<PAGE> 1
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[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 1-9019
UNION TEXAS PETROLEUM HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
76-0040040
(I.R.S. EMPLOYER IDENTIFICATION NO.)
1330 POST OAK BOULEVARD, HOUSTON, TEXAS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
77056
(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 623-6544
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, $.05 par value New York Stock Exchange
Pacific Stock Exchange
8.25% Senior Notes due 1999 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filings pursuant to Item
405 of Regulation S-K (sec. 229.405 under the Securities Exchange Act of 1934)
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. /X/
As of February 28, 1995, there were 87,648,932 shares of Union Texas
Petroleum Holdings, Inc. $.05 par value Common Stock issued and outstanding,
54,174,848 of which, having an aggregate market value of $1,042,865,824, were
held by non-affiliates of the registrant. For purposes of the above statement
only, all directors and executive officers of the registrant are assumed to be
affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement related to the registrant's 1995 Annual
Stockholders Meeting are incorporated by reference into Part III of this report.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Item 1. Business...................................................................... 1
Overview.................................................................... 1
Segment Data................................................................ 3
Reserves.................................................................... 4
Production.................................................................. 6
Oil and Gas Prices and Production Costs..................................... 6
Current Markets for Oil and Gas............................................. 7
Acreage..................................................................... 7
Drilling Activities......................................................... 8
International Exploration and Production.................................... 9
Indonesia................................................................ 9
U.K. North Sea........................................................... 14
Pakistan................................................................. 17
Other International...................................................... 18
Alaska...................................................................... 19
Petrochemical Business...................................................... 20
Plant Operations......................................................... 20
Storage and Transportation............................................... 21
Other Business Matters...................................................... 21
Environmental............................................................ 21
Insurance................................................................ 22
Competition.............................................................. 22
Regulation of Oil and Gas Production and Marketing....................... 22
Employees................................................................ 22
Item 2. Properties.................................................................... 22
Item 3. Legal Proceedings............................................................. 22
Item 4. Submission of Matters to a Vote of Security Holders........................... 22
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......... 23
Item 6. Selected Financial Data....................................................... 24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................... 25
Item 8. Financial Statements and Supplementary Data................................... 32
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................................ 67
Item 10. Directors and Executive Officers of the Registrant............................ 67
Item 11. Executive Compensation........................................................ 67
Item 12. Security Ownership of Certain Beneficial Owners and Management................ 67
Item 13. Certain Relationships and Related Transactions................................ 67
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............... 67
</TABLE>
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PART I
ITEM 1. BUSINESS.
OVERVIEW
The Company, the successor to a corporation founded in 1896, is a
U.S.-based independent (non-integrated) oil and gas company with worldwide
operations. At December 31, 1994, the Company had proved oil and gas reserves of
411 million barrels of oil equivalent. All of the Company's oil and gas
producing activities are currently conducted outside of the United States,
primarily in Indonesia, the U.K. sector of the North Sea and Pakistan. The
Company also owns an interest in a U.S.-based petrochemical business.
Unless the context otherwise requires, all references herein to the Company
are not intended to imply exact corporate relationships and include Union Texas
Petroleum Holdings, Inc., its predecessors and its subsidiaries, including their
interests in certain partnerships. Union Texas Petroleum Holdings, Inc. was
organized under the laws of the State of Delaware in 1982. The address and
telephone number of the Company's principal executive offices are 1330 Post Oak
Blvd., Houston, Texas 77056, (713) 623-6544. As of February 28, 1995, the
Company had approximately 1,000 full-time employees worldwide.
The Company's principal current international activities began in the late
1960s with its participation in a joint venture in Indonesia and in two
consortia in the U.K. North Sea. In addition, the Company is currently engaged
in exploration and production activities in several other countries.
International oil and gas properties accounted for 100% of the Company's total
proved reserves as of December 31, 1994. A significant portion of the Company's
net income attributable to its oil and gas operations in recent periods
(excluding the gain on the sales of the Company's U.S. businesses made in 1991)
has been generated by its international operations.
The Company's Indonesian activities consist primarily of its 37.81% working
interest in a joint venture that produces natural gas and, to a lesser extent,
oil and condensate from several fields in East Kalimantan, Indonesia. The
Company holds its interests in this joint venture directly through a wholly
owned subsidiary and also indirectly through its 50% interest in Unimar Company
("Unimar"), which is a partnership with a subsidiary of LASMO plc, a U.K.
company. Unimar owns ENSTAR Corporation and its subsidiaries, including Virginia
Indonesia Company, the operator of the joint venture. The Company's interests in
Unimar are reported on its Consolidated Financial Statements as an equity
investment (the "Equity Partnership"). See Notes 6 and 19 of Notes to
Consolidated Financial Statements for additional information regarding the
Equity Partnership.
Natural gas produced by the East Kalimantan joint venture is converted into
liquefied natural gas ("LNG") at facilities owned by Pertamina, the Indonesian
national oil company. Currently, LNG is principally sold to two groups of
Japanese industrial and utility customers, the national oil company of the
Republic of China, a consortium of buyers organized by Osaka Gas, and Korea Gas
Corporation, under long-term contracts originally signed in 1973, 1981, 1987,
1990 and 1991, respectively. In 1994, Pertamina reached preliminary agreements
for the extension of two of its long-term LNG sales contracts and for two new
proposed long-term LNG sales contracts. To supply the additional quantities of
LNG called for by the extensions, Pertamina has committed to construct a seventh
processing train at the Bontang LNG facility and currently is conducting a
feasibility study to determine the need for an eighth train to support the
proposed new sales contracts. The construction of the seventh train will begin
in 1995, and completion is expected in 1998. The Company is also participating
in exploration activities of the East Kalimantan joint venture, as well as
exploration activities independent of that joint venture in other parts of
Indonesia.
The Company's principal properties in the North Sea are interests in the
Piper, Claymore, Scapa, Saltire and Chanter oil fields, the Sean gas fields and
the undeveloped Britannia gas and condensate field. The Company owns a 20%
working interest in the Piper, Claymore, Chanter, Scapa and Saltire fields,
which are operated by Elf Enterprise Caledonia Limited, and a 25% working
interest in the Sean gas fields, which are operated by Shell U.K. Limited. The
Sean gas fields include the North and South Sean fields and the recently
discovered East Sean field. The Company acquired a 9.42% unit interest in the
Britannia field in 1994 for approximately $159 million. The Britannia field is
operated by Britannia Operator Limited, a joint venture between Conoco (U.K.)
Limited and Chevron U.K. Limited. The Britannia acquisition resulted in the
1
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addition at December 31, 1994, of proved undeveloped reserves of 38 million
barrels of oil equivalent. Production from the Britannia field is expected to
begin in late 1998.
Since 1977, the Company has participated through joint ventures in oil and
gas exploration, development and production in the Badin area in Pakistan. Oil
production from the Badin block began in 1982, and gas production began in 1989.
The Company is the operator of the Pakistan joint ventures with working
interests of 30% and 25.5% in the currently producing fields. The Company also
bears 38% of the exploration costs and will receive a 25.5% working interest in
any commercial discoveries in a new Badin concession area. In 1994, the Company
was granted an exploration license and is currently negotiating a concession
agreement for the Eastern Sindh block in southeastern Pakistan, which covers
approximately 1.8 million acres. The Company, as operator, holds a 70% working
interest in the license.
The Company participates worldwide in exploration for oil and gas in both
new venture areas and the Company's producing areas. Current worldwide activity
includes interests in prospects in Alaska, Argentina, Indonesia, Ireland, Italy,
Pakistan, Tunisia, the United Kingdom and Vietnam.
In the United States, the Company operates the Geismar ethylene plant in
which it owns a 41.67% interest. Located near Baton Rouge, Louisiana, the
Geismar facility processes gas liquids feedstocks to produce ethylene, a widely
used petrochemical.
In 1991, the Company consummated three separate transactions in which it
sold its U.S. onshore and offshore exploration and production businesses and its
gas processing business for a total cash consideration of approximately $861
million. The buyers in each of the transactions assumed substantially all of the
liabilities related to the respective businesses or assets that they acquired.
During 1992, the Company successfully completed a financial restructuring
through a series of transactions that significantly streamlined its capital
structure and reduced its financing costs. The Company redeemed its outstanding
$410 million of subordinated notes, redeemed for $200 million plus accrued
dividends its outstanding Series B and Series C Preferred Stock, redeemed for
$300 million its outstanding warrants to purchase the Company's common stock and
repaid at maturity its $100 million senior subordinated notes. In 1992, the
Company also entered into a $650 million unsecured credit facility and issued
$100 million in principal amount of 8.25% senior notes due 1999. Since 1992, the
Company has continued to strengthen its financial position by redeeming for $75
million plus accrued dividends its outstanding Preferred Auction Rate Stock
during 1993 and by replacing its credit facility and increasing its short-term,
uncommitted and unsecured lines of credit during 1994. The Company also improved
its financing flexibility during 1994 with an effective shelf registration
statement on file with the Securities and Exchange Commission that covers up to
$200 million of debt securities that the Company may elect to offer in the
future. For more information regarding these transactions, see Item
7 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 8 of Notes to Consolidated Financial Statements.
The Company's strategic focus is to build shareholder value through
developing its core holdings, conducting an active exploration program, pursuing
oil and gas acquisition opportunities and continuing to control costs. In
January 1995, the Board of Directors of the Company approved a $212 million
capital expenditure budget for 1995. Approximately one-third of the 1995 capital
budget is allocated to fund the Company's expanded worldwide exploration
program, which represents an 85% increase over exploration program funds
expended in 1994. A total of $74 million is included in the Company's budget for
exploration activities, including at least ten exploration wells in new venture
areas in Alaska, Argentina, Eastern Indonesia, Ireland, Tunisia and Vietnam, and
as many as 20 wells in ongoing exploration programs in the Company's producing
areas in the U.K. North Sea, Indonesia and Pakistan. The budget also includes
approximately $132 million for oil and gas development programs in the Company's
producing areas, including $47 million for the initial development of the
Britannia field. The Company has also budgeted approximately $5 million for its
petrochemical interests in the United States. During 1995, the Company also
intends to seek acquisition opportunities of both developed and undeveloped oil
and gas reserves as well as to add to its production base in the near-term,
amounts for which are not included in the capital spending budget. The Company
will consider possible acquisition areas worldwide, including in the U.K. North
Sea and Canada.
2
<PAGE> 5
In July 1985, two limited partnerships (the "KKR Partnerships"), which are
affiliated with Kohlberg Kravis Roberts & Co. ("KKR"), purchased approximately
50% of the then outstanding common stock of the Company from AlliedSignal Inc.
("Allied"). In September 1987, the Company sold 18,000,000 shares of its common
stock in concurrent public offerings in the United States and outside the United
States. In November 1992, Allied sold, in a secondary public offering, its
33,333,334 shares of common stock, which represented approximately 39% of the
Company's issued and outstanding shares of common stock. The KKR Partnerships
currently own approximately 38% of the Company's issued and outstanding shares
of common stock. See Note 1 of Notes to Consolidated Financial Statements.
SEGMENT DATA
The table below summarizes the Company's revenues, net income and
identifiable assets by areas of activity for the past three years(a):
<TABLE>
<CAPTION>
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
----------------------------
1994 1993 1992
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Exploration and production:
Sales and operating revenues:
United Kingdom.............................. $ 260 $ 208 $ 156
Indonesia................................... 278 279 299
Pakistan.................................... 39 49 44
Other International......................... 1 1 2
------ ------ ------
Total................................ $ 578 $ 537 $ 501
====== ====== ======
Net income (loss):
United States (Alaska)...................... $ (7) $ (34) $ (4)
United Kingdom.............................. 27 23 67
Indonesia................................... 94 89 93
Pakistan.................................... 10 16 11
Other International......................... (25) (26) (17)
------ ------ ------
Total................................ $ 99 $ 68 $ 150
====== ====== ======
Identifiable assets:
United States (Alaska)...................... $ 8 $ 8 $ 18
United Kingdom.............................. 887 695 835
Indonesia................................... 473 476 490
Pakistan.................................... 40 37 36
Other International......................... 11 5 4
------ ------ ------
Total................................ $1,419 $1,221 $1,383
====== ====== ======
Petrochemicals:
Sales and operating revenues................... $ 169 $ 145 $ 167
Net income(b).................................. 15 5 2
Identifiable assets............................ 108 91 95
</TABLE>
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(a) Net income (loss) and identifiable assets do not give effect to general and
administrative items. See Note 14 of Notes to Consolidated Financial
Statements for additional data.
(b) Includes assumed U.S. taxes at regular statutory tax rates. The Company,
however, was subject to the U.S. corporate alternative minimum tax.
As reflected in the preceding table, a significant portion of the Company's
income was generated from its overseas operations, particularly its
participation in the producing fields in the East Kalimantan area of Indonesia
and in the U.K. North Sea. The Company's overseas operations are subject to
certain risks, including expropriation of assets, governmental reinterpretation
of applicable laws and contract terms,
3
<PAGE> 6
increases in taxes and government royalties, renegotiation of contracts with
foreign governments, foreign government approvals of lease, permit or similar
applications and of exploration and development plans, political and economic
instability, disputes between governments, payment delays, export restrictions,
limits on allowable levels of exploration and production and currency exchange
losses and repatriation restrictions, as well as changes in laws and policies
governing operations of companies with overseas operations, including more
strict environmental regulation. Foreign operations and investments may also be
subject to laws and policies of the United States affecting foreign trade,
investment and taxation that could affect the conduct and profitability of those
operations. See "Current Markets for Oil and Gas" below and Item
7 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations.
All of the Company's oil and gas activities are subject to the risks
usually associated with exploration for, and development and production of, oil
and gas, including blowouts, cratering, oil spills and fires. Offshore
operations are additionally subject to marine perils, including adverse weather
conditions, and extensive governmental regulations, as well as interruption or
termination by governmental authorities based on environmental or other
considerations. The Company's petrochemical operations are also subject to
certain risks, including the breakdown or failure of equipment, the performance
of equipment at levels below those originally projected, and explosions, fires,
floods and other catastrophic events. The occurrence of any of these events
could cause injury to life or property, interruptions in operations or increases
in the costs of operations. As is customary in the oil and gas and petrochemical
industries, the Company reviews its safety equipment and procedures and carries
insurance against some, but not all, of these risks. In particular, the
Company's environmental insurance and pollution coverage contain certain
limitations in coverage. Losses and liabilities arising from such events would
reduce revenues and increase costs to the Company to the extent not covered by
insurance. See "Other Business Matters" below.
RESERVES
The following table sets forth information regarding the Company's
estimates of its proved net reserves as of December 31, 1994. The Company's
estimates of reserves filed with federal agencies, including the Securities and
Exchange Commission, agree with the information set forth below. For additional
information, see Note 19 of Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
OIL EQUIVALENTS
OIL (MBBLS)(A)(B) GAS (MMCF)(B) (MBOE)(A)(B)
----------------------------- ------------------------------- ------------------------------
DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL
--------- ----------- ----- --------- ----------- ---- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United Kingdom.......... 56,773 17,089 73,862 149,301 170,320 319,621 82,515 46,454 128,969
Indonesia(c)............ 17,247 1,895 19,142 812,933 159,863 972,796 157,408 29,457 186,865
Pakistan................ 2,714 1,128 3,842 51,883 46,012 97,895 11,659 9,061 20,720
Other International..... 32 32 32 32
------ ------ ------- --------- ------- --------- ------- ------ -------
Total........... 76,766 20,112 96,878 1,014,117 376,195 1,390,312 251,614 84,972 336,586
------ ------ ------- --------- ------- --------- ------- ------ -------
Equity Partnership:
Indonesia(c).......... 6,835 736 7,571 320,502 65,332 385,834 62,094 12,000 74,094
------ ------ ------- --------- ------- --------- ------- ------ -------
Total........... 83,601 20,848 104,449 1,334,619 441,527 1,776,146 313,708 96,972 410,680
====== ====== ======= ========= ======= ========= ======= ====== =======
</TABLE>
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(a) For the purpose of calculating reserves, oil includes condensate and natural
gas liquids.
(b) Unless otherwise indicated in this Annual Report on Form 10-K, gas volumes
are stated at the legal pressure base of the area or country in which the
reserves are located and at 60 degrees Fahrenheit. As used herein, the term
"BTU" means British thermal unit, the term "TBtu" means trillion BTUs, the
term "MMBtu" means million BTUs, the term "Mcf" means thousand cubic feet,
the term "MMcf" means million cubic feet, the term "Bcf" means billion cubic
feet, the term "Tcf" means trillion cubic feet, the term "Bbl" means barrel,
the term "MBbls" means thousands of barrels, the term "MMBbls" means
millions of barrels, the term "boe" means barrel of oil equivalent, the term
"Mboe" means thousand barrels of oil equivalent and the term "MMboe" means
million barrels of oil equivalent. Gas is converted
(Notes continued on following page)
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<PAGE> 7
into a barrel of oil equivalent based on 5.8 Mcf of gas to one barrel of
oil. The term "LNG" means liquefied natural gas and the term "LPG" means
liquefied petroleum gas.
(c) Information regarding Indonesian reserves relates to the Company's net
interest in a production sharing contract between the Indonesian joint
venture and Pertamina. The joint venture has no ownership interest in the
reserves but does have the right to share revenues and production and is
entitled to recover most field and other operating costs and capital
depreciation. The reserve estimates are subject to revision as prices
fluctuate due to the cost recovery feature under the production sharing
contract and due to the effect that price fluctuations generally have on
estimates of recoverable reserves. Debt relating to the LNG processing
facilities owned by Pertamina is serviced from proceeds of LNG sales prior
to the distribution of such proceeds primarily to the members of the joint
venture, Pertamina and the other production sharing contractors. The debt
obligation is not the obligation of the joint venture. Debt service relating
to such facilities is accounted for in the Company's reserve estimates as a
cost of production and operation. Such debt service is deducted in
estimating future net revenues to be distributed among Pertamina and the
production sharing contractors, including the joint venture and the
Company's interest therein. See "International Exploration and
Production -- Indonesia" below and Note 19 of Notes to Consolidated
Financial Statements.
There are numerous uncertainties inherent in estimating quantities of
reserves and in projecting future rates of production and timing of development
expenditures, including many factors beyond the control of the producer. The
reserve data set forth in this Annual Report on Form 10-K represent only
estimates. Reserve engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact way, and the
accuracy of any reserve estimate is a function of the quality and quantity of
available data and of engineering and geological interpretation and judgment. As
a result, estimates of different engineers often vary. In addition, results of
drilling, testing and production subsequent to the date of an estimate may
justify revision of such estimate. Accordingly, reserve estimates at a specific
point in time are often different from the quantities of oil and gas that are
ultimately recovered, which differences may be significant. Additionally, the
estimates of future net revenues from proved reserves of the Company and the
present value of future net revenues are based upon certain assumptions about
future production levels, prices and costs that may not prove correct over time.
Projections about future prices and production levels are subject to great
uncertainty. The meaningfulness of such estimates is highly dependent upon the
accuracy of the assumptions upon which they were based. See "Current Markets for
Oil and Gas" below.
In general, the Company's volume of production from oil and gas properties
declines with the passage of time. In addition, the Company's and its
co-venturers' participation share of gas volumes supplied to support Indonesian
LNG sales contract extensions or additions will be significantly less than their
participation share under the original long-term sales contracts. Except to the
extent the Company acquires additional properties containing proved reserves or
conducts successful exploration or development activities, or both, the proved
reserves of the Company, and the revenues generated from production thereof
(assuming no price increases), will decline as reserves are produced. Drilling
activities are expensive and subject to numerous risks, including the risk that
no commercially viable oil or gas production will be obtained. Increases or
decreases in prices of oil and gas and in cost levels, along with the timing of
development projects, will also affect revenues generated by the Company and the
present value of estimated future net cash flows from its properties. Revenues
generated from future activities of the Company are highly dependent upon the
level of success in acquiring, finding or developing additional reserves. See
Notes 1 and 19 of Notes to Consolidated Financial Statements.
The Company's reserve and production replacement strategy combines
development drilling in proven areas with increased emphasis on worldwide
exploration activities. The Company also continues to seek acquisitions to add
proved developed and undeveloped reserves, such as the acquisition of the
interest in the Britannia field in 1994. The Company's future oil and natural
gas production is highly dependent on its level of success in these activities,
and there can be no assurance that such activities will result in additional
reserves and production. For a discussion of the Company's production, see
"International Exploration and Production" below.
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<PAGE> 8
PRODUCTION
The following table sets forth the Company's average daily production of
oil, natural gas liquids and gas during 1994, 1993 and 1992:
<TABLE>
<CAPTION>
EQUITY
PARTNERSHIP
UNITED -----------
KINGDOM INDONESIA PAKISTAN INDONESIA
------- --------- -------- -----------
<S> <C> <C> <C> <C>
Oil (MBbls per day):
1994................................................ 35 6 5 2
1993................................................ 27 6 5 2
1992................................................ 13 5 5 2
Natural gas liquids
(MBbls per day):
1994................................................ 2 1
1993................................................ 1 1
1992................................................ 1
Gas (MMcf per day):
1994................................................ 24 266(a) 43 88(a)
1993................................................ 8 242(a) 43 80(a)
1992................................................ 7 244(a) 39 81(a)
</TABLE>
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(a) Includes gas consumed in the operation of the Indonesian LNG plant.
OIL AND GAS PRICES AND PRODUCTION COSTS
The Company's average sales prices and production costs of oil, natural gas
liquids and gas for 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
EQUITY
PARTNERSHIP
UNITED -----------
KINGDOM INDONESIA PAKISTAN INDONESIA
------- --------- -------- -----------
<S> <C> <C> <C> <C>
Average sales prices:
Per Bbl of oil
1994................................................ $14.99 $ 15.78 $13.43 $ 15.78
1993................................................ 15.10 17.26 15.04 17.26
1992................................................ 18.47 20.69 16.32 20.69
Per Bbl of natural gas liquids
1994................................................ 9.46 17.56
1993................................................ 10.38 17.89
1992................................................ 20.07
Per Mcf of gas
1994................................................ 2.57 2.72(a) 1.07 2.72(a)
1993................................................ 2.49 3.00(a) 1.26 3.00(a)
1992................................................ 3.69 3.22(a) 1.09 3.22(a)
Average production costs per boe(b):
1994................................................ 5.56 (c) 3.06(d) 2.80 2.83(d)
1993................................................ 7.68 (c) 3.49(d) 2.72 3.17(d)
1992................................................ 11.94 3.95(d) 3.50 3.56(d)
</TABLE>
(See notes on following page)
6
<PAGE> 9
- ---------------
(a) Includes natural gas sold to a fertilizer plant and a refinery. The average
sales price for LNG for 1994, 1993 and 1992 was $2.85, $3.17 and $3.41 per
Mcf, respectively.
(b) Includes expenditures for operating expenses, severance and ad valorem
taxes.
(c) Includes the impact of increases in volumes as a result of production from
the Piper, Chanter and Saltire fields that came on stream in 1993.
(d) Includes plant processing costs and debt service on the Indonesian LNG
processing facilities.
CURRENT MARKETS FOR OIL AND GAS
Revenues generated from the Company's operations are highly dependent upon
the prices of and demand for oil and gas. The unsettled energy market makes it
difficult to estimate future prices and sales volumes of natural gas and crude
oil. Prices received by the Company for its oil and gas production are affected
by a number of factors beyond the control of the Company, including worldwide
and domestic supplies of oil and gas, changing international economic and
political conditions, domestic and foreign energy legislation, weather,
environmental conditions, regulations and events, and actions of members of the
Organization of Petroleum Exporting Countries. The Company cannot predict
whether oil or gas prices will remain at, or increase or decline from, current
levels. If oil prices decline, the price for a significant portion of the
natural gas produced from the Company's properties, including the sales price
for LNG, will also decline.
ACREAGE
The following table summarizes the Company's developed and undeveloped
acreage at December 31, 1994, by geographic area. As used herein and in
"Drilling Activities" below, the term "gross" refers to acres or wells in which
the Company owns a working interest, and the term "net" refers to gross acres or
wells multiplied by the percentage of the working interest owned by the Company.
<TABLE>
<CAPTION>
DEVELOPED ACRES UNDEVELOPED ACRES
--------------- -------------------
GROSS NET GROSS NET
----- --- ------ ------
<S> <C> <C> <C> <C>
(NUMBERS IN THOUSANDS)
United States (Alaska)........................ 313 118
United Kingdom................................ 51 10 645 214
Indonesia..................................... 97 25 14,070 8,089
Pakistan...................................... 28 8 3,934 1,805
Other International........................... 10,487 5,667
----- --- ------ ------
Total............................... 176 43 29,449 15,893
==== === ====== ======
Equity Partnership:
Indonesia................................... 97(a) 11 1,046(a) 121
==== === ====== ======
</TABLE>
- ---------------
(a) The Company also has a direct interest in such gross developed and
undeveloped acreage, which is included above in the Company's gross acreage
for Indonesia.
7
<PAGE> 10
DRILLING ACTIVITIES
At December 31, 1994, the Company's total gross and net productive oil and
gas wells, including multiple completions, by geographic area, were as shown in
the table below. The gross number of oil and gas wells with multiple completions
was 235.
<TABLE>
<CAPTION>
OIL WELLS GAS WELLS
--------------- ---------------
AREA GROSS NET GROSS NET
------------------------------------------------ --- ----- --- -----
<S> <C> <C> <C> <C>
United Kingdom.................................. 50 10.00 12 2.95
Indonesia....................................... 79 19.75 345 83.57
Pakistan........................................ 41 12.17 42 12.38
Other International............................. 1 .13
--- ----- --- -----
Total................................. 171 42.05 399 98.90
=== ===== === =====
Equity Partnership:
Indonesia..................................... 79(a) 8.70 345(a) 36.81
=== ===== === =====
</TABLE>
- ---------------
(a) The Company also has a direct interest in such wells, which is included
above in the Company's gross wells for Indonesia.
The net productive and dry exploratory wells drilled during 1994, 1993 and
1992, by geographic area, were as follows:
<TABLE>
<CAPTION>
EXPLORATORY WELLS
-------------------------------------------------
PRODUCTIVE DRY
---------------------- ----------------------
AREA 1994 1993 1992 1994 1993 1992
----------------------------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
United States (Alaska)................... .56 1.10
United Kingdom........................... .25 .20 .80 1.03
Indonesia................................ .26 1.29 .53
Pakistan................................. .56 1.11 1.35 1.11 1.76 .93
Other International...................... .75 1.05 1.00
---- ---- ---- ---- ---- ----
Total.......................... .81 1.11 1.35 2.88 6.00 3.49
==== ==== ==== ==== ==== ====
Equity Partnership:
Indonesia.............................. .11 .35 .23
==== ==== ====
</TABLE>
The net productive and dry development wells drilled during 1994, 1993 and
1992, by geographic area, were as follows:
<TABLE>
<CAPTION>
DEVELOPMENT WELLS
--------------------------------------------------
PRODUCTIVE DRY
----------------------- ----------------------
AREA 1994 1993 1992 1994 1993 1992
---------------------------------------- ---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
United Kingdom.......................... 1.20 2.80 .20
Indonesia............................... 5.59 6.83 5.91 .53
Pakistan................................ .60 1.20 .30 .60 .30
---- ----- ---- ---- ---- ----
Total......................... 7.39 10.83 6.41 .60 .83
==== ===== ==== ==== ==== ====
Equity Partnership:
Indonesia............................. 2.47 3.01 2.61 .23
==== ===== ==== ==== ==== ====
</TABLE>
8
<PAGE> 11
At December 31, 1994, wells in progress were as follows:
<TABLE>
<CAPTION>
EXPLORATORY DEVELOPMENT
-------------- --------------
GROSS NET GROSS NET
--- ---- --- ----
<S> <C> <C> <C> <C>
United States (Alaska).............................. 2 .27
United Kingdom...................................... 3 .65
Indonesia........................................... 1 .26 13 3.02
Pakistan............................................ 4 1.11
-- ---- -- ----
Total..................................... 7 1.64 16 3.67
== ==== == ====
Equity Partnership:
Indonesia......................................... 1(a) .12 13(a) 1.33
== ==== == ====
</TABLE>
- ---------------
(a) The Company also has a direct interest in such wells, which is included
above in the Company's gross wells for Indonesia.
At December 31, 1994, there were pressure maintenance programs in the U.K.
North Sea and in Pakistan.
INTERNATIONAL EXPLORATION AND PRODUCTION
Indonesia
The Company is engaged in oil and gas exploration, development and
production in Indonesia, primarily through a joint venture group it joined in
1969. Under a production sharing contract with Pertamina, the Indonesian
national oil company, which currently covers approximately 1.1 million acres,
the joint venture produces gas and, to a lesser extent, oil and condensate, in
the East Kalimantan area. Substantially all of the natural gas produced by the
joint venture is supplied, pursuant to long-term contracts with Pertamina, to a
liquefaction plant owned by Pertamina at Bontang Bay, approximately 35 miles
from the production areas. At the Bontang plant, gas is converted into LNG in
parallel processing units ("trains") by reducing the temperature of the gas to
approximately minus 161 degrees Celsius. The Bontang plant currently has six
trains in operation, and construction of the seventh train by Pertamina is
scheduled for completion in 1998. After conversion, the LNG is pumped into
specially designed tankers (owned by third parties) and transported to
purchasers, primarily in the Pacific Rim, where it is returned to its original
gaseous form and used for fuel by electric utilities and industry. The Bontang
plant also processes liquified petroleum gas ("LPG").
Production Sharing Contract and Drilling. The joint venture's production
sharing contract with Pertamina grants the joint venture the right to share in
the production and revenues from the contract area, but not ownership rights in
the oil and gas reserves. The joint venture's contract area in East Kalimantan
includes substantial portions of two fields, Badak and Nilam, as well as several
other fields. The joint venture has relinquished 20% of the area covered by the
production sharing contract since the contract was extended in 1990, and is
required to relinquish the following additional amounts: 10% by August 1998, 10%
by December 31, 2000, 15% by December 31, 2002, and 15% by December 31, 2004.
The joint venture, however, is not obligated to relinquish any area from which
oil or natural gas is produced.
The production sharing contract had an original term expiring in 1998, but
in 1990, Pertamina and the joint venture amended the production sharing
contract, extending the joint venture's right to explore, develop and produce
oil and gas in the contract area until 2018. The amended production sharing
contract, which generally contains terms and conditions similar to the
production sharing contract prior to extension, entitles the joint venture
participants to recover most field and other operating costs, as well as capital
depreciation, and to receive, net of Indonesian taxes, 35% of the remaining gas
production until August 1998, and 25% or 30%, depending upon the applicable
sales contract, with some exceptions, of such production for the remaining term
of the contract. The production sharing contract also entitles the joint venture
participants to take their respective shares of oil and condensate production in
kind, and after recovering operating expenses and capital depreciation, to
retain 15% of the proceeds from sales of such production, net of Indonesian
taxes. Proceeds from the sale of oil and condensate (except for that sold
pursuant to the joint venture's domestic market obligation) are currently based
on official Indonesian crude oil prices and reflect world market prices.
9
<PAGE> 12
The Company owns a 37.81% working interest in the joint venture (26.25%
directly and 11.56% through subsidiaries of Unimar, the Equity Partnership). The
Company's 11.56% indirect interest is subject to the right of holders of
Unimar's Indonesian Participating Units to receive, until September 25, 1999, a
percentage of certain cash flow resulting from Unimar's interest in the joint
venture. In 1994, approximately one-fourth of the Company's interest in such
cash flow was burdened by such payment obligation. Virginia Indonesia Company, a
participant in the joint venture and a subsidiary of Unimar, acts as operator of
the joint venture. The vote of participants holding 66 2/3% of the total joint
venture ownership interest is generally required for approval of significant
matters pertaining to the joint venture.
At December 31, 1994, proved reserves (net) attributable to the Company's
total interest in the joint venture were approximately 1.4 Tcf of gas and 27
MMBbls of oil and condensate. The volumes of production required to recover the
field, operating and capital depreciation costs of the joint venture are
affected by prices received for such production. The reserve estimates, which
are based on year-end prices, for the Company's net interest in the production
sharing contract are subject to revision as prices fluctuate due to the cost
recovery feature under the contract and due to the effect that price
fluctuations generally have on estimates of recoverable reserves. See Note 19 of
Notes to Consolidated Financial Statements.
Substantially all of the joint venture's natural gas production and
reserves are committed to several long-term supply agreements with Pertamina,
which obligate the joint venture to supply certain minimum quantities of natural
gas. The Company believes that there are adequate reserves in the joint
venture's production sharing contract area to supply natural gas under the joint
venture's contractual commitments outstanding as of December 31, 1994. Pertamina
continues to make progress in marketing additional LNG volumes. The percentage
of the natural gas supplied by the joint venture in support of future LNG or LPG
sales contracts, or renewals or extensions of existing long-term sales
contracts, is dependent upon the uncommitted reserves of natural gas that the
joint venture has in its production sharing contract area at the time that
Pertamina establishes the allocation of the natural gas supply for such sales
contracts among the various contractor groups in the East Kalimantan area.
Because a substantial portion of the joint venture's reserves of natural gas has
been committed to support existing LNG sales contracts, the Company expects that
absent the discovery of significant additional natural gas reserves in the joint
venture's contract area, the joint venture's participation in future new sales
contracts for LNG and LPG, or in extensions or renewals of existing long-term
contracts, will be less than its current participation in existing contracts.
In 1994 and 1993, 23 and 29 successful development wells, respectively,
were drilled in fields in East Kalimantan. During 1995, the Company expects to
spend approximately $30 million on development drilling. The joint venture also
continues to evaluate the East Kalimantan area to identify additional gas
prospects. All of these expenditures will be cost recoverable pursuant to the
amended production sharing contract.
The joint venture participants are required collectively to sell
approximately 8.5% of the total oil and condensate production from most existing
fields in the contract area at $0.20 per barrel for domestic Indonesian
consumption. The domestic market obligation is suspended, however, for the first
60 months of production from new fields in the contract area, after which the
price will be 10% of the realized Indonesian export price. These obligations are
factored into the Company's net reserves estimates. Each participant's remaining
oil and condensate production is generally sold in world oil markets. In
addition to the oil and condensate sold for domestic use, the joint venture
supplies gas for domestic consumption, and the amount supplied for such purposes
may increase in the future. Profits from gas supplied for domestic consumption,
which was sold at an average price of $1.06 per Mcf in 1994, are less than from
gas supplied for LNG. Gas supplied for domestic consumption constituted less
than 6% of the joint venture's gas production during 1994.
Bontang Plant. At the Bontang plant, natural gas supplied by the joint
venture and other production sharing contractors is converted to LNG and shipped
in LNG tankers ("cargoes"). In 1994 and 1993, deliveries from the plant were 247
cargoes (108 Bcf net to the Company) and 217 cargoes (96 Bcf net to the Company)
of LNG, respectively. During 1993, the completion of the debottlenecking project
on the first four trains and the completion of the sixth train increased the
production capacity of the Bontang plant to approximately 275 cargoes per year
(from 1.8 Bcf to 2.3 Bcf per day).
10
<PAGE> 13
The amount of revenue that the Company receives as a result of the
production of natural gas in support of the sale of LNG by Pertamina is
dependent upon the number of cargoes shipped each year, the Company's ultimate
participation in each cargo, the price the buyers must pay for the LNG purchased
and the costs to be recovered from the proceeds of sales of LNG.
With the completion of the sixth train and the debottlenecking project, the
Bontang plant currently has additional unused processing capacity. The Bontang
plant's ability to manufacture and ship quantities of LNG is dependent upon the
continued operation of the Bontang plant without mechanical failure and without
the shutdown of any processing units in excess of scheduled maintenance periods.
The sale of LNG is also dependent upon the availability of shipping without
interruption and upon the continued operation of the buyers' receiving
terminals. The manufacture, shipment, receipt and distribution of LNG can be
interrupted or adversely impacted by severe weather, acts of nature or other
events. The costs associated with transportation of LNG, such as repair and
maintenance or replacement of LNG tankers, are beyond the control of the
Company.
The Bontang plant is owned by Pertamina and operated on a
cost-reimbursement basis by a corporation owned in part by the joint venture.
The financing of the original two trains was repaid in 1990, and the financing
for the second two trains was repaid in 1993. Financing for construction of the
fifth train at the Bontang plant was provided principally from Japanese sources
through a funding arrangement under which debt service is paid by the Trustee
(as defined below) to the lenders from the proceeds of LNG sales, primarily
under the contract with Chinese Petroleum Corporation ("CPC"), the national oil
company of the Republic of China (Taiwan). Final repayment is scheduled in 2000.
In 1991, Pertamina arranged $750 million under a similar financing arrangement
for the construction of the sixth train and associated facilities at the Bontang
plant. Construction began in 1991 and was completed in late 1993 at a cost of
approximately $700 million. Repayment began in 1994 from proceeds of the Osaka
contract (as defined below), and final repayment is scheduled in 2004.
Financings of the fifth and sixth trains are nonrecourse to both Pertamina and
the joint venture. Discussions are currently under way regarding the financing
of the seventh train, dock and other support facilities. The construction of the
seventh train for an estimated cost of approximately $975 million is expected to
begin in 1995.
Sales Contracts. The joint venture currently has gas supply agreements with
Pertamina that support the long-term and short-term LNG sales contracts and
obligate the joint venture to provide certain quantities of natural gas for
fulfillment of Pertamina's obligations pursuant to the LNG sales contracts. The
supply agreements terminate concurrently with the expirations of their
respective LNG sales contracts. The extent of the joint venture's obligation to
supply natural gas in support of Pertamina's LNG sales contracts and its right
to receive revenues attributable to the sale of LNG under such contracts vary
among the sales contracts.
LNG is sold by Pertamina to two groups of Japanese industrial and utility
customers and to CPC under long-term contracts signed in 1973, 1981 and 1987,
respectively. Additionally, sales of LNG began in November 1994 under a
long-term contract signed in 1990 with a consortium of buyers organized by Osaka
Gas, a Japanese utility (the "Osaka contract"). LNG is also sold by Pertamina
under additional long-term contracts with Korea Gas Corporation ("KGC") signed
in 1983 and 1991 (the "Korean Carryover" and "Korea II" contracts, respectively)
and will be sold beginning in 1996 under the long-term Mid-Cities Gas Companies
("MCGC") contract signed in 1992. Some of the added capacity from the expansion
of the LNG facilities during 1993 is also used to supply LNG sold under
short-term contracts to Japanese, Korean and Taiwanese buyers. The sales price
under the LNG sales contracts is tied to an average of prices for exported
Indonesian crude oil.
In 1994, Pertamina negotiated extensions of the LNG contracts originally
signed in 1973 and 1981, and also reached preliminary agreements for new
proposed long-term LNG sales contracts with CPC and KGC. The 1973 contract will
be extended for an additional period of ten years beyond 1999, and the 1981
contract will be extended for an additional period of five years beyond 2003.
The proposed CPC and KGC long-term contracts will be in effect from 1998 until
2017. While memoranda have been signed by Pertamina and the buyers, final
agreements for the extensions and the new long-term sales contracts are
primarily conditional upon concluding LNG transportation arrangements and, with
respect to the new long-term sales contracts,
11
<PAGE> 14
certification of uncommitted reserves. Because the 1973 and 1981 contracts, as
extended, will require the sale of quantities of LNG previously supplied by an
LNG facility other than the Bontang plant, the capacity of the Bontang plant
must be increased through the construction of a seventh train, which Pertamina
agreed in 1994 to construct. Construction of the seventh train is expected to
begin in 1995, and is currently scheduled for completion in 1998. In addition,
preliminary studies are currently being conducted by Pertamina, the joint
venture and the other production sharing contract groups regarding the planning,
development, financing and construction of an eighth train, which could come on
stream early in 2000, to primarily support the proposed CPC and KGC long-term
contracts.
The Company's right to receive revenues from the sale of LNG and LPG under
any future new contracts or extensions or renewals of existing contracts,
including the 1973 and 1981 contract extensions and the proposed new CPC and KGC
long-term contracts, is affected by the allocation of the gas supply obligation
in support of such contracts among the joint venture and the other production
sharing contractors supplying gas to the Bontang plant. This allocation is set
by Pertamina and is based upon uncommitted reserves of natural gas available at
the time Pertamina makes the allocation. The allocation to the Company's joint
venture in such contracts has declined over time since the initial 1973
contract, when the joint venture was virtually the only supplier to the Bontang
plant, to the present when there are several other major production sharing
contractors supplying gas to the Bontang plant and sharing in the allocation of
volumes. Pertamina has preliminarily set the participation of the joint venture
in the 1973 contract extension at 22% based upon the joint venture's uncommitted
reserves as of May 31, 1994, which percentage is less than the joint venture's
participation in existing LNG contracts. This preliminary participation
percentage is subject to final calculations by Pertamina, which should be
concluded in 1995. Pertamina has not yet allocated the natural gas supply
obligation in support of the extension of the 1981 contract or the proposed new
CPC and KGC long-term contracts among the joint venture and the other production
sharing contractors supplying natural gas to the Bontang plant; however, the
amount of natural gas that the joint venture will supply to Pertamina in support
of the 1981 contract extension and the proposed new sales contracts will be less
than the amount of natural gas that the joint venture currently supplies in
support of other existing LNG contracts, and the joint venture's participation
may be less than 22%. A final determination regarding the joint venture's
participation percentage for the 1981 extension and the proposed CPC and KGC
long-term contracts is not expected before 1996. Because the joint venture's
participation percentage will be less, the joint venture's and the Company's
right to receive revenues attributable to the sale of LNG under the extensions
of the 1973 and 1981 contracts and the proposed new CPC and KGC long-term
contracts will be less than that under the original contracts with those buyers.
The Company cannot predict the percentage participation that the joint venture
will have in other future contracts. The Company expects, however, that absent
the discovery of significant additional gas reserves in the joint venture's
contract area, the joint venture's percentage participation in such future sales
contracts will be less than that currently received. See the table presented
below for additional information.
The 1973 and 1981 contracts (including extensions thereof), and the CPC,
Osaka, Korean Carryover, Korea II and MCGC contracts (together with the proposed
new CPC and KGC contracts, the "long-term contracts") contain or will contain
take-or-pay provisions that generally require that the purchasers either take
the contracted quantities or pay for such quantities even if not taken. Prior to
any extensions, the initial term of each long-term contract is approximately 20
years. The other contracts described in the table are short-term contracts and
generally have a term of ten years or less. Of the remaining LNG sales volumes
to be delivered after December 31, 1994, under all of the contracts described in
the table below (excluding any quantities called for by the extensions of the
1973 and 1981 contracts and the proposed new CPC and KGC long-term contracts),
the long-term contracts and the short-term contracts represent approximately 95%
and 5%, respectively, of such deliveries.
