporated herein by reference).
3.2 -- Composite copy of Bylaws of the Registrant as currently in effect (filed as Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1992 and incorporated herein
by reference).
4.1 -- Indenture dated as of October 14, 1993 between the Registrant and U.S. Trust Company of Texas, N.A.,
as Trustee, relating to the Registrant's 7 1/4% Notes Due 2023, including form of the Registrant's
7 1/4% Note Due 2023 (filed as Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by reference).
10.1* -- Samedan Oil Corporation Bonus Plan, as amended and restated on September 24, 1996.
10.2* -- Restoration of Retirement Income Plan for certain participants in the Noble Affiliates Retirement
Plan dated September 21, 1994, effective as of May 19, 1994 (filed as Exhibit 10.5 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein
by reference).
10.3* -- Noble Affiliates Thrift Restoration Plan dated May 19, 1994 (filed as Exhibit 10.6 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and incorporated
herein by reference).
10.4* -- Noble Affiliates Restoration Trust dated September 21, 1994, effective as of October 1, 1994 (filed
as Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December
31, 1994 and incorporated herein by reference).
10.5* -- Noble Affiliates, Inc. 1992 Stock Option and Restricted Stock Plan, as amended and restated, dated
November 2, 1992 (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-8
(Registration No. 33-54084) and incorporated herein by reference).
10.6* -- 1982 Stock Option Plan of the Registrant (filed as Exhibit 4.1 to the Registrant's Registration
Statement on Form S-8 (Registration No. 2-81590) and incorporated herein by reference).
10.7* -- Amendment No. 1 to the 1982 Stock Option Plan of the Registrant (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-8 (Registration No. 2-81590) and incorporated herein
by reference).
10.8* -- Amendment No. 2 to the 1982 Stock Option Plan of the Registrant (filed as Exhibit 10.11 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated herein
by reference).
10.9* -- 1978 Non-Qualified Stock Option Plan of the Registrant (filed as Exhibit 1.1 to the Registrant's
Registration Statement on Form S-8 (Registration No. 2-64600) and incorporated herein by reference).
10.10* -- 1978 Non-Qualified Stock Option Plan of the Registrant, as amended July 27, 1978 (filed as Exhibit
1.2 to the Registrant's Registration Statement on Form S-8 (Registration No. 2-64600) and
incorporated herein by reference).
10.11* -- Amendment No. 2 to 1978 Non-Qualified Stock Option Plan of the Registrant (filed as Exhibit 10.20 to
the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated
herein by reference).
10.12* -- Amendment No. 3 to 1978 Non-Qualified Stock Option Plan of the Registrant (filed as Exhibit 10.15 to
the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated
herein by reference).
</TABLE>
E-1
<PAGE> 19
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------- -------
<S> <C> <C>
10.13* -- 1988 Nonqualified Stock Option Plan for Non-Employee Directors of the Registrant, as amended and
restated, effective as of January 30, 1996.
10.14* -- Form of Indemnity Agreement entered into between the Registrant and each of the Registrant's
directors and bylaw officers (filed as Exhibit 10.18 to the Registrant's Annual Report of Form 10-K
for the year ended December 31, 1995 and incorporated herein by reference).
10.15 -- Guaranty of the Registrant dated October 28, 1982, guaranteeing certain obligations of Samedan
(filed as Exhibit 10.12 to the Registrant's Annual Report on Form 10-K for the year ended December
31, 1993 and incorporated herein by reference).
10.16 -- Agreement dated March 31, 1989, by and between Apache Corporation and the Registrant (filed as
Exhibit 2(a) to the Registrant's Current Report on Form 8-K (Date of Event: May 16, 1989) and
incorporated herein by reference).
10.17 -- Consent regarding agreement dated April 30, 1989, by and between Apache Corporation and the
Registrant (filed as Exhibit 2(b) to the Registrant's Current Report on Form 8-K (Date of Event:
May 16, 1989) and incorporated herein by reference).
10.18 -- Stock Purchase Agreement dated as of July 1, 1996, between Samedan Oil Corporation and Enterprise
Diversified Holdings Incorporated (filed as Exhibit 2.1 to the Registrant's Current Report on Form
8-K (Date of Event: July 31, 1996) dated August 13, 1996 and incorporated herein by reference).
10.19 -- Credit Agreement dated as of July 31, 1996 among the Registrant, as borrower, certain commercial
lending institutions which are or may become a party thereto, as lenders (filed as Exhibit 10.1 to
the Registrant's Current Report on Form 8-K (Date of Event: July 31, 1996), filed on August 13,
1996 and incorporated herein by reference).
10.20 -- First Amendment to Credit Agreement dated as of October 15, 1996 among the Registrant, as borrower,
certain commercial lending institutions which are or may become parties thereto, as lenders, and
Union Bank of Switzerland, Houston Agency, as agents for the lenders (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-3 (No. 333-14275) and incorporated herein by
reference).
10.21* -- Noble Affiliates, Inc. 1992 Stock Option and Restricted Stock Plan, as amended and restated on
December 10, 1996, subject to the approval of stockholders.
13 -- The following information appearing on the following pages of the Registrant's 1996 Annual Report to
Stockholders: (i) management's discussion and analysis of financial condition and results of
operations, pages 15 through 20; (ii) selected financial data, page 21; (iii) the consolidated
financial statements, together with the report thereon of Arthur Andersen LLP dated January 24,
1997, pages 22 through 33, and the unaudited information, pages 34 through 37; and (iv) the table
captioned "Stock Prices and Dividends by Quarters," page 40.
21 -- Subsidiaries.
23 -- Consent of Arthur Andersen LLP.
27 -- Financial Data Schedule.
</TABLE>
- -----------
* Management contract or compensatory plan or arrangement required to be
filed as an exhibit hereto.
E-2
<PAGE> 1
Exhibit 10.1
SAMEDAN OIL CORPORATION
BONUS PLAN
As Amended and Restated on September 24, 1996
Purpose
The success of the Company is a result of the collective efforts of all
employees. Each position within the Company has the ability to make a positive
contribution to key factors making up the components used to measure a
successful year. Those components include cost of finding and developing new
oil and gas reserves, cash flow generated from operations, net income and new
reserves discovered or purchased. In order to intensify each employee's
attention on available opportunities to increase revenues, control costs, and
seek out profitable ventures, the Company is maintaining a bonus program that
rewards employees for successful achievement of specific goals. It is
management's belief that shareholders will benefit from the creation of an
environment that ties employee compensation to the success of the Company.
Participation and Eligibility
The bonus plan covers all full time employees (except those covered by the
Geological Incentive Plan) who have completed one year of service at the close
of the bonus plan year. The bonus earned by employees with less than two full
years of service will be adjusted based upon the number of months employed
compared to twenty-four months. Additionally, no bonus payments will be made
for partial year's service; the eligibility will be determined from the
employee roster at the close of the bonus plan year.
<PAGE> 2
STRUCTURE
Target Bonus
The target bonus amount shall be determined on an aggregate basis for each
division and department. The target bonus shall be the base salary at year end
of eligible employees multiplied times the appropriate percentage factor
assigned to the salary classification or position. Salary
classifications/positions and target bonus factors are as follows:
<TABLE>
<CAPTION>
Salary Classification Target Factor
--------------------- -------------
<S> <C>
56 through 59 5%
60 through 62 6%
63 through 65 8%
18 through 20 12%
21 through 23 15%
24 through 25 20%
Above 25 To Be Assigned
</TABLE>
Goals
The target bonus will be adjusted to reflect the level of attainment of
specific, predetermined division or corporate goals. Four goals will be
established each year by the Board of Directors for the corporation and three
goals for each division. The percentage weighting assigned to each goal shall
be as follows subject to annual review by the Board of Directors.
<TABLE>
<CAPTION>
Corporate Goals Assigned Weight
--------------- ---------------
<S> <C> <C>
1. Cost of Finding 40%
2. New Reserves Added 40%
3. Cash Flow from Operations 10%
4. Net Income 10%
</TABLE>
<TABLE>
<CAPTION>
Division Goals Assigned Weight
-------------- ---------------
<S> <C> <C>
1. Cost of Finding 40%
2. New Reserves Added 40%
3. Cash Flow from Operations 20%
</TABLE>
-2-
<PAGE> 3
The goal weighting percentage set as a target will be adjusted based upon the
measurement of actual results measured against the goal. The adjustment to the
goal weighting will be based upon the following schedule for cost of new
reserves and new reserves to be added.
<TABLE>
<CAPTION>
Goal Achievement Range Adjustment Factor
---------------------- -----------------
<S> <C>
Greater than 135% 2.00
125 - 135% 1.75
115 - 125% 1.50
105 - 115% 1.25
95 - 105% 1.00
85 - 95% .75
75 - 85% .50
Less than 75% .00
</TABLE>
Example Cost of Finding Goal of $7
<TABLE>
<CAPTION>
Goal Range Adjustment
---------- ----------
<S> <C>
Below $4.55 2.00
$4.55 - $5.25 1.75
$5.25 - $5.95 1.50
$5.95 - $6.65 1.25
$6.65 - $7.35 1.00
$7.35 - $8.05 .75
$8.05 - $8.75 .50
Higher than $8.75 .00
</TABLE>
The adjustment to the goal weighting for cash flow will be as follows based on
the percent of growth as compared to the prior year. The effect of oil and gas
price increases (decreases) will be eliminated from the calculation.
<TABLE>
<CAPTION>
Percentage Increase Adjustment Factor
--------------------- -----------------
<S> <C>
Greater than +35% 2.00
+25% - +35% 1.75
+15% - +25% 1.50
+5% - +15% 1.25
0% - +5% 1.00
-5% - 0% .75
Less than -5% .00
</TABLE>
-3-
<PAGE> 4
The adjustment to the goal weighting for net income will be as follows based on
return on beginning shareholders' equity.
<TABLE>
<CAPTION>
Return on Equity Adjustment Factor
---------------- -----------------
<S> <C>
Greater than 18% 2.00
15% - 18% 1.75
12% - 15% 1.50
10% - 12% 1.25
8% - 10% 1.00
5% - 8% .75
Less than 5% .00
</TABLE>
The target bonus for corporate employees will be adjusted to reflect the
combined percentage of achievement of all assigned goals. The target bonus for
division employees will be adjusted to reflect the combined percentage of
achievement of all assigned goals using the ratio of 75 percent for division
goal achievement and 25 percent for corporate goal achievement. Accordingly,
the bonus payable to division employees is dependent on the level of
achievement of both division and corporate goals. The dollar amount of the
bonus payment, if any, will be calculated using the target bonus amount times
the following adjustment schedule:
<TABLE>
<CAPTION>
Combined
Goal Achievement Range Adjustment Factor
---------------------- -----------------
<S> <C>
Greater than 160% 2.00
140 - 160% 1.75
130 - 140% 1.50
120 - 130% 1.40
105 - 120% 1.20
95 - 105% 1.00
75 - 95% .75
65 - 75% .25
Below 65% .00
</TABLE>
-4-
<PAGE> 5
Bonus Allocation
Each division manager, department head and operating committee member shall
receive their bonus (assuming a bonus is payable) as calculated using the
target bonus times the applicable multiplier. The remaining bonus pool shall
be allocated to eligible employees within the division or department based upon
merit. Deviation above or below the target bonus percent must be justified in
writing by the employee's supervisor. Division managers and department heads
shall submit the allocated bonus listing to the President for review and
approval. In order to recognize exceptional performance by an employee, the
division manager or department head may recommend an additional bonus amount be
paid over and above the target bonus calculation. The recommendation must be
accompanied by a written description of the accomplishments justifying the
additional bonus amount. All bonus calculations, allocations and
recommendations are subject to review and approval by the Compensation and
Benefits Committee of the Board of Directors.
Specific definition and method of calculating actual achievement of goals is
set forth in Exhibit A.
-5-
<PAGE> 1
Exhibit 10.13
1988 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
OF
NOBLE AFFILIATES, INC.
AS AMENDED AND RESTATED EFFECTIVE JANUARY 30, 1996
RECITALS
A. Effective as of July 26, 1988 (the "Effective Date"), the
board of directors (the "Board of Directors") of Noble Affiliates, Inc., a
Delaware corporation (the "Company"), hereby adopts this 1988 Nonqualified
Stock Option Plan for Non-Employee Directors (the "Plan").
B. The purposes of the Plan are to provide to each of the
directors of the Company who is not also either an employee or an officer of
the Company added incentive to continue in the service of the Company and a
more direct interest in the future success of the operations of the Company by
granting to such directors options (the "Options", or individually, the
"Option") to purchase shares of the Company's common stock, $3.33-1/3 par value
(the "Common Stock"), subject to the terms and conditions described below.
ARTICLE I
GENERAL
1.01 Definitions. For purposes of this Plan and as used herein,
"non-employee director" shall mean an individual who (a) is now, or hereafter
becomes, a member of the Board of Directors by virtue of an election by the
shareholders of the Company, (b) is neither an employee nor an officer of the
Company and (c) has not elected to decline to participate in the Plan pursuant
to the next succeeding sentence. A director otherwise eligible to participate
in the Plan may make an irrevocable, one-time election, by written notice to
the Company within 30 days after his initial election to the Board of Directors
or, in the case of the directors in office on the Effective Date, prior to
shareholder approval of the Plan, to decline to participate in the Plan. For
purposes of this Plan, "employee" shall mean an individual whose wages are
subject to the withholding of federal income tax under Section 3401 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code"), and
"officer" shall mean an individual elected or appointed by the Board of
Directors or chosen in such other manner as may be prescribed in the By-laws of
the Company to serve as such, except that for the purposes of this Plan, the
Chairman of the Board will not be deemed to be an officer of the Company.
For purposes of this Plan, and as used herein, the "fair market value"
of a share of Common Stock is the closing sales price on the date in question
(or, if there was no reported sale on such date, on the last preceding day on
which any reported sale occurred) of the Common Stock on the New York Stock
Exchange.
1.02 Options. The Options granted hereunder shall be options that
are not qualified under Section 422A of the Code.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Board of Directors. The Board
of Directors shall have no authority, discretion or power to select the
participants who will receive Options, to set the number of shares to be
covered by each Option, or to set the exercise price or the period within which
the Options may be exercised, or to alter any other terms or conditions
specified herein, except in the sense of administering the Plan subject to the
express provisions of the Plan and except in accordance with Sections 3.02(a)
and 6.02 hereof. Subject to the foregoing
<PAGE> 2
limitations, the Board of Directors shall have authority and power to adopt
such rules and regulations and to take such action as it shall consider
necessary or advisable for the administration of the Plan, and to construe,
interpret and administer the Plan. The decisions of the Board of Directors
relating to the Plan shall be final and binding upon the Company, the Holders,
as defined hereinafter, and all other persons. No member of the Board of
Directors shall incur any liability by reason of any action or determination
made in good faith with respect to the Plan or any stock option agreement
entered into pursuant to the Plan.
ARTICLE III
OPTIONS
3.01 Participation. Each non-employee director shall be granted
Options to purchase Common Stock under the Plan on the terms and conditions
herein described.
3.02 Stock Option Agreements. Each Option granted under the Plan
shall be evidenced by a written stock option agreement, which agreement shall
be entered into by the Company and the non-employee director to whom the Option
is granted (the "Holder"), and which agreement shall include, incorporate or
conform to the following terms and conditions, and such other terms and
conditions not inconsistent therewith or with the terms and conditions of this
Plan as the Board of Directors considers appropriate in each case:
(a) Option Grant Date. Options shall be granted
initially as of the Effective Date to each non-employee director
serving the Company as a director on such date. Thereafter, on each
July 1 during the term of the Plan, Options shall be granted
automatically to the non-employee directors serving the Company as
directors on such date. The date of grant of an Option pursuant to
the Plan shall be referred to hereinafter as the "Grant Date" of such
Option. Notwithstanding anything herein to the contrary, the Board of
Directors may revoke, on or prior to each July 1, the next automatic
grant of Options otherwise provided for by the Plan if no options have
been granted to employees since the preceding July 1 under the
Company's 1982 Stock Option Plan or any other employee stock option
plan that the Company might adopt hereafter.
(b) Number. Each non-employee director serving the
Company as a director on the Effective Date shall be granted, as of
such date, an Option to purchase a number of shares of Common Stock
equal to the product obtained by multiplying (i) the number of
completed years such director has served the Company as director by
(ii) 500. Thereafter, as of each subsequent Grant Date, each then
current non-employee director shall be granted an Option to purchase
the number of shares of Common Stock equal to the nearest number of
whole shares determined in accordance with the following formula,
subject to adjustment in accordance with Section 5.02 hereof:
30,000 = Number of Shares of
------------------------------------ Common Stock
Number of Non-Employee Directors
"Number of Non-Employee Directors" shall mean the number of
non-employee directors serving the Company as a director on such Grant
Date. The formula set forth above will not be affected by any
decision of the Board of Directors to revoke an automatic grant.
If, on any July 1 during the term of the Plan, fewer than
30,000 shares of Common Stock (subject to adjustment in accordance
with Section 5.02 hereof) remain available for grant on such date,
such smaller number will be substituted for 30,000 as the numerator in
the formula described above to determine the number of shares of
Common Stock to be subject to each Option to be granted to each
non-employee director on such date.
(c) Price. The price at which each share of Common Stock
covered by an Option may be purchased pursuant to this Plan shall be
the fair market value of the shares on the Grant Date of such Option.
2
<PAGE> 3
(d) Option Period. Each Option shall be exercisable from
time to time over a period (the "Option Period") commencing one year
from the Grant Date of such Option and ending upon the expiration of
ten years from the Grant Date, unless terminated sooner pursuant to
the provisions described in Section 3.02(e) below; provided, however,
that any Option granted pursuant to the Plan shall become exercisable
in full upon the mandatory retirement of the Holder as a regular
director because of age in accordance with Article III of the By-laws
of the Company.
