<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-8567-2
MAXUS ENERGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-1891531
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
717 NORTH HARWOOD STREET 75201-6594
DALLAS, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
Registrant's telephone number, including area code: (214) 953-2000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
Common Stock, $1.00 Par Value.......................... New York Stock Exchange
Pacific Stock Exchange
$4.00 Cumulative Convertible Preferred Stock, $1.00 Par
Value................................................. New York Stock Exchange
$2.50 Cumulative Preferred Stock, $1.00 Par Value...... New York Stock Exchange
8 1/2% Sinking Fund Debentures Due April 1, 2008....... New York Stock Exchange
</TABLE>
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, and (2) has been subject to such filing
requirements for the past 90 days. [X] YES [_] NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 1, 1995 was approximately $905,000,000.
Shares of Common Stock outstanding at March 1, 1995--135,540,880.
DOCUMENTS INCORPORATED BY REFERENCE
None
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<PAGE>
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
Maxus Energy Corporation ("Maxus" or the "Company") was incorporated in
Delaware in 1983 to hold the stock of various corporations, the oldest of which
was founded in 1910. The Company, together with its subsidiaries, is an
independent oil and gas exploration and production company. Its principal
executive offices are located at 717 North Harwood Street, Dallas, Texas 75201-
6594, and its telephone number is (214) 953-2000. In this report, the terms
"Company" and "Maxus" mean Maxus Energy Corporation, its subsidiaries and their
predecessors unless the context otherwise indicates.
The Company is one of the largest independent oil and gas exploration and
production companies in the United States, with ongoing international activity
in Indonesia and a number of other countries, and domestic activity primarily
in the mid-continent region of the United States. Information concerning
outside sales and operating profit by geographic area for the three years ended
December 31, 1994 and identifiable assets by geographic area as of December 31,
1994, 1993 and 1992 is presented on page F-8 of this report.
On February 28, 1995, the Company entered into a merger agreement (the
"Merger Agreement") with YPF Sociedad Anonima ("YPF"), a sociedad anonima
organized under the laws of the Republic of Argentina, and YPF Acquisition
Corp. ("YPFA Corp."), a wholly owned subsidiary of YPF. Pursuant to the Merger
Agreement, YPFA Corp. has commenced a tender offer to purchase all of the
outstanding shares of the Company's common stock, $1.00 par value (the "Common
Stock"), at a price of $5.50 per share in cash (the "Offer"). The Offer is
subject to certain conditions, including the conditions that such number of
shares of Common Stock constituting a majority of the shares of the Company's
voting stock (i.e., the Common Stock and the Company's $4.00 Cumulative
Convertible Preferred Stock (the "$4.00 Preferred Stock")) are validly tendered
and that financing to complete the Offer and the "Merger" (as defined below) is
received by YPF. In connection with the Offer, record holders of Common Stock
as of March 22, 1995 will also receive a cash payment of $0.10 per share upon
the redemption of the rights attached to shares of Common Stock. Subject to
certain conditions, each share of Common Stock not acquired in the Offer will
be converted into a right to receive the same price of $5.50 per share and YPFA
Corp. will be merged into the Company (the "Merger"). Under the terms of the
Merger Agreement, all of the Company's preferred stock would remain
outstanding.
As of the date of this report, no assurance can be given as to whether all
conditions to the Offer or the Merger will be satisfied. A number of lawsuits
have been filed in the State of Delaware by alleged holders of the Company's
outstanding securities seeking, among other things, orders enjoining the
consummation of the Offer and the Merger. See Item 3--"Legal Proceedings."
The Company's sales or transfers between geographic areas were not
significant in each year in the three-year period ended December 31, 1994.
Operating revenues from export sales to unaffiliated customers located outside
the United States were less than 10% of the Company's consolidated sales and
operating revenues in each year in the three-year period ended December 31,
1994.
Exploration and Production
International. The Company has interests in production sharing contracts with
Pertamina, Indonesia's state oil company, for the exploration, development and
production of oil and gas in two primary areas in the Java Sea--Southeast
Sumatra and Northwest Java. These areas accounted for 89% of the Company's
total net production of oil during 1994. The Company's working interest in the
Southeast Sumatra production sharing contract under which it acts as operator
is 55.7% and in the Northwest Java production sharing contract is 24.3%.
The Indonesian production sharing contracts allow the Company to recover,
subject to available production, tangible and intangible costs of exploration,
intangible costs of production and operating costs on a current basis and
tangible costs of production generally over a seven-year period. After recovery
of those costs and fulfillment of a domestic market obligation for oil, the
contractors currently receive 34% of the oil produced and 79.5% of the gas
produced, before Indonesian taxes, the statutory rate for which is 56%. The
Southeast Sumatra and Northwest Java production sharing contracts extend to
2018 and 2017, respectively.
2
<PAGE>
The Company has gas projects in both the Northwest Java and Southeast Sumatra
contract areas. In 1992, ARCO, the operator under the Northwest Java production
sharing contract, began developing gas reserves. Production from this project
began delivery to Jakarta in 1993. Production during 1994 averaged 200 Mmcf per
day (gross). In Southeast Sumatra, where the Company has certified (but not
booked) 300 Bcf of gross gas reserves, the Company is continuing negotiations
with Pertamina for a gas sales contract to supply the Jakarta market.
During 1994, five exploration and 16 development wells were drilled in the
Northwest Java contract area, resulting in three oil and gas discoveries and 14
oil wells, adding reserves to the resource base and increasing production
capacity. During 1994, the Company's development/infill drilling program in the
Southeast Sumatra contract area resulted in the drilling of 25 development
wells which contributed over 15,000 barrels of oil per day of new production.
The Company is the operator of and has a 35% working interest in the Block 16
project in eastern Ecuador from which production began in 1994. During the
year, construction of the production facilities in the northern portion of the
Block, the oil pipeline to the southern fields and the 92-mile road to the
northern and southern fields was completed, resulting in Block 16 oil being
delivered through the Company's blending facilties at Shushufindi for transport
to the Pacific Ocean for export. Average production currently ranges from
30,000 to 35,000 gross barrels per day from 17 wells in the Tivacuno, Amo, Bogi
and Capiron fields.
In Bolivia, total daily production is currently approximately 4,300 barrels
per day from four wells located in the Surubi Field of the Mamore I Block, a
1.6 million acre concession of which the Company is the operator. Proven Surubi
area gross reserves are estimated at 25 million barrels of oil. The Company has
agreed to assign 50% of its rights in this concession to a subsidiary of BHP
Petroleum. Once the Bolivian government gives its formal approval of this
assignment, the Company will have a 50% working interest in the Mamore I Block.
In addition, the Company has a 12.5% non-operator's interest in the Secure
Block which is adjacent to Mamore I.
In 1993, the Company signed a contract for the Quiriquire Unit in Venezuela
with Lagoven, an affiliate of Petroleos de Venezuela, S.A. The Quiriquire Unit
currently produces approximately 1,100 barrels per day of crude oil. The
Company's plans for the Quiriquire Unit by mid-year 1997 include a three
dimensional seismic program, the drilling of two exploration wells and a field
reactivation program. In June 1994, the Company conveyed a 45% interest in the
Quiriquire Unit to BP Exploracion de Venezuela S.A., thus reducing its previous
95% interest in the Unit to 50%.
The Company is also undertaking exploration and production activities in
three other foreign areas. In the East China Sea, the Company operates two
blocks, one in which it has a 60% working interest and one in which it has a
100% working interest. Two and three dimensional seismic surveys will be
acquired on the blocks prior to drilling. In Tunisia, the Company has been
evaluating the 1.1 million acre Djebel Oust Block where it expects to complete
a well in the second quarter of 1995 and to retain a 40% working interest
therein. In Bulgaria, the Company expects to drill its second well on a one
million acre block by the end of 1995; the first well was a dry hole.
The Company's foreign petroleum exploration, development and production
activities are subject to political and economic uncertainties, expropriation
of property and cancellation or modification of contract rights, foreign
exchange restrictions and other risks arising out of foreign governmental
sovereignty over the areas in which the Company's operations are conducted, as
well as risks of loss in some countries due to civil strife, acts of war,
guerrilla activities and insurrection.
Domestic. The Company currently focuses its domestic exploration and
production efforts in the Texas Panhandle and western Oklahoma where it has
substantial investments in natural gas gathering systems which are used to
aggregate gas produced and purchased by the Company for processing and resale.
The
3
<PAGE>
Company owns and operates two gas processing plants in the area: its Sunray
plant in Moore County, Texas and a plant in Roger Mills County, Oklahoma. The
Sunray plant, which was completed in 1993, incorporates state-of-the-art
technology, including a cold box for extraction of helium. It can process
approximately 200 million cubic feet of gas per day at peak operation and, as
of March 1, 1995, was processing approximately 175 million cubic feet of gas
per day.
The Company had conducted exploration and production activities in federal
waters offshore Texas and Louisiana through its ownership of partnership
interests in Diamond Shamrock Offshore Partners Limited Partnership ("Offshore
Partners"). In April 1994, the Company sold all of these interests for $291
million and in June 1994 sold certain onshore properties for $54 million.
In September 1994, the Company sold its geothermal business for $60 million
in cash and a $6.5 million promissory note due in September 1997.
Oil and Gas Operations
Average sales prices and production costs of crude oil and natural gas
produced by geographic area for each year in the three-year period ended
December 31, 1994 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
United States
Average Sales Price
Crude Oil (per barrel).................................. $13.89 $16.99 $18.28
Natural Gas Liquids (per barrel)........................ $10.02 $11.08 $11.51
Natural Gas Sold (per Mcf)(a)........................... $ 1.89 $ 2.13 $ 1.80
Natural Gas Produced (per Mcf)(b)....................... $ 2.10 $ 2.26 $ 2.04
Average Production Cost (per barrel)(c).................. $ 2.83 $ 3.22 $ 2.91
Indonesia
Average Sales Price
Crude Oil (per barrel).................................. $15.61 $17.31 $18.40
Natural Gas Liquids (per barrel)........................ $ 9.42 $10.57 $11.93
Natural Gas Sold (per Mcf)(a)........................... $ 2.24 $ 1.30 $ 0.20
Natural Gas Produced (per Mcf)(b)....................... $ 2.53 $ 2.35 $ 1.50
Average Production Cost (per barrel)(c)................. $ 6.18 $ 6.67 $ 6.10
South America
Average Sales Price
Crude Oil (per barrel).................................. $12.58 NA NA
Average Production Cost (per barrel)(c)................. $ 9.36 NA NA
</TABLE>
- --------
(a) The average natural gas price for sales volumes is calculated by dividing
the total net sales value for all natural gas sold by the Company,
including residue gas remaining after the removal of natural gas liquids,
by the annual natural gas sales volume.
(b) The average natural gas price for produced volumes is calculated by
dividing the total net value received from the sale of natural gas and
natural gas liquids produced by the Company by the annual natural gas
production volume.
(c) Production or lifting cost is exclusive of depreciation and depletion
applicable to capitalized lease acquisition, exploration and development
expenditures. Average production costs are calculated by dividing total
costs by the sum of crude oil and equivalent barrels of oil for natural gas
production. Gas volumes produced were converted to equivalent barrels of
oil by dividing the Mcf volume by six. Six Mcf of gas have approximately
the heating value of one barrel of crude oil.
The Company periodically hedges against the effects of fluctuations in the
prices of natural gas through price swap agreements and futures contracts. A
hedging program which began with June 1993 production covered an average of 50%
of United States production during 1994.
4
<PAGE>
Information regarding the Company's oil and gas producing activities for
1994, 1993 and 1992 is set forth on pages F-27 through F-30 of this report. The
Company's estimates of its net interests in proved reserves are based upon
records regularly prepared and maintained by its engineers. In 1994, the
Company filed estimates of certain of its proved reserves of crude oil and
natural gas in the United States at December 31, 1993 with the United States
Department of Energy. The total reserve estimates included therein do not
differ by more than 5% from the total reserve estimates for the comparable
period for the same reserves included in the Company's filings with the
Securities and Exchange Commission.
The following table shows the Company's average daily sales and net
production (after deducting royalty and operating interests of others) by
geographic area for each year in the three-year period ended December 31, 1994.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
United States
Average Daily Production
Crude Oil (M barrels).......................................... 2.4 4.9 5.7
Natural Gas (Mmcf)(a).......................................... 156 208 227
Average Daily Sales
Natural Gas Liquids (M barrels)................................ 8.2 7.6 8.9
Natural Gas (Mmcf)(b).......................................... 131 181 200
Indonesia
Average Daily Production
Crude Oil (M barrels).......................................... 59.3 62.4 61.9
Average Daily Sales
Natural Gas Liquids (M barrels)................................ 2.1 1.5 1.6
Natural Gas (Mmcf)............................................. 44 13 8
South America
Average Daily Production
Crude Oil (M barrels).......................................... 5.2 NA NA
</TABLE>
- --------
(a) Reflects the average amount of daily wellhead production.
(b) Average daily sales volumes for natural gas production, reduced, in those
cases where the gas is processed for extraction of natural gas liquids, by
the shrinkage resulting therefrom.
In addition to gathering and processing a substantial part of the Company's
own natural gas, the Company purchases natural gas in the Texas Panhandle and
western Oklahoma for resale. The majority of this natural gas is processed
through the Company's processing facilities. The table below reflects the
average daily sales and average sales prices received for such purchased
natural gas and the natural gas liquids extracted in processing during 1994,
1993 and 1992.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Average Sales Price
Natural Gas Liquids (per barrel)........................ $10.12 $11.19 $11.13
Natural Gas (per Mcf)................................... $ 1.90 $ 1.99 $ 1.70
Average Daily Sales
Natural Gas Liquids (M barrels)......................... 9.7 9.8 9.0
Natural Gas (Mmcf)...................................... 144 184 80
</TABLE>
5
<PAGE>
The following tables set forth information regarding the Company's wells and
leasehold acres. "Gross" wells or acres are the total number of wells or acres
in which the Company owns any interest. "Net" wells or acres are the sum of the
fractional working interests the Company owns in gross wells or acres.
"Productive" wells are either producing wells or wells capable of commercial
production although currently shut-in. One or more completions ("multiple
completions") in the same bore hole are counted as one well.
At December 31, 1994, total gross and net productive oil and gas wells,
including multiple completions, by geographic area were as follows:
<TABLE>
<CAPTION>
GROSS NET
----- -------
<S> <C> <C>
Oil Wells Owned
United States................................................... 541 285.0
Indonesia....................................................... 1,039 381.6
South America................................................... 19 7.3
Total......................................................... 1,599 673.9
Gas Wells Owned
United States................................................... 1,365 1,071.6
Indonesia....................................................... 11 2.7
Total......................................................... 1,376 1,074.3
Multiple Completions
United States................................................... 60 51.7
Indonesia....................................................... 78 18.9
Total......................................................... 138 70.6
</TABLE>
At December 31, 1994, total gross and net developed and undeveloped acreage
by geographic area was as follows:
<TABLE>
<CAPTION>
UNITED SOUTH OTHER
STATES INDONESIA AMERICA FOREIGN
------- --------- --------- ----------
<S> <C> <C> <C> <C>
Gross Acres
Developed Acres........................ 527,861 142,151 6,093 -0-
Undeveloped Acres...................... 395,903 7,713,221 6,035,644 41,278,549
------- --------- --------- ----------
Total................................ 923,764 7,855,372 6,041,737 41,278,549
Net Acres
Developed Acres........................ 454,712 53,938 2,542 -0-
Undeveloped Acres...................... 254,823 2,709,626 1,743,769 39,890,044
------- --------- --------- ----------
Total................................ 709,535 2,763,564 1,746,311 39,890,044
</TABLE>
6
<PAGE>
Drilling activities of the Company for each year in the three-year period
ended December 31, 1994 are summarized by geographic area in the following
table:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
United States
Net Exploratory Wells Drilled
Productive..................................................... 1.0 1.7 0
Dry............................................................ 3.5 1.9 1.2
---- ---- ----
Total........................................................ 4.5 3.6 1.2
==== ==== ====
Net Development Wells Drilled
Productive..................................................... 22.3 20.2 10.3
Dry............................................................ 1.6 2.2 1.7
---- ---- ----
Total........................................................ 23.9 22.4 12.0
==== ==== ====
Indonesia
Net Exploratory Wells Drilled
Productive..................................................... 0.7 0 0
Dry............................................................ 3.3 0 1.1
---- ---- ----
Total........................................................ 4.0 0 1.1
==== ==== ====
Net Development Wells Drilled
Productive..................................................... 17.3 20.9 16.4
Dry............................................................ .5 9.1 3.5
---- ---- ----
Total........................................................ 17.8 30.0 19.9
==== ==== ====
South America
Net Exploratory Wells Drilled
Productive..................................................... .4 0 0
Dry............................................................ 0 0 0
---- ---- ----
Total........................................................ .4 0 0
==== ==== ====
Net Development Wells Drilled
Productive..................................................... 4.6 0 0
Dry............................................................ 0 0 0
---- ---- ----
Total........................................................ 4.6 0 0
==== ==== ====
Other Foreign
Net Exploratory Wells Drilled
Productive..................................................... 0 2.0 0
Dry............................................................ 0 2.1 2.5
---- ---- ----
Total........................................................ 0 4.1 2.5
==== ==== ====
Net Development Wells Drilled
Productive..................................................... 0 2.0 0
Dry............................................................ 0 0 0
---- ---- ----
Total........................................................ 0 2.0 0
==== ==== ====
</TABLE>
- --------
At December 31, 1994, the Company was participating in the drilling of 4
gross and 2.0 net wells in the United States, 3 gross and 1.04 net wells in
Indonesia and 2 gross and 1.0 net wells in areas outside the United States
other than Indonesia.
7
<PAGE>
Competition and Markets
The primary markets for the Company's Indonesian oil production are the
Pacific Rim countries, including Japan, China and Indonesia. The increasing
environmental consciousness of this region has resulted in premium prices for
low sulfur oil such as that produced from the Southeast Sumatra and Northwest
Java areas. The Company has ongoing business relationships with government oil
companies, utilities, refiners and trading companies which are expected to
continue to facilitate sales in this area. The Company is preparing for the
sales of increased production in Ecuador, primarily focusing on markets in the
United States.
The Company believes that the long-term potential for growth in natural gas
demand in North America remains high due to environmental advantages of natural
gas relative to other sources of energy; however, market prices remain
extremely volatile, with weather and regional supply and demand imbalances
causing the potential for large monthly price swings. The Company has
concentrated its domestic natural gas production in its mid-continent division,
which encompasses the Texas Panhandle and western Oklahoma. The Company's
Sunray gas plant is located near the intersection of three major interstate
pipelines, giving the Company a choice of markets for its gas sales, thereby
enabling it to maximize prices. Approximately 65% of the Company's natural gas
sales in 1994 were made directly to local gas distribution companies and
industrial and agricultural users through term contracts, and the remaining 35%
was sold on the spot market.
The Company, as do other independent exploration and production companies,
sells crude oil, natural gas and natural gas liquids to a wide number of
customers, including refineries, industrial consumers and utilities. Oil and
gas are essentially commodities and the Company's production represents only a
small fraction of the total world markets for these products. As a result, the
prices the Company receives depend primarily on the relative balance between
supply and demand in these markets.
The world oil market continues to be subject to uncertainty. Iraq has not yet
legally resumed oil sales due to its failure to agree to United Nations imposed
conditions on such sales, but the possibility of renewed Iraqi production
continues to overhang the market. Oil prices decreased in 1994 and have not
recovered primarily due to additional availabilities from non-OPEC countries
and excessive OPEC production coupled with limited demand growth in developed
countries.
Health, Safety and Environmental Controls
Federal, state and local laws and regulations relating to health and
environmental quality in the United States as well as environmental laws and
regulations of other countries in which the Company operates affect nearly all
of the operations of the Company. These laws and regulations set various
standards regulating certain aspects of health and environmental quality,
provide for penalties and other liabilities for the violation of such standards
and establish in certain circumstances obligations to remediate current and
former facilities and off-site locations. In addition, especially stringent
measures and special provisions may be appropriate or required in
environmentally sensitive foreign areas of operation, such as those in Ecuador.
Many of the Company's United States operations are subject to requirements of
the Safe Drinking Water Act, the Clean Water Act, the Clean Air Act (as amended
in 1990), the Occupational Safety and Health Act and other federal, as well as
state, laws. These laws typically require compliance with associated
regulations and permits and provide for the imposition of penalties for
noncompliance. For example, the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), and certain
state laws and regulations thereunder address the cleanup of deposits and
spills of hazardous substances and the monitoring and maintaining of closed
hazardous waste disposal sites. The Clean Air Act Amendments of 1990 may
benefit the Company's business by increasing the demand for natural gas as a
clean fuel.
The Company believes that its policies and procedures in the area of
pollution control, product safety and occupational health are adequate to
prevent unreasonable risk of environmental and other damage, and of resulting
financial liability, in connection with its business. Some risk of
environmental and other damage
8
<PAGE>
is, however, inherent in particular operations of the Company and, as discussed
below, the Company has certain potential liabilities associated with former
operations. The Company cannot predict what environmental legislation or
regulations will be enacted in the future or how existing or future laws or
regulations will be administered or enforced. Compliance with more stringent
laws or regulations, as well as more vigorous enforcement policies of the
regulatory agencies, could in the future require material expenditures by the
Company for the installation and operation of systems and equipment for
remedial measures and in certain other respects.
In connection with the sale of the Company's chemical subsidiary, Diamond
Shamrock Chemicals Company ("Chemicals"), to Occidental Petroleum Corporation
("Occidental") in 1986, the Company agreed to indemnify Chemicals and
Occidental from and against certain liabilities relating to the business or
activities of Chemicals prior to the September 4, 1986 closing date (the
"Closing Date"), including certain environmental liabilities relating to
certain chemical plants and waste disposal sites used by Chemicals prior to the
Closing Date.
In addition, the Company agreed to indemnify Chemicals and Occidental for 50%
of certain environmental costs incurred by Chemicals for which notice is given
to the Company within 10 years after the Closing Date on projects involving
remedial activities relating to chemical plant sites or other property used in
the conduct of the business of Chemicals as of the Closing Date and for any
period of time following the Closing Date, with the Company's aggregate
exposure for this cost sharing being limited to $75 million. The total expended
by the Company under this sharing arrangement was about $31 million as of
December 31, 1994.
In connection with the spin-off of Diamond Shamrock R&M, Inc., now known as
Diamond Shamrock, Inc. ("DSI"), in 1987, the Company and DSI agreed to share
the costs of losses (other than product liability) relating to businesses
disposed of prior to the spin-off, including Chemicals. Pursuant to this cost-
sharing agreement, the Company bore the first $75 million of such costs and DSI
bore the next $37.5 million. Under the arrangement, such ongoing costs are now
borne one-third by DSI and two-thirds by the Company. This arrangement will
continue until DSI has borne an additional $47.5 million, following which such
costs will be borne solely by the Company. As of January 1, 1995, DSI's
remaining responsibility is approximately $20 million.
In 1994, the Company spent $6 million in environmental related expenditures
in its oil and gas operations. Expenditures in 1995 are expected to be
approximately $10 million.
The Company's total expenditures for environmental compliance for disposed of
businesses, including Chemicals, were $30 million in 1994, $10 million of which
was recovered from DSI under the above described cost-sharing agreement. Those
expenditures are projected to be approximately $23 million in 1995 after
recovery from DSI under such agreement.
The insurance companies that wrote Chemicals' and the Company's primary and
excess insurance during the relevant periods have to date refused to provide
coverage for most of Chemicals' or the Company's cost of the personal injury
and property damage claims related to environmental claims, including remedial
activities at chemical plant sites and disposal sites. In two actions filed in
New Jersey state court, the Company has been conducting litigation against all
of these insurers for declaratory judgments that it is entitled to coverage for
certain of these claims. In 1989, the trial judge in one of the New Jersey
actions ruled that there is no insurance coverage with respect to the claims
related to the Newark plant (discussed below). The trial court's decision was
upheld on appeal and that action is now ended. The other suit, which is
pending, covers disputes with respect to insurance coverage related to certain
other environmental matters.
Newark, New Jersey. A consent decree, previously agreed upon by the U.S.
Environmental Protection Agency (the "EPA"), the New Jersey Department of
Environmental Protection and Energy (the "DEP") and Occidental, as successor to
Chemicals, was entered in 1990 by the United States District Court of New
9
<PAGE>
Jersey and requires implementation of a remedial action plan at Chemicals'
former Newark, New Jersey agricultural chemicals plant. Engineering for such
plan, which will include an engineering estimate of the cost of construction,
is progressing. Construction will follow and is expected to take four years to
complete. The work is being supervised and paid for by the Company pursuant to
its above described indemnification obligation to Occidental.
Studies have indicated that sediments of the Newark Bay watershed, including
the Passaic River adjacent to the plant, are contaminated with hazardous
chemicals from many sources. Studies performed by the Company and others
suggest that contaminants historically discharged by the Newark plant are
buried under several feet of more recent sediment deposits and are not moving.
The Company, on behalf of Occidental, negotiated an agreement with the EPA
under which the Company will conduct further testing and studies to
characterize contaminated sediment in a six-mile portion of the Passaic River
near the plant site. The Company has been conducting similar studies under its
own auspices for several years. Until these studies are completed and
evaluated, the Company cannot reasonably forecast what regulatory program, if
any, will be proposed for the Passaic River or the Newark Bay watershed.
Hudson County, New Jersey. Until 1972, Chemicals operated a chromium ore
processing plant at Kearny, New Jersey. According to the DEP, wastes from these
ore processing operations were used as fill material at a number of sites in
Hudson County.
As a result of negotiations between the Company (on behalf of Occidental) and
the DEP, Occidental signed an administrative consent order with the DEP in 1990
for investigation and remediation work at certain chromite ore residue sites in
Kearny and Secaucus, New Jersey. The work is being performed by the Company on
behalf of Occidental, and the Company is funding Occidental's share of the cost
of investigation and remediation of these sites and is currently providing
financial assurance for performance of the work in the form of a self-guarantee
in the amount of $20 million subject to the Company's continuing ability to
satisfy certain financial tests specified by the State. This financial
assurance may be reduced with the approval of the DEP following any annual cost
review. While the Company has participated in the cost of studies and is
implementing interim remedial actions and conducting remedial investigations
and feasibility studies, the ultimate cost of remediation cannot be estimated
at this time. The Governor of New Jersey issued an Executive Order requiring
state agencies to provide specific justification for any state requirements
more stringent than federal requirements. The DEP has recently indicated that
it may be revising its soil "action level" upwards towards the higher soil
screening levels recently proposed by EPA. Such revisions could reduce
remediation requirements at these sites.