12
<PAGE> 15
The following table sets forth information regarding the Bontang LNG
plant's share of LNG sales contracts at December 31, 1994:
<TABLE>
<CAPTION>
JOINT
VENTURE'S
REMAINING SHARE OF
LNG REMAINING
SALES LNG SALES
CONTRACT VOLUMES JOINT VENTURE VOLUMES
TERM (TBTU) PARTICIPATION % (A)(B) (TBTU) (C)
---------- ----- ---------------------- -----------
<S> <C> <C> <C> <C>
LONG-TERM:
1973............................... 1977-1999 901 97.9/27.2(d) 566
1981............................... 1983-2003 1,551 66.4/29.6(e) 972
CPC................................ 1990-2009 1,248 29.6(f) 369
Osaka.............................. 1994-2013 2,265 27.2 616
Korean Carryover................... 1986-2006 173 50(f) 87
Korea II........................... 1994-2014 1,001 27.2(f) 272
MCGC............................... 1996-2015 179 27.2 49
SHORT-TERM:
Toho............................... 1988-1999 29 29.6/27.2 8
KGC MOA............................ 1995-1999 318 22(g) 70
CPC MOA............................ 1998-1999 46 22(g) 10
</TABLE>
- ---------------
(a) The joint venture's participation percentage is set by Pertamina based upon
uncommitted reserves of the various production sharing contractors supplying
gas to the Bontang plant. The participation percentages determined by
Pertamina apply to new contracts, or amendments or extensions of contracts,
entered into during certain time periods. For the extension of the 1973
contract, and, in general, for sales of LNG during the period from 1994 to
1999 under new contracts or renewals or extensions of existing contracts,
Pertamina has preliminarily set the joint venture's participation percentage
at 22% based upon the joint venture's uncommitted natural gas reserves
certified as of May 1994. This preliminary percentage is subject to final
calculations by Pertamina. The Company anticipates a final determination of
the joint venture's participation during 1995, which the Company does not
expect to vary materially from 22%. For sales contracts not covered by this
preliminary determination or by prior determinations, including the
extension of the 1981 contract and the proposed new CPC and KGC long-term
contracts, the Company cannot predict the participation percentage of the
joint venture in such contracts, although absent the discovery of
significant additional gas reserves in the joint venture's contract area,
the participation percentage may be less than 22%.
(b) Those contracts that show two joint venture participation percentages have
been amended or extended to provide for additional deliveries. The second
percentage indicates the portion of gas to be supplied under the amendment
or extension of such contract by the joint venture.
(c) The joint venture's share of remaining LNG sales volumes represents volumes
available to the joint venture under the sales contracts for servicing its
share of plant operating and debt service costs, as applicable, and for
recovering exploration, development and production costs and profit sharing
between the joint venture and Pertamina.
(d) The joint venture has a 97.9% and 27.2% interest in 454 and 447 remaining
TBtus, respectively, of the total 901 TBtus remaining to be sold under this
contract. Under the extension of the 1973 contract, the joint venture is
expected to have a 22% interest in sales of an additional 4,393 TBtus.
(e) The joint venture has a 66.4% and 29.6% interest in 1,394 and 157 remaining
TBtus, respectively, of the total 1,551 TBtus remaining to be sold under
this contract. The extension of the 1981 contract provides for the sale of
an additional 925 TBtus. The joint venture's participation percentage in
this extension, which may be less than 22%, will not be determined by
Pertamina before 1996.
(Notes continued on following page)
13
<PAGE> 16
(f) The proposed new long-term sales contracts with CPC and KGC provide for the
sale of 1,812 TBtus and 659 TBtus, respectively. Such new sales volumes are
in addition to the 1,248 TBtus, 1,001 TBtus and 173 TBtus, respectively,
remaining to be sold under the existing long-term contracts with CPC and
KGC. Sales of LNG under the proposed new contracts will commence in 1998 and
continue until 2017. The joint venture's participation percentage in these
proposed contracts, which may be less than 22%, will not be determined by
Pertamina before 1996.
(g) Memoranda of Agreement have been executed between Pertamina and the buyers
for the sale of these quantities. The joint venture's preliminary
participation percentage is 22%, as it falls within the time periods covered
by Pertamina's preliminary determination discussed in footnote(a) above.
In general, the processing costs and operating costs of the Bontang plant
are charged to each LNG and LPG sales contract during each year based upon the
ratio of the sum of BTUs of LNG and LPG processed by the Bontang plant for each
contract to the total number of BTUs processed by the Bontang plant.
Under the 1973, CPC and MCGC long-term contracts and, in general, the
short-term contracts, LNG is sold on a delivered basis (i.e., title and risk of
loss do not pass until the LNG is unloaded at the customers' facilities). Under
the 1981, Osaka, Korean Carryover and Korea II contracts, LNG is delivered
F.O.B. (i.e., title and risk of loss pass upon loading at Pertamina's port
facility). Payments for LNG under all of the LNG sales contracts are, or will
be, made by the purchasers in U.S. dollars directly to a bank in the United
States that acts as trustee and paying agent (the "Trustee") with respect to
sales proceeds. Bontang plant processing fees, debt service with respect to
plant financings, transportation (as required) and other costs are deducted from
sales proceeds, and the balance is then distributed to Pertamina, the members of
the joint venture and other production sharing contractors.
At December 31, 1994, the average LNG price under all contracts supplied
from the Bontang plant was $2.51 per MMBtu, or $2.77 per Mcf. Prices under the
contracts are subject to monthly adjustments. As of December 31, 1994, January
31, 1995, and February 28, 1995, the average price for the group of crude oils
used to determine the price of LNG was $16.17, $17.01 and $17.85 per Bbl,
respectively. The Company is unable to predict the amount or timing of future
changes in the price of this group of crude oils. Every $1.00 change in the
average of the price of this group of crude oils results in approximately a
$0.17 per Mcf change in the price of LNG.
Pertamina also sells LPG produced at the LPG processing facility at the
Bontang plant under seven contracts with Japanese purchasers, each of which is
for a ten-year term. These LPG contracts, as amended, provide for delivery of an
aggregate of approximately 1,950,000 metric tons of LPG (14.4 MMboe) per year,
of which an aggregate of up to 800,000 metric tons of LPG (5.9 MMboe) per year
will be from the Bontang plant. The balance of the LPG is to be supplied by the
Arun plant, a plant to which the joint venture supplies no gas. The joint
venture has 29.6% and 27.2% participations and a preliminary 22% participation
in the gas processed at the Bontang plant to supply quantities of LPG to be sold
under the LPG contracts. Pertamina may from time to time sell quantities of LPG
outside of the seven LPG contracts, and to the extent that such sales are made,
the joint venture expects to have approximately a 22% participation in the gas
processed at the Bontang plant to supply those additional sales. A significant
portion of the LPG sales proceeds from sales under the seven contracts is
dedicated to the repayment of financing of the LPG processing and dock
facilities at the Bontang plant.
U.K. North Sea
The Company's principal U.K. North Sea properties include interests in the
Piper, Claymore, Scapa, Saltire and Chanter oil fields, the Sean gas fields and
the undeveloped Britannia gas and condensate field. The Company also owns a 20%
interest in the Flotta terminal and pipeline system located in the Orkney
Islands in Scotland.
Piper and Claymore Fields. In 1971, the Company joined a consortium of
companies, of which Elf Enterprise Caledonia Limited is now the operator, to
explore for oil and gas in certain areas of the North Sea. The Company has a 20%
working interest (17.5% revenue interest after government royalty) in the Piper
and Claymore fields discovered in 1972 and 1974, respectively. Production from
Piper and Claymore originally
14
<PAGE> 17
began in late 1976 and late 1977, respectively. After being shut down since July
1988 following a platform explosion, production in the Piper field commenced in
February 1993 from a new fixed platform ("Piper B"). The proved reserves (net)
as of December 31, 1994, contained in the Piper and Claymore fields are 23 MMboe
and 23 MMboe, respectively, including an upward revision for the Piper field of
approximately 9 MMboe recorded in the first quarter of 1994. Average daily
production of oil and liquids (net to the Company) for 1994 from the Piper and
Claymore fields was 15 MBbls and 8 MBbls, respectively. Average daily production
rates for 1994 for the Piper and Claymore blocks were affected by a suspension
of production from May to mid-June due to a natural gas leak. Production
declines from the Piper and Claymore blocks are expected to begin in 1997.
In late 1992, a contract was awarded for the engineering, procurement and
construction of a new platform to provide personnel accommodation facilities for
the Claymore field. The new facilities will replace existing accommodations on
the Claymore A production platform and the floating unit moored alongside. The
installation is scheduled for completion in mid-1995. The Company's share of the
cost of this new platform is currently estimated to be approximately $40 million
through completion of the project. The Company spent approximately $12 million
in 1994 on the platform and anticipates that it will spend approximately $11
million during 1995. These expenditures are fully deductible in the year
incurred for purposes of determining the U.K. Petroleum Revenue Tax ("PRT")
payable with respect to production from the Claymore field.
The Company currently sells, at prevailing market prices, its crude oil
production from the U.K. sector of the North Sea F.O.B. Flotta terminal to B.P.
Oil International Limited and Elf Trading, two major international oil and gas
companies, under contracts with a term of one year. The Company anticipates that
based on current demand it will be able to sell its share of crude oil
production from the U.K. sector of the North Sea.
The Piper and Claymore fields are currently subject to PRT at a 50%
statutory rate, which is based on the net value of oil and gas produced from
each field and on pipeline tariffs. The U.K. tax structure has encouraged
development of smaller fields in the northern North Sea, such as the Scapa,
Saltire and Chanter fields described below, by exempting all or part of their
production from PRT. It is anticipated that only small amounts of PRT, if any,
will be paid on the production from these fields. Production exempted from PRT
provides a greater contribution to cash flow on a per-barrel basis. All
production is subject to the U.K. corporation tax, which is at the current rate
of 33% (27.5% effective rate after benefits provided by the U.K./U.S. tax
treaty). Under current U.S. tax law, the PRT and U.K. corporation tax may be
credited against U.S. taxes. See Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations.
Saltire Field. The Company has a 20% working and revenue interest in the
Saltire field, which was discovered by the joint venture in 1988. This field is
referred to as an edge oil field because it has a separate field designation,
incurs little or no PRT, has no government royalty interest burden and is
developed as a satellite from an existing platform. The Company developed
Saltire using a fixed platform connected to the Piper B platform. Net
expenditures by the Company for the Saltire development were approximately $180
million through December 31, 1994, inclusive of $5 million incurred during 1994.
The Saltire platform was completed and production began in May 1993. Average
daily production (net to the Company) for 1994 was 10 MBbls of oil and liquids.
Proved reserves (net) at December 31, 1994, for Saltire were 13 MMboe.
Chanter Field. In July 1991, the U.K. Department of Energy approved the
development of the Chanter field, which is also an edge oil field located
approximately 120 miles northeast of Aberdeen on U.K. Block 15/17 (Piper) in the
North Sea. The Chanter field was developed as a subsea satellite to the Piper B
platform and utilized the existing pipeline system leading to the Flotta
terminal in the Orkney Islands. The Company has a 20% working and revenue
interest in the Chanter field. The field comprises two reservoirs, one oil and
the other natural gas and condensate. Production from the Chanter field began in
May 1993. Average daily production (net to the Company) for 1994 was 1 MBbls of
oil and liquids. The proved reserves (net) contained in the field are 2 MMboe as
of December 31, 1994.
Scapa Field. The Scapa oil field, in which the Company has a 20% working
and revenue interest, was discovered in 1975 and is produced using a subsea
production facility tied to the Claymore platform. Scapa is
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<PAGE> 18
not subject to a government royalty interest, and it is anticipated that only
small amounts of PRT will be paid on production from this edge oil field. Oil
production from the Claymore and Scapa fields is transferred 135 miles via the
joint venture's pipeline to the Flotta terminal. Average daily production (net
to the Company) for 1994 was 5 MBbls of oil and liquids. Proved reserves (net)
at December 31, 1994, for the Scapa field were 6 MMboe of oil.
Sean Fields. The Company has a 25% working interest (24.375% revenue
interest after overriding royalty) in the Sean gas development project,
discovered in 1969 in the southern portion of the U.K. North Sea. The project,
operated by Shell U.K. Limited, consists of the North and South Sean fields and
the recently discovered East Sean field. Production from the East Sean field
began in November 1994. The proved reserves (net) as of December 31, 1994,
contained in the Sean fields were 24 MMboe, including 3 MMboe attributable to
the East Sean field. The Company believes that the Sean properties have
potential for additional gas reserves and production. The Company expects to
participate in one or more exploratory wells to test structures adjacent to the
existing Sean gas fields during 1995.
The Sean platforms, which currently serve the North and South Sean fields
and the East Sean field, made their first deliveries in December 1986. Under the
terms of a gas sales contract terminating in 2011 with British Gas plc, the
Company will deliver, during each winter contract period, an average minimum of
3.1 Bcf (net to the Company) from the North and South Sean fields, up to the
maximum field contractual reserve of 425 Bcf (104 Bcf net to the Company). This
peak-shaving gas sales agreement also provides that currently proved gas
reserves from the North and South Sean fields may be sold only to British Gas
plc. The price under the gas sales agreement is based upon the volume of gas
taken and various U.K. price indices. The average price for 1994 was $3.16 per
Mcf. The Company also earns a capacity charge during the fall and winter months,
which is independent of production levels, to ensure field deliverability of 600
MMcf (gross) per day. The capacity charge for 1994 totaled $32 million (net to
the Company), and the revenue for the volume of gas taken on 29 days of
production was $13 million (net to the Company). The Company anticipates that,
at current production levels, only small amounts of PRT will be paid over the
next few years with respect to the Company's production from the North and South
Sean fields.
The East Sean field is separated from the producing reservoirs of the North
and South Sean fields, and as a result, production from the East Sean field is
not subject to the peak-shaving contract with British Gas plc. The Company's
share of gas from the East Sean field, which will produce year-round, is sold to
Alliance Gas Limited under a short-term contract. Sales under this contract
commenced in November 1994. Production from the East Sean field is not subject
to PRT.
Britannia Field. In November 1994, the Company acquired a 9.42% unit
interest in the undeveloped Britannia natural gas and condensate field in the
U.K. North Sea from Fina Exploration Limited and Fina Petroleum Development
Limited, subsidiaries of Petrofina SA. The purchase price was approximately $159
million. The Company's total share of development costs for its interest in the
Britannia field is estimated to be approximately $200 million, at current
exchange rates, over a five-year period from 1994 to 1998, with an estimated $47
million budgeted for 1995 for drilling activities and initial platform
fabrication and facilities work. The Britannia field will be operated by
Britannia Operator Limited, a joint venture between Conoco (U.K.) Limited and
Chevron U.K. Limited. Production from Britannia is expected to begin in late
1998. Long-term agreements have been reached to sell a substantial portion of
the gas production in the U.K. market to four purchasers: Kinetica Limited,
Mobil Gas Marketing (U.K.) Limited, National Power plc and Total Oil Marine plc.
As a result of the acquisition, the Company recorded, as of December 31, 1994,
an additional 38 MMboe of proved undeveloped reserves to its year-end oil and
gas reserves. Revenues from the Britannia field will be subject to the U.K.
corporation tax, but will not be subject to U.K. royalty or PRT. For additional
information, see Item 7 -- Management's Discussion and Analysis of Financial
Condition and Results of Operation.
Other Information. Payment to the Company with respect to oil production
from the Piper, Claymore, Saltire, Chanter and Scapa fields is made in U.S.
dollars, and payments under the Sean gas sales agreements with British Gas plc
and Alliance Gas Limited are made in pounds sterling. There are no significant
restrictions on the repatriation of funds from the Company's U.K. subsidiary to
the United States. Dividends
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<PAGE> 19
paid to the Company by its U.K. subsidiary are subject to a 25% U.K. advance
corporation tax. Approximately 27.5% of this tax (or approximately 6.9% of the
dividend paid) is available for immediate refunding to the Company by the U.K.
government. All of this tax (including the refunded portion) may be credited
against the U.K. corporation tax paid by the Company's U.K. subsidiary.
Pakistan
Badin Concessions
Since 1977, the Company has participated through joint ventures in the
exploration for, and development and production of, oil and gas in the Badin
area of the Sindh Province in southeastern Pakistan. The Company's activities
are conducted under three Badin concessions.
1977 Concession. In April 1977, the Pakistan government granted exploration
rights in the Badin area to the Company and its co-venturers (the "1977
concession" or the "Badin-I concession"). The Company is the operator of a joint
venture that includes the Oil and Gas Development Corporation, a Pakistan
government-owned company. The oil and gas reserves discovered under the 1977
concession continue to be produced under leases granted by the Government of
Pakistan. The terms of such leases are 30 years from the date that they were
first granted. The Company has a 30% working interest (26.25% revenue interest)
in the 1977 concession area.
1992 Concession. In 1992, the joint venture was granted a three-year
extension of the exploration license that it originally received in 1977 (the
"1992 concession" or the "Badin-II concession"). The oil and gas reserves
discovered under the 1992 concession will be produced under 20-year leases to be
granted by the Government of Pakistan. Production from the 1992 concession is
expected to begin during 1995. The Company has a 25.5% working interest (22.3%
revenue interest) in the 1992 concession area.
1995 Concession. The exploration license granted by the Pakistan government
in January 1992 under the 1992 concession expired in January 1995. In December
1994, the joint venture and the Pakistan government signed a new petroleum
concession agreement (the "1995 concession"). The 1995 concession provides that
the Company will act as operator and will bear 38% of the costs of exploration,
including 12.5% attributable to the Pakistan government. The 1995 concession
provides that the exploration license will be extended for three one-year
periods beginning January 1995, subject to satisfying certain minimum work
requirements. Under the 1995 concession, the Company will explore for and
develop oil and gas on the approximately 1.7 million acres in the Badin area not
covered by leases granted under the 1977 concession or the 1992 concession. As
discoveries are made, the joint venture will apply for individual 20-year leases
in which the Company will have a 25.5% working interest (22.3% revenue
interest), provided the Government of Pakistan elects to exercise its option to
increase its working interest in such discovery to 25%.
The Government of Pakistan is contractually obligated under the 1992 and
1995 concession agreements to issue leases upon the determination of a
commercial discovery and the fulfillment by the joint venture of the conditions
of the concession agreements and the exploration license.
Proved reserves (net) at December 31, 1994, for the Company's interest in
the Badin area were 4 MMBbls of oil and 98 Bcf of gas. The joint venture under
the 1977 concession produced approximately 33% of Pakistan's total domestic oil
output and 10% of the country's gas production in 1994. Average daily production
(net to the Company) during 1994 was 5 MBbls of oil and 43 MMcf of gas. Oil
production and drilling activities in 1994 were hindered by an unusually heavy
monsoon season. The Company's share of the oil produced from the 1977
concession, and the 1992 concession when it is brought on stream, is sold for
both Pakistan domestic use and for export. The price received for oil sold
domestically is tied to the average spot market price of Middle Eastern crude
oil. In 1994, the Company supplied 1 MMBbls of oil (net to the Company) for
export at prices based on competitive spot market rates. The Company and its
co-venturers sell natural gas produced from the 1977 concession area to Sui
Southern Gas Company, Ltd. ("SSGC"). The contract expires in 2003 and provides
that SSGC must either take or pay for the contracted quantities of natural gas.
The Company expects that the natural gas produced from the 1992 concession area
will be sold to
17
<PAGE> 20
SSGC under a contract with terms similar to the SSGC contract covering
production from the 1977 concession.
During 1994, the Company drilled six exploratory wells in the Badin
concessions, two of which were discoveries. The discoveries included one gas
field and one oil and gas field. During 1995, the Company plans to drill up to
15 exploration wells and three development wells in the Badin concessions.
Eastern Sindh Concession
In December 1994, the Government of Pakistan granted the Company a
petroleum exploration license for the Eastern Sindh block in the Sindh Province
of southeastern Pakistan. The Company will act as operator of the license area,
which covers approximately 1.8 million acres, and holds a 70% working interest
in the license, subject to reduction if the Pakistan government elects to
participate upon discovery of commercial production. The exploration license
will continue for a two-year period, which may be extended for another year upon
commitment to drill an exploration well in the license area. The commencement of
exploration activities is pending the negotiation with the Government of
Pakistan of a concession agreement covering the license area.
Other International
In addition to the activities described above, the Company conducts
evaluations as well as undertakes exploration activities worldwide to expand its
reserve base. The Company has budgeted approximately $33 million for exploration
wells in the Company's producing areas in the U.K. North Sea, Indonesia and
Pakistan. The Company has also budgeted a total of $41 million for exploration
activities during 1995 in other international areas, including primarily the
activities described below. See Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations. The Company is also
considering the possibility of investing in small power generation projects in
Pakistan and Indonesia.
Argentina. The Company serves as operator and has a 50% working interest in
a 4.4 million-acre offshore tract, known as the Cuenca Colorado Marina-1
("CCM-1"), located in the South Atlantic Ocean about 310 miles south of Buenos
Aires. In 1993, the Company's three-year risk service contract was converted
into an exploration permit pursuant to an agreement with the Government of
Argentina. The exploration permit provides the Company with the option to extend
the term of the agreement until 1999 by electing to drill four wells at varying
intervals during that period. An additional four-year extension is possible if
the Company elects to drill one well for each year of the extension. During
1994, the joint venture drilled the first well on the CCM-1 block. The well
identified oil-generating source rock, but did not discover commercial
quantities of oil or gas. In January 1995, the Company acquired additional
seismic data on the CCM-1 block. The venture plans to drill two additional wells
on the CCM-1 block in 1995.
Vietnam. In 1994, the Company acquired a 25% working interest in an oil and
gas production sharing contract offshore the southern coast of Vietnam. The
628,000-acre block is located in the South Con Son Basin in the South China Sea.
The joint venture, operated by LASMO Vietnam Limited, drilled its initial
exploratory well on the block in 1994. The well did not identify commercial
quantities of oil and gas, but provided important data for use in locating
future wells. The joint venture currently expects to drill two additional wells
in 1995. The production sharing contract with the Government of Vietnam provides
the joint venture with the right to conduct exploration activities through 1997
and grants the venture the right to produce any oil and natural gas discovered
through 2017.
Tunisia. In 1993, the Company obtained an oil and gas exploration permit
offshore Tunisia from the Government of Tunisia. The permit calls for a
four-year exploration program on the approximately one-million-acre Ramla block.
The block is situated about 80 miles offshore in the Gulf of Gabes,
approximately 140 miles southeast of the city of Tunis. The Company will act as
operator and will bear 50% of the exploration costs. In the event of a
commercial discovery, the Tunisian national oil company has the right to
participate for up to a 50% working interest. The permit may be extended for an
additional four-year term under certain conditions. During 1994, the Company
acquired additional seismic data. The Company currently plans to drill a well in
1995.
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<PAGE> 21
In 1994, the Company also acquired a 65% working interest in the onshore
Jeffara exploration permit, which covers approximately 970,000 acres in the
Medenine Region of southeastern Tunisia. The Company's interest is subject to
the Tunisian national oil company's right to participate for up to a 50% working
interest in the event of a commercial discovery. The Jeffara exploration permit,
operated by the Company, has an initial three-year term expiring in 1996, with
an optional two-year extension. The Company plans to drill a well in the first
half of 1995.
Ireland. In early 1995, the Company entered into an agreement to acquire a
25% working and revenue interest in five and one-half offshore blocks
encompassing approximately 345,000 acres in St. George's Channel offshore
Ireland from Marathon Petroleum Ireland, Ltd. and Marathon Petroleum Hibernia,
Ltd., wholly owned subsidiaries of Marathon Oil Company (collectively,
"Marathon"). The Company's acquisition of an interest in the blocks is subject
to approval by the Irish government. The exploration licenses, along with an
additional exclusive licensing option, were awarded by the Irish government
during 1993 and 1994. The operator for the consortium is Marathon. An initial
exploratory well is planned for the second quarter of 1995.
In 1994, the Company also acquired a 30% working and revenue interest in a
joint venture that was awarded 11 blocks offshore Ireland. The blocks cover
approximately 650,000 acres and are located in the Atlantic Ocean about 43 miles
west of Ireland in the Slyne/Erris basins. The joint venture, operated by
Statoil (U.K.) Ltd. ("Statoil"), was granted the right to explore for oil and
natural gas for a 16-year period. During the initial four-year term of the
exploration license, the joint venture plans to acquire seismic data as well as
conduct additional geological and geophysical studies. After the acquisition of
the seismic data and the performance of other studies, the joint venture will
determine whether the geology warrants drilling any wells and continuing the
license.
The Company and its co-venturers, including Statoil, have applications
pending with the Irish government for several blocks offshore southwest Ireland
in the Porcupine Basin.
Italy. The Company has entered into agreements to acquire interests in
three onshore exploration permits covering approximately 217,000 acres in the
Basilicata Region in southern Italy, subject to approval by the Italian
government. The Company will serve as operator of and will hold a 42% working
interest in the Serra Corneta permit. The Company will also hold a 33.33%
working interest in the Tempa dei Mercanti permit, operated by Edison Gas, and a
20% working interest in the Forenza permit, operated by LASMO International
Limited. Geological and seismic studies on the three permit areas are planned
for 1995. The Company has also filed applications with the Italian government
for additional exploration permits covering areas adjacent to the Serra Corneta
and Tempa dei Mercanti permit areas.
Eastern Indonesian. In Eastern Indonesia, the Company has a 60% working
interest and is operator for a group that in May 1991 was granted three new
production sharing contract areas for an initial term ending in 1997 (subject to
extension if certain work programs are carried out), covering approximately 13
million acres (gross) located in the Maluku (Moluccas) Island group in the Banda
Sea. During 1994, the Company increased its interest from 33.33% by assuming the
interest of another participant. The Company completed a program to acquire
seismic and geological data for these three areas during 1992 and 1993. In
February 1995, the Company entered into a new production sharing contract
covering an area immediately adjacent to that covered by the three other
production sharing contracts. The Company also is the operator and has a 60%
working interest in the new production sharing contract. The Company currently
plans to drill a well in the area covered by these production sharing contracts
in 1995.
Papua New Guinea. The Company serves as operator and has an 80% working
interest in a petroleum prospecting license located onshore and offshore Papua
New Guinea. The license expires in 1996, subject to extension. The initial well
drilled in the prospecting license area during 1993 was unsuccessful. In 1995,
the Company plans to evaluate additional information to determine its future
exploration strategy.
ALASKA
The Company also pursues exploration projects in Alaska. At year-end 1994,
the Company held acreage primarily in the Colville Delta, Cook Inlet and
offshore the Beaufort Sea in Alaska.
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<PAGE> 22
Colville Delta. During 1994, the Company participated in the drilling and
testing of two wells in the Western Colville area. The results of these two
wells were not released. The wells drilled in 1994 followed the drilling of
several wells in prior years in the general Colville Delta area, certain of
which wells encountered quantities of oil. During 1994, the Company entered into
an agreement to increase its working interest from an average of 13.2% to 22% in
the Western Colville area by agreeing to bear a disproportionate share of the
costs incurred in drilling two wells scheduled to be drilled in the first
quarter of 1995 to evaluate commerciality. ARCO Alaska, Inc. is the operator of
the Colville venture.
Kenai Peninsula. Effective November 1, 1993, the Company entered into a
three-year exploration agreement with Cook Inlet Region, Inc. ("CIRI"), an
Alaska Native Regional Corporation. The agreement includes an initial option to
the Company to lease approximately 340,000 acres in the Kenai Peninsula in south
central Alaska. Under the agreement, the Company will bear 100% of the
exploration costs and may acquire leases on prospects identified, subject to
CIRI's option to participate in the leases and the exploration, drilling and
development of such prospects. As of March 1, 1995, the Company exercised its
option and leased approximately 14,500 acres and has a remaining option to lease
approximately 75,000 acres, which reduces in stages until the expiration of the
agreement on November 1, 1996. During 1994, the Company interpreted geophysical
data acquired pursuant to the terms of the exploration agreement and plans to
acquire additional seismic data during 1995. Pending favorable results from the
seismic studies, drilling could commence in 1996 or 1997. Also in 1994, the
Company acquired leases on 17 blocks onshore and offshore the Kenai Peninsula
pursuant to a lease sale held by the State of Alaska; however, the holding of
the lease sale is being challenged in the Alaskan state courts. The Company has
a 100% working interest in the leases, subject to CIRI's election to acquire a
20% working interest in certain of the leases under the terms of the exploration
agreement.
Kuvlum. In 1994, the Company assumed the other participants' working
interest in the Kuvlum federal exploratory oil and gas unit in the Beaufort Sea
offshore Northern Alaska in order to maintain the federal leases included in the
unit for further economic and technical analysis. Two wells drilled during 1993
did not confirm the commerciality of the Kuvlum unit as a stand-alone
development, and the Company wrote off its $25 million investment in the unit.
See Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PETROCHEMICAL BUSINESS
Plant Operations. The Company's petrochemical business consists primarily
of the Company's 41.67% interest in the jointly owned Geismar ethylene plant
located on the Mississippi River near Baton Rouge, Louisiana. The plant began
operations in 1968. The Company operates the plant, with production costs and
plant production being shared by the co-owners according to their ownership
interests. In 1994 and 1993, the Company's net ethylene sales were 436 million
pounds and 451 million pounds, respectively, and its net propylene sales were 32
million pounds and 27 million pounds, respectively. The Company sells its share
of the ethylene produced by the plant to several major customers for the
manufacture of plastics used in various consumer products. The sales price of
ethylene averaged $0.20 per pound in 1994 and $0.16 per pound in 1993. Sales of
propylene, used in the manufacture of various products such as building
materials, clothing and tires, averaged $0.14 per pound and $0.09 per pound in
1994 and 1993, respectively.
With the start-up of the twelfth furnace at the Geismar plant during
February 1995, the facility has the capacity to produce approximately 1.25
billion gross pounds (521 million net) of ethylene and 92 million gross pounds
(38 million net) of polymer-grade propylene annually. During 1994, the plant
underwent a regularly scheduled maintenance turnaround and therefore operated at
approximately 88% of its rated capacity. During the turnaround, the Company
supplied its customers with ethylene and propylene from storage.
During 1994, the average margin on a pound of ethylene increased from
approximately $0.01 per pound in the first quarter of 1994 to $0.12 per pound in
December. The Company's ethylene margin is primarily affected by the cost of
feedstock (natural gas liquids) and the price received for the ethylene. Low
natural gas prices in the United States and higher ethylene prices, resulting
from tight supplies of ethylene and increased demand, caused significantly
higher margins during the second half of 1994 than in the first half of 1994 and
the previous year. See Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
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<PAGE> 23
Capital expenditures for the petrochemical business were $6 million (net to
the Company) during 1994. The Company plans to spend $5 million (net to the
Company) in capital expenditures for the petrochemical business during 1995.
Expenditures during 1994 and 1995 include costs associated with the installation
of the twelfth furnace.
Storage and Transportation. In addition to the Geismar plant, the Company
owns and operates a 188-mile ethane gathering pipeline system, which transports
feedstock to its ethylene plant from several major suppliers, including the
Company's natural gas liquids fractionation plant in Rayne, Louisiana.
Production from the Rayne plant during 1994 was level with 1993 production. The
Company also operates an underground storage terminal and a 50-mile ethylene
pipeline system, portions of which are jointly owned, to serve the Geismar
facility and several other petrochemical plants in the Baton Rouge area.
OTHER BUSINESS MATTERS
Environmental. Various international, federal, state and local laws and
regulations covering the discharge of materials into the environment, or
otherwise relating to the protection of the environment, affect the Company's
operations and costs. In particular, the Company's petrochemical manufacturing,
gas liquids fractionation plant and other facilities for transporting,
fractionating, treating, storing or otherwise handling hydrocarbons and
hydrocarbon products and wastes therefrom are subject to stringent environmental
regulations relating to, among other things, solid and hazardous waste
management and disposal, air emissions, waste water treatment and other matters
that may affect the environment. The Company is committed to managing its
operations in a safe and environmentally responsible manner and believes that
its operations and facilities are in general compliance with applicable
environmental regulations.
Environmental regulations have had an increasing impact upon the Company's
operations. Environmental expenditures for 1994 included capital outlays for
existing facilities, as well as air and water quality projects, and were made
predominantly in the petrochemical business area. Such expenditures for 1994
were not material, nor are they expected to be material during 1995.
The Company is unable to estimate the impact that current international,
federal and state standards and proposed initiatives or other future
developments in environmental regulations may have on future earnings or
operations, but it believes that required expenditures would not significantly
impact its competitive position with respect to other oil and gas and
petrochemical companies and would not be expected to have a material adverse
effect on the Company's financial position. Nevertheless, the risks of
substantial costs and liabilities are inherent in operations such as the
Company's. There can be no assurance that significant costs and liabilities will
not be incurred in the future.
The Company has, in the past, owned, leased or operated numerous properties
in the United States that have been used for the production of oil and gas for
many years. Although the Company believes that its operating and disposal
practices were standard in the industry at the time and were generally in
compliance with then-existing rules and regulations, certain wastes may have
been disposed of or released on or under the properties owned, leased or
operated by the Company. State and federal laws applicable to oil and gas wastes
and properties have gradually become more strict. In addition, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), also known as
the "superfund" law, and comparable state laws impose liability, without regard
to fault or the legality of the original conduct, on certain classes of persons
that have contributed to the release of a "hazardous substance" into the
environment. Under these laws, the Company could be required in the future, with
respect to future Alaskan operations or prior U.S. activities, to remove or
remediate previously disposed of wastes or property contamination (including
groundwater contamination at onshore locations), to perform remedial plugging
operations to prevent future contamination or to clean up disposal sites where
"hazardous substances" from its operations have been taken.
The Company's foreign operations are similarly subject to foreign laws
respecting environmental and worker safety matters. Although these laws have
generally been less comprehensive than their U.S. counterparts, countries in
which the Company does business are increasing their environmental regulatory
and compliance standards. The Company's operations in the United Kingdom are
subject to the Prevention of Oil Pollution Act, the Environmental Protection Act
and related statutes and orders, as well as
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<PAGE> 24
certain European Community agreements. The foreign laws, however, have not had,
and are not presently expected to have, a material adverse effect on the
Company.
While the outcome of environmental contingencies, lawsuits or other
proceedings against the Company cannot be predicted with certainty, management
expects that such liabilities, to the extent not provided for through insurance
or otherwise, will not have a material adverse effect on the financial position
of the Company.
Insurance. The oil and gas and petrochemical businesses can be hazardous,
involving unforeseen circumstances such as blowouts, explosions or environmental
damage. To address the hazards inherent in the oil and gas and petrochemical
businesses, the Company maintains a comprehensive insurance program covering its
worldwide interests. This insurance coverage includes physical damage coverage,
third party and comprehensive general liability insurance, as well as redrill,
well control and environmental and pollution coverage, although coverage for
environmental-related losses is subject to significant limitations. In addition,
the Company maintains business interruption insurance on its major international
oil and gas producing interests and on its petrochemical business. The scope,
amount and cost of this insurance vary depending upon various market factors.
Competition. The Company actively competes for exploration leases,
licenses, concessions and acquisitions, frequently against companies with
substantially greater financial and other resources, such as technical
capabilities and human resources. In addition, some of the Company's competitors
have greater experience, especially in other international areas where the
Company is currently seeking to acquire interests.
Regulation of Oil and Gas Production and Marketing. Petroleum production is
subject to various types of regulation throughout the world. Legislation
affecting the oil and gas industry is under regular review for amendment or
expansion, frequently increasing the regulatory burden. Statutes and regulations
require permits for drilling operations, drilling bonds and reports concerning
operations. Also, numerous departments and agencies are authorized by statute to
issue and have issued rules and regulations binding on the oil and gas industry
and its individual members. These rules and regulations pose difficult and
costly compliance and reporting requirements, some of which carry substantial
penalties for the failure to comply. Most of the foreign countries in which the
Company operates have statutes and regulations governing conservation matters,
including the unitization or pooling of oil and gas properties and rates of
production from oil and gas wells. The regulatory burden on the oil and gas
industry increases its costs of doing business and, consequently, affects its
profitability.
Employees. As of February 28, 1995, the Company had approximately 1,000
employees. The Company believes that its relations with its employees are good.
ITEM 2. PROPERTIES.
For a description of the Company's properties, see Item 1 of Part I of this
Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries and related entities are named defendants
in numerous lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business.
While the outcome of the contingencies, lawsuits or other proceedings
against the Company cannot be predicted with certainty, management expects that
such liability, to the extent not provided for through insurance or otherwise,
will not have a material adverse effect on the financial statements of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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<PAGE> 25
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Since September 24, 1987, the Company's common stock, $.05 par value (the
"Common Stock"), has been traded on the New York Stock Exchange and the Pacific
Stock Exchange under the symbol "UTH." As of February 28, 1995, there were
approximately 87,648,932 shares of Common Stock outstanding held by
approximately 330 stockholders of record. Beginning with the second quarter of
1988, the Company has paid regular quarterly dividends on the Common Stock of
$.05 per share each quarter. See Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations.
The following table shows the high and low sales prices of the Common Stock
on the New York Stock Exchange for 1993 and 1994:
<TABLE>
<CAPTION>
1993 1994
--------------------------------------------- ----------------------------------------------
QUARTER ENDED QUARTER ENDED
--------------------------------------------- ----------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- -------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High.......... 24 7/8 26 1/8 27 1/2 26 1/2 22 20 1/8 20 3/8 21 7/8
Low........... 17 7/8 21 22 1/2 19 16 5/8 16 1/4 17 18 1/8
</TABLE>
Source of Prices: New York Stock Exchange Composite Transactions Tape
The last reported sale price of the Common Stock on the New York Stock
Exchange on February 28, 1995, was $19 1/4.
23
<PAGE> 26
ITEM 6. SELECTED FINANCIAL DATA.
The financial data as of and for the years ended December 31, 1990 through
1994 were derived from the audited consolidated financial statements of the
Company and should be read in connection with the consolidated financial
statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Revenues........................................ $ 769,595 $ 696,663 $ 714,012 $ 1,080,261 $ 1,332,855
Costs and other deductions:
Product costs and operating expenses.......... 299,586 301,276 316,985 552,884 675,388
Exploration expenses.......................... 53,532 93,640 67,129 70,661 82,882
Depreciation, depletion and amortization...... 168,570 242,704 77,143 125,479 186,164
Selling, general and administrative
expenses.................................... 24,525 23,780 27,008 43,777 52,081
Interest expense.............................. 11,399 6,369 3,958 47,376 62,366
Preferred dividends of a subsidiary........... 1,911 2,398 3,709 5,088
Other charges (credits), net.................. 6,185 (211,597)
---------- ---------- ---------- ---------- ----------
Income before income taxes, extraordinary items
and cumulative effect of changes in accounting
principles.................................... 211,983 26,983 213,206 447,972 268,886
Income taxes (benefit).......................... 145,245 (3,686) 103,808 168,029 152,885
---------- ---------- ---------- ---------- ----------
Income before extraordinary items and cumulative
effect of changes in accounting principles.... 66,738 30,669 109,398 279,943 116,001
Extraordinary items............................. (19,682) 52,907
Cumulative effect of changes in accounting
principles.................................... (3,743) (76,080)
---------- ---------- ---------- ---------- ----------
Net income...................................... $ 66,738 $ 26,926 $ 13,636 $ 332,850 $ 116,001
========== ========== ========== ========== ==========
Net income (loss) applicable to common
stockholders.................................. $ 66,738 $ 26,926 $ (16,586) $ 292,100 $ 75,251
========== ========== ========== ========== ==========
Earnings (loss) per share of common stock:
Income before extraordinary items and
cumulative effect of changes in accounting
principles.................................. $ .76 $ .35 $ .86 $ 2.59 $ .81
Extraordinary items........................... (.23) .52
Cumulative effect of changes in accounting
principles.................................. (.04) (.89)
---------- ---------- ---------- ---------- ----------
Net income (loss)............................. $ .76 $ .31 $ (.26) $ 3.11 $ .81
========== ========== ========== ========== ==========
Weighted average shares outstanding............. 87,642,451 87,218,027 85,823,320 85,189,916 84,642,319
Dividends per share of common stock............. $ .20 $ .20 $ .20 $ .20 $ .20
========== ========== ========== ========== ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Net working capital............................. $ (150,471) $ (112,535) $ 33,630 $ 576,397 $ 114,492
Property, plant and equipment -- net............ 1,286,278 1,088,884 1,198,949 1,157,414 1,486,583
Total assets.................................... 1,544,634 1,338,741 1,580,645 2,246,567 2,101,860
Long-term debt.................................. 430,085 386,874 474,189 421,924 685,507
Redeemable preferred stock...................... 75,000 275,000 275,000
Common stock and other stockholders' equity..... 349,499 281,246 269,197 674,428 374,726
</TABLE>
24
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
1994 Compared with 1993. Net income for the year ended December 31, 1994
was $67 million, or $.76 per share, as compared to net income of $27 million, or
$.31 per share reported for the year ended December 31, 1993. Included in 1993
results are certain non-recurring items; excluding these items, net income for
the year ended December 31, 1993, was $54 million, or $.61 per share. The 1994
earnings were favorably impacted by higher volumes in the U.K. North Sea and
Indonesia, higher U.S. ethylene margins and lower operating expenses, partially
offset by lower oil and LNG prices and higher depreciation, depletion and
amortization expense related to the increased production.
Sales and operating revenues for 1994 were $748 million, up approximately
10% from $682 million in 1993. International revenues totaled $578 million as
compared to $537 million in 1993. In the U.K., sales and operating revenues
increased $52 million as lower crude prices were more than offset by increased
production from the Piper block. In Indonesia, sales were $1 million below 1993
as a result of lower crude oil and LNG prices, which were partially offset by
higher LNG volumes. In Pakistan, sales were $10 million below 1993 primarily due
to lower prices for crude oil and natural gas.
Average prices received and volumes sold by the Company's major operations
during 1994 and 1993, respectively, were as follows.
<TABLE>
<CAPTION>
VOLUMES
PRICES (000S PER DAY)
--------------------- -------------------
1994 1993 1994 1993
------ ------ ----- -----
<S> <C> <C> <C> <C>
Crude oil (barrels):
U.K......................................... $14.99 $15.10 34 27
Pakistan.................................... 13.43 15.04 5 5
Indonesia................................... 15.78 17.26 6 6
Indonesian LNG (Mcf).......................... 2.85 3.17 222 198
Pakistan natural gas (Mcf).................... 1.07 1.26 43 43
U.K. natural gas (Mcf)........................ 2.57 2.49 24 8
U.S. ethylene (pounds)........................ .20 .16 1,194 1,235
</TABLE>
Production costs per barrel of oil equivalent ("boe") for the Company's oil
and gas activities averaged $3.98 in 1994, down from $4.73 per boe in 1993
primarily as a result of increased volumes in the U.K., lower LNG plant costs in
Indonesia and the benefits of a Company-wide cost containment program.
The operating profit for the Company's petrochemical operations was $16
million above the prior year. The increase primarily resulted from improved
ethylene margins reflecting higher sales prices for ethylene and lower costs.
The prior year's results included four non-recurring items which in the
aggregate reduced 1993 earnings by $27 million. These items included
depreciation expense of $103 million ($48 million after tax) representing a
write-down of the Company's investment in the Piper field, a $25 million charge
to exploration expense due to the write-off of the Company's investment in the
Kuvlum prospect in Alaska and a $4 million charge for the cumulative effect of
adopting a new accounting standard for postemployment benefits. Partially
offsetting these items was a $50 million tax benefit associated with changes to
U.K. tax laws.
Exploration expenses decreased by $40 million due to the prior year
write-off of Kuvlum, lower worldwide operating expenditures and reduced
expenditures in the U.K. and Indonesia. Depreciation, depletion and amortization
decreased by $74 million due to the prior period's write-down of the Piper
field, which was partially offset by increased production. Interest expense
increased $5 million due to lower capitalized interest related to the Piper
redevelopment project, which was substantially completed in 1993. The effective
tax rate was essentially level with the prior period, adjusted for the
non-recurring items mentioned previously.