(e) Termination of Service, Death, Etc. Each stock
option agreement shall provide as follows with respect to the exercise
of the Option granted thereby in the event that the Holder ceases to
be a non-employee director for the reasons described in this Section
3.02(e):
(i) If the Holder ceases to be a director of the
Company on account of such Holder's (A) fraud or intentional
misrepresentation, or (B) embezzlement, misappropriation or
conversion of assets or opportunities of the Company or any
direct or indirect majority-owned subsidiary of the Company,
then the Option shall automatically terminate and be of no
further force or effect as of the date the Holder's
directorship terminated;
(ii) If the Holder shall die during the Option
Period while a director of the Company (or during the
additional five-year period provided by paragraph (iii) of
this Section 3.02(e)), the Option may be exercised, to the
extent that the Holder was entitled to exercise it at the date
of Holder's death, within five years after such death (if
otherwise within the Option Period), but not thereafter, by
the executor or administrator of the estate of the Holder, or
by the person or persons who shall have acquired the Option
directly from the Holder by bequest or inheritance; or
(iii) If the directorship of a Holder is terminated
for any reason (other than the circumstances specified in
paragraphs (i) and (ii) of this Section 3.02(e)) within the
Option Period, the Option may be exercised, to the extent the
Holder was able to do so at the date of termination of the
directorship, within five years after such termination (if
otherwise within the Option Period), but not thereafter.
(f) Transferability. An Option granted under the Plan
shall not be transferable by the Holder other than by will or the laws
of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder. The designation of a beneficiary by a Holder does not
constitute a transfer.
(g) Agreement to Continue in Service. Each Holder shall
agree to remain in the service of the Company, at the pleasure of the
Company's shareholders, for a continuous period of at least one year
after the date of the grant of any Option, at the retainer rate and
fee schedule then in effect or at such changed rate or schedule as the
Company from time to time may establish.
(h) Exercise, Payments, Etc. Each stock option agreement
shall provide that the method for exercising the Option granted
thereby shall be by delivery to the President of the Company of, or by
sending by United States registered or certified mail, postage
prepaid, addressed to the Company (for the attention of its President)
of, written notice signed by Holder specifying the number of shares of
Common Stock with respect to which such Option is being exercised.
Such notice shall be accompanied by the full amount of the purchase
price of such shares. Any such notice shall be deemed to be given on
the date on which the same was deposited in a regularly maintained
receptacle for the deposit of United States mail, addressed and sent
as above-stated. In addition to the foregoing, promptly after demand
by the Company, the exercising Holder shall pay to the Company an
amount equal to applicable withholding taxes, if any, due in
connection with such exercise.
3
<PAGE> 4
ARTICLE IV
[Deleted]
ARTICLE V
AUTHORIZED COMMON STOCK
5.01 Common Stock. The total number of shares of Common Stock as
to which Options may be granted pursuant to the Plan shall be 550,000, in the
aggregate, except as such number of shares shall be adjusted from and after the
Effective Date in accordance with the provisions of Section 5.02 hereof. If
any outstanding Option under the Plan shall expire or be terminated for any
reason before the end of the Option Period, the shares of Common Stock
allocable to the unexercised portion of such Option may again be subject to the
Plan. The Company shall, at all times during the life of any outstanding
Options, retain as authorized and unissued Common Stock at least the number of
shares from time to time included in the outstanding Options or otherwise
assure itself of its ability to perform its obligation under the Plan.
5.02 Adjustments Upon Changes in Common Stock. In the event the
Company shall effect a split of the Common Stock or dividend payable in Common
Stock, or in the event the outstanding Common Stock shall be combined into a
smaller number of shares, the maximum number of shares as to which Options may
be granted under the Plan shall be increased or decreased proportionately. In
the event that before delivery by the Company of all of the shares of Common
Stock in respect of which any Option has been granted under the Plan, the
Company shall have effected such a split, dividend or combination, the shares
still subject to the Option shall be increased or decreased proportionately and
the purchase price per share shall be increased or decreased proportionately so
that the aggregate purchase price for all the then optioned shares shall remain
the same as immediately prior to such split, dividend or combination.
In the event of a reclassification of the Common Stock not covered by
the foregoing, or in the event of a liquidation or reorganization, including a
merger, consolidation or sale of assets, the Board of Directors of the Company
shall make such adjustments, if any, as it may deem appropriate in the number,
purchase price and kind of shares covered by the unexercised portions of
Options theretofore granted under the Plan. The provisions of this Section
5.02 shall only be applicable if, and only to the extent that, the application
thereof does not conflict with any valid governmental statute, regulation or
rule.
ARTICLE VI
GENERAL PROVISIONS
6.01 Termination of the Plan. The Plan shall terminate whenever
the Board of Directors adopts a resolution to that effect. If not sooner
terminated under the preceding sentence, the Plan shall wholly cease and expire
at the close of business on July 25, 2006. After termination of the Plan, no
Options shall be granted under this Plan, but the Company shall continue to
recognize Options previously granted.
6.02 Amendment of the Plan. Subject to the limitations set forth
in this Section 6.02, the Board of Directors may from time to time amend,
modify, suspend or terminate the Plan. No such amendment, modification,
suspension or termination shall (a) impair any Options theretofore granted
under the Plan or deprive any Holder of any shares of Common Stock which he
might have acquired through or as a result of the Plan, or (b) be made without
the approval of the shareholders of the Company where such change would (i)
increase the total number of shares of Common Stock which may be granted under
the Plan or decrease the purchase price under the Plan (other than as provided
in Section 5.02 hereof), (ii) materially alter the class of persons eligible to
be granted Options under the Plan, (iii) materially increase the benefits
accruing to Holders under the Plan or (iv) extend the term of the Plan or the
Option Period. Notwithstanding any other provision of this Section 6.02, in
accordance with Rule 16b-3(c)(2)(ii)(B), the provisions of the Plan governing
the matters described in Rule 16b-3(c)(2)(ii)(A) shall
4
<PAGE> 5
not be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
6.03 Treatment of Proceeds. Proceeds from the sale of Common Stock
pursuant to Options granted under the Plan shall constitute general funds of
the Company.
6.04 Effectiveness. This Plan shall become effective as of the
Effective Date, subject to the conditions stated in the following sentence.
This Plan and each Option granted or to be granted hereunder is conditional on
and shall be of no force and effect, and no Option shall be exercised, unless
and until, (a) shareholder approval of the Plan by the affirmative votes of the
holders of a majority of the shares of Common Stock present, or represented,
and entitled to vote at a meeting of shareholders duly held not later than the
date of the next annual meeting of shareholders and (b) receipt by the Company
of a favorable response from the staff of the Securities and Exchange
Commission to the Company's position to the effect that (i) the Plan will meet
the requirements of Rule 16b-3 and (ii) the receipt of Options under the Plan
by non-employee directors will not prohibit them from continuing to be
"disinterested persons" within the meaning of paragraphs (b) and (d)(3) of Rule
16b-3 with respect to the Company's employee stock option plans.
6.05 Paragraph Headings. The paragraph headings included herein
are only for convenience, and they shall have no effect on the interpretation
of the Plan.
IN WITNESS WHEREOF, the undersigned has executed this Amended and
Restated 1988 Nonqualified Stock Option Plan for Non-Employee Directors on this
23rd day of April, 1996, effective as of January 30, 1996.
NOBLE AFFILIATES, INC.
By /s/ ROBERT KELLEY
-------------------------------------
Name: Robert Kelley
Title: Chairman, President and
Chief Executive Officer
5
<PAGE> 1
Exhibit 10.21
NOBLE AFFILIATES, INC.
1992 STOCK OPTION AND RESTRICTED STOCK PLAN
AS AMENDED AND RESTATED ON DECEMBER 10, 1996,
SUBJECT TO THE APPROVAL OF STOCKHOLDERS
SECTION 1. PURPOSE
The purpose of this Plan is to assist Noble Affiliates, Inc., a
Delaware corporation, in attracting and retaining, as officers and key
employees of the Company and its Affiliates, persons of training, experience
and ability and to furnish additional incentive to such persons by encouraging
them to become owners of Shares of the Company's capital stock, by granting to
such persons Incentive Options, Nonqualified Options, Restricted Stock, or any
combination of the foregoing.
SECTION 2. DEFINITIONS
Unless the context otherwise requires, the following words as used
herein shall have the following meanings:
(a) "Affiliate" means any corporation (other than the
Company) in any unbroken chain of corporations (i) beginning with the
Company if, at the time of the granting of the Option or award of
Restricted Stock, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or
more of the total combined voting power of all classes of stock in one
of the other corporations in such chain, or (ii) ending with the
Company if, at the time of the granting of the Option or award of
Restricted Stock, each of the corporations, other than the Company,
owns stock possessing 50 percent or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
(b) "Agreement" means the written agreement (i) between
the Company and the Optionee evidencing the Option and any SARs that
relate to such Option granted by the Company and the understanding of
the parties with respect thereto or (ii) between the Company and a
recipient of Restricted Stock evidencing the restrictions, terms and
conditions applicable to such award of Restricted Stock and the
understanding of the parties with respect thereto.
(c) "Board" means the Board of Directors of the Company
as the same may be constituted from time to time.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means the Committee provided for in
Section 3 of the Plan as the same may be constituted from time to
time.
(f) "Company" means Noble Affiliates, Inc., a Delaware
corporation.
(g) "Corporate Transaction" shall have the meaning as
defined in Section 8 of the Plan.
(h) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(i) "Fair Market Value" means the fair market value per
Share as determined by the Committee in good faith; provided, however,
that if a Share is listed or admitted to trading on a securities
exchange registered under the Exchange Act, the Fair Market Value per
Share shall be the average of the reported high
<PAGE> 2
and low sales price on the date in question (or if there was no
reported sale on such date, on the last preceding date on which any
reported sale occurred) on the principal securities exchange on which
such Share is listed or admitted to trading, or if a Share is not
listed or admitted to trading on any such exchange but is listed as a
national market security on the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or any similar
system then in use, the Fair Market Value per Share shall be the
average of the reported high and low sales price on the date in
question (or if there was no reported sale on such date, on the last
preceding date on which any reported sale occurred) on such system, or
if a Share is not listed or admitted to trading on any such exchange
and is not listed as a national market security on NASDAQ but is
quoted on NASDAQ or any similar system then in use, the Fair Market
Value per Share shall be the average of the closing high bid and low
asked quotations on such system for such Share on the date in
question. For purposes of valuing Shares to be made subject to
Incentive Options, the Fair Market Value per Share shall be determined
without regard to any restriction other than one which, by its terms,
will never lapse.
(j) "Incentive Option" means an Option that is intended
to satisfy the requirements of Section 422(b) of the Code and Section
17 of the Plan.
(k) "Nonqualified Option" means an Option that does not
qualify as a statutory stock option under Section 422 or 423 of the
Code.
(l) "Non-Employee Director" means a director of the
Company who satisfies the definition thereof under Rule 16b-3
promulgated under the Exchange Act.
(m) "Option" means an option to purchase one or more
Shares granted under and pursuant to the Plan. Such Option may be
either an Incentive Option or a Nonqualified Option.
(n) "Optionee" means a person who has been granted an
Option and who has executed an Agreement with the Company.
(o) "Outside Director" means a director of the Company
who is an outside director within the meaning of Section 162(m) of the
Code and the regulations promulgated thereunder.
(p) "Plan" means this Noble Affiliates, Inc. 1992 Stock
Option and Restricted Stock Plan, as amended from time to time.
(q) "Restricted Stock" means Shares issued or transferred
pursuant to Section 20 of the Plan.
(r) "Retirement" means a termination of employment with
the Company or an Affiliate either (i) on a voluntary basis by a
person who (A) is at least 55 years of age with five years of credited
service with the Company or one or more Affiliates or (B) has at least
20 years of credited service with the Company or one or more
Affiliates, immediately prior to such termination of employment or
(ii) otherwise with the written consent of the Committee in its sole
discretion.
(s) "SARs" means stock appreciation rights granted
pursuant to Section 7 of the Plan.
(t) "Securities Act" means the Securities Act of 1933, as
amended.
(u) "Share" means a share of the Company's present common
stock, par value $3.33-1/3 per share, and any share or shares of
capital stock or other securities of the Company hereafter issued or
issuable in respect of or in substitution or exchange for each such
present share. Such Shares may be unissued or reacquired Shares, as
the Board, in its sole and absolute discretion, shall from time to
time determine.
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SECTION 3. ADMINISTRATION
The Plan shall be administered by, and the decisions concerning the
Plan shall be made solely by, a Committee of two or more directors of the
Company, all of whom are (a) Non-Employee Directors, and (b) not later than
immediately after the first meeting of stockholders of the Company at which its
directors are elected that occurs after December 31, 1996, Outside Directors.
Each member of the Committee shall be appointed by and shall serve at the
pleasure of the Board. The Board shall have the sole continuing authority to
appoint members of the Committee. In making grants or awards, the Committee
shall take into consideration the contribution the person has made or may make
to the success of the Company or its Affiliates and such other considerations
as the Board may from time to time specify.
The Committee shall elect one of its members as its chairman and shall
hold its meetings at such times and places as it may determine. A majority of
the members of the Committee shall constitute a quorum. All decisions and
determinations of the Committee shall be made by the majority vote or decision
of the members present at any meeting at which a quorum is present; provided,
however, that any decision or determination reduced to writing and signed by
all members of the Committee shall be as fully effective as if it had been made
by a majority vote or decision at a meeting duly called and held. The
Committee may appoint a secretary (who need not be a member of the Committee)
who shall keep minutes of its meetings. The Committee may make any rules and
regulations for the conduct of its business that are not inconsistent with the
express provisions of the Plan, the bylaws or certificate of incorporation of
the Company or any resolutions of the Board.
All questions of interpretation or application of the Plan, or of a
grant of an Option and any SARs that relate to such Option or an award of
Restricted Stock, including questions of interpretation or application of an
Agreement, shall be subject to the determination of the Committee, which
determination shall be final and binding upon all parties.
Subject to the express provisions of the Plan, the Committee shall
have the authority, in its sole and absolute discretion, (a) to adopt, amend or
rescind administrative and interpretive rules and regulations relating to the
Plan; (b) to construe the Plan; (c) to make all other determinations necessary
or advisable for administering the Plan; (d) to determine the terms and
provisions of the respective Agreements (which need not be identical),
including provisions defining or otherwise relating to (i) the term and the
period or periods and extent of exercisability of the Options, (ii) the extent
to which the transferability of Shares issued upon exercise of Options or any
SARs that relate to such Options is restricted, (iii) the effect of termination
of employment upon the exercisability of the Options, and (iv) the effect of
approved leaves of absence (consistent with any applicable regulations of the
Internal Revenue Service) upon the exercisability of such Options; (e) subject
to Sections 9 and 11 of the Plan, to accelerate, for any reason, regardless of
whether the Agreement so provides, the time of exercisability of any Option and
any SARs that relate to such Option that have been granted or the time of the
lapsing of restrictions on Restricted Stock; (f) to construe the respective
Agreements; and (g) to exercise the powers conferred on the Committee under the
Plan. The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole and final judge of
such expediency. The determinations of the Committee or Board, as the case may
be, on the matters referred to in this Section 3 shall be final and conclusive.
SECTION 4. SHARES SUBJECT TO THE PLAN
(a) The total number of Shares that may be purchased
pursuant to Options, issued or transferred pursuant to the exercise of
SARs or awarded as Restricted Stock shall not exceed a maximum of
4,000,000 in the aggregate, and the total number of shares for which
Options and SARs may be granted, and which may be awarded as
Restricted Stock, to any one person during a calendar year is 80,000
in the aggregate; provided that each such maximum number of Shares
shall be increased or decreased as provided in Section 13 of the Plan.
(b) At any time and from time to time after the Plan
takes effect, the Committee, pursuant to the provisions herein set
forth, may grant Options and any SARs that relate to such Options and
award Restricted Stock until the maximum number of Shares shall be
exhausted or the Plan shall be sooner
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terminated; provided, however, that no Incentive Option and any SARs
that relate to such Option shall be granted after December 9, 2006.
(c) Shares subject to an Option that expires or
terminates prior to exercise and Shares that had been previously
awarded as Restricted Stock that have since been forfeited shall be
available for further grant of Options or award as Restricted Stock.
No Option shall be granted and no Restricted Stock shall be awarded if
the number of Shares for which Options have been granted and which
pursuant to this Section are not again available for Option grant,
plus the number of Shares that have been awarded as Restricted Stock,
would, if such Option were granted or such Restricted Stock were
awarded, exceed 4,000,000.
(d) Any Shares withheld pursuant to Section 19(c) of the
Plan shall not be available after such withholding for being optioned
or awarded pursuant to the provisions hereof.
(e) Unless the Shares awarded as Restricted Stock are Shares
that have been reacquired by the Company as treasury shares,
Restricted Stock shall be awarded only for services actually rendered,
as determined by the Committee.
SECTION 5. ELIGIBILITY
The persons who shall be eligible to receive grants of Options and any
SARs that relate to such Options, and to receive awards of Restricted Stock,
shall be regular salaried officers or other employees of the Company or one or
more of its Affiliates.
SECTION 6. GRANT OF OPTIONS
(a) From time to time while the Plan is in effect, the
Committee may, in its sole and absolute discretion, select from among
the persons eligible to receive a grant of Options under the Plan
(including persons who have already received such grants of Options)
such one or more of them as in the opinion of the Committee should be
granted Options. The Committee shall thereupon, likewise in its sole
and absolute discretion, determine the number of Shares to be allotted
for option to each person so selected.
