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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
(AMENDMENT NO. 37)
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
PENNZOIL COMPANY
(Name of Subject Company)
PENNZOIL COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.83 1/3 PER SHARE
(including the associated Preferred Stock Purchase Rights)
(Title of Class of Securities)
709903 10 8
(CUSIP Number of Class of Securities)
LINDA F. CONDIT
CORPORATE SECRETARY
PENNZOIL COMPANY
PENNZOIL PLACE, P.O. BOX 2967
HOUSTON, TEXAS 77252-2967
(713) 546-8910
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of the person(s) filing
statement)
Copies to:
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<S> <C>
MOULTON GOODRUM, JR. CHARLES F. RICHARDS, JR.
BAKER & BOTTS, L.L.P. RICHARDS, LAYTON & FINGER
ONE SHELL PLAZA ONE RODNEY SQUARE
HOUSTON, TEXAS 77002-4995 P.O. BOX 551
(713) 229-1234 WILMINGTON, DELAWARE 19899-0551
(302) 658-6541
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This Amendment No. 37 (this "Amendment") amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9, as amended, originally
filed on July 1, 1997 by Pennzoil Company, a Delaware corporation ("Pennzoil"
or the "Company"), relating to a tender offer commenced by Resources Newco,
Inc., a wholly owned subsidiary of Union Pacific Resources Group Inc. ("UPR"),
on June 23, 1997.
All capitalized terms used in this Amendment without definition have the
meanings attributed to them in the Schedule 14D-9.
The items of the Schedule 14D-9 set forth below are hereby amended by
adding the following:
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT
NO. DESCRIPTION
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<S> <C>
104 Text of press release of the Company dated October 27,
1997.
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
PENNZOIL COMPANY
Dated: October 27, 1997 By: /s/ James L. Pate
James L. Pate
Chairman of the Board, President
and Chief Executive Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
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<S> <C>
104 Text of press release of the Company dated October 27,
1997.
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[PENNZOIL LOGO] Public Relations Department PENNZOIL COMPANY
P.O. Box 2967 NEWS
Houston, Texas 77252-8200
FOR IMMEDIATE RELEASE Contact: Bob Harper
713/546-8536
PENNZOIL'S THIRD QUARTER RECURRING INCOME UP 56 PERCENT,
YEAR-TO-DATE RECURRING INCOME UP 94 PERCENT
HOUSTON (Oct. 27, 1997) -- Pennzoil Company (NYSE:PZL) today
reported third quarter and year-to-date 1997 results, emphasizing the following
highlights:
o year-to-date recurring income was up 94 percent to $2.85 per
share;
o year-to-date operating cash flow was up 26 percent to $8.79 per
share;
o third quarter recurring income was up 56 percent to 81 cents
per share; and
o third quarter operating cash flow was up 29 percent to $2.84
per share.
Third Quarter
Recurring third quarter net income increased 56 percent to $38.2
million, or 81 cents per share, compared to last year's $24.2 million, or 52
cents per share. Third quarter after-tax nonrecurring items totaled $2.9
million, including $2.6 million of after-tax charges associated with the early
retirement of debt.
Net income for the third quarter totaled $35.2 million, or 75 cents per
share, including nonrecurring charges, compared to net income of $65.1
million, or $1.40 per share, for the same period in 1996. Third quarter 1996
net income included 88 cents per share of nonrecurring gains, primarily
resulting from the sale of noncore real estate holdings.
Cash flow from operations, before changes in operating assets and
liabilities, during the third quarter increased 29 percent to $134.3 million,
or $2.84 per share, compared to $102.3 million, or $2.20 per share, for the
same period in 1996.
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Year-to-Date
On a recurring basis, year-to-date earnings nearly doubled, increasing
94 percent to $134.0 million, or $2.85 per share, versus $68.1 million, or
$1.47 per share, in 1996. Net income, including nonrecurring charges, increased
9 percent to $116.7 million, or $2.48 per share, compared to $105.4 million, or
$2.27 per share, last year.
Year-to-date cash flow from operations, before changes in operating
assets and liabilities, increased 26 percent to $413.3 million, or $8.79 per
share, compared to $323.7 million, or $6.97 per share, for the same period in
1996. For the full year 1997, cash flow from operations, before changes in
operating assets and liabilities, is expected to exceed $12.00 per share.