1993 Compared with 1992. Net income for the year ended December 31, 1993,
was $27 million, or $.31 per share, as compared to net income of $14 million, or
a loss of $.26 per share, reported for the year
25
<PAGE> 28
ended December 31, 1992. Included in 1993 results are certain significant items
related to the U.K. North Sea's Piper field write-down, the benefit of a U.K.
tax law change, the write-off of the Kuvlum prospect in Alaska and a charge for
the cumulative effect of adopting a new accounting standard for postemployment
benefits. Excluding these items, net income for the year ended December 31,
1993, was $54 million, or $.61 per share. The prior period's results include a
$76 million charge for the cumulative effect of adopting two new accounting
standards effective January 1, 1992. The prior period's results also include an
extraordinary charge of $20 million for the early redemption of certain of the
Company's debt in early 1992. Excluding these items, net income for the year
ended December 31, 1992, was $109 million, or $.86 per share. The 1993 earnings
were negatively impacted by lower oil and Indonesian LNG prices and decreased
interest income on refunds of prior years' Petroleum Revenue Tax ("PRT"). The
1993 results benefitted from the elimination of preferred stock dividends and
higher worldwide oil volumes.
Sales and operating revenues for 1993 were $682 million, an increase from
$669 million for 1992. International revenues totaled $537 million as compared
to $500 million in 1992. In the U.K., sales increased by $52 million primarily
due to increased production from the Piper and Saltire fields, partially offset
by lower prices. In Indonesia, sales decreased by $19 million due to lower LNG
and oil prices, partially offset by increased LNG volumes. In Pakistan, sales
increased $6 million due primarily to higher natural gas prices and higher oil
and gas volumes. The average sales price for U.K. crude oil decreased from
$18.47 to $15.10 per barrel. The average sales price received for Indonesia LNG
decreased from $3.41 per Mcf to $3.17 per Mcf. The average sales price received
for Pakistan natural gas increased from $1.09 per Mcf to $1.26 per Mcf.
The Company's petrochemical operation's operating profit increased $4
million from the prior year due to lower costs. The average sales price of
ethylene ($.16 per pound) was consistent with the prior year.
Interest income and other revenues in the U.K. decreased by $21 million,
primarily due to lower refunds of prior years' PRT associated with the
development costs of the Piper field. Domestic interest income and other
revenues were $5 million below the prior year primarily due to a lower level of
interest bearing cash investments held during the current year.
Exploration expenses increased by $27 million primarily due to the
write-off of the Company's investment in the Kuvlum prospect in Alaska. Two
exploratory wells drilled in the third quarter indicated that the prospect was
not commercial as a stand-alone development.
Depreciation increased by $166 million during 1993 due to increased
production in the North Sea and the $103 million pretax ($48 million after-tax)
write-down of the Company's investment in the Piper field. (See Note 2 of Notes
to Consolidated Financial Statements.)
The Company's taxes decreased from the prior period primarily due to a
one-time reduction in deferred taxes as a result of a decrease in the PRT rate
in the North Sea, which had a one-time favorable impact to net income of
approximately $50 million.
Earnings per share of common stock were favorably impacted by the
elimination of dividends on the preferred stock and accretion of discount on
common stock warrants. Dividends on the Series B and C Preferred Stock decreased
during the period by $30 million as a result of the redemption of this stock in
September 1992. Similarly, accretion of discount on common stock warrants
decreased in the current period by $5 million as a result of the redemption of
the warrants in September 1992.
In December 1992, the Financial Accounting Standards Board ("FASB")
released Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits," which concluded that the estimated cost
of benefits provided by an employer to former or inactive employees after
employment but before retirement represents part of the compensation provided to
an employee in exchange for service. The Company currently provides certain
long-term benefits to disabled employees. The Company adopted the Statement
effective January 1, 1993, by recording a cumulative charge to net income of
approximately $4 million representing the estimated future obligation for those
employees currently under the long-term disability program. In prior periods,
the Company's cost of long-term disability was expensed as paid.
26
<PAGE> 29
FINANCIAL CONDITION AND LIQUIDITY
General. The Company's strategic focus is to build shareholder value
through developing its core holdings, conducting an active exploration program,
pursuing oil and gas acquisition opportunities and continuing to control costs.
The Company's capital expenditures for 1995 are estimated to be $212 million,
excluding capitalized interest, an increase from the previously budgeted $170
million for 1995, which is due primarily to the Britannia field development
costs. Approximately one-third of the 1995 capital budget is allocated to fund
the Company's expanded worldwide exploration program, which represents an 85%
increase over exploration program funds expended in 1994. A total of $74 million
is included in the Company's budget for exploration activities, including at
least ten exploration wells in new venture areas in Alaska, Argentina, Eastern
Indonesia, Ireland, Tunisia and Vietnam, and as many as 20 wells in ongoing
exploration programs in the Company's producing areas in the U.K. North Sea,
Indonesia and Pakistan. The budget also includes approximately $132 million for
oil and gas development programs in the Company's producing areas, including $47
million for the initial development of the Britannia field. The Company has also
budgeted approximately $5 million for its petrochemical interests in the United
States. In 1995, the Company intends to evaluate acquisition opportunities of
developed and undeveloped oil and gas reserves and to add to its production base
in the near-term. Acquisition costs are not included in the estimated capital
expenditures for 1995, but the Company believes that its financial strength and
available credit give it the financial resources to make acquisitions.
As a result of the completion of large development projects for the Piper
and Saltire fields in the U.K. North Sea and a continuation of the growing
demand for Indonesian LNG, the Company experienced record levels of production
from its international operations during 1994, which increased 16% from 1993
levels. The Company's objective is for production in 1995 to exceed 1994 levels.
In developing its business plan for 1995, the Company expects that it will
continue to have excess cash flow available after capital expenditures, required
debt service and normal dividends. The business plan is based upon numerous
assumptions made by management including assumptions as to the volume of oil and
gas the Company will produce from its properties and the prices received for
such production. Pricing for the Company's business plan is based on the
assumption that the spot price of West Texas intermediate will average $18.75
per barrel for 1995. Approximately 90% of the Company's oil and gas revenues are
indexed to world crude oil prices.
Although management believes that the assumptions used at the time in
formulating the business plan and the resultant estimate of excess cash flow
were reasonable in light of world energy, financial and economic conditions, and
the Company's cash requirements, such conditions could change materially, and
actual results of operations, cash flows and use of cash by the Company through
1995 may vary materially from those included in the business plan.
Cash flow from operations. Net cash provided by operating activities was
$215 million in 1994, an increase of $24 million from the same period in the
prior year. The increase was primarily the result of increased U.K. oil and
Indonesian LNG sales volumes and improved ethylene margins, partially offset by
lower oil and gas prices.
During the last six months of 1994, ethylene margins improved significantly
from the first six months of 1994. By December 1994, margins had risen to
approximately 12 cents per pound, up from about 1 cent at the beginning of the
year. The Company's ethylene margins averaged 6 cents per pound for the full
year 1994, and the Company's petrochemical business posted 1994 operating profit
of $24 million. The Company has utilized an average 8 cents per pound ethylene
margin for the full year 1995 in its business plan for 1995. The Company
estimates that a margin improvement of an average one cent per pound for an
entire year at full capacity production can provide approximately an additional
$5 million in operating profit and net income on an annualized basis for the
petrochemical business of the Company. Ethylene margins have averaged
approximately 15 cents per pound in the first two months of 1995. The Company
cannot predict the duration of the recent favorable trends in the ethylene
business. The prices the Company receives for its ethylene are sensitive to many
factors beyond the control of the Company, such as worldwide and U.S. demand for
27
<PAGE> 30
petrochemicals, inventory levels, feedstock costs and availability, plant
utilization rates, plant operations and costs and competitive capacity
expansion.
Capital resources. Capital expenditures for 1994, exclusive of the
Britannia acquisition, were $131 million, a decrease from the prior year's
expenditures of $192 million primarily as a result of the completion of the
large development projects in the U.K. North Sea. During 1993, Piper
redevelopment costs were $22 million and Saltire development costs were $23
million. In 1994, the Company spent $45 million in Indonesia, primarily on
exploration and development drilling. In 1994, 1993 and 1992, total Company
capital costs incurred, including capitalized interest, totaled $309 million
(including $159 million related to the Britannia acquisition), $218 million and
$325 million, respectively.
On November 4, 1994, the Company acquired from Fina Exploration Limited and
Fina Petroleum Development Limited, subsidiaries of Petrofina SA (collectively,
"Fina"), a 9.42% unit interest in the Britannia field, the largest undeveloped
natural gas and condensate field in the U.K. North Sea, for 83.8 million pounds
sterling (approximately $133 million). In December 1994, the U.K.'s Department
of Trade and Industry ("DTI") approved the development program for the Britannia
field. As a result of the DTI approval of the development program, the Company
made a second agreed upon payment to Fina for 16.8 million pounds sterling
(approximately $26 million) in December. At year-end 1994, the Company recorded
38 million boe as proved undeveloped reserves associated with the acquisition.
The Company expects to record additional proved reserves from the Britannia
field in the future based on the field's development results and its production
history. The Company increased oil and gas properties and equipment by $219
million, resulting from the purchase price of $159 million, financed through
debt, and an offset to deferred income taxes payable of $60 million. The
Company's share of total development costs for Britannia, at current exchange
rates, is estimated to be approximately $200 million, with $47 million budgeted
for 1995 for drilling activities and initial platform fabrication and facilities
work. Initial production from Britannia is expected in late 1998. The Britannia
field will be operated by Britannia Operator Limited, a joint venture between
Conoco (U.K.) Ltd. and Chevron U.K. Ltd. The Company has contracted to sell a
substantial portion of its share of gas from Britannia under long-term sales
agreements with several large gas purchasers in the U.K. Revenues from the
Britannia field will be subject to a U.K. corporate tax but not to U.K.
government royalty or PRT.
Financing activities. During 1994, the Company replaced its $650 million
unsecured revolving credit facility with three unsecured credit facilities (the
"Credit Facilities"). One of the Credit Facilities is a $100 million unsecured
credit agreement with NationsBank of Texas, N.A. ("NationsBank"), as agent, Bank
of America National Trust and Savings Association ("Bank of America") and Union
Bank of Switzerland, Houston Agency ("UBS"), as co-agents. This Credit Facility
is a revolver that provides for conversion of amounts outstanding on September
15, 1995 to a one-year term loan maturing September 15, 1996. The Company's
other two Credit Facilities are with NationsBank, as agent, Bank of America and
UBS, as co-agents, and certain other banks. One of these Credit Facilities is a
$350 million revolver that reduces quarterly by $25 million beginning July 31,
1997 and has a final maturity of April 30, 1998. The other Credit Facility is a
$200 million revolver that provides for conversion of outstanding amounts on
April 30, 1995 to a one-year term loan maturing April 30, 1996. The Company is
pursuing amendments to extend the maturities on the latter two Credit
Facilities. Loans under the $350 million revolver may be made in both pounds
sterling and U.S. dollars at the option of the Company. Loans under the Credit
Facilities bear interest at floating market rates based on, at the Company's
option, the agent bank's base rate or LIBOR, plus applicable margins, subject to
increase in certain events. In addition, the $350 million revolver allows the
Company to obtain up to $200 million of availability thereunder in U.S. dollar
loans that bear interest at a rate determined in a competitive bid process.
Borrowings under the Credit Facilities are guaranteed by certain subsidiaries of
the Company that also guarantee the Company's senior notes due 1999. The Credit
Facilities contain restrictive covenants, including limitations on incurrence of
additional indebtedness, asset sales and mergers or consolidations. The Credit
Facilities restrict the amount of total indebtedness incurred by the Company and
the restricted subsidiaries referred to in the Credit Facilities, which include
the guarantors and certain other subsidiaries ("Restricted Subsidiaries"), to
$750 million of senior indebtedness (including the senior notes due 1999 and
amounts drawn under the Credit Facilities) and $100 million of subordinated
indebtedness.
28
<PAGE> 31
Debt of unrestricted subsidiaries and nonrecourse debt on certain assets of the
Company and its subsidiaries are not limited under the Credit Facilities,
subject to certain conditions. The covenants also require maintenance of a
certain level of stockholders' equity. Under the terms of the Credit Facilities,
the Company may pay dividends and make stock repurchases, provided that such
level of minimum stockholders' equity is maintained and the Company complies
with the other covenants in the Credit Facilities. Based on current conditions,
the Company expects to pay dividends without restriction under the Credit
Facilities. At December 31, 1994, $326 million was outstanding under the Credit
Facilities bearing interest at a weighted average rate of 6.54% per annum, and
approximately $220 million was available for additional borrowings under such
existing Credit Facilities. At February 28, 1995, $302 million was outstanding
under the Credit Facilities.
Due to the Company's ability to obtain favorable interest rates on
short-term borrowings, uncommitted and unsecured lines of credit were
established with several banks. At December 31, 1994, $106 million was
outstanding under these lines. These amounts outstanding bear interest at a
weighted average rate of 6.46% per annum and are included in the total
indebtedness restriction under the Company's Credit Facilities and reduce
amounts available under the Company's Credit Facilities. At February 28, 1995,
$111 million was outstanding under these lines of credit.
Funding for the acquisition of the Britannia field was through the
Company's Credit Facilities and its uncommitted and unsecured lines of credit.
The Company's indirect subsidiary, Union Texas Britannia Limited ("UTBL"), which
is a wholly owned subsidiary of Union Texas Petroleum Limited ("UTPL"), has
received a commitment, subject to negotiation of definitive agreements, from
Chemical Bank, NationsBank N.A. (Carolinas) and National Westminster Bank plc
for a 150 million pounds sterling secured financing. The financing will be used
to fund the Company's share of the cost of developing the Britannia field to
production (including interest and other financing costs incurred prior to
completion and potential cost overruns), and any remaining availability after
completion may, subject to certain coverage ratios being met, be used to
refinance acquisition costs. Except for certain support by UTPL related to any
potential cost overruns in excess of the facility amount (limited to 30 million
pounds sterling), tax benefits and administrative services, the lenders'
recourse will be limited to the Britannia field project assets and is
nonrecourse to the Company. The financing will have a final maturity in
September 2005. The borrowings by UTBL, an unrestricted subsidiary, would not be
included in the total indebtedness under the Company's Credit Facilities and
will not reduce amounts available under the Credit Facilities.
The Company has an effective shelf registration statement on file with the
Commission covering up to $200 million of its debt securities, which the Company
may elect to offer from time to time and on such terms as the Company deems
appropriate in the form of senior debt securities, which may be guaranteed by
certain of the Company's subsidiaries, or subordinated debt securities. Amounts
of debt securities that may be offered pursuant to the shelf registration
statement will reduce amounts available under the Credit Facilities. The Company
believes the shelf registration provides additional financing flexibility to
meet future funding requirements and to take advantage of potentially attractive
capital market conditions. No securities have yet been issued. In addition, at
the 1995 Annual Meeting of Stockholders to be held May 10, 1995, the Company
will seek stockholder approval to authorize a new class of 15,000,000 shares of
preferred stock. The new preferred stock will provide the Company additional
flexibility to issue from time to time this form of equity based on current
market conditions.
On January 4, 1994, Unimar, an equity partnership, redeemed the 8.25%
convertible subordinated guaranteed debentures which were due in 1995. The
Company's share of the debt redemption was approximately $18 million and was
funded by additional short-term borrowings.
As of December 31, 1994, the Company's scheduled maturities of long-term
debt outstanding for the five-year period of 1995 through 1999 are approximately
$2 million, $2 million, $28 million, $300 million and $100 million,
respectively. The Company believes that it will have sufficient sources of funds
to satisfy these scheduled maturities. The Company is considering refinancing
alternatives in order to extend its maturities. The Company may enter into
interest rate swap contracts from time to time. However, the Company did not
enter into any interest rate swap contracts during 1994.
29
<PAGE> 32
On April 27, 1994, the Board authorized the repurchase of up to 2,000,000
shares of common stock to be used for general corporate purposes, including
fulfilling employee benefit program obligations. During 1994, the Company
repurchased 307,500 shares of common stock at a cost of $5.6 million, a portion
of which shares were used to fund employee savings and benefit plan obligations.
At December 31, 1994, 221,565 shares of common stock were held, at cost, as
treasury shares.
Financial Condition. During January 1993, the Company entered into an
agreement to terminate a portion of its Houston office building lease and
accordingly made a $35 million payment to the lessor in consideration of such
agreement in March 1993 for which an accrual had been made in 1992.
In each of the four quarters ended December 31, 1994, the Company declared
and paid a dividend of approximately $4.3 million on its common stock. On
January 12, 1995, the Company announced a dividend on its common stock of $.05
per share to stockholders of record as of January 31, 1995, which was paid on
February 15, 1995.
Effective July 1, 1993, the British Parliament enacted changes in PRT that
will have an overall positive impact on the Company's operations in the North
Sea. The changes included reforms which reduced PRT on producing fields in the
North Sea from 75% to 50% and which abolished PRT for all new fields not
licensed for development on March 16, 1993. A substantial portion of the
Company's production in the U.K. benefitted from such changes. Also enacted was
the elimination of PRT deductions for most exploration and appraisal
expenditures incurred on or after March 16, 1993, subject to limited
transitional allowances through December 31, 1994.
The functional currency for translating the accounts of foreign
subsidiaries is the U.S. dollar, except for subsidiaries in the United Kingdom
where the functional currency is pounds sterling. The Company's revenues are
predominantly based upon the world market price for crude oil, which is
denominated in U.S. dollars. Certain operating costs, taxes, capital costs and
intercompany transactions represent commitments settled in foreign currencies.
Exchange rate fluctuations on transactions in currencies other than the
functional currency are recognized as gains and losses in current period income.
The Company periodically enters into foreign exchange contracts as a hedge
against fluctuations in foreign currency rates. These contracts are generally of
a short-term nature of three months or less. At December 31, 1994, the Company
had open contracts with a net value of 5 million pounds sterling. However, there
are foreign exchange risks inherent in operations such as the Company's, and the
Company cannot predict with any certainty the results of currency exchange rate
fluctuations.
The Company also cannot predict with any degree of certainty the prices it
will receive in 1995 and future years for its crude oil, LNG, natural gas and
ethylene. In addition, uncertainty in the Middle East, policies of oil exporting
countries and worldwide demand for products affect the Company's sales. The
Company's financial condition, operating results and liquidity may be materially
affected by any significant fluctuations in its sales prices. The Company's
ability to service its long-term obligations and to internally generate funds
for capital expenditures will be similarly affected. See Note 19 of Notes to
Consolidated Financial Statements for information regarding the Company's
estimated proved reserves and sales related to LNG.
Likewise, the Company's business is affected by its costs and success in
finding, developing or acquiring new reserves to replace its reserves depleted
by production. In general, the Company's volume of production from oil and gas
properties declines with the passage of time. In addition, the Company's and its
co-venturers' participation share of gas volumes supplied to support Indonesian
LNG sales contract extensions or additions will be significantly less than their
participation share under the original long-term sales contracts. The Company's
long-term strategy is to increase its production with reserve acquisitions and
successful exploration and development activities. There can be no assurances
that the Company will achieve such objectives. Except to the extent the Company
acquires additional properties containing proved reserves or conducts successful
exploration or development activities, or both, the proved reserves of the
Company, and the revenues generated from production thereof (assuming no price
increases), will decline as reserves are produced. Drilling activities are
expensive and subject to numerous risks, including the risk that no commercially
viable oil or gas production will be obtained. Increases or decreases in prices
of oil and gas and in cost levels, along with the timing of development
projects, will also affect revenues generated by the Company and the present
30
<PAGE> 33
value of estimated future net cash flows from its properties. Revenues generated
from future activities of the Company are highly dependent upon the level of
success in acquiring, finding or developing additional reserves. See Notes 1 and
19 of Notes to Consolidated Financial Statements.
The Company's overseas operations are subject to certain risks, including
expropriation of assets, governmental reinterpretation of applicable law and
contract terms, increases in taxes and government royalties, renegotiation of
contracts with foreign governments, foreign government approvals of lease,
permit or similar applications and of exploration and production plans,
political and economic instability, disputes between governments, payment
delays, export restrictions, increased environmental regulations, limits on
allowable levels of exploration and production and currency exchange losses and
repatriation restrictions, as well as changes in laws and policies governing
operations of companies with overseas operations generally. Foreign operations
and investments may also be subject to laws and policies of the United States
affecting foreign trade, investment and taxation that could affect the conduct
and profitability of these operations.
All of the Company's activities are subject to the risks normally
associated with exploration for and production of oil and gas as well as the
production of petrochemicals. Also, the Company's activities are subject to
stringent environmental regulations. The Company believes that its operations
and facilities are in general compliance with existing environmental
regulations. Nevertheless, the risks of substantive costs and liabilities are
inherent in operations such as the Company's, and there can be no assurance that
significant costs and liabilities will not be incurred in the future.
31
<PAGE> 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... 33
Consolidated Balance Sheet, December 31, 1994 and 1993................................ 34
Consolidated Statement of Operations, Years Ended December 31, 1994,
1993 and 1992....................................................................... 35
Consolidated Statement of Cash Flows, Years Ended December 31, 1994,
1993 and 1992....................................................................... 36
Consolidated Statement of Stockholders' Equity, Years Ended December 31, 1994,
1993 and 1992....................................................................... 37
Notes to Consolidated Financial Statements............................................ 38
</TABLE>
32
<PAGE> 35
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Union Texas Petroleum Holdings, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Union Texas Petroleum Holdings, Inc. 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 Note 1 to the consolidated financial statements, the
Company changed its method of accounting for postemployment benefits in 1993 and
its methods of accounting for income taxes and postretirement benefits other
than pensions in 1992.
PRICE WATERHOUSE LLP
Houston, Texas
January 25, 1995
33
<PAGE> 36
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 8,389 $ 18,143
Accounts and notes receivable, less allowance for doubtful
accounts....................................................... 54,773 49,599
Inventories....................................................... 43,228 34,285
Prepaid expenses and other current assets......................... 30,675 39,451
--------- ---------
Total current assets...................................... 137,065 141,478
Equity investment................................................... 114,505 103,111
Property, plant and equipment, at cost, less accumulated
depreciation, depletion and amortization*......................... 1,286,278 1,088,884
Other assets........................................................ 6,786 5,268
---------- ----------
Total assets.............................................. $1,544,634 $1,338,741
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................................. $ 2,292 $ 2,292
Short-term debt................................................... 106,032 60,500
Accounts payable.................................................. 89,281 99,787
Taxes payable..................................................... 48,069 63,944
Other current liabilities......................................... 41,862 27,490
--------- ---------
Total current liabilities................................. 287,536 254,013
Long-term debt...................................................... 430,085 386,874
Deferred income taxes............................................... 365,777 298,930
Other liabilities................................................... 111,737 117,678
--------- ---------
Total liabilities......................................... 1,195,135 1,057,495
--------- ---------
Stockholders' equity:
Common stock...................................................... 4,391 4,390
Paid in capital................................................... 19,889 20,436
Cumulative foreign exchange translation adjustment and other...... (65,476) (86,545)
Retained earnings................................................. 394,806 345,598
Common stock held in treasury, at cost, 221,565 shares at December
31, 1994 and 145,828 shares at December 31, 1993............... (4,111) (2,633)
--------- ---------
Total stockholders' equity................................ 349,499 281,246
---------- ----------
Total liabilities and stockholders' equity................ $1,544,634 $1,338,741
========== ==========
</TABLE>
- ---------------
*The Company follows the successful efforts method of accounting for oil and gas
activities.
The accompanying notes are an integral part of this financial statement.
34
<PAGE> 37
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Sales and operating revenues............................. $747,883 $681,923 $669,454
Interest income and other revenues....................... 1,268 5,858 31,212
Net income of equity investee............................ 20,444 8,882 13,346
-------- -------- --------
769,595 696,663 714,012
COSTS AND OTHER DEDUCTIONS:
Product costs and operating expenses..................... 299,586 301,276 316,985
Exploration expenses..................................... 53,532 93,640 67,129
Depreciation, depletion and amortization................. 168,570 242,704 77,143
Selling, general and administrative expenses............. 24,525 23,780 27,008
Interest expense......................................... 11,399 6,369 3,958
Preferred dividends of a subsidiary...................... 1,911 2,398
Other charges, net....................................... 6,185
-------- -------- --------
Income before income taxes, extraordinary items and
cumulative effect of changes in accounting principles.... 211,983 26,983 213,206
Provision for (benefit from) income taxes.................. 145,245 (3,686) 103,808
-------- -------- --------
Income before extraordinary items and cumulative effect of
changes in accounting principles......................... 66,738 30,669 109,398
Extraordinary items........................................ (19,682)
Cumulative effect of changes in accounting principles...... (3,743) (76,080)
-------- -------- --------
NET INCOME................................................. 66,738 26,926 13,636
Less:
Cumulative preferred dividends........................... 30,222
-------- -------- --------
Net income (loss) applicable to common stockholders........ $ 66,738 $ 26,926 $(16,586)
======== ======== ========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
Income before extraordinary items and cumulative effect
of changes in accounting principles................... $ .76 $ .35 $ .86
Extraordinary items...................................... (.23)
Cumulative effect of changes in accounting principles.... (.04) (.89)
-------- -------- --------
Net income (loss)........................................ $ .76 $ .31 $ (.26)
======== ======== ========
DIVIDENDS PER SHARE OF COMMON STOCK........................ $ .20 $ .20 $ .20
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
35
<PAGE> 38
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................. $ 66,738 $ 26,926 $ 13,636
Adjustments to reconcile net income to net cash provided
by operating activities:
Net gain on sales of businesses...................... (5,815)
Extraordinary net loss on early retirement of debt... 19,682
Cumulative effect of changes in accounting
principles......................................... 3,743 76,080
Depreciation, depletion and amortization............. 168,570 242,704 77,143
Deferred income taxes................................ (11,962) (107,492) 86,482
Net income of equity investee........................ (20,444) (8,882) (13,346)
Other................................................ 4,027 (7,324) 7,234
--------- --------- ---------
Net cash provided by operating activities before
changes in other assets and liabilities......... 206,929 149,675 261,096
(Increase) decrease in accounts and notes
receivable......................................... (4,510) 58,438 (18,910)
(Increase) decrease in inventories................... (8,187) 4,114 (1,679)
(Increase) decrease in prepaid expenses and other
assets............................................. 6,303 (3,639) (2,508)
Decrease (increase) in accounts payable and other
liabilities........................................ 19,719 (8,753) (6,911)
Decrease (increase) in income taxes payable.......... (5,618) (9,003) 10,336
--------- --------- ---------
Net cash provided by operating activities............ 214,636 190,832 241,424
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment.............. (299,578) (144,476) (295,914)
Cash provided by equity investee........................ 9,050 20,550 29,119
Cash required by sale of businesses, net................ (2,488) (43,373) (18,769)
--------- --------- ---------
Net cash required by investing activities............... (293,016) (167,299) (285,564)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of debt under the credit
facilities........................................... 80,503 30,000 465,000
Payment to settle long-term debt and capitalized lease
obligations.......................................... (37,292) (117,927) (528,802)
Redemption of Preferred Auction Rate Stock.............. (75,000)
Redemption of preferred stock........................... (200,000)
Redemption of common stock warrants..................... (300,000)
Purchase of treasury stock.............................. (6,089)
Proceeds from issuance of treasury stock................ 1,593
Proceeds from issuance of common stock.................. 311 18,849 4,852
Dividends paid.......................................... (17,530) (17,418) (47,364)
Net proceeds from short-term borrowings................. 47,130 54,765 5,735
--------- --------- ---------
Net cash provided (required) by financing activities.... 68,626 (106,731) (600,579)
--------- --------- ---------
Net decrease in cash and cash equivalents............... (9,754) (83,198) (644,719)
Cash and cash equivalents at beginning of year............ 18,143 101,341 746,060
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 8,389 $ 18,143 $ 101,341
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)................. $ 11,933 $ 8,658 $ 11,480
Income taxes......................................... 154,669 57,791 47,620
</TABLE>
The accompanying notes are an integral part of this financial statement.
36
<PAGE> 39
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK (SHARES)
Authorized.......................................... 200,000,000 200,000,000 200,000,000
========== ========== ==========
Issued:
Beginning of year................................ 87,805,095 86,250,940 85,880,286
Issuance of stock................................ 24,188 1,554,155 370,654
----------- ----------- -----------
Ending balance................................... 87,829,283 87,805,095 86,250,940
========== ========== ==========
COMMON STOCK AT PAR VALUE ($.05 PER SHARE)
Beginning of year................................... $ 4,390 $ 4,312 $ 4,294
Issuance of stock................................... 1 78 18
----------- ----------- -----------
Ending balance...................................... $ 4,391 $ 4,390 $ 4,312
========== ========== ==========
PAID IN CAPITAL
Beginning balance................................... $ 20,436 $ 1,569 $ 260,680
Issuance of stock................................... 312 18,770 4,834
Accretion of discount on common stock warrants...... 5,495
Redemption of common stock warrants................. (269,355)
Reissuance of treasury stock........................ (859) 97 (85)
----------- ----------- -----------
Ending balance...................................... $ 19,889 $ 20,436 $ 1,569
========== ========== ==========
CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT AND
OTHER
Beginning balance................................... $ (86,545) $ (69,388) $ 8,068
Translation adjustments............................. 20,182 (16,932) (76,255)
Supplemental pension plan minimum liability......... 887 (225) (1,201)
----------- ----------- -----------
Ending balance...................................... $ (65,476) $ (86,545) $ (69,388)
========== ========== ==========
RETAINED EARNINGS
Beginning balance................................... $ 345,598 $ 336,090 $ 405,957
Net income.......................................... 66,738 26,926 13,636
Dividends on preferred stock........................ (30,222)
Accretion of discount on common stock warrants...... (5,495)
Redemption of common stock warrants................. (30,644)
Dividends on common stock........................... (17,530) (17,418) (17,142)
----------- ----------- -----------
Ending balance...................................... $ 394,806 $ 345,598 $ 336,090
========== ========== ==========
TREASURY STOCK, AT COST
Beginning balance................................... $ (2,633) $ (3,386) $ (4,571)
Purchases........................................... (6,089)
Issues.............................................. 4,611 753 1,185
----------- ----------- -----------
Ending balance...................................... $ (4,111) $ (2,633) $ (3,386)
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
37
<PAGE> 40
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company is engaged in oil and gas exploration and production
principally overseas and petrochemical manufacturing in the United States.
International activities are conducted primarily in Indonesia, the United
Kingdom sector of the North Sea, Pakistan and other strategic areas. Two limited
partnerships (the "KKR Partnerships"), organized and controlled by an affiliate
of Kohlberg Kravis Roberts & Co. ("KKR"), own approximately 38% of the Company's
issued and outstanding common stock.
Principles of consolidation
The consolidated financial statements include the accounts of Union Texas
Petroleum Holdings, Inc. ("UTPH"), its wholly owned subsidiaries and
proportionate interests in the assets, liabilities and operations of
unincorporated joint ventures (referred to herein individually and collectively
as the "Company"). Investments in which the Company has between a 20% to 50%
ownership interest are accounted for using the equity method. All material
intercompany transactions are eliminated.
Inventories
Finished product inventories are valued at the lower of cost or market
using the last-in, first-out method ("LIFO"). Materials and supplies inventories
are valued at the lower of average cost or market.
Property, plant and equipment
Oil and gas exploration and production activities are accounted for
employing the successful efforts method. Under this method, costs of successful
exploratory wells, development wells and acreage are capitalized. Costs of
unsuccessful exploratory wells are expensed upon the determination that the well
does not justify commercial development. Other exploration costs including
geological and geophysical costs and delay rentals, production costs and
overhead are charged to expense as incurred.
Major renewals and improvements are capitalized, and the assets replaced
are retired. Maintenance and repairs are expensed as incurred.
Depreciation, depletion and amortization of the capitalized costs of
producing properties, both tangible and intangible, are provided for on the
units-of-production basis. Unit-of-production rates are based on estimated
recoverable oil and gas reserves. Amortization of undeveloped acreage from date
of acquisition is based upon such factors as lease term, estimated evaluation
period and prior experience. The Company reviews its leases and related
amortization rates periodically.
Oil and gas assets are reviewed when they are fully placed into service to
insure that capitalized costs of the asset do not exceed undiscounted future net
pretax cash flows and are further reviewed annually on a country-by-country
basis.
Estimated dismantlement, restoration and abandonment costs net of estimated
salvage value are taken into account in determining amortization. Depreciable
assets other than oil and gas properties are depreciated using the straight-line
method based on estimated asset service lives from 3 to 31 years.
Income taxes
In February 1992, the Financial Accounting Standards Board ("FASB")
released Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which requires an asset and liability approach for financial
accounting and reporting of income taxes. The Company adopted the Statement
38
<PAGE> 41
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
effective January 1, 1992, by recording a cumulative charge to net income of $31
million representing the effect on prior years of adopting the Statement;
otherwise, adoption of the standard did not materially impact 1992 results of
operations.
Under this accounting standard, a deferred tax liability or asset is
recorded for future tax consequences arising from differences between the
financial accounting and tax basis of the assets and liabilities of the Company.
An impairment evaluation, with reserves recorded as necessary for any tax
benefit not expected to be realized, is required of deferred tax assets.
Deferred tax liabilities or assets are adjusted for changes in income tax laws
or rates when enacted. Deferred tax expense or benefit is derived from changes
in deferred tax liabilities or assets. A current tax expense or benefit is
recognized for the estimated taxes payable or refundable on tax returns for the
current year.
Under the corporate alternative minimum tax ("AMT"), the Company's U.S. tax
liability is the greater of its regular tax or the AMT. To the extent that the
Company's AMT liability exceeds its otherwise determined tax liability, an AMT
credit may be generated and this credit may be applied against future tax
liabilities.
Postretirement health care benefits
In December 1990, the FASB released Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," which concluded that postretirement benefits represent a form of
deferred compensation and that the cost and obligation should be recognized
based on service. The Statement contains provisions that are similar to the
FASB's approach to accounting for pension costs. The Company adopted the
Statement effective January 1, 1992, by recording a cumulative charge to net
income of approximately $45 million representing the effect on prior years of
adopting the Statement; otherwise, adoption of the standard did not materially
impact 1992 results of operations.
Postemployment benefits
In December 1992, the FASB released Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits," which
concluded that the estimated cost of benefits provided by an employer to former
or inactive employees after employment but before retirement represents part of
the compensation provided to an employee in exchange for service. The Company
currently provides certain long-term benefits to disabled employees. The Company
adopted the Statement effective January 1, 1993, by recording a cumulative
charge to net income of approximately $4 million representing the estimated
future obligation for those employees currently under the long-term disability
program. In prior periods, the Company's cost of long-term disability was
expensed as paid.
Foreign currency
The functional currency for translating the accounts of foreign
subsidiaries is the U.S. dollar, except for subsidiaries in the United Kingdom,
where the functional currency is the local currency. Translation adjustments of
this local currency, which represent unrealized increases and decreases in the
Company's net investment in foreign operations as the result of exchange rate
changes, are included in stockholders' equity as the cumulative foreign exchange
translation adjustment. Transaction gains and losses resulting from the effect
of exchange rate fluctuations on transactions in currencies other than the
functional currency are included in determining net income. Foreign exchange
gains (losses) included in the determination of net income for the years 1994,
1993, and 1992 were ($178), $492, and ($4,318), respectively.
39
<PAGE> 42
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Foreign exchange contracts
The Company periodically enters into foreign exchange contracts as a hedge
against fluctuations in foreign currency rates. These contracts hedge economic
exposures. For contracts that hedge specific transactions, market value gains
and losses are deferred and recognized as a component of cost of the transaction
upon consummation. For contracts that hedge economic exposures, market value
gains and losses are recognized in the period in which they occur.
Other
The fair value of financial instruments included in the Company's assets
and liabilities approximates carrying value. Cash equivalents are comprised of
highly liquid debt instruments purchased at a maturity of three months or less.
NOTE 2 -- PIPER FIELD WRITE-DOWN
It is the policy of the Company to review oil and gas assets when they are
fully placed in service to insure that capitalized costs of the asset do not
exceed undiscounted future net pretax cash flows. In the third quarter of 1993,
as a result of the crude oil price environment, it was determined that estimated
future net pretax cash flows from the U.K. Piper field did not exceed
capitalized costs of the field, and accordingly, the Company recorded a $103
million pretax, non-cash charge to depreciation, depletion and amortization.
After including the reversal of $55 million of related U.K. deferred income
taxes, the net income impact of the charge was $48 million.
NOTE 3 -- OTHER CHARGES, NET
The following pretax charges (credits) are reflected in the Company's
Consolidated Statement of Operations as other charges, net for the year ended
December 31, 1992:
<TABLE>
<CAPTION>
1992
-------
<S> <C>
Gain on sale of Unola de Argentina Ltd..................................... $(5,815)
Loss provision on building lease termination............................... 12,000
-------
$ 6,185
=======
</TABLE>
In January 1992, the Company sold its wholly owned subsidiary, Unola de
Argentina Ltd. ("Unola"), which held a minority interest in an onshore Argentine
oil production service contract, for approximately $16 million and recorded a
gain of $6 million. This sale did not include the Company's exploration acreage
offshore Argentina.
During January 1993, the Company entered into an agreement to terminate a
portion of its Houston office building lease and in March 1993 made a payment to
the lessor of $35 million in consideration of such agreement.
40
<PAGE> 43
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 4 -- ACCOUNTS AND NOTES RECEIVABLE
At December 31, 1994 and 1993, accounts and notes receivable consisted of
the following:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Accounts receivable, trade....................................... $54,768 $49,704
Interest and notes receivable.................................... 8 34
------- -------
54,776 49,738
Less -- allowance for doubtful accounts.......................... (3) (139)
------- -------
$54,773 $49,599
======= =======
</TABLE>
Most of the Company's worldwide business activity is with major marketing
companies, industrial users and joint venture partners. Those receivables
considered a significant credit risk are backed by letters of credit. Typically,
credit terms are of a short-term nature.
NOTE 5 -- INVENTORIES
At December 31, 1994 and 1993, inventories consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Products......................................................... $11,307 $ 851
Materials and supplies........................................... 31,921 33,434
------- -------
$43,228 $34,285
======= =======
</TABLE>
Inventories valued at LIFO amounted to $1,822 at December 31, 1994 and $281
at December 31, 1993, which were below estimated replacement cost by $8,474 and
$792, respectively.
NOTE 6 -- EQUITY INVESTMENT
At December 31, 1994 and 1993, an investment, accounted for using the
equity method, consisted of the following:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Unimar Company................................................. $114,505 $103,111
======== ========
</TABLE>
The Company has a 50% interest in Unimar Company ("Unimar"), a partnership
through which the Company has an additional 11.56% working interest in the
Indonesian joint venture, resulting in a total working interest of 37.81%. The
Company's share of Unimar's nonrecourse debt of $18 million was redeemed on
January 4, 1994.
41
<PAGE> 44
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Company's share of selected financial data for its equity investee is
summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Net revenues........................................ $98,963 $100,390 $103,258
Gross profit........................................ 63,880 64,564 66,725
Net income reported by equity partnership........... $16,552 $ 15,114 $ 11,662
Other............................................... 3,892 (6,232) 1,684
------- -------- --------
Net income of equity investee....................... $20,444 $ 8,882 $ 13,346
======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Current assets............................................. $ 12,226 $ 16,889
Total assets............................................... 211,090 224,704
Current liabilities........................................ 15,281 33,513
Partners' account.......................................... 109,124 101,716
</TABLE>
NOTE 7 -- PROPERTY, PLANT AND EQUIPMENT
At December 31, 1994 and 1993, property, plant and equipment consisted of
the following:
<TABLE>
<CAPTION>
1994 1993
----------- ----------
<S> <C> <C>
Land and land improvements................................. $ 13,549 $ 13,705
Oil and gas properties and equipment....................... 2,130,175 1,514,030
Plants and equipment....................................... 151,748 150,887
Other facilities........................................... 24,978 23,149
Construction and wells in progress......................... 106,413 345,217
----------- ----------
2,426,863 2,046,988
Less -- accumulated depreciation, depletion and
amortization............................................. (1,140,585) (958,104)
----------- ----------
$ 1,286,278 $1,088,884
========== =========
</TABLE>
In November 1994, the Company acquired a 9.42% unit interest from Fina
Exploration Limited and Fina Petroleum Development Limited, subsidiaries of
Petrofina SA (collectively, "Fina") in two blocks in the undeveloped Britannia
natural gas and condensate field in the U.K. North Sea for 83.8 million pounds
sterling (approximately $133 million). In December 1994, the U.K. Department of
Trade and Industry ("DTI") approved the development program for the Britannia
field. As a result of the DTI approval of the development program, the Company
made a second agreed upon payment to Fina for 16.8 million pounds sterling
(approximately $26 million) in December. Production from Britannia is planned to
begin in late 1998. The Company increased oil and gas properties and equipment
by $219 million, resulting from the purchase price of $159 million, financed
through debt, and an offset to deferred income taxes payable of $60 million.
42
<PAGE> 45
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 8 -- DEBT
At December 31, 1994 and 1993, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Credit Facility ($350 million revolver)................................ $325,503 $280,000
8.25% Senior Notes due November 15, 1999............................... 100,000 100,000
Subsidiary production loan............................................. 6,874 9,166
-------- --------
432,377 389,166
Less -- portion due within one year.................................... (2,292) (2,292)
-------- --------
$430,085 $386,874
======== ========
</TABLE>
Credit Facilities
During 1994, the Company replaced its $650 million unsecured revolving
credit facility with three unsecured credit facilities (the "Credit
Facilities"). One of the Credit Facilities is a $100 million unsecured credit
agreement with NationsBank of Texas, N.A., as agent, Bank of America National
Trust and Savings Association and Union Bank of Switzerland, Houston Agency, as
co-agents. This Credit Facility is a revolver that provides for conversion of
amounts outstanding on September 15, 1995 to a one-year term loan maturing
September 15, 1996, if drawn. The Company's other two Credit Facilities are with
NationsBank of Texas, N.A., as agent, Bank of America National Trust and Savings
Association and Union Bank of Switzerland, Houston Agency, as co-agents, and
certain other banks. One of these Credit Facilities is a $350 million revolver
that reduces quarterly by $25 million beginning July 31, 1997 and has a final
maturity of April 30, 1998. The other Credit Facility is a $200 million revolver
that provides for conversion of outstanding amounts on April 30, 1995 to a
one-year term loan maturing April 30, 1996. Borrowings are guaranteed by certain
subsidiaries of the Company that also guarantee the Notes (see Note 20). The
Credit Facilities contain restrictive covenants, including limitations on
incurrence of additional indebtedness, asset sales and mergers or
consolidations. The Credit Facilities restrict the amount of total indebtedness
incurred by the Company and the restricted subsidiaries referred to in the
Credit Facilities, which include the guarantors and certain other subsidiaries
("Restricted Subsidiaries"), to $750 million of senior indebtedness (including
the Notes and amounts drawn under the Credit Facilities) and $100 million of
subordinated indebtedness. Debt of unrestricted subsidiaries and nonrecourse
debt on certain assets of the Company and its subsidiaries are not limited under
the Credit Facilities, subject to certain conditions. The covenants also require
maintenance of a certain level of stockholders' equity. Loans under the $350
million revolver may be made in both pounds sterling and U.S. dollars, at the
option of the Company. Loans under the Credit Facilities bear interest at
floating market rates based on, at the Company's option, the agent bank's base
rate or LIBOR, plus applicable margins, subject to increase in certain events.