Painesville, Ohio. From about 1912 until 1977, Chemicals operated
manufacturing facilities in Painesville, Ohio. The operations over the years
involved several discrete but contiguous plant sites over an area of about
1,300 acres. The primary area of concern historically has been Chemicals'
former chromite ore processing plant (the "Chrome Plant"). For many years, the
site of the Chrome Plant has been under the administrative control of the EPA
pursuant to an administrative consent order under which Chemicals is required
to maintain a clay cap over the site and to conduct certain ground water and
surface water monitoring. Many other sites have previously been clay-capped and
one specific site, which was a waste disposal site from the mid-1960s until the
1970s, has been encapsulated and is being controlled and monitored. In spite of
these many remedial, maintenance and monitoring activities, the former
Painesville plant sites have been proposed for listing on the National Priority
List under CERCLA. Discussions are underway among the Company, the EPA and the
Ohio Environmental Protection Agency ("Ohio EPA") concerning the appropriate
scope and nature of any further investigation or remediation that may be
required. No estimate can be made at this time of the ultimate cost of
investigation and any further remediation.
Other Former Plant Sites. Environmental remediation programs are in place at
all other former plant sites where material remediation is required in the
opinion of the Company. Former plant sites where remediation has been completed
are being maintained and monitored to insure continued compliance with
applicable laws and regulatory programs.
10
<PAGE>
Third Party Sites. Chemicals has also been designated as a potentially
responsible party ("PRP") by the EPA under CERCLA with respect to a number of
third party sites, primarily off of the Company's properties, where hazardous
substances from Chemicals' plant operations allegedly were disposed of or have
come to be located. Numerous PRPs have been named at substantially all of these
sites. At several of these, Chemicals has no known exposure. Although PRPs are
almost always jointly and severally liable for the cost of investigations,
cleanups and other response costs, each has the right of contribution from
other PRPs and, as a practical matter, cost sharing by PRPs is usually effected
by agreement among them. Accordingly, the ultimate cost of these sites and
Chemicals' share of the costs thereof cannot be estimated at this time, but is
not expected to be material except possibly as a result of the matters
described below.
1. Fields Brook; Ashtabula, Ohio. At the time that Chemicals was sold to
Occidental, Chemicals operated a chemical plant at Ashtabula, Ohio which
discharges into Fields Brook. Occidental has continued to operate the Ashtabula
plant. In 1986, Chemicals was formally notified by the EPA that it was a PRP
for the Fields Brook site. The site is defined as Fields Brook, its tributaries
and surrounding areas within the Fields Brook watershed. At least 15 other
parties are presently considered to be financially responsible PRPs. In 1986,
the EPA estimated the cost of sediment remediation at the site would be $48.4
million. The PRPs, including Occidental, have developed an allocation agreement
for sharing the costs of the work in Fields Brook ordered by the EPA. Under the
allocation, the Occidental share for Chemicals' ownership of the Ashtabula
plant would be about five percent of the total, assuming all viable PRPs were
to participate.
In 1990, the Ohio EPA, as state trustee for natural resources under CERCLA,
advised previously identified PRPs, including Chemicals, that the Ohio EPA
intended to conduct a Natural Resource Damage Assessment of the Fields Brook
site to calculate a monetary value for injury to surface water, groundwater,
air, and biological and geological resources at the site. Also, although Fields
Brook empties into the Ashtabula River which flows into Lake Erie, it is not
known to what extent, if any, the EPA will propose remedial action beyond
Fields Brook for which the Fields Brook PRPs might be asked to bear some share
of the costs. Until all preliminary studies and necessary governmental actions
have been completed and negotiated or judicial allocations have been made, it
is not possible for the Company to estimate what the response costs, response
activities or natural resource damages, if any, may be for Fields Brook or
related areas, the parties responsible therefor or their respective shares.
It is the Company's position that costs attributable to the Ashtabula plant
fall under the Company's above-described cost sharing arrangement with
Occidental under which the Company bears one-half of certain costs up to an
aggregate dollar cap. Occidental, however, is contending that it is entitled to
full indemnification from the Company for such costs, and the outcome of this
dispute cannot be predicted.
2. French Limited Disposal Site; Crosby, Texas. The PRPs, including Chemicals
represented by the Company, entered into a consent decree and a related trust
agreement with the EPA with respect to this disposal site. The consent decree
has been entered by the federal court as a settlement of the EPA's claim for
remedial action. The estimated cost of future remediation is approximately $8
million, of which Chemicals' share is expected to be approximately five
percent.
3. SCP/Carlstadt Site; Carlstadt, New Jersey. Chemicals' share of remediation
costs at this CERCLA site would be approximately one percent, based on relative
volume of waste shipped to the site. A final interim remedy has now been
implemented at the site by the PRPs but no estimate can be made at this time of
ultimate costs of remediation which may extend to certain off-site locations.
4. Chemical Control Site; Elizabeth, New Jersey. The DEP has demanded of PRPs
(including Chemicals) reimbursement of the DEP's alleged $26 million in past
costs for its partial cleanup of this site. The PRPs and the EPA have settled
the federal claims for cost recovery and site remediation, and remediation is
now complete. Based on the previous allocation formula, it is expected that
Chemicals' share of any money paid to the DEP for its claim would be
approximately two percent.
11
<PAGE>
Employees
As of December 31, 1994, the Company had approximately 2,400 employees.
ITEM 3. LEGAL PROCEEDINGS.
In connection with the Offer and Merger, the Company has obtained copies of a
number of complaints filed in the Chancery Court of the State of Delaware by
alleged holders of shares of Common Stock. In the various complaints, the
plaintiffs purport to sue individually and on behalf of classes comprised of
the holders of shares of Common Stock, stockholders of the Company, or all
holders of the Company's securities. The complaints name as defendants the
Company, the directors and certain of the officers of the Company, a former
director of the Company, and, with respect to some of the complaints, YPF, and
allege, among other things, that the defendant directors and officers of the
Company breached their fiduciary duties in approving the Offer and the Merger
and that YPF aided and abetted the alleged breach of duties. The plaintiffs
purport to seek orders enjoining the consummation of the Offer and the Merger
(or the rescission of those transactions) or, in the alternative, accountings
for any damages to the alleged classes, together with their attorneys' fees and
other relief.
On March 7, 1995, counsel in one of the pending cases filed an amended
complaint, which repeated the original allegations and, in addition, asserted
that the Company's Solicitation/Recommendation Statement on Schedule 14D-9
filed in connection with the Offer and Merger is materially misleading and
deficient in a number of respects. At a hearing on March 9, 1995, the Court set
March 28, 1995 as the date for a hearing on plaintiffs' request for a
preliminary injunction enjoining the Offer and the Merger and directed the
parties to proceed with expedited discovery.
The Company intends to vigorously defend these lawsuits, including the
request for a preliminary injunction. The absence of an injunction, among other
things, is a condition to YPFA Corp.'s obligation to purchase shares tendered
pursuant to the Offer.
See also the heading "Health, Safety and Environmental Controls" under "Items
1 and 2. Business and Properties" of this report for a description of certain
legal proceedings, which description is incorporated herein by reference.
The Company is involved in various other legal proceedings incidental to its
business, the outcome of any of which should not have a material adverse effect
on its financial position.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Inapplicable.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal United States market on which the Common Stock is traded is the
New York Stock Exchange. The Common Stock is also listed and traded on the
Pacific Stock Exchange, the Basel Stock Exchange (Switzerland), the Geneva
Stock Exchange (Switzerland) and the Zurich Stock Exchange (Switzerland). The
high and low sales prices for the Common Stock for each full quarterly period
during 1994 and 1993 as reported on the New York Stock Exchange Composite Tape
are set forth on page F-31 of this report.
The Company paid no dividends on its Common Stock during 1994 and 1993. Cash
flows are currently being dedicated to exploration and development projects
rather than to the payment of dividends on Common Stock. The Company intends to
continue paying regular quarterly dividends on its $4.00 Preferred Stock, $9.75
Cumulative Convertible Preferred Stock ("$9.75 Preferred Stock") and $2.50
Cumulative Preferred Stock ("$2.50 Preferred Stock").
The approximate number of record holders of Common Stock at December 31, 1994
was 32,093.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Sales and operating revenues.. $ 682.1 $ 786.7 $ 718.4 $ 790. 8 $ 685.4
Net income (loss) before
extraordinary item and
cumulative effect of change
in accounting principle...... (22.7) (37.9) 74.2 (11.2) 7.3
Extraordinary item............ (7.1)
Cumulative effect of change in
accounting principle......... (4.4)
-------- -------- -------- -------- --------
Net income (loss)............. $ (22.7) $ (49.4) $ 74.2 $ (11.2) $ 7.3
FINANCIAL POSITION
Current assets................ $ 441.9 $ 404.7 $ 391.2 $ 205.7 $ 232.9
Current liabilities........... 171.0 263.4 327.9 249.3 260.4
Properties and equipment, less
accumulated
depreciation, depletion and
amortization................. 1,088.4 1,305.6 1,138.3 1,075.2 1,077.1
Total assets.................. 1,706.7 1,987.4 1,811.6 1,451.5 1,470.2
Long-term debt, including
portion payable within
one year..................... 975.6 1,055.1 829.4 788.9 766.5
Deferred income taxes......... 199.3 198.3 152.9 142.9 145.6
Redeemable preferred stock.... 125.0 250.0 250.0 250.0 250.0
Stockholders' equity
(deficit).................... 91.1 147.9 171.6 (55.9) (23.1)
OTHER DATA
Expenditures for properties
and equipment--including dry
hole costs................... $ 166.2 $ 340.0 $ 261.1 $ 272.3 $ 272.9
Total exploration and
development expenditures
(whether capitalized or
expensed).................... 194.2 373.8 253.7 300.0 309.2
Preferred dividends paid...... 43.6 41.7 41.7 41.7 44.0
Depreciation, depletion and
amortization................. 140.2 153.6 174.4 203.6 190.5
PER COMMON SHARE
Net income (loss) before
extraordinary item, and
cumulative effect of change
in accounting principle...... $ (.49) $ (.60) $ .27 $ (.52) $ (.38)
Extraordinary item............ (.05)
Cumulative effect of change in
accounting principle......... (.03)
-------- -------- -------- -------- --------
Net income (loss)............. $ (.49) $ (.68) $ .27 $ (.52) $ (.38)
</TABLE>
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Maxus responded to many financial and operational challenges in 1994
culminating with Maxus' recent agreement to merge with YPF Acquisition Corp.
("YPFA Corp."), a wholly owned subsidiary of YPF Sociedad Anonima ("YPF"). YPFA
Corp. has commenced a tender offer (the "Offer") to purchase all of the
outstanding Common Stock for $5.50 per share in cash. If such number of shares
of Common Stock constituting a majority of the Company's voting stock (i.e.,
Common Stock and $4.00 Preferred Stock) are tendered in the Offer and the other
conditions to the Offer are satisfied (including the receipt by YPF and YPFA
Corp. of financing), the Offer will be followed by a merger in which the
remaining Common Stock will be exchanged for the same price of $5.50 per share.
Holders of Common Stock on the close of business on March 22, 1995 also will
receive a cash payment of $0.10 per share upon redemption of rights issued
under Maxus' shareholder rights plan.
Financially, significant natural gas and crude oil price declines in 1994
contributed to Maxus' decision to streamline operations by decreasing overhead
and operating expenses, lowering program spending and redeeming certain
preferred stock. During 1994, the Company also sold its interest in Offshore
Partners and certain producing oil and gas properties in Maxus' U.S. Southern
Division for $325 million net ("the Divested Properties"). Additionally, the
Company sold its geothermal subsidiary, Thermal Power Company, for
approximately $58 million net in cash and a note for $6.5 million. A portion of
the proceeds from these sales was used to reduce debt and redeem 625,000 shares
of the $9.75 Preferred Stock for $63 million.
Operationally, Maxus accomplished many of its objectives in 1994. The Company
initiated production from all three of Maxus' South American operations--
Ecuador, Bolivia and Venezuela--with production expected to increase in 1995.
The Sunray gas plant experienced its first full year of operation and achieved
the operating efficiencies and cost savings (approximately $14 million
annually) that had been anticipated. Additionally, net production from the
Northwest Java gas project averaged approximately 44 million cubic feet per day
("mmcfpd") during 1994, resulting in $30 million of additional revenues.
Although production was below planned volumes in Northwest Java, deliverability
is available at or above contract quantities with the purchaser taking
approximately one-half the contract volume in 1994 during the transition from
traditional sources of fuel to natural gas for electric power generation. In
March 1995, the Company received approximately $14 million from the purchaser
to settle its 1994 take-or-pay obligation. After fulfillment of 1995 contract
requirements, any excess quantities will be used to offset the 1994 take-or-pay
settlement.
Results of Operations
Maxus reported a net loss of $23 million in 1994 and $49 million in 1993 and
net income of $74 million in 1992. Earnings for 1994, 1993 and 1992 included
the following special items:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C> <C>
Net income before income taxes, extraordinary item and
cumulative effect of change in accounting principle.... $ 64 $46 $177
Add back special items:
Restructuring:
Gain on sale of assets.............................. (202)
Restructuring costs................................. 101
Settlement of litigation.............................. (1) (7) (121)
Environmental remediation............................. 61 18 6
---- --- ----
Pre-tax income after adjusting for special items........ $ 23 $57 $ 62
</TABLE>
14
<PAGE>
Comparison of Results
1994 vs. 1993
Sales and Operating Revenues. Sales and operating revenues dropped 13%, or
$105 million, during 1994 when compared to 1993. The loss of production from
the Divested Properties and lower volumes of purchased gas which were
aggregated and sold with the production from the Divested Properties accounted
for $86 million of the revenue decline. Additionally, worldwide oil and gas
prices fell, which further compounded the loss of revenues. However, initial
production from South America and new gas production from Northwest Java added
$54 million to revenues during 1994, partially offsetting the overall negative
revenue variances.
The Company's total net crude oil production was 67 thousand barrels per day
("mbpd") in 1994, essentially flat compared to 1993. Production from South
American operations added five mbpd during 1994 and favorably impacted revenues
by $24 million. Crude oil volumes in the United States declined three mbpd,
resulting in a $15 million negative volume variance, primarily from the loss of
production from the Divested Properties. Crude oil sales from the Company's
Indonesian operations were also down approximately three mbpd ($20 million
negative volume variance), primarily in Northwest Java. A portion of the 1994
decline was the result of temporary production problems in November, which have
been corrected. Also, the 1993 volumes in Northwest Java reflected additional
barrels received through cost recovery due to the substantial capital outlay
for the gas project, which was completed in late 1993. Maxus' 1994 average
worldwide crude price hit a five-year low of $15.31 per barrel, negatively
impacting income by $39 million.
United States natural gas sales volumes fell from 365 mmcfpd to 275 mmcfpd in
1994 with the decline attributable to the loss of production from the Divested
Properties and the decrease in purchased gas volumes which were aggregated and
sold with the production from the Divested Properties. The decline was
partially offset by increased sales volumes of nine mmcfpd from the Company's
mid-continent division. United States natural gas revenues declined
approximately $83 million during 1994, with $68 million occurring as a result
of the Divested Properties and $14 million attributable to declining prices.
Maxus' United States natural gas prices averaged $1.95 per thousand cubic feet
("mcf") in 1994 and $2.08 per mcf in 1993.
Northwest Java gas volumes increased from 13 mmcfpd in 1993 to 44 mmcfpd
during 1994. The Company realized an additional $30 million of revenues during
1994 from the Northwest Java gas project, which was completed late 1993.
Natural gas liquids sales in the United States increased slightly from 17.4
mbpd to 17.9 mbpd in 1994 but average prices received declined from $11.14 per
barrel in 1993 to $10.07 per barrel. Overall, liquids revenues were down $5
million compared to 1993 due to the price declines.
Costs and Expenses. Costs and expenses, excluding restructuring, were $728
million in 1994 compared to $781 million in 1993. The decline was primarily due
to the elimination of expenses related to the Divested Properties.
Overall, operating expenses were down $21 million, of which approximately $15
million related to the Divested Properties. Operating expenses declined in
Indonesia as well as in the United States, but were partially offset by the
additional operating expenses incurred in South America due to the start-up of
production in Ecuador, Bolivia and Venezuela.
Gas purchase costs were $39 million lower than in 1993 primarily as a result
of lower purchased gas prices and the reduction in volumes of purchased gas
which were previously aggregated and sold with the production from the Divested
Properties.
Exploration expenses were $24 million lower than 1993 due to management's
decision to curtail exploratory spending in new frontiers during 1994. The
Company had previously announced its decision to concentrate spending in its
core areas of the United States and Indonesia and its emerging areas in South
America.
15
<PAGE>
Depreciation, depletion and amortization ("DD&A") declined $13 million in
1994. The Divested Properties created a $32 million favorable variance.
Partially offsetting this favorable variance was a $7 million increase in DD&A
in South America due to the start-up of production in Ecuador, Bolivia and
Venezuela. DD&A in Indonesia was also up $13 million as a result of higher DD&A
rates and additional depreciation from the Northwest Java gas project, which
came on-stream in fourth quarter 1993.
The Company increased its reserve for environmental liabilities in 1994 by
$60 million, primarily in response to the EPA's recently proposed chromium
clean-up standards and for additional costs expected to be incurred at the
Company's former Newark, New Jersey plant site. The 1993 environmental accrual
of $18 million related to expected costs of engineering studies for the Passaic
River in New Jersey and the Newark plant site.
Restructuring. The 1994 results reflect a $101 million pre-tax net benefit
from the Company's restructuring activities, which included a pre-tax gain of
$202 million from the Divested Properties. This gain was partially offset by
restructuring costs, including a non-cash, pre-tax $70 million write-off
associated with the Company's undeveloped Alaska coal leases, the development
of which does not fit within the Company's revised strategy to commit funds
only to oil and gas exploration and production primarily in core and emerging
areas. The restructuring also included costs associated with staff reductions
and the write-off of non-producing assets outside the Company's core areas. As
a result of the restructuring, Maxus expects annualized cost savings of
approximately $35 million due to lower administrative costs and exploration
expenditures.
Other Revenues, Net. Other revenues, net were approximately $25 million lower
in 1994 compared to 1993. Approximately half of this change was due to a loss
of $13 million stemming from the sale of the Company's geothermal subsidiary in
the third quarter of 1994. The balance of the 1994 decrease was due to gains
recorded on the sale of investments in U.S. Treasury notes and other securities
of $12 million during 1993.
Income Taxes. The Company's provision for income taxes in 1994 was comprised
primarily of Indonesian income tax. The 1994 Indonesian tax was $12 million
less than that of 1993 as a result of lower operating profit.
U.S. and state taxes increased $9 million in 1994 compared to 1993. This
increase was the result of tax on asset sales, which was offset by tax benefit
from the write-off of undeveloped Alaska coal leases and the favorable
resolution of a federal tax refund suit.
Change in Accounting Principle. In 1993, Maxus adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which requires an accrual method of recognizing postemployment
benefits. Prior to 1993, postemployment benefit expenses were recognized on a
pay-as-you-go basis. The Company recognized a one-time charge of $4 million to
recognize the cumulative effect of the change in accounting for postemployment
benefits. This liability primarily represented medical benefits for long-term
disability recipients.
Extraordinary Item. During 1993, the Company recorded an extraordinary loss
of $7 million after tax, representing call premium and unamortized issuance
costs for the early retirement of debt. Approximately $115 million of
outstanding 11 1/4% sinking fund debentures were redeemed at 105.329% of the
principal amount.
16
<PAGE>
Comparison of Results
1993 vs. 1992
Sales and Operating Revenues. Sales and operating revenues increased 10% from
1992 levels as a result of rising U.S. natural gas prices and increased
volumes, partially offset by a drop in worldwide crude oil prices. The 1993
average U.S. gas price of $2.08 per mcf was $.31 per mcf higher than that of
1992, producing a $42 million favorable revenue variance. Additionally, sales
of purchased gas volumes rose significantly during 1993, contributing an
incremental $54 million to revenue. Maxus' 1993 average worldwide crude price
of $17.28 per barrel was $1.11 per barrel lower than 1992, negatively impacting
revenues by $29 million.
The Company's total net crude oil production, over 90% of which came from
Indonesian operations, was 67 mbpd in 1993, essentially flat compared to 1992.
Crude oil volumes decreased in both Southeast Sumatra and the United States.
Marketing constraints during the fourth quarter of 1993 as well as natural
declines were contributing factors in Southeast Sumatra's $17 million
unfavorable volume variance for 1993. Crude oil volumes in the United States
declined from 1992 resulting in a $6 million negative volume variance,
primarily from the loss of volumes due to the divestiture of the remaining
Rocky Mountain properties during 1992. Only Northwest Java had increased
volumes during 1993 ($20 million positive volume variance), reflecting
additional barrels received through cost recovery due to the capital outlay for
the gas project during 1993.
U.S. natural gas sales volumes rose from 280 mmcfpd in 1992 to 365 mmcfpd in
1993 with the increase attributable to additional sales of gas purchased for
processing and/or resale. Produced volumes, however, dropped slightly as a
result of natural declines.
Costs and Expenses. Costs and expenses were $781 million in 1993 as compared
to $681 million in 1992. Increased gas purchase costs and operating expenses
were the principal factors in this increase, partially offset by lower DD&A.
Escalating domestic gas prices as well as additional volumes of gas purchased
for processing and/or resale caused gas purchase costs to increase $90 million
from 1992. However, the increased costs were exceeded by higher revenues
received upon sale of the processed gas and natural gas liquids.
Operating expenses increased $23 million in 1993. Southeast Sumatra incurred
higher production expenses for well workover and repair and contract vessels,
as well as additional costs associated with repairing a pipeline leak in the
Intan field. Operating expenses also reflect the adoption, effective January 1,
1993, of Statement of Financial Accounting Standards No. 106 ("SFAS 106"),
"Employers' Accounting for Postretirement Benefits Other Than Pensions," for
its retiree benefit plans. Under SFAS 106, the Company is required to accrue
the estimated costs of retiree benefit payments, other than pensions, during
employees' active service period. The Company previously expensed the costs of
these benefits, principally medical, as claims were incurred. For 1993, the
Company's postretirement benefit cost was $7 million, a $3 million increase
over the 1992 expense, which was recorded using the pay-as-you-go method.
DD&A declined $21 million from 1992 largely due to lower rates traceable to
Maxus' continued success in finding and developing low-cost reserves.
Additionally, decreased production volumes in Indonesia and the United States
contributed to the lower overall DD&A for 1993.
The 1993 environmental accrual of $18 million was $12 million higher than
that of 1992, and related to expected costs of engineering studies for the
Passaic River in New Jersey and the Newark plant site.
Litigation Settlement. In November 1992, the Company settled a lawsuit with
Ivan Boesky arising out of transactions related to the acquisition of Natomas
Company in 1983. The Company received approximately $1 million and $7 million,
net of legal costs, from Mr. Boesky in 1994 and 1993, respectively, which was
recorded as income.
17
<PAGE>
In October 1992, Maxus settled a lawsuit against Kidder, Peabody & Co.
Incorporated ("Kidder Peabody") also arising out of transactions related to the
acquisition of Natomas Company. Under the terms of the settlement, the Company
received $165 million in cash, a portion of which represented payment for
warrants to acquire eight million shares of Common Stock of the Company at a
price of $13 per share for a period of five years. In 1992, the fair market
value of the warrants ($10 million) was recorded as an increase to paid-in
capital; the remainder of the settlement ($155 million) was recorded as income,
net of legal costs. The settlement was not taxable for federal income tax
purposes.
In 1992, the Company recorded a $20 million non-cash write-off of a
receivable related to an unfavorable New Jersey appellate court ruling that a
war risk exclusion in certain of the Company's insurance policies precluded
recovery from insurance carriers of an earlier settlement of claims by Vietnam
veterans concerning Agent Orange. The Company had previously recorded the
expected recovery as a receivable.
Other Revenues, Net. Other revenues, net were approximately $15 million
higher in 1993 compared to 1992. Maxus recorded higher interest income and
gains on the sale of its investment in United States Treasury notes and other
securities in 1993.
Income Taxes. The Company's provision for income taxes in 1993 was comprised
almost entirely of Indonesian taxes. The provision for income taxes decreased
$18 million in 1993 compared to 1992, despite a $3 million increase in
operating profit before the non-taxable litigation settlements. The provision
for income taxes decreased primarily due to lower taxable Indonesian income,
partially offset by lower foreign exploratory expenses, which had no tax
effect.
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The adoption,
which was made prospectively, had no impact on 1993 earnings or cash flow;
however, $21 million of deferred tax liabilities, which were considered current
under Statement of Financial Accounting Standards No. 96, were reclassified as
noncurrent and $4 million of deferred tax assets were reported as current
assets.
Liquidity and Capital Resources
Liquidity refers to the ability of an enterprise to generate adequate amounts
of cash to satisfy its financial needs. Maxus' primary needs for cash are to
fund its exploration and development program, service debt, pay existing trade
obligations, meet redemption obligations on redeemable preferred stock and pay
dividends to preferred stockholders. The Company's primary sources of liquidity
have been from operating activities, asset sales, debt financing and equity
issuances. Absent further price declines in 1995, in management's opinion, cash
on hand and cash from operations will be adequate to fund the 1995 program
spending budget, service debt and pay dividends and trade obligations. Should a
substantial decline in prices occur, Maxus could reduce program spending, since
a portion of the program is discretionary and could be delayed if adequate cash
were not available to fund the total planned expenditures.
The Company's current ratio (the relationship between current assets and
current liabilities) for 1994 increased to 2.4 from 1.5 at year-end 1993.
Accounts payable were $35 million lower than 1993 primarily due to the timing
of expenditures in Ecuador. Income taxes changed from a net payable to a net
receivable due to an income tax refund of approximately $24 million expected to
be received during 1995. Additionally, the current portion of debt was $5
million at December 31, 1994, compared to $40 million at December 31, 1993.
