<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996 COMMISSION FILE NUMBER 1-8674
GLOBAL NATURAL RESOURCES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 93-0835865
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OF ORGANIZATION) IDENTIFICATION NO.)
5300 MEMORIAL DRIVE 77007
SUITE 800 (ZIP CODE)
HOUSTON, TEXAS
ADDRESS OF PRINCIPAL
(EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 880-5464
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X YES NO
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of August 1, 1996, 29,774,600 shares of common stock were
outstanding.
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TABLE OF CONTENTS
<TABLE>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . 1
Consolidated Balance Sheets - June 30, 1996 and December 31, 1995 . . . . 1
Consolidated Statements of Operations for the Three Months and the Six
Months Ended June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 11
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 16,801 $ 10,272
Short-term liquid investments . . . . . . . . . . . . . . . . . . . . . -- 5,004
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 13,399 11,811
Current investments . . . . . . . . . . . . . . . . . . . . . . . . . . 154 481
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,902 6,482
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 34,256 34,050
-------- --------
Properties and equipment, at cost:
Oil and gas properties (successful efforts method) . . . . . . . . . . . 183,751 169,590
Pipeline facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 19,564 19,519
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,426 13,052
-------- --------
216,741 202,161
Less: accumulated depletion, depreciation and amortization . . . . . . . (89,707) (83,398)
-------- --------
Net properties and equipment . . . . . . . . . . . . . . . . . . . . . 127,034 118,763
-------- --------
Notes receivable - Russian joint venture . . . . . . . . . . . . . . . . . 3,060 3,867
Indonesian venture advances, net . . . . . . . . . . . . . . . . . . . . . 1,838 2,425
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,140 1,224
-------- --------
$167,328 $160,329
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,641 $ 11,207
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 10,337 16,341
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . 1,250 436
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,049 803
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 23,277 28,787
-------- --------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,250 11,764
Deferred credits and other . . . . . . . . . . . . . . . . . . . . . . . . 624 961
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . . . . -- --
Redeemable bearer shares . . . . . . . . . . . . . . . . . . . . . . . . . 16,265 16,591
Shareholders' equity:
Common stock; authorized 100,000,000 shares at $1.00 par value;
issued and outstanding 33,648,987 in 1996 and 33,433,987 in 1995 . . . 33,649 33,434
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . 140,266 138,967
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (43,328) (50,474)
-------- --------
130,587 121,927
Less: treasury stock; 3,882,487 shares in 1996 and 3,887,513 in 1995 . . (19,675) (19,701)
-------- --------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . 110,912 102,226
-------- --------
$167,328 $160,329
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
1
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GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas . . . . . . . . . . . . . . . . $ 22,835 $ 13,604 $ 45,555 $ 27,781
Pipeline . . . . . . . . . . . . . . . . . 4,196 4,145 9,550 8,548
Other . . . . . . . . . . . . . . . . . . . 192 128 411 269
----------- ----------- ----------- -----------
27,223 17,877 55,516 36,598
----------- ----------- ----------- -----------
Expenses:
Production . . . . . . . . . . . . . . . . 5,042 3,264 9,289 6,197
Exploration . . . . . . . . . . . . . . . . 3,216 4,064 5,944 7,020
Pipeline cost of sales . . . . . . . . . . 3,800 3,729 8,767 7,777
Depletion, depreciation and amortization . 6,295 6,711 12,278 11,584
Administrative . . . . . . . . . . . . . . 2,306 2,216 5,582 4,764
----------- ----------- ----------- -----------
20,659 19,984 41,860 37,342
----------- ----------- ----------- -----------
Income(loss) from operations . . . . . 6,564 (2,107) 13,656 (744)
Other income (expense):
Interest income . . . . . . . . . . . . . . 403 470 738 1,012
Interest expense . . . . . . . . . . . . . (14) (25) (29) (77)
Other, net . . . . . . . . . . . . . . . . (193) (122) (207) (174)
----------- ----------- ----------- -----------
196 323 502 761
----------- ----------- ----------- -----------
Income (loss) before income tax expense 6,760 (1,784) 14,158 17
Income tax expense . . . . . . . . . . . . . . 3,434 2,139 7,012 4,674
----------- ----------- ----------- -----------
Net income (loss) . . . . . . . . . . . . . $ 3,326 $ (3,923) $ 7,146 $ (4,657)
=========== =========== =========== ===========
Net income (loss) per share based on weighted
average shares outstanding:
Net income (loss) primary . . . . . . . . . $ .11 $ (.13) $ .24 $ (.16)
=========== =========== =========== ===========
Net income (loss) assuming full dilution . $ .11 $ (.13) $ .23 $ (.16)
=========== =========== =========== ===========
Weighted average common shares outstanding:
Primary . . . . . . . . . . . . . . . . . . 29,712,306 29,477,480 29,657,299 29,458,353
=========== =========== =========== ===========
Assuming full dilution . . . . . . . . . . 29,712,306 29,477,480 30,472,144 29,458,353
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
Six Months Ended
June 30,
-----------------------------
1996 1995
-------- ---------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,146 $ (4,657)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depletion, depreciation and amortization . . . . . . . . . . . . 12,278 11,584
Leasehold impairments and dry hole expense . . . . . . . . . . . 2,159 4,325
Unrealized gain on short-term liquid investments . . . . . . . . (6) (215)
(Gain) loss on asset sales . . . . . . . . . . . . . . . . . . . 3 (16)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35) 225
-------- ---------
21,545 11,246
-------- ---------
Changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (1,588) (1,676)
Other current assets . . . . . . . . . . . . . . . . . . . . . . 3,138 2,171
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . (566) (66)
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . (6,004) (1,978)
Short-term liquid investments . . . . . . . . . . . . . . . . . . 5,010 18,806
Deferred credits . . . . . . . . . . . . . . . . . . . . . . . . (337) (710)
-------- ---------
Net cash provided by operating activities . . . . . . . . . . . . . . 21,198 27,793
-------- ---------
Cash Flows from Investing Activities:
Additions to oil and gas properties . . . . . . . . . . . . . . . . . (22,380) (23,469)
Additions to pipeline facilities and other properties and equipment . (420) (412)
Proceeds from asset sales . . . . . . . . . . . . . . . . . . . . . . 251 548
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,306 (669)
-------- ---------
Net cash used in investing activities . . . . . . . . . . . . . . . . (21,243) (24,002)
-------- ---------
Cash Flows from Financing Activities:
Proceeds from common stock issuance . . . . . . . . . . . . . . . . . 1,514 509
Redemptions of bearer shares . . . . . . . . . . . . . . . . . . . . (326) (337)
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . 5,300 --
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . -- (1,275)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 (480)
-------- ---------
Net cash provided by (used in) financing activities . . . . . . . . . 6,574 (1,583)
-------- ---------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . 6,529 2,208
Cash and cash equivalents at beginning of period . . . . . . . . . . 10,272 3,881
-------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 16,801 $ 6,089
======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Supplemental disclosure of cash flow information:
<TABLE>
<S> <C> <C>
Cash paid for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ 53
============ ===========
Income taxes - Foreign . . . . . . . . . . . . . . . . . . . . . . $ 6,466 $ 3,857
============ ===========
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
In connection with the Company's Employees 401(k) Savings Plan, the Company
contributed 5,026 treasury shares during the six month period ended June 30,
1996 with a market value of approximately $72,000 to the plan. During the six
month period ended June 30, 1995, the Company contributed 8,704 treasury shares
with a market value of approximately $73,000 to the plan.
See accompanying notes to consolidated financial statements.
4
<PAGE> 7
GLOBAL NATURAL RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(1) Basis for Preparation of Financial Statements
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to
such rules and regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading. It is suggested
that these consolidated financial statements be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
In Management's opinion, the accompanying unaudited consolidated financial
statements contain all necessary adjustments to present fairly the financial
position, the results of operations and cash flows for the periods reported.
All adjustments are of a normal recurring nature.
Certain reclassifications have been made to the 1995 financial statements
to conform to the presentation used in 1996.
The results of operations for the above periods are not necessarily
indicative of the results to be expected for the full year.
(2) Investments
The Company's securities are classified as trading securities and are
recorded at fair value. Unrealized holding gains and losses on trading
securities are included in earnings. Dividend and interest income are
recognized when earned.
Marketable investment securities at December 31, 1995 and June 30, 1996
consist of certificates of deposit and U.S. government and corporate debt
securities (included in short-term liquid investments) and equity securities
(included in current investments). During the six month period ended June 30,
1996, the Company recorded $231,000 of unrealized losses resulting from changes
in the difference between cost and market value of short-term liquid
investments and equity securities. During the six month period ended June 30,
1995, the Company recorded $86,000 of unrealized losses resulting from these
same changes.
(3) Redeemable Bearer Shares
In August 1993, the Company received $19.2 million, the cash held by the
Hambros Channel Islands Trust Corporation Limited ("Trust"), in the form of an
interest-free loan. The loan is repayable on demand only to the extent
necessary to redeem bearer share warrants presented for exchange until July
2008. Each bearer share warrant presented during this period will be redeemed
for $6.66. As of June 30, 1996, there were 2,504,969 outstanding bearer share
warrants. The loan is secured by a letter of credit which is issued under the
Credit Agreement (see Note 4). During 1996 and 1995 there were no drawings
under the letter of credit. In July 2008, the obligation of the Company to
holders of bearer share warrants will cease, the interest-free loan will
terminate, and any remaining cash will revert to the Company and will be
accounted for as an increase to capital in excess of par value.
(4) Long-Term Debt
On July 16, 1996, the Company amended its Credit Agreement dated May 19,
1995 (the "Credit Agreement"). Pursuant to the Credit Agreement, the bank has
agreed to provide loans to the Company from time to time, not to exceed in the
aggregate $41.6 million (subject in all events to certain periodic reductions
and to the calculation of the Available Borrowing Base, as defined in the
Credit Agreement). The Company may borrow, repay and re-borrow such amounts
available under the Credit Agreement until March 31, 2001 (subject to certain
early termination dates determined in accordance with the Credit Agreement).
In addition, the bank has agreed to extend
5
<PAGE> 8
credit to the Company (or any subsidiary of the Company) by issuing, renewing,
extending or reissuing letters of credit not exceeding the lesser of (i) $20
million or (ii) the Aggregate Commitments (as defined in the Credit Agreement)
minus the aggregate principal amount of all loans then outstanding under the
Credit Agreement. The loan facility is unsecured. As of June 30, 1996 and
December 31, 1995, the Company, under this agreement, had no loans outstanding
and had approximately $18 million in letters of credit issued. These letters
of credit are primarily associated with the Redeemable Bearer Shares (see Note
3).
GNR (Cote d'Ivoire) Ltd., a wholly owned subsidiary of the Company,
executed a Financing Agreement dated July 14, 1995 (the "Financing Agreement")
with the International Finance Corporation ("IFC"), a subsidiary of the World
Bank. The Financing Agreement is secured by the present and future assets of
GNR (Cote d'Ivoire) Ltd. ("the Borrower"). Until the completion date of the
project, as defined, the loan is guaranteed by the Company. After completion
of the project, the amount guaranteed by the Company, if any, is determined by
the amount of the proved oil and gas reserves related to the activities. As of
June 30, 1996, the Borrower, under this agreement, had approximately $17.5
million of loans outstanding. The Financing Agreement contains covenants
which, among other things, require the Borrower to maintain a cash reserve
amount equal to the aggregate of the principal and interest which will be due
and payable within the next six months.