In addition, the $350 million revolver allows the Company to obtain up to $200
million of availability thereunder in U.S. dollar loans that bear interest at a
rate determined in a competitive bid process. At December 31, 1994, outstanding
borrowings bore interest at a weighted average of 6.54% per annum. The Credit
Facilities provide the Company with the ability to borrow on a long-term basis,
and as it is the Company's intent to do so, such borrowings are classified as
long-term.
Senior Notes
In November 1992, the Company sold $100 million principal amount, at an
initial offering price of 99.424%, of 8.25% Senior Notes due November 15, 1999
(the "Notes") for approximately $98 million (after deducting underwriting
discounts, commission and offering expenses). The Company used such proceeds to
reduce then outstanding debt under its credit facility. The Notes represent
general unsecured obligations of the Company and rank pari passu in right of
payment with the Company's obligations under its Credit Facilities and senior in
right of payment to any future subordinated indebtedness of the Company. The
Notes
43
<PAGE> 46
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
are guaranteed by the subsidiaries that are guarantors under the Credit
Facilities (see Note 20). The Notes are redeemable at any time, at the option of
the Company, in whole or in part, at a price equal to 100% of the principal
amount plus accrued interest plus a make-whole premium relating to the
then-prevailing Treasury Yield and the remaining life of the Notes.
Subsidiary Production Loan
Union Texas Pakistan, Inc., a wholly owned subsidiary of the Company, has a
nonrecourse loan, payable from production proceeds, which will be repaid in
semiannual installments of $1,146 through 1997, and bears interest at the
182-day Treasury bill rate plus 1.0%. At December 31, 1994, such interest rate
was 7.53%.
Short-term Debt
Uncommitted and unsecured lines of credit are established with several
banks in both U.S. dollars and pounds sterling. At December 31, 1994, $106
million was outstanding under these lines, which bore interest at a weighted
average rate of 6.46% per annum. These amounts are included in the total
indebtedness restriction under the Company's Credit Facilities, thereby reducing
amounts available under the Company's Credit Facilities.
Subordinated Debt
In February 1992, the Company redeemed all of its outstanding $100 million
Senior Subordinated Reset Notes due November 1, 1993, at a redemption price of
103.125% together with accrued interest, and all of its outstanding $310 million
13% Subordinated Notes due July 1, 1995, at a redemption price of 104% together
with accrued interest. The notes were redeemed by using existing cash balances.
As a result, an extraordinary loss of $20 million was recorded representing the
debt premium and the remaining unamortized issuance cost. The $100 million
Senior Subordinated Floating Rate Notes due November 1, 1992 were repaid at
maturity with borrowings under the Company's credit facility.
Interest capitalized for the years 1994, 1993 and 1992 was $18,774, $25,674
and $17,215, respectively.
Scheduled maturities of long-term debt outstanding during the five years
1995 through 1999 are $2,292, $2,292, $27,793, $300,000 and $100,000,
respectively.
NOTE 9 -- INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
-------- --------- --------
<S> <C> <C> <C>
United States (Current):
Federal........................................... $ 3,756 $ 1,543 $ 4,158
State............................................. 4,713 1,616 (1,308)
-------- --------- --------
8,469 3,159 2,850
-------- --------- --------
Foreign:
Current........................................... 148,738 100,648 14,476
Deferred.......................................... (11,962) (107,493) 86,482
-------- --------- --------
136,776 (6,845) 100,958
-------- --------- --------
145,245 (3,686) 103,808
Tax effect of extraordinary items................... (400)
-------- --------- --------
$145,245 $ (3,686) $103,408
======== ========= ========
</TABLE>
44
<PAGE> 47
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The principal items accounting for the difference in taxes on income
computed at the United States statutory rate and as recorded are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Computed tax at 35% in 1994 and 1993 and 34% in 1992
of pretax income................................... $ 74,194 $ 9,444 $ 72,490
Rate change in the U.K. for PRT...................... (50,200)
Taxes in excess of the U.S. tax rate on foreign
earnings........................................... 52,270 10,467 14,486
Alternative Minimum Tax.............................. 3,756 1,543 4,312
Domestic operating losses generating no tax
benefit............................................ 10,313 23,445 13,982
All other items, net................................. 4,712 1,615 (1,462)
-------- -------- --------
$145,245 $ (3,686) $103,808
======== ======== ========
</TABLE>
Effective July 1, 1993, the British Parliament enacted changes in the U.K.
Petroleum Revenue Tax ("PRT"). These changes included reducing PRT on producing
fields in the U.K. North Sea from 75% to 50% and abolishing PRT for all new
fields not licensed for development on March 16, 1993. Accordingly, in the third
quarter of 1993, the Company reduced its liability for U.K. deferred income
taxes and recorded a one-time benefit to net income of approximately $50
million.
Deferred tax liabilities (assets) are comprised of the effects of temporary
differences as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Gross deferred tax liabilities:
Property differences pertaining to depreciation and other
expenditures.............................................. $369,037 $356,852
Britannia acquisition........................................ 60,466
Gross deferred tax assets:
U.K. Corporation Tax effect of deferred Petroleum Revenue
Tax....................................................... (32,998) (32,691)
Dismantlement and removal provision.......................... (30,728) (25,231)
-------- --------
$365,777 $298,930
======== ========
</TABLE>
NOTE 10 -- PENSION BENEFITS
The Union Texas Petroleum Salaried Employees' Pension Plan (the "Pension
Plan") covers substantially all employees. Plan benefits are generally based on
years of service and an employee's compensation levels during the last years of
employment. The Company's funding policy is to contribute annually an amount at
least equal to the minimum funding requirement of the Employee Retirement Income
Security Act of 1974.
The Union Texas Petroleum Supplemental Retirement Plans ("Supplemental
Retirement Plans") cover certain employees whose pension benefits were affected
by changes in the Internal Revenue Code of 1986, as amended, and certain other
benefit limitations of the Internal Revenue Code. The supplemental plans are
unfunded.
45
<PAGE> 48
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Pension Plan has assets in excess of the accumulated benefit
obligation. The assets of this plan are held by trustees and are invested in
common stock, fixed rate and real estate investments. The following table sets
forth the plans' funded status at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
SUPPLEMENTAL
PENSION PLAN RETIREMENT PLANS
--------------------- -------------------
1994 1993 1994 1993
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits........................... $109,074 $114,898 $ 3,753 $ 4,864
Nonvested benefits........................ 4,083 4,951 75
-------- -------- ------- -------
Total accumulated benefit
obligation...................... 113,157 119,849 3,828 4,864
Amounts related to projected pay
increases.............................. 7,572 9,365 660 189
-------- -------- ------- -------
Total projected benefit
obligation...................... 120,729 129,214 4,488 5,053
Net assets available for plan benefits held
by trustees............................... 116,731 130,978
-------- -------- ------- -------
Net assets over (under) projected benefit
obligation................................ (3,998) 1,764 (4,488) (5,053)
Unrecognized net obligation at the date of
initial application of FAS 87 (1/1/86).... 1,988 2,319
Unrecognized prior service cost............. 3,633 1,212 1,665 1,225
Adjustment required to recognize minimum
liability................................. (2,205) (2,652)
Unrecognized net (gain) loss................ (833) (5,857) 1,200 1,616
-------- -------- ------- -------
Prepaid pension cost (pension
liability)............................. $ 790 $ (562) $(3,828) $(4,864)
======== ======== ======= =======
</TABLE>
Net periodic pension cost for 1994, 1993 and 1992 included the following
components:
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Service cost-benefits earned during the period...... $ 2,474 $ 2,286 $ 3,135
Interest cost on projected benefit obligation....... 10,173 10,825 11,460
Return on plan assets............................... 477 (12,070) (15,830)
Net amortization and deferral....................... (9,381) 2,468 8,949
------- -------- --------
Net periodic pension cost before effect of
settlement loss................................... 3,743 3,509 7,714
Settlement loss..................................... 596 610 828
------- -------- --------
Net periodic pension cost........................... $ 4,339 $ 4,119 $ 8,542
======= ======== ========
</TABLE>
Settlement losses resulted from certain lump sum payments to employees who
terminated from participation in the Supplemental Retirement Plans during the
year. Net periodic pension expense decreased from 1992 due primarily to changes
in actuarial assumptions and gain and loss experience.
The assumed average rate of return on plan assets was 8% in 1994, 1993 and
1992 for the plans. Measurement of the projected benefit obligation was based on
an assumed discount rate of 8.5% and 7% in 1994, 7.5% and 7% in 1993 and 8% and
6.5% in 1992 for normal and lump sum eligible participants, respectively, for
the Pension and Supplemental Retirement Plans and an assumed long-term rate of
compensation increase of 4.5%, 5% and 5% for the Pension and Supplemental
Retirement Plans in 1994, 1993 and 1992, respectively.
46
<PAGE> 49
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 11 -- OTHER POSTRETIREMENT BENEFITS
The Company currently provides postretirement benefits, principally health
care and life insurance benefits, for employees. Under the Company's current
policy, substantially all of the Company's employees may become eligible for
those benefits if they reach normal retirement age with ten years of service
while working for the Company. These benefits are unfunded.
The following table sets forth the plan's status at December 31:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees' benefits........................................... $ 26,060 $ 29,356
Other fully eligible participants' benefits.................. 3,721 3,043
Other active plan participants' benefits..................... 4,587 4,840
-------- --------
Accumulated postretirement benefit obligation............. (34,368) (37,239)
Unrecognized amounts:
Prior service cost........................................ (15,306) (19,194)
Net loss.................................................. 9,114 12,952
-------- --------
Accrued obligation............................................. $(40,560) $(43,481)
======== ========
</TABLE>
Net postretirement benefit cost for 1994, 1993 and 1992 included the
following components:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the period.......... $ 497 $ 393 $ 541
Interest cost on projected benefit obligation........... 2,735 2,743 3,513
Cumulative effect of prior years' net obligation........ 44,633
Net amortization........................................ (3,051) (3,138)
------- ------- -------
Net postretirement benefit cost......................... $ 181 $ (2) $48,687
======= ======= =======
</TABLE>
Measurement of the accumulated postretirement benefit obligation was based
on an assumed discount rate of 8.5% for 1994, 7.5% for 1993, and 8% for 1992.
For measurement purposes, a 12.75%, 13.5% and 14.25% annual rate of increase in
the per capita cost of covered health care benefits for those age 65 and older
were assumed for 1994, 1993 and 1992, respectively; the rate was assumed to
decrease linearly to 6% for 2003 and after. The health care cost trend rate
assumption has a significant effect on the amounts reported. Increasing the
assumed health care cost trend rates by 1% in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1994 and 1993,
by $1,451 and $1,479, respectively. Additionally, it would increase the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the years ended December 31, 1994, 1993 and 1992
by $176, $151 and $469, respectively.
47
<PAGE> 50
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 12 -- STOCK OPTIONS
Under the terms of the 1992 Stock Option Plan, the Company has authorized
the issuance of options to employees to purchase up to 4 million shares of
common stock. Options are exercisable for a maximum period of ten years at an
exercise price of not less than the fair market value of the underlying common
stock at the time of the grant. Options granted prior to 1994 vest at 20% per
annum. Options granted in 1994 vest at 25% per annum. Certain officers have been
granted options with appreciation rights. At December 31, 1994, options
outstanding with respect to 789,100 shares of common stock have appreciation
rights attached.
<TABLE>
<CAPTION>
NUMBER OF SHARES
-----------------------
1994 1993
-------- ---------
<S> <C> <C>
Outstanding at beginning of year.............................. 1,778,710 909,200
Granted at $20.875 per share.................................. 927,900
Granted at $18.75 per share................................... 960,900*
Less:
Exercised................................................... 6,460 2,190
Canceled.................................................... 89,770 56,200
--------- ---------
Outstanding at end of year.................................... 2,643,380 1,778,710
========= =========
</TABLE>
- ---------------
*298,700 shares granted in 1994 were granted with stock appreciation rights.
Under the terms of the 1985 Stock Option Plan (the "1985 Plan"), the
Company authorized the issuance of options to officers and key employees to
purchase up to 4,466,667 shares of common stock. Options are exercisable for a
maximum period of ten years at an exercise price of not less than the fair
market value of the underlying common stock at the time of the grant. Certain
officers and employees have been granted options with appreciation rights. All
options granted are fully vested. At December 31, 1994, options outstanding with
respect to 381,566 shares of common stock have appreciation rights attached.
<TABLE>
<CAPTION>
NUMBER OF SHARES
---------------------
1994 1993
-------- ---------
<S> <C> <C>
Outstanding at beginning of year............................... 714,976 2,143,917
Less:
Exercised.................................................... 98,624 1,424,022
Canceled..................................................... 4,919
------- ---------
Outstanding at end of year..................................... 616,352 714,976
======= =========
</TABLE>
Under the terms of the 1987 Stock Option Plan, the Company authorized the
issuance of options to purchase up to 1,333,333 shares of common stock to
certain employees not covered under the 1985 Plan. Options are exercisable for a
maximum period of ten years at an exercise price of not less than the fair
market value of the underlying common stock at the time of grant. The options
vest at 20% per annum.
<TABLE>
<CAPTION>
NUMBER OF SHARES
--------------------
1994 1993
-------- --------
<S> <C> <C>
Outstanding at beginning of year................................. 326,022 741,992
Less:
Exercised...................................................... 44,810 397,714
Canceled....................................................... 5,548 18,256
------- -------
Outstanding at end of year....................................... 275,664 326,022
======= =======
</TABLE>
48
<PAGE> 51
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
In connection with the stock acquisition by the KKR Partnerships, officers
and key employees purchased common stock for approximately $3 million and
obtained options, which are subject to the terms of the 1985 Plan, to acquire
additional common stock for approximately $14 million at prices equivalent to
that paid by the KKR Partnerships. In some instances, the appreciation rights
could only be exercised with respect to 36% of the shares covered by each
option.
NOTE 13 -- MAJOR CUSTOMERS
During 1994, the Company's U.K. operations had sales to B.P. Oil
International Limited and Elf Trading, in the amount of $81,292 and $80,578, or
11% and 11%, respectively, of total sales and operating revenues. During 1993,
the Company's U.K. operations had sales to B.P. Oil International Limited, in
the amount of $89,098 or 13% of total sales and operating revenues. During 1992,
the Company's Indonesian operations had sales to Chubu Electric, a Japanese
utility, in the amount of $75,374 or 11% of total sales and operating revenues.
NOTE 14 -- SEGMENT FINANCIAL DATA
<TABLE>
<CAPTION>
EXPLORATION AND PRODUCTION
-------------------------------------------------- PETRO-
UNITED OTHER CHEM-
STATES UNITED INTER- ICALS
(ALASKA) KINGDOM INDONESIA PAKISTAN NATIONAL (A) OTHER(A) TOTAL
-------- ------- --------- -------- -------- ----- -------- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994
Sales and operating revenues........ $260 $278 $39 $ 1 $169 $ 1 $ 748
===== ===== ==== ===== ===== ====== ======
Operating profit (loss)............. $ (7) $ 57 $174 $13 $(25) $ 24 $ (10) $ 226
Interest income..................... 1 1
General and administrative
expenses.......................... (24) (24)
Interest expense.................... 1 (12) (11)
Net income (loss) of equity
investee.......................... 21 (1) 20
---- ---- ---- --- ---- ---- ----- ------
Income (loss) before income taxes... (7) 59 195 13 (25) 24 (47) 212
Income taxes........................ 32 101 3 9 145
---- ---- ---- --- ---- ---- ----- ------
Net income (loss)................... $ (7) $ 27 $ 94 $10 $(25) $ 15 $ (47) $ 67
===== ===== ===== ==== ===== ===== ====== ======
Identifiable assets................. $ 8 $887 $473 $40 $ 11 $108 $ 18 $1,545
Capital additions................... 2 219 31 9 8 6 1 276
Depreciation, depletion and
amortization...................... 2 114 37 7 2 5 2 169
1993
Sales and operating revenues........ $208 $279 $49 $ 1 $145 $ 682
===== ===== ==== ===== ===== ======
Operating profit (loss)............. $(34) $(83) $164 $24 $(26) $ 8 $ (8) $ 45
Interest income..................... 2 1 2 5
General and administrative
expenses.......................... (24) (24)
Interest expense.................... (1) (1) (4) (6)
Preferred dividends of a
subsidiary........................ (2) (2)
Net income (loss) of equity
investee.......................... 14 (5) 9
---- ---- ---- --- ---- ---- ----- ------
Income (loss) before income taxes
and cumulative effect of change in
accounting principles............. (34) (82) 179 23 (26) 8 (41) 27
Income taxes (benefit).............. (105) 90 7 3 1 (4)
---- ---- ---- --- ---- ---- ----- ------
Cumulative effect of change in
accounting principles............. (4) (4)
---- ---- ---- --- ---- ---- ----- ------
Net income (loss)................... $(34) $ 23 $ 89 $16 $(26) $ 5 $ (46) $ 27
===== ===== ===== ==== ===== ===== ====== ======
Identifiable assets................. $ 8 $695 $476 $37 $ 5 $ 91 $ 27 $1,339
Capital additions................... (9) 94 46 5 4 1 141
Depreciation, depletion and
amortization...................... 2 193 36 6 5 1 243
</TABLE>
(Table continued on following page)
49
<PAGE> 52
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
<TABLE>
<CAPTION>
EXPLORATION AND PRODUCTION
------------------------------------------- PETRO-
UNITED OTHER CHEM-
STATES UNITED INTER- ICALS
(ALASKA) KINGDOM INDONESIA PAKISTAN NATIONAL (A) OTHER(A) TOTAL
-------- ------- --------- -------- -------- ----- -------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1992
Sales and operating revenues........ $156 $299 $44 $ 2 $167 $ 1 $ 669
===== ===== ==== ===== ===== ====== ======
Operating profit (loss)............. $ (6) $ 40 $177 $15 $(17) $ 4 $ (15) $ 198
Interest income..................... 25 1 10 36
General and administrative
expenses.......................... (27) (27)
Interest expense.................... (1) (1) (2) (4)
Preferred dividends of a
subsidiary........................ (2) (2)
Net income (loss) of equity
investee.......................... 15 (2) 13
---- ---- ---- --- ---- ---- ----- ------
Income (loss) before income taxes,
extraordinary item and cumulative
effect of changes in accounting
principles........................ (6) 64 193 14 (17) 4 (38) 214
Income taxes (benefit).............. (2) (3) 100 3 2 4 104
---- ---- ---- --- ---- ---- ----- ------
Income (loss) before extraordinary
item.............................. (4) 67 93 11 (17) 2 (42) 110
Extraordinary item.................. (20) (20)
Cumulative effect of changes in
accounting principles............. (76) (76)
---- ---- ---- --- ---- ---- ----- ------
Net income (loss)................... $ (4) $ 67 $ 93 $11 $(17) $ 2 $(138) $ 14
===== ===== ===== ==== ===== ===== ====== ======
Identifiable assets................. $ 18 $835 $490 $36 $ 4 $ 95 $ 103 $1,581
Capital additions................... 16 205 41 5 6 1 274
Depreciation, depletion and
amortization...................... 2 21 41 6 1 5 1 77
</TABLE>
- ---------------
(a) Petrochemicals operations and Other represent United States activities.
NOTE 15 -- COMMITMENTS
The Company has entered into various commitments and operating agreements
related to the development of and production from certain proved oil and gas
properties. Also during the normal course of business, the Company has issued
various letters of credit, bank guarantees and performance bonds, which at
December 31, 1994, totaled $12 million. At December 31, 1994, the Company had
open foreign exchange contracts with a net value of 5 million pounds sterling.
These contracts hedge economic exposures, based on the Company's assessment of
its net exposure to changes in foreign currency rates. It is management's belief
that such commitments and guarantees will be met without material adverse effect
on the Company's financial position.
The amounts of operating lease obligations due during the five years 1995
through 1999 are $8,200, $8,515, $8,326, $8,346 and $8,421, respectively.
Rental expense for the years 1994, 1993 and 1992 was $9,520, $8,339, and
$8,528, respectively.
NOTE 16 -- CONTINGENCIES
The Company and its subsidiaries and related companies are named defendants
in a number of lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business.
While the outcome of such contingencies, lawsuits or other proceedings
against the Company cannot be predicted with certainty, management expects that
such liability, to the extent not provided for through insurance or otherwise,
will not have a material adverse effect on the financial statements of the
Company.
50
<PAGE> 53
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 17 -- EARNINGS (LOSS) PER SHARE
Earnings (loss) per share of common stock are based upon the following:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Net income.................................... $ 66,738 $ 26,926 $ 13,636
Preferred dividend requirement................ (30,222)
Accretion of discount on warrants............. (5,495)
---------- ---------- ----------
Total income (loss) applicable for earnings
per share calculation....................... $ 66,738 $ 26,926 $ (22,081)
========== ========== ==========
Average outstanding shares of common stock.... 87,642,451 87,218,027 85,823,320
Earnings (loss) per share..................... $ .76 $ .31 $ (.26)
========== ========== ==========
</TABLE>
Dividends on the Series B and C Preferred Stock were eliminated after
September 1992 as a result of the redemption of this stock. Similarly, accretion
of discount on the common stock warrants were eliminated after September 1992 as
a result of the redemption of the warrants.
NOTE 18 -- SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1994 1993(A)
QUARTER ENDED QUARTER ENDED
---------------------------------------------------- ----------------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales and
operating
revenues........... $194,097 $145,608 $193,707 $214,471 $747,883 $175,615 $146,939 $169,908 $189,461 $681,923
Gross profit......... 84,578 48,648 75,193 74,253 282,672 87,768 47,438 (51,911) 58,606 141,901
Income before
cumulative effect
of change in
accounting
principle.......... 26,615 8,296 14,641 17,186 66,738 25,654 12,747 (12,790) 5,058 30,669
Change in accounting
principle.......... (3,743) (3,743)
Net income (loss).... 26,615 8,296 14,641 17,186 66,738 21,911 12,747 (12,790) 5,058 26,926
Per share of common
stock:
Net earnings (loss)
before cumulative
effect of change in
accounting
principle.......... .30 .09 .17 .20 .76 .30 .15 (.15) .06 .35
Net earnings
(loss)............. .30 .09 .17 .20 .76 .26 .15 (.15) .06 .31
Dividends............ .05 .05 .05 .05 .20 .05 .05 .05 .05 .20
Market price:
High................. 22 20 1/8 20 3/8 21 7/8 22 24 7/8 26 1/8 27 1/2 26 1/2 27 1/2
Low.................. 16 5/8 16 1/4 17 18 1/8 16 1/4 17 7/8 21 22 1/2 19 17 7/8
</TABLE>
- ---------------
Source of Market Prices: New York Stock Exchange Composite Transactions Tape
(a) As discussed in Note 1, the Company adopted, effective January 1, 1993, the
accounting standard FAS 112, "Employers' Accounting For Postemployment
Benefits."
51
<PAGE> 54
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 19 -- SUPPLEMENTARY OIL AND GAS INFORMATION
Reserve estimation -- (Unaudited)
Oil and gas reserves cannot be measured exactly. Reserve estimates are
based on many factors related to reservoir performance which require evaluation
by the engineers interpreting the available data, as well as price, costs and
other economic factors. The reliability of these estimates at any point in time
depends on both the quality and quantity of the technical and economic data, the
production performance of the reservoirs as well as extensive engineering
judgment. Consequently, reserve estimates are subject to revision as additional
data becomes available during the producing life of a reservoir. When a
commercial reservoir is discovered, proved reserves are initially determined
based on only limited data from the first well or wells. Further drilling may
better define the extent of the reservoir and additional production performance,
well tests and engineering studies will likely improve the reliability of the
estimate.
Reserves are considered proved if economic producibility is supported by
either actual production or conclusive formation tests. Proved developed
reserves are reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. Proved undeveloped reserves
are reserves that are expected to be recovered from new wells on undrilled
acreage or from existing wells where a relatively significant expenditure is
required to permit production. These estimates do not include reserves which may
be found by extension of proved areas or reserves recoverable by secondary or
tertiary recovery methods unless these methods are in operation and showing
successful results.
In 1994, the Company purchased an interest in the undeveloped Britannia
field in the U.K. North Sea, adding at year end 1994 approximately 38 million
barrels of oil equivalent ("boe") to its proved reserves.
In 1992, the Company included in its reported estimates of proved reserves
attributable to its interest in the Indonesian joint venture only those proved
reserves that were committed to be sold under LNG sales contracts or which the
Company expected to be sold in the spot market. Over the past several years, the
Indonesian joint venture experienced better than anticipated field performance
and development drilling successes. Also, Pertamina made progress in marketing
additional LNG volumes that the Company believes will be sold. As a result,
after 1992, the Company booked upward revisions of proved reserves attributable
to its interest in this joint venture.
Information presented for the Company's operations in Indonesia relates to
a production sharing contract between a joint venture group in which the Company
is a member and Pertamina. Debt service relating to the Indonesian facility
which liquefies natural gas supplied by the joint venture and other production
sharing contractors is accounted for by the Company as a cost of production and
operation. The debt obligation is that of Pertamina and not the joint venture.
Such debt service is deducted in estimating future net revenues to be
distributed among Pertamina and the production sharing contractors including the
joint venture and the Company's interest therein. The joint venture has no
ownership interest in the oil and gas reserves but does have the right to share
revenues and/or production and is entitled to recover most field and other
operating costs and capital depreciation. The reserve estimates are subject to
revision as prices fluctuate due to the cost recovery feature under the
production sharing contract and due to the effect that price fluctuations
generally have on reserve estimates. Indonesian reserves associated with the
Unimar partnership are shown under the caption "Non-Consolidated Interests."
"Other International" primarily represents a service contract in Argentina
under which a service fee for each barrel of production was received by Unola
and an interest in Egypt. In January 1992, the Company completed the sale of
Unola.
52
<PAGE> 55
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Company's net quantities of proved developed and undeveloped reserves
of oil and natural gas, by geographic areas and changes therein, were as
follows:
ESTIMATED QUANTITIES OF NET PROVED CRUDE OIL AND NATURAL GAS LIQUIDS RESERVES
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------- NON-
UNITED OTHER CONSOLIDATED TOTAL
KINGDOM INDONESIA PAKISTAN INTERNATIONAL TOTAL INTERESTS WORLDWIDE
------- --------- -------- ------------- ------- ------------ ---------
(THOUSANDS OF BARRELS)
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Net proved reserves
-- beginning of year................. 69,199 17,779 4,660 35 91,673 6,809 98,482
-- revisions of previous estimates... 8,818 3,371 699 48 12,936 1,426 14,362
-- extensions, discoveries and other
additions........................ 278 278 278
-- purchase of minerals in place..... 9,241 9,241 9,241
-- production........................ (13,396) (2,008) (1,795) (51) (17,250) (664) (17,914)
------- ------ ------ ------ ------- ----- -------
Net proved reserves
-- end of year....................... 73,862 19,142 3,842 32 96,878 7,571 104,449
======= ====== ====== ====== ======= ===== =======
Net proved developed reserves
-- beginning of year................. 33,709 14,503 3,293 35 51,540 5,557 57,097
-- end of year....................... 56,773 17,247 2,714 32 76,766 6,835 83,601
YEAR ENDED DECEMBER 31, 1993
Net proved reserves
-- beginning of year................. 76,098 13,380 5,467 26 94,971 4,866 99,837
-- revisions of previous estimates... 3,212 6,464 505 56 10,237 2,626 12,863
-- extensions, discoveries and other
additions........................ 594 594 594
-- production........................ (10,111) (2,065) (1,906) (47) (14,129) (683) (14,812)
------- ------ ------ ------ ------- ----- -------
Net proved reserves
-- end of year....................... 69,199 17,779 4,660 35 91,673 6,809 98,482
======= ====== ====== ====== ======= ===== =======
Net proved developed reserves
-- beginning of year................. 24,789 12,223 3,054 26 40,092 4,438 44,530
-- end of year....................... 33,709 14,503 3,293 35 51,540 5,557 57,097
YEAR ENDED DECEMBER 31, 1992
Net proved reserves
-- beginning of year................. 78,880 13,210 6,831 8,296 107,217 4,744 111,961
-- revisions of previous estimates... 2,054 2,045 363 51 4,513 742 5,255
-- sales of minerals in place........ (8,195) (8,195) (8,195)
-- extensions, discoveries and other
additions........................ 66 66 66
-- production........................ (4,836) (1,875) (1,793) (126) (8,630) (620) (9,250)
------- ------ ------ ------ ------- ----- -------
Net proved reserves
-- end of year....................... 76,098 13,380 5,467 26 94,971 4,866 99,837
======= ====== ====== ====== ======= ===== =======
Net proved developed reserves
-- beginning of year................. 27,832 11,530 2,821 7,153 49,336 4,145 53,481
-- end of year....................... 24,789 12,223 3,054 26 40,092 4,438 44,530
</TABLE>
53
<PAGE> 56
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
ESTIMATED QUANTITIES OF NET PROVED NATURAL GAS RESERVES
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
----------------------------------------------- NON-
UNITED CONSOLIDATED TOTAL
KINGDOM INDONESIA PAKISTAN TOTAL INTERESTS WORLDWIDE
------- --------- -------- --------- ------------ ---------
(MILLIONS OF CUBIC FEET)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Net proved reserves
-- beginning of year..................... 139,195 1,008,863 101,753 1,249,811 389,670 1,639,481
-- revisions of previous estimates....... 6,625 63,381 3,303 73,309 29,054 102,363
-- extensions, discoveries and other
additions............................. 15,673 8,618 24,291 24,291
-- purchase of minerals in place......... 166,828 166,828 166,828
-- production............................ (8,700) (99,448)(a) (15,779) (123,927) (32,890)(a) (156,817)
------- --------- ------- --------- ------- ---------
Net proved reserves
-- end of year........................... 319,621 972,796 (a) 97,895 1,390,312 385,834(a) 1,776,146
======= ========= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year..................... 131,002 785,135 38,784 954,921 299,768 1,254,689
-- end of year........................... 149,301 812,933 51,883 1,014,117 320,502 1,334,619
YEAR ENDED DECEMBER 31, 1993
Net proved reserves
-- beginning of year..................... 89,774 797,988 101,032 988,794 295,184 1,283,978
-- revisions of previous estimates....... 52,166 301,278 (579) 352,865 124,383 477,248
-- extensions, discoveries and other
additions............................. 16,840 16,840 16,840
-- production............................ (2,745) (90,403)(a) (15,540) (108,688) (29,897)(a) (138,585)
------- --------- ------- --------- ------- ---------
Net proved reserves
-- end of year........................... 139,195 1,008,863(a) 101,753 1,249,811 389,670(a) 1,639,481
======= ========= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year..................... 74,658 725,490 34,542 834,690 267,085 1,101,775
-- end of year........................... 131,002 785,135 38,784 954,921 299,768 1,254,689
YEAR ENDED DECEMBER 31, 1992
Net proved reserves
-- beginning of year..................... 92,785 879,374 108,072 1,080,231 320,684 1,400,915
-- revisions of previous estimates....... (327) 9,696 7,055 16,424 4,619 21,043
-- production............................ (2,684) (91,082)(a) (14,095) (107,861) (30,119)(a) (137,980)
------- --------- ------- --------- ------- ---------
Net proved reserves
-- end of year........................... 89,774 797,988 (a) 101,032 988,794 295,184(a) 1,283,978
======= ========= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year..................... 77,669 737,218 32,364 847,251 267,463 1,114,714
-- end of year........................... 74,658 725,490 34,542 834,690 267,085 1,101,775
</TABLE>
- ---------------
(a) Includes gas consumed in the operation of the LNG plant, which was
approximately 11 Bcf and 4 Bcf, 10 Bcf and 4 Bcf and 10 Bcf and 4 Bcf
attributable to the Company and its Unimar partnership, respectively, for
1994, 1993 and 1992; and gas sold to a fertilizer plant and a refinery.
54
<PAGE> 57
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Costs incurred and results of operations
Costs incurred in oil and gas property acquisition, exploration and
development activities whether expensed or capitalized were as follows:
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
--------------------------------------------------------
UNITED OTHER NON- TOTAL
STATES UNITED INTER- CONSOLIDATED WORLD-
(ALASKA) KINGDOM INDONESIA PAKISTAN NATIONAL TOTAL INTERESTS WIDE
--------- ------- --------- -------- -------- ----- ------------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Property acquisition (proved and
unproved)
1994.............................. $ 3 $ 159 $ 7 $ 169 $169
1993.............................. 1 1 1
1992.............................. 2 2 2
Exploration
1994.............................. 4 14 $ 9 $ 10 24 61 $ 1 62
1993.............................. 23(a) 11 17 10 27 88 3 91
1992.............................. 18 19 14 8 22 81 2 83
Development
1994.............................. 55(b) 30 6 91 10 101
1993.............................. 94(b) 44 3 141 15 156
1992.............................. 206(b) 40(c) 4 1 251 13 264
</TABLE>
- ---------------
(a) Includes $1 million for capitalized interest.
(b) Includes $19 million, $25 million and $16 million for capitalized interest
in 1994, 1993 and 1992, respectively.
(c) Includes $1 million for capitalized interest.
The aggregate amount of capitalized costs (including construction in
progress) relating to oil and gas producing activities and the aggregate amount
of the related accumulated depreciation, depletion and amortization ("DD&A")
including accumulated valuation allowances at December 31, were as follows:
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
--------------------------------------------------------
UNITED OTHER NON- TOTAL
STATES UNITED INTER- CONSOLIDATED WORLD-
(ALASKA) KINGDOM INDONESIA PAKISTAN NATIONAL TOTAL INTERESTS WIDE
-------- ------- --------- -------- -------- ----- ------------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Proved and unproved properties
Gross capital
1994......................... $ 20 $1,437 $ 687 $ 68 $ 13 $2,225 $512 $2,737
1993......................... 19 1,120 658 60 5 1,862 496 2,358
1992......................... 27 1,047 612 55 6 1,747 380 2,127
Accumulated DD&A (including
valuation allowances)
1994......................... 12 599 361 40 7 1,019 316 1,335
1993......................... 11 479 324 34 5 853 290 1,143
1992......................... 9 298 287 28 5 627 200 827
Proved properties
Gross capital
1994......................... 1,428 679 63 4 2,174 512 2,686
1993......................... 1,115 648 56 1 1,820 496 2,316
1992......................... 1,038 603 52 1 1,694 379 2,073
Accumulated DD&A
1994......................... 598 354 39 4 995 316 1,311
1993......................... 478 317 33 1 829 290 1,119
1992......................... 297 281 27 1 606 200 806
</TABLE>
55
<PAGE> 58
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The results of operations for the Company's oil and gas producing
activities for 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
-----------------------------------------------------------
UNITED OTHER NON- TOTAL
STATES UNITED INTER- CONSOLIDATED WORLD-
(ALASKA) KINGDOM INDONESIA PAKISTAN NATIONAL TOTAL INTERESTS WIDE
-------- ------- --------- -------- -------- ----- ------------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1994
Net sales................ $ 260 $ 278 $ 39 $ 1 $578 $ 99 $677
------- --------- --- -------- ---- ------ ------
Production costs......... 83 59 12 154 10 164
Exploration expenses..... 6 9 8 7 24 54 1 55
DD&A..................... 114 37 7 158 25 183
Valuation allowances..... 1 1 2 4 4
-------- ------- --------- --- -------- ---- ------ ------
Total costs and
expenses.............. 7 207 104 26 26 370 36 406
-------- ------- --------- --- -------- ---- ------ ------
(7) 53 174 13 (25) 208 63 271
Income tax expense(a).... 32 102 4 138 43 181
-------- ------- --------- --- -------- ---- ------ ------
Results of
operations(b)......... $ (7) $ 21 $ 72 $ 9 $(25) $ 70 $ 20 $ 90
======= ====== ======= ====== ====== ==== ========= =====
YEAR ENDED DECEMBER 31,
1993
Net sales................ $ 208 $ 279 $ 49 $ 1 $537 $100 $637
------- --------- --- -------- ---- ------ ------
Production costs......... 81 62 12 155 9 164
Exploration expenses..... 32 11 16 8 27 94 2 96
DD&A..................... 193 35 6 234 26 260
Valuation allowances..... 2 1 3 3
-------- ------- --------- --- -------- ---- ------ ------
Total costs and
expenses.............. 34 285 114 26 27 486 37 523
-------- ------- --------- --- -------- ---- ------ ------
(34) (77) 165 23 (26) 51 63 114
Income tax expense
(benefit)(a).......... (99) 90 8 (1) 44 43
-------- ------- --------- --- -------- ---- ------ ------
Results of
operations(b)......... $(34) $ 22 $ 75 $ 15 $(26) $ 52 $ 19 $ 71
======= ====== ======= ====== ====== ==== ========= =====
YEAR ENDED DECEMBER 31,
1992
Net sales................ $ 156 $ 299 $ 44 $ 2 $501 $103 $604
------- --------- --- -------- ---- ------ ------
Production costs......... 67 69 15 1 152 10 162
Exploration expenses..... 4 21 13 7 22 67 5 72
DD&A..................... 21 40 6 1 68 23 91
Valuation allowances..... 2 1 3 3
-------- ------- --------- --- -------- ---- ------ ------
Total costs and
expenses.............. 6 109 123 28 24 290 38 328
-------- ------- --------- --- -------- ---- ------ ------
(6) 47 176 16 (22) 211 65 276
Income tax expense
(benefit)(a).......... (2) (3) 101 3 99 36 135
-------- ------- --------- --- -------- ---- ------ ------
Results of
operations(b)......... $ (4) $ 50 $ 75 $ 13 $(22) $112 $ 29 $141
======= ====== ======= ====== ====== ==== ========= =====
</TABLE>
- ---------------
(a) Computed using statutory rates adjusted for permanent differences, tax
credits and allowances that are reflected in the income tax expense for the
respective years.
(b) Excludes overhead and financing costs.
56
<PAGE> 59
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Standardized measure of discounted future net cash flows -- (Unaudited)
The standardized measure of discounted future net cash flows and changes
therein relating to proved oil and gas reserves for 1994, 1993 and 1992 were as
follows:
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
----------------------------------------- NON- TOTAL
UNITED CONSOLIDATED WORLD-
KINGDOM INDONESIA PAKISTAN TOTAL INTERESTS WIDE
------- --------- -------- -------- ------------ -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1994
Future cash inflows.................. $2,686 $ 2,622 $180 $ 5,488 $1,155 $ 6,643
Future production and development
costs............................. (1,161) (1,043) (74) (2,278) (492) (2,770)
Future income tax expense............ (487) (781) (24) (1,292) (344) (1,636)
------- --------- -------- -------- ------------ -------
Future net cash flows(a)............. 1,038 798 82 1,918 319 2,237
10% discount for estimated timing of
cash flows........................ (466) (365) (22) (853) (161) (1,014)
------- --------- -------- -------- ------------ -------
Standardized measure of discounted
future net cash flows............. $ 572 $ 433 $ 60 $ 1,065 $ 158 $ 1,223
====== ======= ====== ======= ========= =======
DECEMBER 31, 1993
Future cash inflows.................. $1,920 $ 2,366 $167 $ 4,453 $1,042 $ 5,495
Future production and development
costs............................. (764) (1,089) (80) (1,933) (509) (2,442)
Future income tax expense............ (285) (637) (15) (937) (281) (1,218)
------- --------- -------- -------- ------------ -------
Future net cash flows(a)............. 871 640 72 1,583 252 1,835
10% discount for estimated timing of
cash flows........................ (421) (268) (25) (714) (118) (832)
------- --------- -------- -------- ------------ -------
Standardized measure of discounted
future net cash flows............. $ 450 $ 372 $ 47 $ 869 $ 134 $ 1,003
====== ======= ====== ======= ========= =======
DECEMBER 31, 1992
Future cash inflows.................. $2,104 $ 2,448 $231 $ 4,783 $1,078 $ 5,861
Future production and development
costs............................. (803) (1,051) (65) (1,919) (506) (2,425)
Future income tax expense............ (467) (720) (58) (1,245) (317) (1,562)
------- --------- -------- -------- ------------ -------
Future net cash flows(a)............. 834 677 108 1,619 255 1,874
10% discount for estimated timing of
cash flows........................ (331) (247) (25) (603) (109) (712)
------- --------- -------- -------- ------------ -------
Standardized measure of discounted
future net cash flows............. $ 503 $ 430 $ 83 $ 1,016 $ 146 $ 1,162
====== ======= ====== ======= ========= =======
</TABLE>
- ---------------
(a) Future net cash flows were computed using year-end prices and costs and
statutory tax rates adjusted for permanent differences, tax credits and
allowances.
57
<PAGE> 60
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Changes in the standardized measure of discounted future net cash flows for
the consolidated subsidiaries were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Beginning of year........................................ $ 869 $1,016 $1,071
Sales and transfers of oil and gas produced, net of
production costs....................................... (437) (374) (320)
Net changes in prices, development and production
costs.................................................. 358 (767) (133)
Extensions, discoveries and improved recovery, less
related costs.......................................... 46 9 1
Purchase of minerals in place............................ 118
Development costs incurred during the period............. 73 110 235
Revisions of previous quantity estimates................. 105 384 47
Increase in present value due to passage of one year..... 144 189 187
Sale of reserves in place................................ (34)
Net change in income taxes............................... (211) 302 (38)
------ ------ ------
End of year.............................................. $1,065 $ 869 $1,016
====== ====== ======
</TABLE>
The standardized measure data includes estimates of oil and gas reserve
volumes and forecasts of future production rates over the reserve lives.
Estimates of future production expenditures, including taxes and future
development costs, are based on management's best estimate of such costs
assuming a continuation of current economic and operating conditions. No
provision is included for depletion, depreciation and amortization of property
acquisition costs or indirect costs. The sales prices used in the calculation
are the year-end prices of crude oil, including condensate and natural gas
liquids, and natural gas which as of December 31, 1994, were $15.40 per barrel
of U.K. crude oil and $2.47 per Mcf (at the plant inlet) of Indonesian LNG.
Because of the estimated nature of the data presented, changes in price and cost
levels, as well as the timing of future development costs, may have a
significant impact on such data and cause such data not to be representative of
production or cash flows the Company may realize in the future.
NOTE 20 -- SUPPLEMENTAL GUARANTOR INFORMATION
In connection with the sale by UTPH of the Notes, the following
subsidiaries of UTPH (collectively, the "Guarantors") unconditionally guaranteed
(the "Guarantees") on a joint and several basis UTPH's obligations to pay
principal, premium, if any, and interest with respect to the Notes: Union Texas
East Kalimantan Limited, Union Texas Petroleum Energy Corporation, Union Texas
International Corporation, Union Texas Products Corporation and Unistar, Inc.