Maxus repaid a portion of its 1995 debt maturities during 1994 with the
proceeds from asset sales.
Operating Activities. Net cash provided by operating activities totaled $70
million and $137 million in 1994 and 1993, respectively. Excluding the change
in working capital requirements, net cash from operating activities was $58
million lower in 1994 than 1993. Cash flow from operations was negatively
impacted by lower crude oil and natural gas prices, the loss of production from
the Divested Properties and costs associated with staff reductions, but was
partially offset by additional gas volumes from Northwest Java
18
<PAGE>
($30 million). The 1993 cash flow from operations included the $7 million
litigation settlement from Ivan Boesky. Net working capital requirements of $42
million for 1994 were $9 million higher than last year due to lower accounts
payable primarily as a result of timing of expenditures in Ecuador.
Excluding the Kidder Peabody and Ivan Boesky litigation settlements, net cash
provided by operating activities would have been $130 million in 1993 and $151
million in 1992. Net cash provided by operating activities, before the change
in working capital, was relatively flat from year to year. Falling worldwide
crude prices and sales volumes negatively impacted Maxus during 1993, but the
impact was substantially offset by the $.31 per mcf favorable increase in the
price of natural gas. Additionally, working capital requirements increased $19
million during 1993 primarily due to voluntary production curtailments in
Indonesia during the fourth quarter of 1993. The Company ended 1993 with an
underlift receivable compared to an overlift liability in 1992.
Investing Activities. The Company significantly reduced its capital spending
in 1994, with spending concentrated in core areas of the United States and
Indonesia, plus development of the emerging areas: Block 16 in Ecuador, the
Mamore Block in Bolivia and the Quiriquire Block in Venezuela. Approximately
45% of the 1994 capital spending was for development of oil reserves in South
America. Initial production began in the third quarter of 1994 in Ecuador,
Bolivia and Venezuela.
Spending in Ecuador in 1994 was $31 million below 1993 as spending for major
infrastructure and facilities was being completed. In 1993, the development of
gas reserves in Northwest Java and development of Block 16 in Ecuador alone
accounted for $167 million of spending. The Northwest Java gas project was
completed in the fourth quarter of 1993. Additionally, construction of the
Sunray gas plant in the Texas Panhandle, which was started in mid-1991, was
completed during first quarter 1993.
On April 25, 1994, Offshore Partners sold its interests in Main Pass Blocks
72, 73 and 74. On April 26, 1994, Maxus and its subsidiaries sold all of their
partnership interests in Offshore Partners. In second quarter 1994, Maxus also
sold the McFarlan Field and Grand Isle Block 25, both producing oil and gas
properties. In total, the Company received $325 million of net proceeds and
recorded a pre-tax gain of $202 million from these transactions. A portion of
the proceeds from these sales was used to reduce senior debt by $70 million net
and to prepay a $63 million redemption obligation with respect to 625,000
shares of $9.75 Preferred Stock which otherwise would have been due in February
1995.
During the second quarter of 1994, Maxus Bolivia, Inc., a subsidiary of
Maxus, signed an agreement to take BHP Petroleum ("BHP") as a partner in its
Bolivian oil development project. The Company received $10 million from BHP in
exchange for a 50% interest in the project. Also during the second quarter of
1994, Maxus Venezuela (C.I.) Ltd. ("Maxus Venezuela"), a subsidiary of Maxus,
signed an agreement with BP Exploracion de Venezuela S.A. ("BP"), granting BP a
45% interest in the Quiriquire Unit in eastern Venezuela. Maxus Venezuela
remains the operator with a 50% interest and Otepi Consultores, a Venezuelan
company, holds the remaining 5%.
As part of its strategy to focus on core and emerging exploration and
production areas, the Company sold its geothermal subsidiary, Thermal Power
Company, in September 1994 for $58 million net in cash and a $6.5 million
promissory note payable in three years. The Company recorded a loss of $13
million on the transaction.
In comparison to 1994, the Company received only $35 million of cash during
1992 and 1993 from the sale of non-strategic United States oil and gas
properties.
Maxus substantially increased its short-term investments during 1992, with
the purchase of approximately $121 million in United States Treasury notes,
which were to be held to partially fund the program spending budget and cover
working capital fluctuations during 1993. In 1993, the Company purchased an
additional $52 million of United States Treasury notes and subsequently sold
$142 million of
19
<PAGE>
the total balance realizing a gain of $8 million. Additionally, during 1993,
Maxus received stock and other securities from The LTV Corporation ("LTV") in
settlement of its bankruptcy claims against LTV. The Company sold these
securities for approximately $22 million, realizing a $2 million gain. During
1994, the Company purchased an additional $112 million of short-term
investments with the proceeds from the sales of assets. These investments are
being held to partially fund the program spending budget during 1995.
Effective October 1992, Maxus terminated its $150 million bank revolving
credit agreement ("Credit Agreement"), which historically had been used to
provide backing for letters of credit. Upon termination of the Credit
Agreement, the Company used $94 million of cash to collateralize outstanding
letters of credit. During 1993, the Company used an additional $36 million of
cash as collateral for its spending commitment in Venezuela. The $36 million in
restricted cash backing the letters of credit in Venezuela was released in 1994
when the Company took on a partner and reduced its interest to 50%.
Financing Activities. Over the three-year period from 1992 through 1994,
Maxus has taken steps to restructure its debt and equity position. The overall
intent was to provide immediate funding for its major development and
construction projects (the Sunray gas plant, the Northwest Java gas project and
the development of Block 16 in Ecuador) and to match the repayment schedules of
the debt with the future cash flow expected from the projects while maintaining
necessary working capital balances required for flexibility. The Company was
able to take advantage of lower interest rates and, at the same time, the
average debt maturities were extended.
The 1992 financing activities resulted in minimal debt increases with cash
from operations virtually covering the Company's investing activities. Unlike
1992, debt rose significantly in 1993. The completion of two of the major
projects and the near completion of the initial phase of the Ecuador project
contributed to the substantial increase in the Company's 1993 capital
expenditures as compared to 1992. To cover the shortfall between cash from
operations and the cash used in investing activities, incremental new debt was
issued. Of the $412 million proceeds received in 1993 from the issuance of
long-term debt, $204 million was used to refinance currently maturing debt and
to fund the early retirement of a portion of the Company's 11 1/4% sinking fund
debentures, with the remainder partially funding the 1993 program spending
budget.
During 1994, the Company issued $101 million of additional long-term debt.
Debt issuances, along with a portion of the proceeds from asset sales, were
used to repay approximately $170 million of debt obligations due in 1994 and
beyond and to prepay a $63 million redemption obligation with respect to
625,000 shares of $9.75 Preferred Stock due in February 1995.
In 1993, Maxus issued a new class of preferred stock, the $2.50 Preferred
Stock. Of the $85 million in net proceeds received from the offering, $63
million was used to redeem 625,000 shares of $9.75 Preferred Stock as required
in February 1994. The 1992 financing activity also included a Common Stock
offering which netted Maxus $179 million.
Accounting Standards
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities." SFAS 115 requires that all investments in debt
securities and certain investments in equity securities be reported at fair
value except for those investments which management has the intent and ability
to hold to maturity. The cumulative effect of adopting SFAS 115 of $2.4 million
has been recorded as a valuation reserve in stockholders' equity. Prior to the
adoption of SFAS 115, the Company accounted for its investments in debt
securities at amortized cost and classified such investments according to the
stated maturity of the underlying securities.
The Financial Accounting Standards Board has issued a proposed statement
addressing the accounting for the impairment of long-lived assets. The proposal
would establish guidance for recognizing and measuring impairment losses and
would require that the carrying amount of impaired assets be reduced to fair
value.
20
<PAGE>
The Company has evaluated the carrying value and fair value (as defined in the
proposed statement) of its long-lived assets and has determined, if adopted as
proposed, there would be no material impact on the Company's financial
statements.
Environmental Matters
Like other energy companies, Maxus' operations are subject to various laws
related to the handling and disposal of hazardous substances which require the
cleanup of deposits and spills. Compliance with the laws and protection of the
environment worldwide is of the highest priority to Maxus management. In 1994,
the Company spent $6 million in environmental related expenditures for its oil
and gas operations. Expenditures in 1995 are expected to be approximately $10
million.
In addition, the Company is implementing certain environmental projects
related to its former chemicals business ("Chemicals") sold to Occidental
Petroleum Corporation ("Occidental") in 1986 and certain other disposed of
businesses.
The Company has agreed to remediate the site of the former agricultural
chemical plant in Newark, New Jersey as required by a consent decree entered
into in 1990 by Occidental, the EPA and the DEP. Pursuant to an agreement with
the EPA, the Company is conducting further testing and studies to characterize
contaminated sediment in a six-mile portion of the Passaic River near the plant
site. The Company has been conducting similar studies under its own auspices
for several years.
Under an Administrative Consent Order issued by the DEP in 1990 covering
sites in Kearny and Secaucus, New Jersey, the Company will continue to
implement interim remedial measures and to perform remedial investigations and
feasibility studies. If necessary, the Company will implement additional
remedial actions at various locations where chromite ore residue, allegedly
from the former Kearny plant, was utilized, as well as at the plant site.
Until 1976, Chemicals operated manufacturing facilities in Painesville, Ohio.
The Company has heretofore conducted many remedial, maintenance and monitoring
activities at this site. The former Painesville plant area has been proposed
for listing on the national priority list of Superfund sites. The scope and
nature of further investigation or remediation which may be required cannot be
determined at this time.
In the opinion of the Company, environmental remediation has been
substantially completed at all other former plant sites where material
remediation was required.
The Company also has responsibility for Chemicals' share of the remediation
cost for a number of other non-plant sites where wastes from plant operations
by Chemicals were allegedly disposed of or have come to be located, including
several commercial waste disposal sites.
At the time of the spin-off by the Company of Diamond Shamrock, Inc. ("DSI")
in 1987, the Company executed a cost-sharing agreement for the partial
reimbursement by DSI of environmental expenses related to the Company's
disposed of businesses, including Chemicals.
The Company's total expenditures for environmental compliance for disposed of
businesses, including Chemicals, were $30 million in 1994, $10 million of which
was recovered from DSI under the cost-sharing agreement. Those expenditures are
projected to be approximately $23 million in 1995 after recovery from DSI. At
December 31, 1994, $20 million remains to be reimbursed by DSI under the cost-
sharing agreement.
Reserves, net of cost-sharing by DSI, have been established for environmental
liabilities where they are material and probable and can be reasonably
estimated. At December 31, 1994 and 1993, the reserve balance was $87 million
and $38 million, respectively.
21
<PAGE>
Future Outlook
As with all international energy companies, Maxus is subject to political and
economic uncertainties as well as the risk inherent in the exploration for oil
and gas reserves. The current business environment requires that a company must
be able to adapt and continually reassess its position. Production from Block
16 in Ecuador has steadily increased since start up in mid-1994 with new wells
and fields continuing to be brought on stream. However, with the lower
worldwide crude oil prices, higher Ecuadorian diesel prices and increases in
total project costs reducing the overall economic benefit to the state, the
Ecuadorian government has requested Maxus to investigate alternatives for
improving project economics. Discussions concerning various alternatives have
begun and will likely continue for the next several months. It is not possible
to project at this time what, if any, impact these discussions will have on the
project's economics. Also in Ecuador, in recent weeks, there has been
intermittent military action between the armed forces of Ecuador and Peru over
certain national boundary issues. These activities are several hundred miles
from Maxus' operations in Block 16 and, in management's opinion, the military
actions at current levels do not pose a threat to continued operations in
Ecuador but may result in temporary transportation delays of materials through
Peruvian waters.
Maxus currently projects total program spending (capital expenditures plus
exploration expenses) for 1995 to be approximately $208 million, compared to
$196 million in 1994. Indonesia will receive nearly $97 million, the U.S. Mid-
Continent Division $42 million and South America $47 million (of which $32
million is for Ecuador). The remaining $22 million will be allocated to
domestic and overseas new ventures. Funding for the 1995 spending program is
expected to be provided through cash and cash equivalents on hand at the
beginning of the year and expected cash from operations. In addition to the
1995 program, Maxus has financial and/or performance commitments for
exploration and development activities in 1996 and beyond which are not
material.
YPF has obtained a commitment letter from The Chase Manhattan Bank (National
Association) ("Chase") pursuant to which Chase has agreed to provide credit
facilities to YPFA Corp. aggregating up to $600 million to effect the Offer and
the Merger. Following the Merger, YPF has informed the Company that it
anticipates that some portion of such borrowings will be repaid from the
Company's available cash, but that most of such borrowings will be refinanced
from the proceeds of loans to be extended by Chase to certain subsidiaries of
the Company.
Management believes that, in general, the recently proposed Merger with YPFA
Corp. will provide Maxus with additional financial flexibility to carry out
exploration and development activities. However, it is not known what impact
the Merger will have on specific programs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears on pages F-1 to F-31 of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Inapplicable.
22
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive Officers of the Company
The following table sets forth certain information as of March 1, 1995
concerning the executive officers of the Company.
<TABLE>
<CAPTION>
SERVED
AS AN
OFFICER
NAME POSITION WITH THE COMPANY AGE SINCE
---- ------------------------- --- -------
<S> <C> <C> <C>
Chairman, President
C. L. Blackburn......... and Chief Executive Officer 67 1986
Senior Vice President,
M. C. Forrest........... Business Development 61 1992
Senior Vice President,
S. G. Crowell........... Producing Operations 47 1987
Senior Vice President, Finance and Administration
G. W. Pasley............ and Chief Financial Officer 44 1989
M. J. Barron............ Vice President and Treasurer 45 1991
G. R. Brown............. Vice President and Controller 52 1987
M. J. Gentry............ Vice President, Administration 43 1991
M. Middlebrook.......... Vice President and General Counsel 59 1984
</TABLE>
Officers are elected annually by the Board of Directors (sometimes referred
to as the "Board") and may be removed at any time by the Board. There are no
family relationships among the executive officers listed and there are no
arrangements or understandings pursuant to which any of them were elected as
officers. Each of the officers named above has been employed by the Company
during the last five years with responsibilities of the general nature
indicated by his title, except as set forth below.
Mr. Forrest joined the Company in 1992 as special assistant to the Chairman
and later that year was elected Vice Chairman and Chief Operating Officer.
Prior to 1992, he was with Shell U.S.A. for more than five years, last serving
as president of its subsidiary, Pecten International Company. Mr. Forrest was
named Senior Vice President, Business Development, in 1994.
Mr. Crowell joined the Company in 1976 as a geophysicist. Since such time, he
has held various positions with the Company, including Senior Vice President,
North American Exploration and Production, and Vice President, Administration.
Mr. Crowell was named Senior Vice President, Producing Operations, in 1994.
Mr. Pasley joined the Company in 1984 as Associate Director of Investor
Relations. Since such time, he has held various positions with the Company,
including Director of Communications, Vice President, Human Resources and
Senior Vice President, Operations. Mr. Pasley was name Senior Vice President,
Finance and Administration and Chief Financial Officer, in 1994.
Mr. Barron was elected Vice President and Treasurer of the Company in 1994.
Mr. Barron joined Natomas Company in 1982 as a Project Manager. Natomas Company
was acquired by the Company in 1983, and Mr. Barron has held various positions
with the Company, including Director of Strategic Planning and Vice President,
Treasurer and Chief Financial Officer, since such time.
Mr. Gentry was named Vice President, Administration, in 1994. Mr. Gentry
joined the Company in 1975 and has held various positions with the Company,
including Associate Director of Management Information Systems Operations,
Assistant Treasurer, General Manager of Human Resources and Vice President,
Human Resources and General Services, since such time.
23
<PAGE>
A former Vice President of the Company, L. E. Ardila, filed a Form 3 dated
November 8, 1993 that erroneously reported the number of shares of Common Stock
beneficially owned by him. After becoming aware of such error, Mr. Ardila filed
an amended Form 3 dated January 13, 1995.
Directors of the Company
Certain information regarding each director, including his age, is set forth
below.
Directors Whose Terms Expire at the 1995 Annual Meeting:
B. CLARK BURCHFIEL: 60, Schlumberger Professor of Geology, Massachusetts
Institute of Technology. B.S. and M.S., Stanford University; Ph.D., Yale
University. Member of the National Academy of Sciences and the American
Association of Petroleum Geologists. Fellow of the American Academy of Arts and
Sciences, the Geological Society of America and the American Geophysical Union.
Dr. Burchfiel has been a director of the Company since 1989.
BRUCE B. DICE: 68, oil and gas consultant and president of Dice Exploration
Company, Inc., Houston, Texas, engaged in the business of oil and gas
consulting. President of Wadi Petroleum Inc., a family-owned production
company. Former president of Transco Exploration Company, Houston, Texas. B.S.,
University of Michigan; M.S., Michigan State University. Member of the American
Association of Petroleum Geologists and the Houston Geological Society. Mr.
Dice has been a director of the Company since 1987.
CHARLES W. HALL: 64, senior partner in the law firm of Fulbright & Jaworski,
L.L.P., Houston, Texas. B.A., University of the South; J.D. and L.L.M.,
Southern Methodist University. Director of Texas Medical Center and Friedman
Industries, Inc., Houston; trustee of Southwestern Legal Foundation, M.D.
Anderson Foundation, Southwest Research Institute, Sarah Campbell Blaffer
Foundation and Institute of Religion. Mr. Hall has been a director of the
Company since 1991.
RAYMOND A. HAY: 65, chairman of Aberdeen Associates, investments; former
chief executive officer of The LTV Corporation, Dallas, Texas, engaged in the
steel, aerospace, defense and energy business. B.S. (Economics), Long Island
University. Director of National Medical Enterprises, Inc. Mr. Hay has been a
director of the Company since 1979.
R. A. WALKER: 38, managing director, Prudential Capital Group, and vice
president, The Prudential Insurance Company of America ("Prudential"). B.S.B.A.
and M.B.A., University of Tulsa. Mr. Walker has held similar positions with
Prudential Capital Group for the past five years. He has been a director of the
Company since May 1994 and was elected to the Board by Prudential pursuant to
the terms of the $9.75 Preferred Stock.
Directors Whose Terms Expire at the 1996 Annual Meeting:
J. DAVID BARNES: 65, chairman emeritus of Mellon Bank Corporation and Mellon
Bank, N.A., Pittsburgh, Pennsylvania. B.A., Allegheny College; L.L.B., Harvard
Law School. Mr. Barnes has been a director of the Company since 1971.
CHARLES L. BLACKBURN: 67, Chairman, President and Chief Executive Officer of
the Company. Director of Lone Star Technologies, Inc. and Landmark Graphics
Corporation. B.S., University of Oklahoma. Member of the Society of Petroleum
Engineers, the American Association of Petroleum Geologists and the Executive
and Budget Committees of the Mid-Continent Oil and Gas Association. Mr.
Blackburn has been a director of the Company since 1986.
MICHAEL C. FORREST: 61, Senior Vice President of the Company since April 1994
and prior to that Vice Chairman and Chief Operating Officer of the Company.
Before joining the Company in 1992, with Shell U.S.A. for more than five years,
last serving as president of its subsidiary, Pecten International Company.
B.S., St. Louis University. Member of the Society of Exploration Geophysicists,
American Association of Petroleum Geologists, Society of Petroleum Engineers
and Association of International Petroleum
24
<PAGE>
Negotiators. Director of Amigos de Las Americas and Board of Trustees of
Institute of Earth and Man at Southern Methodist University. Mr. Forrest has
been a director of the Company since 1992.
W. THOMAS YORK: 61, Former chairman of the board and chief executive officer
of AMF Incorporated, White Plains, New York, manufacturer of leisure and
industrial products. B.S. and M.B.A., University of North Carolina. Mr. York
has been a director of the Company since 1978.
Directors Whose Terms Expire at the 1997 Annual Meeting:
GEORGE L. JACKSON: 66, oil field service consultant, Kerrville, Texas. B.S.,
Southern Methodist University. Mr. Jackson has been a director of the Company
since 1987.
JOHN T. KIMBELL: 69, president, John Kimbell Associates, Boston,
Massachusetts, business consulting firm. B.S., University of Southern
California. Director of Hemasure, Marlborough, Massachusetts. Mr. Kimbell has
been a director of the Company since 1974.
RICHARD W. MURPHY: 65, senior fellow for the Middle East, Council on Foreign
Relations, New York City, New York; consultant, Kissinger Associates, New York
City, New York and member, Board of Advisors, Naval War College. Chairman,
Chatham House Foundation (U.S.) and Chairman, Middle East Institute. From 1955
to 1989, United States Department of State, last serving as Assistant Secretary
of State for Near Eastern and South Asian Affairs, with the rank of Career
Ambassador. B.A., Harvard University; A.B., Emmanuel College, Cambridge
University; Doctor of Law (Hon.), New England College and Baltimore Hebrew
University. Director of F. Diehl & Son, Inc., retail building supplier,
Wellesley, Massachusetts. Mr. Murphy has been a director of the Company since
1990.
JOSE MARIA PEREZ ARTETA: 60, partner in the law firm of Perez, Bustamante y
Perez, Quito, Ecuador. Master of Laws, Southern Methodist University. Attended
the Ecole National d'Administration, Paris, France. License in Public and
Social Sciences and Doctor at Law, Catholic University of Quito. From 1960 to
1969, Professor of Economic Law and Development at Catholic University. From
1961 to 1963, Head, Legal Department, Ministry of Public Works. Member, Quito
Bar Association and International Bar Association. Dr. Perez has been a
director since May 1994.
ITEM 11. EXECUTIVE COMPENSATION.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive an annual retainer of
$20,000 and a fee of $1,000 for each Board meeting attended and for Board
committee meetings attended on days other than those on which the Board meets.
Non-employee directors automatically participate in the Director Stock
Compensation Plan (the "Stock Compensation Plan"). Under the Stock Compensation
Plan, non-employee directors who do not defer their annual retainer under the
deferred compensation plan described below receive, in lieu of that portion of
their annual retainer allocable to four months in a given calendar year, a
number of shares of Common Stock equal to 34% of the amount of their annual
retainer ($6,800 in 1994) divided by the closing market price of the Common
Stock as of the end of such four-month period, rounded down to the nearest
whole share. If a director defers only a portion of his annual retainer or
ceases to be a director during the applicable four-month period, the amount of
Common Stock he receives in lieu of his annual retainer is proportionally
reduced. Under a deferred compensation plan, the annual retainer and/or meeting
fees may be deferred in whole or in part at the election of the director.
Compensation so deferred may be denominated in dollars or in shares of Common
Stock determined by reference to the market price on the business day
immediately preceding the date of credit. Share-denominated accounts will be
credited with dividends, if any, and dollar amounts will bear interest at a
rate indexed to an investment fund selected from time to time by the plan's
administrator. The annual rate of such interest accruals for 1995 is 5.34%.
25
<PAGE>
The non-employee directors also participate in the 1992 Director Stock Option
Plan (the "1992 Director Plan"). Under the 1992 Director Plan, non-employee
directors receive grants of options to purchase 10,000 shares of Common Stock
each when first elected and when re-elected as a director. Such options
generally are not exercisable for six months, are for a 10-year term, have an
exercise price equal to the closing market price on the day preceding the
grant date and are not transferable except by will or the laws of descent and
distribution. The directors may participate in the Company's health insurance
program available to all employees.
EXECUTIVE OFFICER COMPENSATION
The following tables set forth compensation awarded to, earned by or paid to
the executive officers named below in 1992, 1993 and 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS
--------------- -----------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND SALARY BONUS AWARD(S) OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)
------------------ ---- ------- ------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
C. L. Blackburn......... 1994 519,996 200,000 0(1) 185,000 $31,200(5)
Chairman, President and 1993 512,496 100,000 0 0 30,750(5)
Chief Executive
Officer 1992 482,496 500,000 0 65,600 28,950(5)
M. C. Forrest........... 1994 304,020 100,000 0 65,000 $18,241(5)
Senior Vice President 1993 298,020 75,000 0 0 17,881(5)
1992 213,345 85,000 0 50,000 91,508(6)
S. G. Crowell........... 1994 236,544 100,000 0(2) 75,000 $14,193(5)
Senior Vice President 1993 222,669 60,000 0 0 13,360(5)
1992 212,547 95,000 0 20,400 12,753(5)
G. W. Pasley............ 1994 208,440 100,000 0(3) 65,000 $12,506(5)
Senior Vice President 1993 197,640 45,000 0 0 11,930(5)
1992 183,540 82,500 0 24,500 11,012(5)
M. Middlebrook.......... 1994 186,270 65,000 0(4) 28,000 $11,176(5)
Vice President and 1993 192,520 30,000 0 0 10,951(5)
General Counsel 1992 176,895 75,000 0 12,000 10,614(5)
</TABLE>
- --------
(1) As of 12/31/94, Mr. Blackburn owned 19,016 shares of restricted stock
having an aggregate market value of $64,179.
(2) As of 12/31/94, Mr. Crowell owned 6,260 shares of restricted stock having
an aggregate market value of $21,128.
(3) As of 12/31/94, Mr. Pasley owned 3,756 shares of restricted stock having
aggregate market value of $12,677.
(4) As of 12/31/94, Mr. Middlebrook owned 2,712 shares of restricted stock
having an aggregate market value of $9,153.
(5) These payments represent the Company's matching contributions to the
qualified and non-qualified saving plans' accounts of the named executive
officers.
(6) $81,708 of the amount shown for Mr. Forrest in the All Other Compensation
column for 1992 are associated with his relocation from Houston to Dallas
upon his initial employment. The remainder, $9,800, represents the
Company's matching contribution to the qualified and non-qualified saving
plans' accounts of Mr. Forrest for that year.
26
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS/SARS EXERCISE GRANT
OPTIONS/SARS GRANTED TO OR BASE DATE
GRANTED EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SH) DATE VALUE(2)
---- ------------ ------------ -------- ---------- --------
<S> <C> <C> <C> <C> <C>
C. L. Blackburn...... 185,000 34.37% $5.00 6/17/04 $555,000
M. C. Forrest........ 65,000 12.43% $5.00 6/17/04 $226,850
S. G. Crowell........ 75,000 14.34% $5.00 6/17/04 $268,500
G. W. Pasley......... 65,000 12.43% $5.00 6/17/04 $232,700
M. Middlebrook....... 28,000 5.35% $5.00 6/17/04 $100,240
</TABLE>
- --------
(1) The named executive officers were granted the stated number of options and
a like number of SARs in tandem with the options. Both the options and
tandem SARs become exercisable on June 16, 1995.