(b) Each person so selected shall be offered an Option to
purchase the number of Shares so allotted to him, upon such terms and
conditions, consistent with the provisions of the Plan, as the
Committee may specify. Each such person shall have a reasonable
period of time, to be fixed by the Committee, within which to accept
or reject the proffered Option. Failure to accept within the period
so fixed may be treated as a rejection.
(c) Each person who accepts an Option offered to him
shall enter into an Agreement with the Company, in such form as the
Committee may prescribe, setting forth the terms and conditions of the
Option, whereupon such person shall become a participant in the Plan.
In the event a person is granted both one or more Incentive Options
and one or more Nonqualified Options, such grants shall be evidenced
by separate Agreements, one for each Incentive Option grant and one
for each Nonqualified Option grant. The date on which the Committee
completes all action constituting an offer of an Option to a person,
including the specification of the number of Shares to be subject to
the Option, shall constitute the date on which the Option covered by
such Agreement is granted. In no event, however, shall an Optionee
gain any rights in addition to those specified by the Committee in its
grant, regardless of the time that may pass between the grant of the
Option and the actual signing of the Agreement by the Company and the
Optionee.
(d) Each Agreement that includes SARs in addition to an
Option shall comply with the provisions of Section 7 of the Plan.
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SECTION 7. GRANT OF SARS
The Committee may from time to time grant SARs in conjunction with all
or any portion of any Option either (i) at the time of the initial Option grant
(not including any subsequent modification that may be treated as a new grant
of an Incentive Option for purposes of Section 424(h) of the Code) or (ii) with
respect to Nonqualified Options, at any time after the initial Option grant
while the Nonqualified Option is still outstanding. SARs shall not be granted
other than in conjunction with an Option granted hereunder.
SARs granted hereunder shall comply with the following conditions and
also with the terms of the Agreement governing the Option in conjunction with
which they are granted:
(a) The SAR shall expire no later than the expiration of
the underlying Option.
(b) Upon the exercise of an SAR, the Optionee shall be
entitled to receive payment equal to the excess of the aggregate Fair
Market Value of the Shares with respect to which the SAR is then being
exercised (determined as of the date of such exercise) over the
aggregate purchase price of such Shares as provided in the related
Option. Payment may be made in Shares, valued at their Fair Market
Value on the date of exercise, or in cash, or partly in Shares and
partly in cash, as determined by the Committee in its sole and
absolute discretion.
(c) SARs shall be exercisable (i) only at such time or
times and only to the extent that the Option to which they relate
shall be exercisable, (ii) only when the Fair Market Value of the
Shares subject to the related Option exceeds the purchase price of the
Shares as provided in the related Option, and (iii) only upon
surrender of the related Option or any portion thereof with respect to
the Shares for which the SARs are then being exercised.
(d) Upon exercise of an SAR, a corresponding number of
Shares subject to option under the related Option shall be canceled.
Such canceled Shares shall be charged against the Shares reserved for
the Plan, as provided in Section 4 of the Plan, as if the Option had
been exercised to such extent and shall not be available for future
Option grants or Restricted Stock awards hereunder.
SECTION 8. OPTION PRICE
The option price for each Share covered by an Incentive Option shall
not be less than the greater of (a) the par value of such Share or (b) the Fair
Market Value of such Share at the time such Option is granted. The option
price for each Share covered by a Nonqualified Option shall not be less than
the greater of (a) the par value of such Share or (b) 50 percent of the Fair
Market Value of such Share at the time the Option is granted. Notwithstanding
the two immediately preceding sentences, if the Company or an Affiliate agrees
to substitute a new Option under the Plan for an old Option, or to assume an
old Option, by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation (any of such
events being referred to herein as a "Corporate Transaction"), the option price
of the Shares covered by each such new Option or assumed Option may be other
than the Fair Market Value of the Shares at the time the Option is granted as
determined by reference to a formula, established at the time of the Corporate
Transaction, which will give effect to such substitution or assumption;
provided, however, in no event shall:
(a) the excess of the aggregate Fair Market Value of the
Shares subject to the Option immediately after the substitution or
assumption over the aggregate option price of such Shares be more than
the excess of the aggregate Fair Market Value of all Shares subject to
the Option immediately prior to the substitution or assumption over
the aggregate option price of such Shares;
(b) in the case of an Incentive Option, the new Option or
the assumption of the old Option give the Optionee additional benefits
that he would not have under the old Option; or
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(c) the ratio of the option price to the Fair Market
Value of the stock subject to the Option immediately after the
substitution or assumption be more favorable to the Optionee than the
ratio of the option price to the Fair Market Value of the stock
subject to the old Option immediately prior to such substitution or
assumption, on a Share by Share basis.
Notwithstanding the above, the provisions of this Section 8 with respect to the
option price in the event of a Corporate Transaction shall, in the case of an
Incentive Option, be subject to the requirements of Section 424(a) of the Code
and the Treasury regulations and revenue rulings promulgated thereunder. In
the case of an Incentive Option, in the event of a conflict between the terms
of this Section 8 and the above cited statute, regulations and rulings, or in
the event of an omission in this Section 8 of a provision required by said
laws, the latter shall control in all respects and are hereby incorporated
herein by reference as if set out at length.
SECTION 9. OPTION PERIOD AND TERMS OF EXERCISE
(a) Each Option shall be exercisable during such period
of time as the Committee may specify, but in no event for longer than
10 years from the date when the Option is granted; provided, however,
that
(i) All rights to exercise an Option and any SARs
that relate to such Option shall, subject to the provisions of
subsection (c) of this Section 9, terminate one year after the
date the Optionee ceases to be employed by at least one of the
employers in the group of employers consisting of the Company
and its Affiliates, for any reason other than death, becoming
disabled (within the meaning of Section 22(e)(3) of the Code)
or Retirement, except that, in the event of the termination of
employment of the Optionee on account of (a) fraud or
intentional misrepresentation, or (b) embezzlement,
misappropriation or conversion of assets or opportunities of
the Company or its Affiliates, the Option and any SARs that
relate to such Option shall thereafter be null and void for
all purposes. Employment shall not be deemed to have ceased
by reason of the transfer of employment, without interruption
of service, between or among the Company and any of its
Affiliates.
(ii) If the Optionee ceases to be employed by at
least one of the employers in the group of employers
consisting of the Company and its Affiliates, by reason of his
death, becoming disabled (within the meaning of Section
22(e)(3) of the Code) or Retirement, all rights to exercise
such Option and any SARs that relate to such Option shall,
subject to the provisions of subsection (c) of this Section 9,
terminate five years thereafter.
(b) If an Option is granted with a term shorter than 10
years, the Committee may extend the term of the Option and any SARs
that relate to such Option, but for not more than 10 years from the
date when the Option was originally granted.
(c) In no event may an Option or any SARs that relate to
such Option be exercised after the expiration of the term thereof.
SECTION 10. OPTIONS AND SARS NOT TRANSFERABLE
No Option or any SARs that relate to such Option shall be transferable
by the Optionee otherwise than by will or the applicable laws of descent and
distribution.
SECTION 11. EXERCISE OF OPTIONS AND SARS
(a) During the lifetime of an Optionee, only such
Optionee may exercise an Option or any SARs that relate to such Option
granted to him. In the event of his death, any then exercisable
portion of his Option and any SARs that relate to such Option may,
within five years thereafter, or earlier date of termination of
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the Option, be exercised in whole or in part by the duly authorized
representative of the deceased Optionee's estate.
(b) At any time, and from time to time, during the period
when any Option and any SARs that relate to such Option, or a portion
thereof, are exercisable, such Option or SARs, or portion thereof, may
be exercised in whole or in part; provided, however, that the
Committee may require any Option or SAR that is partially exercised to
be so exercised with respect to at least a stated minimum number of
Shares.
(c) Each exercise of an Option, or a portion thereof,
shall be evidenced by a notice in writing to the Company accompanied
by payment in full of the option price of the Shares then being
purchased. Payment in full shall mean payment of the full amount due,
either in cash, by certified check or cashier's check, or, with the
consent of the Committee, with Shares owned by the Optionee, including
an actual or deemed multiple series of exchanges of such Shares.
Notwithstanding anything contained herein to the contrary, at
the request of an Optionee and to the extent permitted by applicable
law, the Committee may, in its sole and absolute discretion,
selectively approve arrangements with a brokerage firm or firms under
which any such brokerage firm shall, on behalf of the Optionee, make
payment in full to the Company of the option price of the Shares then
being purchased, and the Company, pursuant to an irrevocable notice in
writing from the Optionee, shall make prompt delivery of one or more
certificates for the appropriate number of Shares to such brokerage
firm. Payment in full for purposes of the immediately preceding
sentence shall mean payment of the full amount due, either in cash or
by certified check or cashier's check.
(d) Each exercise of SARs, or a portion thereof, shall be
evidenced by a notice in writing to the Company.
(e) No Shares shall be issued upon exercise of an Option
until full payment therefor has been made, and an Optionee shall have
none of the rights of a shareholder until Shares are issued to him.
(f) Nothing herein or in any Agreement shall require the
Company to issue any Shares upon exercise of an Option or SAR if such
issuance would, in the opinion of counsel for the Company, constitute
a violation of the Securities Act or any similar or superseding
statute or statutes, or any other applicable statute or regulation, as
then in effect. Upon the exercise of an Option or SAR (as a result of
which the Optionee receives Shares), or portion thereof, the Optionee
shall give to the Company satisfactory evidence that he is acquiring
such Shares for the purposes of investment only and not with a view to
their distribution; provided, however, if or to the extent that the
Shares delivered to the Optionee shall be included in a registration
statement filed by the Company under the Securities Act, such
investment representation shall be abrogated.
SECTION 12. DELIVERY OF STOCK CERTIFICATES
As promptly as may be practicable after an Option or SAR (as a result
of the exercise of which the Optionee receives Shares), or a portion thereof,
has been exercised as hereinabove provided, the Company shall make delivery of
one or more certificates for the appropriate number of Shares. In the event
that an Optionee exercises both (i) an Incentive Option or SARs that relate to
such Option (as a result of which the Optionee receives Shares), or a portion
thereof, and (ii) a Nonqualified Option or SARs that relate to such Option (as
a result of which the Optionee receives Shares), or a portion thereof, separate
stock certificates shall be issued, one for the Shares subject to the Incentive
Option and one for the Shares subject to the Nonqualified Option.
SECTION 13. CHANGES IN COMPANY'S SHARES AND CERTAIN CORPORATE
TRANSACTIONS
If at any time while the Plan is in effect there shall be any increase
or decrease in the number of issued and outstanding Shares of the Company
effected without receipt of consideration therefor by the Company, through the
declaration of a stock dividend or through any recapitalization or merger or
otherwise in which the Company is the
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surviving corporation, resulting in a stock split-up, combination or exchange
of Shares of the Company, then and in each such event:
(a) An appropriate adjustment shall be made in the
maximum number of Shares then subject to being optioned or awarded as
Restricted Stock under the Plan, to the end that the same proportion
of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned and awarded;
(b) Appropriate adjustment shall be made in the number of
Shares and the option price per Share thereof then subject to purchase
pursuant to each Option previously granted and then outstanding, to
the end that the same proportion of the Company's issued and
outstanding Shares in each such instance shall remain subject to
purchase at the same aggregate option price; and
(c) In the case of Incentive Options, any such
adjustments shall in all respects satisfy the requirements of Section
424(a) of the Code and the Treasury regulations and revenue rulings
promulgated thereunder.
Except as is otherwise expressly provided herein, the issue by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with a direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number of or option price of Shares then
subject to outstanding Options granted under the Plan. Furthermore, the
presence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities
or preferred stock that would rank above the Shares subject to outstanding
Options granted under the Plan; (iv) the dissolution or liquidation of the
Company; (v) any sale, transfer or assignment of all or any part of the assets
or business of the Company; or (vi) any other corporate act or proceeding,
whether of a similar character or otherwise.
SECTION 14. EFFECTIVE DATE
The Plan was originally adopted by the Board on January 28, 1992 and
approved by the stockholders of the Company on April 28, 1992. The Plan as
amended and restated on December 10, 1996 shall be effective as of that date,
the date of the adoption thereof by the Board, but shall be submitted to the
stockholders of the Company for approval and ratification at the next regular
or special meeting thereof to be held after December 31, 1996. If at such a
meeting of the stockholders of the Company a quorum is present, the Plan as
amended and restated shall be presented for approval and ratification, and
unless at such a meeting the Plan as amended and restated is approved and
ratified by the affirmative vote of a majority of the outstanding shares of
common stock, par value $3.33-1/3 per share, of the Company present in person
or by proxy and entitled to vote, then, and in such event, the amendments to
the Plan adopted by the Board on December 10, 1996 and any then outstanding
Options (and any SARs that relate to such Options) that may have been
conditionally granted prior to such stockholder meeting dependent upon an
increase in the number of Shares subject to the Plan shall become null and void
and of no further force or effect. No award of Restricted Stock dependent upon
an increase in the number of Shares subject to the Plan shall be made prior to
the approval and ratification of the Plan as amended and restated by
stockholders in accordance with this Section 14.
SECTION 15. AMENDMENT, SUSPENSION OR TERMINATION
The Board may at any time amend, suspend or terminate the Plan;
provided, however, that after the shareholders have approved and ratified the
Plan in accordance with Section 14 of the Plan, the Board may not, without
approval of the shareholders of the Company, amend the Plan so as to (a)
increase the maximum number of Shares subject thereto, as specified in Sections
4(a) and 13 of the Plan, or (b) reduce the option price for Shares covered by
Options granted hereunder below the price specified in Section 8 of the Plan;
and provided further, that the Board may
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not modify, impair or cancel any outstanding Option or SAR that relates to such
Option, or the restrictions, terms or conditions applicable to Shares of
Restricted Stock, without the consent of the holder thereof.
SECTION 16. REQUIREMENTS OF LAW
Notwithstanding anything contained herein or in any Agreement to the
contrary, the Company shall not be required to sell or issue Shares under any
Option or SAR if the issuance thereof would constitute a violation by the
Optionee or the Company of any provision of any law or regulation of any
governmental authority or any national securities exchange; and as a condition
of any sale or issuance of Shares upon exercise of an Option or SAR, the
Company may require such agreements or undertakings, if any, as the Company may
deem necessary or advisable to assure compliance with any such law or
regulation.
SECTION 17. INCENTIVE OPTIONS
The Committee may, in its sole and absolute discretion, designate any
Option granted under the Plan as an Incentive Option intended to qualify under
Section 422(b) of the Code. Any provision of the Plan to the contrary
notwithstanding, (a) no Incentive Option shall be granted to any person who, at
the time such Incentive Option is granted, owns stock possessing more than 10
percent of the total combined voting power of all classes of stock of the
Company or any Affiliate unless the option price under such Incentive Option is
at least 110 percent of the Fair Market Value of the Shares subject to the
Incentive Option at the date of its grant and such Incentive Option is not
exercisable after the expiration of five years from the date of its grant; and
(b) the aggregate Fair Market Value of the Shares subject to an Incentive
Option and the aggregate Fair Market Value of the shares of stock of the
Company or any Affiliate (or a predecessor corporation of the Company or an
Affiliate) subject to any other incentive stock option (within the meaning of
Section 422(b) of the Code) of the Company and its Affiliates (or a predecessor
corporation of any such corporation), that may become first exercisable in any
calendar year, shall not (with respect to any Optionee) exceed $100,000,
determined as of the date the Incentive Option is granted.
SECTION 18. MODIFICATION OF OPTIONS AND SARS
Subject to the terms and conditions of and within the limitations of
the Plan, the Committee may modify, extend or renew outstanding Options and any
SARs that relate to such Options granted under the Plan, or accept the
surrender of Options and any SARs that relate to such Options outstanding
hereunder (to the extent not theretofore exercised) and authorize the granting
of new Options and any SARs that relate to such new Options hereunder in
substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing provisions of this Section 18, no modification of
an Option and any SARs that relate to such Option granted hereunder shall,
without the consent of the Optionee, alter or impair any rights or obligations
under any Option and any SARs that relate to such Option theretofore granted
hereunder to such Optionee, except as may be necessary, with respect to
Incentive Options, to satisfy the requirements of Section 422(b) of the Code.
SECTION 19. AGREEMENT PROVISIONS
(a) Each Agreement shall contain such provisions
(including, without limitation, restrictions or the removal of
restrictions upon the exercise of the Option and any SARs that relate
to such Option and the transfer of shares thereby acquired) as the
Committee shall deem advisable. Each Agreement relating to an Option
shall identify the Option evidenced thereby as an Incentive Option or
Nonqualified Option, as the case may be. Incentive Options and
Nonqualified Options may not both be covered by a single Agreement.
Each such Agreement relating to Incentive Options shall contain such
limitations and restrictions upon the exercise of the Incentive Option
as shall be necessary for the Incentive Option to which such Agreement
relates to constitute an incentive stock option, as defined in Section
422(b) of the Code.
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(b) Each Agreement shall recite that it is subject to the
Plan and that the Plan shall govern where there is any inconsistency
between the Plan and the Agreement.
(c) Each Agreement shall contain a covenant by the
Optionee, in such form as the Committee may require in its discretion,
that he consents to and will take whatever affirmative actions are
required, in the opinion of the Committee, to enable the Company or
appropriate Affiliate to satisfy its Federal income tax and FICA and
any applicable state and local withholding obligations. An Agreement
may contain such provisions as the Committee deems appropriate to
enable the Company or its Affiliates to satisfy such withholding
obligations, including provisions permitting the Company, upon the
exercise of an Option or SAR (as a result of which the Optionee
receives Shares), to withhold Shares otherwise issuable to the
Optionee exercising the Option or SAR, or to accept delivery of Shares
owned by the Optionee, to satisfy the applicable withholding
obligations.