The Guarantors are also guarantors under the Credit Facilities. Supplemental
combining financial information of the Guarantors is presented below:
58
<PAGE> 61
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
SUPPLEMENTAL COMBINING BALANCE SHEET
DECEMBER 31, 1994
ASSETS
<TABLE>
<CAPTION>
UNCONSOLIDATED
----------------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
---------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents......... $ 528 $ 5,299 $ 2,562 $ 8,389
Accounts and notes receivable,
less allowance for doubtful
accounts....................... 273 31,302 23,198 54,773
Inventories....................... 23,764 19,464 43,228
Prepaid expenses and other current
assets......................... 1,457 5,074 24,144 30,675
Intercompany notes receivable..... 105,502 243,504 $ (349,006)
---------- ------------ ------------ ----------- ------------
Total current assets...... 2,258 170,941 312,872 (349,006) 137,065
Intercompany investments............ 1,270,244 685,168 157,180 (2,112,592)
Equity investment................... 114,505 114,505
Property, plant and equipment, at
cost, less accumulated
depreciation, depletion and
amortization*..................... 88,951 394,745 802,582 1,286,278
Other assets........................ 3,920 2,866 6,786
---------- ------------ ------------ ----------- ------------
Total assets.............. $1,365,373 $ 1,365,359 $ 1,275,500 $(2,461,598) $ 1,544,634
========== =========== =========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt........................... $ 2,292 $ 2,292
Short-term debt................... $ 40,000 66,032 106,032
Accounts payable.................. 295 $ 23,727 65,259 89,281
Taxes payable..................... 21,904 26,746 (581) 48,069
Other current liabilities......... 5,360 10,922 25,580 41,862
Intercompany notes payable........ 8,395 340,611 $ (349,006)
---------- ------------ ------------ ----------- ------------
Total current
liabilities............. 67,559 69,790 499,193 (349,006) 287,536
Long-term debt...................... 425,504 4,581 430,085
Deferred income taxes............... 2,003 107,707 256,067 365,777
Other liabilities................... 2,478 4,300 104,959 111,737
Intercompany clearing account....... (284,114) 87,791 196,323
---------- ------------ ------------ ----------- ------------
Total liabilities......... 213,430 269,588 1,061,123 (349,006) 1,195,135
---------- ------------ ------------ ----------- ------------
Stockholders' equity:
Common stock...................... 4,391 19 121,080 (121,099) 4,391
Paid in capital................... 19,888 1,721,287 272,441 (1,993,727) 19,889
Cumulative foreign exchange
translation adjustment and
other.......................... (22,153) (45,557) 2,234 (65,476)
Retained earnings (deficit)....... 1,153,928 (625,535) (133,587) 394,806
Common stock held in treasury, at
cost........................... (4,111) (4,111)
---------- ------------ ------------ ----------- ------------
Total stockholders'
equity.................. 1,151,943 1,095,771 214,377 (2,112,592) 349,499
---------- ------------ ------------ ----------- ------------
Total liabilities and
stockholders' equity.... $1,365,373 $ 1,365,359 $ 1,275,500 $(2,461,598) $ 1,544,634
========== =========== =========== =========== ===========
</TABLE>
- ---------------
* The Company follows the successful efforts method of accounting for oil and
gas activities.
59
<PAGE> 62
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
SUPPLEMENTAL COMBINING BALANCE SHEET
DECEMBER 31, 1993
ASSETS
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.......... $ 68 $ 7,957 $ 10,118 $ 18,143
Accounts and notes receivable, less
allowance for doubtful
accounts........................ 262 23,613 25,724 49,599
Inventories........................ (354) 14,168 20,471 34,285
Prepaid expenses and other current
assets.......................... 1,531 10,691 27,229 39,451
Intercompany notes receivable...... 222,330 19,071 $ (241,401)
---------- -------- -------- ----------- -----------
Total current assets....... 1,507 278,759 102,613 (241,401) 141,478
Intercompany investments............. 1,277,985 142,581 2 (1,420,568)
Equity investment.................... 103,111 103,111
Property, plant and equipment, at
cost, less accumulated
depreciation, depletion and
amortization*...................... 87,512 399,526 601,846 1,088,884
Other assets......................... 3,574 1,694 5,268
---------- -------- -------- ----------- -----------
Total assets............... $1,370,578 $923,977 $706,155 $(1,661,969) $ 1,338,741
========== ======== ======== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term
debt............................ $ 2,292 $ 2,292
Short-term debt.................... $ 60,500 60,500
Accounts payable................... 114 $ 21,178 78,495 99,787
Taxes payable...................... 19,998 26,161 17,785 63,944
Other current liabilities.......... 4,462 962 22,066 27,490
Intercompany notes payable......... 19,334 222,067 $ (241,401)
---------- -------- -------- ----------- -----------
Total current
liabilities.............. 85,074 67,635 342,705 (241,401) 254,013
Long-term debt....................... 380,000 6,874 386,874
Deferred income taxes................ 122,303 176,627 298,930
Other liabilities.................... 2,711 3,604 111,363 117,678
Intercompany clearing account........ (302,054) 201,633 100,421
---------- -------- -------- ----------- -----------
Total liabilities.......... 165,731 395,175 737,990 (241,401) 1,057,495
---------- -------- -------- ----------- -----------
Stockholders' equity:
Common stock....................... 4,390 19 1,207 (1,226) 4,390
Paid in capital.................... 20,436 1,333,853 85,489 (1,419,342) 20,436
Cumulative foreign exchange
translation adjustment and
other........................... (22,153) (31,891) (32,501) (86,545)
Retained earnings (deficit)........ 1,204,807 (773,179) (86,030) 345,598
Common stock held in treasury,
at cost......................... (2,633) (2,633)
---------- -------- -------- ----------- -----------
Total stockholders'
equity................... 1,204,847 528,802 (31,835) (1,420,568) 281,246
---------- -------- -------- ----------- -----------
Total liabilities and
stockholders' equity..... $1,370,578 $923,977 $706,155 $(1,661,969) $ 1,338,741
========== ======== ======== =========== ===========
</TABLE>
- ---------------
*The Company follows the successful efforts method of accounting for oil and gas
activities.
60
<PAGE> 63
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
-------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales and operating
revenues................... $ 439,990 $312,739 $ (4,846) $747,883
Interest income and other
revenues................... $ 2,450 144,402 6,686 (152,270) 1,268
Net income of equity
investee................... 20,444 20,444
-------- ------------ ------------ ----------- ------------
2,450 604,836 319,425 (157,116) 769,595
Costs and other deductions:
Product cost and operating
expenses................... (353) 203,131 101,654 (4,846) 299,586
Exploration expenses.......... 230 5,641 47,661 53,532
Depreciation, depletion and
amortization............... 17,093 41,019 110,458 168,570
Selling, general and
administrative expenses.... 1,078 8,341 15,106 24,525
Interest expense.............. 10,995 4,655 15,060 (19, 311) 11,399
-------- ------------ ------------ ----------- ------------
Income before income taxes...... (26,593) 342,049 29,486 (132,959) 211,983
Income taxes.................... 4,390 104,503 36,352 145,245
-------- ------------ ------------ ----------- ------------
Net income...................... $(30,983) $ 237,546 $ (6,866) $ (132,959) $ 66,738
======== =========== =========== ========== ===========
</TABLE>
61
<PAGE> 64
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
-------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales and operating
revenues................... $422,087 $ 263,301 $ (3,465) $681,923
Interest income and other
revenues................... $ 19,139 122,584 8,091 (143,956) 5,858
Net income of equity
investee................... 8,882 8,882
-------- ------------ ------------ ----------- ------------
19,139 553,553 271,392 (147,421) 696,663
Costs and other deductions:
Product cost and operating
expenses................... 354 191,517 112,871 (3,466) 301,276
Exploration expenses.......... 681 9,813 83,146 93,640
Depreciation, depletion and
amortization............... 27,992 39,648 175,064 242,704
Selling, general and
administrative expenses.... (137) 8,304 15,613 23,780
Interest expense.............. 3,464 21,245 19,015 (37,355) 6,369
Preferred dividends of
a subsidiary............... 1,911 1,911
-------- ------------ ------------ ----------- ------------
Income before income taxes and
cumulative effect of change in
accounting principles......... (13,215) 283,026 (136,228) (106,600) 26,983
Income taxes.................... (690) 92,444 (95,440) (3,686)
-------- ------------ ------------ ----------- ------------
Income before cumulative effect
of change in accounting
principles.................... (12,525) 190,582 (40,788) (106,600) 30,669
Cumulative effect of change in
accounting principles......... (3,743) (3,743)
-------- ------------ ------------ ----------- ------------
Net income...................... $(12,525) $190,582 $ (44,531) $ (106,600) $ 26,926
======== ========== ============ =========== ===========
</TABLE>
62
<PAGE> 65
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
SUPPLEMENTAL COMBINING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
UNCONSOLIDATED
------------------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
-------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales and operating
revenues................... $ 887 $461,688 $216,707 $ (9,828) $669,454
Interest income and other
revenues................... 31,039 125,417 27,305 (152,549) 31,212
Net income of equity
investee................... 13,346 13,346
-------- ------------ ------------ ----------- ------------
31,926 600,451 244,012 (162,377) 714,012
Costs and other deductions:
Product cost and operating
expenses................... 217,082 109,731 (9,828) 316,985
Exploration expenses.......... 7,811 59,318 67,129
Depreciation, depletion and
amortization............... 2,576 44,023 30,544 77,143
Selling, general and
administrative expenses.... (331) 7,899 19,440 27,008
Interest expense.............. 2,527 19,067 31,765 (49,401) 3,958
Preferred dividends of a
subsidiary................. 2,398 2,398
Other charges (credits),
net........................ (5,815) 12,000 6,185
-------- ------------ ------------ ----------- ------------
Income before income taxes,
extraordinary items and
cumulative effect of changes
in accounting principles...... 27,154 310,384 (21,184) (103,148) 213,206
Income taxes.................... (9,061) 102,425 10,444 103,808
-------- ------------ ------------ ----------- ------------
Income before extraordinary
items and cumulative effect of
changes in accounting
principles.................... 36,215 207,959 (31,628) (103,148) 109,398
Extraordinary items............. (19,682) (19,682)
Cumulative effect of changes in
accounting principles......... (5,023) (32,250) (38,807) (76,080)
-------- ------------ ------------ ----------- ------------
Net income...................... $ 11,510 $175,709 $(70,435) $ (103,148) $ 13,636
======== ========== =========== =========== ===========
</TABLE>
63
<PAGE> 66
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income......................... $ (30,983) $237,546 $ (6,866) $ (132,959) $ 66,738
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation, depletion and
amortization.................. 17,093 41,019 110,458 168,570
Deferred income taxes........... (2,198) (9,764) (11,962)
(Income) of equity investee..... (20,444) (20,444)
Other........................... 2,161 (11,168) (29,926) 42,960 4,027
(Increase) decrease in working
capital and other assets and
liabilities................... 4,111 (4,279) 7,875 7,707
--------- ------------ ------------ ----------- ------------
Net cash provided by
operating activities..... (7,618) 240,476 71,777 (89,999) 214,636
--------- ------------ ------------ ----------- ------------
Cash flows from investing activities:
Additions to property, plant and
equipment....................... (18,532) (38,002) (243,044) (299,578)
Cash provided by equity investee... 9,050 9,050
Dissolved companies................ 7,082 (7,082)
Cash required by sale of
businesses, net................. (2,488) (2,488)
--------- ------------ ------------ ----------- ------------
Net cash required by
investing activities..... (11,450) (28,952) (245,532) (7,082) (293,016)
--------- ------------ ------------ ----------- ------------
Cash flows from financing activities:
Net proceeds from issuance of debt
under the credit facility....... 80,503 80,503
Payments to settle long-term
debt............................ (35,000) (2,292) (37,292)
Purchase of treasury stock......... (6,089) (6,089)
Proceeds from issuance of treasury
stock........................... 1,593 1,593
Proceeds from issuance of common
stock........................... 311 311
Dividends paid..................... (17,530) (90,000) (42,959) 132,959 (17,530)
Net proceeds from short-term
borrowings...................... (20,500) 67,630 47,130
Dissolved companies................ (7,082) 7,082
(Decrease) increase in net payable
to parent....................... 16,240 (124,184) 150,904 (42,960)
--------- ------------ ------------ ----------- ------------
Net cash provided
(required) by financing
activities............... 19,528 (214,184) 166,201 97,081 68,626
--------- ------------ ------------ ----------- ------------
Net increase (decrease) in cash and
cash equivalents................... 460 (2,660) (7,554) (9,754)
Cash and cash equivalents at
beginning of year.................. 68 7,957 10,118 18,143
--------- ------------ ------------ ----------- ------------
Cash and cash equivalents at end
of year............................ $ 528 $ 5,297 $ 2,564 $ 8,389
========= ========= ========= ========== =========
</TABLE>
64
<PAGE> 67
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
UNCONSOLIDATED
-----------------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income............................... $ (12,525) $ 190,582 $ (44,531) $ (106,600) $ 26,926
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, depletion and
amortization........................ 27,992 39,648 175,064 242,704
Deferred income taxes................. (527) (106,965) (107,492)
(Income) of equity investee........... (8,882) (8,882)
Cumulative effect of change in
accounting principles............... 3,743 3,743
Other................................. 849 (4,353) (3,820) (7,324)
(Increase) decrease in working capital
and other assets and liabilities.... (2,695) 1,977 41,875 41,157
--------- ------------ ------------ ----------- ------------
Net cash provided by operating
activities..................... 13,621 218,445 65,366 (106,600) 190,832
--------- ------------ ------------ ----------- ------------
Cash flows from investing activities:
Additions to property, plant and
equipment........................... (25,001) (47,483) (71,992) (144,476)
Cash provided by equity investee...... 20,550 20,550
Cash required by sale of businesses,
net................................. (43,373) (43,373)
--------- ------------ ------------ ----------- ------------
Net cash required by investing
activities..................... (25,001) (26,933) (115,365) (167,299)
--------- ------------ ------------ ----------- ------------
Cash flows from financing activities:
Payment to settle long-term debt and
capitalized lease obligations......... (115,000) (635) (2,292) (117,927)
Proceeds from issuance of notes.......... 30,000 30,000
Proceeds from issuance of common stock... 18,849 18,849
Dividends paid........................... (17,418) (77,000) (29,600) 106,600 (17,418)
Net proceeds from short-term
borrowings............................ 54,765 54,765
Redemption of preferred stock............ (75,000) (75,000)
(Decrease) increase in net payable to
parent................................ 40,198 (114,740) 74,542
--------- ------------ ------------ ----------- ------------
Net cash provided (required) by
financing activities........... 11,394 (192,375) (32,350) 106,600 (106,731)
--------- ------------ ------------ ----------- ------------
Net increase (decrease) in cash and cash
equivalents.............................. 14 (863) (82,349) (83,198)
Cash and cash equivalents at beginning of
year..................................... 54 8,820 92,467 101,341
--------- ------------ ------------ ----------- ------------
Cash and cash equivalents at end of year... $ 68 $ 7,957 $ 10,118 $ 18,143
========= ========= ========= ========= =========
</TABLE>
65
<PAGE> 68
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
SUPPLEMENTAL COMBINING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
UNCONSOLIDATED
---------------------------------------
NON-
GUARANTOR GUARANTOR ELIMINATING CONSOLIDATED
UTPH SUBSIDIARIES SUBSIDIARIES ENTRIES UTPH
--------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 11,510 $ 175,709 $ (70,435) $ (103,148) $ 13,636
Adjustments to reconcile net income to net
cash provided by operating activities:
Net gain on sales of businesses........... (5,815) (5,815)
Depreciation, depletion and
amortization............................ 2,576 44,023 30,544 77,143
Deferred income taxes..................... (6,000) (964) 93,446 86,482
(Income) of equity investee............... (13,346) (13,346)
Extraordinary net loss on early retirement
of debt................................. 19,682 19,682
Cumulative effect of changes in accounting
principles.............................. 5,023 32,248 38,809 76,080
Other..................................... 1,100 (51,792) 57,926 7,234
(Increase) decrease in working capital and
other assets and liabilities............ (30,784) 2,087 9,025 (19,672)
--------- ------------ ------------ ----------- ------------
Net cash provided by operating
activities......................... 3,107 182,150 159,315 (103,148) 241,424
--------- ------------ ------------ ----------- ------------
Cash flows from investing activities:
Additions to property, plant and
equipment............................... (16,714) (48,104) (231,096) (295,914)
Cash provided by equity investee.......... 29,119 29,119
Cash provided (required) by sale of
businesses, net......................... 14,256 (33,025) (18,769)
--------- ------------ ------------ ----------- ------------
Net cash required by investing
activities......................... (16,714) (4,729) (264,121) (285,564)
--------- ------------ ------------ ----------- ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt..... 465,000 465,000
Payment to settle long-term debt and
capitalized lease obligations............. (525,125) (1,385) (2,292) (528,802)
Proceeds from issuance of common stock....... 4,852 4,852
Dividends paid............................... (47,364) (93,000) (10,148) 103,148 (47,364)
Net proceeds from short-term borrowings...... 5,775 (40) 5,735
Redemption of preferred stock and warrants... (500,000) (500,000)
(Decrease) increase in net payable to
parent.................................... (5,129) (86,258) 91,387
--------- ------------ ------------ ----------- ------------
Net cash provided (required) by
financing activities............... (601,991) (180,643) 78,907 103,148 (600,579)
--------- ------------ ------------ ----------- ------------
Net decrease in cash and cash equivalents...... (615,598) (3,222) (25,899) (644,719)
Cash and cash equivalents at beginning of
year......................................... 615,652 12,042 118,366 746,060
--------- ------------ ------------ ----------- ------------
Cash and cash equivalents at end of year....... $ 54 $ 8,820 $ 92,467 $ 101,341
========= ========= ========= ========= =========
</TABLE>
66
<PAGE> 69
NOTES TO SUPPLEMENTAL GUARANTOR INFORMATION
(1) In connection with the sale of Notes by UTPH, the following
subsidiaries of UTPH (collectively, the "Guarantors") unconditionally guaranteed
on a joint and several basis UTPH's obligations to pay principal, premium, if
any, and interest with respect to the Notes: Union Texas East Kalimantan Limited
("Kalimantan"), Union Texas Petroleum Energy Corporation ("Energy"), Union Texas
International Corporation ("International"), Union Texas Products Corporation
("Products") and Unistar, Inc. ("Unistar"). Each of the Guarantors is a Delaware
corporation, except that Kalimantan is incorporated under the laws of the
Bahamas, although, the applicable laws of the Bahamas are similar to the laws of
Delaware with respect to the availability of assets to satisfy the obligations
to the Noteholders. Kalimantan and Unistar together own a 37.81% interest in a
joint venture that represents the Company's operations in Indonesia. Products
conducts the Company's domestic hydrocarbon products businesses. International,
a subsidiary of Energy, is a holding company for subsidiaries that conduct the
Company's principal international operations, which include operations in
Indonesia by Kalimantan, a Guarantor, and in the United Kingdom and Pakistan by
two non-Guarantor subsidiaries. Separate financial statements of the Guarantors
of the Notes are not considered to be material to the Noteholders. See Notes 14
and 19 for information describing the Company's operations through the two
Guarantor subsidiaries in Indonesia relating to a production sharing contract as
well as through the non-Guarantor subsidiaries in the United Kingdom, Pakistan
and other international locations.
(2) Investments in subsidiaries are accounted for by the Company on the
cost basis for purposes of the supplemental information. Earnings of
subsidiaries are therefore not reflected in the related investment accounts.
(3) Certain reclassifications were made to conform all of the financial
information to the financial presentation on a consolidated basis. The principal
eliminating entries eliminate investments in subsidiaries, intercompany balances
and intercompany dividends.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For the information called for by Items 10, 11, 12 and 13, reference is
made to the Company's definitive proxy statement for its 1995 Annual Meeting of
Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after December 31, 1994, and portions of which are incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) 1 FINANCIAL STATEMENTS.
The following financial statements and the Report of Independent
Accountants are filed as a part of this report on the pages indicated:
Report of Independent Accountants -- page 33.
Consolidated Balance Sheet -- December 31, 1994 and 1993 -- page 34.
67
<PAGE> 70
Consolidated Statement of Operations -- For the years ended December 31,
1994, 1993 and 1992 -- page 35.
Consolidated Statement of Cash Flows -- For the years ended December 31,
1994, 1993 and 1992 -- page 36.
Consolidated Statement of Stockholders' Equity -- For the years ended
December 31, 1994, 1993 and 1992 -- page 37.
Selected Quarterly Financial Data for the two years ended December 31,
1994 -- page 51.
Selected Financial Data for the five years ended December 31, 1994 -- page
24.
(A) 2 EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
3.1 Restated Certificate of Incorporation of Union Texas Petroleum Holdings,
Inc. (Filed under the identical exhibit number to Post Effective
Amendment No. 1 to the Company's Registration Statement No. 33-12800 and
incorporated herein by reference)
3.2 Bylaws of Union Texas Petroleum Holdings, Inc., as amended (Filed as
Exhibit 3.2 to the Company's Form 10-Q for quarter ended June 30, 1994
(Commission File No. 1-9019) and incorporated herein by reference)
3.3 Specimen of Certificate evidencing the Common Stock (Filed under the
identical exhibit number to the Company's Registration Statement No.
33-16267 and incorporated herein by reference)
4.1 Indenture for 8.25% Senior Notes due November 15, 1999, dated as of
November 15, 1992, between Union Texas Petroleum Holdings, Inc., the
Guarantors named therein and State Street Bank and Trust Company
(including form of note) (Filed as Exhibit 10.1 to the Company's Form
10-Q for quarter ended March 31, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.1 Tax Agreement, dated as of June 27, 1985, among Allied Corporation and
Union Texas Petroleum Holdings, Inc. (Filed as Exhibit 10.6 to the
Company's Registration Statement No. 33-00312 and incorporated herein by
reference)
10.2+ Form of Subscription Agreement between Union Texas Petroleum Holdings,
Inc. and certain employees (Filed as Exhibit 10.8 to the Company's
Registration Statement No. 33-00312 and incorporated herein by
reference)
10.3+ Form of Tagalong Agreement between Union Texas Petroleum Holdings, Inc.
and certain employees (Filed as Exhibit 10.9 to the Company's
Registration Statement No. 33-00312 and incorporated herein by
reference)
10.4+ Amended and Restated Union Texas Petroleum Salaried Employees' Pension
Plan, effective as of January 1, 1994 (Filed under the identical exhibit
number to the Company's 1993 Form 10-K (Commission No. 1-9019) and
incorporated herein by reference)
10.5+ Union Texas Petroleum Holdings, Inc. 1985 Stock Option Plan, as amended
(Filed as Exhibit 10.10 to Post Effective Amendment No. 2 to the
Company's Registration Statement No. 33-12800 and incorporated herein by
reference)
10.6+ Union Texas Petroleum Holdings, Inc. Executive Severance Plan (Filed as
Exhibit 10.14 to the Company's Registration Statement No. 33-00312 and
incorporated herein by reference) and Appendix A (Filed as Exhibit 10.6
to the Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
</TABLE>
68
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.7+ Amended and Restated Union Texas Petroleum Savings Plan for Salaried
Employees, effective as of January 1, 1993 (Filed under the identical
exhibit number to the Company's 1993 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.8+ Form of employment letter with A. C. Johnson (Filed as Exhibit 10.16 to
the Company's Registration Statement No. 33-00312 and incorporated
herein by reference)
10.9+ Amended and Restated Supplemental Non-Qualified Savings Plan for
Executive Employees of Union Texas Petroleum Holdings, Inc. and its
Subsidiaries, effective as of January 1, 1993 (Filed under the identical
exhibit number to the Company's 1993 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.10+ Form of employment letter with executive officers (Filed as Exhibit
10.18 to the Company's Registration Statement No. 33-00312 and
incorporated herein by reference) and Exhibit A (Filed as Exhibit 10.10
to the Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.11 Joint Venture Agreement, dated as of August 8, 1968, among Roy M.
Huffington, Inc., Virginia International Company, Austral Petroleum Gas
Corporation, Golden Eagle Indonesia Limited and Union Texas Far East
Corporation, as amended (Filed as Exhibit 6.6 to the Registration
Statement No. 2-58834 of Alaska Interstate Company and incorporated
herein by reference)
10.12 Supply Agreement, dated as of April 14, 1981, for Badak LNG Expansion
Project among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara
("Pertamina") and the parties to the Joint Venture Agreement (Filed as
Exhibit 10.14 to the Company's 1992 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.13 Indenture, dated as of September 25, 1984, between Unimar Company, as
Issuer, and Irving Trust Company, as Trustee, providing for 14,077,747
Indonesian Participating Units (Filed as Exhibit 4 to the Form S-14
Registration Statement No. 2-93037 of Unimar Company and incorporated
herein by reference)
10.14 Amended and Restated Agreement of General Partnership of Unimar Company,
dated as of September 11, 1990 (Filed as Exhibit 3.1 to the Form 10-Q
for quarter ended September 30, 1990 of Unimar Company (Commission File
No. 1-8791) and incorporated herein by reference)
10.15 License No. P054 concerning all or part of the following blocks in the
United Kingdom North Sea: 49/15 and 49/25 (Sean Field) (Filed as Exhibit
10.74 to the Company's Registration Statement No. 33-00312 and
incorporated herein by reference)
10.16 License No. P220 concerning all or part of the following blocks in the
United Kingdom North Sea: 9/26, 14/19, 15/11, 15/15, 15/17 and 210/29
(Piper Field) (Filed as Exhibit 10.75 to the Company's Registration
Statement No. 33-00312 and incorporated herein by reference)
10.17 License No. P249 concerning part of the following block in the United
Kingdom North Sea: 14/19 (Claymore Field) (Filed as Exhibit 10.76 to the
Company's Registration Statement No. 33-00312 and incorporated herein by
reference)
10.18 License No. P250 concerning all or part of the following blocks in the
United Kingdom North Sea: 9/26, 15/11, 15/15, 210/29, 15/17 and 14/19
(Scapa Field) (Filed as Exhibit 10.77 to the Company's Registration
Statement No. 33-00312 and incorporated herein by reference)
</TABLE>
69
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.19 Restated United Kingdom Continental Shelf Operating Agreement (Piper
License), dated as of August 11, 1977, among Occidental Petroleum (U.K.)
Limited, Occidental of Britain, Inc., Getty Oil (Britain) Limited,
Allied Chemical (Great Britain) Limited, Allied Chemical (North Sea)
Ltd., Thomson North Sea Limited and the British National Oil Corporation
(Filed as Exhibit No. 10.78 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.20 Restated United Kingdom Continental Shelf Operating Agreement (Claymore
License), dated August 11, 1977, among Occidental Petroleum (Caledonia)
Limited, Occidental of Scotland, Inc., Getty Oil (Britain) Limited,
Allied Chemical (Great Britain) Limited, Allied Chemical (North Sea)
Ltd., Thomson North Sea Limited and the British National Oil Corporation
(Filed as Exhibit 10.79 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.21 United Kingdom Continental Shelf Joint Operating Agreement for Blocks
49/15a and 49/25a (Sean Field), dated July 3, 1984, among Shell U.K.
Limited, Union Texas Petroleum Limited, Britoil Public Limited Company
and Esso Exploration and Production U.K. Limited (Filed as Exhibit 10.81
to the Company's Registration Statement No. 33-00312 and incorporated
herein by reference)
10.22 Agreement for Sale and Purchase of Natural Gas from the Sean North and
Sean South Fields, dated November 7, 1984, between Union Texas Petroleum
Limited and British Gas Corporation, including list of omitted schedules
(Filed as Exhibit 10.82 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.23 Badak III LNG Sales Contract, dated March 19, 1987, between Pertamina,
as Seller, and Chinese Petroleum Corporation, as Buyer (Filed as Exhibit
10.28 to the Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.24 Supplemental Indenture, dated as of October 31, 1986, to the Indenture
between Unimar Company and Irving Trust Company (Exhibit 10.13 above)
(Filed as Exhibit 10.114 to the Company's Registration Statement No.
33-16267 and incorporated herein by reference)
10.25 Amended and Restated Registration Rights Agreement, dated September 30,
1987, among Union Texas Petroleum Holdings, Inc. and Certain Holders of
Certain Securities of Union Texas Petroleum Holdings, Inc. (Filed as
Exhibit 10.117 to Post Effective Amendment No. 1 to the Company's
Registration Statement No. 33-12800 and incorporated herein by
reference)
10.26+ Union Texas Petroleum Holdings, Inc. 1987 Stock Option Plan and First
Amendment to Union Texas Petroleum Holdings, Inc. 1987 Stock Option Plan
(Filed as Exhibit 4.4 to the Company's Registration Statement No.
33-21684 and incorporated herein by reference)
10.27 Bontang Capital Projects Loan Agreement No. 2, dated as of June 9, 1987,
among Continental Bank International, as Trustee under the Badak Trustee
and Paying Agent Agreement (Borrower), the banks named therein as Lead
Managers and Lenders and The Industrial Bank of Japan Trust Company
(Agent) (Filed as Exhibit 10.125 to the Company's Registration Statement
No. 33-16267 and incorporated herein by reference)
</TABLE>
70
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.28 Producers Agreement No. 2, dated as of June 9, 1987, by Pertamina, Roy
M. Huffington, Inc., Virginia International Company, Ultramar Indonesia
Limited, Virginia Indonesia Company ("VICO"), Union Texas East
Kalimantan Limited, Universe Tankships, Inc. and Huffington Corporation
in favor of The Industrial Bank of Japan Trust Company as Agent (Filed
as Exhibit 10.126 to the Company's Registration Statement No. 33-16267
and incorporated herein by reference)
10.29 Badak III LNG Sales Contract Supply Agreement, dated October 19, 1987,
among Pertamina and the parties to the Joint Venture Agreement (Filed as
Exhibit 10.132 to Post Effective Amendment No. 1 to the Company's
Registration Statement No. 33-12800 and incorporated herein by
reference)
10.30 $316,000,000 Bontang III Loan Agreement, dated February 9, 1988, among
Continental Bank International as Trustee, Train-E Finance Co., Ltd., as
Tranche A Lender and The Industrial Bank of Japan Trust Company as Agent
for the Tranche B Lenders and as Tranche B Lender (Filed as Exhibit
10.83 to Post Effective Amendment No. 2 to the Company's Registration
Statement No. 33-12800 and incorporated herein by reference)
10.31 Bontang III Producers Agreement, dated as of February 9, 1988, among
Pertamina, Roy M. Huffington, Inc., Huffington Corporation, VICO,
Virginia International Company, Ultramar Indonesia Company Limited,
Union Texas East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd., in favor
of Train-E Finance Co., Ltd., as Tranche A Lender, The Industrial Bank
of Japan Trust Company as Agent for the Tranche B Lenders and as Tranche
B Lender, and the other Tranche B Lenders named therein (Filed as
Exhibit 10.84 to the Post Effective Amendment No. 2 to the Company's
Registration Statement No. 33-12800 and incorporated herein by
reference)
10.32 Bontang III Trustee and Paying Agent Agreement, dated February 9, 1988,
among Pertamina, Roy M. Huffington, Inc., Huffington Corporation,
Virginia International Company, VICO, Ultramar Indonesia Limited, Union
Texas East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd. and
Continental Bank International (Filed as Exhibit 10.42 to the Company's
1991 Form 10-K (Commission File No. 1-9019) and incorporated herein by
reference)
10.33 $21,250,000 Financing Agreement, dated December 20, 1988, among Union
Texas Pakistan, Inc. and Overseas Private Investment Corporation (Filed
as Exhibit 10.85 to the Company's 1988 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.34 Guaranty Agreement, dated December 20, 1988, between Union Texas
Petroleum Holdings, Inc. and Overseas Private Investment Corporation
(Filed as Exhibit 10.86 to the Company's 1988 Form 10-K (Commission File
No. 1-9019) and incorporated herein by reference)
10.35+ First Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.87 to the Company's 1989 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.36+ Second Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.88 to the Company's 1989 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.37+ Third Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.93 to the Company's Form 10-Q for
quarter ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
</TABLE>
71
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.38+ Third Amendment to Union Texas Petroleum Holdings, Inc. 1985 Stock
Option Plan (Filed as Exhibit 10.95 to the Company's Form 10-Q for
quarter ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.39+ Second Amendment to Union Texas Petroleum Holdings, Inc. 1987 Stock
Option Plan (Filed as Exhibit 10.96 to the Company's Form 10-Q for
quarter ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.40+ Union Texas Petroleum Supplemental Retirement Plan (Filed as Exhibit
10.99 to the Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by reference)
10.41+ Amended and Restated Union Texas Petroleum Supplemental Retirement Plan
II, effective January 1, 1994 (Filed under the identical exhibit number
to the Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.42+ Union Texas Petroleum Supplemental Retirement Plans Trust, as amended
(Filed as Exhibit 10.101 to the Company's Form 10-Q for quarter ended
June 30, 1990 (Commission File No. 1-9019) and incorporated herein by
reference)
10.43 Amended and Restated Production Sharing Contract effective August 8,
1968-August 7, 1998 among Pertamina, Roy M. Huffington, Inc., VICO,
Virginia International Company, Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington
Corporation (Filed as Exhibit 10.102 to the Company's Form 10-Q for
quarter ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.44 Production Sharing Contract effective August 8, 1998-August 7, 2018
among Pertamina, Roy M. Huffington, Inc., VICO, Virginia International
Company, Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation
(Filed as Exhibit 10.103 to the Company's Form 10-Q for quarter ended
June 30, 1990 (Commission File No. 1-9019) and incorporated herein by
reference)
10.45 Joint Operating Agreement for the Scapa Field, dated December 23, 1985,
among Occidental Petroleum (Caledonia) Limited, Texaco Britain Limited,
Union Texas Petroleum Limited, Thomson North Sea Limited, Thomson
Scottish Petroleum Limited and the Oil and Pipelines Agency (Filed as
Exhibit 10.104 to the Company's Form 10-Q for quarter ended June 30,
1990 (Commission File No. 1-9019) and incorporated herein by reference)
10.46 Amended and Restated 1973 LNG Sales Contract, dated as of the 1st day of
January, 1990, by and between Pertamina, as Seller, and Chubu Electric
Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric
Power Co., Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd. and Toho
Gas Co., Ltd., as Buyers (Filed as Exhibit (10)-8 to the 1993 Form 10-K
of Unimar Company and incorporated herein by reference)
10.47 Amended and Restated Badak LNG Sales Contract, dated as of the 1st day
of January, 1990, by and between Pertamina, as Seller, and Chubu
Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Osaka Gas
Co., Ltd. and Toho Gas Co., Ltd., as Buyers (Filed as Exhibit (10)-11 to
the 1993 Form 10-K of Unimar Company and incorporated herein by
reference)
10.48+ Fourth Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.85 to the Company's 1990 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
</TABLE>
72
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.49 Asset Purchase Agreement, dated March 12, 1991, among Union Texas
Petroleum Holdings, Inc., Union Texas Petroleum Corporation, Union Texas
Development Corporation, Union Texas Exploration Corporation, Benoil,
Inc. and NERCO Oil & Gas, Inc. (Filed as Exhibit 2.1 to the Company's
Form 8-K dated April 19, 1991 (Commission File No. 1-9019) and
incorporated herein by reference)
10.50 Asset Purchase Agreement, dated August 20, 1991, among Union Texas
Petroleum Corporation, Union Texas Canada Ltd., Union Texas Development
Corporation, Meridian Oil Production Inc. and El Paso Production Company
(Filed as Exhibit 2.1 to the Company's Form 8-K dated October 1, 1991
(Commission File No. 1-9019) and incorporated herein by reference)
10.51+ Fifth Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.69 to the Company's 1991 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.52 Asset Purchase Agreement, dated September 17, 1991, among Union Texas
Petroleum Holdings, Inc., Union Texas Products Corporation and Western
Gas Resources, Inc. (Filed as Exhibit 2.1 to the Company's Form 8-K
dated November 14, 1991 (Commission File No. 1-9019) and incorporated
herein by reference)
10.53 Amended and Restated Bontang Processing Agreement, dated February 9,
1988, among Pertamina and Roy M. Huffington, Inc., Huffington
Corporation, VICO, Virginia International Company, Ultramar Indonesia
Limited, Union Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd. and
P.T. Badak Natural Gas Liquefaction Company (Filed as Exhibit (10)-39 to
the 1988 Form 10-K of Unimar Company and incorporated herein by
reference)
10.54 Amended and Restated Debt Service Allocation Agreement, dated February
9, 1988, among Pertamina and Roy M. Huffington, Inc., VICO, Ultramar
Indonesia Limited, Virginia International Company, Union Texas East
Kalimantan Limited, Universe Tankships, Inc., Huffington Corporation,
Total Indonesie, Unocal Indonesia, Ltd. and Indonesia Petroleum, Ltd.
(Filed as Exhibit (10)-40 to the 1988 Form 10-K of Unimar Company and
incorporated herein by reference)
10.55 Amendment No. 1 to Bontang III Producers Agreement, dated as of May 31,
1988, among Pertamina, Roy M. Huffington, Inc., Huffington Corporation,
VICO, Virginia International Company, Ultramar Indonesia Company
Limited, Union Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd. and
Train-E Finance Co., Ltd., as Tranche A Lender, and The Industrial Bank
of Japan Trust Company on behalf of the Tranche B Lenders, (Filed as
Exhibit (10)-21 to the 1993 Form 10-K of Unimar Company and incorporated
herein by reference)
10.56 Amendment No. 2 to Producers Agreement No. 2, dated as of May 31, 1988,
among Pertamina, Roy M. Huffington, Inc., Huffington Corporation, VICO,
Virginia International Company, Ultramar Indonesia Company Limited,
Union Texas East Kalimantan Limited and Universe Tankships, Inc. (Filed
as Exhibit (10)-44 to the 1988 Form 10-K of Unimar Company and
incorporated herein by reference)
10.57 Badak IV LNG Sales Contract, dated October 23, 1990, between Pertamina,
as Seller, and Osaka Gas Co., Ltd., Tokyo Gas Co., Ltd. and Toho Gas
Co., Ltd., as Buyer (Filed as Exhibit (10)-65 to the 1990 Form 10-K of
Unimar Company and incorporated herein by reference)
</TABLE>
73
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.58 Supply Agreement for Natural Gas to Badak IV LNG Sales Contract, dated
August 12, 1991, by and between Pertamina, VICO, Opicoil Houston, Inc.,
Ultramar Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia International Company
(Filed as Exhibit 10.80 to the Company's 1991 Form 10-K (Commission No.
1-9019) and incorporated herein by reference)
10.59 LNG Sales and Purchase Contract (Korea II), dated May 7, 1991, between
Pertamina, as Seller, and Korea Gas Corporation, as Buyer (Filed as
Exhibit (10)-1 to the 1990 Form 10-Q for quarter ended June 30, 1991 of
Unimar Company and incorporated herein by reference)
10.60 Amended and Restated Bontang II Trustee and Paying Agent Agreement,
dated as of July 15, 1991, among Pertamina, VICO, Opicoil Houston, Inc.,
Virginia International Company, Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd. and
Continental Bank International (Filed as Exhibit 10.82 to the Company's
1991 Form 10-K (Commission No. 1-9019) and incorporated herein by
reference)
10.61 $750,000,000 Bontang IV Loan Agreement, dated as of August 26, 1991,
among Continental Bank International as Trustee under the Bontang IV
Trustee and Paying Agent Agreement as Borrower, Chase Manhattan Asia
Limited and The Mitsubishi Bank, Limited as Coordinators, the other
banks and financial institutions named therein as Arrangers,
Co-Arrangers, Lead Managers, Managers, Co-Managers and Lenders, The
Chase Manhattan Bank, N.A. and The Mitsubishi Bank, Limited as Co-Agents
and The Chase Manhattan Bank, N.A. as Agent (Filed as Exhibit 10.1 to
the Form 10-Q for quarter ended September 30, 1991 of Unimar Company
(Commission File No. 1-8791) and incorporated herein by reference)
10.62 Bontang IV Producers Agreement, dated as of August 26, 1991, by
Pertamina, Virginia International Company, Opicoil Houston, Inc., VICO,
Ultramar Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc., Total Indonesie, Unocal Indonesia,
Ltd. and Indonesia Petroleum, Ltd. in favor of The Chase Manhattan Bank,
N.A., as Agent for the Lenders and as Lender, and the other Lenders
named therein (Filed as Exhibit 10.2 to the Form 10-Q for quarter ended
September 30, 1991 of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.63 Bontang IV Trustee and Paying Agent Agreement, dated as of August 26,
1991, among Pertamina, Virginia International Company, Opicoil Houston,
Inc., VICO, Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc., Total Indonesie, Unocal
Indonesia, Ltd., Indonesia Petroleum, Ltd. and Continental Bank
International (Filed as Exhibit 10.3 to the Form 10-Q for quarter ended
September 30, 1991 of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.64+ Sixth Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.77 to the Company's 1992 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.65 Consulting Agreement, dated as of November 18, 1992, among Petroleum
Associates, L.P., KKR Partners II, L.P. and Union Texas Petroleum
Holdings, Inc. (Filed as Exhibit 10.81 to the Company's 1992 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
</TABLE>
74
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.66+ Second Amendment to Union Texas Petroleum Supplemental Retirement Plans
Trust (Filed as Exhibit 10.82 to the Company's 1992 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.67 Amendment No. 1 to Bontang III Trustee and Paying Agent Agreement, dated
as of December 11, 1992, among Pertamina, VICO, Virginia International
Company, Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Opicoil Houston, Inc., Universe Gas & Oil Company, Inc., Total
Indonesie, Unocal Indonesia Ltd., Indonesia Petroleum, Ltd. and
Continental Bank International, as Bontang III Trustee (Filed as Exhibit
10.83 to the Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.68+ Key Employee Incentive Compensation Plan (Filed as Exhibit 10.84 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and incorporated
herein by reference)
10.69+ First Amendment to Union Texas Petroleum Supplemental Retirement Plan
(Filed as Exhibit 10.85 to the Company's 1992 Form 10-K (Commission File
No. 1-9019) and incorporated herein by reference)
10.70+ Union Texas Petroleum Holdings, Inc. 1992 Stock Option Plan (Filed as
Exhibit 4.3 to the Company's Registration Statement No. 33-64928 and
incorporated herein by reference)
10.71 Arun and Bontang LPG Sales and Purchase Contract, dated July 15, 1986,
between Pertamina, as Seller, and Mitsubishi Corporation, Cosmo Oil Co.,
Ltd., Nippon Petroleum Gas Co., Ltd., Showa Shell Sekiyu K.K., Kyodo Oil
Co., Ltd., Idemitsu Kosan Co., Ltd. and Mitsui Liquefied Gas Co., Ltd.,
as Buyers (Filed as Exhibit (10)-60 to the 1991 Form 10-K of Unimar
Company and incorporated herein by reference)
10.72 Petroleum Concession Agreement, dated January 21, 1992, between the
President of the Islamic Republic of Pakistan and Union Texas Pakistan,
Inc., Occidental Petroleum (Pakistan) Inc. and Oil & Development
Corporation (Filed as Exhibit 10.87 to the Company's Form 10-Q for
quarter ended March 31, 1992 (Commission File No. 1-9019) and
incorporated herein by reference)
10.73 Amended and Restated Supply Agreement (In support of the Amended and
Restated 1973 LNG Sales Contract), dated September 22, 1993, and
effective December 3, 1973, between Pertamina and VICO, LASMO Sanga
Sanga Limited, Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia International
Company (Filed as Exhibit 10.75 to the Company's 1993 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.74 Amended and Restated Credit Agreement, dated as of May 13, 1994, among
the Company, the Banks listed therein and NationsBank of Texas, N.A., as
agent, and Bank of America National Trust and Savings Association and
Union Bank of Switzerland, Houston Agency, as co-agents, with form of
note attached (Filed as Exhibit 10.1 to the Company's Registration
Statement No. 33-52683 and incorporated herein by reference)
10.75# First Amendment Agreement to the Amended and Restated Credit Agreement,
dated as of November 21, 1994, among the Company, the Banks and
Co-Agents listed therein and NationsBank of Texas, N.A., as agent
10.76# Second Amendment Agreement to the Amended and Restated Credit Agreement,
dated as of January 31, 1995, among the Company, the Banks and Co-Agents
listed therein and NationsBank of Texas, N.A., as agent
</TABLE>
75
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.77 Credit Agreement, dated as of May 13, 1994, among the Company, the Banks
listed therein and NationsBank of Texas, N.A., as agent, and Bank of
America National Trust and Savings Association and Union Bank of
Switzerland, Houston Agency, as co-agents, with form of note attached
(Filed as Exhibit 10.2 to the Company's Registration Statement No.