(2) The grant date present value was determined using a variation of the
Black-Scholes option pricing model. In determining such value, the
expected volatility of the Common Stock was assumed to be 50%, the risk-
free rate of return was based on zero coupon Treasury yields as listed in
The Wall Street Journal on June 16, 1994 for trading activity on June 15,
1994 (ranging from 5.09% to 7.31%), no dividend yield was assumed since
dividends are not currently paid on Common Stock, and the time of exercise
was assumed to be immediately before expiration of the options. No
adjustments were made for non-transferability or risk of forfeiture,
except that an adjustment was made to reflect the probability of
retirement based on actuarial estimates and retirement no later than age
70.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTION/SARS AT OPTIONS/SARS
ON VALUE FY-END (#) AT FY-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- -------- -------- --------------- -------------
<S> <C> <C> <C> <C>
C. L. Blackburn.............. 0 N/A 271,933/185,000 0/0
M. C. Forrest................ 0 N/A 50,000/65,000 0/0
S. G. Crowell................ 0 N/A 85,214/75,000 0/0
G. W. Pasley................. 0 N/A 43,608/65,000 0/0
M. Middlebrook............... 0 N/A 38,583/28,000 0/0
</TABLE>
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS
Change in Control Agreements. The Company has entered into agreements with
Mr. Blackburn and each of the other named executive officers which were
binding upon execution but become operative only upon the occurrence of a
change in control of the Company as defined therein.
Under these agreements, in the event of a change in control the executive
officer will be entitled to continue in the employ of the Company until the
earlier of the expiration of the third anniversary of the occurrence of a
change in control or the executive's death at an annual base salary of not
less than the rate in effect upon the occurrence of a change in control plus
an incentive award of not less than the highest such award received by the
executive for any year in the three calendar years immediately preceding the
change in control. In the event the Company terminates the executive's
employment during such term without cause, the executive will be entitled to
receive as severance compensation a lump-sum payment equal to the present
value of the cash compensation payable under the agreement in the absence of
such termination, not to exceed 299% of his "base amount" as defined in the
Internal Revenue Code of 1986, as amended (the "Code"), without any reduction
for subsequent earnings.
27
<PAGE>
Under these agreements, continuation of benefits under employee benefit plans
of the Company is provided after termination during the remainder of the
original term of employment. The agreements include provisions which limit the
amounts payable under them in certain circumstances in which the net after-tax
amount received by the officer would be reduced as a result of the
applicability of the 20% excise tax imposed in respect of certain change in
control payments under the Code. The Company has assumed the obligation to pay
certain fees and expenses of counsel incurred by the executive officers if
legal action is required to enforce their rights under the agreements and has
secured such obligation by obtaining a letter of credit issued by a commercial
bank.
Separation Pay Plan. Under the Separation Pay Plan, most employees (other
than non-resident aliens), including Mr. Blackburn and the other named
executive officers, are eligible for separation pay if their employment is
terminated for any reason other than death, voluntary termination of
employment, voluntary retirement or discharge for reasons of criminal activity,
willful misconduct, gross negligence in the performance of duties or violation
of Company policy. The payment to be received under the plan by a particular
employee depends on his job classification and length of service and whether
termination occurs after the elimination of the employee's position or a change
in control of the Company (as defined in the plan). In the case of the named
executive officers, the plan provides in most cases for separation pay in an
amount equal to two-weeks' base pay for each year of service with the Company,
plus three months' base pay, not to exceed a maximum of 12 months' base pay;
and, in the case of a change in control of the Company, separation pay in an
amount equal to one month's base pay for each year of service with the Company,
but not less than 12 months' base pay nor more than 24 months' base pay. The
plan requires that employees sign releases as a condition of receiving
separation pay. Executive officers are not entitled to separation pay under the
plan to the extent they receive severance payments under the change in control
agreements discussed above.
The transactions contemplated by the Merger Agreement with YPF would
constitute a change in control for purposes of the agreements and plan
described above.
RETIREMENT PROGRAM
Effective February 1, 1987, the Company adopted a new retirement income plan
(the "New Retirement Income Plan") applicable to most of its employees to
replace the Company's former retirement income plans under which such employees
ceased to accrue benefits on January 31, 1987. Under the New Retirement Income
Plan, a covered employee acquires a right upon retirement to a yearly amount
equal to 2% of the employee's earnings during each year from February 1, 1987
forward (rather than on final compensation or average final compensation)
without offset for social security benefits. Benefits under the New Retirement
Income Plan become vested after five years of service. Benefits may be paid in
equal monthly installments, starting on the date of retirement and continuing
until death, or employees may select one of a number of optional forms of
payment having equal actuarial value as provided in the plan. The benefits
payable under the New Retirement Income Plan are subject to maximum limitations
under the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code. In the case of the named executives, if benefits at
the time of retirement exceed the then permissible limits of such statutes, the
excess would be paid by the Company from the "SERP" described below.
The Company has an unfunded Supplemental Executive Retirement Plan (the
"SERP") that provides additional benefits to the Company's highest ranking
officer (Mr. Blackburn), the other named executives and to certain executive
employees designated by the highest ranking officer. Under the SERP, a
participant acquires the right upon retirement to a lump sum amount which is
the actuarial equivalent of a straight life or, if married, a 50% joint and
survivor annuity payable monthly in an amount equal to (i) the sum of (a) 1.6%
of the participant's average monthly compensation in 1986 times his years of
service through January 31, 1987, plus (b) 2% of the participant's average
monthly compensation after January 31, 1987 times his years of service after
January 31, 1987 plus an additional five years less (ii) the amount of the
benefits
28
<PAGE>
calculated for such participant under the Company's other retirement plans. The
maximum benefit payable is 60% of the participant's high three-year average
pay. The amounts calculated under the SERP are not subject to any reduction for
Social Security and are not determined primarily by final compensation or
average final compensation and years of service. If a participant dies while
still employed by the Company and is survived by an eligible spouse, his
surviving spouse will receive a lump-sum payment equal to the present value of
one-half of the benefit which would have been payable to the participant at his
normal retirement age under the SERP assuming he had terminated employment with
the Company at the time of his death with a vested interest under the SERP and
that he survived to his normal retirement age. In the case of retirement after
age 55 but before age 60, the supplemental retirement benefits generally will
be reduced by 5% for each year that the employee's actual retirement date
precedes age 60. The benefits provided under the plan will vest upon completion
of five years of service or attainment of age 55.
The estimated annual benefits payable upon retirement at normal retirement
age (or January 1, 1995 in those cases where the participant's age on that date
was greater than normal retirement age) under the Company's retirement plans as
supplemented by the SERP based on service and compensation through December 31,
1994 for the executive officers named in the compensation table are as follows:
Mr. Blackburn--$180,699, Mr. Forrest --$60,200, Mr. Crowell -- $96,224, Mr.
Pasley -- $54,227 and Mr. Middlebrook--$63,380.
Whether any amounts actually become payable in whole or in part depends on
the contingencies and conditions governing the applicable retirement plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors consists of Mr. Barnes,
Chairman, Dr. Burchfiel, and Messrs. Hall, Jackson and Murphy. Dr. Burchfiel
has, from time to time, served the Company by conducting training workshops and
seminars, performing geological research and furnishing consultation with
respect to selected potential exploration projects. As consideration for these
services in 1994, approximately $32,600 was paid to Dr. Burchfiel individually
and approximately $147,000 was paid to Massachusetts Institute of Technology.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth the beneficial ownership (as defined in the
rules of the Securities and Exchange Commission) as of February 1, 1995 of the
Company's equity securities of the directors, the named executive officers and
all directors and executive officers as a group. At such date, all directors
and executive officers as a group beneficially owned less than 1% of the $4.00
Preferred Stock outstanding and less than 1% of the Common Stock outstanding.
None of the directors or executive officers beneficially owned any $9.75
Preferred Stock or $2.50 Preferred Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF SECURITIES
BENEFICIALLY
NAME OF BENEFICIAL OWNER TITLE OF SECURITY OWNED(1)
------------------------ ----------------- -----------------
<C> <S> <C>
J. David Barnes....................... Common Stock............ 22,500(2)
$4.00 Preferred Stock... -0-
C. L. Blackburn....................... Common Stock............ 375,962(3)
$4.00 Preferred Stock... -0-
B. Clark Burchfiel.................... Common Stock............ 10,000(2)
$4.00 Preferred Stock... -0-
S. G. Crowell......................... Common Stock............ 129,110(3)
$4.00 Preferred Stock... -0-
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF SECURITIES
BENEFICIALLY
NAME OF BENEFICIAL OWNER TITLE OF SECURITY OWNED(1)
------------------------ ----------------- -----------------
<C> <S> <C>
Bruce B. Dice............................... Common Stock............ 10,500(2)
$4.00 Preferred Stock... -0-
Michael C. Forrest.......................... Common Stock............ 67,048(4)
$4.00 Preferred Stock... -0-
Charles W. Hall............................. Common Stock............ 11,000(2)
$4.00 Preferred Stock... -0-
Raymond A. Hay.............................. Common Stock............ 10,319(2)
$4.00 Preferred Stock... -0-
George L. Jackson........................... Common Stock............ 20,000(2)
$4.00 Preferred Stock... -0-
John T. Kimbell............................. Common Stock............ 21,023(2)
$4.00 Preferred Stock... -0-
M. Middlebrook.............................. Common Stock............ 55,563(3)
$4.00 Preferred Stock... 133
Richard W. Murphy........................... Common Stock............ 21,000(2)
$4.00 Preferred Stock... -0-
George W. Pasley............................ Common Stock............ 67,211(3)
$4.00 Preferred Stock... -0-
Jose Maria Perez Arteta..................... Common Stock............ 10,000(2)
$4.00 Preferred Stock... -0-
R. A. Walker................................ Common Stock............ 10,000(2)(5)
$4.00 Preferred Stock... -0-
W. Thomas York.............................. Common Stock............ 20,200(2)
$4.00 Preferred Stock... -0-
Directors and executive officers as a group. Common Stock............ 988,906(3)(4)(5)
$4.00 Preferred Stock... 133
</TABLE>
- --------
(1) These amounts include shares of Common Stock covered by options
exercisable within 60 days, as follows: Mr. Barnes, 20,000; Mr. Blackburn,
271,933; Dr. Burchfiel, 10,000; Mr. Crowell, 85,214; Mr. Dice, 10,000; Mr.
Forrest, 50,000; Mr. Hall, 10,000; Mr. Hay, 10,000; Mr. Jackson, 20,000;
Mr. Kimbell, 20,000; Mr. Middlebrook, 38,583; Mr. Murphy, 20,000; Mr.
Pasley, 43,608; Dr. Perez, 10,000; Mr. Walker, 10,000; Mr. York, 20,000;
and all directors and executive officers as a group, 733,009.
(2) These amounts do not include $6,800 worth of Common Stock the non-employee
directors are entitled to under the Stock Compensation Plan which such
directors are expected to receive following the consummation or
termination of the Offer. Assuming a market value of $5.50 per share of
Common Stock, each such non-employee director will receive 1,236 shares of
Common Stock not reflected above.
(3) These amounts include shares of "restricted stock," i.e., Common Stock
subject to restriction for a period of years, as to which the holders have
sole voting power, but no investment power, during the restricted period,
as follows: Mr. Blackburn, 19,016; Mr. Crowell, 6,260; Mr. Pasley, 3,756;
Mr. Middlebrook, 2,712; and all directors and executive officers as a
group, 38,424.
(4) Includes 4,699 shares of Common Stock held pursuant to the Savings Plan
for the account of Mr. Forrest as to which his rights are not fully
vested.
(5) Does not include shares owned by Prudential, as to which Mr. Walker
disclaims beneficial ownership.
30
<PAGE>
To the knowledge of the Company, as of February 1, 1995, no person
beneficially owned more than 5% of any class of the Company's voting
securities except as set forth below:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER TITLE OF CLASS OWNED OF CLASS
- ------------------------------------ --------------- ------------ --------
<S> <C> <C> <C>
The Prudential Insurance Company of
America................................ Common Stock 8,039,242(1) 5.6%
Prudential Plaza $9.75 Preferred 1,250,000(2) 100.0%
Newark, New Jersey 07102-3777 Stock
Brinson Holdings, Inc. ................ Common Stock 11,327,200(3) 8.4%
209 South LaSalle
Chicago, Illinois 60604-1295
Kidder, Peabody Group Inc. ............ Common Stock 8,000,000(4) 5.6%
10 Hanover Square
New York, New York 10005
State Treasurer........................ Common Stock 10,733,500(5) 7.9%
State of Michigan
Director of Investments
P. O. Box 15128
Lansing, Michigan 88901
Wellington Management Co. ............. Common Stock 11,118,610(6) 8.2%
75 State Street
Boston, Massachusetts 02109
</TABLE>
- --------
(1) Prudential reported on Amendment No. 6 to Schedule 13G, dated January 31,
1995, in connection with beneficial ownership at December 31, 1994, that
it had sole dispositive and voting power with respect to 59,837 shares of
the Common Stock indicated above as beneficially owned by it, shared
voting power with respect to 66,305 of such shares and shared dispositive
power with respect to 69,405 of such shares. Prudential indicated that it
may have direct or indirect voting and/or investment discretion over
129,242 of such shares which were held for the benefit of its clients by
its separate accounts, externally managed accounts, registered investment
companies and/or other affiliates. It also indicated that the remainder of
shares reported by it resulted from the assumed conversion of shares of
$9.75 Preferred Stock. Except as provided in Footnote 2 below, the
information herein regarding such shares assumes that Prudential's
ownership thereof has not changed as of February 1, 1995, and is included
in reliance on such Amendment No. 6.
(2) On February 28, 1995, the Company and Prudential entered into an agreement
pursuant to which Prudential has waived certain rights, including
conversion rights and registration rights, subject to consummation of the
Merger. See Item 13 in this report.
(3) Brinson Holdings, Inc. ("Brinson"), together with its wholly owned
subsidiaries Brinson Partners, Inc. ("BPI") and Brinson Trust Company
("BTC"), reported on Amendment No. 1 to Schedule 13G, dated February 13,
1995, in connection with beneficial ownership at December 31, 1994, that
BPI had sole voting and dispositive power with respect to 8,471,300 shares
shown above as beneficially owned by Brinson and that BTC had sole voting
and dispositive power with respect to the remaining 2,855,900 of such
shares. The information herein regarding such shares assumes that
Brinson's ownership had not changed as of February 1, 1995, and is
included in reliance on such Amendment No. 1.
(4) Kidder, Peabody Group Inc. ("Kidder") reported on Schedule 13D dated
October 10, 1992 that it owns 8,000,000 warrants, each representing the
right to purchase from the Company at any time prior to 5:00 p.m. on
October 10, 1997 one share of Common Stock at a price of $13.00 per share.
The 8,000,000 shares of Common Stock reported as beneficially owned by
Kidder result from the assumed exercise of all 8,000,000 of such warrants.
According to said Schedule 13D, General Electric Company is the indirect
parent of Kidder. The information herein regarding such shares assumes
that Kidder's beneficial ownership thereof had not changed as of February
1, 1995 and is included herein in reliance on such filing, except that the
percent of class is based upon the Company's calculations made in reliance
upon the information regarding such shares contained in such filing.
(5) Ownership as of February 1, 1995, according to oral advice given by an
employee of the State of Michigan to a representative of the Company in
February 1995. The State Treasurer is the investment fiduciary for certain
retirement systems sponsored by the State of Michigan.
(6) Wellington Management Company ("WMC") reported on Schedule 13G, dated
February 3, 1995, in connection with beneficial ownership at December 31,
1993, that, with respect to shares owned by various investment clients of
WMC or a subsidiary of WMC, it has shared voting power with respect to
6,946,810 of such shares and shared dispositive power with respect to all
of such shares shown above. The information herein regarding such shares
assumes that WMC's ownership had not changed as of February 1, 1995, and
is included in reliance on such filing, except that the percent of class
is based upon the Company's calculations made in reliance upon the
information regarding such shares contained in such filing.
31
<PAGE>
MERGER
On February 28, 1995, the Company entered into the Merger Agreement with YPF
and YPFA Corp., the consummation of which will result in a change in control of
the Company. See Items 1 and 2 in this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company has business transactions and relationships in the ordinary
course of business with unaffiliated corporations and institutions of which
certain of its directors, executive officers and substantial stockholders are
affiliated, including the transactions discussed below. All such transactions
are conducted on an arm's-length basis.
Prudential is the record or beneficial owner of more than 5% of one or more
of the classes of the Company's voting securities. Mr. Walker, an officer of
Prudential, was elected as a director of the Company by Prudential as holder of
all outstanding shares of the $9.75 Preferred Stock pursuant to the terms
thereof. During 1994, the Company offered its employees the opportunity to
participate in medical programs administered by Prudential. In addition, during
such year Prudential provided services and coverages relating to pension and
life insurance plans for retired employees of Gateway Coal Company, a
partnership owned
by the Company. Further, Prudential provided the Company certain software-
related services in 1994. The Company has paid or will pay Prudential
approximately $377,000 for these services. The Company and Prudential have
agreed that Prudential will continue to perform such services during 1995 and
anticipate that the fees for the year will be somewhat higher.
On February 28, 1995, the Company and Prudential entered into an agreement
pursuant to which Prudential agreed to consent to the Merger and, upon
consummation of the Merger, to (i) waive certain rights, (ii) waive certain
covenants restricting the Company's ability to take certain actions, and (iii)
terminate the registration rights associated with the $9.75 Preferred Stock.
Pursuant to this agreement, the Company has agreed to (i) waive certain rights,
including the right to redeem the $9.75 Preferred Stock at its option and right
of first offer with respect to the transfer of the shares of $9.75 Preferred
Stock, and (ii) pay to Prudential a restructuring fee of $250,000 upon
consummation of the Merger.
In 1994, the Company paid approximately $140,000 to the law firm of Perez,
Bustamante y Perez for legal services rendered in connection with various
matters. Dr. Perez, a director of the Company, is a partner in Perez,
Bustamante y Perez. It is expected that this law firm will continue to provide
legal services to the Company in 1995.
Dr. Burchfiel has from time to time served the Company by conducting training
workshops and seminars, performing geological research and furnishing
consultation with respect to selected potential exploration projects. As
consideration for these services in 1994, approximately $32,600 was paid to Dr.
Burchfiel individually and approximately $147,000 was paid to Massachusetts
Institute of Technology.
In 1994, the Company paid approximately $218,000 to D. L. Black, a former
director, for services rendered in connection with the sale of the Company's
geothermal business. Mr. Black retired as a director of the Company in May
1994. It is not expected that Mr. Black will continue to provide services to
the Company in 1995.
32
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements--The following financial statements appear on
pages F-1 through F-24 and pages F-26 through F-31 of this report.
Consolidated Statement of Operations for the three years ended
December 31, 1994.
Consolidated Balance Sheet at December 31, 1994 and 1993.
Consolidated Statement of Cash Flows for the three years ended
December 31, 1994.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
Supplementary Financial Information (unaudited).
Quarterly Data (unaudited).
(2) Financial Statement Schedules.
None
Condensed parent company financial information has been omitted, since the
amount of restricted net assets of consolidated subsidiaries does not exceed
25% of total consolidated net assets. Also, footnote disclosure regarding
restrictions on the ability of both consolidated and unconsolidated
subsidiaries to transfer funds to the parent company has been omitted since the
amount of such restrictions does not exceed 25% of total consolidated net
assets.
(3) Exhibits.
Each document marked by an asterisk is incorporated herein by reference to
the designated document previously filed with the Securities and Exchange
Commission (the "Commission"). Each of Exhibits Nos. 10.1 through 10.18 is a
management contract or compensatory plan, contract or arrangement required to
be filed as an exhibit hereto by Item 14(c) of Form 10-K.
3.(i)--Restated Certificate of Incorporation of the Company (Exhibit 3.(i)
to the Company's Current Report on Form 8-K dated January 24,
1994).*
3.(ii)--By-Laws of the Company (Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992 [the "1992 Form
10-K"]).*
4.1--Indenture dated as of April 1, 1978 between Diamond Shamrock
Corporation ("Diamond") and Mellon Bank, N.A. relating to Diamond's
$150,000,000 8 1/2% Sinking Fund Debentures due April 1, 2008
(Exhibit 4.1 to the 1992 Form 10-K).*
4.2--First Supplemental Indenture dated as of January 26, 1984 among the
Company, Diamond Shamrock Chemicals Company ("Chemicals") and Mellon
Bank, N.A. supplementing the Indenture described in Exhibit 4.1
above (Exhibit 4.2 to the 1992 Form 10-K).*
4.3--Tri Party Agreement dated January 24, 1993 appointing Chemical Bank as
successor trustee under the Indenture described in Exhibit 4.1 above
(Exhibit 4.3 to the Company's Current Report on Form 8-K dated
January 12, 1994 [the "January 12 Form 8-K"]).*
33
<PAGE>
4.4--Indenture dated as of May 1, 1983 between Diamond and Mellon Bank,
N.A. relating to unspecified Debt Securities of Diamond (Exhibit 4.4
to the 1992 Form 10-K).*
4.5--Resolutions of the Board of Directors of Diamond supplementing the
Indenture described in Exhibit 4.4 above and establishing terms and
conditions of Diamond's $150,000,000 11 1/4% Sinking Fund Debentures
due May 1, 2013 (Exhibit 4.5 to the 1992 Form 10-K).*
4.6--First Supplemental Indenture dated as of January 26, 1984 among the
Company, Chemicals and Mellon Bank, N.A. supplementing the Indenture
and the resolutions described in Exhibits 4.4 and 4.5, respectively,
above (Exhibit 4.6 to the 1992 Form 10-K).*
4.7--Tri Party Agreement dated January 12, 1994 appointing NationsBank of
Texas, N.A. as successor trustee under the Indenture described in
Exhibit 4.4 above (Exhibit 4.1 to the January 12 Form 8-K).*
4.8--Indenture dated as of November 1, 1985 between the Company and Mellon
Bank, N.A. relating to unspecified Debt Securities of the Company
(Exhibit 4.8 to the 1992 Form 10-K).*
4.9--Resolutions of an ad hoc committee of the Board of Directors of the
Company supplementing the Indenture described in Exhibit 4.8 above
and establishing terms and conditions of the Company's $150,000,000
11 1/2% Sinking Fund Debentures due November 15, 2015 (Exhibit 4.9
to the 1992 Form 10-K).*
4.10--Tri Party Agreement dated January 12, 1994 appointing NationsBank of
Texas, N.A. as successor trustee under the Indenture described in
Exhibit 4.8 above (Exhibit 4.2 to the January 12 Form 8-K).*
4.11--Indenture dated as of April 1, 1988 between the Company and Chemical
Bank relating to unspecified debt securities of the Company (Exhibit
4.11 to the 1992 Form 10-K).*
4.12--Officers' Certificate dated June 1, 1988 establishing a series of
debt securities ($150,000,000 Medium-Term Notes, Series A) to be
issued under the Indenture described in Exhibit 4.11 above (Exhibit
4.12 to the 1992 Form 10-K).*
4.13--Indenture dated as of November 1, 1990 between the Company and
Chemical Bank relating to unspecified debt securities of the Company
(Exhibit 4.13 to the 1992 Form 10-K).*
4.14--Officers' Certificate dated February 13, 1991 establishing a series
of debt securities ($150,000,000 Medium-Term Notes, Series B) to be
issued under the Indenture described in Exhibit 4.13 above (Exhibit
4.14 to the 1992 Form 10-K).*
4.15--Officers' Certificate dated September 28, 1992 establishing a series
of debt securities ($250,000,000 9 7/8% Notes Due 2002) to be issued
under the Indenture described in Exhibit 4.13 above (Exhibit 4.15 to
the 1992 Form 10-K).*
4.16--Officers' Certificate dated January 26, 1993 establishing a series of
debt securities ($100,000,000 9 1/2% Notes Due 2003) to be issued
under the Indenture described in Exhibit 4.13 above (Exhibit 4.16 to
the 1992 Form 10-K).*
4.17--Officer's Certificate dated June 30, 1993 establishing a series of
debt securities ($150,000,000 Medium-Term Notes, Series C) to be
issued under the Indenture described in Exhibit 4.13 above (Exhibit
4 to the Company's Current Report on Form 8-K dated June 21, 1993).*
4.18--Officer's Certificate dated September 9, 1993 establishing a series
of debt securities ($250,000,000 Medium-Term Notes, Series D) to be
issued under the Indenture described in Exhibit 4.13 above (Exhibit
4 to the Company's Current Report on Form 8-K dated September 9,
1993).*
34
<PAGE>
4.19--Officer's Certificate dated October 27, 1993 establishing a series of
debt securities ($200,000,000 9 3/8% Notes due 2003) to be issued
under the Indenture described in Exhibit 4.13 above (Exhibit 4 to
the Company's current Report on Form 8-K dated October 20, 1993).*
4.20--Officer's Certificate dated January 18, 1994 establishing a series of
debt securities ($60,000,000 9 3/8% Notes due 2003) to be issued
under the Indenture described in Exhibit 4.13 (Exhibit 4 to the
Company's Current Report on Form 8-K dated January 10, 1994).*
4.21--Preferred Stock Purchase Agreement dated February 1, 1987 (the
"Preferred Stock Purchase Agreement") between the Company and The
Prudential Insurance Company of America ("Prudential") (Exhibit 4.17
to the 1992 Form 10-K).*
4.22--Amendment dated February 8, 1987 to the Preferred Stock Purchase
Agreement (Exhibit 4.18 to the 1992 Form 10-K).*
4.23--Registration Rights Agreement dated as of February 1, 1987 between
the Company and Prudential (Exhibit 4.19 to the 1992 Form 10-K).*
4.24--Agreement dated April 12, 1990 amending the Preferred Stock Purchase
Agreement (Exhibit 4.20 to the 1992 Form 10-K).*
4.25--Waiver of Certain Rights Relating to $9.75 Preferred Stock dated June
5, 1990 between the Company and Prudential (Exhibit 4.21 to the 1992
Form 10-K).*
4.26--Waiver of Certain Equity Offering Rights dated April 12, 1990 between
the Company and Prudential amending the Preferred Stock Purchase
Agreement (Exhibit 4.22 to the 1992 Form 10-K).*
4.27--Agreement dated February 28, 1995 between Prudential and the Company
(Exhibit 2 to the Company's Schedule 14D-9 dated March 3, 1995 [the
"Schedule 14D-9"]).*
4.28--Warrant Certificate No. 1 dated October 10, 1992 issued to Kidder,
Peabody Group Inc. for 8,000,000 warrants each representing the
right to purchase from the Company on or prior to October 10, 1997
one share of common stock, $1.00 par value, of the Company at a
price of $13.00 per share (Exhibit 4.23 to the 1992 Form 10-K).*
4.29--Registration Rights Agreement dated as of October 10, 1992 between
Kidder, Peabody Group Inc. and the Company (Exhibit 4.24 to the 1992
Form 10-K).*
10.1--1992 Director Stock Option Plan of the Company, revised as of July
26, 1994, filed herewith.