(d) Each Agreement relating to an Incentive Option shall
contain a covenant by the Optionee immediately to notify the Company
in writing of any disqualifying disposition (within the meaning of
Section 421(b) of the Code) of Shares received upon the exercise of an
Incentive Option.
SECTION 20. RESTRICTED STOCK
(a) Subject to the provisions of Section 14 of the Plan,
the Committee may from time to time, in its sole and absolute
discretion, award Shares of Restricted Stock to such persons as it
shall select from among those persons who are eligible under Section 5
of the Plan to receive awards of Restricted Stock. Any award of
Restricted Stock shall be made from Shares subject hereto as provided
in Section 4 of the Plan.
(b) A Share of Restricted Stock shall be subject to such
restrictions, terms and conditions, including forfeitures, if any, as
may be determined by the Committee, which may include, without
limitation, the rendition of services to the Company or its Affiliates
for a specified time or the achievement of specific goals, and to the
further restriction that no such Share may be sold, assigned,
transferred, discounted, exchanged, pledged or otherwise encumbered or
disposed of until the terms and conditions set by the Committee at the
time of the award of the Restricted Stock have been satisfied. Each
recipient of an award of Restricted Stock shall enter into an
Agreement with the Company, in such form as the Committee shall
prescribe, setting forth the restrictions, terms and conditions of
such award, whereupon such recipient shall become a participant in the
Plan.
If a person is awarded Shares of Restricted Stock, whether or
not escrowed as provided below, the person shall be the record owner
of such Shares and shall have all the rights of a shareholder with
respect to such Shares (unless the escrow agreement, if any,
specifically provides otherwise), including the right to vote and the
right to receive dividends or other distributions made or paid with
respect to such Shares. Any certificate or certificates representing
Shares of Restricted Stock shall bear a legend similar to the
following:
The shares represented by this certificate have been
issued pursuant to the terms of the Noble Affiliates, Inc.
1992 Stock Option and Restricted Stock Plan and may not be
sold, assigned, transferred, discounted, exchanged, pledged or
otherwise encumbered or disposed of in any manner except as
set forth in the terms of the agreement embodying the award of
such shares dated , 19 .
In order to enforce the restrictions, terms and conditions
that may be applicable to a person's Shares of Restricted Stock, the
Committee may require the person, upon the receipt of a certificate or
certificates representing such Shares, or at any time thereafter, to
deposit such certificate or certificates, together with stock powers
and other instruments of transfer, appropriately endorsed in blank,
with the Company or an escrow agent designated by the Company under an
escrow agreement in such form as by the Committee shall prescribe.
A-10
<PAGE> 11
After the satisfaction of the restrictions, terms and
conditions set by the Committee at the time of an award of Restricted
Stock to a person, a new certificate, without the legend set forth
above, for the number of Shares that are no longer subject to such
restrictions, terms and conditions shall be delivered to the person.
If a person to whom Restricted Stock has been awarded dies
after satisfaction of the restrictions, terms and conditions for the
payment of all or a portion of the award but prior to the actual
payment of all or such portion thereof, such payment shall be made to
the person's beneficiary or beneficiaries at the time and in the same
manner that such payment would have been made to the person.
The Committee shall have the authority (and the Agreement
evidencing an award of Restricted Stock may so provide) to cancel all
or any portion of any outstanding restrictions prior to the expiration
of such restrictions with respect to any or all of the Shares of
Restricted Stock awarded to a person hereunder on such terms and
conditions as the Committee may deem appropriate.
(c) Without limiting the provisions of the first
paragraph of subsection (b) of this Section 20, if a person to whom
Restricted Stock has been awarded ceases to be employed by at least
one of the employers in the group of employers consisting of the
Company and its Affiliates, for any reason, prior to the satisfaction
of any terms and conditions of an award, any Restricted Stock
remaining subject to restrictions shall thereupon be forfeited by the
person and transferred to, and reacquired by, the Company or an
Affiliate at no cost to the Company or the Affiliate; provided,
however, if the cessation is due to the person's death, disability or
Retirement, the Committee may, in its sole and absolute discretion,
deem that the terms and conditions have been met for all or part of
such remaining portion. In the event of such forfeiture, the person,
or in the event of his death, his personal representative, shall
forthwith deliver to the Secretary of the Company the certificates for
the Shares of Restricted Stock remaining subject to such restrictions,
accompanied by such instruments of transfer, if any, as may reasonably
be required by the Secretary of the Company.
(d) In case of any consolidation or merger of another
corporation into the Company in which the Company is the surviving
corporation and in which there is a reclassification or change
(including a change to the right to receive cash or other property) of
the Shares (other than a change in par value, or from par value to no
par value, or as a result of a subdivision or combination, but
including any change in such shares into two or more classes or series
of shares), the Committee may provide that payment of Restricted Stock
shall take the form of the kind and amount of shares of stock and
other securities (including those of any new direct or indirect parent
of the Company), property, cash or any combination thereof receivable
upon such consolidation or merger.
SECTION 21. GENERAL
(a) The proceeds received by the Company from the sale of
Shares pursuant to Options shall be used for general corporate
purposes.
(b) Nothing contained in the Plan or in any Agreement
shall confer upon any Optionee or recipient of Restricted Stock the
right to continue in the employ of the Company or any Affiliate, or
interfere in any way with the rights of the Company or any Affiliate
to terminate his employment at any time, with or without cause.
(c) Neither the members of the Board nor any member of
the Committee shall be liable for any act, omission or determination
taken or made in good faith with respect to the Plan or any Option and
any SARs that relate to such Option granted hereunder or any
Restricted Stock awarded hereunder; and the members of the Board and
the Committee shall be entitled to indemnification and reimbursement
by the Company in respect of any claim, loss, damage or expenses
(including counsel fees) arising therefrom to the full extent
permitted by law and under any directors' and officers' liability or
similar insurance coverage that may be in effect from time to time.
A-11
<PAGE> 12
(d) Any payment of cash or any issuance or transfer of
Shares to the Optionee, or to his legal representative, heir, legatee
or distributee, in accordance with the provisions hereof, shall, to
the extent thereof, be in full satisfaction of all claims of such
persons hereunder. The Committee may require any Optionee, legal
representative, heir, legatee or distributee, as a condition precedent
to such payment, to execute a release and receipt therefor in such
form as it shall determine.
(e) Neither the Committee, the Board nor the Company
guarantees the Shares from loss or depreciation.
(f) All expenses incident to the administration,
termination or protection of the Plan, including, but not limited to,
legal and accounting fees, shall be paid by the Company or its
Affiliates.
(g) Records of the Company and its Affiliates regarding a
person's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment and other matters
shall be conclusive for all purposes hereunder, unless determined by
the Committee to be incorrect.
(h) Any action required of the Company shall be by
resolution of its Board or by a person authorized to act by resolution
of the Board. Any action required of the Committee shall be by
resolution of the Committee or by a person authorized to act by
resolution of the Committee.
(i) If any provision of the Plan or any Agreement is held
to be illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining provisions of the Plan or such
Agreement, as the case may be, but such provision shall be fully
severable and the Plan or such Agreement, as the case may be, shall be
construed and enforced as if the illegal or invalid provision had
never been included herein or therein.
(j) Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or
sent by mail. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered on the date on which it is
personally delivered, or, whether actually received or not, on the
third business day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who
is to receive it at the address which such person has theretofore
specified by written notice delivered in accordance herewith. The
Company, an Optionee or a recipient of Restricted Stock may change, at
any time and from time to time, by written notice to the other, the
address that it or he had theretofore specified for receiving notices.
Until changed in accordance herewith, the Company and each Optionee
and recipient of Restricted Stock shall specify as its and his address
for receiving notices the address set forth in the Agreement
pertaining to the Shares to which such notice relates.
(k) Any person entitled to notice hereunder may waive
such notice.
(l) The Plan shall be binding upon the Optionee or
recipient of Restricted Stock, his heirs, legatees, distributees and
legal representatives, upon the Company, its successors and assigns,
and upon the Committee, and its successors.
(m) The titles and headings of Sections and paragraphs
are included for convenience of reference only and are not to be
considered in the construction of the provisions hereof.
(n) All questions arising with respect to the provisions
of the Plan shall be determined by application of the laws of the
State of Texas except to the extent Texas law is preempted by Federal
law.
(o) Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of the Plan
dictates, the plural shall be read as the singular and the singular as
the plural.
A-12
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SIGNIFICANT EVENTS IN 1996
o The Company once again set record levels of oil and gas production during
1996.
o The Company acquired Energy Development Corporation (EDC) on July 31, 1996
for $768 million.
o The Company expended $1,009 million on acquisition, exploration and
development costs during 1996.
o The Company added 46.3 million barrels (BBLS) of oil and 528.1 billion cubic
feet (BCF) of gas to its reserve base in 1996 through acquisitions and
drilling.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATIONS
Net cash provided by operating activities was $380.9 million for 1996, a 59
percent and 102 percent increase from the $238.9 million and $188.6 million in
1995 and 1994, respectively. Cash and short-term cash investments increased to
$94.8 million at December 31, 1996, from $12.4 million at year-end 1995,
primarily due to increased revenues from higher volumes of oil and gas sold
coupled with higher oil and gas prices.
During 1996, the Company utilized its beginning cash balance and cash flow
from operations to fund its exploration and development expenditures. On July
31, 1996, Samedan Oil Corporation (Samedan) acquired all the outstanding common
stock of EDC for $768 million. In connection with the acquisition, the Company
entered into an $800 million bank credit agreement. Borrowings of $800 million
under that agreement were used to fund the purchase of EDC and repay $48
million of outstanding indebtedness under the Company's then existing bank
credit agreement.
The Company's current ratio (current assets divided by current liabilities)
was 1.13:1 at December 31, 1996, compared with 1.21:1 at December 31, 1995.
Current liabilities at December 31, 1996 include $50 million in current
installments of long-term debt.
RESERVES ADDED AND COST OF FINDING
During 1996, the Company spent $1,009 million on acquisitions, exploration
and development of oil and gas properties. Total proved gas reserves increased
from 850.3 BCF at year-end 1995 to 1.2 trillion cubic feet (TCF) at year-end
1996 and total proved oil reserves increased from 84 million BBLS at year-end
1995 to 115.7 million BBLS at year-end 1996.
An accepted method of calculating cost of finding is to divide the Company's
expenditures for oil and gas acquisition, exploration and development by the
net barrels of oil equivalents (BOE's) added during the year. Using this
method, the Company's cost of finding for 1996 was $7.51 per BOE. A three year
summary of cost of finding follows:
<TABLE>
<CAPTION>
Three
(BOE's and Dollars stated in millions, Year
except finding cost) 1996 1995 1994 Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oil reserves added 46.3 18.2 11.5 76.0
Gas reserves added BOE (6:1) 88.0 29.0 29.4 146.4
- -----------------------------------------------------------------------------
Total reserves added BOE 134.3 47.2 40.9 222.4
- -----------------------------------------------------------------------------
Costs incurred in oil and gas
acquisition, exploration
and development activities $ 1,009 $ 266 $ 190 $ 1,465
Average finding cost per BOE $ 7.51 $ 5.64 $ 4.64 $ 6.59*
</TABLE>
*Three year average
FINANCING
Total long-term debt (including current portion) at December 31, 1996 was
$848 million compared with $377 million at December 31, 1995, an increase of
125 percent. The ratio of debt to book capital (defined as the Company's debt
plus its equity) was 54 percent at December 31,1996 compared with 48 percent at
December 31, 1995.
(This page contained two graphs: Costs Incurred For Acquisitions, Exploration
and Development For Three Years and Average Finding Cost Per BOE For Three
Years. See Appendix I.)
15
<PAGE> 2
On November 1, 1996 all of the Company's $230 million in 4 1/4% Subordinated
Convertible Notes due 2003 were converted into 6,275,510 shares of common
stock.
The Company has $749 million outstanding under its current $800 million bank
credit agreement. Such borrowings were made to finance the acquisition of EDC.
The bank credit agreement consists of a $400 million term loan, with certain
scheduled prepayments aggregating $150 million and a final maturity of July 31,
2001, and a $400 million revolving credit facility with a final maturity of
July 31, 2001. The interest rate is a variable rate based on a Eurodollar rate.
The weighted average interest rate on the borrowings during 1996 was 6.1
percent.
Also outstanding at December 31, 1996 was $100 million of 7 1/4% Notes due
2023. The Company may not redeem any portion of these notes prior to maturity.
The Company's previous bank credit agreement provided for maximum unsecured
borrowings of $100 million at variable rates. On July 31, 1996, the Company
used proceeds from its current bank credit agreement to repay $48 million of
outstanding indebtedness under the previous bank credit agreement. The bank
credit agreement was canceled in connection with the repayment.
During the next five years principal payments of $50 million in 1997, $49
million in 1998 and $650 million in 2001 are required under the Company's debt
agreements.
OTHER
The Company follows an entitlements method of accounting for its gas
imbalances. The Company's estimated gas imbalance receivables were $19.3
million and $12.3 million at December 31, 1996 and 1995, respectively, and
estimated gas imbalance liabilities were $21.7 million and $11.4 million at
December 31, 1996 and 1995, respectively. These imbalances are valued at the
amount that is expected to be received or paid to settle the imbalances. The
settlement of the imbalances can occur either during, or at the end of, the
life of a well on a volume basis or by cash settlement. The Company does not
expect that a significant portion of the settlements will occur in any one
year. Thus, the Company believes the periodic settlement of gas imbalances will
have little impact on its liquidity.
The Company has sold a number of non-strategic oil and gas properties over
the past three years, recognizing gains of $1,895,000, $3,620,000 and $254,000
for 1996, 1995 and 1994, respectively. Total amounts of oil and gas reserves
associated with these disposals during the last three years were 1,871,000 BBLS
of oil and 61.0 BCF of gas. The Company believes the disposal of non-strategic
properties furthers the goal of concentrating its efforts on its strategic
properties.
The Company has paid quarterly cash dividends of $.04 per share since 1989,
and currently anticipates it will continue to pay quarterly dividends of $.04
per share.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." The Company adopted SFAS No. 123 during 1996 and has presented
in the footnotes to its financial statements pro forma disclosure as if the
provisions of SFAS No. 123 had been adopted.
RESULTS OF OPERATIONS
NET INCOME AND REVENUES
1996 VERSUS 1995. Net income for 1996 was $83.9 million, or $1.63 per share,
compared with $4.1 million, or $.08 per share in 1995. The increase in net
income was achieved through record oil and gas production and substantially
higher oil and gas prices. Total revenues were $887.2 million in 1996 and
$487.0 million in 1995.
Oil and gas revenues were $604.6 million in 1996, an increase of $276.5
million, or 84 percent, over 1995. The Company received an average oil price
for 1996 of $18.28 per BBL, a 9 percent increase from the average 1995 price of
$16.78 per BBL. The average gas price increased 26 percent in 1996 to $2.17 per
thousand cubic feet (MCF) from the 1995 average of $1.72 per MCF. The increase
in gas price was due primarily to higher demand and lower levels of gas storage
than in the previous year.
Gathering, marketing and processing revenues were $273.7 million, an
increase of 143 percent from the $112.7 million in 1995. The increase reflects
a full year of operations for Noble
(This page contained three graphs: Gas Reserves Added For Three Years, Oil
Reserves Added For Three Years and Net Income For Three Years. See Appendix I.)
16
<PAGE> 3
Trading, Inc. (NTI), as well as, Noble Gas Marketing, Inc. (NGM), both wholly
owned subsidiaries of the Company.
Other income in 1996 was $8.9 million, compared with $46.2 million in 1995.
Other income in 1995 included non-recurring income of $39.0 million resulting
from the settlement of a Columbia Gas Transmission Corporation bankruptcy claim
with Samedan.
1995 VERSUS 1994. Net income for 1995 was $4.1 million, or $.08 per share,
compared with $3.2 million, or $.06 per share, in 1994. The change in net
income was achieved primarily through increases in oil and gas production and
higher oil prices.
Oil and gas revenues were $328.1 million in 1995, an increase of $21.9
million or 7 percent, compared with 1994. Average oil price in 1995 was $16.78
per BBL, a 13 percent increase from the 1994 average of $14.90 per BBL. Average
gas price declined 13 percent in 1995 to $1.72 per MCF from the 1994 average of
$1.97 per MCF. The decline was a reflection of weaker pricing as a result of
milder weather and excess gas in storage.
Gathering, marketing and processing revenues increased 157 percent, or $68.8
million, to $112.7 million in 1995 from 1994 levels. This increase reflects a
full year of operations for NGM as well as operations for NTI, which began
operations in May 1995.
Other income in 1995 was $46.2 million, compared with $8.3 million in 1994,
which reflected the above mentioned settlement with Columbia Gas Transmission
Corporation.
NATURAL GAS INFORMATION
1996 VERSUS 1995. Gas sales for 1996 increased 118 percent to $365.4 million
from $167.4 million in 1995. Average daily production in 1996 increased 72
percent to 469.4 million cubic feet (MMCF) from 272.2 MMCF in 1995.
The average gas price in 1996 increased 26 percent to $2.17 per MCF from
$1.72 per MCF in 1995. During 1996, the Company's average gas prices ranged
from a low of $1.82 in April and October, to a high of $3.15 in December.
1995 VERSUS 1994. Gas sales for 1995 decreased 4 percent to $167.4 million
from $174.5 million in 1994. Average daily production in 1995 increased 10
percent to 272.2 MMCF from 247.6 MMCF in 1994.