(5) Earnings per Share
Earnings per share is computed based upon the weighted average common
shares outstanding, determined on a monthly basis. Unexercised stock options
have a dilutive effect on the reported earnings per common share for the six
months ended June 30, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Introduction
The Company recorded net income of $7.1 million ($.24 per share) for the
first six months of 1996, as compared to a net loss of $4.7 million ($.16 per
share) for the same period in 1995. The 1996 results include dry hole expenses
of $1.6 million, while 1995 results include $3.8 million of similar expenses.
Results of Operations - Six Months Ended June 30, 1996 and 1995
Oil and Gas Revenues are summarized for the six months ended June 30, 1996 and
1995 in the following table:
<TABLE>
<CAPTION>
Revenues Price Volumes
------------------------ ---------------------- ---------------------------------
1996 1995 1996 1995 1996 1995
-------- -------- ------- --------- -------------- --------------
(thousands of dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States
Oil . . . . . . . $ 3,850 $ 2,219 $18.45 $17.59 209 MBbls 126 MBbls
Gas . . . . . . . $15,445 $10,848 $ 2.23 $ 1.47 6.9 Bcf 7.4 Bcf
Russia
Oil . . . . . . . $ 7,066 $ 7,253 $13.89 $15.55 509 MBbls 466 MBbls
Ivory Coast
Oil . . . . . . . $ 5,061 $ 682 $18.49 $15.04 274 MBbls 45 MBbls
Gas . . . . . . . $ 1,415 n/a $ 1.71 n/a .8 Bcf n/a
Egypt
Oil . . . . . . . $ 4,959 n/a $19.02 n/a 261 MBbls n/a
Indonesia
Oil . . . . . . . $ 462 $ 451 n/a n/a n/a n/a
Gas . . . . . . . $ 7,297 $ 6,328 n/a n/a n/a n/a
</TABLE>
United States oil revenues increased 74% in the first six months of 1996 as
compared to the first six months of 1995. The increased revenues are
reflective of a 66% increase in volumes and a $0.86 increase in price received
per barrel. United States oil volumes increased 83 MBbls from the first half
of 1995 compared to the first half of 1996. This increase was primarily due to
production from a new offshore property, High Island Block 442.
6
<PAGE> 9
United States gas revenues increased 42% during the first six months of
1996 as compared to the same period during 1995. This increase was primarily
the result of a 52% increase in gas price which was partially offset by a 7%
decrease in gas volumes. The .5 Bcf decrease in gas sales volumes was due to
cessation of production on Mustang Island 783 and normal production declines on
High Island 23L, which were only partially offset by new production from South
Pass 78. The average gas price per Mcf in 1996 includes pricing settlement
dispute proceeds of approximately $0.6 million. The 1996 gas price excluding
these settlement proceeds would have been $2.14.
Russian oil revenues decreased 3% during the first half of 1996 as compared
to the same period in 1995. This decrease was primarily the result of 11%
decrease in price per barrel received. This decrease in price is primarily the
result of selling approximately 174,000 barrels of production on the Russian
domestic market instead of exporting that production and selling it for world
oil prices. Because the Company has not received its export tax exemption for
1996, it does not have priority access to export pipelines and must compete
with Russian production associations for limited pipeline capacity to export
markets. The first quarter of 1996 was the first period during which the
Company did not export all of its Russian production. The Company cannot
predict what percentage of its future production will be sold on the Russian
domestic market. The decrease in price received was partially offset by a 9%
increase in volumes during 1996.
Ivory Coast oil revenues increased 642% during the first six months of 1996
as compared to the first six months of 1995. The increased revenues were
attributable to the 23% increase in price received per barrel and the 509%
increase in volumes. The increased volumes were primarily due to the fact that
oil production did not commence until April 1995.
Ivory Coast gas production began during October 1995 via a gas pipeline
from the offshore production facilities to the capital city of Abidjan. This
gas is sold under a long-term contract with the Ivorian government.
Egyptian oil production began from the Qarun concession in November 1995.
Currently oil is being produced under an "early oil production" authorization
and is being trucked to market at a rate of approximately 12,000 barrels of oil
per day. A 16 inch pipeline from the field to Dashour has been completed and
is expected to be operational in late September 1996.
Indonesian liquefied natural gas (LNG) liftings for the six months ended
June 30, 1996 totaled 242 as compared to 218 for the same period in 1995. The
Company has not been advised as to specific price or production changes which
would affect Indonesian oil and gas revenues.
Pipeline Operations contributed $9.6 million to consolidated revenues and
incurred $8.8 million in pipeline operating expenses, exclusive of
depreciation, for the six months ended June 30, 1996 as compared to $8.5
million and $7.8 million, respectively, for the same period in 1995. The
pipeline segment generated a net loss from operations before taxes of
approximately $0.1 million for the six months ended June 30, 1996 as compared
to a loss of $0.1 million for the same period in 1995.
Expenses increased to $41.9 million for the six months ended June 30, 1996 as
compared to $37.3 million for the same period in 1995. This 12% increase was
primarily due to increases of $3.1 million, $1.0 million and $0.7 million for
production, pipeline cost of sales and depletion, depreciation and amortization
expenses, respectively. These increases were primarily the result of increased
oil and gas production.
Other Income and Expense decreased approximately $0.3 million for the six
months ended June 30, 1996 compared to the same period in 1995. This decrease
is primarily the result of decreased interest income.