10.2--1992 Long-Term Incentive Plan of the Company (Exhibit 4.1 to the
Company's Form S-8 Registration Statement No. 33-47538).*
10.3--1980 Long-Term Incentive Plan of the Company, as amended August 31,
1983 (Exhibit 4.19 to Post Effective Amendment on Form S-8, amending
the Company's Form S-14 Registration Statement No. 2-85403).*
10.4--1986 Long-Term Incentive Plan of the Company (Exhibit 4.1 to the
Company's Form S-8 Registration Statement No. 33-6693).*
10.5--Amendment dated April 29, 1987 to the 1986 Long-Term Incentive Plan
of the Company (Exhibit 4.2 to Post Effective Amendment No. 1 to the
Company's Form S-8 Registration Statement No. 33-6693).*
10.6--Performance Incentive Plan of the Company, as amended effective
January 1, 1986 (Exhibit 10.6 to the 1992 Form 10-K).*
10.7--Specimen copy of Change of Control Agreement between the Company and
its executive officers (Exhibit 10.7 to the 1992 Form 10-K).*
35
<PAGE>
10.8--Specimen copy of letter agreement between the Company and its
executive officers relating to the Agreements referred to in Exhibit
10.7 above (Exhibit 10.8 to the 1992 Form 10-K).*
10.9--Employee Shareholding and Investment Supplemental Benefits Plan of
the Company, as amended and restated effective January 1, 1991
(Exhibit 10.9 to the 1992 Form 10-K).*
10.10--Amendment effective as of January 1, 1994 to the plan described in
Exhibit 10.9 above (Exhibit 10.10 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1993 [the "1993 Form 10-
K"]).*
10.11--Specimen copy of disability benefit arrangement between the Company
and its executive officers (Exhibit 10.10 to the 1992 Form 10-K).*
10.12--Supplemental Executive Retirement Plan of the Company, effective May
1, 1987 (Exhibit 10.11 to the 1992 Form 10-K).*
10.13--Supplemental Executive Retirement Plan of the Company, effective
March 1, 1990 (Exhibit 10.12 to the 1992 Form 10-K).*
10.14--Specimen copy of supplemental death benefit arrangement between the
Company and its executive officers (Exhibit 10.13 to the 1992 Form
10-K).*
10.15--Deferred Compensation Plan for Directors of the Company, revised as
of April 30, 1991 (Exhibit 10.14 to the 1992 Form 10-K).*
10.16--Trust Agreement dated December 18, 1986 between the Company and
AmeriTrust Company National Association (Exhibit 10.15 to the 1992
Form 10-K).*
10.17--Deferred Compensation Plan for Executives of the Company, effective
September 28, 1993 (Exhibit 10.17 to the 1993 Form 10-K).*
10.18--Director Stock Compensation Plan (Exhibit 4.1 to the Company's Form
S-8 Registration Statement No. 33-55857).*
10.19--Distribution Agreement dated as of April 22, 1987 between the
Company and Diamond Shamrock R&M, Inc. (Exhibit 10.23 to the 1992
Form 10-K).*
10.20--Rights Agreement dated as of September 2, 1988 between the Company
and AmeriTrust Company National Association (Exhibit 10.24 to the
1992 Form 10-K).*
10.21--Stock Purchase Agreement by and among the Company and Occidental
Petroleum Corporation, et. al. dated September 4, 1986 (Exhibit
10.25 to the 1992 Form 10-K).*
10.22--Agreement of Merger dated as of February 28, 1995 among YPF, YPFA
Corp. and the Company (Exhibit 3 to the Schedule 14D-9).*
21.1--List of Subsidiaries of the Company, filed herewith.
23.1--Consent of Independent Accountants, filed herewith.
24.1--Powers of Attorney of directors and officers of the Company, filed
herewith.
27.1--Financial Statement Schedule, filed herewith.
(b) Reports on Form 8-K.
None.
36
<PAGE>
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.
MAXUS ENERGY CORPORATION
C. L. Blackburn
By___________________________________
C. L. Blackburn
Chairman, President and
Chief Executive Officer
March 22, 1995
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 date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
C. L. Blackburn*
- -------------------------------------------
C. L. Blackburn Chairman, President and Chief
Executive Officer and Director
G. W. Pasley*
- -------------------------------------------
G. W. Pasley Senior Vice President, Finance and
Administration, and Chief Financial
Officer (Principal Financial Officer)
G. R. Brown*
- -------------------------------------------
G. R. Brown Vice President and Controller (Principal
Accounting Officer)
J. David Barnes*
- -------------------------------------------
J. David Barnes Director
B. Clark Burchfiel*
- -------------------------------------------
B. Clark Burchfiel Director
Bruce B. Dice*
- -------------------------------------------
Bruce B. Dice Director
M. C. Forrest*
- -------------------------------------------
M. C. Forrest Director
Charles W. Hall*
- -------------------------------------------
Charles W. Hall Director
Raymond A. Hay*
- -------------------------------------------
Raymond A. Hay Director
</TABLE>
37
<PAGE>
<TABLE>
<S> <C>
George L. Jackson*
- -------------------------------------------
George L. Jackson Director
John T. Kimbell*
- -------------------------------------------
John T. Kimbell Director
Richard W. Murphy*
- -------------------------------------------
Richard W. Murphy Director
Jose Maria Perez Arteta*
- -------------------------------------------
Jose Maria Perez Arteta Director
R. A. Walker*
- -------------------------------------------
R. A. Walker Director
W. Thomas York*
- -------------------------------------------
W. Thomas York Director
</TABLE>
Lynne P. Ciuba, by signing her name hereto, does hereby sign this report on
Form 10-K on behalf of each of the above-named officers and directors of the
registrant pursuant to a power of attorney executed by each of such officers
and directors.
Lynne P. Ciuba
*By__________________________________
Lynne P. Ciuba
Attorney-in-fact March 22, 1995
38
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1994 1993 1992
------ ------ ------
(IN MILLIONS, EXCEPT
PER SHARE)
<S> <C> <C> <C>
Revenues
Sales and operating revenues.......................... $682.1 $786.7 $718.4
Litigation settlement................................. .8 6.8 120.8
Other revenues, net................................... 8.2 33.6 18.9
------ ------ ------
691.1 827.1 858.1
Costs and Expenses
Operating expenses.................................... 232.7 253.9 231.3
Gas purchase costs.................................... 116.9 155.6 65.5
Exploration, including exploratory dry holes.......... 32.6 56.8 64.6
Depreciation, depletion and amortization.............. 140.2 153.6 174.4
General and administrative expenses................... 35.4 38.7 37.1
Taxes other than income taxes......................... 12.9 15.9 15.9
Interest and debt expenses............................ 96.7 88.4 86.9
Environmental studies and remediation................. 60.5 17.9 5.7
Restructuring:
Gain on sale of assets.............................. (201.9)
Restructuring costs................................. 100.9
------ ------ ------
626.9 780.8 681.4
------ ------ ------
Income Before Income Taxes, Extraordinary Item and
Cumulative Effect of Change in Accounting Principle.... 64.2 46.3 176.7
Income Taxes.......................................... 86.9 84.2 102.5
------ ------ ------
Net Income (Loss) Before Extraordinary Item and
Cumulative Effect of Change in Accounting Principle.... (22.7) (37.9) 74.2
Extraordinary item, net of tax benefit of $.1......... (7.1)
Cumulative effect of change in accounting principle... (4.4)
------ ------ ------
Net Income (Loss)....................................... (22.7) (49.4) 74.2
Dividend requirement on Preferred Stock............... (43.6) (41.7) (41.7)
------ ------ ------
Income (Loss) Applicable to Common Shares............... $(66.3) $(91.1) $ 32.5
====== ====== ======
Net Income (Loss) per Common Share Before
Extraordinary Item and Cumulative Effect of Change
in Accounting Principle................................ $ (.49) $ (.60) $ .27
Extraordinary item.................................... (.05)
Cumulative effect of change in accounting principle... (.03)
------ ------ ------
Net Income (Loss) Per Common Share...................... $ (.49) $ (.68) $ .27
====== ====== ======
Average Common Shares Outstanding....................... 134.7 133.9 119.6
</TABLE>
See Notes to Consolidated Financial Statements.
F-1
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1994 1993
------ -------- --------
(IN MILLIONS,
EXCEPT SHARES)
<S> <C> <C>
Current Assets
Cash and cash equivalents................................ $ 40.6 $ 128.7
Short-term investments................................... 103.8 33.6
Receivables, less doubtful receivables................... 152.4 156.8
Taxes receivable......................................... 23.8
Inventories.............................................. 27.9 24.1
Restricted cash.......................................... 46.4 38.4
Prepaids and other current assets........................ 18.7 23.1
-------- --------
Total Current Assets................................... 413.6 404.7
Properties and Equipment, less accumulated depreciation,
depletion and amortization................................ 1,088.4 1,305.6
Investments and Long-Term Receivables...................... 40.2 94.2
Restricted Cash............................................ 94.2 121.8
Intangible Assets, less accumulated amortization........... 35.8 37.1
Deferred Income Taxes...................................... 9.4
Deferred Charges........................................... 25.1 24.0
-------- --------
$1,706.7 $1,987.4
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current Liabilities
Long-term debt........................................... $ 4.7 $ 39.7
Accounts payable......................................... 65.1 99.9
Taxes payable............................................ 16.1
Accrued liabilities...................................... 101.2 107.7
-------- --------
Total Current Liabilities.............................. 171.0 263.4
Long-Term Debt............................................. 970.9 1,015.4
Deferred Income Taxes...................................... 199.3 198.3
Other Liabilities and Deferred Credits..................... 149.4 112.4
$9.75 Redeemable Preferred Stock, $1.00 par value
Authorized and issued shares--1,250,000 and 2,500,000..... 125.0 250.0
Stockholders' Equity
$2.50 Preferred Stock, $1.00 par value
Authorized shares--5,000,000
Issued shares--3,500,000................................ 3.5 3.5
$4.00 Preferred Stock, $1.00 par value
Authorized shares--5,915,017
Issued shares--4,358,658................................ 4.4 4.4
Common Stock, $1.00 par value
Authorized shares--300,000,000
Issued shares--135,694,722 and 134,373,523.............. 135.7 134.4
Paid-in capital.......................................... 988.1 1,026.2
Accumulated deficit...................................... (1,016.4) (993.7)
Minimum pension liability................................ (18.3) (24.4)
Valuation reserve on marketable securities............... (2.4)
Common Treasury Stock, at cost--295,995 and 173,963...... (3.5) (2.5)
-------- --------
Total Stockholders' Equity............................. 91.1 147.9
-------- --------
$1,706.7 $1,987.4
======== ========
</TABLE>
See Commitments and Contingencies.
See Notes to Consolidated Financial Statements.
The Company uses the successful efforts method to account for its oil and gas
producing activities.
F-2
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993 1992
------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss)................................. $ (22.7) $ (49.4) $ 74.2
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Extraordinary item.............................. 7.1
Cumulative effect of change in accounting
principle...................................... 4.4
Depreciation, depletion and amortization........ 140.2 153.6 174.4
Dry hole costs.................................. 2.8 5.7 12.9
Write-off of insurance receivable............... 19.6
Income taxes.................................... (9.3) 22.3 3.6
Net gain on sale of assets...................... (166.7) (13.8) (3.7)
Postretirement benefits......................... 6.2 6.6
Restructuring costs............................. 91.0
Environmental studies and remediation........... 60.5 17.9 5.7
Other........................................... 9.2 15.1 24.1
Changes in components of working capital:
Receivables................................... (1.8) (21.5) (12.8)
Inventories, prepaids and other current
assets....................................... (2.3) (6.4) (2.2)
Accounts payable.............................. (22.3) 9.0 (2.1)
Accrued liabilities........................... (12.5) (5.2) 30.5
Taxes payable/receivable...................... (2.8) (8.8) (5.4)
Deferred revenue.............................. (21.7)
------- ------- -------
Net Cash Provided by Operating Activities... 69.5 136.6 297.1
------- ------- -------
Cash Flows From Investing Activities:
Expenditures for properties and equipment--
including dry hole costs (166.2) (340.0) (261.1)
Expenditures for investments...................... (20.1) (20.4) (21.4)
Proceeds from sales of assets..................... 377.0 20.4 14.1
Proceeds from sale/maturity of short-term
investments...................................... 10.9 171.3 32.7
Purchases of short-term investments............... (111.8) (53.1) (146.7)
Restricted cash................................... 19.6 (35.5) (104.5)
Other............................................. (10.8) (20.4) (6.9)
------- ------- -------
Net Cash Provided by (Used in) Investing
Activities................................. 98.6 (277.7) (493.8)
------- ------- -------
Cash Flows From Financing Activities:
Net borrowings from joint venture partners........ (4.4) 4.4
Interest rate swap................................ (7.9) 5.8
Proceeds from issuance of short-term debt......... 30.0 32.7
Repayment of short-term debt...................... (69.1) (32.7) (.1)
Proceeds from issuance of long-term debt.......... 101.3 412.5 332.0
Repayment of long-term debt....................... (137.5) (203.7) (291.9)
Proceeds from issuance of Common Stock............ 178.9
Proceeds from issuance of Preferred Stock......... 85.7
Redemption of Preferred Stock..................... (125.0)
Proceeds from issuance of Stock Warrants.......... 10.0
Dividends paid.................................... (43.6) (41.7) (41.7)
------- ------- -------
Net Cash Provided by (Used in) Financing
Activities................................. (256.2) 263.0 187.2
------- ------- -------
Net Increase (Decrease) in Cash and Cash
Equivalents........................................ (88.1) 121.9 (9.5)
Cash and Cash Equivalents at Beginning of Year...... 128.7 6.8 16.3
------- ------- -------
Cash and Cash Equivalents at End of Year............ $ 40.6 $ 128.7 $ 6.8
======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Data is as of December 31 of each year or for the year then ended and dollar
amounts in tables are in millions, except per share. Certain data for 1993 and
1992 has been reclassified to conform with the 1994 presentation.
NOTE ONE--SIGNIFICANT ACCOUNTING POLICIES
The Consolidated Financial Statements have been prepared in conformity with
generally accepted accounting principles, the most significant of which are
described below.
Consolidation and Equity Accounting
The Consolidated Financial Statements include the accounts of Maxus Energy
Corporation and all domestic and foreign subsidiaries (the "Company"). The
Company uses the equity method to account for its less than majority owned
investments in affiliates and joint ventures ("Associated Companies"). The
Company used the proportionate consolidation method to account for its
investment in Diamond Shamrock Offshore Partners Limited Partnership ("Offshore
Partners"). Under the equity method, the Company recognizes its proportionate
share of the net income or loss of Associated Companies currently, rather than
when realized through dividends or disposal. All significant intercompany
accounts and transactions have been eliminated.
Statement of Cash Flows
Investments with maturities of three months or less at the time of
acquisition are considered cash equivalents for purposes of the accompanying
Consolidated Statement of Cash Flows. Short-term investments include
investments with maturities over three months but less than one year.
Net cash provided by operating activities reflects cash receipts for interest
income and cash payments for interest expense and income taxes as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- ------
<S> <C> <C> <C>
Interest income........................................ $12.4 $13.5 $ 7.7
Interest expense....................................... 98.7 82.0 80.9
Income taxes........................................... 98.1 73.4 104.1
</TABLE>
Inventory Valuation
Inventories, consisting primarily of oil and gas tubular goods and supplies,
are valued at the lower of cost or market, cost being determined primarily by
the weighted average cost method.
Properties and Equipment
Properties and equipment are carried at cost. Major additions are
capitalized; expenditures for repairs and maintenance are charged against
earnings.
The Company uses the successful efforts method to account for costs incurred
in the acquisition, exploration, development and production of oil and gas
reserves. Under this method, all geological and geophysical costs are expensed;
all development costs, whether or not successful, are capitalized as costs of
proved properties; exploratory drilling costs are initially capitalized, but if
the effort is determined to be unsuccessful, the costs are then charged against
earnings; depletion is computed based on an aggregation of properties with
common geologic structural features or stratigraphic conditions, such as
reservoirs or fields. Capitalized costs of proved properties are subject to a
ceiling test which limits, on a worldwide basis, the capitalized costs to the
estimated undiscounted future net cash flows after tax from such properties
assuming current prices and costs. For unproved properties, a valuation
allowance (included as an element of depletion) is provided by a charge against
earnings to reflect the impairment of unproven acreage.
F-4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and depletion related to the costs of all development drilling,
successful exploratory drilling and related production equipment is calculated
using the unit of production method based upon estimated proved recoverable
reserves. Other properties and equipment are depreciated generally on the
straight-line method over their estimated useful lives. Intangible assets are
amortized on the straight-line method over their legal or estimated useful
lives, not to exceed 40 years.
The Company capitalizes the interest cost associated with major property
additions and mineral development projects while in progress, such amounts
being amortized over the useful lives of the related assets.
Revenue Recognition
Sales are recorded on the entitlement method. Differences between actual
production and entitlements result in a receivable when underproduction occurs
and a payable when overproduction occurs.
Pensions
The Company has a number of trusteed noncontributory pension plans covering
substantially all full-time employees. The Company's funding policy is to
contribute amounts to the plans sufficient to meet the minimum funding
requirements under governmental regulations, plus such additional amounts as
management may determine to be appropriate. The benefits related to the plans
are based on years of service and compensation earned during years of
employment. The Company also has a noncontributory supplemental retirement plan
for executive officers.
Other Postretirement and Postemployment Benefits
The Company provides certain health care and life insurance benefits for
retired employees and certain insurance and other postemployment benefits for
individuals whose employment is terminated by the Company prior to their normal
retirement. The Company accrues the estimated cost of retiree benefit payments,
other than pensions, during employees' active service period. Employees become
eligible for these benefits if they meet minimum age and service requirements.
The Company accounts for benefits provided after employment but before
retirement by accruing the estimated cost of postemployment benefits when the
minimum service period is met, payment of the benefit is probable and the
amount of the benefit can be reasonably estimated. Prior to 1993, the Company
expensed the cost of postretirement and postemployment benefits as claims were
incurred.
Environmental Expenditures
Environmental liabilities are recorded when environmental assessments and/or
remediation are probable and material and such costs to the Company can be
reasonably estimated.
Income Taxes
The Company reports income taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," which
was adopted in January 1993. SFAS 109 requires the use of an asset and
liability approach to measure deferred tax assets and liabilities resulting
from all expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns. Previously, the Company
reported income taxes under Statement of Financial Accounting Standards No. 96
("SFAS 96"). That standard required the use of an asset and liability approach
which gave no recognition to future events other than the recovery of assets
and settlement of liabilities at their carrying amounts.
Earnings per Share
Primary earnings per share are based on the weighted average number of shares
of common stock and common stock equivalents outstanding, unless the inclusion
of common stock equivalents has an antidilutive
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
effect on earnings per share. Fully diluted earnings per share are not
presented due to the antidilutive effect of including all potentially dilutive
common stock equivalents.
Financial Instruments with Off-Balance-Sheet Risk and Concentrations of Credit
Risk
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash equivalents, short-term investments and
trade receivables.
The Company's cash equivalents and short-term investments represent high-
quality securities placed with various high investment grade institutions. This
investment practice limits the Company's exposure to concentrations of credit
risk.
The trade receivables are dispersed among a broad domestic and international
customer base; therefore, concentrations of credit risk are limited. The
Company carefully assesses the financial strength of its customers. Letters of
credit are the primary security obtained to support lines of credit.
The Company has minimal exposure to credit losses in the event of
nonperformance by the counterparties to its interest rate swap agreement,
natural gas price swap agreements and nonderivative financial assets. The
Company does not obtain collateral or other security to support financial
instruments subject to credit risk but restricts such arrangements to
investment-grade counterparties.
Investments in Marketable Securities
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments
in Debt and Equity Securities." SFAS 115 requires that all investments in debt
securities and certain investments in equity securities be reported at fair
value except for those investments which management has the intent and the
ability to hold to maturity. Investments which are held-for-sale are classified
based on the stated maturity and management's intent to sell the securities.
Changes in fair value are reported as a separate component of stockholders'
equity. The cumulative effect of adopting SFAS 115 of $2.4 million has been
recorded as a valuation reserve in shareholders' equity. Prior to the adoption
of SFAS 115, the Company accounted for its investments in debt securities at
amortized cost and classified such investments according to the stated maturity
of the underlying securities.
Derivatives
The Company periodically hedges the effects of fluctuations in the price of
natural gas through price swap agreements and futures contracts. The Company
typically hedges no more than 50% of its U. S. gas production. Gains and losses
on these hedges are deferred until the related sales are recognized and are
recorded as a component of sales and operating revenues. The Company
periodically enters into interest rate swap agreements to hedge interest on
long-term debt. The gain or loss on interest rate swaps is recognized monthly
as an increase or decrease to interest expense.
NOTE TWO--MASTER LIMITED PARTNERSHIP
In 1994, the Company sold its interests in Offshore Partners, a master
limited partnership, which explores for and produces natural gas and crude oil
on federal offshore leases in the Gulf of Mexico off Texas and Louisiana (See
Note Four). Maxus Offshore Exploration Company, a wholly owned subsidiary of
the Company, and the Company had a combined 1% general partner's interest in
Offshore Partners and were the managing general partner and special general
partner, respectively. The Company had an aggregate interest in Offshore
Partners of approximately 87.1% at December 31, 1993.
NOTE THREE--LITIGATION SETTLEMENT
In October 1992, the Company settled its lawsuit against Kidder, Peabody &
Co. Incorporated ("Kidder Peabody") arising out of transactions related to the
acquisition of Natomas Company in 1983. Under the
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
terms of the settlement, the Company received $165.0 million in cash, a portion
of which represented payment for warrants to acquire eight million shares of
common stock of the Company at a price of $13.00 per share for a period of five
years. The fair market value of the warrants ($10.0 million) was recorded as
additional paid-in capital; the remainder of the settlement ($155.0 million)
was recorded as income, net of legal costs. None of the settlement proceeds
were taxable for federal income tax purposes.
In November 1992, the Company settled a lawsuit with Ivan Boesky, also
arising out of transactions related to the acquisition of Natomas Company. In
June 1993, the Company received $7.0 million from Mr. Boesky, which was
recorded as income, net of legal costs. In July 1994, the Company received an
additional $.8 million from Mr. Boesky.
On April 6, 1992, a New Jersey appellate court ruled that a war risk
exclusion in certain of the Company's insurance policies precluded recovery
from insurance carriers of an earlier settlement of claims by Vietnam veterans
concerning Agent Orange. The Company had previously recorded the expected
recovery as a $19.6 million receivable. Included in "Litigation settlement" for
1992 is the non-cash write-off of this receivable.
NOTE FOUR--RESTRUCTURING
Asset Sales
On April 25, 1994, Offshore Partners sold its interests in Main Pass Blocks
72, 73 and 74. On April 26, 1994, Maxus and its subsidiaries sold all of their
partnership interests in Offshore Partners. On June 22, 1994, Maxus also sold
the McFarlan Field and Grand Isle Block 25, both producing oil and gas
properties. In total, the Company received $324.6 million of net proceeds and
recorded a net gain of $201.9 million from these transactions.
Restructuring Costs
In June 1994, the Company recorded a $100.9 million restructuring charge. The
charge included a $69.8 million write-off associated with undeveloped Alaska
coal leases, the development of which does not fit within the Company's revised
strategy to commit funds only to oil and gas exploration and production. The
charge also included costs associated with staff reductions and the write-off
of non-producing assets outside the Company's core areas.
NOTE FIVE--ASSET ACQUISITIONS AND DIVESTITURES
In September of 1994, the Company sold its geothermal subsidiary, Thermal
Power Company, for approximately $58 million net in cash and a $6.5 million
promissory note due in three years, realizing a loss on the sale of $12.6
million.
In November of 1993, the Company transferred its working interest in the
Recetor Block in Colombia to its partner for partial recoupment of its
investment. Maxus received $10.0 million and retained an overriding royalty
interest. There was no gain or loss recognized on this transaction.
Effective March 1, 1992, the Company sold its remaining producing oil and gas
interests in the Rocky Mountain area of the United States for $8.4 million,
realizing a gain on the sale of $4.9 million.
In October 1993, the Company and its Venezuelan partner, Otepi Consultores,
S.A., were awarded an operating service agreement to reactivate Venezuelan oil
fields with Lagoven, S.A., an affiliate of the national oil company, Petroleos
de Venezuela, S.A. Under the terms of the operating service agreement, Maxus
will be a contractor for Lagoven and will be responsible for overall operations
of the Quiriquire Unit, including all necessary investments to reactivate the
fields comprising the unit. Maxus will receive a fixed fee in U.S. dollars for
each barrel of crude oil produced and will be reimbursed in U.S. dollars for
its capital expenditures,
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
provided that such fee and expense reimbursement cannot exceed the maximum
dollar amount per barrel set forth in the agreement. The Venezuelan government
will retain full ownership of all hydrocarbons in the field.