33-52683 and incorporated herein by reference)
10.78 Amended and Restated Subsidiary Guaranty Agreement, dated as of May 13,
1994, among Union Texas Petroleum Energy Corporation, Union Texas
Products Corporation, Union Texas East Kalimantan Limited, Union Texas
International Corporation and Unistar, Inc., and NationsBank of Texas,
N.A., as agent (Filed as Exhibit 10.3 to the Company's Registration
Statement No. 33-52683 and incorporated herein by reference)
10.79# First Amendment to Amended and Restated Subsidiary Guaranty, dated as of
November 21, 1994, among Union Texas Petroleum Energy Corporation, Union
Texas Products Corporation, Union Texas East Kalimantan Limited, Union
Texas International Corporation and Unistar, Inc., and NationsBank of
Texas, N.A., as agent
10.80 Subsidiary Guaranty Agreement, dated as of May 13, 1994, among Union
Texas Petroleum Energy Corporation, Union Texas Products Corporation,
Union Texas East Kalimantan Limited, Union Texas International
Corporation and Unistar, Inc., and NationsBank of Texas, N.A., as agent
(Filed as Exhibit 10.4 to the Company's Registration Statement No.
33-52683 and incorporated herein by reference)
10.81+ Seventh Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.5 to the Company's Form 10-Q for
quarter ended June 30, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.82 Credit Agreement, dated as of September 27, 1994, among the Company,
NationsBank of Texas, N.A., as agent, and Bank of America National Trust
and Savings Association and Union Bank of Switzerland, Houston Agency,
as co-agents, with form of note attached (Filed as Exhibit 10.1 to the
Company's Form 10-Q for quarter ended September 30, 1994 (Commission
File No. 1-9019) and incorporated herein by reference)
10.83 Subsidiary Guaranty Agreement, dated as of September 27, 1994, among
Union Texas Petroleum Energy Corporation, Union Texas Products
Corporation, Union Texas East Kalimantan Limited, Union Texas
International Corporation and Unistar, Inc., and NationsBank of Texas,
N.A., as agent (Filed as Exhibit 10.2 to the Company's Form 10-Q for
quarter ended September 30, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.84 East Sean Gas Sales Agreement, dated August 30, 1994, between Union
Texas Petroleum Limited and Alliance Gas Limited (Filed as Exhibit 10.3
to the Company's Form 10-Q for quarter ended September 30, 1994
(Commission File No. 1-9019) and incorporated herein by reference)
10.85 Share Sale Agreement, dated October 18, 1994, among Union Texas
Petroleum Limited, Fina Petroleum Development Limited and Fina
Exploration Limited (the "Share Sale Agreement") (Filed as Exhibit 2.1
to the Company's Form 8-K dated November 14, 1994 (Commission File No.
1-9019) and incorporated herein by reference)
</TABLE>
76
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.86 Guarantee, dated October 18, 1994, by Union Texas International
Corporation relating to the Share Sale Agreement (Filed as Exhibit 2.3
to the Company's Form 8-K dated November 14, 1994 (Commission File No.
1-9019) and incorporated herein by reference)
10.87# Petroleum Concession Agreement, dated April 20, 1977, between the
President of Pakistan and Union Texas Pakistan, Inc.
10.88# Amendments to Arun and Bontang LPG Sales and Purchase Contract, dated
October 5, 1994, between Pertamina, as Seller, and Mitsubishi
Corporation, Cosmo Oil Co., Ltd., Nippon Petroleum Gas Co., Ltd., Showa
Shell Sekiyu K.K., Japan Energy Corporation, Idemitsu Kosan Co., Ltd.
and Mitsui Oil & Gas Co., Ltd., as Buyers
10.89 Amendment to the Amended and Restated 1973 LNG Sales Contract, dated as
of the 1st day of June 1992, by and between Pertamina, as Seller, and
Kyushu Electric Power Co., Inc., Nippon Steel Corporation and Toho Gas
Co., Ltd., as Buyers (Filed as Exhibit (10)-9 to the 1993 Form 10-K of
Unimar Company and incorporated herein by reference)
21.1# List of subsidiaries
23.1 Consent of Price Waterhouse LLP is included on page S-1 of this Annual
Report on Form 10-K
24.1 Power of Attorney, pursuant to which amendments to this Annual Report on
Form 10-K may be filed, is included on page 78 of this Annual Report on
Form 10-K
27.1# Financial data schedule
</TABLE>
- ---------------
<TABLE>
<S> <C>
+ Executive Severance Plan or Arrangement pursuant to Item 601(b)(10)(iii)(A) of Regulation
S-K.
# Filed herewith.
</TABLE>
(B) REPORTS ON FORM 8-K.
The Company filed Current Reports on Form 8-K dated: (i) October 19, 1994,
to attach press releases announcing the extension of the Company's exploration
concession by the Pakistan government and the increase in the Company's working
interest in acreage in Alaska's Western Colville Delta area and to report the
execution of the $100 million credit facility and the agreement to acquire
interests in the Britannia field in the U.K. North Sea from Fina Exploration
Limited and Fina Petroleum Development Limited (collectively "Fina"); (ii)
October 25, 1994, to attach a press release announcing the 1994 third quarter
results; (iii) November 14, 1994, to report the completion of the acquisition of
a unit interest in the Britannia field and the appointment of a succession
committee and to attach press releases regarding the Company's high bids on
acreage in the Kenai Peninsula, Alaska, and the acquisition of a unit interest
in the Britannia field; (iv) December 9, 1994, to report the agreement to
acquire an interest in the Britannia field in the U.K. North Sea from AGIP
(U.K.) Limited ("AGIP") and the exercise of a preemptive purchase right by
another interest holder regarding an interest in the Britannia field that was to
be acquired by the Company from Fina; (v) December 27, 1994, to report the
approval of Britannia development costs by the U.K. Department of Trade and
Industry and the exercise of a preemptive purchase right by another interest
holder regarding the interest that was to be acquired by the Company from AGIP
and to attach a press release to announce a new exploration license in the
Eastern Sindh block granted to the Company by the Pakistan government; (vi)
January 20, 1995, to attach a press release announcing 1994 production and
year-end reserve amounts; (vii) February 7, 1995, to attach press releases
announcing the 1994 year-end and fourth quarter results, the 1995 capital
spending budget and the agreement to acquire an interest in St. George's Channel
offshore Ireland; and (viii) February 22, 1995, to attach press releases
announcing title change to Vice President and Chief Financial Officer of the
Company, the Company's agreement to acquire interests in three onshore
exploration permit areas in Italy and the Company's three discoveries in
Pakistan.
77
<PAGE> 80
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.
<TABLE>
<S> <C>
UNION TEXAS PETROLEUM HOLDINGS, INC.
Date: March 10, 1995 By: /s/ DONALD M. MCMULLAN
----------------------------------------------------
DONALD M. MCMULLAN
VICE PRESIDENT AND CONTROLLER
</TABLE>
POWER OF ATTORNEY
We, the undersigned, directors and officers of Union Texas Petroleum
Holdings, Inc. (the "Company"), do hereby severally constitute and appoint A.
Clark Johnson, Larry D. Kalmbach and Donald M. McMullan and each or any of them,
our true and lawful attorneys and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, and to file the same with
all exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys and agents, and
each or any of them, full power and authority to do and perform each and every
act and thing requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ A. CLARK JOHNSON Chairman of the Board and Chief March 10, 1995
- --------------------------------------------- Executive Officer (Principal
(A. CLARK JOHNSON) Executive Officer)
/s/ LARRY D. KALMBACH Vice President and Chief March 10, 1995
- --------------------------------------------- Financial Officer
(LARRY D. KALMBACH) (Principal Financial Officer)
/s/ DONALD M. MCMULLAN Vice President and Controller March 10, 1995
- --------------------------------------------- (Principal Accounting Officer)
(DONALD M. MCMULLAN)
/s/ GLENN A. COX Director March 10, 1995
- ---------------------------------------------
(GLENN A. COX)
/s/ SAUL A. FOX Director March 10, 1995
- ---------------------------------------------
(SAUL A. FOX)
/s/ EDWARD A. GILHULY Director March 10, 1995
- ---------------------------------------------
(EDWARD A. GILHULY)
/s/ JAMES H. GREENE, JR. Director March 10, 1995
- ---------------------------------------------
(JAMES H. GREENE, JR.)
</TABLE>
78
<PAGE> 81
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ HENRY R. KRAVIS Director March 10, 1995
- ---------------------------------------------
(HENRY R. KRAVIS)
/s/ MICHAEL W. MICHELSON Director March 10, 1995
- ---------------------------------------------
(MICHAEL W. MICHELSON)
/s/ STANLEY P. PORTER Director March 10, 1995
- ---------------------------------------------
(STANLEY P. PORTER)
/s/ GEORGE R. ROBERTS Director March 10, 1995
- ---------------------------------------------
(GEORGE R. ROBERTS)
/s/ RICHARD R. SHINN Director March 10, 1995
- ---------------------------------------------
(RICHARD R. SHINN)
/s/ SELLERS STOUGH Director March 10, 1995
- ---------------------------------------------
(SELLERS STOUGH)
</TABLE>
79
<PAGE> 82
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of Union Texas Petroleum Holdings, Inc.'s Registration
Statements on Forms S-8 (Nos. 33-26105, 33-44045, 33-13575, 33-21684 and
33-64928) and Form S-3 (No. 33-52683) of our report dated January 25, 1995,
appearing on page 33 of this Form 10-K.
PRICE WATERHOUSE LLP
Houston, Texas
March 9, 1995
S-1
<PAGE> 83
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
3.1 Restated Certificate of Incorporation of Union Texas Petroleum Holdings,
Inc. (Filed under the identical exhibit number to Post Effective
Amendment No. 1 to the Company's Registration Statement No. 33-12800 and
incorporated herein by reference)
3.2 Bylaws of Union Texas Petroleum Holdings, Inc., as amended (Filed as
Exhibit 3.2 to the Company's Form 10-Q for quarter ended June 30, 1994
(Commission File No. 1-9019) and incorporated herein by reference)
3.3 Specimen of Certificate evidencing the Common Stock (Filed under the
identical exhibit number to the Company's Registration Statement No.
33-16267 and incorporated herein by reference)
4.1 Indenture for 8.25% Senior Notes due November 15, 1999, dated as of
November 15, 1992, between Union Texas Petroleum Holdings, Inc., the
Guarantors named therein and State Street Bank and Trust Company
(including form of note) (Filed as Exhibit 10.1 to the Company's Form
10-Q for quarter ended March 31, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.1 Tax Agreement, dated as of June 27, 1985, among Allied Corporation and
Union Texas Petroleum Holdings, Inc. (Filed as Exhibit 10.6 to the
Company's Registration Statement No. 33-00312 and incorporated herein by
reference)
10.2+ Form of Subscription Agreement between Union Texas Petroleum Holdings,
Inc. and certain employees (Filed as Exhibit 10.8 to the Company's
Registration Statement No. 33-00312 and incorporated herein by
reference)
10.3+ Form of Tagalong Agreement between Union Texas Petroleum Holdings, Inc.
and certain employees (Filed as Exhibit 10.9 to the Company's
Registration Statement No. 33-00312 and incorporated herein by
reference)
10.4+ Amended and Restated Union Texas Petroleum Salaried Employees' Pension
Plan, effective as of January 1, 1994 (Filed under the identical exhibit
number to the Company's 1993 Form 10-K (Commission No. 1-9019) and
incorporated herein by reference)
10.5+ Union Texas Petroleum Holdings, Inc. 1985 Stock Option Plan, as amended
(Filed as Exhibit 10.10 to Post Effective Amendment No. 2 to the
Company's Registration Statement No. 33-12800 and incorporated herein by
reference)
10.6+ Union Texas Petroleum Holdings, Inc. Executive Severance Plan (Filed as
Exhibit 10.14 to the Company's Registration Statement No. 33-00312 and
incorporated herein by reference) and Appendix A (Filed as Exhibit 10.6
to the Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.7+ Amended and Restated Union Texas Petroleum Savings Plan for Salaried
Employees, effective as of January 1, 1993 (Filed under the identical
exhibit number to the Company's 1993 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.8+ Form of employment letter with A. C. Johnson (Filed as Exhibit 10.16 to
the Company's Registration Statement No. 33-00312 and incorporated
herein by reference)
10.9+ Amended and Restated Supplemental Non-Qualified Savings Plan for
Executive Employees of Union Texas Petroleum Holdings, Inc. and its
Subsidiaries, effective as of January 1, 1993 (Filed under the identical
exhibit number to the Company's 1993 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.10+ Form of employment letter with executive officers (Filed as Exhibit
10.18 to the Company's Registration Statement No. 33-00312 and
incorporated herein by reference) and Exhibit A (Filed as Exhibit 10.10
to the Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.11 Joint Venture Agreement, dated as of August 8, 1968, among Roy M.
Huffington, Inc., Virginia International Company, Austral Petroleum Gas
Corporation, Golden Eagle Indonesia Limited and Union Texas Far East
Corporation, as amended (Filed as Exhibit 6.6 to the Registration
Statement No. 2-58834 of Alaska Interstate Company and incorporated
herein by reference)
10.12 Supply Agreement, dated as of April 14, 1981, for Badak LNG Expansion
Project among Perusahaan Pertambangan Minyak Dan Gas Bumi Negara
("Pertamina") and the parties to the Joint Venture Agreement (Filed as
Exhibit 10.14 to the Company's 1992 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.13 Indenture, dated as of September 25, 1984, between Unimar Company, as
Issuer, and Irving Trust Company, as Trustee, providing for 14,077,747
Indonesian Participating Units (Filed as Exhibit 4 to the Form S-14
Registration Statement No. 2-93037 of Unimar Company and incorporated
herein by reference)
10.14 Amended and Restated Agreement of General Partnership of Unimar Company,
dated as of September 11, 1990 (Filed as Exhibit 3.1 to the Form 10-Q
for quarter ended September 30, 1990 of Unimar Company (Commission File
No. 1-8791) and incorporated herein by reference)
10.15 License No. P054 concerning all or part of the following blocks in the
United Kingdom North Sea: 49/15 and 49/25 (Sean Field) (Filed as Exhibit
10.74 to the Company's Registration Statement No. 33-00312 and
incorporated herein by reference)
10.16 License No. P220 concerning all or part of the following blocks in the
United Kingdom North Sea: 9/26, 14/19, 15/11, 15/15, 15/17 and 210/29
(Piper Field) (Filed as Exhibit 10.75 to the Company's Registration
Statement No. 33-00312 and incorporated herein by reference)
10.17 License No. P249 concerning part of the following block in the United
Kingdom North Sea: 14/19 (Claymore Field) (Filed as Exhibit 10.76 to the
Company's Registration Statement No. 33-00312 and incorporated herein by
reference)
10.18 License No. P250 concerning all or part of the following blocks in the
United Kingdom North Sea: 9/26, 15/11, 15/15, 210/29, 15/17 and 14/19
(Scapa Field) (Filed as Exhibit 10.77 to the Company's Registration
Statement No. 33-00312 and incorporated herein by reference)
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.19 Restated United Kingdom Continental Shelf Operating Agreement (Piper
License), dated as of August 11, 1977, among Occidental Petroleum (U.K.)
Limited, Occidental of Britain, Inc., Getty Oil (Britain) Limited,
Allied Chemical (Great Britain) Limited, Allied Chemical (North Sea)
Ltd., Thomson North Sea Limited and the British National Oil Corporation
(Filed as Exhibit No. 10.78 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.20 Restated United Kingdom Continental Shelf Operating Agreement (Claymore
License), dated August 11, 1977, among Occidental Petroleum (Caledonia)
Limited, Occidental of Scotland, Inc., Getty Oil (Britain) Limited,
Allied Chemical (Great Britain) Limited, Allied Chemical (North Sea)
Ltd., Thomson North Sea Limited and the British National Oil Corporation
(Filed as Exhibit 10.79 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.21 United Kingdom Continental Shelf Joint Operating Agreement for Blocks
49/15a and 49/25a (Sean Field), dated July 3, 1984, among Shell U.K.
Limited, Union Texas Petroleum Limited, Britoil Public Limited Company
and Esso Exploration and Production U.K. Limited (Filed as Exhibit 10.81
to the Company's Registration Statement No. 33-00312 and incorporated
herein by reference)
10.22 Agreement for Sale and Purchase of Natural Gas from the Sean North and
Sean South Fields, dated November 7, 1984, between Union Texas Petroleum
Limited and British Gas Corporation, including list of omitted schedules
(Filed as Exhibit 10.82 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.23 Badak III LNG Sales Contract, dated March 19, 1987, between Pertamina,
as Seller, and Chinese Petroleum Corporation, as Buyer (Filed as Exhibit
10.28 to the Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.24 Supplemental Indenture, dated as of October 31, 1986, to the Indenture
between Unimar Company and Irving Trust Company (Exhibit 10.13 above)
(Filed as Exhibit 10.114 to the Company's Registration Statement No.
33-16267 and incorporated herein by reference)
10.25 Amended and Restated Registration Rights Agreement, dated September 30,
1987, among Union Texas Petroleum Holdings, Inc. and Certain Holders of
Certain Securities of Union Texas Petroleum Holdings, Inc. (Filed as
Exhibit 10.117 to Post Effective Amendment No. 1 to the Company's
Registration Statement No. 33-12800 and incorporated herein by
reference)
10.26+ Union Texas Petroleum Holdings, Inc. 1987 Stock Option Plan and First
Amendment to Union Texas Petroleum Holdings, Inc. 1987 Stock Option Plan
(Filed as Exhibit 4.4 to the Company's Registration Statement No.
33-21684 and incorporated herein by reference)
10.27 Bontang Capital Projects Loan Agreement No. 2, dated as of June 9, 1987,
among Continental Bank International, as Trustee under the Badak Trustee
and Paying Agent Agreement (Borrower), the banks named therein as Lead
Managers and Lenders and The Industrial Bank of Japan Trust Company
(Agent) (Filed as Exhibit 10.125 to the Company's Registration Statement
No. 33-16267 and incorporated herein by reference)
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.28 Producers Agreement No. 2, dated as of June 9, 1987, by Pertamina, Roy
M. Huffington, Inc., Virginia International Company, Ultramar Indonesia
Limited, Virginia Indonesia Company ("VICO"), Union Texas East
Kalimantan Limited, Universe Tankships, Inc. and Huffington Corporation
in favor of The Industrial Bank of Japan Trust Company as Agent (Filed
as Exhibit 10.126 to the Company's Registration Statement No. 33-16267
and incorporated herein by reference)
10.29 Badak III LNG Sales Contract Supply Agreement, dated October 19, 1987,
among Pertamina and the parties to the Joint Venture Agreement (Filed as
Exhibit 10.132 to Post Effective Amendment No. 1 to the Company's
Registration Statement No. 33-12800 and incorporated herein by
reference)
10.30 $316,000,000 Bontang III Loan Agreement, dated February 9, 1988, among
Continental Bank International as Trustee, Train-E Finance Co., Ltd., as
Tranche A Lender and The Industrial Bank of Japan Trust Company as Agent
for the Tranche B Lenders and as Tranche B Lender (Filed as Exhibit
10.83 to Post Effective Amendment No. 2 to the Company's Registration
Statement No. 33-12800 and incorporated herein by reference)
10.31 Bontang III Producers Agreement, dated as of February 9, 1988, among
Pertamina, Roy M. Huffington, Inc., Huffington Corporation, VICO,
Virginia International Company, Ultramar Indonesia Company Limited,
Union Texas East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd., in favor
of Train-E Finance Co., Ltd., as Tranche A Lender, The Industrial Bank
of Japan Trust Company as Agent for the Tranche B Lenders and as Tranche
B Lender, and the other Tranche B Lenders named therein (Filed as
Exhibit 10.84 to the Post Effective Amendment No. 2 to the Company's
Registration Statement No. 33-12800 and incorporated herein by
reference)
10.32 Bontang III Trustee and Paying Agent Agreement, dated February 9, 1988,
among Pertamina, Roy M. Huffington, Inc., Huffington Corporation,
Virginia International Company, VICO, Ultramar Indonesia Limited, Union
Texas East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd. and
Continental Bank International (Filed as Exhibit 10.42 to the Company's
1991 Form 10-K (Commission File No. 1-9019) and incorporated herein by
reference)
10.33 $21,250,000 Financing Agreement, dated December 20, 1988, among Union
Texas Pakistan, Inc. and Overseas Private Investment Corporation (Filed
as Exhibit 10.85 to the Company's 1988 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.34 Guaranty Agreement, dated December 20, 1988, between Union Texas
Petroleum Holdings, Inc. and Overseas Private Investment Corporation
(Filed as Exhibit 10.86 to the Company's 1988 Form 10-K (Commission File
No. 1-9019) and incorporated herein by reference)
10.35+ First Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.87 to the Company's 1989 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.36+ Second Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.88 to the Company's 1989 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.37+ Third Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.93 to the Company's Form 10-Q for
quarter ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.38+ Third Amendment to Union Texas Petroleum Holdings, Inc. 1985 Stock
Option Plan (Filed as Exhibit 10.95 to the Company's Form 10-Q for
quarter ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.39+ Second Amendment to Union Texas Petroleum Holdings, Inc. 1987 Stock
Option Plan (Filed as Exhibit 10.96 to the Company's Form 10-Q for
quarter ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.40+ Union Texas Petroleum Supplemental Retirement Plan (Filed as Exhibit
10.99 to the Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by reference)
10.41+ Amended and Restated Union Texas Petroleum Supplemental Retirement Plan
II, effective January 1, 1994 (Filed under the identical exhibit number
to the Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.42+ Union Texas Petroleum Supplemental Retirement Plans Trust, as amended
(Filed as Exhibit 10.101 to the Company's Form 10-Q for quarter ended
June 30, 1990 (Commission File No. 1-9019) and incorporated herein by
reference)
10.43 Amended and Restated Production Sharing Contract effective August 8,
1968-August 7, 1998 among Pertamina, Roy M. Huffington, Inc., VICO,
Virginia International Company, Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc. and Huffington
Corporation (Filed as Exhibit 10.102 to the Company's Form 10-Q for
quarter ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.44 Production Sharing Contract effective August 8, 1998-August 7, 2018
among Pertamina, Roy M. Huffington, Inc., VICO, Virginia International
Company, Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Huffington Corporation
(Filed as Exhibit 10.103 to the Company's Form 10-Q for quarter ended
June 30, 1990 (Commission File No. 1-9019) and incorporated herein by
reference)
10.45 Joint Operating Agreement for the Scapa Field, dated December 23, 1985,
among Occidental Petroleum (Caledonia) Limited, Texaco Britain Limited,
Union Texas Petroleum Limited, Thomson North Sea Limited, Thomson
Scottish Petroleum Limited and the Oil and Pipelines Agency (Filed as
Exhibit 10.104 to the Company's Form 10-Q for quarter ended June 30,
1990 (Commission File No. 1-9019) and incorporated herein by reference)
10.46 Amended and Restated 1973 LNG Sales Contract, dated as of the 1st day of
January, 1990, by and between Pertamina, as Seller, and Chubu Electric
Power Co., Inc., The Kansai Electric Power Co., Inc., Kyushu Electric
Power Co., Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd. and Toho
Gas Co., Ltd., as Buyers (Filed as Exhibit (10)-8 to the 1993 Form 10-K
of Unimar Company and incorporated herein by reference)
10.47 Amended and Restated Badak LNG Sales Contract, dated as of the 1st day
of January, 1990, by and between Pertamina, as Seller, and Chubu
Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Osaka Gas
Co., Ltd. and Toho Gas Co., Ltd., as Buyers (Filed as Exhibit (10)-11 to
the 1993 Form 10-K of Unimar Company and incorporated herein by
reference)
10.48+ Fourth Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.85 to the Company's 1990 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.49 Asset Purchase Agreement, dated March 12, 1991, among Union Texas
Petroleum Holdings, Inc., Union Texas Petroleum Corporation, Union Texas
Development Corporation, Union Texas Exploration Corporation, Benoil,
Inc. and NERCO Oil & Gas, Inc. (Filed as Exhibit 2.1 to the Company's
Form 8-K dated April 19, 1991 (Commission File No. 1-9019) and
incorporated herein by reference)
10.50 Asset Purchase Agreement, dated August 20, 1991, among Union Texas
Petroleum Corporation, Union Texas Canada Ltd., Union Texas Development
Corporation, Meridian Oil Production Inc. and El Paso Production Company
(Filed as Exhibit 2.1 to the Company's Form 8-K dated October 1, 1991
(Commission File No. 1-9019) and incorporated herein by reference)
10.51+ Fifth Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.69 to the Company's 1991 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.52 Asset Purchase Agreement, dated September 17, 1991, among Union Texas
Petroleum Holdings, Inc., Union Texas Products Corporation and Western
Gas Resources, Inc. (Filed as Exhibit 2.1 to the Company's Form 8-K
dated November 14, 1991 (Commission File No. 1-9019) and incorporated
herein by reference)
10.53 Amended and Restated Bontang Processing Agreement, dated February 9,
1988, among Pertamina and Roy M. Huffington, Inc., Huffington
Corporation, VICO, Virginia International Company, Ultramar Indonesia
Limited, Union Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd. and
P.T. Badak Natural Gas Liquefaction Company (Filed as Exhibit (10)-39 to
the 1988 Form 10-K of Unimar Company and incorporated herein by
reference)
10.54 Amended and Restated Debt Service Allocation Agreement, dated February
9, 1988, among Pertamina and Roy M. Huffington, Inc., VICO, Ultramar
Indonesia Limited, Virginia International Company, Union Texas East
Kalimantan Limited, Universe Tankships, Inc., Huffington Corporation,
Total Indonesie, Unocal Indonesia, Ltd. and Indonesia Petroleum, Ltd.
(Filed as Exhibit (10)-40 to the 1988 Form 10-K of Unimar Company and
incorporated herein by reference)
10.55 Amendment No. 1 to Bontang III Producers Agreement, dated as of May 31,
1988, among Pertamina, Roy M. Huffington, Inc., Huffington Corporation,
VICO, Virginia International Company, Ultramar Indonesia Company
Limited, Union Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd. and
Train-E Finance Co., Ltd., as Tranche A Lender, and The Industrial Bank
of Japan Trust Company on behalf of the Tranche B Lenders, (Filed as
Exhibit (10)-21 to the 1993 Form 10-K of Unimar Company and incorporated
herein by reference)
10.56 Amendment No. 2 to Producers Agreement No. 2, dated as of May 31, 1988,
among Pertamina, Roy M. Huffington, Inc., Huffington Corporation, VICO,
Virginia International Company, Ultramar Indonesia Company Limited,
Union Texas East Kalimantan Limited and Universe Tankships, Inc. (Filed
as Exhibit (10)-44 to the 1988 Form 10-K of Unimar Company and
incorporated herein by reference)
10.57 Badak IV LNG Sales Contract, dated October 23, 1990, between Pertamina,
as Seller, and Osaka Gas Co., Ltd., Tokyo Gas Co., Ltd. and Toho Gas
Co., Ltd., as Buyer (Filed as Exhibit (10)-65 to the 1990 Form 10-K of
Unimar Company and incorporated herein by reference)
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.58 Supply Agreement for Natural Gas to Badak IV LNG Sales Contract, dated
August 12, 1991, by and between Pertamina, VICO, Opicoil Houston, Inc.,
Ultramar Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia International Company
(Filed as Exhibit 10.80 to the Company's 1991 Form 10-K (Commission No.
1-9019) and incorporated herein by reference)
10.59 LNG Sales and Purchase Contract (Korea II), dated May 7, 1991, between
Pertamina, as Seller, and Korea Gas Corporation, as Buyer (Filed as
Exhibit (10)-1 to the 1990 Form 10-Q for quarter ended June 30, 1991 of
Unimar Company and incorporated herein by reference)
10.60 Amended and Restated Bontang II Trustee and Paying Agent Agreement,
dated as of July 15, 1991, among Pertamina, VICO, Opicoil Houston, Inc.,
Virginia International Company, Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Gas & Oil Company, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd. and
Continental Bank International (Filed as Exhibit 10.82 to the Company's
1991 Form 10-K (Commission No. 1-9019) and incorporated herein by
reference)
10.61 $750,000,000 Bontang IV Loan Agreement, dated as of August 26, 1991,
among Continental Bank International as Trustee under the Bontang IV
Trustee and Paying Agent Agreement as Borrower, Chase Manhattan Asia
Limited and The Mitsubishi Bank, Limited as Coordinators, the other
banks and financial institutions named therein as Arrangers,
Co-Arrangers, Lead Managers, Managers, Co-Managers and Lenders, The
Chase Manhattan Bank, N.A. and The Mitsubishi Bank, Limited as Co-Agents
and The Chase Manhattan Bank, N.A. as Agent (Filed as Exhibit 10.1 to
the Form 10-Q for quarter ended September 30, 1991 of Unimar Company
(Commission File No. 1-8791) and incorporated herein by reference)
10.62 Bontang IV Producers Agreement, dated as of August 26, 1991, by
Pertamina, Virginia International Company, Opicoil Houston, Inc., VICO,
Ultramar Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc., Total Indonesie, Unocal Indonesia,
Ltd. and Indonesia Petroleum, Ltd. in favor of The Chase Manhattan Bank,
N.A., as Agent for the Lenders and as Lender, and the other Lenders
named therein (Filed as Exhibit 10.2 to the Form 10-Q for quarter ended
September 30, 1991 of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.63 Bontang IV Trustee and Paying Agent Agreement, dated as of August 26,
1991, among Pertamina, Virginia International Company, Opicoil Houston,
Inc., VICO, Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc., Total Indonesie, Unocal
Indonesia, Ltd., Indonesia Petroleum, Ltd. and Continental Bank
International (Filed as Exhibit 10.3 to the Form 10-Q for quarter ended
September 30, 1991 of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.64+ Sixth Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.77 to the Company's 1992 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.65 Consulting Agreement, dated as of November 18, 1992, among Petroleum
Associates, L.P., KKR Partners II, L.P. and Union Texas Petroleum
Holdings, Inc. (Filed as Exhibit 10.81 to the Company's 1992 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------------- ------------------------------------------------------------------------
<S> <C>
10.66+ Second Amendment to Union Texas Petroleum Supplemental Retirement Plans
Trust (Filed as Exhibit 10.82 to the Company's 1992 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.67 Amendment No. 1 to Bontang III Trustee and Paying Agent Agreement, dated
as of December 11, 1992, among Pertamina, VICO, Virginia International
Company, Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Opicoil Houston, Inc., Universe Gas & Oil Company, Inc., Total
Indonesie, Unocal Indonesia Ltd., Indonesia Petroleum, Ltd. and
Continental Bank International, as Bontang III Trustee (Filed as Exhibit
10.83 to the Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.68+ Key Employee Incentive Compensation Plan (Filed as Exhibit 10.84 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and incorporated
herein by reference)
10.69+ First Amendment to Union Texas Petroleum Supplemental Retirement Plan
(Filed as Exhibit 10.85 to the Company's 1992 Form 10-K (Commission File
No. 1-9019) and incorporated herein by reference)
10.70+ Union Texas Petroleum Holdings, Inc. 1992 Stock Option Plan (Filed as
Exhibit 4.3 to the Company's Registration Statement No. 33-64928 and
incorporated herein by reference)
10.71 Arun and Bontang LPG Sales and Purchase Contract, dated July 15, 1986,
between Pertamina, as Seller, and Mitsubishi Corporation, Cosmo Oil Co.,
Ltd., Nippon Petroleum Gas Co., Ltd., Showa Shell Sekiyu K.K., Kyodo Oil
Co., Ltd., Idemitsu Kosan Co., Ltd. and Mitsui Liquefied Gas Co., Ltd.,
as Buyers (Filed as Exhibit (10)-60 to the 1991 Form 10-K of Unimar
Company and incorporated herein by reference)
10.72 Petroleum Concession Agreement, dated January 21, 1992, between the
President of the Islamic Republic of Pakistan and Union Texas Pakistan,
Inc., Occidental Petroleum (Pakistan) Inc. and Oil & Development
Corporation (Filed as Exhibit 10.87 to the Company's Form 10-Q for
quarter ended March 31, 1992 (Commission File No. 1-9019) and
incorporated herein by reference)
10.73 Amended and Restated Supply Agreement (In support of the Amended and
Restated 1973 LNG Sales Contract), dated September 22, 1993, and
effective December 3, 1973, between Pertamina and VICO, LASMO Sanga
Sanga Limited, Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia International
Company (Filed as Exhibit 10.75 to the Company's 1993 Form 10-K
(Commission File No. 1-9019) and incorporated herein by reference)
10.74 Amended and Restated Credit Agreement, dated as of May 13, 1994, among
the Company, the Banks listed therein and NationsBank of Texas, N.A., as
agent, and Bank of America National Trust and Savings Association and
Union Bank of Switzerland, Houston Agency, as co-agents, with form of
note attached (Filed as Exhibit 10.1 to the Company's Registration
Statement No. 33-52683 and incorporated herein by reference)
10.75# First Amendment Agreement to the Amended and Restated Credit Agreement,
dated as of November 21, 1994, among the Company, the Banks and
Co-Agents listed therein and NationsBank of Texas, N.A., as agent
10.76# Second Amendment Agreement to the Amended and Restated Credit Agreement,
dated as of January 31, 1995, among the Company, the Banks and Co-Agents
listed therein and NationsBank of Texas, N.A., as agent
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
10.77 Credit Agreement, dated as of May 13, 1994, among the Company, the Banks
listed therein and NationsBank of Texas, N.A., as agent, and Bank of
America National Trust and Savings Association and Union Bank of
Switzerland, Houston Agency, as co-agents, with form of note attached
(Filed as Exhibit 10.2 to the Company's Registration Statement No.
33-52683 and incorporated herein by reference)
10.78 Amended and Restated Subsidiary Guaranty Agreement, dated as of May 13,
1994, among Union Texas Petroleum Energy Corporation, Union Texas
Products Corporation, Union Texas East Kalimantan Limited, Union Texas
International Corporation and Unistar, Inc., and NationsBank of Texas,
N.A., as agent (Filed as Exhibit 10.3 to the Company's Registration
Statement No. 33-52683 and incorporated herein by reference)
10.79# First Amendment to Amended and Restated Subsidiary Guaranty, dated as of
November 21, 1994, among Union Texas Petroleum Energy Corporation, Union
Texas Products Corporation, Union Texas East Kalimantan Limited, Union
Texas International Corporation and Unistar, Inc., and NationsBank of
Texas, N.A., as agent
10.80 Subsidiary Guaranty Agreement, dated as of May 13, 1994, among Union
Texas Petroleum Energy Corporation, Union Texas Products Corporation,
Union Texas East Kalimantan Limited, Union Texas International
Corporation and Unistar, Inc., and NationsBank of Texas, N.A., as agent
(Filed as Exhibit 10.4 to the Company's Registration Statement No.
33-52683 and incorporated herein by reference)
10.81+ Seventh Amendment to Union Texas Petroleum Holdings, Inc. Executive
Severance Plan (Filed as Exhibit 10.5 to the Company's Form 10-Q for
quarter ended June 30, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.82 Credit Agreement, dated as of September 27, 1994, among the Company,
NationsBank of Texas, N.A., as agent, and Bank of America National Trust
and Savings Association and Union Bank of Switzerland, Houston Agency,
as co-agents, with form of note attached (Filed as Exhibit 10.1 to the
Company's Form 10-Q for quarter ended September 30, 1994 (Commission
File No. 1-9019) and incorporated herein by reference)
10.83 Subsidiary Guaranty Agreement, dated as of September 27, 1994, among
Union Texas Petroleum Energy Corporation, Union Texas Products
Corporation, Union Texas East Kalimantan Limited, Union Texas
International Corporation and Unistar, Inc., and NationsBank of Texas,
N.A., as agent (Filed as Exhibit 10.2 to the Company's Form 10-Q for
quarter ended September 30, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.84 East Sean Gas Sales Agreement, dated August 30, 1994, between Union
Texas Petroleum Limited and Alliance Gas Limited (Filed as Exhibit 10.3
to the Company's Form 10-Q for quarter ended September 30, 1994
(Commission File No. 1-9019) and incorporated herein by reference)
10.85 Share Sale Agreement, dated October 18, 1994, among Union Texas
Petroleum Limited, Fina Petroleum Development Limited and Fina
Exploration Limited (the "Share Sale Agreement") (Filed as Exhibit 2.1
to the Company's Form 8-K dated November 14, 1994 (Commission File No.
1-9019) and incorporated herein by reference)
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
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<S> <C>
10.86 Guarantee, dated October 18, 1994, by Union Texas International
Corporation relating to the Share Sale Agreement (Filed as Exhibit 2.3
to the Company's Form 8-K dated November 14, 1994 (Commission File No.
1-9019) and incorporated herein by reference)
10.87# Petroleum Concession Agreement, dated April 20, 1977, between the
President of Pakistan and Union Texas Pakistan, Inc.
10.88# Amendments to Arun and Bontang LPG Sales and Purchase Contract, dated
October 5, 1994, between Pertamina, as Seller, and Mitsubishi
Corporation, Cosmo Oil Co., Ltd., Nippon Petroleum Gas Co., Ltd., Showa
Shell Sekiyu K.K., Japan Energy Corporation, Idemitsu Kosan Co., Ltd.
and Mitsui Oil & Gas Co., Ltd., as Buyers
10.89 Amendment to the Amended and Restated 1973 LNG Sales Contract, dated as
of the 1st day of June 1992, by and between Pertamina, as Seller, and
Kyushu Electric Power Co., Inc., Nippon Steel Corporation and Toho Gas
Co., Ltd., as Buyers (Filed as Exhibit (10)-9 to the 1993 Form 10-K of
Unimar Company and incorporated herein by reference)
21.1# List of subsidiaries
23.1 Consent of Price Waterhouse LLP is included on page S-1 of this Annual
Report on Form 10-K
24.1 Power of Attorney, pursuant to which amendments to this Annual Report on
Form 10-K may be filed, is included on page 78 of this Annual Report on
Form 10-K
27.1# Financial data schedule
</TABLE>
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<TABLE>
<S> <C>
+ Executive Severance Plan or Arrangement pursuant to Item 601(b)(10)(iii)(A) of Regulation
S-K.
# Filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 10.75
FIRST AMENDMENT AGREEMENT
This First Amendment Agreement dated as of November 21, 1994
("Amendment") is by and among Union Texas Petroleum Holdings Inc., a Delaware
corporation ("Company"), the Banks and Co-Agents party to the Agreement
(defined below) and NationsBank of Texas, N.A., as Agent ("Agent"). In
consideration of the mutual covenants contained herein, the Company, the Banks,
the Co-Agents and the Agent agree as set forth herein.
1. Amendments to Credit Agreement. The Amended and Restated
Credit Agreement dated as of May 13, 1994 ("Agreement") among the Company, the
Banks, the Co-Agents and the Agent, is hereby amended as follows:
1.1. Section 1.01. The following respective definitions set
forth in Section 1.01 of the Agreement are hereby amended to read as follows:
"Applicable Lending Office" means, with respect to any Bank,
(i) in the case of its Base Rate Loans, its Domestic Lending Office,
(ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending
Office, (iii) in the case of its Money Market Loans, its Money Market
Lending Office, and (iv) in the case of its Sterling Loans, its
Sterling Lending Office.
"Committed Loan" means a loan made by a Bank pursuant to
Section 2.01 and refers to a Base Rate Loan, a Euro-Dollar Loan or a
Sterling Loan (each of which shall be a "Type" of Loan).
"Convert," "Conversion" and "Converted" each refers to (i) the
change of Committed Loans of one Type into Committed Loans of another
Type pursuant to Section 2.18 or Article VIII, (ii) the continuation
of all Euro-Dollar Loans or all Sterling Loans, as the case may be,
comprising the same Borrowing as such for an additional Interest
Period pursuant to Section 2.18, and (iii) an election to change,
pursuant to Section 2.18, the Interest Period applicable to all
Euro-Dollar Loans or all Sterling Loans, as the case may be,
comprising the same Borrowing prior to the end of the Interest Period
then applicable thereto.
"Euro-Dollar Loan" means a Committed Loan which bears interest
as provided in Section 2.07(b) or Section 2.07(d).
"Fixed Rate Loans" means Sterling Loans, Euro-Dollar Loans or
Money Market Loans (excluding Money Market LIBOR Loans bearing
interest pursuant to Section 8.01(a)) or any combination of the
foregoing.
"Required Banks" means at any time Banks having at least 51%
of the aggregate amount of the Commitments or, if the Commitments
shall have been terminated, holding Notes evidencing at least 51% of
the aggregate unpaid
<PAGE> 2
principal amount of the Loans (in the case of Sterling Loans, based on
the Current Dollar Amount thereof in effect as of such time).
Section 1.01 of the Agreement is hereby further amended by amending
the definition of "Interest Period" by (I) deleting, from the first sentence in
clause (1) thereof, the term "Base Rate Loan" and inserting in lieu thereof the
term "Committed Loan" and (II) inserting, at the end of clause (3) thereof, a
new clause (4) to such definition reading as follows:
(4) with respect to each Sterling Loan comprising part of the same
Borrowing, the period commencing on the date of such Loan or the date
of the Conversion of any Committed Loan into such Sterling Loan and
ending on the last day of the period selected by the Company pursuant
to the provisions below and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest
Period (or on any other date selected by the Company pursuant to
Section 2.18) and ending on the last day of the period selected by the
Company pursuant to the provisions below and Section 2.18. The
duration of each such Interest Period shall be 1, 2, 3 or 6 months, in
each case as the Company may, upon notice received by the Agent not
later than 10:00 a.m. (Houston time) on the third Sterling Business
Day prior to the first day of such Interest Period, select; provided
that:
(a) any Interest Period which would otherwise end
on a day which is not a Sterling Business Day shall be
extended to the next succeeding Sterling Business Day unless
such Sterling Business Day falls in another calendar month, in
which case such Interest Period shall end on the next
preceding Sterling Business Day;
(b) any Interest Period which begins on the last
Sterling Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall,
subject to clause (c) below, end on the last Sterling Business
Day of a calendar month;
(c) if any Interest Period includes a date on
which a payment of principal of the Loans is required to be
made under Section 2.10(c) but does not end on such date, then
(i) the principal amount (if any) of each Sterling Loan
required to be repaid on such date shall have an Interest
Period ending on such date and (ii) the remainder (if any) of
each such Sterling Loan shall have an Interest Period
determined as set forth above; and
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<PAGE> 3
(d) Interest Periods for all Loans comprising the
same Borrowing shall commence on the same date and shall be of
the same duration.
Section 1.01 of the Agreement is hereby further amended by adding, in
appropriate alphabetical order, the following new definitions reading as
follows:
"Adjustment Date" means (i) each day on which any principal
payment (including any principal payment effected pursuant to Section
2.04(c)) of any Sterling Loan is required to be made (except pursuant
to Section 2.10(e)) or is made, (ii) each day on which any Conversion
involving any Sterling Loan occurs, (iii) the last Sterling Business
Day of each month, (iv) each day on which a Sterling Loan or a
Euro-Dollar Loan is made and (v) each day designated as an Adjustment
Date by the Required Banks from time to time during the continuance of
an Event of Default.
"Current Dollar Amount" means, as to each Sterling Loan, the
Dollar amount thereof based on the then Current Exchange Rate, as
determined from time to time by the Agent, which determinations shall
be conclusive in the absence of manifest error.