7
<PAGE> 10
Results of Operations - Three Months Ended June 30, 1996 and 1995
Oil and Gas Revenues are summarized for the three months ended June 30, 1996
and 1995 in the following table:
<TABLE>
<CAPTION>
Revenues Price Volumes
-------------------- ---------------------- -------------------------------
1996 1995 1996 1995 1996 1995
------ -------- -------- -------- ------------- --------------
(thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
United States
Oil . . . . . . . . . . $1,505 $1,100 $19.46 $17.87 78 MBbls 62 MBbls
Gas . . . . . . . . . . $8,101 $5,188 $ 2.37 $ 1.54 3.4 Bcf 3.4 Bcf
Russia
Oil . . . . . . . . . . $3,861 $3,428 $14.71 $15.89 262 MBbls 216 MBbls
Ivory Coast
Oil . . . . . . . . . . $2,248 $ 682 $17.96 $15.04 125 MBbls 45 MBbls
Gas . . . . . . . . . . $ 720 n/a $ 1.70 n/a .4 Bcf n/a
Egypt
Oil . . . . . . . . . . $2,872 n/a $19.32 n/a 149 MBbls n/a
Indonesia
Oil . . . . . . . . . . $ 249 $ 226 n/a n/a n/a n/a
Gas . . . . . . . . . . $3,279 $2,980 n/a n/a n/a n/a
</TABLE>
United States oil revenues increased 37% during the second quarter of 1996
as compared to the second quarter of 1995. The increased revenues are
reflective of a 26% increase in volumes and a $1.59 increase in price received
per barrel. United States oil volumes increased 16 MBbls from the second
quarter of 1995 compared to the second quarter of 1996. This increase was
primarily due to production from a new offshore property, High Island Block
442.
United States gas revenues increased 56% during the second quarter of 1996
as compared to the same period during 1995. This increase was primarily the
result of a $0.83 increase in gas price per Mcf. The average gas price during
the second quarter of 1996 includes pricing dispute settlement proceeds
received of approximately $0.6 million. The gas price excluding these
settlement proceeds would have been $2.18.
Russian oil revenues increased 13% during the second quarter of 1996 as
compared to the same period in 1995. This increase was primarily the result of
a 21% increase in volumes. This volume increase was partially offset by a 7%
decrease in price. This decrease in price is primarily the result of selling
approximately 37,000 barrels of production on the Russian domestic market
instead of exporting that production and selling it for world oil prices.
Because the Company has not received its export tax exemption for 1996, it does
not have priority access to export pipelines and must compete with Russian
production associations for limited pipeline capacity to export markets. The
first quarter of 1996 was the first period during which the Company did not
export all of its Russian production. The Company cannot predict what
percentage of its future production will be sold on the Russian domestic
market.
Ivory Coast oil revenues increased 230% during the second quarter of 1996
as compared to the second quarter of 1995. The increased revenues are
attributable to the 19% increase in price received per barrel and the 178%
increase in volumes. The increased volumes were primarily due to the fact that
oil production began late in April 1995 and was held at a restricted rate while
initial production difficulties were resolved.
Ivory Coast gas production began during October 1995 via a gas pipeline
from the offshore production facilities to the capital city of Abidjan. This
gas is sold under a long-term contract with the Ivorian government.
Egyptian oil production began from the Qarun concession November 1995.
Currently oil is being produced under an "early oil production" authorization
and is being trucked to market at a rate of approximately 12,000 barrels of oil
per day. A 16 inch pipeline from the field to Dashour has been completed and
is expected to be operational in late September 1996.
Indonesian LNG liftings for the three months ended June 30, 1996 totaled
112 as compared to 98 for the same period in 1995. The Company has not been
advised as to specific price or production changes which would affect
Indonesian oil and gas revenues.
8
<PAGE> 11
Expenses increased only slightly to $20.7 million for the three months ended
June 30, 1996 as compared to $20.0 million for the same period in 1995. A $1.8
million increase in production expenses was partially offset by $0.8 million
and $0.4 million decreases in exploration and depletion expenses, respectively.
Liquidity and Capital Resources
Cash and cash equivalents increased by $6.5 million during the first six
months of 1996. This increase was primarily due to the $5.0 million decrease
in short-term liquid investments during the period.
Cash provided by operating activities for the six months ended June 30,
1996 was $21.2 million compared to $27.8 million for the same period in 1995.
This decrease was primarily due to the $13.8 million decrease in changes in
short-term liquid investments and the $4 million decrease in accrued
liabilities which were partially offset by the $11.8 million increase in net
income. The Company expended approximately $22.8 million for additions to
properties and equipment in the first six months of 1996 compared to $23.9
million for the same period in 1995. Working capital for the first six months
of 1996 increased by $5.7 million. This increase was primarily due to a $6.0
million accrued liability decrease.
In 1996, the Company intends to direct cash flow from its current base of
domestic properties to expand its exploration and development efforts in the
United States, mainly offshore Gulf of Mexico. The Company intends to direct
its balance sheet cash (cash and short-term investments), its available credit
facilities, if required, and its cash flows from international properties
toward international opportunities. The Company plans to spend in 1996
approximately $14.3 million on exploration and development activities in the
United States. Capital expenditures for international activities, primarily in
Russia, Egypt and the Ivory Coast, are projected to be approximately $37.1
million for 1996. Factors such as political stability in the various host
countries and world oil prices will heavily influence the amount and timing of
these expenditures. The Company believes that it has adequate resources to
fund these planned expenditures.