During the second quarter of 1994, Maxus Venezuela (C.I.) Ltd., a subsidiary
of Maxus, signed an agreement with BP Exploracion de Venezuela S.A., granting
BP a 45% interest in the Quiriquire Unit in eastern Venezuela. Maxus Venezuela
remains the operator with a 50% interest and Otepi Consultores, a Venezuelan
company, holds the remaining 5%. Also, during the second quarter of 1994, Maxus
Bolivia, Inc., a subsidiary of Maxus, signed an agreement to take BHP Petroleum
as a partner in its Bolivian oil development project. The Company received $10
million from BHP in exchange for a 50% interest in the project.
NOTE SIX--GEOGRAPHIC DATA
The Company is engaged primarily in the exploration for and the production
and sale of crude oil and natural gas.
Sales, operating profit and identifiable assets by geographic area were as
follows:
<TABLE>
<CAPTION>
SALES AND OPERATING
REVENUES
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
United States............................... $ 276.9 $ 380.7 $ 294.2
Indonesia................................... 381.2 406.0 424.2
South America............................... 24.0
-------- -------- --------
Sales and operating revenues................ $ 682.1 $ 786.7 $ 718.4
======== ======== ========
<CAPTION>
OPERATING PROFIT
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
United States............................... $ 48.0 $ 39.3 $ 52.7
Indonesia................................... 138.5 169.1 188.4
South America............................... (2.6) (13.0) (11.4)
Other Foreign............................... (11.6) (20.4) (31.8)
-------- -------- --------
172.3 175.0 197.9
Equity earnings............................. 5.2 10.2 8.7
General corporate income and (expenses)..... (117.6) (50.5) 57.0
Interest and debt expenses.................. (96.7) (88.4) (86.9)
Restructuring............................... 101.0
-------- -------- --------
Operating profit............................ $ 64.2 $ 46.3 $ 176.7
======== ======== ========
<CAPTION>
IDENTIFIABLE ASSETS
----------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
United States............................... $ 327.0 $ 521.1 $ 535.6
Indonesia................................... 647.5 665.5 597.2
South America............................... 304.2 218.9 74.8
Other Foreign............................... 11.4 3.9 6.1
-------- -------- --------
1,290.1 1,409.4 1,213.7
Corporate assets............................ 416.6 489.7 521.9
Investments in Associated Companies......... 88.3 76.0
-------- -------- --------
Identifiable assets......................... $1,706.7 $1,987.4 $1,811.6
======== ======== ========
</TABLE>
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Net foreign assets were $701.4 million at December 31, 1994, $673.5 million
at December 31, 1993 and $507.9 million at December 31, 1992.
Results of foreign operations, after applicable local taxes, amounted to net
income of $63.9 million in 1994, $77.8 million in 1993 and $78.1 million in
1992.
Sales to three customers in 1994, 1993 and 1992 each represented 10% or more
of consolidated sales:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Diamond Shamrock, Inc............................... $ 13.2 $ 38.4 $ 79.9
Mitsubishi Corporation.............................. 66.5 83.3 95.0
Indonesian Government............................... 145.8 148.0 141.1
</TABLE>
NOTE SEVEN--TAXES
The Company reports income taxes in accordance with SFAS 109. The standard
was adopted in January 1993. Adoption, which was made prospectively, had no
impact on current period earnings or cash flow; however, $21.0 million of
deferred tax liabilities which were considered current under SFAS 96 were
reclassified as noncurrent and $4.1 million of deferred tax assets were
reclassified as current assets.
Income before income taxes, extraordinary item and cumulative effect of the
change in accounting principle was comprised of income (loss) from:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
United States...................................... $(60.1) $(89.4) $ 31.5
Foreign............................................ 124.3 135.7 145.2
------ ------ ------
$ 64.2 $ 46.3 $176.7
====== ====== ======
</TABLE>
The Company's provision for income taxes was comprised of the following:
<TABLE>
<CAPTION>
1994 1993 1992
------ ----- ------
<S> <C> <C> <C>
Current
Federal........................................... $(20.1) $ .4 $ .9
Foreign........................................... 73.7 60.9 97.4
State and local................................... 5.5 .6 .6
------ ----- ------
59.1 61.9 98.9
Deferred
Federal........................................... 24.7 .4
Foreign........................................... 3.1 22.3 3.2
------ ----- ------
27.8 22.3 3.6
------ ----- ------
Provision for income taxes.......................... $ 86.9 $84.2 $102.5
====== ===== ======
</TABLE>
The extension of production sharing contracts resulted in the reduction of
deferred tax expense applicable to temporary differences on foreign assets and
liabilities of $16.3 million in 1992.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The principal reasons for the difference between tax expense at the statutory
federal income tax rate and the Company's provision for income taxes were:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- ------
<S> <C> <C> <C>
Tax expense at statutory federal rate.............. $22.5 $16.2 $ 60.1
Increase (reduction) resulting from:
Taxes on foreign income.......................... 49.5 53.7 69.5
Excess statutory depletion....................... (.7) (1.0) (1.0)
Asset sales...................................... 20.5
Alternative minimum tax.......................... (.3) .3 .9
Settlement of claims relating to Natomas
acquisition..................................... (.3) (2.4) (47.7)
Utilization of operating loss carryforward....... 19.9
Valuation allowance.............................. 24.9 30.0
Items not related to current year earnings....... (33.4) (13.7)
Other, net....................................... 4.2 1.1 .8
----- ----- ------
Provision for income taxes....................... $86.9 $84.2 $102.5
===== ===== ======
</TABLE>
"Items not related to current year earnings for 1994" includes a tax benefit
from the favorable resolution of a federal tax refund suit.
Additionally, the Company recorded a $.1 million tax benefit from the
extraordinary loss on early retirement of debt in 1993 (See Note Sixteen).
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities for 1993 and
1994 were as follows:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
U.S. deferred tax liabilities
Properties and equipment.............................. $ 5.0 $ 45.4
Other................................................. .6
------- -------
Deferred U.S. tax liabilities....................... 5.0 46.0
------- -------
U.S. deferred tax assets
Foreign deferred taxes................................ (69.7) (68.7)
Loss carryforwards.................................... (36.3) (55.9)
Book accruals......................................... (35.1) (14.3)
Credit carryforwards.................................. (23.2) (26.5)
Other................................................. (.4) (7.2)
------- -------
Gross deferred U.S. tax assets...................... (164.7) (172.6)
------- -------
Valuation allowance................................... 150.0 126.6
------- -------
Net deferred U.S. tax assets........................ (14.7) (46.0)
------- -------
Net deferred U.S. taxes............................. (9.7)
------- -------
Foreign deferred tax liabilities
Properties and equipment.............................. 199.4 196.2
------- -------
Net deferred foreign taxes.......................... 199.4 196.2
------- -------
Net deferred taxes...................................... $ 189.7 $ 196.2
======= =======
</TABLE>
The valuation allowance was $92.6 million upon adoption of SFAS 109. The
valuation allowance was increased $34.0 million during 1993 and $23.4 million
during 1994.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
For years reported prior to the adoption of SFAS 109, the provision (benefit)
for deferred income taxes was comprised of the tax effects of temporary
differences as follows:
<TABLE>
<CAPTION>
1992
-----
<S> <C>
Intangible drilling costs......................................... $(1.4)
Accelerated depreciation.......................................... 4.0
Development wells and related items............................... (.3)
Contingencies and asset write-offs................................ .8
Other, net........................................................ .5
-----
$ 3.6
=====
</TABLE>
At December 31, 1994, the Company had $13.1 million of general business
credit carryforwards that expire between 1996 and 2002; $103.8 million of U. S.
net operating loss carryforwards that expire in 2003, 2005 and 2008; and $10.1
million of minimum tax credit that can be carried forward indefinitely. Changes
in the Company's ownership could impact the annual limitation on the amount of
carryforward which can be utilized. Any potential limitation is not expected to
materially impact the utilization of such carryforwards.
There are accumulated undistributed earnings after applicable local taxes of
foreign subsidiaries of $9.3 million for which no provision was necessary for
foreign withholding or other income taxes because that amount had been
reinvested in properties and equipment and working capital.
Taxes other than income taxes were comprised of the following:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Gross production....................................... $ 6.5 $ 8.0 $ 7.9
Real and personal property............................. 5.5 7.4 7.0
Other.................................................. .9 .5 1.0
----- ----- -----
$12.9 $15.9 $15.9
===== ===== =====
</TABLE>
NOTE EIGHT--POSTEMPLOYMENT BENEFITS
Pensions
<TABLE>
<CAPTION>
1994 1993 1992
----- ------ -----
<S> <C> <C> <C>
Service cost for benefits earned during the year... $ 2.9 $ 2.1 $ 2.1
Interest cost on projected benefit obligation...... 8.7 9.3 9.0
Actual return on plan assets....................... (2.5) (10.4) (7.5)
Net amortization and deferrals..................... (5.4) .6 (2.4)
----- ------ -----
$ 3.7 $ 1.6 $ 1.2
===== ====== =====
</TABLE>
Due to an early retirement program offered to former employees, the Company
recognized a settlement loss of $1.7 million on one of its plans.
Plan assets are primarily invested in short-term investments, stocks and
bonds. The principal assumptions used to estimate the benefit obligations of
the plans on the measurement date, October 1, were as follows:
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Discount rate................................................. 8.50% 7.25%
Expected long-term rate of return on assets................... 9.00% 9.50%
Rate of increase in compensation levels....................... 5.50% 5.50%
</TABLE>
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The funded status of the plans at December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
ACCUMULATED ASSETS ACCUMULATED
BENEFITS EXCEEDING BENEFITS
EXCEEDING ACCUMULATED EXCEEDING
ASSETS BENEFITS ASSETS
1994 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation.......... $ 87.6 $ 9.4 $111.6
------ ----- ------
Accumulated benefit obligation..... $ 91.9 $11.5 $120.5
------ ----- ------
Projected benefit obligation....... $ 92.7 $14.6 $125.5
Plan assets at fair value............ 78.0 14.2 102.2
------ ----- ------
Plan assets less than projected
benefit obligation.................. (14.7) (.4) (23.3)
Unrecognized net loss................ 24.1 1.0 36.0
Unrecognized net transition
obligation (asset).................. (3.8) .1 (4.5)
Unrecognized prior service cost...... (.3) (.9) (1.4)
Adjustment required to recognize
minimum liability................... (18.3) (24.4)
------ ----- ------
Prepaid (accrued) pension cost....... $(13.0) $ (.2) $(17.6)
====== ===== ======
</TABLE>
In 1994 and 1993, the Company's accumulated postretirement benefit obligation
("APBO") exceeded the plan assets. In accordance with Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions," the Company
recorded a minimum pension liability of $13.9 million and $18.3 million and a
charge to equity of $18.3 million and $24.4 million in 1994 and 1993,
respectively.
In addition to the defined benefit plans, the Company has a defined
contribution plan which covers Indonesian nationals. Employee contributions of
2% of each covered employee's compensation are matched 6% of compensation by
the Company. Contributions to the plan were $.4 million in both 1993 and 1994.
Other Postretirement Benefits
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for
Postretirement Benefits Other Than Pensions," for its retiree benefits plan.
Under SFAS 106, the Company is required to accrue the estimated cost of retiree
benefit payments, other than pensions, during employees' active service period.
The Company previously expensed the cost of these benefits, which are
principally medical benefits, as claims were incurred. The Company currently
administers several unfunded postretirement medical and life insurance plans
covering primarily United States employees which are, depending on the type of
plan, either contributory or noncontributory. Employees become eligible for
these benefits if they meet minimum age and service requirements. At January 1,
1993, the estimated APBO was $46.1 million, which the Company has elected to
amortize over a 20-year period.
During 1994, the Company's postretirement medical and life insurance plans
experienced a partial curtailment due to the Company's decision to reduce
staff. The effect of the curtailment was a $6.6 million charge to earnings, as
a component of the restructuring costs (See Note Four), primarily due to
accelerated recognition of the transition obligation.
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of net periodic postretirement cost are as follows for the
years ended December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Service cost-benefits earned during period..................... $ .5 $ .4
Interest cost on accumulated postretirement benefit obligation. 3.4 3.9
Amortization of transition obligation.......................... 2.3 2.3
---- ----
$6.2 $6.6
==== ====
</TABLE>
The Company's current policy is to fund postretirement health care benefits
on a pay-as-you-go basis as in prior years.
The APBO as of December 31, 1994 was $44.4 million. The amount recognized in
the Company's statement of financial position at December 31, 1994 and 1993 is
as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Retirees.................................................. $ 39.0 $ 43.7
Fully eligible active employees........................... 1.8 2.5
Other active employees.................................... 3.6 4.2
------ ------
Total..................................................... 44.4 50.4
Unrecognized transition obligation........................ (34.2) (43.8)
Unrecognized net gain (loss).............................. 2.0 (3.6)
------ ------
Accrued liability recognized in the balance sheet......... $ 12.2 $ 3.0
====== ======
</TABLE>
A discount rate of 8.5% was used in determining the APBO in 1994 and 7.25% in
1993. The year-end 1994 APBO was based on a 10.4% increase in the medical cost
trend rate, with the rate trending downward .6% per year to 5% in 2003 and
remaining at 5% thereafter. This assumption has a significant effect on annual
expense, as it is estimated that a 1% increase in the medical trend rate would
increase the APBO at December 31, 1994 by $4.2 million and increase the net
periodic postretirement benefit cost by $.4 million per year.
Other Postemployment Benefits
In the fourth quarter of 1993, the Company adopted, retroactive to January 1,
1993, Statement of Financial Accounting Standards No. 112 ("SFAS 112"),
"Employer's Accounting for Postemployment Benefits," to account for benefits
provided after employment but before retirement. SFAS 112 requires an accrual
method of recognizing postemployment benefits. Prior to 1993, postemployment
benefit expenses were recognized on a pay-as-you-go basis. The Company
recognized the cumulative effect of the change in accounting for postemployment
benefits, which resulted in a charge of $4.4 million. This liability primarily
represents medical benefits for long-term disability recipients. Future annual
costs are expected to be immaterial.
NOTE NINE--VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is determined by reference to various
market data and other valuation techniques as appropriate. Unless otherwise
disclosed, the fair value of financial instruments approximates their recorded
values.
U. S. Treasury Notes
At December 31, 1994, the U. S. Treasury notes are recorded at fair market
value, which is based on year-end quoted market prices.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
$9.75 Preferred Stock
The fair value of the $9.75 Preferred Stock is based on the comparable yield
to the Company's publicly-traded $4.00 Preferred Stock.
Interest Rate Swaps
The fair value of the interest rate swaps in a favorable position is based on
the present value of expected future cash flows from the interest rate swap
agreement. The fair value of interest swaps in an unfavorable position is based
on the present value of expected future outflows for the interest rate swap
agreement.
Natural Gas Hedging Program
The fair value of the Company's natural gas price swap agreements is the
estimated amount the Company would receive or pay to terminate the swap
agreements at the reporting date.
The estimated fair value of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1994
-----------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Liabilities
Long-term debt, including current portion............ $975.6 $857.8
Unrecognized Financial Instruments
Interest rate swaps in an unfavorable position....... (7.9)
Natural gas hedging program.......................... (.6)
<CAPTION>
1993
-----------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
<S> <C> <C>
Assets
U. S. Treasury notes................................. $ 30.7 $ 32.2
Liabilities
Long-term debt, including current portion............ 1,055.1 1,079.1
$9.75 Preferred Stock.................................. 250.0 261.9
Unrecognized Financial Instruments
Interest rate swaps in a favorable position.......... 6.3
Natural gas hedging program.......................... 6.0
</TABLE>
NOTE TEN--RECEIVABLES
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Trade receivables.......................................... $110.8 $ 89.2
Underlift receivables...................................... 18.5
Notes and other receivables................................ 42.3 50.4
Less--Allowance for doubtful receivables................... .7 1.3
------ ------
$152.4 $156.8
====== ======
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE ELEVEN--PROPERTIES AND EQUIPMENT
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Proved properties...................................... $2,397.7 $2,902.1
Unproved properties.................................... 29.1 72.3
Other.................................................. 219.1 220.6
-------- --------
Total Oil and Gas.................................... 2,645.9 3,195.0
Corporate.............................................. 53.5 173.8
-------- --------
2,699.4 3,368.8
Less--Accumulated depreciation, depletion and
amortization.......................................... 1,611.0 2,063.2
-------- --------
$1,088.4 $1,305.6
======== ========
</TABLE>
The charge against earnings for depreciation, depletion and amortization was
$138.9 million in 1994, $152.3 million in 1993 and $173.1 million in 1992. The
charge against earnings for maintenance and repairs was $38.9 million in 1994,
$35.0 million in 1993 and $23.6 million in 1992.
NOTE TWELVE--INVESTMENTS AND LONG-TERM RECEIVABLES
<TABLE>
<CAPTION>
1994 1993
----- -----
<S> <C> <C>
Investments and advances, at equity
Union-Magma-Thermal Tax Partnership ("UMT") (25%)........... $88.3
Investments, at cost, and long-term receivables.............. $11.9 5.9
U. S. Treasury Notes......................................... 28.3
----- -----
$40.2 $94.2
===== =====
</TABLE>
The Company sold its investment in UMT effective July 1, 1994 (See Note
Five).
The following schedule presents certain summarized financial information of
UMT:
<TABLE>
<CAPTION>
1993 1992
------ ------
<S> <C> <C>
Summarized Balance Sheet:
Current assets........................................... $ 14.2 $ 12.4
Non-current assets....................................... 408.7 429.0
Current liabilities...................................... 44.9 34.6
Non-current liabilities.................................. 20.0
Summarized Statement of Income:
Sales.................................................... $ 93.1 $ 91.6
Gross profit............................................. 50.3 47.8
Net income............................................... 50.3 47.8
</TABLE>
Equity earnings are principally from geothermal operations and were $5.2
million in 1994, $10.2 million in 1993 and $8.7 million in 1992.
NOTE THIRTEEN--RESTRICTED CASH
At December 31, 1994 and 1993, the Company had $140.6 million and $160.2
million, respectively, in restricted cash, of which $78.5 million in 1994 and
$103.4 million in 1993 represented collateral for outstanding letters of
credit. Assets held in trust as required by certain insurance policies were
$62.1 million in 1994 and $56.8 million in 1993. Approximately $46.4 million
and $38.4 million of collateral for outstanding letters of credit at December
31, 1994, and 1993, respectively, was classified as a current asset.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE FOURTEEN--INTANGIBLE ASSETS
Intangibles, primarily the excess of cost over fair market value of net
assets acquired, were $50.0 million at December 31, 1994 and 1993. Accumulated
amortization at December 31, 1994 and 1993 was $14.2 million and $12.9 million,
respectively. The charge against earnings for amortization of intangible assets
was $1.3 million in 1994, 1993 and 1992.
NOTE FIFTEEN--ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Accrued interest payable................................... $ 23.3 $ 27.0
Joint interest billings for international operations....... 25.9 37.8
Environmental reserve...................................... 14.9 12.9
Overlift payable........................................... 9.1 .8
Postretirement and postemployment benefits................. 4.5 3.3
Accrued compensation, benefits and withholdings............ 6.4 8.3
Other...................................................... 17.1 17.6
------ ------
$101.2 $107.7
====== ======
</TABLE>
NOTE SIXTEEN--LONG-TERM DEBT AND CREDIT ARRANGEMENTS
<TABLE>
<CAPTION>
1994 1993
------ --------
<S> <C> <C>
Senior Indebtedness
Sinking Fund Debentures
11 1/4% due 1994-2013................................ $ 16.9 $ 16.9
11 1/2% due 1996-2015................................ 109.0 108.9
8 1/2% due 1997-2008................................. 93.4 97.8
Notes
9 7/8% due 2002........................................ 247.3 249.5
9 1/2% due 2003........................................ 99.5 99.5
9 3/8% due 2003........................................ 260.0 200.0
Medium-term notes........................................ 149.3 272.7
Bank and other loans..................................... .2 9.8
------ --------
Total senior indebtedness.......................... 975.6 1,055.1
Less--current portion.................................... 4.7 39.7
------ --------
$970.9 $1,015.4
====== ========
</TABLE>
The aggregate maturities of long-term debt outstanding at December 31, 1994,
for the next five years were as follows: 1995-$4.7 million; 1996-$34.3 million;
1997-$14.2 million; 1998-$20.5 million; 1999-$8.5 million.
On January 10, 1994, the Company issued $60.0 million of 9 3/8% notes due
2003. The proceeds from these debt securities were used to redeem $29.0 million
of medium-term notes maturing in 1994.
At December 31, 1994, the Company had $109.3 million of medium-term notes
outstanding, which were issued in prior years, with maturities from 1995 to
2004 and annual interest rates from 7.57% to 11.08%. On September 1, 1994, the
Company issued an additional $40.0 million of medium-term notes due 2004 at an
annual interest rate of 10.83%, the proceeds of which were used to repay $29.8
million of medium-term notes maturing in 1998 and 2001 and $2.2 million of 9
7/8% notes maturing in 2002.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1994, the Company used proceeds from the sale of assets to repay
$104.6 million of medium- term notes maturing in 1994 and beyond and $4.4
million of 8 1/2% notes due in 2008.
The Company has entered into a $25.0 million uncommitted credit facility (the
"credit facility") to be used for the issuance of documentary or standby
letters of credit and/or the payment of shipping documents. The credit facility
terminates on December 31, 1995 and can be secured by cash or the accounts
receivable which are financed through the letters of credit. At December 31,
1994, there were $24.7 million of cash collateralized letters of credit
outstanding under this credit facility.
Total interest and debt expenses incurred, including capitalized interest,
were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Interest and debt expenses............................. $96.7 $88.4 $86.9
Capitalized interest................................... 3.2 7.5 4.6
----- ----- -----
$99.9 $95.9 $91.5
===== ===== =====
</TABLE>
NOTE SEVENTEEN--DERIVATIVE FINANCIAL INSTRUMENTS
The Company's only derivative financial instruments are interest rate swap
agreements, natural gas price swap agreements and futures contracts, which are
not used for trading purposes.
Interest Rate Swap Agreement
Effective January 27, 1993, the Company entered into an interest rate swap
agreement under which it pays the counterparty interest at a variable rate
based on the London Interbank Offering Rate (LIBOR) and the counterparty pays
the Company interest at 6.73% on the notional principal of $100.0 million. This
agreement is effective through January 27, 2003. The Company is not required to
collateralize its obligation under this agreement unless it is in an
unfavorable position. At December 31, 1993, the Company had borrowings of $5.8
million against its then favorable position in this interest rate swap
agreement. Due to higher interest rates in 1994, the Company's position in the
interest rate swap became unfavorable. As a result, the Company was required to
collateralize $7.9 million, which was recorded in deferred charges at December
31, 1994.
Natural Gas Price Swap Agreements
Under the price swap agreements used to hedge fluctuations in the price of
natural gas, the Company receives or makes payments based on the differential
between the Company's specified price and the counterparty's specified price of
natural gas. Depending on the agreement, the Company pays a fixed or variable
price per million British Thermal Units ("Mmbtu") and receives a fixed or
variable price per Mmbtu. At December 31, 1994, the Company had swap agreements
with other companies to exchange payments on 5.9 million Mmbtu of gas over the
next year. Under the swap agreements, the Company pays fixed or variable prices
averaging $1.70 per Mmbtu and receives a fixed or variable price averaging
$1.60 per Mmbtu. Expected losses on anticipated sales exceed the unrealized
gains on the swap agreements, based on gas sales prices at December 31, 1994.
NOTE EIGHTEEN--PREFERRED STOCK
The Company has the authority to issue 100,000,000 shares of Preferred Stock,
$1.00 par value. The rights and preferences of shares of authorized but
unissued Preferred Stock are established by the Company's Board of Directors at
the time of issuance.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$9.75 Cumulative Convertible Preferred Stock
In June 1990, the Company used $69.0 million of the net proceeds from a
Common Stock offering (see "Common Stock") to fund its obligations under an
agreement, dated April 12, 1990 between the Company and the holder of the
3,000,000 shares of $9.75 Cumulative Convertible Preferred Stock (the "$9.75
Preferred Stock"). Pursuant to the agreement, the Company repurchased 500,000
shares of the $9.75 Preferred Stock. In addition, the holder waived the right
to convert 750,000 of the remaining 2,500,000 shares of $9.75 Preferred Stock
and will receive an additional cash payment of $.25 per share per quarter
(subject to increase to $.50 per share per quarter in certain circumstances) on
the 750,000 nonconvertible shares (the "Conversion Waiver Shares"). Further,
certain covenants relating to the $9.75 Preferred Stock were waived or amended.
In October 1990, the number of authorized shares of $9.75 Preferred Stock was
decreased to 2,500,000.
The $9.75 Preferred Stock has a liquidation value of $101.0836 per share for
the 12-month period commencing February 1, 1995 ($126.4 million in the
aggregate), reducing progressively as of February 1 of each year to $100 per
share at February 1, 1996, in each case plus accrued dividends. Each
outstanding share of the $9.75 Preferred Stock is convertible (other than the
Conversion Waiver Shares) into 9.04 shares of the Company's Common Stock,
receives annual cash dividends of $9.75 per share, is redeemable at the
Company's option after August 1, 1995 and is subject to mandatory redemption at
the rate of 625,000 shares per year beginning February 1, 1994. The Company
redeemed 625,000 shares as required on February 1, 1994, with proceeds from the
November 1993 issuance of $2.50 Cumulative Preferred Stock. On June 15, 1994,
the Company also redeemed an additional 625,000 shares of its $9.75 Preferred
Stock for $63.5 million, an obligation otherwise due in February 1995.
In addition, the holder of the $9.75 Preferred Stock (other than the
Conversion Waiver Shares) is entitled to elect one individual to the Company's
Board of Directors and vote as a class on any transaction between the Company
and any holder of 5% or more of the outstanding Common Stock that requires
stockholder approval and certain matters separately affecting the holders of
the $9.75 Preferred Stock. The holders of the Conversion Waiver Shares may only
vote on certain matters separately affecting the holders of the $9.75 Preferred
Stock. In connection with the issuance of the $9.75 Preferred Stock, the
Company agreed to certain financial covenants relating to the issuance of debt,
capital expenditures, the payment of dividends, the repurchase of stock and the
disposition of certain assets.