Average gas price in 1995 decreased 13 percent to $1.72 per MCF, from $1.97
per MCF in 1994. In 1995, the Company's average gas prices ranged from a low of
$1.50 in February and August, to a high of $2.33 in December.
A three-year summary of gas related information follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Proved reserves at year end (MMCF) 1,156,250 850,339 778,950
Gas revenues (millions) $ 365.4 $ 167.4 $ 174.5
Average price per MCF* $ 2.17 $ 1.72 $ 1.97
Average daily production (MMCF) 469.4 272.2 247.6
Gas sales as a % of oil and gas sales 62% 52% 59%
</TABLE>
*The average price reflects a reduction of $.33 per MCF in 1996 and $.004 per
MCF in 1995 from hedging.
CRUDE OIL INFORMATION
1996 VERSUS 1995. Oil sales for 1996 increased 47 percent to $225.2 million
from $153.5 million in 1995. Average daily production in 1996 increased 35
percent to 34,520 BBLS from 25,617 BBLS in 1995.
Average oil price for 1996 was $18.28 per BBL, a 9 percent increase from the
1995 average of $16.78 per BBL. The Company's average oil prices ranged from a
low of $17.11 per BBL in January to a high of $19.74 per BBL in September.
International sales accounted for 20 percent of 1996 oil sales compared with
15 percent in 1995. Average daily oil production outside the United States was
6,230 BBLS in 1996 and 3,777 BBLS in 1995.
1995 VERSUS 1994. Oil sales for 1995 increased 25 percent to $153.5 million
from $122.9 million in 1994. Average daily production in 1995 increased 13
percent to 25,617 BBLS from 22,751 BBLS in 1994.
Average oil price for 1995 was $16.78 per BBL, a 13 percent increase from
the 1994 average of $14.90 per BBL.
International sales accounted for 15 percent of 1995 oil sales compared with
16 percent of oil sales in 1994. Average daily oil production from properties
outside the United States was 3,777 BBLS in 1995 and 3,329 BBLS in 1994.
A three-year summary of oil related information follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Proved reserves at year end
(thousands of BBLS) 115,747 84,008 75,527
Oil revenues (millions) $225.2 $153.5 $122.9
Average price per BBL* $18.28 $16.78 $14.90
Average daily production (BBLS) 34,520 25,617 22,751
Oil sales as a % of
oil and gas sales 38% 48% 41%
</TABLE>
*The average price reflects a reduction of $2.35 per BBL in 1996 and includes
an increase of $.16 per BBL in 1995 from hedging.
(This page contained two graphs: Gas Revenues For Three Years and Oil Revenues
For Three Years. See Appendix I.)
17
<PAGE> 4
HEDGING ACTIVITY
The Company, through its subsidiaries, from time to time, uses various
hedging arrangements in connection with anticipated crude oil and natural gas
sales of its production to minimize the impact of product price fluctuations.
Such arrangements include fixed price hedges, costless collars and other
contractual arrangements.
During 1996, the Company had natural gas hedging contracts that ranged from
39 percent to 86 percent of its average daily natural gas production. Natural
gas hedges were in the price range of $1.60 to $3.59 per MMBTU. The net effect
of these 1996 hedges was a $.33 per MCF reduction in the average natural gas
price. At December 31, 1996, the Company was a party to natural gas hedging
contracts to hedge approximately 21 percent of its estimated 1997 average daily
natural gas production at an average price per MMBTU of $2.20.
The Company also had crude oil hedging contracts that ranged from 48 percent
to 55 percent of its average daily oil production for January through July 1996
and 62 percent to 100 percent of its average daily oil production for August
through December 1996. Crude oil hedges were in the price range of $16.50 to
$24.27 per BBL. The net effect of these 1996 hedges was a $2.35 per BBL
reduction in the average crude oil price. At December 31, 1996, the Company was
a party to crude oil hedging contracts to hedge approximately 26 percent of its
estimated 1997 annual crude oil production at an average price per BBL of
$20.48.
Hedging gains and losses related to the Company's oil and gas production are
recorded in oil and gas sales and royalties.
In addition to the hedging arrangements pertaining to the Company's
production as described above, NGM employs various hedging arrangements in
connection with its purchases and sales of third party production to lock in
profits or limit exposure to gas price risk. Most of the purchases made by NGM
are on an index basis; however, purchasers in the markets in which NGM sells
often require fixed or NYMEX related pricing. NGM may use a hedge to convert
the fixed or NYMEX sale to an index basis thereby determining the margin and
minimizing the risk of price volatility. During 1996, NGM had hedging
transactions with broker-dealers that ranged from 158,696 MMBTU's to 429,377
MMBTU's of gas per day.
At December 31, 1996, NGM had in place hedges ranging from approximately
7,475 MMBTU's to 551,126 MMBTU's of gas per day for January 1997 to March 1998
for future physical transactions. NGM records hedging gains or losses relating
to fixed term sales as gathering, marketing and processing revenues in the
periods in which the related contract is completed.
Although these hedging arrangements expose the Company to credit risk, the
Company monitors the creditworthiness of its counterparties, which generally
are major institutions, and believes that losses from nonperformance are
unlikely to occur.
During 1995, NGM had hedging transactions with large financial institutions
that averaged approximately 126,000 MMBTU's of gas per day at prices linked to
certain indices. Samedan had natural gas hedging contracts for November and
December 1995 to hedge from 20 percent to 46 percent of its average daily
natural gas production. For May to December 1995, Samedan had hedged
approximately 20 percent of its daily crude oil production. Natural gas hedges
were in the range of $1.60 to $1.96 per MMBTU and crude oil hedges were in the
range of $18.56 to $20.27 per BBL. The net effect of these 1995 hedges was a
$.004 per MCF reduction in the average natural gas price and a $.16 per BBL
increase in the average crude oil price for the year.
During 1994, all gas hedging activity related to NGM sales, which hedged an
average of approximately 32,000 MMBTU's of gas per day at prices ranging from
$.01 per MMBTU above index to $.58 per MMBTU above index. The Company did not
hedge any of its oil production during 1994.
COSTS AND EXPENSES
1996 VERSUS 1995. Oil and gas exploration expense increased in 1996 by $16.6
million from 1995 to $49.9 million. The increase resulted primarily from a
$15.2 million increase in dry hole expense for 1996.
Oil and gas operations expense in 1996 increased $44.3 million from 1995 to
$126 million. Lease operating expense increased $37.7 million in 1996 due to
higher oil and gas production from a greater number of properties and the
acquisition of EDC. Production taxes increased $6.7 million in 1996 due to
record production levels and higher oil and gas prices.
In 1996, depreciation, depletion and amortization (DD&A) expense increased
$32.7 million over 1995 due to the record production levels and the EDC
acquisition. The unit rate of DD&A expense per BOE, converting gas to oil on a
6:1 basis, was $5.66 for 1996, compared with $7.75 for 1995. The 1995 rate
included $59.5 million of additional impairment for the writedown of certain
long lived assets in accordance with provisions of SFAS No. 121.
The Company provides for the cost of future liabilities related to
restoration and dismantlement costs for offshore facilities. This provision is
based on the Company's best estimate of such costs to be incurred in future
years based on information from the Company's engineers. These estimated costs
are provided
(This page contained one graph: DD&A Expense Per BOE of Production For Three
Years. See Appendix I.)
18
<PAGE> 5
through charging DD&A expense using a ratio of production divided by reserves
multiplied by the estimated costs to dismantle and restore. The Company has
provided $51.6 million for such future costs which are classified in
accumulated DD&A on the balance sheet at December 31, 1996. Total estimated
future dismantlement and restoration costs of $130.2 million are included in
future production and development costs for purposes of estimating the future
net revenues relating to the Company's proved reserves.
In 1996, selling, general and administrative (SG&A) expense increased $15.1
million over 1995 to $51.6 million. Administrative costs increased $11.1
million in 1996 due to the acquisition of EDC and the hiring of additional
personnel to oversee increased operations. The Company estimates that
approximately 32 percent of the EDC increase is due to non-recurring costs.
1995 VERSUS 1994. Oil and gas exploration expense in 1995 decreased $21.1
million from 1994 to $33.2 million. The decrease resulted primarily from a
$17.7 million decrease in dry hole expense in 1995, a $2.5 million decrease in
abandoned assets, and a $1.3 million decrease in undeveloped lease
amortization.
Oil and gas operations expense in 1995 increased $7.0 million over 1994 to
$81.7 million. Lease operating expense increased $9.3 million in 1995 primarily
due to higher oil and gas production from a greater number of properties. This
increase was partially offset by a $2.5 million decrease in production taxes
paid, resulting from a contractual tax reimbursement from a purchaser.
In 1995, DD&A expense increased $73.4 million over 1994 to $200.9 million.
This increase resulted principally as a result of adoption of SFAS No. 121 in
the fourth quarter of 1995, in which a pretax charge of $59.5 million was
recorded to DD&A expense. The charge reduced 1995 net income by $38.7 million,
or $.77 per share. The pretax charge included $4.1 million and $3.2 million
related to Samedan Oil of Canada, Inc. and Samedan of Tunisia, Inc.,
respectively, both wholly owned indirect subsidiaries of the Company. The unit
rate of DD&A expense per BOE was $7.75 for 1995, compared with $5.46 for 1994.
The DD&A unit rate without the effect of SFAS No. 121 would also have been
$5.46 in 1995. Higher oil and gas volumes also contributed to the higher DD&A
expense in 1995.
INTEREST EXPENSE
1996 VERSUS 1995. In 1996, interest expense increased $16.6 million from
1995 to $38.5 million. This increase was due primarily to the financing of the
EDC acquisition offset in part by the conversion into common stock on November
1, 1996 of the $230,000,000 4 1/4% Convertible Subordinated Notes due 2003.
1995 VERSUS 1994. In 1995, interest expense decreased $2.8 million from 1994
to $21.9 million. This decrease was due primarily to the redemption in June
1994 of the Company's $125,000,000 10 1/8% Notes due June 1, 1997.
Capitalized interest in 1995 decreased $4.1 million from 1994 to $3.1
million. This decrease resulted primarily from the completion of the East
Cameron blocks 320, 331 and 332 construction program.
MARKETING SUBSIDIARIES
NGM markets the Company's natural gas, as well as, certain third-party gas.
NGM sells gas directly to end-users, gas marketers, industrial users,
interstate and intrastate pipelines, and local distribution companies. The
Company records all of NGM's sales as gathering, marketing and processing
revenues. All intercompany sales and expenses have been eliminated.
During 1996, NGM recorded $197.4 million in gathering, marketing and
processing revenues and $184.6 million in gathering, marketing and processing
expenses, generating a gross margin of $12.8 million for the year. The gross
margin was offset by administrative expenses of $1.7 million, resulting in
pretax income of $11.1 million for its third year of operations.
In 1995, NGM recorded $104.6 million in gathering, marketing and processing
revenues and $100.6 million in gathering, marketing and processing expenses,
generating a gross margin of $4.0 million for the year. The gross margin was
offset by administrative expenses of $1.6 million, resulting in pretax income
of $2.4 million for its second year of operations.
In 1995, NTI began marketing a portion of the Company's oil, as well as,
certain third-party oil. The Company records all of NTI's sales as gathering,
marketing and processing revenues. All intercompany sales and expenses have
been eliminated.
During 1996, NTI recorded $76.3 million in gathering, marketing and
processing revenues and $68.9 million in gathering, marketing and processing
expenses, generating a gross margin of $7.4 million for its second year of
operations. The gross margin was offset by administrative expenses of $100,000,
resulting in pretax income of $7.3 million for its second year of operations.
In 1995, NTI recorded $8.1 million in gathering, marketing and processing
revenues and $7.3 million in gathering, marketing and processing expenses,
generating a gross margin of $791,000 for the year. The gross margin was offset
by administrative expenses of $52,000, resulting in pretax income of $739,000
for NTI's initial year of operation.
(This page contained one graph: SG&A Expense Per BOE of Production For Three
Years. See Appendix I.)
19
<PAGE> 6
FUTURE TRENDS
The Company expects higher revenues in 1997 compared with 1996 levels. The
increases in revenues are expected primarily due to projected higher production
levels. The Company ended 1996 producing approximately 40,714 BBLs of oil and
609.4 MMCF of gas per day. Those rates were 18 and 30 percent higher,
respectively, than the 1996 average rates.
The projected increases in revenues should have a positive impact on net
income and cash flows in 1997 compared to 1996.
The Company recently set its 1997 exploration and development budget at $393
million. Such expenditures are planned to be funded through internally
generated cash flows. The Company plans an active exploration and development
program in its domestic onshore and offshore divisions along with its
international operations.
Over the past several years, Samedan has settled various claims which it had
against parties who had contracted to purchase gas at fixed prices which were
greater than market, or who had take-or-pay contracts with Samedan in which
such obligations to take-or-pay for quantities of gas were not fulfilled. It is
the Company's policy, which is consistent with general industry practice, that
such payments do not represent payment for gas produced and, therefore, are not
subject to royalty payments. The federal government, with respect to leases on
both onshore and offshore federal lands, certain other governmental bodies, and
some private landowners have begun to assert claims in recent years against oil
and gas companies for royalties on some or all of such settlement amounts.
The Company participated in a joint effort with the Independent Petroleum
Association of America wherein Samedan was a party to a test case involving
such a claim made with respect to a lease on Indian lands. In the U.S. District
Court for the District of Columbia, Samedan and other plaintiffs challenged the
determination by the U.S. Minerals Management Service (MMS) that royalties were
payable to the government on certain proceeds received by Samedan (and the
other plaintiffs) with respect to a contract settlement. The district court
ruled in favor of the MMS, and a judgment in the amount of $20,000 was awarded
against Samedan. Samedan appealed this judgment, and on August 27, 1996, the
U.S. Court of Appeals for the District of Columbia overturned the U.S. District
Court's decision. The appeals court decision ordered the MMS to cease its
efforts to collect royalty from Samedan for any contract settlement that was
not recoupable and in February 1997 the U.S. Department of Justice announced
that it would not seek Supreme Court action to overturn the decision.
Management believes that the Company is well positioned with its balanced
reserves of oil and gas to take advantage of future price increases that may
occur. However, the uncertainty of oil and gas prices continues to impact the
domestic oil and gas industry. Due to the volatility of oil and gas prices, the
Company, from time to time, has used hedging and plans to do so in the future
as a means of controlling its exposure to price changes. The Company cannot
predict the extent to which its operations will be impacted by inflation,
government regulation or changing prices.
(This page contained one graph: Average Production and Lifting Cost Per BOE
For Three Years. See Appendix I.)