Subsequent Events
On July 22, 1996, Seagull Energy Corporation ("Seagull"), GNR Merger
Corporation, a wholly-owned subsidiary of Seagull ("Merger Sub"), and the
Company executed and delivered an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Merger Sub shall merge with and into the Company
(the "Merger"). If the Merger is consummated, each share of the Company's
Common Stock, par value $1.00 (the "Global Shares"), shall be converted into
such number of shares of fully paid and nonassessable voting common stock, par
value $.10 per share, of Seagull ("Seagull Common Stock") equal to the Common
Stock Exchange Ratio. The"Common Stock Exchange Ratio" shall be determined as
follows: (i) if the Seagull Transaction Value is equal to or greater than
$27.50, then the Common Stock Exchange Ratio shall be equal to .72, (ii) if the
Seagull Transaction Value is equal to or less than $22.50, then the Common
Stock Exchange Ratio shall be equal to .88 and (iii) if the Seagull Transaction
Value is less than $27.50 and greater than $22.50, the Common Stock Exchange
Ratio shall be determined by linear interpolation between .72 and .88. The
term "Seagull Transaction Value" shall mean the closing sales price of Seagull
Common Stock, counted to four decimal places, as reported under "NYSE Composite
Transaction Reports" in The Wall Street Journal for each of the first 20
consecutive trading days in the period commencing 25 trading days prior to the
date of the Company's shareholder meeting to vote upon the proposed merger.
The Merger is intended to constitute a reorganization under Section 368(a)
of the Internal Revenue Code of 1986, as amended, and is intended to be
accounted for as a "pooling of interests" for financial accounting purposes.
The Merger transactions are subject to the approval of the shareholders of
the Company and Seagull and requisite regulatory approvals. The Merger is
expected to be submitted to the shareholders of the Company in October, 1996.
The Merger is also subject to several other material conditions.
Seagull is an independent energy company primarily engaged in natural gas
exploration, development and production with major positions in the U.S.
Mid-Continent and Mid-South as well as Canada.
The Company has amended its Amended and Restated Rights Agreement dated as
of September 28, 1993 between the Company and Registrar and Transfer Company to
provide that the Merger will not trigger the issuance of Rights under, or any
other provision of, such Amended and Restated Rights Agreement.
9
<PAGE> 12
On July 16, 1996, the Company executed the First Amendment To Credit
Agreement. The effect of this amendment, among other things, was to increase
the Borrowing Base, as defined in the Credit Agreement, from $35 million to
$41.6 million. The amendment also reduced from 100% to 50% of the face amount
of the letters of credit associated with the Redeemable Bearer Shares that are
considered in the determination of the Available Borrowing Base, as defined in
the Credit Agreement.
10
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
None.
Item 2. Changes in Securities:
None.
Item 3. Defaults upon Senior Securities:
None.
Item 4. Submission of Matters to a Vote of Security Holders:
The Annual Meeting of Shareholders of Global Natural Resources Inc.
was held on May 6, 1996 in Houston, Texas. The amendment to the
Company's 1992 Stock Option Plan increasing the aggregate number of
shares for which options may be granted from 1,000,000 to 1,500,000
was adopted by a vote of 21,507,107 shares of common stock in favor
and 3,151,079 shares of common stock against.
Messrs. John A. Brock, Patrick L. Macdougall and R. A. Walker were
elected to the Board of Directors of the Company. The directors
whose terms of office continued after the meeting are Madam Linda F.
Sjoman and Messrs. Paul E. Carlton, James G. Niven, Sidney R.
Petersen and Robert F. Vagt.
Item 5. Other Information:
None.
Item 6. Exhibits and Reports on Form 8-K:
a) The following documents are included as an Exhibit to this
report.
4.5 Amendment To Rights Agreement dated as of July 22, 1996
between Global Natural Resources Inc. and Registrar
and Transfer Company.
10.44 The First Amendment To Credit Agreement by and Among
Global Natural Resources Corporation of Nevada as
Borrower, Global Natural Resources Inc., as Guarantor,
and NationsBank of Texas, N.A. as Agent, dated July 16,
1996.
b) Reports on Form 8-K
On July 30, 1996, a Form 8-K was filed with the
Securities and Exchange Commission. This Form 8-K
reported the announced executed Agreement and Plan of
Merger of the Company and Seagull Energy Corporation.
11
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLOBAL NATURAL RESOURCES INC.
-----------------------------
(Registrant)
Date: August 8, 1996 By /s/ Eric Lynn Hill
-------------------------------
Eric Lynn Hill
Senior Vice President-Finance and
Administration
12
<PAGE> 15
EXHIBIT INDEX
4.5 Amendment To Rights Agreement dated as of July 22, 1996 between Global
Natural Resources Inc. and Registrar and Transfer Company.
10.44 The First Amendment To Credit Agreement by and Among Global Natural
Resources Inc., as Guarantor, and NationsBank of Texas, N.A. as agent,
dated July 16, 1996.
27 Financial Data Schedules
<PAGE> 1
EXHIBIT 4.5
AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT, dated as of July 22, 1996 (the "Amendment"), to the
Amended and Restated Rights Agreements dated as of September 28, 1993 (the
"Rights Agreement") between GLOBAL NATURAL RESOURCES INC., a New Jersey
corporation (the "Company"), and REGISTRAR AND TRANSFER COMPANY (the "Rights
Agent").
WHEREAS, Seagull Energy Corporation, GNR Merger Corporation, a
subsidiary of Seagull Energy Corporation ("Sub"), and the Company intend to
enter into an Agreement and Plan of Merger pursuant to which the Sub will merge
with and into the Company; and
WHEREAS, pursuant to and in compliance with Section 28 of the
Rights Agreement, the Company and the Rights Agent desire to amend the Rights
Agreement as set forth in this Agreement to reflect the foregoing;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth herein and in the Rights Agreement, the parties
hereto hereby agree as follows:
1. Section 1(a) of the Rights Agreement is hereby
amended to add the following at the end of the existing language thereof:
"Anything in this Agreement to the contrary
notwithstanding, "Acquiring Person" shall not include
Seagull Energy Corporation, a Texas corporation
("Parent"), GNR Merger Corporation, a New Jersey
corporation and a wholly-owned
<PAGE> 2
EXHIBIT 4.5
subsidiary of Parent ("Sub"), or any Affiliates or Associates
of Parent or Sub, by virtue of (x) the announcement, approval,
execution or delivery of the Agreement and Plan of Merger among
Parent, Sub and the Company, dated as of July 22, 1996 and any
amendments thereto in accordance with its terms (the "Merger
Agreement"), pursuant to which, among other things, the Sub
shall merge with and into the Company (the "Merger") or (y) the
consummation of the Merger and the transactions contemplated by
the Merger Agreement."