On February 28, 1995, the Company and the sole holder of the $9.75 Preferred
Stock entered into an agreement pursuant to which such holder agreed to consent
to the Merger and, upon consummation of the Merger, to (i) waive certain
rights, (ii) waive certain covenants restricting the Company's ability to take
certain actions, and (iii) terminate the registration rights associated with
the $9.75 Preferred Stock. Pursuant to this agreement, the Company has agreed
to (i) waive certain rights, including the right to redeem the $9.75 Preferred
Stock at its option and right of first offer with respect to the transfer of
the shares of $9.75 Preferred Stock, and (ii) pay to such holder a
restructuring fee of $250,000 upon consummation of the Merger.
$4.00 Cumulative Convertible Preferred Stock
Each outstanding share of $4.00 Cumulative Convertible Preferred Stock (the
"$4.00 Preferred Stock") is entitled to one vote, is convertible at any time
into shares of the Company's Common Stock (2.29751 shares at December 31,
1994), shall receive annual cash dividends of $4.00 per share, is callable at
$50.00 per share ($217.9 million in the aggregate at December 31, 1994) and has
a liquidation value of $50.00 per share ($217.9 million in the aggregate at
December 31, 1994) plus accrued but unpaid dividends, if any.
In August 1993, the Company issued 23,800 shares of $4.00 Preferred Stock for
net proceeds of $1.1 million after deducting related fees and expenses.
$2.50 Cumulative Preferred Stock
In November 1993, the Company issued 3.5 million shares of $2.50 Cumulative
Preferred Stock (the "$2.50 Preferred Stock") in a public offering for $25.00
per share. The net proceeds to the Company, after
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
deducting related fees and expenses, were approximately $84.6 million, of which
$62.5 million was used to redeem 625,000 shares of the $9.75 Preferred Stock as
required on February 1, 1994.
Each outstanding share of the $2.50 Preferred Stock shall receive annual cash
dividends of $2.50 per share, is callable after December 1, 1998 at $25.00 per
share ($87.5 million in the aggregate at December 31, 1994), and has a
liquidation value of $25.00 per share ($87.5 million in the aggregate at
December 31, 1994) plus accrued but unpaid dividends, if any.
The holders of the shares are entitled to limited voting rights under certain
conditions. In the event the Company is in arrears in the payment of six
quarterly dividends, the holders of the $2.50 Preferred Stock have the right to
elect two members to the Board of Directors until such time as the dividends in
arrears are current and a provision is made for the current dividends due.
NOTE NINETEEN--COMMON STOCK
<TABLE>
<CAPTION>
SHARES AMOUNT
----------- ------
<S> <C> <C>
January 1, 1992...................................... 102,778,910 $102.8
Issuance of Common Stock........................... 22,000,000 22.0
Dividend Reinvestment and Stock Purchase Plan...... 7,955,830 8.0
Employee Shareholding and Investment Plan.......... 506,002 .5
Restricted stock................................... 322,360 .3
Exercise of stock options.......................... 4,200
Fractional shares exchanged for cash............... (2)
----------- ------
January 1, 1993...................................... 133,567,300 133.6
Employee Shareholding and Investment Plan.......... 475,852 .5
Restricted stock................................... 312,690 .3
Exercise of stock options.......................... 17,683
Fractional shares exchanged for cash............... (2)
----------- ------
January 1, 1994...................................... 134,373,523 134.4
Employee Shareholding and Investment Plan.......... 830,798 .8
Restricted stock................................... 490,430 .5
Fractional shares exchanged for cash............... (29)
----------- ------
December 31, 1994.................................... 135,694,722 $135.7
=========== ======
</TABLE>
In June 1992, the Company issued 22 million shares of Common Stock in a
public offering for $6.00 per share. The net proceeds to the Company, after
deducting related fees and expenses, were approximately $125.9 million.
On July 30, 1991, the Company's Dividend Reinvestment and Stock Purchase Plan
(the "Plan") became effective. The Plan allows holders of Common Stock to
purchase additional shares at a 3% discount from the current market prices
without paying brokerage commissions or other charges. In addition, if the
Company pays a dividend on its Common Stock in the future, common stockholders
may then reinvest the amount of those dividends in additional shares also at a
3% discount from the current market prices. In November 1992, the Company
effectively suspended the Plan by raising the threshold price.
At December 31, 1994 and 1993, respectively, there were 35.8 million and 51.1
million shares of Common Stock reserved for issuance upon conversion of
Preferred Stock, exercises of stock options or issuance under certain employee
benefit plans.
The Company has an Employee Shareholding and Investment Plan ("ESIP") which
allows eligible participating employees to contribute a certain percentage of
their salaries (1%-10%) to a trust for investment in any of six funds, one of
which consists of the Company's Common Stock. The Company matches the
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
participating employee's contribution to the ESIP (up to 6% of base pay); such
matching contribution is charged against earnings and invested in the ESIP fund
which consists of the Company's Common Stock. The charge against earnings for
the Company's contribution to the ESIP was $2.8 million, $2.6 million and $2.5
million in 1994, 1993 and 1992, respectively.
In 1988, the Company adopted a Preferred Share Purchase Rights Plan. The plan
issued one right for each share of Common Stock and 7.92 rights for each share
of $9.75 Preferred Stock outstanding as of the close of business on September
12, 1988. The rights, which entitle the holder to purchase from the Company one
one-hundredth of a share of a new series of junior preferred stock at $23.00
per share, become exercisable if a person becomes the beneficial owner of 20%
or more of the Company's Common Stock or of an amount that the Board of
Directors determines is intended to cause the Company to take certain actions
not in the best long-term interests of the Company and its stockholders. The
rights also become exercisable if a person makes a tender offer or exchange
offer for 30% or more of the Company's outstanding Common Stock. The rights may
be redeemed at $.10 per right under certain circumstances. In the Merger
Agreement, the Company agreed to redeem the rights. On February 28, 1995, the
Board of Directors of the Company took action to redeem the rights, effective
as of March 22, 1995. Holders of Common Stock on the close of business on that
date will be entitled to receive the redemption price of $0.10 per right. Under
a separate agreement with the sole holder of the $9.75 Preferred Stock, such
holder waived its right to receive the redemption price with respect to the
rights associated with the $9.75 Preferred Stock, subject to consummation of
the Merger.
NOTE TWENTY--PAID-IN CAPITAL AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
PAID-IN ACCUMULATED
CAPITAL DEFICIT
-------- -----------
<S> <C> <C>
January 1, 1992.................................... $ 857.5 $(1,018.5)
Net income....................................... 74.2
Dividends on Preferred Stock..................... (41.7)
Issuance of Common Stock......................... 103.9
Dividend Reinvestment and Stock Purchase Plan.... 45.0
Issuance of Stock Warrants....................... 10.0
Employee Shareholding and Investment Plan
Purchases....................................... 2.8
Restricted Stock................................. 2.6
-------- ---------
January 1, 1993.................................... 980.1 (944.3)
Net loss......................................... (49.4)
Dividends on Preferred Stock..................... (41.7)
Issuance of $4.00 Preferred Stock................ 1.1
Issuance of $2.50 Preferred Stock................ 81.1
Employee Shareholding and Investment Plan
Purchases....................................... 3.1
Restricted Stock................................. 2.5
-------- ---------
January 1, 1994.................................... 1,026.2 (993.7)
Net loss......................................... (22.7)
Dividends on Preferred Stock..................... (43.6)
Employee Shareholding and Investment Plan
Purchases....................................... 3.1
Restricted Stock................................. 2.4
-------- ---------
December 31, 1994.................................. $ 988.1 $(1,016.4)
======== =========
</TABLE>
The $10.0 million addition to paid-in capital in 1992 reflects the market
value of the eight million warrants purchased by Kidder Peabody in partial
settlement of the Company's lawsuit against Kidder Peabody arising out of
transactions related to the 1983 acquisition of Natomas Company. Each warrant
represents the right to purchase one share of the Company's Common Stock at
$13.00 per share at any time prior to the expiration of the warrants on October
10, 1997.
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE TWENTY-ONE--VALUATION RESERVE ON MARKETABLE SECURITIES
The amortized cost and estimated fair value of marketable securities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994
---------------------------
GROSS
AMORTIZED UNREALIZED MARKET
COST LOSSES VALUE
--------- ---------- ------
<S> <C> <C> <C>
Held-to-maturity:
Corporate and other debt securities.. $139.4 $139.4
Held-for-sale:
Corporate and other debt securities.. $ 30.7 $2.4 $ 28.3
</TABLE>
At December 31, 1994, securities categorized as held-to-maturity with
maturities of 90 days or less are classified as cash equivalents and those with
maturities greater than ninety days are classified as short-term investments.
The securities held-for-sale consist of U. S. Treasury notes which mature in
August, 2002 and are classified as long-term investments (See Note Twelve).
NOTE TWENTY-TWO--COMMON TREASURY STOCK
<TABLE>
<CAPTION>
SHARES AMOUNT
-------- ------
<S> <C> <C>
January 1, 1992.................................... (122,809) $(2.0)
Restricted stock................................. (12,942) (.1)
-------- -----
January 1, 1993.................................... (135,751) (2.1)
Restricted stock................................. (38,212) (.4)
-------- -----
January 1, 1994.................................... (173,963) (2.5)
Restricted stock................................. (122,032) (1.0)
-------- -----
December 31, 1994.................................. (295,995) $(3.5)
======== =====
</TABLE>
NOTE TWENTY-THREE--STOCK OPTIONS
Two plans, a Long-Term Incentive Plan and a Director Stock Option Plan, were
approved by the stockholders in 1992. The Company's 1986 and 1992 Long-Term
Incentive Plans (the "Incentive Plans"), administered by the Compensation
Committee of the Board of Directors, permit the grant to officers and certain
key employees of stock options, stock appreciation rights ("SARs"), performance
units and awards of Common Stock or other securities of the Company on terms
and conditions determined by the Compensation Committee of the Board of
Directors.
The Director Stock Option Plan became effective on September 1, 1992. Under
this plan, non-employee directors received options to purchase shares of Common
Stock on the effective date of the plan. Thereafter, upon initial election or
re-election of a non-employee director at an annual meeting, the non-employee
directors automatically receive options to purchase shares of Common Stock. The
plan terminates on September 1, 2002.
The grant or exercise of an option does not result in a charge against the
Company's earnings because all options have been granted at exercise prices
approximating the market value of the stock at the date of grant. However, any
excess of Common Stock market price over the option price of options, which
includes SARs, does result in a charge against the Company's earnings; a
subsequent decline in market price results in a credit to earnings, but only to
a maximum of the earnings charges incurred in prior years on SARs.
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock option activity was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------- ---------------- ----------
<S> <C> <C> <C>
Outstanding at January 1. 1,694,445 1,855,695 1,605,673
Granted................ 758,000 20,000 449,700
Exercised.............. (17,683) (4,200)
Canceled............... (184,377) (163,567) (195,478)
--------------- ---------------- ----------
Outstanding at December
31...................... 2,268,068 1,694,445 1,855,695
Grant price............ $5.00 to $8.625 $8.625 $6.25
Exercise price......... $6.625 to $8.506 $6.625
Available for future
grants at December 31... 2,419,441 3,492,787 4,330,435
Restricted stock held for
vesting at December 31.. 951,410 874,602 930,736
Performance units held
for vesting at December
31...................... 653,355 653,355
</TABLE>
Exercise prices of stock options outstanding at December 31, 1994 ranged from
$5.00 to $13.75 per share. There was a credit to earnings for SARs in 1993 and
1992 of $.1 million and $.4 million, respectively. There was no earnings
activity related to SARs in 1994.
Under the 1986 Long-Term Incentive Plan, the Company granted Restricted
Stock. The amount of the grant price is amortized over the vesting period of
the grant as a charge against earnings. The charge against earnings was $1.4
million in 1994, $2.4 million in 1993 and $2.6 million in 1992.
In 1993, the Company issued performance units under the 1992 Long-Term
Incentive Plan. The performance unit entitles the grantee to the value of a
share of Common Stock contingent upon the performance of the Company compared
to a selected group of peer companies. The value of the performance unit is
amortized over the vesting period based on a weighted probability of expected
payout levels. The charge against earnings was $.6 million in 1993. There was
no earnings activity related to performance units in 1994.
NOTE TWENTY-FOUR--LEASES
The Company leases certain machinery and equipment, facilities and office
space under cancelable and noncancelable operating leases, most of which expire
within 20 years and may be renewed.
Minimum annual rentals for non-cancelable operating leases at December 31,
1994, were as follows:
<TABLE>
<S> <C>
1995............................................................... $ 52.1
1996............................................................... 22.7
1997............................................................... 19.0
1998............................................................... 10.3
1999............................................................... 8.2
2000 and thereafter................................................ 27.2
------
$139.5
======
</TABLE>
Minimum annual rentals have not been reduced by minimum sublease rentals of
$39.7 million due in the future under noncancelable subleases.
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Rental expense for operating leases was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Total rentals.......................................... $60.1 $67.7 $60.8
Less--Sublease rental income........................... 2.9 3.4 4.7
----- ----- -----
Rental expense......................................... $57.2 $64.3 $56.1
===== ===== =====
</TABLE>
NOTE TWENTY-FIVE--COMMITMENTS AND CONTINGENCIES
Like other energy companies, Maxus' operations are subject to various laws
related to the handling and disposal of hazardous substances which require the
cleanup of deposits and spills. Compliance with the laws and protection of the
environment worldwide is of the highest priority to Maxus management. In 1994,
the Company spent $5.8 million in environmental related expenditures for its
oil and gas operations. Expenditures in 1995 are expected to be approximately
$10 million.
In addition, the Company is implementing certain environmental projects
related to its former chemicals business ("Chemicals"), sold to Occidental
Petroleum Corporation ("Occidental") in 1986 and certain other disposed of
businesses.
The Company has agreed to remediate the site of the former agricultural
chemical plant in Newark, New Jersey as required by a consent decree entered
into in 1990 by Occidental, the United States Environmental Protection Agency
(the "EPA") and the New Jersey Department of Environmental Protection and
Energy (the "DEP"). Pursuant to an agreement with the EPA, the Company is
conducting further testing and studies to characterize contaminated sediment in
a six-mile portion of the Passaic River near the plant site. The Company has
been conducting similar studies under its own auspices for several years.
Under an Administrative Consent Order issued by the DEP in 1990, covering
sites in Kearny and Secaucus, New Jersey, the Company will continue to
implement interim remedial measures and to perform remedial investigations and
feasibility studies and, if necessary, will implement additional remedial
actions at various locations where chromite ore residue, allegedly from the
former Kearny plant, was utilized, as well as at the plant site.
Until 1976, Chemicals operated manufacturing facilities in Painesville, Ohio.
The Company has heretofore conducted many remedial, maintenance and monitoring
activities at this site. The former Painesville plant area has been proposed
for listing on the national priority list of Superfund sites. The scope and
nature of further investigation or remediation which may be required cannot be
determined at this time.
In the opinion of the Company, environmental remediation has been
substantially completed at all other former plant sites where material
remediation was required.
The Company also has responsibility for Chemicals' share of the remediation
cost for a number of other non-plant sites where wastes from plant operations
by Chemicals were allegedly disposed of or have come to be located, including
several commercial waste disposal sites.
At the time of the spin-off by the Company of Diamond Shamrock, Inc. ("DSI")
in 1987, the Company executed a cost-sharing agreement for the partial
reimbursement by DSI of environmental expenses related to the Company's
disposed of businesses, including Chemicals.
The Company's total expenditures for environmental compliance for disposed of
businesses, including Chemicals, were $30.3 million in 1994, $9.8 million of
which was recovered from DSI under the cost-sharing agreement. Those
expenditures are projected to be approximately $23.0 million in 1995 after
recovery from DSI.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
Reserves, net of cost-sharing by DSI, have been established for environmental
liabilities where they are material and probable and can be reasonably
estimated. At December 31, 1994 and 1993, the reserve balance was $87.1 million
and $38.4 million, respectively. During 1994, the Company increased its reserve
for future environmental liabilities by $60.5 million ($49.0 million during the
fourth quarter), primarily in response to the EPA's recently proposed chromium
clean-up standards and for additional costs expected to be incurred at the
Company's former Newark, New Jersey plant site.
The Company enters into various operating agreements and capital commitments
associated with the exploration and development of its oil and gas properties.
Such contractual financial and/or performance commitments are not material.
The Company's foreign petroleum exploration, development and production
activities are subject to political and economic uncertainties, expropriation
of property and cancellation or modification of contract rights, foreign
exchange restrictions and other risks arising out of foreign governmental
sovereignty over the areas in which the Company's operations are conducted, as
well as risks of loss in some countries due to civil strife, acts of war,
guerrilla activities and insurrection. Areas in which the Company has
significant operations include the United States, Indonesia, Ecuador, Bolivia
and Venezuela.
NOTE TWENTY-SIX--SUBSEQUENT EVENT
Maxus has agreed to a merger with YPF Acquisition Corp. ("YPFA Corp."), a
wholly owned subsidiary of YPF Sociedad Anonima ("YPF"). YPFA Corp. has
commenced a tender offer (the "Offer") to purchase all of Maxus' outstanding
Common Stock for $5.50 per share in cash. If such number of shares of Common
Stock constituting a majority of Maxus' voting stock, i.e., the Common Stock
and the $4.00 Preferred Stock, are tendered in the Offer and the other
conditions to the Offer are satisfied (including the receipt by YPF and YPFA
Corp. of financing), the Offer will be followed by a merger in which the
remaining Common Stock will be exchanged for the same price of $5.50 per share.
Holders of Common Stock on the close of business on March 22, 1995 also will
receive a cash payment of $0.10 per share upon redemption of rights issued
under Maxus' shareholder rights plan.
F-24
<PAGE>
REPORT OF MANAGEMENT
To the Stockholders of Maxus Energy Corporation
The Consolidated Financial Statements have been prepared in conformity with
generally accepted accounting principles and have been audited by Price
Waterhouse LLP, independent accountants. The Company is responsible for all
information and representations contained in the Consolidated Financial
Statements. In the preparation of this information, it has been necessary to
make estimates and judgments based on data provided by the Company's accounting
and control systems.
In meeting its responsibility for the reliability of the Consolidated
Financial Statements, the Company depends on its accounting and control
systems. These systems are designed to provide reasonable assurance that assets
are safeguarded against loss from unauthorized use and that transactions are
executed in accordance with the Company's authorizations and are recorded
properly. The Company believes that its accounting and control systems provide
reasonable assurance that errors or irregularities that could be material to
the Consolidated Financial Statements are prevented or would be detected within
a timely period. The Company also requires that all officers and other
employees adhere to a written business conduct policy.
The independent accountants provide an objective review as to the Company's
reported operating results and financial position. The Company also has an
active operations auditing program which monitors the functioning of the
Company's accounting and control systems and provides additional assurance that
the Company's operations are conducted in a manner which is consistent with
applicable laws.
The Board of Directors pursues its oversight role for the Consolidated
Financial Statements through the Audit Review Committee which is composed
solely of directors who are not employees of the Company. The Audit Review
Committee meets with the Company's financial management and operations auditors
periodically to review the work of each and to monitor the discharge of their
responsibilities. The Audit Review Committee also meets periodically with the
Company's independent accountants without representatives of the Company
present, to discuss accounting, control, auditing and financial reporting
matters.
G. W. Pasley
Senior Vice President, Finance and
Administration, and Chief Financial
Officer
G. R. Brown
Vice President and Controller
Dallas, Texas
February 28, 1995
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Maxus Energy Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and of cash flows present fairly, in all
material respects, the financial position of Maxus Energy Corporation and its
subsidiaries at December 31, 1994 and 1993 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Notes 1, 7 and 8 to the Consolidated Financial Statements,
the Company changed its methods of accounting for income taxes, postretirement
benefits and postemployment benefits in 1993.
PRICE WATERHOUSE LLP
Dallas, Texas
February 28, 1995
F-26
<PAGE>
FINANCIAL SUPPLEMENTARY INFORMATION (Unaudited)
(DATA IS AS OF DECEMBER 31 OF EACH YEAR OR FOR THE YEAR THEN ENDED AND THE
DOLLAR AMOUNTS IN TABLES ARE IN MILLIONS, EXCEPT PER SHARE)
OIL AND GAS PRODUCING ACTIVITIES
The following are disclosures about the oil and gas producing activities of
the Company as required by Statement of Financial Accounting Standards No. 69
("SFAS 69").
Results of Operations
Results of operations from all oil and gas producing activities are shown
below. These results exclude revenues and expenses related to the purchase of
natural gas and the subsequent processing and resale of such natural gas plus
the sale of natural gas liquids extracted therefrom.
<TABLE>
<CAPTION>
UNITED STATES INDONESIA
-------------------------- ----------------------
1994 1993 1992 1994 1993 1992
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Sales................... $132.3 $202.0 $207.8 $381.2 $405.9 $424.3
------ ------ ------ ------ ------ ------
Production costs........ 29.4 46.5 46.4 151.5 157.5 143.2
Exploration costs....... 9.2 14.6 15.2 13.8 16.5 13.7
Depreciation, depletion
and amortization....... 45.3 77.9 83.5 75.6 63.0 79.4
(Gain) loss on sale of
assets................. (201.8) 3.0 (3.3)
Other................... 8.8(a) 17.0(a) 8.6(a) 1.8 (.2) (.4)
------ ------ ------ ------ ------ ------
(109.1) 159.0 150.4 242.7 236.8 235.9
------ ------ ------ ------ ------ ------
Income (loss) before tax
provision.............. 241.4 43.0 57.4 138.5 169.1 188.4
Provision (benefit) for
income taxes........... 4.8 .9 1.1 74.4 86.7 104.4
------ ------ ------ ------ ------ ------
Results of operations... $236.6 $ 42.1 $ 56.3 $ 64.1 $ 82.4 $ 84.0
====== ====== ====== ====== ====== ======
<CAPTION>
SOUTH AMERICA OTHER FOREIGN WORLDWIDE
-------------------------- ---------------------- ---------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................... $ 24.0 $537.5 $607.9 $632.1
------ ------ ------ ------ ------ ------ ------ ------ ------
Production costs........ 17.8 $ 1.7 198.7 205.7 189.6
Exploration costs....... 2.4 10.5 $ 11.1 $ 7.2 $ 15.2 $ 24.6 32.6 56.8 64.6
Depreciation, depletion
and amortization....... 7.5 .6 .4 2.7 1.7 2.8 131.1 143.2 166.1
(Gain) loss on sale of
assets................. .2 (201.6) 3.0 (3.3)
Other................... (1.4) .2 (.1) (.3) (.1) (.1) 8.9 16.9 8.0
------ ------ ------ ------ ------ ------ ------ ------ ------
26.5 13.0 11.4 9.6 16.8 27.3 169.7 425.6 425.0
------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before tax
provision.............. (2.5) (13.0) (11.4) (9.6) (16.8) (27.3) 367.8 182.3 207.1
Provision (benefit) for
income taxes........... 5.2 (.3) (.3) (.2) (.3) (.5) 84.2 87.0 104.7
------ ------ ------ ------ ------ ------ ------ ------ ------
Results of operations... $ (7.7) $(12.7) $(11.1) $ (9.4) $(16.5) $(26.8) $283.6 $ 95.3 $102.4
====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
- --------
(a) Includes United States gathering and processing costs related to sales.
Such costs were $9.7 million, $13.1 million and $12.2 million for 1994,
1993 and 1992, respectively.
F-27
<PAGE>
Capitalized Costs
Included in properties and equipment are capitalized amounts applicable to
the Company's oil and gas producing activities. Such capitalized amounts
include the cost of mineral interests in properties, completed and incomplete
wells and related support equipment as follows:
<TABLE>
<CAPTION>
UNITED STATES INDONESIA
------------------------ --------------------------
1994 1993 1992 1994 1993 1992
------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Proved properties....... $584.0 $1,214.6 $1,201.2 $1,572.9 $1,514.3 $1,393.4
Unproved properties..... 7.8 51.2 46.9 .7 .8 .8
------ -------- -------- -------- -------- --------
591.8 1,265.8 1,248.1 1,573.6 1,515.1 1,394.2
------ -------- -------- -------- -------- --------
Less--Accumulated
depreciation, depletion
and amortization....... 416.8 931.9 894.0 1,043.7 968.1 905.1
------ -------- -------- -------- -------- --------
$175.0 $ 333.9 $ 354.1 $ 529.9 $ 547.0 $ 489.1
====== ======== ======== ======== ======== ========
<CAPTION>
SOUTH AMERICA OTHER FOREIGN WORLDWIDE
------------------------ -------------------------- --------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proved properties....... $240.8 $ 173.2 $ 33.4 $2,397.7 $2,902.1 $2,628.0
Unproved properties..... 15.2 14.9 29.1 $ 5.4 $ 5.4 $ 2.7 29.1 72.3 79.5
------ -------- -------- -------- -------- -------- -------- -------- --------
256.0 188.1 62.5 5.4 5.4 2.7 2,426.8 2,974.4 2,707.5
------ -------- -------- -------- -------- -------- -------- -------- --------
Less--Accumulated
depreciation, depletion
and amortization....... 8.5 1.0 .4 4.0 2.6 .3 1,473.0 1,903.6 1,799.8
------ -------- -------- -------- -------- -------- -------- -------- --------
$247.5 $ 187.1 $ 62.1 $ 1.4 $ 2.8 $ 2.4 $ 953.8 $1,070.8 $ 907.7
====== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Costs Incurred
Costs incurred by the Company in its oil and gas producing activities
(whether capitalized or charged against earnings) were as follows:
<TABLE>
<CAPTION>
UNITED STATES INDONESIA
------------------ -------------------
1994 1993 1992 1994 1993 1992
----- ------ ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Property acquisition
costs.................. $ 2.4 $13.5 $ 2.7 $ 6.6
Exploration costs....... 9.9 22.6 14.4 $13.8 $ 16.4 13.8
Development costs....... 20.9 35.6 23.4 58.7 120.8 109.0
----- ------ ----- ----- ------ ------
$33.2 $ 71.7 $40.5 $72.5 $137.2 $129.4
===== ====== ===== ===== ====== ======
<CAPTION>
SOUTH AMERICA OTHER FOREIGN WORLDWIDE
------------------ ------------------- --------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992
----- ------ ----- ----- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Property acquisition
costs.................. $ .5 $ .5 $ 2.4 $ 14.0 $ 9.8
Exploration costs....... $ 3.4 $ 25.3 $35.5 $ 7.4 15.5 24.4 34.5 79.8 88.1
Development costs....... 77.7 123.6 23.4 157.3 280.0 155.8
----- ------ ----- ----- ------ ------ ------ ------ ------
$81.1 $148.9 $58.9 $ 7.4 $ 16.0 $ 24.9 $194.2 $373.8 $253.7
===== ====== ===== ===== ====== ====== ====== ====== ======
</TABLE>
Oil and Gas Reserves
The following table represents the Company's net interest in estimated
quantities of developed and undeveloped reserves of crude oil, condensate,
natural gas liquids and natural gas and changes in such quantities at year-end
1994, 1993 and 1992. Net proved reserves are the estimated quantities of crude
oil and natural gas which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed reserves are
proved reserve volumes that can be expected to be recovered through existing
wells with existing equipment and operating methods. Proved undeveloped
reserves are proved reserve volumes that are expected
F-28
<PAGE>
to be recovered from new wells on undrilled acreage or from existing wells
where a significant expenditure is required for recompletion.