"Current Exchange Rate" means the arithmetic average of the
respective spot exchange rates determined by each of the Reference
Banks for converting Sterling into Dollars (in an amount substantially
equal to the aggregate outstanding principal amount of the Sterling
Loans of such Reference Bank) in the interbank eurocurrency market
where the foreign currency and exchange operations of such Reference
Bank's Sterling Lending Office are customarily conducted with respect
to Sterling, at 10:00 A.M. (London time) or as near thereto as
practicable on the date that is two Sterling Business Days prior to
the date of determination, as determined by the Agent in accordance
with Section 2.19(a), which determination shall be conclusive in the
absence of manifest error. The Current Exchange Rate shall be
determined for, and shall take effect on, each Adjustment Date and
shall remain in effect until any subsequent determination of the
Current Exchange Rate.
"Dollar" (whether or not capitalized) and "$" mean lawful
money of the United States of America.
"Obligation Currency" has the meaning set forth in Section
9.14.
"Permitted Excess" has the meaning set forth in Section
2.19(c).
"Sterling" and "pounds sterling" mean pounds sterling (U.K.
pounds sterling), the lawful currency of the United Kingdom.
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<PAGE> 4
"Sterling Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including
dealings in Sterling deposits and Dollar deposits) in London and New
York City.
"Sterling Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Sterling Lending Office" means, as to each Bank, the office,
branch or affiliate of such Bank located at its address set forth on
Schedule VII hereto or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Sterling Lending Office by
notice to the Company and the Agent.
"Sterling Loan" means a Committed Loan made in Sterling.
1.2. Section 1.03. Section 1.03 of the Agreement is hereby
amended to read as follows:
Section 1.03. Types of Borrowings. The term "Borrowing"
denotes the aggregate of Loans of one or more Banks to be made to the
Company pursuant to Article II on a single date and, if such Loans are
Committed Loans, of a single Type, and if such Loans are Fixed Rate
Loans, for a single Interest Period (except as contemplated by
paragraph (1)(c) and paragraph (4)(c) of the definition herein of
"Interest Period"). Borrowings are classified for purposes of this
Agreement either by reference to the pricing or currency of Loans
comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a
Borrowing comprised of Euro-Dollar Loans, and a "Sterling Borrowing"
is a Borrowing comprised of Sterling Loans) or by reference to the
provisions of Article II under which participation therein is
determined (i.e., a "Committed Borrowing" is a Borrowing under Section
2.01 in which all Banks participate in proportion to their
Commitments, while a "Money Market Borrowing" is a Borrowing under
Section 2.03 in which the Bank participants are determined on the
basis of their bids in accordance therewith).
1.3. Section 2.01. Section 2.01 of the Agreement is hereby
amended to read as follows:
SECTION 2.01. Commitments to Lend. During the Revolving
Credit Period each Bank severally agrees, on the terms and conditions
set forth in this Agreement, to make loans to the Company pursuant to
this Section 2.01 from time to time in amounts such that the aggregate
principal amount of Committed Loans by such Bank at any one time
outstanding to the Company (in the case of Sterling Loans, such
principal amount being the Current Dollar Amount of such Sterling
Loans in effect as of such time) shall not exceed the sum of (i) the
amount of such Bank's Commitment at such time plus (ii) if clause (y)
of Section
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<PAGE> 5
2.19(c) is applicable to a particular Borrowing, such Bank's ratable
(based on the respective Commitments of the Banks) portion of the
Permitted Excess applicable to such Borrowing; provided that any
amount added pursuant to this clause (ii) in respect of any particular
Borrowing shall not be included in any subsequent determination of the
maximum aggregate principal amount of Committed Loans which such Bank
is obligated to advance to the Company. Each Borrowing under this
Section 2.01 shall be in an aggregate principal amount of $10,000,000
(or, in the case of Sterling Loans, $10,000,000 in the Current Dollar
Amounts of such Sterling Loans at the time of such Borrowing or
5,000,000 pounds sterling, at the option of the Company in its sole
discretion) or any larger multiple of $1,000,000 (or, in the case of
Sterling Loans, $1,000,000 in the Current Dollar Amounts of such
Sterling Loans at the time of such Borrowing or 1,000,000 pounds
sterling, as applicable) (except that any such Borrowing may be,
subject to the other terms hereof, in the aggregate amount available
in accordance with Section 3.02(b)) and shall be made from the
several Banks ratably in proportion to their respective Commitments,
subject in each case to the effects of Section 2.19(c). Within the
foregoing limits, the Company may borrow under this Section 2.01,
repay (whether pursuant to Section 2.10 or otherwise), or to the
extent permitted by Section 2.11, prepay Loans and reborrow at any
time during the Revolving Credit Period under this Section 2.01.
1.4. Section 2.02(a). Section 2.02(a) of the Agreement is
hereby amended to read as follows:
(a) The Company shall give the Agent notice (a "Notice of
Committed Borrowing") not later than 10:00 A.M. (Houston time) on (x)
the date of each Base Rate Borrowing, (y) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, and (z) the third
Sterling Business Day before each Sterling Borrowing, specifying:
(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Base Rate Borrowing, a
Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing or a Sterling Business Day in the case of a Sterling
Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing
are to be Sterling Loans, Base Rate Loans or Euro-Dollar
Loans,
(iv) in the case of a Fixed Rate Borrowing, the
duration of the initial Interest Period applicable thereto,
subject to the provisions of the definition herein of
"Interest Period", and
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<PAGE> 6
(v) if such Interest Period includes (but does
not end on) a Commitment Reduction Date and all or part of
such Loans are to be repaid on such date to comply with
Section 2.10(c), the aggregate amount then to be repaid.
Notwithstanding the foregoing, not more than twelve Borrowings that
are either Euro-Dollar Borrowings or Sterling Borrowings shall be
outstanding at any one time, and any Borrowing which would exceed such
limitation shall be made as a Base Rate Borrowing.
1.5. Section 2.03(a). The first sentence of Section 2.03(a)
of the Agreement is hereby amended by inserting the phrase "in Dollars"
immediately after the phrase "to make Money Market Loans to the Company".
1.6. Section 2.03(c). Section 2.03(c) of the Agreement is
hereby amended by inserting the phrase "in Dollars" immediately after the
phrase "offering to make the Money Market Loans".
1.7. Section 2.03(d)(i). The first sentence of Section
2.03(d)(i) of the Agreement is hereby amended by inserting the phrase "in
Dollars" immediately after the phrase "offers to make Money Market Loans".
1.8. Section 2.03(d)(ii). Subclause (x) of clause (B) in
Section 2.03(d)(ii) of the Agreement is hereby amended by inserting the phrase
"must be in Dollars and" immediately before the phrase "must be $5,000,000 or a
larger multiple of $1,000,000,".
1.9. Section 2.03(f). Clause (ii) of Section 2.03(f) of the
Agreement is hereby amended to read as follows:
(ii) each Money Market Borrowing must be in Dollars, and
the principal amount of each Money Market Borrowing must be
$10,000,000 or a larger multiple of $1,000,000,
1.10. Section 2.04. Section 2.04 of the Agreement is hereby
amended to read as follows:
SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon
receipt of a Notice of Borrowing, the Agent shall promptly (except in
the case of notice to a Bank with respect to an acceptance of such
Bank's Money Market Quote by the Company, by no later than 10:30 A.M.
(Houston time) by telephone or facsimile transmission) notify each
Bank of the contents thereof and of such Bank's share (if any) of such
Borrowing and such Notice of Borrowing shall not thereafter be
revocable by the Company.
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<PAGE> 7
(b) Not later than 12:00 Noon (London time in the case of
Sterling Borrowings and Houston time in the case of all other
Borrowings) on the date of each Borrowing, each Bank participating
therein shall (except as provided in subsection (c) of this Section
2.04) make available its share of such Borrowing, (x) in the case of
all Borrowings other than Sterling Borrowings, in Federal or other
funds immediately available in Houston, to the Agent at its address
specified in or pursuant to Section 9.01 in Dollars, and (y) in the
case of Sterling Borrowings, in funds immediately available in London,
to the Agent at NationsBank of North Carolina, N.A., New Broad Street
House, 35 New Broad Street, London, EC2M 1NH England, United Kingdom
or such other address in London as the Agent may hereafter specify by
notice to the Company and the Banks, in Sterling. Unless the Agent
determines that any applicable condition specified in Article III has
not been satisfied, the Agent will make the funds so received from the
Banks available to the Company at the Agent's relevant aforesaid
address.
(c) If any Bank makes a new Loan hereunder in either
currency available hereunder (i.e., Dollars or Sterling) to the
Company on a day on which the Company is to repay all or any part of
an outstanding Loan in either currency from such Bank, such Bank shall
apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being
borrowed by the Company (based on the Current Dollar Amount thereof
then in effect in the case of Sterling Borrowings) and the amount
being repaid (based on the Current Dollar Amount thereof then in
effect in the case of Sterling Borrowings) shall be made available by
such Bank to the Agent in the applicable currency as provided in
subsection (b), or remitted by the Company to the Agent as provided in
Section 2.12, as the case may be; provided that in any case in which
this Section 2.04(c) would apply to the making of a new Loan in one
currency and a payment of an outstanding Loan in the other currency,
the Company may, by notice to the Agent given not later than 10:00
A.M. (Houston time) on the third Sterling Business Day prior to the
date of such new Loan, elect that this Section 2.04(c) not apply to
such Loan and payment on such date.
(d) Unless the Agent shall have received notice from a
Bank prior to the date of any Borrowing that such Bank will not make
available to the Agent such Bank's share of such Borrowing, the Agent
may assume that such Bank has made such share available to the Agent
on the date of such Borrowing in accordance with subsections (b) and
(c) of this Section 2.04 and the Agent may, in reliance upon such
assumption, make available to the Company on such date a corresponding
amount. If and to the extent that such Bank shall not have so made
such share available to the Agent, such Bank and the Company severally
agree to repay to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date such
amount is made available to the Company until the date such amount is
repaid to the Agent, at (i) in the case of the Company, a rate per
annum equal to the higher of the Federal
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<PAGE> 8
Funds Rate and the interest rate applicable thereto pursuant to
Section 2.07 and (ii) in the case of such Bank, (x) if such Borrowing
is not a Sterling Borrowing, the Federal Funds Rate, and (y) if such
Borrowing is a Sterling Borrowing, the higher of (1) the Federal Funds
Rate and (2) the rate per annum determined by the Agent as being the
average rate quoted to NationsBank for such day (or, if such day is
not a Sterling Business Day, for the next preceding Sterling Business
Day) for overnight transactions in Sterling in London with other
leading banks. If such Bank shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
1.11. Section 2.05(b). Section 2.05(b) is hereby amended to
read as follows:
(b) Each Bank may, by notice to the Company and the
Agent, request that its (i) Euro-Dollar Loans and Money Market LIBOR
Loans, (ii) Base Rate Loans and Money Market Absolute Rate Loans,
(iii) Sterling Loans or (iv) any combination of the foregoing, payable
to such Bank (or such lending office, agency or branch of such Bank as
such Bank may specify in such request) be evidenced by a separate Note
of the Company. Each such Note shall be substantially in the form of
Exhibit A hereto with appropriate modifications to reflect the fact
that it evidences solely Loans of the relevant grouping. Any Bank
that receives multiple Notes through the application of this Section
2.05(b) agrees that: (1) the aggregate principal amount payable by the
Company under (A) the Notes issued to such Bank pursuant to this
Section 2.05(b) plus (B) all other Notes issued to such Bank pursuant
to this Agreement, shall never exceed the aggregate principal amount
of the Loans owed to such Bank (including, if applicable, the separate
lending offices, agencies or branches of such Bank) and (2) the payees
of the Notes issued at the request of such Bank shall enjoy no greater
rights (voting or otherwise) than such Bank would enjoy in the absence
of such request and such payees (including, if applicable, the
separate lending offices, agencies or branches of such Bank) shall be
considered a single Bank for purposes of this Agreement. Each
reference in this Agreement to the "Note" of such Bank shall be deemed
to refer to and include any or all such Notes, as the context may
require.
1.12. Section 2.05(c). The second sentence in Section
2.05(c) of the Agreement is hereby amended by inserting the phrase ", currency"
after the phrase "shall record the date, amount, maturity".
1.13. Section 2.07. Section 2.07 of the Agreement is hereby
amended to read as follows:
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<PAGE> 9
SECTION 2.07. Interest Rates. The Company shall pay
interest on the unpaid principal amount of each Loan from the date of
such Loan until such principal amount shall be paid in full, at the
following rates per annum:
(a) If such Loan is a Base Rate Loan, for each day that
such Loan is a Base Rate Loan, at a rate per annum equal to the sum of
(i) the Base Rate for such day plus (ii) at such times as the Margin
Increase Condition exists and the Additional Margin Increase Condition
does not exist, 1/8% plus (iii) at such times as the Additional Margin
Increase Condition exists, 1/4% plus (iv) at such times as any Event
of Default exists, 1%. Such interest shall be payable quarterly on
each March 31, June 30, September 30 and December 31 and on the date
such Base Rate Loan is Converted or paid in full. Any overdue
interest on any Base Rate Loan shall bear interest, payable on demand,
for each day until paid at a rate per annum equal to the sum of 1%
plus the otherwise applicable rate for such day.
(b) If such Loan is a Euro-Dollar Loan, at a rate per
annum equal at all times during any Interest Period for such Loan to
the sum of (i) 0.575% plus (ii) the applicable London Interbank
Offered Rate plus (iii) at such times as the Margin Increase Condition
exists and the Additional Margin Increase Condition does not exist,
1/8% plus (iv) at such times as the Additional Margin Increase
Condition exists, 1/4% plus (v) at such times as any Event of Default
exists, 1%; provided that if any Euro-Dollar Loan or any portion
thereof shall, as a result of clause (1)(c)(i) of the definition
herein of "Interest Period", have an Interest Period of less than one
month, such portion shall bear interest during such Interest Period at
the rate applicable to Base Rate Loans during such period. Such
interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
The "London Interbank Offered Rate" applicable to any Interest
Period means the arithmetic average (rounded upward, if necessary, to
the next higher 1/16 of 1%) of the respective rates per annum at which
deposits in Dollars are offered to each of the Reference Banks in the
London interbank market at approximately 11:00 A.M. (London time) two
Euro-Dollar Business Days before the first day of such Interest Period
in an amount approximately equal to the principal amount in Dollars of
the Euro-Dollar Loan of such Reference Bank to which such Interest
Period is to apply and for a period of time comparable to such
Interest Period.
(c) If such Loan is a Sterling Loan, at a rate per annum
equal at all times during any Interest Period for such Loan to the sum
of (i) 0.575% plus (ii) the applicable Sterling Interbank Offered Rate
plus (iii) at such times as the Margin Increase Condition exists and
the Additional Margin Increase Condition does not exist, 1/8% plus
(iv) at such times as the Additional Margin Increase
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<PAGE> 10
Condition exists, 1/4% plus (v) at such times as any Event of Default
exists, 1%; provided that if any Sterling Loan or any portion thereof
shall, as a result of clause (4)(c)(i) of the definition herein of
"Interest Period", have an Interest Period of less than one month,
such portion shall bear interest during such Interest Period at the
rate otherwise applicable to such Sterling Loans during such period
plus 1/2%. Such interest shall be payable for each Interest Period on
the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof.
The "Sterling Interbank Offered Rate" applicable to any
Interest Period means the arithmetic average (rounded upward, if
necessary, to the next higher 1/16 of 1%) of the respective rates per
annum at which deposits in Sterling are offered to each of the
Reference Banks in the London interbank market at approximately 11:00
A.M. (London time) two Sterling Business Days before the first day of
such Interest Period in an amount approximately equal to the principal
amount in Sterling of the Sterling Loan of such Reference Bank to
which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
(d) Any overdue principal of or interest on any
Euro-Dollar Loan shall bear interest, payable on demand, for each day
from and including the date payment thereof was due to but excluding
the date of actual payment, at a rate per annum equal to the sum of 1%
plus the higher of (i) the sum of 0.575% plus the London Interbank
Offered Rate applicable to such Loan plus at such times as the Margin
Increase Condition exists and the Additional Margin Increase Condition
does not exist, 1/8% plus at such times as the Additional Margin
Increase Condition exists, 1/4% and (ii) the sum of (1) 0.575% plus
(2) the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which one day (or, if such
amount due remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than three months as the
Agent may select) deposits in Dollars in an amount approximately equal
to such overdue payment due to each of the Reference Banks are offered
to such Reference Bank in the London interbank market for the
applicable period determined as provided above plus (3) at such times
as the Margin Increase Condition exists and the Additional Margin
Increase Condition does not exist, 1/8% plus (4) at such times as the
Additional Margin Increase Condition exists, 1/4% (or, if the
circumstances described in clause (i) or (ii) of Section 8.01(a) shall
exist, at a rate per annum equal to the sum of 1% plus the rate
applicable to Base Rate Loans for such day).
(e) Any overdue principal of or interest on any Sterling
Loan shall bear interest, payable on demand, for each day from and
including the date payment thereof was due to but excluding the date
of actual payment, at a rate per annum equal to the sum of 1% plus the
higher of (i) the sum of 0.575% plus the Sterling Interbank Offered
Rate applicable to such Loan plus at such times as the Margin
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<PAGE> 11
Increase Condition exists and the Additional Margin Increase Condition
does not exist, 1/8% plus at such times as the Additional Margin
Increase Condition exists, 1/4% and (ii) the sum of (1) 0.575% plus
(2) the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which one day (or, if such
amount due remains unpaid more than three Sterling Business Days, then
for such other period of time not longer than three months as the
Agent may select) deposits in Sterling in an amount approximately
equal to such overdue payment due to each of the Reference Banks are
offered to such Reference Bank in the London interbank market for the
applicable period determined as provided above plus (3) at such times
as the Margin Increase Condition exists and the Additional Margin
Increase Condition does not exist, 1/8% plus (4) at such times as the
Additional Margin Increase Condition exists, 1/4% (or, if the
circumstances described in clause (i) or (ii) of Section 8.01(b) shall
exist, at a rate per annum equal to the sum of 1% plus the rate
applicable to Base Rate Loans for such day).
(f) Subject to Section 8.01(a), each Money Market LIBOR
Loan shall bear interest on the outstanding principal amount thereof,
for the Interest Period applicable thereto, at a rate per annum equal
to the sum of the London Interbank Offered Rate for such Interest
Period (determined in accordance with Section 2.07(b) as if the
related Money Market LIBOR Borrowing were a Committed Euro-Dollar
Borrowing) plus (or minus) the Money Market Margin quoted by the Bank
making such Loan in accordance with Section 2.03 plus, at such times
as any Event of Default exists, 1%. Each Money Market Absolute Rate
Loan shall bear interest on the outstanding principal amount thereof,
for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan
in accordance with Section 2.03 plus, at such times as any Event of
Default exists, 1%. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer
than three months, at intervals of three months after the first day
thereof. Any overdue principal of or interest on any Money Market
Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 1% plus the Base Rate for such
day.
(g) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give prompt notice
to the Company and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the
absence of manifest error. Upon request of the Company, the Agent
shall furnish to it such information as to its determinations
hereunder as the Company may reasonably request.
(h) Each Reference Bank agrees to use its best efforts to
furnish quotations to the Agent as contemplated by this Section 2.07.
If any Reference Bank does not furnish a timely quotation, the Agent
shall determine the relevant interest rate on the basis of the
quotation or quotations furnished by the remaining
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<PAGE> 12
Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
(i) This Section 2.07 and each other provision in any of
the Financing Documents or in any other agreement executed in
connection herewith are specifically made subject to Section 2.16.
1.14. Section 2.08(a). The first sentence of Section 2.08(a)
of the Agreement is hereby amended by inserting the parenthetical "(in the case
of Sterling Loans, based on the Current Dollar Amounts thereof from time to
time during such period)" immediately prior to the period at the end thereof.
1.15. Section 2.08(b). The last sentence of Section 2.08(b)
of the Agreement is hereby amended by inserting the parenthetical "(in the case
of Sterling Loans, based on the Current Dollar Amounts thereof from time to
time during such period)" immediately before the period at the end thereof.
1.16. Section 2.09. Section 2.09 of the Agreement is hereby
amended by inserting the parenthetical "(in the case of Sterling Loans, such
principal amount being the Current Dollar Amount thereof then in effect)"
immediately before the period at the end thereof.
1.17. Section 2.10. Section 2.10 of the Agreement is hereby
amended to read as follows:
SECTION 2.10. Mandatory Termination or Reduction of
Commitments; Mandatory Prepayments. (a) The Commitments shall
terminate on the Termination Date and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on
such date.
(b) The Commitment of each Bank shall be automatically
reduced, on each Commitment Reduction Date, to an amount equal to such
Bank's ratable share of (i) the amount of maximum aggregate
Commitments set forth in Schedule I with respect to such Commitment
Reduction Date minus (ii) the aggregate amount of all reductions of
the Commitments pursuant to Section 2.09 or Section 2.10(d) applicable
to such Commitment Reduction Date pursuant to the following sentence.
Each reduction of the Commitments pursuant to Section 2.09 or Section
2.10(d) shall be applied to reduce each amount set forth on Schedule I
for each subsequent Commitment Reduction Date by an amount equal to
the amount of such reduction divided by the number of Commitment
Reduction Dates to occur on or after the date such reduction is
effective.
(c) On each Commitment Reduction Date, the Company shall
be obligated to repay such principal amount (together with accrued
interest thereon) of each Bank's outstanding Committed Loans, if any,
as may be necessary so that after such repayment the aggregate
outstanding principal amount of such Bank's
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<PAGE> 13
Committed Loans (in the case of Sterling Loans, such principal amount
being the Current Dollar Amounts of such Sterling Loans in effect on
such Commitment Reduction Date) does not exceed the amount of such
Bank's Commitment as then reduced. Whenever the Interest Period
specified in a Notice of Committed Borrowing includes (but does not
end on) a Commitment Reduction Date on which a payment of Committed
Loans will be required under this subsection (c), the Company shall
consider whether it wishes to repay on such Commitment Reduction Date
all or part of the Borrowing to be made pursuant to such Notice of
Committed Borrowing and, if so, shall specify the aggregate amount so
to be repaid in such Notice of Committed Borrowing. If the Company
fails so to select the Committed Borrowing to be repaid on any
Commitment Reduction Date, such Committed Borrowing shall be selected
by the Agent.
(d) On the fifth Domestic Business Day following any
Asset Sale that results in positive Excess Net Sales Proceeds, (i) the
Company will deliver to each of the Banks a certificate of the chief
financial officer, the chief accounting officer or the treasurer of
the Company certifying the amount of such Excess Net Sales Proceeds
from such Asset Sale, (ii) the Commitments shall be automatically
reduced ratably by an amount equal to 100% of the amount of such
Excess Net Sales Proceeds from such Asset Sale, (iii) the Company
shall be obligated to repay such principal amount (together with
accrued interest thereon) of each Bank's outstanding Committed Loans,
if any, as may be necessary so that after such repayment the aggregate
outstanding principal amount of such Bank's Committed Loans (in the
case of Sterling Loans, such principal amount being the Current Dollar
Amounts of such Sterling Loans in effect on the date of such
reduction) does not exceed the amount of such Bank's Commitment as
then reduced.
(e) If, on any Adjustment Date, either (i) the aggregate
outstanding principal amount of any Bank's Committed Loans (in the
case of Sterling Loans, such principal amount being the Current Dollar
Amounts of such Sterling Loans in effect on such Adjustment Date)
exceeds the amount of such Bank's Commitment or (ii) the aggregate
outstanding principal amount of all Loans (in the case of Sterling
Loans, such principal amount being the Current Dollar Amounts of such
Sterling Loans in effect on such Adjustment Date) exceeds the
aggregate amount of the Commitments, then on such Adjustment Date, the
Company shall be obligated to repay such principal amount (together
with accrued interest thereon) of each Bank's outstanding Committed
Loans as may be necessary so that after such repayment (x) the
aggregate outstanding principal amount of each Bank's Committed Loans
(in the case of Sterling Loans, such principal amount being the
Current Dollar Amounts of such Sterling Loans in effect on such
Adjustment Date) does not exceed the amount of such Bank's Commitment
on such Adjustment Date, and (y) the aggregate outstanding principal
amount of all Loans (in the case of Sterling Loans, such principal
amount being the Current Dollar Amounts of such Sterling Loans in
effect on such Adjustment Date) does not exceed the aggregate amount
of the
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<PAGE> 14
Commitments; provided that if the aggregate payment that is required
to be made pursuant to this Section 2.10(e) on any Adjustment Date
(other than any Adjustment Date referred to in clause (iii) of the
definition herein of "Adjustment Date") is less than $1,000,000, then
the Company shall not be required to make such payment on such
Adjustment Date pursuant to this Section 2.10(e).
1.18. Section 2.11(a). Section 2.11(a) of the Agreement is
hereby amended to read as follows:
(a) The Company may, upon at least one Domestic Business
Day's (or in the case of prepayments on any Sterling Borrowing, three
Sterling Business Days') notice to the Agent, prepay any Borrowing in
whole at any time, or from time to time in part in amounts aggregating
$10,000,000 (or, in the case of Sterling Borrowings, $10,000,000 in
the Current Dollar Amounts of such Sterling Loans then in effect or
5,000,000 pounds sterling, at the option of the Company in its sole
discretion) or any larger multiple of $1,000,000 (or, in the case of
Sterling Borrowings, $1,000,000 in the Current Dollar Amounts of such
Sterling Loans then in effect or 1,000,000 pounds sterling, as
applicable), by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment; provided
that no partial prepayment of a Sterling Borrowing, a Euro-Dollar
Borrowing or a Money Market Borrowing shall be made if after giving
effect thereto the principal amount of such Borrowing would be less
than $10,000,000 (or, in the case of Sterling Borrowings, the lesser
of $10,000,000 in the Current Dollar Amounts of such Sterling Loans
then in effect and 5,000,000 pounds sterling). Each such optional
prepayment shall be applied to prepay ratably the Loans of the
several Banks included in such Borrowing.
1.19. Section 2.12. Section 2.12 of the Agreement is hereby
amended to read as follows:
SECTION 2.12. General Provisions as to Payments. (a) The
Company shall make each payment of principal of, and interest on, the
Loans and of fees hereunder, not later than 12:00 Noon (London time in
the case of Sterling Loans and Houston time in the case of all other
Loans and fees) on the date when due, (i) in the case of fees and all
Loans other than Sterling Loans, in Federal or other funds immediately
available in Houston, to the Agent at its address referred to in
Section 9.01, in Dollars, and (ii) in the case of Sterling Loans, in
funds immediately available in London, to the Agent at its address
referred to in Section 2.04(b), in Sterling. The Agent will promptly
distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any
payment of principal of, or interest on, the Base Rate Loans or of
fees shall be due on a day which is not a Domestic Business Day, the
date for payment thereof shall be extended to the next succeeding
Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not
a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day unless
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<PAGE> 15
such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding
Euro-Dollar Business Day. Whenever any payment of principal of, or
interest on, the Money Market Loans shall be due on a day which is not
a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. Whenever
any payment of principal of, or interest on, the Sterling Loans shall
be due on a day which is not a Sterling Business Day, the date for
payment thereof shall be extended to the next succeeding Sterling
Business Day unless such Sterling Business Day falls in another
calendar month, in which case the date for payment thereof shall be
the next preceding Sterling Business Day. If the date for any payment
of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the
Company prior to the date on which any payment is due from the Company
to the Banks hereunder that the Company will not make such payment in
full, the Agent may assume that the Company has made such payment in
full to the Agent on such date and the Agent may, in reliance upon
such assumption, cause to be distributed to each Bank on such due date
an amount equal to the amount then due such Bank. If and to the
extent that the Company shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount distributed
to such Bank together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank
repays such amount to the Agent, at (i) if such amount was distributed
in Dollars, the Federal Funds Rate, and (ii) if such amount was
distributed in Sterling, the higher of (x) the Federal Funds Rate and
(y) the rate per annum determined by the Agent as being the average
rate quoted to NationsBank for such day (or, if such day is not a
Sterling Business Day, for the next preceding Sterling Business Day)
for overnight transactions in Sterling in London with other leading
banks.
(c) At the time of each payment of principal of any Loan,
the Company shall specify, by notice to the Agent, the Loans to which
such payment shall be applied. If the Company fails to so specify,
the Agent shall apply such payment first to such Committed Loans as
the Agent may select and, after payment in full of the Committed
Loans, to such other Loans as the Agent may select.
1.20. Section 2.13. Section 2.13 of the Agreement is hereby
amended to read as follows:
SECTION 2.13. Funding Losses. If any Obligor makes any
payment of principal with respect to any Fixed Rate Loan (pursuant to
Article II, VI or VIII or otherwise) on any day other than the last
day of the Interest Period applicable thereto, or the end of an
applicable period fixed pursuant to Section 2.07(d) or Section
2.07(e), or if the Company fails to borrow any Fixed Rate Loans after
notice has been given to any Bank in accordance with Section 2.04(a),
or if any
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<PAGE> 16
Conversion of any Euro-Dollar Loan or Sterling Loan occurs on any day
other than the last day of an Interest Period applicable thereto or
fails to occur as contemplated herein, the Company shall reimburse
each Bank within 15 days after demand for any resulting loss or
expense incurred by it (or by an existing or prospective Participant
in the related Loan), including (without limitation) any loss incurred
in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin from the period after any such payment or
failure to borrow and, in the case of any such payment or Conversion
occurring on a day other than the last day of the applicable Interest
Period, losses resulting from currency fluctuations after such payment
or such Conversion; provided that such Bank shall have delivered to
the Company a certificate as to the amount of such loss or expense,
which certificate shall be conclusive in the absence of manifest
error; provided further that, the Company shall not be required to
reimburse a Bank for any such loss or expense resulting from the
failure of a Conversion to occur if such failure is the fault of such
Bank.
1.21. Section 2.18. Section 2.18 of the Agreement is hereby
amended to read as follows:
SECTION 2.18. Conversions. (a) The Company may on any
Sterling Business Day, upon notice given to the Agent no later than
10:00 a.m. (Houston time) on the third Sterling Business Day prior to
the date of the proposed Conversion and subject to the provisions of
Section 2.02 and Article VIII and the other provisions hereof, Convert
all Committed Loans comprising one or more Borrowings; provided, that
(i) Loans comprising a Borrowing may not be Converted if after giving
effect to such Conversion, such Borrowing would be (A) a Euro-Dollar
Borrowing and the outstanding principal amount of such Borrowing would
be less than $10,000,000 or (B) a Sterling Borrowing and the
outstanding principal amount of such Sterling Borrowing would be less
than the lesser of 5,000,000 pounds sterling and $10,000,000 (based
on the Current Dollar Amount of the Sterling Loans comprising such
Sterling Borrowing then in effect), and (ii) no Conversion (other
than changing Euro-Dollar Loans or Sterling Loans into Base Rate
Loans) may be made if any Event of Default is then existing. Each
such notice of a Conversion shall, within the restrictions specified
above, specify (i) the date of such Conversion, (ii) the Loans to be
Converted, (iii) if after giving effect to such Conversion, such
Borrowing would be a Euro-Dollar Borrowing or a Sterling Borrowing,
the commencement date and duration of the proposed Interest Period
for each Loan comprising such Borrowing, and (iv) the nature of such
Conversion (i.e., whether such Conversion is a change of Committed
Loans of one Type into another Type, a continuation of Euro-Dollar
Loans or Sterling Loans as such for an additional Interest Period or
an election to change an Interest Period). Each such notice shall
be irrevocable.
(b) If the aggregate unpaid principal amount of
Euro-Dollar Loans comprising any Borrowing shall be reduced by payment
or prepayment or
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<PAGE> 17
otherwise, to less than $10,000,000, such Loans shall automatically,
on the last day of the then existing Interest Period therefor, Convert
into Base Rate Loans.
(c) If the Company shall fail (whether as a result of the
proviso to the first sentence of Section 2.18(a) or otherwise) to
select the duration of any Interest Period for any Euro-Dollar Loans
or Sterling Loans in accordance with the provisions contained in the
definition herein of "Interest Period", or if there shall be any Event
of Default, such Loans will automatically on the last day of the then
existing Interest Period therefor, Convert into Base Rate Loans.
1.22. Section 2.19. Article II of the Agreement is hereby
further amended by inserting at the end thereof a new Section 2.19 to read as
follows:
SECTION 2.19 Sterling Loans. (a) At or before 11:00 A.M.
(London time) two Sterling Business Days before each Adjustment Date
or as soon thereafter as practicable, each Reference Bank agrees to
use its best efforts to furnish to the Agent the information
contemplated by the definition herein of "Current Exchange Rate".
Promptly thereafter and in any event by 4:00 P.M. (London time) or as
soon thereafter as practicable (subject to the last sentence of this
Section 2.19(a)), the Agent shall determine the Current Exchange Rate
and the Current Dollar Amount of each Sterling Loan. All
determinations of any Current Exchange Rate or any Current Dollar
Amount from time to time shall be made by the Agent, which
determinations shall be conclusive in the absence of manifest error,
and the Agent shall give prompt notice to the Banks and the Company of
each such determination. If any Reference Bank does not furnish a
timely quotation, the Agent shall determine the relevant Current
Exchange Rate and Current Dollar Amounts on the basis of the
information furnished by the remaining Reference Bank or Banks or, if
no such information is available on a timely basis, the then existing
Current Exchange Rate shall continue to apply and the provisions of
Section 8.01(b) shall apply.
(b) The Company expressly agrees that all payments of
principal of and interest on Sterling Loans shall be made in Sterling.
(c) If (i) on any date on which a Notice of Committed
Borrowing or notice of Conversion is given by the Company to the
Agent, the aggregate outstanding principal amount of the Loans plus
the principal amount of any new Borrowing (in the case of outstanding
Sterling Loans and in the case of any new Sterling Borrowing, such
principal amounts being the Current Dollar Amounts thereof as of the
date such notice is given) would not exceed the aggregate amount of
the Commitments, and (ii) upon recalculation of the Current Dollar
Amounts prior to such new Borrowing or Conversion, as the case may be,
as contemplated by Section 2.19(a) and the relevant definitions
herein, the aggregate outstanding principal amount of the Loans plus
the principal amount of any new Borrowing (in the case of outstanding
Sterling Loans and in the case of any new Sterling Borrowing, such
principal amounts being the Current Dollar Amounts thereof
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<PAGE> 18
immediately following such recalculation) would exceed the aggregate
amount of the Commitments, then (x) if such excess is equal to or
greater than $1,000,000, the requested amount of such new Borrowing or
Conversion shall be deemed to be decreased by the amount of such
excess (with such decrease being applied to each of the Banks ratably
based on their respective Commitments), and (y) if such excess is less
than $1,000,000, the requested amount of such new Borrowing or
Conversion shall not be decreased and such excess shall be a
"Permitted Excess" applicable to such Sterling Borrowing.
1.23. Section 3.02(b). Section 3.02(b) of the Agreement is
hereby amended to read as follows:
(b) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans (in the case of
Sterling Loans, such principal amount being the Current Dollar Amounts
of such Sterling Loans in effect as of the date of such Borrowing)
will not exceed the aggregate amount of the Commitments plus the
Permitted Excess, if any, applicable to such Borrowing in accordance
with Section 2.19(c);
1.24. Section 6.01. Section 6.01 of the Agreement is hereby
amended by inserting the parenthetical "(in the case of Sterling Loans, such
principal amount being the Current Dollar Amounts of such Sterling Loans then
in effect)" after the phrase "at least 51% in aggregate principal amount of the
Loans" in clause (ii) thereof.
1.25. Section 8.01. Section 8.01 of the Agreement is hereby
amended to read as follows:
Section 8.01. Basis for Determining Interest Rate Inadequate
or Unfair. (a) If on or prior to the first day of any of any Interest
Period (unless such Interest Period is an Interest Period for Sterling
Loans):
(i) the Agent is advised by the Reference Banks
that deposits in Dollars (in the applicable amounts) are not
being offered to the Reference Banks in the relevant market
for such Interest Period, or
(ii) in the case of a Committed Borrowing, Banks
having 50% or more of the aggregate amount of the Commitments
advise the Agent that the London Interbank Offered Rate as
determined by the Agent will not adequately and fairly reflect
the cost to such Banks of funding their Euro-Dollar Loans for
such Interest Period,
the Agent shall forthwith give notice thereof to the Company and the
Banks, whereupon until the Agent notifies the Company that the
circumstances giving rise to such suspension no longer exist, (1) the
obligations of the Banks to make Euro-Dollar Loans, or make any
Conversion that results in any Loan becoming or remaining a
Euro-Dollar Loan, shall be suspended, and (2) unless the Company
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<PAGE> 19
notifies the Agent before 10:00 A.M. (Houston time) on the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, (x) if such
Fixed Rate Borrowing is a Euro-Dollar Borrowing, such Borrowing shall
instead be made as a Base Rate Borrowing and (y) if such Fixed Rate
Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR
Loans comprising such Borrowing shall bear interest for each day from
and including the first day to but excluding the last day of the
Interest Period applicable thereto at the sum of the Base Rate for
such day plus at such times as the Margin Increase Condition exists
and the Additional Margin Increase Condition does not exist, 1/8% plus
at such times as the Additional Margin Increase Condition exists, 1/4%
plus at such times as any Event of Default exists, 1%.
(b) If on or prior to the first day of any Interest Period for
any Sterling Loan:
(i) the Agent is advised by the Reference Banks
that deposits in Sterling (in the applicable amounts) are not
being offered to the Reference Banks in the relevant market
for such Interest Period, or
(ii) Banks having 50% or more of the aggregate
amount of the Commitments advise the Agent that the Sterling
Interbank Offered Rate as determined by the Agent will not
adequately and fairly reflect the cost to such Banks of
funding their Sterling Loans for such Interest Period, or
(iii) any Bank advises the Agent that such Bank
reasonably believes that having its Sterling Loan outstanding
for such Interest Period could reasonably be expected to
result in a reduction in interest payable to such Bank
pursuant to Section 2.16(a) or 2.16(b), or
(iv) none of the Reference Banks furnishes the
Agent with the information contemplated by Section 2.19(a) or
Banks having 50% or more of the aggregate amount of the
Commitments advise the Agent that Sterling is not freely
convertible and freely transferable into Dollars or that
Dollars are not freely convertible and freely transferable
into Sterling,
the Agent shall forthwith give notice thereof to the Company and the
Banks, whereupon until the Agent notifies the Company that the
circumstances giving rise to such suspension no longer exist:
(1) the obligations of the Banks to make new Sterling Loans, or
make any Conversion that results in any Loan (other than an
existing Sterling Loan) becoming a Sterling Loan, shall be
suspended and (A) unless the Company notifies the Agent before
10:00 A.M. (Houston time) on the date specified for any new
Sterling Borrowing for which a Notice of Borrowing has
previously been given, that it elects not to borrow on such
date, such
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<PAGE> 20
Sterling Borrowing shall instead be made as a Base Rate
Borrowing (based on the Current Dollar Amount of such Sterling
Borrowing, but subject to the provisions and limitations
applicable to all Base Rate Borrowings set forth herein), and
(B) unless the Company notifies the Agent before 10:00 A.M.
(Houston time) on the date specified for any Conversion of a
Loan (other than an existing Loan) into a Sterling Loan for
which a notice of Conversion has previously been given, that
it elects not to Convert such Loan on such date, such Loan
shall be Converted into a Base Rate Loan;
(2) in the event that any of the circumstances referred to in
paragraphs (i), (ii) or (iii) exist but none of the
circumstances referred to in paragraph (iv) exists, the
obligations of the Banks to make any Conversion that results
in any Sterling Loan remaining a Sterling Loan shall be
suspended;
(3) in the event that any of the circumstances referred to in
paragraph (iv) exist but none of the circumstances referred to
in paragraphs (i), (ii) or (iii) exist, each existing Sterling
Loan shall be Converted on the last day of each Interest
Period therefor by continuing such Sterling Loan for
additional one month Interest Period(s) until such time as the
circumstances causing such suspension no longer exist; and
(4) in the event that any of the circumstances referred to in
paragraph (iv) exist and any of the circumstances referred to
in paragraph (i), (ii) or (iii) exist, each existing Sterling
Loan shall continue as a Sterling Loan but shall bear interest
at (a) a rate per annum to be agreed upon by the Company and
the Required Banks, acting reasonably and in good faith with a
view to agreeing to an interest rate that is the economic
equivalent of the interest rate that would have applied (for
successive one month Interest Period(s) until such time as the
circumstances causing such suspension no longer exist) had
such event not existed, or (b) in the absence of such
agreement referred to in the preceding clause (a), at the rate
applicable to such Sterling Loan prior to such event.
1.26. Section 8.02. Section 8.02 of the Agreement is hereby
amended to read as follows:
Section 8.02. Illegality. (a) If, after (x) the date of this
Agreement, in the case of any Euro-Dollar Loan or (y) the date of the
related Money Market Quote, in the case of any Money Market LIBOR
Loan, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or
compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall make it
unlawful or impossible for any Bank (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans
-20-
<PAGE> 21
or Money Market LIBOR Loans, as the case may be, or make any
Conversion that results in any Loan becoming or remaining a
Euro-Dollar Loan, and such Bank shall so notify the Agent, the Agent
shall forthwith give notice thereof to the other Banks and the
Company, whereupon until such Bank notifies the Company and the Agent
that the circumstances giving rise to such suspension no longer exist,
the obligation of such Bank to make Euro-Dollar Loans, or make any
Conversion that results in any Loan becoming or remaining a
Euro-Dollar Loan, or make Money Market LIBOR Loans, as the case may
be, shall be suspended. Before giving any notice to the Agent
pursuant to this Section 8.02(a), such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid
the need for giving such notice and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. If such Bank shall
determine that it may not lawfully continue to maintain and fund any
of its outstanding Euro-Dollar Loans or Money Market LIBOR Loans, as
the case may be, to maturity and shall so specify in such notice, the
Company shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan or Money Market LIBOR
Loan, as the case may be, of such Bank, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, the
Company shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other
Banks), and such Bank shall make such a Base Rate Loan.
(b) If, after the date of this Agreement, the adoption of any
applicable law, rule or regulation, or any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any
Bank (or its Sterling Lending Office) with any request or directive
(whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible
for any Bank (or its Sterling Lending Office) to make, maintain or
fund its Sterling Loans or make any Conversion that results in any
Loan becoming or remaining a Sterling Loan, and such Bank shall so
notify the Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Company, whereupon until such Bank notifies the
Company and the Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make
Sterling Loans, or make any Conversion that results in any Loan
becoming or remaining a Sterling Loan, as the case may be, shall be
suspended. Before giving any notice to the Agent pursuant to this
Section 8.02(b), such Bank shall designate a different Sterling
Lending Office if such designation will avoid the need for giving such
notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it
may not lawfully continue to maintain and fund any of its outstanding
Sterling Loans to maturity and shall so specify in such notice, the
Company shall immediately prepay in full the then outstanding
principal amount of each such Sterling Loan of such Bank together with
accrued interest thereon. Concurrently with prepaying each such
Sterling Loan, the
-21-
<PAGE> 22
Company shall borrow a Base Rate Loan, and such Bank shall make such
Base Rate Loan, in the principal amount equal to the Current Dollar
Amount of such Sterling Loan from such Bank (on which interest and
principal shall be payable contemporaneously with the related Sterling
Loans of the other Banks) (or, if making such Base Rate Loan in such
amount would result in (x) the aggregate outstanding principal amount
of such Bank's Committed Loans (in the case of any remaining Sterling
Loans, such principal amount being the Current Dollar Amounts of such
remaining Sterling Loans then in effect) exceeding the amount of such
Bank's Commitment then in effect, or (y) the aggregate outstanding
principal amount of all Loans (in the case of any remaining Sterling
Loans, such principal amount being the Current Dollar Amounts of such
remaining Sterling Loans then in effect) exceeding the aggregate
amount of the Commitments, in such lesser principal amount so that no
such excess referred to in clause (x) or (y) would so result).