2. Section 3(d) of the Rights Agreement is hereby
amended by inserting after "September 28, 1993" in line 5 of the legend set
forth therein the phrase "as amended as of July 22, 1996."
3. Section 13 of the Rights Agreement is hereby amended
to add the following paragraph at the end thereof:
"Notwithstanding any other provision of this Agreement,
neither of the following events shall constitute an occurrence
of the events referred to in Section 13(a), (b) or (c) hereof:
(A) the announcement, approval, execution or delivery of the
Merger Agreement or the Voting Agreement (as defined in the
Merger Agreement) or (B) the consummation of the Merger."
4. The Rights Agreement is hereby amended to add a new
Section 35 which shall read in its entirety as follows:
-2-
<PAGE> 3
EXHIBIT 4.5
"Anything in this Agreement to the contrary notwithstanding,
the announcement, approval, execution or delivery of the Merger
Agreement or the Voting Agreement (as defined in the Merger
Agreement), the acquisition of beneficial ownership of the
Common Stock of the Company pursuant to the Merger and the
consummation of the transactions contemplated by the Merger
Agreement shall not cause Parent, Sub or any Affiliates or
Associates of Parent or Sub to be deemed an Acquiring Person or
to give rise to a Distribution Date, any event referred to in
Section 11 hereof, any of the events referred to in Section
13(a), (b) or (c) hereof or a Shares Acquisition Date."
5. The Form of Right Certificate attached to the Rights
Agreement as Exhibit A is hereby amended by inserting after "September 28,
1993" in line 4 thereof the phrase "as amended as of July 22, 1996."
6. This Amendment shall be governed by and construed in
accordance with the laws of the State of New Jersey without regard to
principles of conflicts of laws.
7. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
8. Expect as expressly set forth herein, this Amendment
shall not by implication or otherwise alter, modify, amend or in any way affect
any of the terms, conditions, obligations, covenants or agreements contained in
the Rights
-3-
<PAGE> 4
EXHIBIT 4.5
Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered and to become effective, all as of
the day and year first above written.
ATTEST: GLOBAL NATURAL RESOURCES INC.
By: /s/ E. Lynn Hill By: /s/ Robert F. Vagt
------------------------------- ----------------------------------
Name: E. Lynn Hill Name: Robert F. Vagt
Title: Secretary Title: Chairman, President and
Chief Executive Officer
ATTEST: REGISTRAR AND TRANSFER COMPANY
By: By: /s/ William P. Tatler
------------------------------ ----------------------------------
Name: Name: William P. Tatler
Title: Title: Vice President
-4-
<PAGE> 1
EXHIBIT 10.44
FIRST AMENDMENT TO CREDIT AGREEMENT
BY AND AMONG
GLOBAL NATURAL RESOURCES
CORPORATION OF NEVADA,
AS BORROWER,
GLOBAL NATURAL RESOURCES INC.,
AS GUARANTOR,
NATIONSBANK OF TEXAS, N.A.,
AS AGENT,
AND
THE LENDERS SIGNATORY HERETO
July 16, 1996
<PAGE> 2
EXHIBIT 10.44
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment")
executed and effective as of the 16th day of July, 1996 (the "Effective Date")
is among GLOBAL NATURAL RESOURCES CORPORATION OF NEVADA, a corporation
organized under the laws of the State of Nevada ("Borrower"); GLOBAL NATURAL
RESOURCES INC., a corporation formed under the laws of the State of New Jersey
("Guarantor"); each of the lenders that is a signatory to the Credit Agreement
(as herein defined) or which becomes a signatory to the Credit Agreement
(individually, together with its successors and assigns, a "Lender" and,
collectively, the "Lenders"); and NATIONSBANK OF TEXAS, N.A., a national
banking association (in its individual capacity, "NationsBank"), as agent for
the Lenders (in such capacity, together with its successors in such capacity,
the "Agent").
W I T N E S S E T H
WHEREAS Borrower, Guarantor, the Lenders, and the Agent made and
entered into that certain Credit Agreement dated as of May 19, 1995
(hereinafter, the "Credit Agreement"), whereby the Lenders agreed to provide
certain loans and extensions of credit to Borrower, subject to the terms and
conditions of the Credit Agreement; and
WHEREAS, Borrower has requested the Agent and the Lenders to amend,
and the Agent and the Lenders have agreed to amend, on the terms and conditions
set forth herein, certain provisions of the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. All capitalized terms that are
defined in the Credit Agreement, but that are not defined in this First
Amendment, shall have the same meanings as defined in the Credit Agreement.
<PAGE> 3
EXHIBIT 10.44
ARTICLE II
AMENDMENTS TO CREDIT AGREEMENT
Section 2.01 Amendments Concerning Definitions. Article I of the
Credit Agreement concerning Definitions is amended hereby as follows:
(a) Definition of Conversion Date. The definition of
"Conversion Date" is amended hereby to read hereafter as follows:
"Conversion Date" shall mean April 30, 1998.
(b) Definition of Revolving Credit Termination Date. The
definition of "Revolving Credit Termination Date" is amended hereby to
delete the phrase "March 31, 2000" and to insert in lieu thereof the
phrase "March 31, 2001."
(c) Definition of Secured Hambros Trust Debt Letter of
Credit. The definition of "Secured Hambros Trust Debt Letter of
Credit" is deleted in its entirety.
(d) Definition of Total Debt. The definition of "Total
Debt" is amended hereby to (i) delete the word "Secured" in the fourth
line of that definition, (ii) insert the word "and" after the phrase
"Letter of Credit" in the fifth line of that definition, and (iii)
delete the phrase "Secured Hambros Trust Debt Letter of Credit, and
(iii)".