20
<PAGE> 7
SELECTED FINANCIAL DATA NOBLE AFFILIATES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
- -------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts and ratios) 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES AND INCOME
Revenues.......................................$ 887,203 $ 487,018 $ 358,389 $ 286,583 $ 303,782
Net cash provided by operating activities...... 380,945 238,920 188,621 139,381 125,107
Net income..................................... 83,880 4,086 3,166 12,625 41,240
PER SHARE DATA
Net income.....................................$ 1.63 $ .08 $ .06 $ .26 $ .93
Cash dividends................................. .16 .16 .16 .16 .16
Year end stock price........................... 47.88 29.88 24.75 26.50 17.63
Average shares outstanding..................... 51,414 50,046 49,970 48,098 44,341
FINANCIAL POSITION
Property, plant and equipment, net:
Oil and gas mineral interests,
equipment and facilities...................$ 1,559,691 $ 831,827 $ 804,009 $ 784,235 $ 409,740
Total assets................................... 1,956,938 989,176 933,516 1,067,996 625,621
Long-term obligations:
Long-term debt, net of current portion....... 798,028 376,992 376,956 453,760 224,793
Deferred income taxes........................ 108,434 69,445 61,802 45,108 33,378
Other........................................ 50,603 33,650 19,455 7,158 7,010
Shareholders' equity........................... 720,067 411,911 412,066 415,432 304,779
Ratio of debt to book capital.................. .54 .48 .48 .52 .42
CAPITAL EXPENDITURES
Oil and gas mineral interests,
equipment and facilities.....................$ 982,499 $ 252,977 $ 158,973 $ 508,506 $ 64,066
Other.......................................... 3,485 6,265 2,371 1,607 1,744
- -------------------------------------------------------------------------------------------------------------------
Total capital expenditures.....................$ 985,984 $ 259,242 $ 161,344 $ 510,113 $ 65,810
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
OPERATING STATISTICS
<TABLE>
<CAPTION>
Year ended December 31,
- -------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GAS
Sales (in millions)................................ $ 365.4 $ 167.4 $ 174.5 $ 159.2 $ 134.2
Production (MMCF per day).......................... 469.4 272.2 247.6 211.1 204.6
Average price (per MCF)............................ $ 2.17 $ 1.72 $ 1.97 $ 2.10 $ 1.81
OIL
Sales (in millions)................................ $ 225.2 $ 153.5 $ 122.9 $ 111.3 $ 120.2
Production (BBLS per day).......................... 34,520 25,617 22,751 19,496 17,826
Average price (per BBL)............................ $ 18.28 $ 16.78 $ 14.90 $ 15.91 $ 18.68
Royalty sales (in millions)........................ $ 13.9 $ 7.2 $ 8.8 $ 7.5 $ 5.4
</TABLE>
21
<PAGE> 8
CONSOLIDATED BALANCE SHEET NOBLE AFFILIATES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31,
- ---------------------------------------------------------------------------------------------------------
(In thousands, except share amounts) 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term cash investments $ 94,768 $ 12,429
Accounts receivable - trade 206,151 79,478
Materials and supplies inventories 4,489 2,855
Other current assets 11,395 22,750
- ---------------------------------------------------------------------------------------------------------
Total current assets 316,803 117,512
- ---------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Oil and gas mineral interests, equipment and facilities
(successful efforts method of accounting) 2,536,524 1,658,157
Other 35,440 33,328
- ---------------------------------------------------------------------------------------------------------
2,571,964 1,691,485
Accumulated depreciation, depletion and amortization (1,000,200) (847,540)
- ---------------------------------------------------------------------------------------------------------
Total property, plant and equipment, net 1,571,764 843,945
- ---------------------------------------------------------------------------------------------------------
OTHER ASSETS 68,371 27,719
- ---------------------------------------------------------------------------------------------------------
$ 1,956,938 $ 989,176
- ---------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 143,408 $ 73,536
Other current liabilities 75,736 20,206
Current installments of long-term debt 50,000
Income taxes - current 10,662 3,436
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 279,806 97,178
- ---------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 108,434 69,445
- ---------------------------------------------------------------------------------------------------------
OTHER DEFERRED CREDITS AND NONCURRENT LIABILITIES 50,603 33,650
- ---------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 798,028 376,992
- ---------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Preferred stock - par value $1; 4,000,000 shares authorized, none issued
Common stock - par value $3.33 1/3; 100,000,000 shares authorized;
58,321,297 and 51,722,647 shares issued in 1996 and 1995, respectively 194,402 172,407
Capital in excess of par value 355,651 145,059
Retained earnings 185,432 109,863
- ---------------------------------------------------------------------------------------------------------
735,485 427,329
Less common stock in treasury, at cost (1996 and 1995, 1,524,900 shares) (15,418) (15,418)
- ---------------------------------------------------------------------------------------------------------
Total shareholders' equity 720,067 411,911
- ---------------------------------------------------------------------------------------------------------
$ 1,956,938 $ 989,176
- ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
22
<PAGE> 9
CONSOLIDATED STATEMENT OF OPERATIONS NOBLE AFFILIATES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
- -------------------------------------------------------------------------------
(In thousands, except per share amounts) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Oil and gas sales and royalties $ 604,588 $ 328,134 $ 306,169
Gathering, marketing and processing 273,690 112,702 43,921
Other income 8,925 46,182 8,299
- -------------------------------------------------------------------------------
887,203 487,018 358,389
- -------------------------------------------------------------------------------
COSTS AND EXPENSES:
Oil and gas exploration 49,861 33,246 54,321
Oil and gas operations 126,044 81,735 74,661
Gathering, marketing and processing 253,529 107,867 42,758
Depreciation, depletion and amortization 233,604 200,914 127,470
Selling, general and administrative 51,567 36,514 36,408
Interest 38,474 21,871 24,729
Interest capitalized (2,165) (3,127) (7,183)
- -------------------------------------------------------------------------------
750,914 479,020 353,164
- -------------------------------------------------------------------------------
INCOME BEFORE TAXES 136,289 7,998 5,225
- -------------------------------------------------------------------------------
INCOME TAX PROVISIONS:
Current 31,376 (9,123) (10,462)
Deferred 21,033 13,035 12,521
- -------------------------------------------------------------------------------
52,409 3,912 2,059
- -------------------------------------------------------------------------------
NET INCOME $ 83,880 $ 4,086 $ 3,166
- -------------------------------------------------------------------------------
NET INCOME PER SHARE $ 1.63 $ .08 $ .06
- -------------------------------------------------------------------------------
AVERAGE NUMBER SHARES OUTSTANDING 51,414 50,046 49,970
- -------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
23
<PAGE> 10
CONSOLIDATED STATEMENT OF CASH FLOWS NOBLE AFFILIATES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year ended December 31,
- ---------------------------------------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 83,880 $ 4,086 $ 3,166
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 233,604 200,914 127,470
Amortization of undeveloped lease costs, net 5,827 6,465 7,813
(Gain) loss on disposal of assets (3,335) (3,289) 2,213
Noncurrent deferred income taxes 38,989 7,642 16,694
Increase in other deferred credits 14,409 14,194 12,297
(Increase) decrease in other (16,296) (399) 8,232
Changes in working capital, not including cash:
(Increase) decrease in accounts receivable (89,141) (29,786) 16,622
(Increase) decrease in other current assets 10,608 5,151 (18,185)
Increase (decrease) in accounts payable 37,536 27,063 17,119
Increase (decrease) in other current liabilities 64,864 6,879 (4,820)
- ---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 380,945 238,920 188,621
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (257,719) (255,188) (166,121)
Acquisition of Energy Development Corporation (768,185)
Proceeds from sale of property, plant and equipment 26,758 10,745 2,392
- ---------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (999,146) (244,443) (163,729)
- ---------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 7,851 3,766 1,463
Cash dividends paid (8,311) (8,006) (7,995)
Proceeds from bank borrowings 800,000 30,000 48,000
Repayment of bank debt (99,000) (30,000)
(Retirement of) proceeds from issuance of long-term debt (125,000)
(Retirement of) proceeds from short-term debt for property acquisition (95,600)
- ---------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 700,540 (4,240) (179,132)
- ---------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND SHORT-TERM CASH INVESTMENTS 82,339 (9,763) (154,240)
CASH AND SHORT-TERM CASH INVESTMENTS AT BEGINNING OF YEAR 12,429 22,192 176,432
- ---------------------------------------------------------------------------------------------------------------
CASH AND SHORT-TERM CASH INVESTMENTS AT END OF YEAR $ 94,768 $ 12,429 $ 22,192
- ---------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized) $ 28,652 $ 17,659 $ 18,603
Income taxes $ 11,500 $ $ 660
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
24
<PAGE> 11
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY NOBLE AFFILIATES, INC. AND
SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock Capital in Treasury
-------------------------- Excess of Stock at Retained
(In thousands, except shares issued) Shares Issued Amount Par Value Cost Earnings
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JANUARY 1, 1994 51,461,122 $ 171,535 $ 140,703 $ (15,418) $ 118,612
- ---------------------------------------------------------------------------------------------------------------
Net Income 3,166
Exercise of stock options 76,333 255 1,208
Cash dividends ($ .16 per share) (7,995)
- ---------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994 51,537,455 $ 171,790 $ 141,911 $ (15,418) $ 113,783
- ---------------------------------------------------------------------------------------------------------------
Net Income 4,086
Exercise of stock options 185,192 617 3,148
Cash dividends ($ .16 per share) (8,006)
- ---------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 51,722,647 $ 172,407 $ 145,059 $ (15,418) $ 109,863
- ---------------------------------------------------------------------------------------------------------------
Net Income 83,880
Exercise of stock options 323,140 1,077 6,774
Redemption of convertible notes 6,275,510 20,918 203,818
Cash dividends ($ .16 per share) (8,311)
- ---------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1996 58,321,297 $ 194,402 $ 355,651 $ (15,418) $ 185,432
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
25
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in tables, unless otherwise indicated, are in thousands, except
per share amounts)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated accounts include Noble Affiliates, Inc. (the Company) and
the consolidated accounts of its wholly owned subsidiaries: Noble Gas
Marketing, Inc. (NGM); Noble Trading, Inc. (NTI); NPM, Inc.; and Samedan Oil
Corporation (Samedan). Listed below are consolidated entities at December 31,
1996.
NOBLE AFFILIATES, INC.
Noble Gas Marketing, Inc.
Noble Gas Pipeline, Inc.
Noble Trading, Inc.
NPM, Inc.
Samedan Oil Corporation
Samedan Oil of Canada, Inc.
Samedan Oil of Indonesia, Inc.
Samedan of North Africa, Inc.
Samedan LPG
Samedan Pipe Line Corporation
Samedan Royalty Corporation
Samedan of Tunisia, Inc.
Energy Development Corporation
Brabant Petroleum, Ltd.
EDC Argentina, Inc.
EDC Australia, Ltd.
EDC China, Inc.
EDC Ecuador Ltd.
EDC Portugal Ltd.
EDC Senegal Ltd.
Gasdel Pipeline System Incorporated
HGC, Inc.
HIPS, Inc.
Producers Service, Inc.
NATURE OF OPERATIONS
The Company is principally engaged, through its subsidiaries, in the
exploration, development, production and marketing of oil and gas. Samedan
operates throughout the major basins in the United States, including the Gulf
of Mexico, as well as international operations with production in the U.K.
Sector of the North Sea, Equatorial Guinea, Argentina and Canada. The Company
markets its oil and gas production through NGM, NTI and Samedan.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities. Such
estimates and assumptions also affect the disclosure of contingent assets and
liabilities at the date of the financial statements as well as amounts of
revenues and expenses recognized during the reporting period. Of the estimates
and assumptions that affect reported results, the estimate of the Company's oil
and gas reserves is the most significant.
FOREIGN CURRENCY TRANSLATION
The U.S. dollar is considered the functional currency for each of the
Company's international operations with the exception of Canada and the United
Kingdom. The functional currency for Canada is the Canadian dollar and for the
United Kingdom is the British pound, both of which have been translated into
U.S. dollars for the financial statements. Translation gains or losses were not
material in any of the periods presented.
INVENTORIES
Materials and supplies inventories consisting principally of tubular goods
and production equipment are stated at the lower of cost or market, with cost
being determined by the first-in, first-out method.
PROPERTY, PLANT AND EQUIPMENT
The Company accounts for its oil and gas properties under the successful
efforts method of accounting. Under this method, costs to acquire mineral
interests in oil and gas properties, to drill and equip exploratory wells that
find proved reserves and to drill and equip development wells are capitalized.
Capitalized costs of producing oil and gas properties are amortized to
operations by the unit-of-production method based on proved developed oil and
gas reserves on a property by property basis as estimated by Company engineers.
Estimated future restoration and abandonment costs are recorded by charges to
depreciation, depletion and amortization expense over the productive lives of
the related properties. The Company has provided $51.6 million for such future
costs classified with accumulated DD&A in the balance sheet. The total
estimated future dismantlement and restoration costs of $130.2 million are
included in future production and development costs for purposes of estimating
the future net revenues relating to the Company's proved reserves. Upon sale or
retirement of depreciable or depletable property, the cost and related
accumulated DD&A are eliminated from the accounts and the resulting gain or
loss is recognized.
Undeveloped oil and gas properties, which are individually significant, are
periodically assessed for impairment of value and a loss is recognized at the
time of impairment by providing an impairment allowance. Other undeveloped
properties are
26
<PAGE> 13
amortized on a composite method based on the Company's experience of successful
drilling and average holding period. Geological and geophysical costs, delay
rentals and costs to drill exploratory wells which do not find proved reserves
are expensed.
Developed oil and gas properties and other long-lived assets are
periodically assessed to determine if circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company performs this review of
recoverability by estimating future cash flows. If the sum of the expected
future cash flows is less than the carrying amount of the asset, an impairment
is recognized based on the discounted amount of such cash flows.
Repairs and maintenance are charged to expense as incurred. Renewals and
betterments are capitalized.
INCOME TAXES
The Company files a consolidated federal income tax return. Deferred income
taxes are provided for temporary differences between the financial reporting
and tax bases of the Company's assets and liabilities.
NET INCOME PER SHARE
Net income per share of common stock has been computed on the basis of the
weighted average number of shares outstanding during each period. The effect of
shares issuable upon the exercise of stock options is immaterial. The
convertible subordinated notes, which were converted on November 1, 1996, were
not common stock equivalents and have not been included in computing fully
diluted earnings per share for 1995 and 1994 since their inclusion would be
antidilutive.
CAPITALIZATION OF INTEREST
The Company capitalizes interest costs associated with the acquisition or
construction of significant oil and gas properties.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and short-term cash investments
include cash on hand and investments purchased with original maturities of
three months or less.
REVENUE RECOGNITION AND GAS IMBALANCES
Samedan has a gas sales contract with NGM, whereby Samedan is paid an index
price for all gas sold to NGM. NGM records sales, including hedging
transactions, as gathering, marketing and processing revenues. NGM records as
cost of sales in gathering, marketing and processing costs, the amount paid to
Samedan and third parties. All intercompany sales and costs have been
eliminated.
The Company follows an entitlements method of accounting for its gas
imbalances. Gas imbalances occur when the Company sells more or less gas than
its entitled ownership percentage of total gas production. Any excess amount
received above the Company's share is treated as a liability. If less than the
Company's entitlement is received, the underproduction is recorded as a
receivable. The Company records the noncurrent liability in Other Deferred
Credits and Noncurrent Liabilities, and the current liability in Other Current
Liabilities. The Company's gas imbalance liabilities were $21.7 million and
$11.4 million for 1996 and 1995, respectively. The Company records the
noncurrent receivable in Other Assets, and the current receivable in Other
Current Assets. The Company's gas imbalance receivables were $19.3 million and
$12.3 million for 1996 and 1995, respectively, and are valued at the amount
which is expected to be received.
TAKE-OR-PAY SETTLEMENTS
The Company records gas contract settlements which are not subject to
recoupment in Other Income when the settlement is received.
TRADING AND HEDGING ACTIVITIES
The Company, through its subsidiaries, from time to time, uses various
hedging arrangements in connection with anticipated crude oil and natural gas
sales of its production to minimize the impact of product price fluctuations.
Such arrangements include fixed price hedges, costless collars and other
contractual arrangements.
During 1996, the Company had natural gas hedging contracts that ranged from
39 percent to 86 percent of its average daily natural gas production. Natural
gas hedges were in the price range of $1.60 to $3.59 per MMBTU. The net effect
of these 1996 hedges was a $.33 per MCF reduction in the average natural gas
price. At December 31, 1996, the Company was a party to natural gas hedging
contracts to hedge approximately 21 percent of its estimated 1997 average daily
natural gas production at an average price per MMBTU of $2.20.
The Company also had crude oil hedging contracts that ranged from 48 percent
to 55 percent of its average daily oil production for January through July 1996
and 62 percent to 100 percent of its average daily oil production for August
through December 1996. Crude oil hedges were in the price range of $16.50 to
$24.27 per BBL. The net effect of these 1996 hedges was a $2.35 per BBL
reduction in the average crude oil price. At December 31, 1996, the Company was
a party to crude oil hedging contracts to hedge approximately 26 percent of its
estimated 1997 annual crude oil production at an average price per BBL of
$20.48.
Hedging gains and losses related to the Company's oil and gas production are
recorded in oil and gas sales and royalties.
In addition to the hedging arrangements pertaining to the Company's
production as described above, NGM employs various hedging arrangements in
connection with its purchases and
27
<PAGE> 14
sales of third party production to lock in profits or limit exposure to gas
price risk. Most of the purchases made by NGM are on an index basis; however,
purchasers in the markets in which NGM sells often require fixed or NYMEX
related pricing. NGM may use a hedge to convert the fixed or NYMEX sale to an
index basis thereby determining the margin and minimizing the risk of price
volatility. During 1996, NGM had hedging transactions with broker-dealers that
ranged from 158,696 MMBTU's to 429,377 MMBTU's of gas per day.
At December 31, 1996, NGM had in place hedges ranging from approximately
7,475 MMBTU's to 551,126 MMBTU's of gas per day for January 1997 to March 1998
for future physical transactions. NGM records hedging gains or losses relating
to fixed term sales as gathering, marketing and processing revenues in the
periods in which the related contract is completed.
Although these hedging arrangements expose the Company to credit risk, the
Company monitors the creditworthiness of its counterparties, which generally
are major institutions, and believes that losses from nonperformance are
unlikely to occur.
SELF-INSURANCE
The Company self-insures the medical and dental coverage provided to certain
of its employees, certain workers compensation and the first $100,000 of its
general liability coverage.
A provision for self-insured claims is recorded when sufficient information
is available to reasonably estimate the amount of the loss.
NOTE 2 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments pursuant to the requirements of SFAS No.
107, "Disclosures about Fair Value of Financial Instruments."
CASH AND SHORT-TERM CASH INVESTMENTS
The carrying amount approximates fair value due to the short maturity of
the instruments.
OIL AND GAS PRICE HEDGE AGREEMENTS
The fair value of oil and gas price hedges is the estimated amount the
Company would receive or pay to terminate the hedge agreements at the
reporting date taking into account the creditworthiness of the hedging
parties.
LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues or on the current
rates offered to the Company for debt of the same remaining maturities.
The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and short-term
cash investments $ 94,768 $ 94,768 $ 12,429 $ 12,429
Oil and gas hedge
agreements $ 5,180 $ (26,869) $ (7,867)
Long-term debt
(including current
portion) $ 848,028 $ 854,000 $ 376,992 $ 379,812
</TABLE>
NOTE 3 - DEBT
A summary of debt at December 31 follows:
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
$800 million Credit Agreement $749,000 $
4 1/4% Convertible Subordinated
Notes Due 2003 230,000
7 1/4% Notes Due 2023 100,000 100,000
Bank Credit Agreement 48,000
- ---------------------------------------------------------------
Outstanding debt 849,000 378,000
- ---------------------------------------------------------------
Less: current portion 50,000
Less: unamortized discount 972 1,008
- ---------------------------------------------------------------
Long-term debt $798,028 $376,992
- ---------------------------------------------------------------
</TABLE>
The Company has $749 million outstanding under its current $800 million bank
credit agreement. Such borrowings were made to finance the acquisition of EDC.
The bank credit agreement consists of a $400 million term loan, with certain
scheduled prepayments aggregating $150 million and a final maturity of July 31,
2001, and a $400 million revolving credit facility with a final maturity of
July 31, 2001. The interest rate is a variable rate based on a Eurodollar rate.
The weighted average interest rate on the borrowings during 1996 was 6.1
percent.
On November 1, 1996 all of the Company's $230 million in 4 1/4% Subordinated
Convertible Notes due 2003 were converted into 6,275,510 shares of common
stock.
Also outstanding are $100 million of 7 1/4% Notes due 2023. The Company may
not redeem any portion of these notes prior to maturity.