James L. Pate, chairman and chief executive officer, said, "Pennzoil
has now had eight consecutive quarters of year-over-year increases in recurring
earnings. This demonstrates that Pennzoil's turnaround is well underway. The
improvement at Pennzoil Company has been solid, consistent and across the
board. We are committed to creating value for all Pennzoil shareholders."
Pate added, "Each of our core business segments showed strong third
quarter results and year-over-year operating income improvements." Oil and gas
reported an 11 percent increase, motor oil and refined products reported a 240
percent increase, and franchise operations reported a 28 percent increase.
Oil and Gas
The oil and gas segment reported third quarter operating income of
$67.7 million, an 11 percent increase over last year's $60.7 million. The
increase in operating income was primarily due to increased liquids and natural
gas production and higher realized prices. Production volumes increased
approximately 3 percent, while natural gas prices increased 29 cents per
thousand cubic feet and liquids prices increased 70 cents per barrel. These
improvements were partially offset by higher exploration expense which resulted
from increased drilling activity in the Gulf of Mexico.
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Pennzoil was the high bidder on 9 out of 17 blocks in the August 1997
western Gulf of Mexico federal offshore oil and gas sale. The blocks are
located in water depths ranging from 50 to 3,000 feet. Pennzoil will have a 100
percent working interest in eight of the blocks and 50 percent in one block bid
jointly with Enterprise Oil Gulf of Mexico, Inc., subject to approval by the
Minerals Management Service. Pennzoil's share of the high bids was $4 million.
Internationally, Pennzoil is currently drilling several wells in the
Caspian Sea, Australia and Qatar. In the Caspian Sea, the KPS-1 well on the
Karabakh block continues drilling at 3,691 meters. Pennzoil has a 30 percent
working interest in Karabakh. On October 10, Pennzoil confirmed that natural
gas had been encountered after drilling had reached 3,470 meters. Additional
natural gas shows have been encountered after drilling deeper, and drilling
continues toward additional prospective horizons. KPS-1 is expected to reach
target depth of approximately 3,850 meters in early November.
At the nearby Azeri-Chirag-Gunashli (ACG) joint development area, where
Pennzoil has a 4.8 percent carried interest, the first development well to be
drilled off of the Chirag-1 platform is currently being completed after
reaching total depth of 2,938 meters. The ACG joint development area is
estimated to contain over 4.7 billion barrels of crude oil. First crude oil
production will begin in early November, with sales of crude expected to begin
in the first quarter of 1998. The international consortium developing this
area, known as AIOC, plans to drill one more development well in 1997 and six
wells in 1998.
In Australia, the WR-4 exploration well on Whicher Range (44 percent
Pennzoil) is currently drilling at 4,400 meters toward target depth of 4,600
meters. In Qatar, the PQ-3 exploration well on Block 8 (75 percent Pennzoil)
spudded October 17 with a target depth of 2,800 meters.
Motor Oil and Refined Products
The motor oil and refined products segment reported third quarter
operating income of $32.3 million, a 240 percent increase over last year's $9.5
million. The increase in operating income was due to a number of factors,
including higher fuels
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volumes resulting from the upgrade of Pennzoil's Shreveport refinery, higher
income from the Excel Paralubes lube base oil plant joint venture, increased
industrial specialities margins and volumes and improved international
marketing results. Third quarter operating income also included a one-time
insurance settlement.
Pennzoil continues as the leading marketer of motor oil in the U.S.,
with a market share of over 21 percent.
In July, Pennzoil Products Company and Conoco Inc. signed a joint
venture agreement combining portions of the two companies' speciality petroleum
products businesses. The 50/50 joint venture, called Penreco, will have
estimated sales of $200 million worldwide.
On October 17, Pennzoil Products Company announced that it has agreed
to acquire the assets of two automobile aftermarket chemical companies.
Pennzoil is purchasing the marketing assets of Snap Automotive Products, Inc.
Snap products include Fix-a-Flat, the number one selling tire inflator in the
U.S., fuel additives and other automotive chemicals.