Section 2.02 Amendments Concerning Commitments. Article II of the
Credit Agreement concerning Commitments is amended hereby as follows:
(a) Section 2.01(a) is amended hereby to insert the
parenthetical "(for purposes of this test, the LC Exposure shall only
include fifty percent (50%) of the face amount of the Hambros Trust
Debt Letters of Credit)" between the words "Exposure" and "shall" in
the eighth line of that Section.
(b) Section 2.01(b) is amended hereby to insert the
parenthetical "(for purposes of this test, the LC Exposure shall only
include fifty percent (50%) of the face amount of the Hambros Trust
Debt Letters of Credit)" between the words "Exposure" and "at" in the
fifth line of that Section.
(c) Section 2.04(a) is amended hereby to insert the
parenthetical "(for purposes of this calculation, the LC Exposure
shall only include fifty percent (50%) of the face amount of the
Hambros Trust Debt Letters of Credit)" between the word "Exposure" and
the ")" in the fourth line of that section.
(d) The first sentence of Section 2.08(a) is amended
hereby to read as follows:
-2-
<PAGE> 4
EXHIBIT 10.44
"During the period from and after July 16, 1996,
until the Borrowing Base is first thereafter redetermined
pursuant to this Section 2.08, the amount of the Borrowing
Base shall be $41,600,000."
Section 2.03 Amendment Concerning Representations and Warranties.
Article VII of the Credit Agreement is amended hereby as follows:
(a) Section 7.14 is amended hereby to read as follows:
"Section 7.14 Subsidiaries and Partnerships.
Except as set forth on Schedule 7.14 and as may hereafter be
created in accordance with the terms of this Agreement,
neither the Guarantor nor the Borrower has any Subsidiaries
nor any interest in any partnerships."
(b) The first sentence of Section 7.19 is amended hereby
to read as follows:
"Schedule 7.19 attached hereto contains an accurate
and complete description of all material policies of fire,
liability, worker's compensation and other forms of insurance
owned or held by the Borrower and each Subsidiary on the date
hereof; the Borrower and each Subsidiary shall hereafter
maintain such policies or acquire similar policies, and the
references in the following sentences of this Section to "such
policies" shall mean the insurance policies then maintained by
the Borrower and each Subsidiary."
(c) Section 7.22 is amended hereby to delete the phrase
"cubic feet" in the sixth line of that Section and to insert in lieu
thereof the abbreviation "MCF".
Section 2.04 Amendments Concerning Negative Covenants. Article IX
of the Credit Agreement concerning Negative Commitments is amended hereby as
follows:
(a) Section 9.03(h)(ii) is amended hereby to read
hereafter as follows:
(ii) Ivory Coast Joint Venture -- joint ventures
between subsidiaries of the Borrower (GNR (Cote d'Ivoire)
Ltd., GNR (Cote d'Ivoire) CI-12 Ltd., and GNR (Cote d'Ivoire)
CI-104 Ltd.) and Societe National d'Operations Petrolieres de
la Cote d'Ivoire ("Petroci"), the Cote d'Ivoire national oil
company, which have been established for the exploration,
development, and production of oil and natural gas in Blocks
CI-11, CI-12, and CI-104 offshore Cote d'Ivoire, under
Production Sharing Contracts with Petroci.
(b) Section 9.03(h)(iii) is amended hereby to read
hereafter as follow:
-3-
<PAGE> 5
EXHIBIT 10.44
(iii) Egyptian Joint Ventures -- joint ventures
between subsidiaries of the Borrower (GNR (Egypt) Ltd., GNR
(Egypt) East Beni Suef Ltd., and GNR (Egypt) Darag Ltd.) and
Egyptian General Petroleum Corporation ("EGPC"), the Egyptian
national oil company, which have been established for the
exploration, development, and production of oil and gas in
Egypt, under concession agreements with EGPC.
(c) Section 9.17 is amended hereby to read hereafter as
follows:
Section 9.17 Subsidiaries and Partnerships. (a)
Neither the Guarantor, the Borrower, nor any Subsidiary shall
create or acquire any additional Subsidiaries other than
Subsidiaries created to effectuate any investment, loan, or
advance permitted by Section 9.03(i) or (j).
(b) Guarantor, Borrower, or any Subsidiary may
create or acquire any interest in any partnership or joint
venture only to the extent the aggregate of Borrower's,
Guarantor's, and all Subsidiaries' liability arising from such
partnerships or joint ventures will not exceed the amount
specified in Section 9.03(j) or as may be permitted in
accordance with Section 9.03(i).