The Company's previous bank credit agreement provided for maximum unsecured
borrowings of $100 million at variable rates. On July 31, 1996 the Company used
proceeds from its current bank credit agreement to repay $48 million of
outstanding indebtedness under its previous bank credit agreement. The bank
credit agreement was canceled in connection with the repayment.
During the next five years principal payments of $50 million in 1997, $49
million in 1998 and $650 million in 2001 are required under the Company's debt
agreements.
28
<PAGE> 15
NOTE 4 - INCOME TAXES
The components of income from operations before income taxes for each year
are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $ 137,462 $ 18,368 $ 12,148
Foreign (1,173) (10,370) (6,923)
- ------------------------------------------------------------------------------
$ 136,289 $ 7,998 $ 5,225
- ------------------------------------------------------------------------------
</TABLE>
The income tax provisions relating to operations for each year consist of
the following:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. current $ 26,425 $ (9,309) $(10,462)
U.S. deferred 17,918 11,327 13,140
State current 844 65
State deferred 644 258 (31)
Foreign current 4,107 121
Foreign deferred 2,471 1,450 (588)
- ------------------------------------------------------------------------------
$ 52,409 $ 3,912 $ 2,059
- ------------------------------------------------------------------------------
</TABLE>
The net current deferred tax asset (liability) in the following table is
classified as Other Current Assets (Liabilities) in the Consolidated Balance
Sheet at December 31, 1996 and 1995. The tax effects of temporary differences
which gave rise to deferred tax assets and liabilities as of December 31 were:
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
U.S. and State Current Deferred Tax Assets (Liabilities):
Accrued expenses $ (197) $ (513)
Deferred income 255 525
Deferred hedge (219) (2,281)
Minimum tax 286 1,460
Allowance for doubtful accounts 1,186 181
Other (111) 335
- ------------------------------------------------------------------------------
Net current deferred tax asset (liability) 1,200 (293)
- ------------------------------------------------------------------------------
U.S. and State Non-current Deferred Tax Liabilities:
Property, plant and equipment, principally due to
differences in depreciation, amortization, lease
impairment and abandonments (100,983) (71,789)
Accrued expenses 3,454 2,824
Deferred income 6,629
Income tax accruals 11,215 1,287
Other 423 (317)
- ------------------------------------------------------------------------------
Net non-current deferred liability (79,262) (67,995)
- ------------------------------------------------------------------------------
U.S. and state net deferred tax liability (78,062) (68,288)
- ------------------------------------------------------------------------------
Foreign Deferred Tax Liabilities:
Property, plant and equipment of
foreign operations (25,226) 12,836
Valuation allowance (3,946) (14,286)
- ------------------------------------------------------------------------------
Deferred tax liability (29,172) (1,450)
- ------------------------------------------------------------------------------
Total deferred taxes $(107,234) $ (69,738)
- ------------------------------------------------------------------------------
</TABLE>
A valuation allowance of $3.9 million and $14.3 million for 1996 and 1995,
respectively, related to the Company's foreign operations, was established for
the portion of the deferred tax assets which management believes is unlikely to
have a tax benefit realized.
The following table details the difference between the federal statutory tax
rate and the effective tax rate for the years ended December 31:
<TABLE>
<CAPTION>
(Amounts expressed in percentages) 1996 1995 1994
- ------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0 35.0 35.0
Effect of:
Percentage depletion (.1) (1.4) (2.2)
State taxes .7 2.6 .1
Foreign taxes 3.1 12.8
Net operating loss carryback 7.9
Other, net (.2) (.1) (1.4)
- ------------------------------------------------------------------
Effective rate 38.5 48.9 39.4
- ------------------------------------------------------------------
</TABLE>
NOTE 5 - COMMON STOCK AND STOCK OPTIONS
The Company has two stock option plans, the 1992 Stock Option and Restricted
Stock Plan (1992 Plan) and the 1988 Non-Employee Director Stock Option Plan
(1988 Plan). The Company accounts for these plans under APB Opinion 25, under
which no compensation cost has been recognized in the accompanying financial
statements.
The following schedule shows the Company's net income and net income per
share for each of the years ended December 31, had compensation costs been
determined consistent with SFAS No. 123.
1996 1995
- --------------------------------------------------
Net Income:
As Reported $ 83,880 $ 4,086
Pro Forma $ 82,447 $ 3,651
Net Income Per Share:
As Reported $ 1.63 $ .08
Pro Forma $ 1.60 $ .07
The SFAS No. 123 method of accounting has not been applied to options
granted prior to 1995. The pro forma information presented above is based on
several assumptions and should not be viewed as indicative of the operations of
the Company in future periods.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: risk-free interest
rates of 6.62 and 6.33 percent; dividend yield of .40 and .66 percent; expected
lives of options of 7 years for both grants and; expected volatility of 32.89
and 33.33 percent.
29
<PAGE> 16
Under the Company's 1992 Plan the Board of Directors may grant stock options
and award restricted stock. No restricted stock has been issued under the 1992
Plan. Since the 1992 Plan's adoption stock options have been issued at the
market price on the date of grant. The earliest the granted options may be
exercised is over a three year period at the rate of 33 1/3% each year
commencing on the first anniversary of the grant date. The options expire ten
years from the grant date. The Plan covers a maximum of 2,000,000 shares of the
Company's authorized but unissued common stock. At December 31, 1996, the
Company had reserved 1,735,739 shares of its common stock for issuance,
including 525,660 shares available for grant under its 1992 Plan.
The Company's 1988 Plan allows stock options to be issued to certain
non-employee directors at the market price on the date of grant. The options
may be exercised one year after issue and expire ten years from the grant date.
The 1988 Plan originally provided for the grant of options to purchase a
maximum of 250,000 shares of the Company's authorized but unissued common
stock. The 1988 Plan was amended with a vote of the shareholders during 1996 to
increase by 300,000 shares to 550,000 shares the aggregate number of shares of
common stock that may be issued under the 1988 Plan. At December 31, 1996, the
Company had reserved 434,500 shares of its common stock for issuance, including
304,000 shares available for grant under its 1988 Plan.
Stock options outstanding under the plans mentioned above and two previously
terminated plans are presented for the periods indicated.
<TABLE>
<CAPTION>
Number Option
of Shares Price Range
- ---------------------------------------------------------------
<S> <C> <C>
OUTSTANDING DECEMBER 31, 1993 1,203,948 $10.63-$24.88
- ---------------------------------------------------------------
Granted 303,243 $27.25-$30.00
Exercised (76,333) $10.63-$24.88
Cancelled (1,476) $13.75-$16.88
- --------------------------------------------------------------
OUTSTANDING DECEMBER 31, 1994 1,429,382 $10.63-$30.00
- ---------------------------------------------------------------
Granted 357,663 $24.25-$25.50
Exercised (185,192) $10.63-$27.25
Cancelled (18,144) $16.88-$27.25
- --------------------------------------------------------------
OUTSTANDING DECEMBER 31, 1995 1,583,709 $10.63-$30.00
- ---------------------------------------------------------------
Granted 376,368 $37.63-$40.38
Exercised (323,140) $10.63-$27.25
Cancelled (34,839) $16.88-$27.25
- --------------------------------------------------------------
OUTSTANDING DECEMBER 31, 1996 1,602,098 $10.63-$40.38
- ---------------------------------------------------------------
EXERCISABLE AT DECEMBER 31, 1996 916,207 $10.63-$40.38
- ---------------------------------------------------------------
</TABLE>
The weighted average fair value of options granted using the Black-Scholes
option pricing model was $18.95 for 1996 and $11.05 for 1995.
NOTE 6 - EMPLOYEE BENEFIT PLANS
PENSION PLAN
The Company has a non-contributory defined benefit pension plan covering
substantially all of its domestic employees. The benefits are based on an
employee's years of service and average earnings for the 60 consecutive
calendar months of highest compensation. The Company also has an unfunded
restoration plan to ensure payments of amounts for which employees are entitled
under the provisions of the pension plan, but which are subject to limitations
imposed by federal tax laws. The Company's funding policy has been to make
annual contributions equal to the actuarially computed liability to the extent
such amounts are deductible for income tax purposes. Plan assets consist
principally of equity securities and fixed income investments.
The periodic pension expense included the following components for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned in the period $ 2,212 $ 1,781 $ 1,814
Interest cost on projected benefit obligation 3,382 3,298 2,876
Actual return on plan assets (6,734) (8,611) 1,346
Net amortization and deferral 3,621 5,461 (4,200)
- -------------------------------------------------------------------------------------
Net pension expense $ 2,481 $ 1,929 $ 1,836
- -------------------------------------------------------------------------------------
</TABLE>
The funded status of the plans at December 31 was as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
Funded Unfunded Funded Unfunded
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $ 27,694 $ 3,473 $ 27,445 $ 2,934
Accumulated benefit obligation 31,476 3,623 31,009 3,069
- --------------------------------------------------------------------------------------------------------
Projected benefit obligation 42,506 5,074 42,946 5,055
Plan assets at fair value 47,921 42,070
- --------------------------------------------------------------------------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation 5,415 (5,074) (876) (5,055)
Unrecognized net (gain) loss (11,775) 32 (4,711) 536
Unrecognized net (asset)
liability at transition (1,936) 3,248 (2,152) 3,488
Unrecognized prior
service cost 2,579 451 2,325 155
- --------------------------------------------------------------------------------------------------------
Accrued pension cost $ (5,717) $ (1,343) $ (5,414) $ (876)
- --------------------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE> 17
The Company's assumptions as of December 31 in determining the pension cost
and liability for the three years were as follows:
<TABLE>
<CAPTION>
(Amounts expressed in percentages) 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.75 7.25 8.50
Rates of increase in compensation 5.50 5.50 6.00
Long-term rate of return on plan assets 8.50 8.50 8.50
</TABLE>
EMPLOYEE SAVINGS PLAN
The Company has an employee savings plan (ESP) which is a defined
contribution plan. Participation in the ESP is voluntary and all regular
employees of the Company are eligible to participate. Subject to certain
limitations, the Company may contribute up to 100 percent of the participant's
contribution. Plan contributions of $1,053,000, $895,000 and $775,000 for 1996,
1995 and 1994, respectively, were charged to expense.
OTHER EMPLOYEE PLANS
The Company sponsors other plans for the benefit of its employees and
retirees. These plans include health care and life insurance benefits. The
accumulated postretirement benefit obligation of these plans was computed using
an assumed discount rate of 7.75, 7.25 and 8.5 percent in 1996, 1995 and 1994,
respectively. The health care cost trend rate was assumed to be 10 percent for
1996, declining by one percent for four successive years to 6 percent in 2000
and 2001, decreasing to 5.5 percent for 2002 and remaining at that rate
thereafter.
If the health care cost trend rate was increased one percent for all future
years, the accumulated postretirement benefit obligation as of December 31,
1996, would have increased approximately $288,000. The effect of this change on
the aggregate of service and interest cost for 1996 would have been an increase
of approximately $52,000.
Net postretirement benefit cost for the years ended December 31, includes
the following components:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned in the period $180 $140 $136
Interest cost-accumulated benefit obligation 143 123 93
Net loss amortization 27 12 24
- ----------------------------------------------------------------------------
Net postretirement benefit cost $350 $275 $253
- ----------------------------------------------------------------------------
</TABLE>
The plan's postretirement benefit obligation at December 31 was as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (357) $ (173)
Fully eligible active employees (377) (363)
Active employees, not fully eligible (1,418) (1,471)
- -------------------------------------------------------------------------------
Total participants (2,152) (2,007)
Plan Assets
- -------------------------------------------------------------------------------
Funded status (2,152) (2,007)
Unrecognized net loss 554 656
- -------------------------------------------------------------------------------
Accrued postretirement benefit obligation $ (1,598) $ (1,351)
- -------------------------------------------------------------------------------
</TABLE>
NOTE 7 - EDC ACQUISITION
On July 31, 1996, Samedan acquired all the outstanding common stock of EDC
for $768 million. In connection with the acquisition, the Company entered into
a $800 million bank credit facility. Borrowings of $800 million under that
agreement and existing cash balances were used to fund the purchase of EDC and
repay $48.0 million of outstanding indebtedness under the Company's then
existing bank credit agreement.
The acquisition has been accounted for using the purchase method of
accounting, and, accordingly, the purchase price has been allocated to EDC's
assets and liabilities based on fair values at the date of the acquisition.
The operating results of EDC have been included in the Consolidated
Statement of Operations from the date of the acquisition. The pro forma
information includes adjustments for interest expense that would have been
incurred to finance the acquisition, additional depreciation, depletion and
amortization based on the fair value of EDC's property, plant and equipment and
expected savings from the termination of certain EDC employees and facilities
consolidation. The following pro forma information has been prepared assuming
the acquisition had taken place at the beginning of each of the following
years.
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(unaudited)
- --------------------------------------------------
<S> <C> <C>
Revenues $1,103,334 $ 842,757
Net income $ 74,082 $ 73
Net income per share $ 1.44 $ 0.00
</TABLE>
The pro forma information presented above is based on several assumptions
and should not be viewed as indicative of the operations of the Company in
future periods.
31
<PAGE> 18
NOTE 8 - ADDITIONAL BALANCE SHEET AND STATEMENT OF OPERATIONS INFORMATION
Included in accounts receivable-trade is an allowance for doubtful accounts
at December 31 of the following:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Allowance for doubtful accounts $ 3,083 $ 500
</TABLE>
Other current assets at December 31 include the following:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Deferred hedges $ 1,684 $ 7,632
Deferred tax asset $ 1,200
Income tax receivable $ 9,329
</TABLE>
Other current liabilities at December 31 include the following:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------
<S> <C> <C>
Gas imbalance liabilities $ 3,583 $ 5,173
</TABLE>
Oil and gas operations expense included the following for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Lease operating expense $ 116,692 $ 78,959 $ 69,613
Production taxes $ 10,108 $ 3,426 $ 5,927
</TABLE>
Oil and gas exploration expense included the following for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Dry hole expense $ 32,762 $ 17,608 $ 35,275
Undeveloped lease amortization $ 5,827 $ 6,465 $ 7,813
Abandoned assets $ 545 $ 483 $ 2,945
Seismic $ 11,885 $ 8,358 $ 8,254
</TABLE>
Listed below is the only purchaser who accounted for more than ten percent
of total oil and gas sales and royalties in the past three years.
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Natural Gas Clearinghouse * * 16%
*Less than ten percent
</TABLE>
NOTE 9 - IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." The Company adopted SFAS No. 121 during the fourth
quarter of 1995.
The assets impaired under SFAS No. 121 are oil and gas properties
maintained under the successful efforts method of accounting. The excess of the
net book value over the projected discounted future net revenue of the impaired
properties was charged to DD&A expense. The Company recognized a $59.5 million
SFAS No. 121 impairment for 1995. This impairment included $3.2 million in
Tunisia, $4.1 million in Canada, $18.4 million onshore U.S., and $33.8 million
in offshore Gulf of Mexico properties.
The Company recorded no asset impairment for its properties during 1996.
32
<PAGE> 19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Noble Affiliates, Inc.:
We have audited the accompanying consolidated balance sheet of Noble
Affiliates, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1996 and 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Noble Affiliates, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
As explained in Note 9 to the financial statements, in 1995 the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of."
Oklahoma City, Oklahoma ARTHUR ANDERSEN LLP
January 24, 1997
33
<PAGE> 20
NOTE 10 - SUPPLEMENTAL OIL AND GAS INFORMATION
(Unaudited)
The following reserve schedules were developed by the Company's reserve
engineers and set forth the changes in estimated quantities of proved oil and
gas reserves of the Company during each of the three years presented, and the
proved developed oil and gas reserves as of the beginning of each year.
<TABLE>
<CAPTION>
Natural Gas and Crude Oil & Condensate
Casinghead Gas (MMCF) (barrels in thousands)
- -----------------------------------------------------------------------------------------------------------------------
PROVED DEVELOPED AND UNDEVELOPED RESERVES:United States International TOTAL United States International TOTAL
- -----------------------------------------------------------------------------------------------------------------------
PROVED RESERVES AS OF DECEMBER 31, 1993 664,399 27,131 691,530 65,523 7,432 72,955
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revisions of previous estimates 15,409 2,418 17,827 (1,052) 1,711 659
Extensions, discoveries and other additions 148,008 6,773 154,781 8,160 1,851 10,011
Production (84,504) (3,225) (87,729) (7,434) (1,237) (8,671)
Sale of minerals in place (854) (167) (1,021) (276) (19) (295)
Purchase of minerals in place 1,787 1,775 3,562 615 253 868
- -----------------------------------------------------------------------------------------------------------------------
PROVED RESERVES AS OF DECEMBER 31, 1994 744,245 34,705 778,950 65,536 9,991 75,527
- -----------------------------------------------------------------------------------------------------------------------
Revisions of previous estimates (35,728) (4,776) (40,504) 247 (517) (270)
Extensions, discoveries and other additions 143,589 6,558 150,147 12,270 3,658 15,928
Production (94,038) (2,946) (96,984) (8,175) (1,405) (9,580)
Sale of minerals in place (2,424) (3,489) (5,913) (115) (6) (121)
Purchase of minerals in place 62,657 1,986 64,643 1,144 1,380 2,524
- -----------------------------------------------------------------------------------------------------------------------
PROVED RESERVES AS OF DECEMBER 31, 1995 818,301 32,038 850,339 70,907 13,101 84,008
- -----------------------------------------------------------------------------------------------------------------------
Revisions of previous estimates (30,618) (2,792) (33,410) (187) 731 544
Extensions, discoveries and other additions 127,399 9,825 137,224 7,701 2,507 10,208
Production (162,996) (5,104) (168,100) (10,785) (2,287) (13,072)
Sale of minerals in place (49,851) (4,286) (54,137) (1,239) (216) (1,455)
Purchase of minerals in place 377,372 46,962 424,334 15,920 19,594 35,514
- -----------------------------------------------------------------------------------------------------------------------
PROVED RESERVES AS OF DECEMBER 31, 1996 1,079,607 76,643 1,156,250 82,317 33,430 115,747
- -----------------------------------------------------------------------------------------------------------------------
PROVED DEVELOPED RESERVES:
January 1, 1994 570,462 27,131 597,593 64,284 6,885 71,169
January 1, 1995 658,228 34,705 692,933 63,013 8,305 71,318
January 1, 1996 750,753 32,036 782,789 67,368 11,667 79,035
January 1, 1997 1,010,837 50,258 1,061,095 78,564 29,334 107,898
</TABLE>
PROVED RESERVES
Proved reserves are 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.