Pennzoil will also acquire the assets of Total Action Automotive
products (TAAP). TAAP manufactures and markets premium automotive appearance
products, including Classic car waxes and washes.
Franchise Operations
The franchise operations segment, Jiffy Lube International, Inc.,
reported third quarter operating income of $7.6 million, a 23 percent increase
over last year's $6.2 million. The year-on-year improvement was primarily due
to improved results in company-operated stores.
Jiffy Lube has added 144 new fast oil change centers in the U.S. since
the third quarter last year, an increase of 11 percent. Most of the new stores
are part of the company's alliance with Sears. Jiffy Lube now has a total of
1,476 stores. Jiffy Lube is the largest fast oil change provider in the U.S.
with over 25 percent of the market.
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Pennzoil Company explores for and produces crude oil and natural gas,
manufactures and markets premium quality lubricants, including America's top
selling motor oil for the past 11 years, and is the parent company of Jiffy
Lube International, the world's largest franchiser of fast oil change centers.
- -----------------------
This release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to
be covered by the safe harbors created thereby. Factors that could cause actual
results or events to differ materially from those anticipated are discussed in
detail in Pennzoil's Annual Report on Form 10-K for the year ended December 31,
1996.
###
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The following are the unaudited results of operations for the quarter and six
months ended September 30,1997 compared with the same periods in 1996.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- ----------------------------
1997 1996 1997 1996
--------- --------- ----------- ------------
(Expressed in thousands except per share amounts)
<S> <C> <C> <C> <C>
REVENUES
Oil and Gas $ 210,703 $ 186,797 $ 641,718 $ 566,097
Motor Oil & Refined Products 441,493 426,475 1,327,541 1,258,141
Franchise Operations 84,459 78,626 243,256 226,617
Other 14,543 55,352 23,551 90,640
Intersegment sales (92,259) (93,562) (279,771) (263,886)
--------- --------- ----------- -----------
Total revenues $ 658,939 $ 653,688 $ 1,956,295 $ 1,877,609
========= ========= =========== ===========
OPERATING INCOME
Oil and Gas $ 67,689 $ 60,715 $ 243,975 $ 175,522
Motor Oil & Refined Products 32,302 9,459 71,153 39,667
Franchise Operations 7,554 6,152 18,966 15,988
Other 14,420 51,609 26,903 77,411
--------- --------- ----------- -----------
Total operating income 121,965 127,935 960,397 308,588
Corporate administrative expenses 20,245 13,413 53,232 39,495
Interest charges, net 42,708 43,585 120,988 137,952
--------- --------- ----------- -----------
Income before income tax 59,012 70,937 186,177 131,141
Income tax provision 21,188 5,812 66,926 25,704
--------- --------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM 37,824 65,125 119,251 105,437
Extraordinary Item (2,575) - (2,575) -
NET INCOME $ 35,249 $ 65,125 $ 116,676 $ 105,437
========= ========= =========== ===========
EARNINGS PER SHARE
Before Extraordinary Item $ 0.80 $ 1.40 $ 2.53 2.27
Extraordinary Item (0.05) - (0.05) -
--------- --------- ------------ -----------
EARNINGS PER SHARE $ 0.75 $ 1.40 $ 2.48 $ 2.27
========= ========= =========== ===========
AVERAGE SHARES OUTSTANDING 47,208 46,494 47,002 46,445
END OF PERIOD SHARES OUTSTANDING 47,382 46,518 47,382 46,518
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PENNZOIL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------- -----------
(Expressed in Thousands)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 29,724 $ 34,383
Receivables 215,500 250,328
Inventories
Crude oil, natural gas and sulphur 25,989 24,365
Motor oil and refined products 181,963 147,554
Deferred income taxes 14,309 20,834
Other current assets 60,123 60,128
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Total current assets 527,608 537,592