(c) Neither the Guarantor, the Borrower, nor any
Subsidiary shall sell or issue any stock of a Subsidiary or
any interest in a partnership or joint venture; provided,
however, that the Guarantor, the Borrower and any Subsidiary,
subject to the provisions of Section 9.14, may sell interests
in any partnership or joint venture to the extent such
interests relate solely to undeveloped, unproved Oil and Gas
Properties. The Borrower shall not permit any Subsidiary to
issue any stock except to the Borrower or the Guarantor and
except in compliance with Section 9.03.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01 Conditions Precedent. The obligation of the Lenders
to enter into this First Amendment is subject to the satisfaction by Borrower
and Guarantor of the following conditions, each of which shall be satisfactory
to the Agent in form and substance:
(a) No Default or Event of Default has occurred and is
continuing as of the Effective Date;
(b) The Agent will have received copies of resolutions of
the Board of Directors of Borrower authorizing the execution,
delivery, and performance of the Credit Agreement as amended by this
First Amendment, accompanied by an original certificate of the
Secretary or Assistant Secretary of Borrower that such resolutions are
true, correct, and complete copies of resolutions duly adopted by the
Board of Directors and that such resolutions have
-4-
<PAGE> 6
EXHIBIT 10.44
not been modified, rescinded, or revoked, and further certifying as to
the incumbency and signature of the officer of Borrower executing this
First Amendment and as to the fact that the articles of incorporation
and by-laws of Borrower have not changed from those furnished pursuant
to Section 6.01(a) of the Credit Agreement;
(c) The Agent will have received copies of resolutions of
the Board of Directors of Guarantor authorizing the execution,
delivery, and performance of the Credit Agreement as amended by this
First Amendment, accompanied by an original certificate of the
Secretary or Assistant Secretary of Guarantor that such resolutions
are true, correct, and complete copies of resolutions duly adopted by
the Board of Directors and that such resolutions have not been
modified, rescinded, or revoked, and further certifying as to the
incumbency and signature of the officer of Guarantor executing this
First Amendment and as to the fact that the certificate of
incorporation and by-laws of Guarantor have not changed from those
furnished pursuant to Section 6.01(b) of the Credit Agreement;
(d) A compliance certificate, which shall be in the form
of Exhibit C to the Credit Agreement, duly and properly executed by an
authorized officer of Borrower on behalf of Borrower, dated as of the
Effective Date; and
(e) Such other documents as the Lenders or special
counsel to the Lenders may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties. Borrower and
Guarantor do hereby affirm that as of the date of execution and delivery of
this First Amendment the representations and warranties contained in Article
VII of the Credit Agreement (as modified by this First Amendment) and in each
of the Security Instruments are true and correct in all material respects as of
the Effective Date, except (i) as such representations and warranties are
modified to give effect to the transactions contemplated by this First
Amendment and (ii) for immaterial deviations.
ARTICLE V
RATIFICATION AND ACKNOWLEDGMENT
OF GUARANTOR
Section 5.01 Ratification and Acknowledgment. The Guarantor
hereby expressly (i) acknowledges the terms of this First Amendment; (ii)
ratifies and affirms its obligations under the Guaranty Agreement dated May 19,
1995, executed by the undersigned Guarantor in favor of NATIONSBANK OF TEXAS,
N.A., as agent for the Lenders; and (iii) acknowledges, renews, and
-5-
<PAGE> 7
EXHIBIT 10.44
extends its continued liability under the Guaranty Agreement and agrees that
the Guaranty Agreement remains in full force and effect with respect to the
Indebtedness and other Obligations of Borrower, as amended hereby.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Full Force and Effect. The Borrower hereby agrees
that the provisions of the Credit Agreement, the Note, and each of the other
Security Instruments are, and shall continue to be, in full force and effect as
of the Effective Date of this First Amendment, and are ratified and confirmed
in all aspects and all Indebtedness described in and/or secured by such
Security Instruments does and shall include such Indebtedness as modified
hereby.
Section 6.02 Counterparts. This First Amendment may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute this First
Amendment by signing any such counterpart.
Section 6.03 Successors and Assigns. This First Amendment will be
binding upon and inure to the benefit of Borrower, Guarantor, the Lenders, the
Agent, and NationsBank and their permitted successors and assigns, as provided
in the Credit Agreement.
Section 6.04 Limitations. The amendments set forth herein are
limited precisely as written and shall not be deemed to (a) be a consent to, or
waiver or modification of, any other term or condition of the Credit Agreement,
the Note, or any of the Security Instruments, or (b) except as expressly set
forth herein, prejudice any right or rights which the Lenders may now have or
may have in the future under or in connection with the Credit Agreement, the
Note, the Security Instruments, or any of the other documents referred to
therein. In the event of a conflict between this First Amendment and any of
the foregoing documents, the terms of this First Amendment shall be
controlling.
Section 6.05 Existing Defaults. Any Default occurring during the
period prior to and including the Effective Date and continuing shall
constitute a Default for all purposes under the Credit Agreement as amended
hereby.
Section 6.06 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
Section 6.07 FINAL AGREEMENT. THIS WRITTEN FIRST AMENDMENT, THE
CREDIT AGREEMENT, THE NOTE, AND THE SECURITY INSTRUMENTS REPRESENT THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS
-6-
<PAGE> 8
EXHIBIT 10.44
BETWEEN SUCH PARTIES RELATED TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS
WRITTEN FIRST AMENDMENT, THE CREDIT AGREEMENT, THE NOTE, AND THE SECURITY
INSTRUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section 6.08 References. The words "hereby," "hereof," "hereto,"
"hereinabove," "hereinafter," "hereinbelow," and "hereunder," when used in this
First Amendment, shall refer to this First Amendment as a whole and not to any
particular Article, Section, Subsection, or provision of this First Amendment.
-7-
<PAGE> 9
EXHIBIT 10.44
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be duly executed as of the day and year first above written.
BORROWER: GLOBAL NATURAL RESOURCES
CORPORATION OF NEVADA
By: /s/ Eric Lynn Hill
--------------------------------------
Eric Lynn Hill
Senior Vice President-Finance and
Administration
GUARANTOR: GLOBAL NATURAL RESOURCES INC.
By: /s/ Eric Lynn Hill
--------------------------------------
Eric Lynn Hill
Senior Vice President-Finance and
Administration
AGENT: NATIONSBANK OF TEXAS, N.A.
INDIVIDUALLY AND AS AGENT
By: /s/ James R. Allred
--------------------------------------
James R. Allred
Senior Vice President
-8-
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,801
<SECURITIES> 0
<RECEIVABLES> 13,399
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<CURRENT-ASSETS> 34,256
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<COMMON> 33,649
0
0
<OTHER-SE> 77,254
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<SALES> 55,105
<TOTAL-REVENUES> 55,516
<CGS> 8,767
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<INCOME-TAX> 7,021
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,146
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
</TABLE>