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------- ------------------------------- -------------------------------
UNITED SOUTH UNITED SOUTH UNITED SOUTH
CRUDE OIL STATES INDONESIA AMERICA TOTAL STATES INDONESIA AMERICA TOTAL STATES INDONESIA AMERICA TOTAL
- --------- ------ --------- ------- ----- ------ --------- ------- ----- ------ --------- ------- -----
(MILLIONS OF BARRELS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Proved Developed
and Undeveloped
Reserves...........
Beginning of year... 12.3 180.1 71.6 264.0 12.2 155.2 53.1 220.5 14.6 162.8 27.5 204.9
Revisions of
previous
estimates......... .2 (3.2)(a) 5.1 2.1 .4 39.6(a) 1.2 41.2 .8 8.0(a) (15.1) (6.3)
Purchase of
reserves in place. .2 .2 36.7 36.7
Extensions,
discoveries and
other additions... .1 3.5(a) 3.6 1.3 8.1(a) 17.3 26.7 .4 7.0(a) 4.0 11.4
Production......... (.9) (21.6) (1.8)(c) (24.3) (1.8) (22.8) (24.6) (2.1) (22.6) (24.7)
Sales of reserves
in place.......... (8.2) (7.8) (16.0) (1.5) (1.5)
---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ----- -----
End of year......... 3.5 158.8 67.1 229.4 12.3 180.1 71.6 264.0 12.2 155.2 53.1 220.5
---- ----- ---- ----- ---- ----- ---- ----- ---- ----- ----- -----
Net Proved Developed
Reserves
Beginning of year.. 11.0 161.1 14.1 186.2 11.3 128.9 140.2 13.9 137.9 151.8
End of year........ 2.9 141.5 14.8 159.2 11.0 161.1 14.1 186.2 11.3 128.9 140.2
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
---------------------- ---------------------- ----------------------
UNITED UNITED UNITED
NATURAL GAS(B) STATES INDONESIA TOTAL STATES INDONESIA TOTAL STATES INDONESIA TOTAL
- -------------- ------ --------- ----- ------ --------- ----- ------ --------- -----
(BILLIONS OF CUBIC FEET)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Proved Developed and
Undeveloped Reserves
Beginning of year....... 679 262 941 584 245 829 635 37 672
Revisions of previous
estimates............. 21 1 22 3 (23) (20) 8 (3) 5
Purchase of reserves in
place................. 17 17 1 1
Extensions, discoveries
and other additions... 13 58 71 152 45 197 24 216 240
Production............. (57) (17) (74) (76) (5) (81) (83) (5) (88)
Sales of reserves in
place................. (164) (164) (1) (1) (1) (1)
---- ---- ---- ---- ---- ---- ---- --- ----
End of year............. 492 304 796 679 262 941 584 245 829
---- ---- ---- ---- ---- ---- ---- --- ----
Net Proved Developed
Reserves
Beginning of year...... 507 85 592 515 22 537 568 23 591
End of year............ 384 107 491 507 85 592 515 22 537
<CAPTION>
1994 1993 1992
---------------------- ---------------------- ----------------------
UNITED UNITED UNITED
NATURAL GAS LIQUIDS STATES INDONESIA TOTAL STATES INDONESIA TOTAL STATES INDONESIA TOTAL
- ------------------- ------ --------- ----- ------ --------- ----- ------ --------- -----
(MILLIONS OF BARRELS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Proved Developed and
Undeveloped Reserves
Beginning of year....... 37.1 10.2 47.3 30.8 9.3 40.1 31.2 4.9 36.1
Revisions of previous
estimates............. 2.0 (.7) 1.3 1.9 (.3) 1.6 2.5 (.7) 1.8
Purchase of reserves in
place................. .1 .1
Extensions, discoveries
and other additions... .4 .7 1.1 7.2 1.7 8.9 .3 5.7 6.0
Production............. (3.0) (.8) (3.8) (2.8) (.5) (3.3) (3.3) (.6) (3.9)
---- ---- ---- ---- ---- ---- ---- --- ----
End of year............. 36.5 9.4 45.9 37.1 10.2 47.3 30.8 9.3 40.1
---- ---- ---- ---- ---- ---- ---- --- ----
Net Proved Developed
Reserves
Beginning of year...... 29.5 3.3 32.8 27.0 5.1 32.1 29.6 3.1 32.7
End of year............ 29.7 3.2 32.9 29.5 3.3 32.8 27.0 5.1 32.1
</TABLE>
- -------
(a) The changes reflect the impact of the change in the price of crude oil on
the barrels to which the Company is entitled under the terms of the
Indonesian production sharing contracts. The Indonesian production sharing
contracts allow the Company to recover tangible production and exploration
costs, as well as operating costs. As the price of crude oil fluctuates,
the Company is entitled to more or less barrels of cost recovery oil.
Increasing prices at the end of
F-29
<PAGE>
1994 resulted in a decrease of 11.7 million barrels. Decreasing prices
resulted in an increase of 24.3 million barrels in 1993 and 4.5 million
barrels in 1992.
(b) Natural gas is reported on the basis of actual or calculated volumes which
remain after removal, by lease or field separation facilities, of
liquefiable hydrocarbons and of non-hydrocarbons where they occur in
sufficient quantities to render the gas unmarketable. Natural gas reserve
volumes include liquefiable hydrocarbons approximating 11% of total gas
reserves in the United States and 5% in Indonesia which are recoverable at
natural gas processing plants downstream from the lease or field separation
facilities. Such recoverable liquids also have been included in natural gas
liquids reserve volumes.
(c) Reserves in Venezuela attributable to an operating service agreement under
which all hydrocarbons are owned by the Venezuelan government have not been
included. Production reported in Oil and Gas reserves does not include
Venezuela production but it is included in net oil sales reported in
Exploration and Production Statistics. The SFAS 69 Results of Operations,
Capitalized Costs and Costs Incurred disclosures include costs related to
Venezuela.
Future Net Cash Flows
The standardized measure of discounted future net cash flows relating to the
Company's proved oil and gas reserves is calculated and presented in accordance
with SFAS 69. Accordingly, future cash inflows were determined by applying
year-end oil and gas prices (adjusted for future fixed and determinable price
changes) to the Company's estimated share of future production from proved oil
and gas reserves. Future income taxes were derived by applying year-end
statutory tax rates to the estimated net future cash flows. A prescribed 10%
discount factor was applied to the future net cash flows. Because prices have
declined since year-end, a calculation of the standardized measure using
current prices would result in lower discounted net cash flows for 1994 than is
presented.
In the Company's opinion, this standardized measure is not a representative
measure of fair market value, and the standardized measure presented for the
Company's proved oil and gas reserves is not representative of the reserve
value. The standardized measure is intended only to assist financial statement
users in making comparisons between companies.
<TABLE>
<CAPTION>
UNITED STATES INDONESIA SOUTH AMERICA WORLDWIDE
-------------------------- ---------------------------- ---------------------- ----------------------------
1994 1993 1992 1994 1993 1992 1994 1993 1992 1994 1993 1992
------ -------- -------- -------- -------- -------- ------ ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Future cash
flows.......... $967.3 $1,781.2 $1,557.5 $3,389.0 $3,269.8 $3,538.7 $831.9 $700.9 $708.8 $5,188.2 $5,751.9 $5,805.0
Future
production and
development
costs.......... (324.7) (521.6) (457.0) (2,246.8) (2,258.1) (2,024.1) (371.8) (500.9) (423.5) (2,943.3) (3,280.6) (2,904.6)
Future income
tax expenses... (92.8) (152.4) (154.7) (503.1) (438.5) (707.1) (53.6) (81.9) (64.0) (649.5) (672.8) (925.8)
------ -------- -------- -------- -------- -------- ------ ------ ------ -------- -------- --------
Future net cash
flows.......... 549.8 1,107.2 945.8 639.1 573.2 807.5 406.5 118.1 221.3 1,595.4 1,798.5 1,974.6
Annual discount
at 10% rate.... (241.1) (414.0) (303.5) (261.7) (238.2) (342.8) (162.8) (85.0) (158.7) (665.6) (737.2) (805.0)
------ -------- -------- -------- -------- -------- ------ ------ ------ -------- -------- --------
Standardized
measure of
discounted
future net cash
flows.......... $308.7 $ 693.2 $ 642.3 $ 377.4 $ 335.0 $ 464.7 $243.7 $ 33.1 $ 62.6 $ 929.8 $1,061.3 $1,169.6
====== ======== ======== ======== ======== ======== ====== ====== ====== ======== ======== ========
</TABLE>
The following are the principal sources for change in the standardized
measure:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
January 1........................................ $1,061.3 $1,169.6 $1,094.2
Sales and transfers of oil and gas produced,
net of production costs....................... (334.9) (399.6) (437.0)
Net changes in prices and production costs..... 103.4 (443.6) (29.1)
Extensions, discoveries and improved recovery,
less related costs............................ 68.0 229.9 202.3
Previously estimated development costs incurred
during the year............................... 123.2 217.4 17.8
Revisions of previous quantity estimates....... 56.6 13.6 82.3
Purchase of reserves in place.................. .4 18.8 30.3
Sale of reserves in place...................... (275.7) (.9) (10.0)
Net change in income taxes..................... (22.6) 170.5 7.9
Accretion of discount.......................... 132.4 172.3 167.7
Other.......................................... 17.7 (86.7) 43.2
-------- -------- --------
December 31...................................... $ 929.8 $1,061.3 $1,169.6
======== ======== ========
</TABLE>
F-30
<PAGE>
Quarterly Data
<TABLE>
<CAPTION>
1994
-----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, FOR THE YEAR
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales and operating
revenues............... $187.1 $167.5 $170.2 $157.3 $682.1
Gross profit (a) (b).... 43.8 44.6 57.1 46.8 192.3
Net income (loss)....... (11.2) 30.1 (16.0) (25.6)(c) (22.7)
Per Common Share
Net income (loss)..... (.17) .13 (.19) (.26) (.49)
Market price per share:
Common Stock
High................ 5 7/8 5 1/4 5 7/8 4 3/4 5 7/8
Low................. 4 1/8 4 1/8 4 1/2 3 1/4 3 1/4
$4.00 Preferred Stock
High................ 45 3/4 41 1/8 40 1/2 37 3/4 45 3/4
Low................. 39 33 5/8 37 30 1/8 30 1/8
$2.50 Preferred Stock
High................ 25 3/4 23 1/4 23 3/8 22 3/4 25 3/4
Low................. 21 1/4 20 21 3/4 17 1/2 17 1/2
<CAPTION>
1993
-----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, FOR THE YEAR
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales and operating
revenues............... $192.0 $204.2 $193.1 $197.4 $786.7
Gross profit (a) (b).... 65.1 60.3 52.5 45.7 223.6
Net income (loss) before
extraordinary item and
cumulative effect of
change in accounting
principle.............. .2 (3.9) (7.4) (26.8) (37.9)
Extraordinary item...... (3.2) (3.9) (7.1)
Cumulative effect of
change in accounting
principle.............. (4.4) (4.4)
Net loss................ (4.2) (3.9) (10.6) (30.7) (49.4)
Per Common Share
Loss before
extraordinary item
and cumulative effect
of change in
accounting principle. (.07) (.11) (.14) (.28) (.60)
Extraordinary item.... (.02) (.03) (.05)
Cumulative effect of
change in accounting
principle............ (.03) (.03)
Net loss.............. (.10) (.11) (.16) (.31) (.68)
Market price per share:
Common Stock
High................ 9 3/4 10 3/8 9 3/4 7 3/8 10 3/8
Low................. 6 1/8 8 3/8 7 3/8 4 1/2 4 1/2
$4.00 Preferred Stock
High................ 49 49 3/8 49 7/8 48 7/8 49 7/8
Low................. 42 5/8 46 1/4 47 1/8 40 40
$2.50 Preferred Stock
High................ 25 25
Low................. 23 1/2 23 1/2
</TABLE>
- --------
(a) Gross profit is sales and operating revenues less purchases and operating
expenses, gas purchase costs and depreciation, depletion and amortization.
(b) Gross profit has been restated to conform to the 1994 year-end
presentation.
(c) In the fourth quarter of 1994, the Company increased its reserve for future
environmental liabilities by $49.0 million.
F-31
<PAGE>
Exhibit Index
(exhibits filed herewith)
<TABLE>
<CAPTION>
<S> <C>
10.1 --1992 Director Stock Option plan of the Company.
21.1 --List of Subsidiaries of the Company.
23.1 --Consent of Independent Accountants.
24.1 --Powers of Attorney of directors and officers of the Company.
27.1 --Financial Statement Schedule.
</TABLE>
<PAGE>
EXHIBIT 10.1
MAXUS ENERGY CORPORATION
1992 DIRECTOR STOCK OPTION PLAN
1. AGGREGATE LIMITATIONS. The total number of shares of Common Stock, $1.00
par value ("Common Stock"), of Maxus Energy Corporation (the "Corporation")
which may be issued, sold and delivered under the 1992 Director Stock Option
Plan (the "Plan") shall not exceed 500,000, except to the extent of adjustments
authorized by Section 2 hereof. Any share of Common Stock subject to an
"Option" (hereinafter defined in Section 3) which is terminated, is unexercised,
expires, is forfeited or is surrendered for any reason whatsoever shall again be
available for issuance under the Plan.
2. ADJUSTMENT. (a) If any merger, consolidation or other business combination,
transaction, recapitalization, stock dividend, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other event has the effect of diluting, enlarging or otherwise
changing the aggregate number of shares of Common Stock reserved for issuance
pursuant to the Plan or the number and option price of shares of Common Stock
subject to outstanding Options granted pursuant to the Plan immediately prior
thereto, such number of shares reserved for issuance and number and option price
of shares subject to outstanding Options shall be adjusted so that, assuming
that Options had been previously granted for all of the shares of Common Stock
so reserved, the Participants (hereinafter defined in Section 3) would be
entitled to receive for the same aggregate price that number of shares of Common
Stock or other capital stock of the Corporation which they would have owned as a
result of exercising their Options after the happening of any of the events
described above had they exercised all of such Options prior to the happening of
such event. An adjustment made pursuant to this Section 2(a) shall become
effective immediately after the record date in the case of a dividend and shall
become effective immediately after the effective date in the case of all other
described transactions.
(b) No adjustment pursuant to this Section 2 shall be required unless such
adjustment would require an increase or decrease of at least 1% in such number
or price; PROVIDED, HOWEVER, that any adjustments that would reflect the
foregoing changes but which by reason of this Section 2 are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 2 shall be made to the nearest
cent or to the nearest full share, as the case may be.
(c) Whenever an adjustment is made pursuant to this Section 2, the Corporation
shall promptly prepare a notice of such adjustment setting
1
<PAGE>
forth the terms of such adjustment and the date on which such adjustment becomes
effective and shall mail such notice of such adjustment to the Participants at
their respective addresses appearing on the records of the Corporation or at
such other address any Participant may from time to time designate in writing to
the Secretary of the Corporation.
3. GRANT AND ELIGIBILITY. All directors of the Corporation who are not full
time employees of the Corporation ("Non-employee Directors" or "Participants")
are eligible to be granted stock options ("Options") which are not intended to
qualify for special treatment under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), to purchase Common Stock under the Plan. On the
effective date of the Plan ("Effective Date"), each person who is then a Non-
employee Director of the Corporation shall receive an Option to purchase 10,000
shares of Common Stock. Thereafter and in addition, upon (a) the initial
election of a Non-employee Director to the Corporation's Board of Directors,
whether at an Annual Meeting of Stockholders of the Corporation ("Annual
Meeting") or otherwise in accordance with the Corporation's By-Laws or (b) the
re-election of a Non-employee Director at an Annual Meeting, such Non-employee
Director shall automatically receive an Option to purchase 10,000 shares of
Common Stock.
4. TERMS AND CONDITIONS. Options granted under the Plan shall be evidenced
by option agreements and shall be subject to the following terms and conditions:
(a) OPTION PRICE. The option price per share of Common Stock purchasable under
an Option shall be the Fair Market Value of the Stock on the date of grant.
(b) DATE OF GRANT. The date of grant shall be the Effective Date in the case
of the initial grant of Options hereunder and shall be the date the Non-employee
Director is elected or re-elected to the Board in the case of grants subsequent
to the Effective Date.
(c) OPTION TERM. Subject to Section 4(f), the term of each Option shall
commence as of the date of the grant and shall terminate on the tenth
anniversary of that date.
(d) EXERCISE. Each Option shall become exercisable on the date which is six
months and one day after the date of the grant and shall thereafter be
exercisable during the term of such Option, subject to Section 4(f).
(e) METHOD OF EXERCISE. When exercisable in accordance with Section 4(d),
Options may be exercised, in whole or in part, by giving written notice of
exercise to the Secretary of the Corporation specifying the number of shares of
Common Stock to be purchased. Such notice shall be accompanied by payment in
full of the option price of the shares of Common Stock for which the Option is
exercised, in cash or by check or such other instrument as the Corporation may
accept, and the payment or provision for
2
<PAGE>
payment in a manner satisfactory to the Corporation of any state, federal or
local withholding taxes attributable to the exercise of the Option.
No Common Stock shall be issued pursuant to an exercise of an Option until full
payment has been made. A Participant shall not have rights to dividends or any
other rights of a stockholder with respect to any Common Stock subject to an
Option unless and until the Participant has given written notice of exercise,
has paid in full for such shares and such shares have been issued to him.
(f) DEATH OR RETIREMENT OF PARTICIPANT. If any Participant ceases to be a
director of the Corporation for any reason, including death, (such event
referred to as "Termination Event") while holding unexercised Options, any
Option held by such Participant at the time of the Termination Event may
thereafter be exercised, to the extent such Option was exercisable at that time,
by such Participant or by the estate of the Participant (acting through its
fiduciary), for a period of three years from the date of the Termination Event,
but in no event beyond the tenth anniversary of the date of grant.
5. FAIR MARKET VALUE. As used in the Plan (unless a different method of
calculation is required by applicable law), "Fair Market Value" on any date
shall mean the closing price of the Common Stock as reported in the New York
Stock Exchange Composite Transactions Report (or any other consolidated
transactions reporting system which subsequently may replace such Composite
Transactions Report) for the New York Stock Exchange trading day immediately
preceding such date, or if there are no sales on such date, on the next
preceding day on which there were sales.
6. NON-TRANSFERABILITY. No Option shall be transferable other than by will
or the applicable laws of descent and distribution.
7. EFFECTIVE DATE; AMENDMENT; TERMINATION. The Plan shall be effective as of
September 1, 1992. The Plan shall terminate on September 1, 2002, and no
Options shall be granted hereunder after such termination. The Corporation may
at any time, in its sole discretion, amend, alter or discontinue the Plan, but
no such amendment, alteration or discontinuation shall be made which would
impair the rights of a Participant under an Option theretofore granted, without
the Participant's consent. Any provision in the immediately preceding sentence
to the contrary notwithstanding, this plan may 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.
8. REGISTRATION, ETC. Notwithstanding any other provision hereof, the
Options will not be exercisable unless the Common Stock to be issued pursuant to
such exercise is subject to an effective registration statement under the
Securities Act of 1933, as amended, or if such exercise would result in a
violation of any applicable federal or state
3
<PAGE>
securities law. The Corporation will use reasonable efforts to comply with any
such applicable laws.
9. SUSPENSION. Any provision herein to the contrary notwithstanding, if on
the date of grant of any Option hereunder the General Counsel ("General
Counsel") of the Corporation determines, in his sole discretion, that the
Corporation is in possession of material, undisclosed information that would
prevent it from issuing securities, the grant of such Option(s) will be
suspended until the General Counsel determines, in his sole discretion, that the
Corporation is no longer in possession of material, undisclosed information that
would prevent it from issuing securities. The General Counsel may only suspend
the date of grant; the amount, pricing and other terms of any such Option will
be as set forth in the Plan, except the price of the Option will be determined
on the date such Option is granted. Any determination by the General Counsel
will be made in writing. If the grant of an Option is suspended, the term of
such Option will begin to run as of the date the Option is granted.
4
<PAGE>
EXHIBIT 21.1
ORGANIZATIONAL LIST OF SUBSIDIARIES,
MAXUS ENERGY CORPORATION
(Subsidiaries are shown as indented under their immediate parent. Unless
otherwise noted, all companies are 100% owned.)
MAXUS ENERGY CORPORATION
Diamond Shamrock Europe Limited
Maxus (U.S.) Exploration Company
Wheeling Gateway Coal Company (Partnership)
MAXUS INTERNATIONAL ENERGY COMPANY
Falcon Seaboard, Inc.
Maxus Angola, Inc.
Maxus Aru Inc.
Maxus Bolivia, Inc.
Maxus Bulgaria, Inc.
Maxus Chile, Inc.
Maxus China (C.I.) Ltd.
Maxus Colombia, Inc.
Maxus Egypt, Inc.
Maxus Energy Co. (U.K.) Limited
Maxus Energy Global B.V.
Maxus Ethiopia, Inc.
Maxus Fifi Zaitun, Inc.
Maxus Gabon Inc
Maxus International Services Company
Maxus Madagascar, Inc.
Maxus Mahdia East, Inc.
Maxus Morocco, Inc.
Maxus New Zealand Limited
Maxus North Sea, Inc.
Maxus Paraguay, Inc.
Maxus Slovakia, Inc
Maxus Bratislava Association (50%)
Maxus Southeast Asia New Ventures, Inc.
Maxus Spain, Inc.
Maxus Tasmania, Inc.
Maxus Tunisia Inc.
Maxus Venezuela (C.I.) Ltd.
Maxus Venezuela S.A.
Natomas Company
Natomas Overseas Finance N.V.
Natomas Energy Company
Maxus Ecuador Inc.
<PAGE>
Maxus Energy Trading Company
Maxus Northwest Java, Inc.
Maxus Southeast Sumatra Inc.
Natomas Trading Company
Transworld Petroleum Corporation
MIDGARD ENERGY COMPANY
Maxus Gas Marketing Company
Maxus Industrial Gas Company
Maxus Offshore Exploration Company
Natomas North America, Inc.
Trice Properties, Inc
MAXUS CORPORATE COMPANY
Biospecific Technologies, Inc.
Boja Realty Corp.
Quail Hollow Properties, Inc.
Chemical Land Holdings, Inc.
Crile Road Investments, Inc.
CSBWMD All Terrain Vehicles, Inc.
Delaware City Plastics Corporation
Diamond Gateway Coal Company
Gateway Coal Company (Partnership)
Diamond Shamrock Venezolana, S.A.
DSC Acquisition, Inc.
DSC Holdings, Inc.
DSC Investment Management Company
DSC Receivables, Inc.
DST Corporation
Duolite International, Inc.
Emerald Mining Company
Gateway Land Company
Greenstone Assurance Ltd.
Insulating Aggregates, Inc.
Leon Properties, Inc. (d/b/a Riverside Farms)
RMC Securities, Inc.
Maxus Agricultural Chemicals, Inc.
DSC Products International, Inc.
Fint Corporation
DS Investments, S.A. (99.97%)
Maxus International Corporation
Maxus Realty Company
OCV Corporation
QHRP Investments, Inc.
The Harbor Land Company
V.E.P. Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting parts of the Registration Statement on Form S-3 No. 33-61350 and
the Registration Statements on Form S-8 (Nos. 2-85403, 33-6693, 33-28353, 33-
47538, 33-55857, 33-55938 and 33-55918, respectively), and any existing
amendments thereto, of Maxus Energy Corporation of our report dated February
28, 1995 appearing on Page F-26 of this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Dallas, Texas
March 17 1995
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
THE STATE OF TEXAS
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS
That each undersigned hereby constitutes and appoints Lynne P. Ciuba, H.R.
Smith and David A. Wadsworth, and each of them, his true and lawful attorney or
attorneys-in-fact with full power of substitution and resubstitution, for him
and in his name, place and stead, to sign on his behalf as a director or
officer, or both, as the case may be, of Maxus Energy Corporation (the
"Corporation") the Corporation's Form 10-K Annual Report pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, for fiscal year ended
December 31, 1994, and to sign any or all amendments to such Form 10-K, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney or attorneys-in-fact, and to each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney or
attorneys-in-fact or any of them or their substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
January 31, 1995
J. DAVID BARNES RAYMOND A. HAY
- --------------- --------------
J. David Barnes Raymond A. Hay
CHARLES L. BLACKBURN GEORGE L. JACKSON
- -------------------- -----------------
Charles L. Blackburn George L. Jackson
B. CLARK BURCHFIEL JOHN T. KIMBELL
- ------------------ ---------------
B. Clark Burchfiel John T. Kimbell
BRUCE B. DICE RICHARD W. MURPHY
- ------------- -----------------
Bruce B. Dice Richard W. Murphy
M. C. FORREST JOSE MARIA PEREZ ARTETA
- ------------- -----------------------
M. C. Forrest Jose Maria Perez Arteta
CHARLES W. HALL R. A. WALKER
- --------------- ------------
Charles W. Hall R. A. Walker
W. THOMAS YORK
--------------
W. Thomas York
***
G. R. BROWN G. W. PASLEY
- ----------- ------------
G. R. Brown G. W. Pasley
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