Net property, plant, and equipment 2,501,354 2,318,084
Marketable securities and other investments 953,489 955,182
Other assets 317,652 313,396
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TOTAL ASSETS $ 4,300,103 $ 4,124,254
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 2,433 $ 1,181
Accounts payable and accrued liabilities 235,443 274,618
Interest accrued 47,596 30,827
Other current liabilities 90,053 86,321
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Total current liabilities 375,525 392,947
Long-term debt 2,271,809 2,217,806
Deferred income taxes 273,801 241,791
Other liabilities 290,269 302,635
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TOTAL LIABILITIES 3,211,404 3,155,179
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 1,088,699 969,075
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,300,103 $ 4,124,254
=========== ===========
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PENNZOIL COMPANY
CASH FLOW FROM OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- -----------------------
1997 1996 1997 1996
-------- --------- --------- ---------
(Expressed in thousands except per share amounts)
Description
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<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 35,249 $ 65,125 $116,676 $105,437
Adjustments to net income
Depreciation, depletion and amortization 77,406 68,728 214,757 207,726
Dry holes and impairments 10,210 67 19,441 5,240
Deferred income tax 11,408 (4,597) 40,089 14,805
Non-cash items and other non-operating items 32 (27,064) 22,303 (9,474)
-------- --------- -------- --------
NET CASH FROM OPERATING ACTIVITIES BEFORE
CHANGES IN OPERATING ASSETS AND LIABILITIES $134,305 $ 102,258 $413,266 $323,734
CASH FLOW FROM OPERATIONS PER SHARE $ 2.84 $ 2.20 $ 8.79 $ 6.97
======== ========= ======== ========
Other exploration expense 8,581 8,239 21,669 24,774
-------- --------- -------- --------
CASH FLOW FROM OPERATIONS ADJUSTED FOR
TOTAL EXPLORATION EXPENSE $142,886 $ 110,497 $434,935 $348,508
======== ========= ======== ========
CASH FLOW FROM OPERATIONS PER SHARE
ADJUSTED FOR TOTAL EXPLORATION EXPENSE $ 3.03 $ 2.38 $ 9.25 $ 7.50
======== ========= ======== ========
AVERAGE SHARES OUTSTANDING 47,208 46,494 47,002 46,445
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PENNZOIL COMPANY
OPERATING HIGHLIGHTS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------- -------- -------- ---------
1997 1996 1997 1996
--------- -------- -------- ---------
OPERATING DATA
- ------------------------------------------------
<S> <C> <C> <C> <C>
OIL AND GAS
Net production
Crude oil, condensate and natural gas
liquids (barrels per day) 59,938 58,442 58,807 61,274
Natural gas produced for sale (Mcf per day) 619,364 599,615 586,709 595,967
Weighted average prices
Crude oil, condensate and natural gas
liquids (per barrel) $ 15.55 $ 14.85 $ 16.77 $ 14.85
Natural gas (per Mcf) $ 2.09 $ 1.80 $ 2.25 $ 1.81
Costs and expenses ($/BOE)
Operating expense excl. COS $ 2.83 $ 2.75 $ 2.93 $ 2.77
Cost of sales 0.06 0.08 0.08 0.08
General and administrative expense 0.87 0.84 0.87 0.91
Other taxes 0.57 0.67 0.61 0.67
-------- -------- -------- --------
Total ($/BOE) $ 4.33 $ 4.34 $ 4.49 $ 4.43
DD&A expense ($/BOE) $ 3.95 $ 3.74 $ 3.85 $ 3.76
MOTOR OIL & REFINED PRODUCTS
Sales (barrels per day)
Gasoline and naphtha 18,807 21,332 19,015 21,043
Distillates and gas oils 24,073 25,984 26,479 26,711
Lubricating oil and other specialty products 30,257 24,638 29,200 23,768
Residual fuel oils 1,284 4,221 1,962 4,120
-------- -------- -------- --------
Total sales (barrels per day) 74,421 76,175 76,656 75,642
======== ======== ======== ========
Raw materials processed (barrels per day)(1) 54,320 54,330 54,540 53,302
Refining capacity (barrels per day)(1) 62,700 62,700 62,700 62,700
FRANCHISE OPERATIONS
Domestic systemwide sales (in thousands) $199,002 $179,980 $572,566 $523,394
Same center sales (in thousands) $185,205 $179,554 $542,418 $522,183
Centers open (U.S.) 1,476 1,332 1,476 1,332
</TABLE>
(1) Excludes Excel Paralubes