PROVED DEVELOPED RESERVES
Proved developed reserves are proved reserves which are expected to be
recovered through existing wells with existing equipment and operating methods.
34
<PAGE> 21
COSTS INCURRED IN OIL AND GAS ACTIVITIES
Costs incurred in connection with the Company's oil and gas acquisition,
exploration and development activities during the year are shown below. Amounts
are presented in accordance with SFAS No. 19, and may not agree with amounts
determined using traditional industry definitions.
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------- --------------------------------- ----------------------------------
United States International TOTAL United States International TOTAL United States International TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property acquisition
costs:
Proved $541,363 $146,052 $687,415 $36,728 $6,932 $43,660 $ 3,742 $2,375 $ 6,117
Unproved 24,672 21,737 46,409 8,209 1,096 9,305 8,695 1,773 10,468
- ------------------------------------------------------------------------------------------------------------------------------
Total $566,035 $167,789 $733,824 $44,937 $8,028 $52,965 $12,437 $4,148 $ 16,585
- ------------------------------------------------------------------------------------------------------------------------------
Exploration costs $ 81,018 $ 9,981 $ 90,999 $39,008 $11,586 $50,594 $48,151 $14,656 $ 62,807
- ------------------------------------------------------------------------------------------------------------------------------
Development costs $176,419 $ 7,886 $184,305 $159,405 $2,981 $162,386 $105,993 $4,345 $110,338
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AGGREGATE CAPITALIZED COSTS
Aggregate capitalized costs relating to the Company's oil and gas producing
activities, and related accumulated DD&A as of the end of the year are shown
below.
<TABLE>
<CAPTION>
1996 1995
-------------------------------------------- ----------------------------------------------
United States International TOTAL United States International TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unproved oil and gas properties $ 49,380 $ 26,591 $ 75,971 $ 31,124 $ 5,784 $ 36,908
Proved oil and gas properties 2,242,325 218,228 2,460,553 1,558,009 63,239 1,621,248
- -----------------------------------------------------------------------------------------------------------------------------------
2,291,705 244,819 2,536,524 1,589,133 69,023 1,658,156
Accumulated DD&A (943,055) (33,778) (976,833) (794,622) (31,707) (826,329)
- -----------------------------------------------------------------------------------------------------------------------------------
Net capitalized costs $ 1,348,650 $ 211,041 $ 1,559,691 $ 794,511 $ 37,316 $ 831,827
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 22
OIL AND GAS OPERATIONS
Aggregate results of operations in connection with the Company's oil and gas
producing activities are shown below.
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------- --------------------------------- ----------------------------------
United States International TOTAL United States International TOTAL United States International TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $548,488 $ 56,100 $604,588 $301,710 $ 26,424 $328,134 $277,467 $ 28,702 $306,169
Production costs 118,387 20,737 139,124 74,911 7,473 82,384 68,340 7,200 75,540
Exploration expenses 43,844 15,473 59,317 40,971 12,262 53,233 49,991 18,247 68,238
DD&A and valuation provision 222,426 13,767 236,193 191,227 13,115 204,342* 125,880 6,526 132,406
- -----------------------------------------------------------------------------------------------------------------------------------
Income (loss) 163,831 6,123 169,954 (5,399) (6,426) (11,825) 33,256 (3,271) 29,985
Income tax expense (benefit) 57,873 4,850 62,723 (2,046) (2,296) (4,342) 11,503 (33) 11,470
- -----------------------------------------------------------------------------------------------------------------------------------
Results of operations
from producing
activities (excluding
corporate overhead
and interest costs) $105,958 $ 1,273 $107,231 $ (3,353) $ (4,130) $ (7,483) $ 21,753 $ (3,238) $ 18,515
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Includes $59.5 million of additional DD&A as a result of adoption of
SFAS No. 121.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS RELATING TO
PROVED OIL AND GAS RESERVES
The following information is based on the Company's best estimate of the
required data for the Standardized Measure of Discounted Future Net Cash Flows
required by Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 69. The Standard requires the use of a 10 percent
discount rate. This information is not the fair market value nor does it
represent the expected present value of future cash flows of the Company's
proved oil and gas reserves.
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------- --------------------------------- -----------------------------------
United States International TOTAL United States International TOTAL United States International TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Future cash inflows $ 6,013 $ 878 $ 6,891 $ 3,610 $ 277 $ 3,887 $ 2,439 $ 224 $ 2,663
Future production and
development costs 2,078 361 2,439 1,055 58 1,113 870 62 932
Future income tax expenses 1,078 147 1,225 709 61 770 423 44 467
- -----------------------------------------------------------------------------------------------------------------------------------
Future net cash flows 2,857 370 3,227 1,846 158 2,004 1,146 118 1,264
10% annual discount for
estimated timing of
cash flows 890 115 1,005 673 57 730 479 49 528
- -----------------------------------------------------------------------------------------------------------------------------------
Standardized measure of
discounted future net
cash flows $ 1,967 $ 255 $ 2,222 $ 1,173 $ 101 $ 1,274 $ 667 $ 69 $ 736
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 23
Future cash inflows are computed by applying year-end prices of oil and gas
relating to the Company's proved reserves to the year-end quantities of those
reserves, with consideration given to the effect of existing trading and
hedging contracts if any. The year-end weighted average oil price utilized in
the computation of future cash inflows was approximately $22.63 per BBL.
West Texas intermediate crude oil price in mid February 1997 was
approximately $2.10 lower than year-end 1996. The Company estimates that a
$1.00 per BBL change in the average oil price from the year-end price would
change discounted future net cash flows before income taxes by approximately
$67 million.
The year-end weighted average gas price utilized in the computation of
future cash inflows was approximately $3.83 per MCF. Natural gas index prices
at Henry Hub have decreased approximately $1.10 per MCF in mid February 1997
compared with the year-end index. The Company estimates that a $.10 per MCF
change in the average gas price from the year-end price would change discounted
future net cash flows before income taxes by approximately $72 million.
Future production and development costs, which include dismantlement and
restoration expense, are computed by estimating the expenditures to be incurred
in developing and producing the Company's proved oil and gas reserves at the
end of the year, based on year-end costs, and assuming continuation of existing
economic conditions.
Future income tax expenses are computed by applying the appropriate year-end
statutory tax rates to the future pretax net cash flows relating to the
Company's proved oil and gas reserves, less the tax bases of the properties
involved. The future income tax expenses give effect to tax credits and
allowances, but do not reflect the impact of general and administrative costs
and exploration expenses of ongoing operations relating to the Company's proved
oil and gas reserves.
At December 31, 1996, the Company had estimated gas imbalance receivables of
$19.3 million and estimated liabilities of $21.7 million; at year-end 1995,
$12.3 million in receivables and $11.4 million in liabilities; and at year-end
1994, $11.7 million in receivables and $10.5 million in liabilities. Neither
the gas imbalance receivables nor liabilities have been included in the
standardized measure of discounted future net cash flows for the three years
ended December 31, 1996.
Principal changes in the aggregate standardized measure of discounted future
net cash flows attributable to the Company's proved oil and gas reserves at
year end are shown below.
<TABLE>
<CAPTION>
(In millions of dollars) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Standardized measure of discounted
future net cash flows at the beginning
of the year $ 1,274 $ 736 $ 675
Extensions, discoveries and improved
recovery, less related costs 256 378 160
Revisions of previous quantity estimates (76) (53) 18
Changes in estimated future
development costs (21) (29) (31)
Purchases/sales of minerals in place 1,043 116 3
Net changes in prices and production costs 212 378 (90)
Accretion of discount 178 103 95
Sales of oil and gas produced, net of
production costs (475) (241) (228)
Development costs incurred during
the period 74 67 44
Net change in income taxes (368) (216) (17)
Change in timing of estimated future
production, and other 125 35 107
- --------------------------------------------------------------------------------
Standardized measure of discounted
future net cash flows at the end
of the year $ 2,222 $ 1,274 $ 736
- --------------------------------------------------------------------------------
</TABLE>
NOTE 11 - INTERIM FINANCIAL INFORMATION
(Unaudited)
Interim financial information for the years ended December 31, 1996 and 1995
are as follows:
<TABLE>
<CAPTION>
Quarter Ended
- ------------------------------------------------------------------------------
Mar. 31, June 30, Sept. 30, Dec. 31,
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Revenues $ 170,423 $ 183,572 $ 257,232 $ 275,976
Gross profit
from operations $ 40,410 $ 31,066 $ 37,333 $ 63,789
Net income $ 22,679 $ 16,859 $ 15,306 $ 29,036
Net income per share $ .45 $ .33 $ .31 $ .53
1995
Revenues $ 91,854 $ 107,130 $ 110,290 $ 177,744
Gross profit
from operations $ 5,266 $ 10,186 $ 9,013 $ 2,277
Net income (loss) $ 440 $ 3,357 $ 2,729 $ (2,440)
Net income (loss) per share $ .01 $ .07 $ .05 $ (.05)
</TABLE>
During the fourth quarter of 1996 and 1995, DD&A expense increased $.8
million and decreased $3.1 million, respectively, relating to the cumulative
effect of oil and gas reserve revisions on the DD&A provision for the preceding
three quarters.
During the fourth quarter of 1995, the Company recognized two non-recurring
items. In November, $39.0 million was recorded as income from the settlement of
a bankruptcy claim against Columbia Gas Transmission Corporation. In December,
the Company recorded a pretax charge of $59.5 million relating to the adoption
of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long Lived Assets to Be Disposed Of."
37
<PAGE> 24
CORPORATE INFORMATION
TRANSFER AGENT AND REGISTRAR
Liberty Bank and Trust Company
of Oklahoma City, N. A.
P. O. Box 25848
Oklahoma City, Oklahoma 73125
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
Oklahoma City, Oklahoma
COMMON STOCK LISTED
New York Stock Exchange
Symbol - NBL
ANNUAL MEETING
The Annual Meeting of Shareholders of Noble Affiliates, Inc. will be held
on Tuesday, April 22, 1997, at 10:00 a.m. at the Charles B. Goddard Center
located at "D" Street and First Avenue S.W. in Ardmore, Oklahoma. All
shareholders are cordially invited to attend.
FORM 10-K
A copy of Form 10-K, as filed with the Securities and Exchange Commission, is
available upon request by writing to Vice President - Finance and Treasurer,
Noble Affiliates, Inc., P.O. Box 1967, Ardmore, Oklahoma 73402.
GLOSSARY
BBL Barrel
BCF Billion Cubic Feet
BOE Barrel of Oil Equivalent
LPG Liquid Petroleum Gas
MCF Thousand Cubic Feet
MMBBL Million Barrels
MMBTU Million British Thermal Units
MMCF Million Cubic Feet
TCF Trillion Cubic Feet
SHAREHOLDERS' PROFILE
December 31, 1996
<TABLE>
<CAPTION>
Shares Shareholders
Outstanding of Record
- --------------------------------------------------------------
<S> <C> <C>
Individuals 565,033 1,022
Joint accounts 86,662 228
Fiduciaries 191,497 294
Institutions 6,420,363 38
Nominees 49,520,088 4
Foreign 12,754 14
- ------------------------------------------------------------
Total 56,796,397 1,600
- ------------------------------------------------------------
</TABLE>
STOCK PRICES AND DIVIDENDS BY QUARTERS
<TABLE>
<CAPTION>
DIVIDEND
HIGH LOW PER SHARE
- -------------------------------------------------------------
<S> <C> <C> <C>
1996
First quarter $33 3/8 $26 7/8 $.04
Second quarter 38 3/8 32 1/8 .04
Third quarter 42 1/2 37 3/8 .04
Fourth quarter 49 41 5/8 .04
- -------------------------------------------------------------
1995
First quarter $27 1/2 $21 1/4 $.04
Second quarter 29 25 1/2 .04
Third quarter 29 1/8 23 5/8 .04
Fourth quarter 30 1/2 22 5/8 .04
</TABLE>
40
<PAGE> 25
APPENDIX I.
The following describes graphs which were included in the Management's
Discussion and Analysis on pages 15 through 20 of the Registrant's 1996 annual
report.
Page 15 - Three Years of Costs Incurred for Acquisitions, Exploration and
Development
1994: $190 million
1995: $266 million
1996: $1,009 million
Average Finding Cost Per BOE for Three Years
1994: $4.64 per barrel
1995: $5.64 per barrel
1996: $7.51 per barrel
Three Year Average: $6.59
Gas converted 6:1
Page 16 - Gas Reserves Added for Three Years
1994: 176.2 BCF's
1995: 174.3 BCF's
1996: 528.1 BCF's
Oil Reserves Added for Three Years
1994: 11.5 million barrels
1995: 18.2 million barrels
1996: 46.3 million barrels
Net Income for Three Years
1994: $3.2 million
1995: $4.1 million
1996: $83.9 million
Page 17 - Gas Revenues for Three Years
1994: $174.5 million - $1.97 Average price per mcf
1995: $167.4 million - $1.72 Average price per mcf
1996: $365.4 million - $2.17 Average price per mcf
Oil Revenues For Three Years
1994: $122.9 million - $14.90 Average price per barrel
1995: $153.5 million - $16.78 Average price per barrel
1996: $225.2 million - $18.28 Average price per barrel
Page 18 - DD&A Expense Per BOE of Production for Three Years
1994: $5.46 per barrel
1995: $7.75 per barrel (includes $59.5 million impairment -
SFAS 121)
1996: $5.66 per barrel
Gas converted 6:1
Page 19 - SG&A Expense Per BOE of Production for Three Years
1994: $1.56 per barrel
1995: $1.41 per barrel
1996: $1.25 per barrel
Gas converted 6:1
Page 20 - Average Production and Lifting Cost per BOE for Three Years
1994: $3.20 per barrel
1995: $3.15 per barrel
1996: $3.05 per barrel
Gas converted 6:1
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF NOBLE AFFILIATES, INC.
The following table sets forth the material subsidiaries of Noble Affiliates,
Inc. as of March 1, 1997:
<TABLE>
<S> <C>
Samedan Oil Corporation (1) Delaware
Noble Gas Marketing, Inc. (1) Delaware
Noble Trading, Inc. (1) Delaware
NPM, Inc. (1) Delaware
Noble Gas Pipeline, Inc. (2) Delaware
Samedan Oil of Canada, Inc. (3) Delaware
Samedan of North Africa, Inc. (3) Delaware
Samedan Oil of Indonesia, Inc. (3) Delaware
Samedan Pipe Line Corporation (3) Delaware
Samedan Royalty Corporation (3) Delaware
Samedan of Tunisia, Inc. (3) Delaware
Samedan - NEEI Exploration Company (4) Oklahoma
Samedan LPG (5) Cayman Islands, British West Indies
Energy Development Corporation (3) New Jersey
Brabant Petroleum, Ltd. (6) United Kingdom
EDC Argentina, Inc. (6) Delaware
EDC Australia, Ltd. (6) Delaware
EDC China, Inc. (6) Delaware
EDC Ecuador Ltd. (6) Delaware
EDC (HIPS), Inc. (6) Delaware
EDC Portugal Ltd. (6) Delaware
EDC Senegal Ltd. (6) Delaware
EDC (U.K.) LTD (6) Delaware
Gasdel Pipeline System Incorporated (6) New Jersey
HGC, Inc. (6) Delaware
Producers Service, Inc. (6) New Jersey
</TABLE>
___________________________________________________
(1) 100% owned by Noble Affiliates, Inc.
(2) 100% owned by Noble Gas Marketing, Inc.
(3) 100% owned by Samedan Oil Corporation
(4) 50% general partnership interest owned by Samedan Oil Corporation
(5) 100% owned by Samedan of North Africa, Inc.
(6) 100% owned by Energy Development Corporation
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated January 24, 1997, included on page 33 of the 1996 Annual
Report to Shareholders and incorporated by reference in this Form 10-K, into
the previously filed Registration Statements on Form S-3 (File No. 333-18929)
and on Form S-8 (File Nos. 2-64600, 2-81590, 33-32692, 2-66654 and 33-54084).
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
March 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 94,768
<SECURITIES> 0
<RECEIVABLES> 206,151
<ALLOWANCES> 0
<INVENTORY> 4,489
<CURRENT-ASSETS> 316,803
<PP&E> 2,571,964
<DEPRECIATION> (1,000,200)
<TOTAL-ASSETS> 1,956,938
<CURRENT-LIABILITIES> 279,806
<BONDS> 798,028
<COMMON> 194,402
0
0
<OTHER-SE> 541,083
<TOTAL-LIABILITY-AND-EQUITY> 1,956,938
<SALES> 604,588
<TOTAL-REVENUES> 887,203
<CGS> 0
<TOTAL-COSTS> 712,440
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,474
<INCOME-PRETAX> 136,289
<INCOME-TAX> 52,409
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,880
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 0
</TABLE>