1.27. Section 8.04. Section 8.04 of the Agreement is hereby
amended to read as follows:
Section 8.04. Base Rate Loans Substituted for Affected Fixed
Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar
Loans or Sterling Loans to the Company has been suspended pursuant to
Section 8.02 or (ii) any Bank has demanded compensation under Section
8.03(a) in respect of Euro-Dollar Loans or Sterling Loans and the
Company shall, by at least five Euro-Dollar Business Days' prior
notice to such Bank through the Agent, have elected that the
provisions of this Section 8.04 shall apply to such Bank, then, unless
and until such Bank notifies the Company that the circumstances giving
rise to such suspension or demand for compensation no longer apply:
(a) all Loans to the Company which would
otherwise be made by such Bank as, or be Converted by such
Bank as or into, Euro-Dollar Loans or Sterling Loans, as the
case may be, shall instead be made as, or Converted into, Base
Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the
other Banks), and
(b) after each of its Euro-Dollar Loans or
Sterling Loans, as the case may be, to the Company has been
repaid, all payments of principal which would otherwise be
applied to repay such Fixed Rate Loans shall be applied to
repay its Base Rate Loans instead.
1.28. Section 8.05. Section 8.05 of the Agreement is hereby
amended to read as follows:
Section 8.05. Substitution of Bank. If (i) the obligation of
any Bank to make Euro-Dollar Loans or Sterling Loans has been
suspended pursuant to Section 8.01(b)(iii) or Section 8.02, (ii) any
Bank has demanded compensation
-22-
<PAGE> 23
under Section 8.03 or payment of Taxes or Other Taxes under Section
2.17, or (iii) after satisfaction of all applicable conditions
precedent, any Bank fails to fund when due any Committed Loan it is
obligated to fund under this Agreement, the Company shall have the
right, with the assistance of the Agent, to seek a mutually
satisfactory substitute bank or banks (which may be one or more of the
Banks) to purchase the Note and assume the Commitment of such Bank
(any such Bank is herein called an "Affected Bank"). Each Affected
Bank agrees to sell, without recourse, all of its Commitment, its
interest in this Agreement and its Note to any such bank for an amount
equal to the sum of the outstanding unpaid principal of and accrued
interest on the Loans of such Affected Bank and all commitment fees
and other fees and amounts due such Affected Bank hereunder,
calculated, in each case, to the date such Commitment, interest in
this Agreement and Note are purchased (the principal of and accrued
interest on Sterling Loans shall be paid in Sterling and all other
amounts shall be paid in Dollars).
1.29. Section 9.06(c). The first sentence of Section 9.06(c)
of the Agreement is hereby amended by inserting the parenthetical "(in the case
of Sterling Loans, based on the Current Dollar Amount of such Sterling Loans in
effect at such time)" after the phrase "equals $10,000,000 or more".
1.30. Section 9.14. The Agreement is hereby further amended
by inserting, immediately following Section 9.13 of the Agreement, a new
Section 9.14 reading as follows:
SECTION 9.14. Judgment Currency. The obligations of the
Company hereunder and under the Notes to make payments in Dollars or
in Sterling (the "Obligation Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed
in or converted into any currency other than the Obligation Currency
except to the extent to which such tender or recovery shall result in
the effective receipt by the Banks of the full amount of the
Obligation Currency expressed to be payable hereunder and under the
Notes, and accordingly such obligations of the Company shall be
enforceable as an alternate or additional cause of action for the
purpose of recovery in the Obligation Currency of the amount (if any)
by which such effective receipt shall fall short of the full amount of
the Obligation Currency expressed to be payable hereunder and under
the Notes and shall not be affected by judgment being obtained for any
other sums due under this Agreement and the Notes.
1.31. Schedule VII. The Agreement is further amended by
inserting, immediately after Schedule VI, a new Schedule VII in the form of
Schedule VII hereto.
1.32. Exhibits A, B, C, D and I. Exhibits A, B, C, D and I
to the Agreement are hereby amended by replacing such exhibits with Exhibits A,
B, C, D and I hereto, respectively.
-23-
<PAGE> 24
2. Effectiveness. The effectiveness of this Amendment is subject
to the satisfaction (or waiver in accordance with Section 9.05 of the
Agreement) of receipt by the Agent of:
2.1. counterparts of this Amendment signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation
from such party of execution of a counterpart hereof by such party);
2.2. a Note for the account of each Bank, duly executed by
the Company substantially in the form of Exhibit A hereto;
2.3. the First Amendment to Amended and Restated
Subsidiary Guaranty Agreement dated as of the date hereof (the
"Guaranty Amendment"), duly executed by each of the Required
Guarantors, substantially in the form of Exhibit E-1 hereto;
2.4. an opinion of Newton W. Wilson, III, General Counsel
of the Company, substantially in the form of Exhibit F hereto;
2.5. receipt by the Agent of an opinion of Andrews & Kurth
L.L.P., special counsel for the Obligors, substantially in the form of
Exhibit G hereto;
2.6. an opinion of Bracewell & Patterson, L.L.P., special
counsel for the Agent, substantially in the form of Exhibit H hereto;
and
2.7. all documents which the Agent may reasonably request
relating to the existence of the Obligors, the corporate authority for
and the validity of this Amendment, the Notes issued pursuant to
Section 2.2 hereof and the Guaranty Amendment and any other matters
relevant thereto, all in form and substance satisfactory to the Agent.
3. Miscellaneous.
3.1. Bank Consent. Each of the undersigned Banks hereby
consents to the amendment of the Subsidiary Guaranty Agreement pursuant to the
terms and provisions of the Guaranty Amendment.
3.2. Amendments, Etc. No amendment or waiver of any
provision of this Amendment, nor consent to any departure by the Company
therefrom, shall in any event be effective unless effected in accordance with
Section 9.05 of the Agreement.
3.3. Governing Law. This Amendment and the Agreement as
amended hereby shall be construed in accordance with and governed by the laws
of the State of Texas.
-24-
<PAGE> 25
3.4. Preservation. Except as specifically modified by the
terms of this Amendment or the Guaranty Amendment, all of the terms,
provisions, covenants, warranties and agreements contained in the Agreement
(including, without limitation, exhibits thereto) or any other Financing
Document remain in full force and effect. Undefined capitalized terms used
herein are used herein as defined in the Agreement as amended hereby.
3.5. Execution in Counterparts. This Amendment may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
3.6. Representations and Warranties. The Company hereby
represents and warrants to the Banks, the Co-Agent and the Agent that (i) the
representations and warranties contained in Article IV of the Agreement (other
than the representations and warranties contained in Sections 4.04(a) and
4.04(c) thereof) are correct on and as of the date hereof as though made on and
as of the date hereof, with this Amendment, the Agreement as amended hereby,
the Guaranty Amendment and the Notes issued pursuant to Section 2.2 hereof
constituting "Financing Documents" for purposes thereof, and (ii) no event has
occurred and is continuing which constitutes a Default or an Event of Default.
3.7. Default. Without limiting any other event which may
constitute an Event of Default, in the event that any representation or
warranty set forth herein shall be incorrect or misleading in any material
respect when made, such event shall constitute an "Event of Default" under the
Agreement, as amended hereby.
3.8. Original Notes. Each of the Banks shall, reasonably
promptly after the execution by all parties of this Amendment, deliver to the
Company each Note held by such Bank that was issued and outstanding immediately
prior to the execution of this Amendment.
-25-
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: /s/ M. N. Markowitz
Name: M. N. Markowitz
Title: Vice President and Treasurer
NATIONSBANK OF TEXAS, N.A.,
individually and as Agent
By: /s/ Paul A. Squires
Name: Paul A. Squires
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
individually and as Co-Agent
By: /s/ John Robinson
Name: John Robinson
Title: Vice President
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY, individually and as
Co-Agent
By: /s/ Evans Swann
Name: Evans Swann
Title: Vice President
By: /s/ Jan Buettgen
Name: Jan Buettgen
Title: Assistant Vice President
-26-
<PAGE> 27
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Dixon Schultz
Name: Dixon Schultz
Title: Vice President
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ Xavier Ratouis
Name: Xavier Ratouis
Title: Authorized Signature
MELLON BANK, N.A.
By: /s/ A. Gary Chace
Name: A. Gary Chace
Title: Senior Vice President
THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. Ashby
Name: F. C. H. Ashby
Title: Senior Manager, Loan Operations
CHEMICAL BANK
By: /s/ Mary Jo Woodford
Name: Mary Jo Woodford
Title: Vice President
-27-
<PAGE> 28
LTCB TRUST COMPANY
By: /s/ S. Otsubo
Name: Satory Otsubo
Title: Executive Vice President
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Mark A. Cox
Name: Mark A. Cox
Title: Vice President
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By: /s/ Henri de Clisson
Name: Henri de Clisson
Title: VP & Deputy General Manager
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ Ann M. Rhoads
Name: Ann M. Rhoads
Title: Vice President
THE MITSUBISHI TRUST & BANKING
CORPORATION
By: /s/ Masaaki Yamagishi
Name: Masaaki Yamagishi
Title: Chief Manager
-28-
<PAGE> 29
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ John Kowalczuk
Name: John Kowalczuk
Title: Vice President
BANQUE PARIBAS, HOUSTON AGENCY
By: /s/ Barton D. Schouest
Name: Barton D. Schouest
Title: Group Vice President
By: /s/ Patrich Milon
Name: Patrich Milon
Title: Sr. VP & Deputy General Manager
THE YASUDA TRUST AND BANKING COMPANY,
LIMITED, NEW YORK BRANCH
By: /s/ Gerald T. Gill
Name: Gerald T. Gill
Title: Vice President
CITIBANK, N.A.
By: /s/ Barbara A. Cohen
Name: Barbara A. Cohen
Title: Vice President
NATIONAL WESTMINSTER BANK PLC
By: /s/ David L. Smith
Name: David L. Smith
Title: Vice President
-29-
<PAGE> 30
DRESDNER BANK AG, NEW YORK
AND GRAND CAYMAN BRANCHES
By: /s/ B. C. Erickson
Name: B. C. Erickson
Title: Vice President
By: /s/ J. Michael Leffler
Name: J. Michael Leffler
Title: First Vice President
DEN NORSKE BANK AS
By: /s/ Nelvin Farstad
Name: Nelvin Farstad
Title: Senior Vice President
By: /s/ Anne Marie Rotan
Name: Anne Marie Rotan
Title: First Vice President
BANK OF TAIWAN
By: /s/ Kao-Chin Wang
Name: Kao-Chin Wang
Title: Vice President & General Manager
BANK OF TOKYO, LTD., DALLAS AGENCY
By: /s/ J. McIntyre
Name: J. McIntyre
Title: Vice President
-30-
<PAGE> 31
CHRISTIANIA BANK
By: /s/ Jahn O. Roising
Name: Jahn O. Roising
Title: First Vice President
By: /s/ Peter M. Dodge
Name: Peter M. Dodge
Title: Vice President
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By: /s/ Iain A. Whyte
Name: Iain A. Whyte
Title: Assistant Vice President
By: /s/ Mark A. Harrington
Name: Mark A. Harrington
Title: Vice President & Regional Manager
-31-
<PAGE> 32
SCHEDULE VII
NOTICE INFORMATION FOR STERLING LOANS
<TABLE>
<CAPTION>
Bank Sterling Lending Office
- ---- -----------------------
<S> <C>
NationsBank of Texas, N.A. NationsBank of Texas, N.A.
901 Main Street, 13th Floor
P.O. Box 831000
Dallas, Texas 75283-1000
Attention: Tammy Grier
Telephone No.: (214) 508-0987
Telecopier No.: (214) 508-2515
with a copy to:
NationsBank of Texas, N.A.
700 Louisiana Street, 8th Floor
Houston, Texas 77002
Attention: Paul Squires and Marion Leman
Telephone No.: (713) 247-6952
Telecopier No.: (713) 247-6568
Bank of America National Trust and Bank of America
Savings Association 1850 Gateway Blvd.
Concord, California 94520
Attention: John Sanchez
Telephone No.: (510) 675-7479
Telecopier No.: (510) 675-7531
Union Bank of Switzerland, Houston Union Bank of Switzerland, New York Branch
Agency 299 Park Avenue
New York, New York 10002
Attention: Caroline Z. Cruz
Telephone No.: (212) 821-3037
Telecopier No.: (212) 821-3259 or 821-3891
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
Bank Sterling Lending Office
- ---- -----------------------
<S> <C>
The First National Bank of Chicago The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: Bill Laird
Telephone No.: (312) 732-5635
Telecopier No.: (312) 732-4840
Credit Lyonnais Cayman Island Branch Credit Lyonnais Cayman Island Branch
1000 Louisiana Street, Suite 5360
Houston, Texas 77002
Attention: Bernadette Archie
Telephone No.: (713) 753-8723
Telecopier No.: (713) 751-0307
Mellon Bank, N.A. Mellon Landon
Princess House
1 Suffolk Land
London EC 4ROAN
Attention: Richard Gulston
Telephone No.: 4471-623-2495
Telecopier No.: 4471-623-5023
The Bank of Nova Scotia The Bank of Nova Scotia
600 Peachtree Street N.E., Suite 2700
Atlanta, Georgia 30328
Attention: Dottie Legista
Telephone No.: (404) 877-1535
Telecopier No.: (404) 888-8998
Chemical Bank Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Edna Norat
Telephone No.: (212) 270-3552
Telecopier No.: (212) 270-4016
</TABLE>
-2-
<PAGE> 34
<TABLE>
<CAPTION>
Bank Sterling Lending Office
- ---- -----------------------
<S> <C>
LTCB Trust Company LTCB Trust Company
165 Broadway, 48th Floor
New York, New York
Attention: Winston Brown
Telephone No.: (212) 335-4854
Telecopier No.: (212) 608-3081
Societe Generale, Southwest Agency Societe Generale, Southwest Agency
2001 Ross Avenue, Suite 4800
Dallas, Texas 75201
Attention: Molly Franklin
Telephone No.: (214) 979-2767
Telecopier No.: (214) 754-0171
Banque Nationale de Paris, Houston Banque Nationale de Paris, New York Branch
Agency 499 Park Avenue
New York, New York 10022
Attention: Charmaine Robinson or
Jessie Griffiths
Telephone No.: (212) 415-9785 or 415-9610
Telecopier No.: (212) 415-9695
with a copy to:
Banque Nationale de Paris, Houston Agency
333 Clay Street, Suite 3400
Houston, Texas 77002
Attention: Richard Hite
Telephone No.: (713) 951-1224
Telecopier No.: (713) 659-1414
First Interstate Bank of Texas, N.A. First Interstate Bank of Texas, N.A.
P.O. Box 3326
Houston, Texas 77253-3326
Attention: Blanca Ruiz or Darlene Briks
Telephone No.: (713) 250-4332 or 250-4874
Telecopier No.: (713) 250-6933
</TABLE>
-3-
<PAGE> 35
<TABLE>
<CAPTION>
Bank Sterling Lending Office
- ---- -----------------------
<S> <C>
The Mitsubishi Trust & Banking The Mitsubishi Trust and Banking Corporation, Chicago
Corporation Branch
440 South LaSalle St., Suite 3100
Chicago, Illinois 60605
Attention: David Miller or Harash N. Jayonthi
Telephone No.: (312) 408-6023 or 408-6022
Telecopier No.: (312) 663-0863
Morgan Guaranty Trust Company of New Morgan Guaranty Trust Company of New York
York 60 Wall Street
New York, New York 10260
Attention: Phillip McNeal or J. Kowalczuk
Telephone No.: (212) 648-7181
Telecopier No.: (212) 648-5014
Banque Paribas, Houston Agency Banque Paribas, Houston Agency
1200 Smith Street, Suite 3100
Houston, Texas 77002
Attention: Bart Schouest
Telephone No.: (713) 659-4811
Telecopier No.: (713) 659-3832
The Yasuda Trust and Banking Company, The Yasuda Trust and Banking Company, Limited, New York
Limited, New York Branch Branch
666 Fifth Avenue, Suite 801
New York, New York 10103
Attention: Richard Ortiz or Winnie Tang
Telephone No.: (212) 373-5755 or 373-5760
Telecopier No.: (212) 373-5797
with a copy to:
1 Liverpool Street
London, EC2M 7NH, United Kingdom
Attention: Nick Beeson
Telephone No.: 4471-628-5721
Telecopier No.: 4471-374-4894/4941
</TABLE>
-4-
<PAGE> 36
<TABLE>
<CAPTION>
Bank Sterling Lending Office
- ---- -----------------------
<S> <C>
Citibank, N.A. Citicorp North America, Inc.
2000 Citicorp Center
1200 Smith Street
Houston, Texas 77002
Attention: Raymond Bowen or
L. Don Miller
Telephone No.: (713) 654-2962
Telecopier No.: (713) 654-2849
National Westminster Bank PLC NatWest Markets
175 Water Street
New York, New York 10038
Attention: Robert Passarells
Telephone No.: (212) 602-4149
Telecopier No.: (212) 602-4118
Dresdner Bank AG, New York Branch and Dresdner Bank
Grand Cayman Branches 75 Wall Street
New York, New York 10005-2889
Attention: B. Craig Erickson or
Yunie Shin-Thomas
Telephone No.: (212) 574-0183
Telecopier No.: (212) 574-0130
Den Norske Bank AS Den Norske Bank AS, London
20 St. Dunstan's Hill
London EC3R 8HY England
Attention: Nick Smith
Telephone No.: 4471-621-1111
Telecopier No.: 4471-626-7400
Telex No.: 887654
Bank of Taiwan Bank of Taiwan, New York Agency
One World Trade Center, Suite 5323
New York, New York 10048
Attention: J.I. Tseng
Telephone No.: (212) 938-3488
Telecopier No.: (212) 775-9026 or 775-9027
</TABLE>
-5-
<PAGE> 37
<TABLE>
<CAPTION>
Bank Sterling Lending Office
- ---- -----------------------
<S> <C>
Bank of Tokyo, Ltd., Dallas Agency Bank of Tokyo, Ltd., Dallas Agency
909 Fannin Street, Suite 1104
Houston, Texas 77002
Attention: John M. McIntyre
Telephone No.: (713) 658-1021
Telecopier No.: (713) 658-8341
Christiania Bank Christiania Bank og Kreditkasse
11 West 42nd Street, 7th Floor
New York, New York 10036
Attention: Sophia White
Telephone No.: (212) 827-4820
Telecopier No.: (212) 827-4888
Banque Francaise du Commerce Banque Francaise du Commerce Exterieur
Exterieur 333 Clay Street, Suite 4340
Houston, Texas 77002
Attention: Iain A. Whyte
Telephone No.: (713) 759-9401
Telecopier No.: (713) 759-9908
</TABLE>
-6-
<PAGE> 38
EXHIBIT A
NOTE
Houston, Texas
May 13, 1994
For value received, Union Texas Petroleum Holdings, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of __________________
_____________________________________ (the "Bank"), for the account of its
Applicable Lending Office, the unpaid principal amount of (i) each Money Market
Loan owed to the Bank on the last day of the Interest Period relating to such
Loan or as otherwise required by the Credit Agreement and (ii) each Committed
Loan owed to the Bank on the Termination Date or as otherwise required by the
Credit Agreement. The Company promises to pay interest on the unpaid principal
amount of each Loan on the dates and at the rate or rates provided for in the
Credit Agreement (including, without limitation, Section 2.16 thereof). All
such payments of principal and interest shall be made (a) for all Base Rate
Loans, Euro-Dollar Loans and Money Market Loans, in lawful money of the United
States of America in immediately available funds, and (b) for all Sterling
Loans, in lawful money of the United Kingdom in immediately available funds, in
each case at the office of the Agent as provided in the Credit Agreement.
All Loans made by the Bank, the respective currencies, Types (if
applicable) and maturities thereof and all repayments of the principal thereof
shall be recorded by the Bank and, prior to any transfer hereof, appropriate
notations to evidence the foregoing information with respect to each such Loan
then outstanding shall be endorsed by the Bank on the schedule attached hereto,
or on a continuation of such schedule attached to and made a part hereof;
provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Company hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of May 13, 1994 among the Company, the lenders and
Co-Agents parties thereto and NationsBank of Texas, N.A., as Agent (the
"Agent"), as amended (as so amended and as the same may be further amended from
time to time, the "Credit Agreement") and has been issued pursuant to the First
Amendment Agreement dated as of November 21, 1994 among the Company, the
lenders and Co-Agents parties thereto and the Agent. Terms not defined herein
and defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof. This note shall be
construed in accordance with and governed by the law of the State of Texas.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: ___________________________________
Title:
<PAGE> 39
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of
Amount of Principal
Loan Repaid
($ or Pounds Type of ($ or Pounds Date of Maturity Notation
Date Sterling) Loan Sterling) Payment Date Made By
---- --------- ---- --------- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C>
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
_________________________________________________________________________________________________________
</TABLE>
<PAGE> 40
EXHIBIT B
MONEY MARKET QUOTE REQUEST
[Date]
To: NationsBank of Texas, N.A., as Agent
From: Union Texas Petroleum Holdings, Inc. (the "Company")
Re: Amended and Restated Credit Agreement dated as of May 13, 1994
(as amended and as the same may be further amended from time
to time, the "Credit Agreement") among the Company, the Banks
and Co-Agents parties thereto and NationsBank of Texas, N.A.,
as Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s) in Dollars:
Date of Borrowing: _________________________
Principal Amount* Interest Period**
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the
Credit Agreement.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: ___________________________________
Title:
__________________________________
* Amount must be in Dollars and must be $10,000,000 or a larger multiple
of $1,000,000.
** Not less than one month (LIBOR Auction) or not less than 14 days
(Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
<PAGE> 41
EXHIBIT C
INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes to Union Texas Petroleum
Holdings, Inc. (the "Company")
Pursuant to Section 2.03 of the Amended and Restated Credit
Agreement dated as of May 13, 1994 (as amended and as the same may be further
amended from time to time, the "Credit Agreement") among the Company, the Banks
and Co-Agents parties thereto and NationsBank of Texas, N.A., as Agent, we are
pleased on behalf of the Company to invite you to submit Money Market Quotes to
the Company for the following proposed Money Market Borrowing(s) in Dollars:
Date of Borrowing: __________________________
Principal Amount Interest Period
- ---------------- ---------------
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the
Credit Agreement.
Please respond to this invitation by no later than [1:00 P.M.]
[9:00 A.M.] (Houston time) on [date].
NATIONSBANK OF TEXAS, N.A.,
as Agent
By: __________________________________
Authorized Officer
<PAGE> 42
EXHIBIT D
MONEY MARKET QUOTE
NationsBank of Texas, N.A.,
as Agent
700 Louisiana St.
Houston, Texas 77002
Attention:
Re: Money Market Quote to Union Texas Petroleum Holdings, Inc. (the
"Company")
In response to your invitation on behalf of the Company dated
________________, 19__, we hereby make the following Money Market Quote on the
following terms:
A. Quoting Bank: ___________________________________________________
B. Person to contact at Quoting Bank:
_________________________________________________________________
C. Date of Borrowing: ______________________________________________(1)
D. We hereby offer to make Money Market Loan(s) in the following
principal amounts in Dollars, for the following Interest Periods and
at the following rates:
Money Market
Principal Amount(2) Interest Period(3) [Margin](4) [Absolute Rate](5)
- ---------------- --------------- ---------------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for which
the above offers may be accepted shall not exceed $_______________.](2)
_____________________________
(1) As specified in the related Invitation for Money Market Quotes.
(2) Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be in Dollars
and must be made for $5,000,000 or a larger multiple of $1,000,000.
(3) Not less than one month or not less than 14 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
(4) Margin over or under the London Interbank Offered Rate determined for
the applicable Interest Period. Specify percentage (rounded to the nearest
1/10,000 of 1%) and specify whether "PLUS" or "MINUS".
(5) Specify rate of interest per annum (rounded to the nearest 1/10,000th
of 1%).
<PAGE> 43
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Amended and
Restated Credit Agreement dated as of May 13, 1994 (as amended and as the same
may be further amended from time to time, the "Credit Agreement") among the
Company, the Banks and Co-Agents parties thereto and NationsBank of Texas,
N.A., as Agent, irrevocably obligates us to make the Money Market Loan(s) for
which any offer(s) are accepted, in whole or in part. Terms used herein have
the meanings assigned to them in the Credit Agreement.
Very truly yours,
[NAME OF BANK]
Dated: __________________________ By: __________________________________
Authorized Officer
-2-
<PAGE> 44
EXHIBIT E-1
FIRST AMENDMENT TO AMENDED AND RESTATED
SUBSIDIARY GUARANTY AGREEMENT
This First Amendment to Amended and Restated Subsidiary Guaranty dated
as of November 21, 1994 (this "Guaranty Amendment") is among each of the
Subsidiary Guarantors listed on the signature pages hereof under the caption
"Subsidiary Guarantors" and NationsBank of Texas, N.A. (the "Agent"), as agent
for the banks under the Amended and Restated Credit Agreement dated as of May
13, 1994 (as the same may be amended from time to time, the "Credit Agreement")
among Union Texas Petroleum Holdings, Inc. (the "Company"), the Co-Agents and
lenders parties thereto ("Banks") and the Agent.
In consideration of the mutual covenants contained herein, the parties
hereto agree as follows:
1. Amendments to the Guaranty Agreement. The Amended and
Restated Subsidiary Guaranty Agreement dated as of May 13, 1994 (the "Guaranty
Agreement") executed by the Subsidiary Guarantors and the Agent is hereby
amended as follows:
1.1. The preamble to the Guaranty Agreement is hereby amended
by deleting the parenthetical ("Agreement") and inserting in lieu thereof the
following parenthetical (as may be amended or otherwise modified from time to
time in accordance with the terms hereof, the "Agreement").
1.2. The third recital to the Guaranty Agreement is hereby
amended by deleting the parenthetical ("Amended and Restated Credit Agreement")
and inserting in lieu thereof the following parenthetical:
("1994 Credit Agreement"; and the 1994 Credit Agreement, as it may be
amended or otherwise modified from time to time, is herein called the
"Amended and Restated Credit Agreement")
1.3. The fourth recital to the Guaranty Agreement is hereby
amended by inserting, immediately after the dollar amount "$350,000,000", the
phrase "or such other amount as may be available pursuant thereto".
1.4. The seventh recital to the Guaranty Agreement is hereby
amended to read as follows:
WHEREAS, as a condition to borrowings under the Amended and
Restated Credit Agreement, each Required Guarantor is required to
execute and deliver to the Agent this Agreement whereby such entity
shall, subject to Section 2.08 hereof, guarantee the payment when due
of the principal of and interest on all Loans and all other amounts
payable at any time, whether denominated in
<PAGE> 45
Sterling, Dollars or otherwise, by any Obligor under any of the
Financing Documents or under the 1994 Credit Agreement or any note
issued in connection with the 1994 Credit Agreement, including,
without limitation, interest which accrues during a proceeding which
occurs under the U.S. Bankruptcy Code or which would otherwise accrue
under the terms of any of the Financing Documents, the 1994 Credit
Agreement or any note issued in connection with the 1994 Credit
Agreement, but for a proceeding under the U.S. Bankruptcy Code (such
principal, interest and other amounts being herein called the
"Guaranteed Amounts");
1.5. Section 1.01. The Guaranty Agreement is hereby further
amended by deleting the phrase "under the 1992 Agreement" from the second
sentence of Section 1.01 and inserting in lieu thereof the phrase "under the
1994 Credit Agreement".
1.6. Section 2.09. The Guaranty Agreement is hereby further
amended by inserting, immediately following Section 2.08 of the Guaranty
Agreement, a new Section 2.09 reading as follows:
SECTION 2.09. Obligation Currency. The obligations of each
Subsidiary Guarantor hereunder to make payments in Dollars or in
Sterling (the "Obligation Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed
in or converted into any currency other than the Obligation Currency
except to the extent to which such tender or recovery shall result in
the effective receipt by the Banks of the full amount of the
Obligation Currency expressed to be payable hereunder, and accordingly
such obligations of each Subsidiary Guarantor shall be enforceable as
an alternate or additional cause of action for the purpose of recovery
in the Obligation Currency of the amount (if any) by which such
effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and shall not be
effected by judgment being obtained for any other sums due under this
Agreement.
1.7. Section 3.10 of the Guaranty Agreement is hereby amended
to read as follows:
SECTION 3.10. Judgment Currency. Each Subsidiary Guarantor
agrees to indemnify the Agent and each Bank against any loss incurred
by it as a result of any judgment or order being given or made and
expressed and paid in a currency (the "Judgment Currency") other than
the Obligation Currency and as a result of any variation as between
(i) the rate of exchange at which the Obligation Currency amount is
converted into the Judgment Currency for the purpose of such judgment
or order and (ii) the spot rate of exchange in the Sterling Lending
Office of the Agent or any Bank at which the Agent or such Bank on the
date of payment of such judgment or order is able to purchase
Obligation Currency with the amount of the Judgment Currency actually
received by the Agent or such Bank. The foregoing indemnity shall
constitute a separate and independent obligation of each Subsidiary
Guarantor and shall continue in full
-2-
<PAGE> 46
force and effect notwithstanding any such judgment or order as
aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase
of, or conversion into, the Obligation Currency.
2. Acknowledgement and Consent. To induce the Agent and the
Banks to execute the First Amendment Agreement dated as of November 21, 1994
among the Company, the Banks and Co-Agents parties thereto, and the Agent (the
"Credit Agreement Amendment") and other Financing Documents, each of the
undersigned Subsidiary Guarantors hereby (a) consents to and agrees to the
terms of the Credit Agreement Amendment and the Credit Agreement as amended
thereby and the other Financing Documents, (b) agrees that (i) none of such
Subsidiary Guarantor's obligations under or in connection with the Financing
Documents and none of the Banks' or the Agent's rights and remedies with
respect to any Subsidiary Guarantor is released, impaired or affected thereby
or by the foregoing, (ii) neither the Guaranty Agreement as amended hereby nor
any other Financing Document provided by any Subsidiary Guarantor is released,
impaired or affected thereby or by any of the foregoing, and (iii) this
acknowledgement shall not be construed as requiring the consent or agreement of
any Subsidiary Guarantor in any circumstance, (c) ratifies and confirms all
provisions of all Financing Documents executed by such Subsidiary Guarantor and
all documents pertaining thereto or referred to therein, and (d) agrees that
none of such Subsidiary Guarantor's obligations, none of the Banks' or the
Agent's rights and remedies and neither the Guaranty Agreement as amended
hereby, nor any other Financing Document, would be released, impaired or
affected if such Subsidiary Guarantor had not acknowledged the Credit Agreement
Amendment and other Financing Documents.
3. Miscellaneous.
3.1. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty Amendment, and no consent to any departure by any
Subsidiary Guarantor, any Bank or the Agent herefrom, shall in any event be
effective unless effected in accordance with Section 3.03 of the Guaranty
Agreement. This Guaranty Amendment shall become effective upon the execution
of this Guaranty Amendment by the Subsidiary Guarantors and the Agent.
3.2. Texas Law. This Guaranty Amendment, and the Guaranty
Agreement as amended hereby, shall be construed in accordance with and governed
by the laws of the State of Texas.
3.3. Preservation. Except as specifically modified by the
terms of this Amendment, all of the terms, provisions, covenants, warranties
and agreements contained in the Guaranty Agreement remain in full force and
effect. Each of the undersigned Subsidiary Guarantors hereby ratifies and
confirms the Guaranty Agreement as amended hereby. Terms used herein which are
not defined herein and are defined in the Credit Agreement, as amended by the
Credit Agreement Amendment, are used herein as defined in the Credit Agreement,
as amended by the Credit Agreement Amendment. References
-3-
<PAGE> 47
in the Guaranty Agreement as amended hereby to "the Agreement", "the Guaranty
Agreement", "this Guaranty Agreement" or to "this Agreement" or to words of
similar effect (such as "herein") shall mean the Guaranty Agreement as amended
hereby.
3.4. Execution in Counterparts. This Guaranty Amendment may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
3.5. Authority, etc. Each of the undersigned Subsidiary
Guarantors hereby represents and warrants to the Agent and each of the Banks
that (a) the execution and delivery by such Subsidiary Guarantor of the
Guaranty Agreement and this Guaranty Amendment, and the performance of the
Guaranty Agreement as amended hereby and this Guaranty Amendment, (i) are
within such Subsidiary Guarantor's corporate powers, (ii) have been duly
authorized by all necessary corporate action of such Subsidiary Guarantor,
(iii) do not contravene or constitute a default under any provision of
applicable law or regulation and (iv) require no authorization, consent or
approval of any governmental body, agency or official other than those
authorizations, consents and approvals that have been obtained and are in full
force and effect, and (b) the Guaranty Agreement and this Guaranty Amendment
have been duly executed and delivered by such Subsidiary Guarantor and this
Guaranty Amendment and the Guaranty Agreement as amended hereby constitute
legal, valid and binding obligations of such Subsidiary Guarantor.
-4-
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized, as of the date first above written.
SUBSIDIARY GUARANTORS:
UNION TEXAS PETROLEUM ENERGY CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
UNION TEXAS PRODUCTS CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
UNION TEXAS EAST KALIMANTAN LIMITED
By: ____________________________________
Name: __________________________________
Title: _________________________________
UNION TEXAS INTERNATIONAL CORPORATION
By: ____________________________________
Name: __________________________________
Title: _________________________________
-5-
<PAGE> 49
UNISTAR, INC.
By: ____________________________________
Name: __________________________________
Title: _________________________________
AGENT:
NATIONSBANK OF TEXAS, N.A., as Agent
By: ____________________________________
Name: __________________________________
Title: _________________________________
-6-
<PAGE> 50
EXHIBIT F
OPINION OF GENERAL COUNSEL
November ___, 1994
To the Banks and the Agent
Referred to Below
c/o NationsBank of Texas, N.A., as Agent
700 Louisiana Street
Houston, Texas 77002
Dear Sirs:
I am General Counsel, Vice President-Administration, and
Secretary of Union Texas Petroleum Holdings, Inc., a Delaware corporation (the
"Company"), and have acted as counsel for:
(a) the Company in connection with (i) the Amended and
Restated Credit Agreement dated as of May 13, 1994 (the "Existing Credit
Agreement") among the Company, the Banks and Co-Agents listed on the
signature pages thereof and NationsBank of Texas, N.A., as Agent (the
"Agent") and (ii) the First Amendment Agreement dated as of November
___, 1994 (the "Credit Agreement Amendment") among the Company, the
Banks and Co-Agents listed on the signature pages thereof and the Agent;
and
(b) Union Texas Petroleum Energy Corporation, a Delaware
corporation, Union Texas International Corporation, a Delaware
corporation, Unistar, Inc., a Delaware corporation, Union Texas East
Kalimantan Limited, a Bahamian corporation, and Union Texas Products
Corporation, a Delaware corporation (collectively, the "Subsidiary
Guarantors" and together with the Company, the "Obligors"), in
connection with (i) the Amended and Restated Subsidiary Guaranty
Agreement dated as of May 13, 1994 (the "Existing Subsidiary Guaranty
Agreement") among the Subsidiary Guarantors and the Agent and (ii) the
First Amendment to Amended and Restated Subsidiary Guaranty Agreement
dated as of November ___, 1994 (the "Guaranty Amendment") among the
Subsidiary Guarantors and the Agent.
Terms defined in the Existing Credit Agreement, as amended by the Credit
Agreement Amendment (the "Credit Agreement"), and not otherwise defined herein
are used herein as defined in the Credit Agreement.
In connection with the opinions expressed below, I have examined
or caused to be examined executed counterparts of the following (collectively,
the "Financing Documents"):
(a) the Existing Credit Agreement,
(b) the Credit Agreement Amendment,
<PAGE> 51
To the Banks and the Agent
November ___, 1994
Page 2
(c) the Existing Subsidiary Guaranty Agreement,
(d) the Guaranty Amendment, and
(e) twenty four (24) promissory notes dated ______________,
1994, each substantially in the form of Exhibit A to the Credit
Agreement, one payable to each Bank.
I have also examined or caused to be examined originals or
copies, certified or otherwise identified to my satisfaction, of such other
instruments, documents and records as I deemed necessary to express the
opinions hereinafter set forth. To the extent relevant to my opinion, I have
assumed, without independent verification, (i) the due execution and delivery
of each Financing Document by each party thereto (other than the Obligors),
(ii) the genuineness of all signatures on all documents submitted to me, (iii)
that each party (other than the Obligors) to each of the Financing Documents is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has full power and authority to enter into
and to carry out its obligations under such Financing Documents, (iv) that the
execution and delivery of each of the Financing Documents by each party thereto
(other than the Obligors) and the performance of its obligations under such
Financing Documents have been duly authorized by all necessary proceedings and
actions, (v) that each of the Financing Documents is the legal, valid and
binding obligation of each party thereto (other than the Obligors), enforceable
against such party in accordance with the terms of such Financing Documents,
subject to limitations of the types described in the opinion of Andrews & Kurth
L.L.P. delivered to you pursuant to the Financing Documents, and (vi) the
authenticity of all documents submitted to me as originals and the conformity
to authentic original documents of all documents submitted to me as certified,
conformed or photostatic copies. I have relied, to the extent that I deem such
reliance proper, upon certificates of officers of one or more of the Obligors
and of governmental officials as to matters of fact not independently
established by me.
For purposes of the opinion set forth in paragraph 2 below, I
have (i) relied on the opinion of Andrews & Kurth L.L.P. with respect to the
agreements and instruments identified on Schedule I thereto, and (ii) examined
or caused to be examined each other agreement or other instrument binding upon
any Obligor, a breach of or default under which would, in my judgment, have a
material adverse effect upon the Company and its Subsidiaries taken as a whole.
As to other agreements and instruments, I have not undertaken such a review for
purposes of this opinion, given the volume of such documents and given the fact
that by virtue of the character of such documents and the historical practices
of the Company with respect thereto, I have no reason to believe that a breach
of or default under any such document would arise by virtue of the execution,
delivery and performance of the Financing Documents.
<PAGE> 52
To the Banks and the Agent
November ___, 1994
Page 3
Based on the foregoing and subject to the qualifications and
limitations set forth below, I am of the opinion that:
1. Each of the Obligors has all material governmental
licenses, authorizations, consents and approvals required to own its assets and
to carry on its business as now conducted.
2. To the best of my knowledge, the execution, delivery and
performance of each of the Financing Documents, and the performance of the
Credit Agreement and the Existing Subsidiary Guaranty Agreement as amended by
the Guaranty Amendment (the "Subsidiary Guaranty Agreement"), by each Obligor
which is a party thereto do not constitute a breach of or default under, or
result in the creation or imposition of any Lien on any material asset of the
Company or any Subsidiary under, any provision of any instrument or agreement
evidencing or governing Debt binding upon such Obligor or any other material
agreement, judgment, injunction, order, decree or other instrument binding upon
such Obligor.
3. To the best of my knowledge, there is no action, suit or
proceeding pending against, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective properties or interests, at law
or in admiralty or equity, before any court or arbitrator or any governmental
body, agency or official, foreign or domestic, in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business, financial position or results of operations of the Company and its
Subsidiaries, taken as a whole, or which in any manner draws into question the
validity of any of the Financing Documents, the Credit Agreement or the
Subsidiary Guaranty Agreement.
My opinions in paragraph 1 are rendered only with respect to the
constitutions, laws, rules and regulations which are currently in effect and
applicable court rulings and orders which have been published and are generally
available. In addition, the foregoing opinions are rendered only as of the
date hereof, and I disclaim any obligation to advise you of changes thereafter.
I am a member of the bar of the State of Texas only, and this
opinion is limited in all respects to the laws of the State of Texas, the
General Corporation Law of Delaware and federal law of the United States of
America, and, to the limited extent described below, the laws of The
Commonwealth of The Bahamas and The Republic of Indonesia. In rendering
certain of the opinions expressed above, I have relied, with your approval,
upon an opinion, dated the date hereof, of Andrews & Kurth L.L.P., a copy of
which has been furnished to you. My opinion in paragraph 1 addresses, with
respect to Union Texas East Kalimantan Limited, the laws of The Commonwealth of
The Bahamas and The Republic of Indonesia and such opinion with respect to such
laws is, with your permission and without independent investigation, and
subject to the other qualifications
<PAGE> 53
To the Banks and the Agent
November ___, 1994
Page 4
set forth in this paragraph, given solely in reliance upon and limited in
scope to the opinions of Graham, Thompson & Co. and Mochtar, Karuwin & Komar,
respectively, dated May 13, 1994 (the "May 1994 Opinions") addressed to each of
you as "Banks" under the Existing Credit Agreement, copies of which May 1994
Opinions have been furnished to you, and my opinion incorporates by reference
all qualifications, exceptions and limitations set forth therein. As you know,
neither Graham, Thompson & Co. nor Mochtar, Karuwin & Komar have reviewed the
Credit Agreement Amendment, the Guaranty Amendment or the Notes, nor have they
updated their respective opinions since May 13, 1994. I have assumed, with
your permission and without independent investigation, that the May 1994
Opinions are true and correct as of the date hereof as if such opinions were
published on the date hereof and the Credit Agreement Amendment, the Guaranty
Amendment and the Notes were included in the "Financing Documents" referred to
therein.
This opinion is for the benefit of and may be relied upon by the
Banks, the Agent, the Co-Agents, their respective successors and assigns, their
respective counsel and Participants in connection with the transactions
contemplated by the Credit Agreement, the Credit Agreement Amendment, the
Subsidiary Guaranty and the Guaranty Amendment. Otherwise, this opinion may
not be used, published, circulated or relied upon by any other Person for any
purpose without my prior written consent.
Very truly yours,
Newton W. Wilson, III
<PAGE> 54
EXHIBIT G
November ____, 1994
To the Banks and the Agent
Referred to Below
c/o NationsBank of Texas, N.A., as Agent
700 Louisiana Street
Houston, Texas 77002
Dear Sirs:
We have acted as special counsel to:
(a) Union Texas Petroleum Holdings, Inc., a Delaware
corporation (the "Company"), in connection with (i) the Amended and
Restated Credit Agreement dated as of May 13, 1994 (the "Existing Credit
Agreement") among the Company, the Banks and Co-Agents listed on the
signature pages thereof and NationsBank of Texas, N.A., as Agent (the
"Agent") and (ii) the First Amendment Agreement dated as of November
___, 1994 (the "Credit Agreement Amendment") among the Company, the
Banks and Co-Agents listed on the signature pages thereof and the Agent;
and
(b) Union Texas Petroleum Energy Corporation, a Delaware
corporation, Union Texas International Corporation, a Delaware
corporation, Unistar, Inc., a Delaware corporation, Union Texas East
Kalimantan Limited, a Bahamian corporation, and Union Texas Products
Corporation, a Delaware corporation (collectively, the "Subsidiary
Guarantors" and together with the Company, the "Obligors"), in
connection with (i) the Amended and Restated Subsidiary Guaranty
Agreement dated as of May 13, 1994 (the "Existing Subsidiary Guaranty
Agreement") among the Subsidiary Guarantors and the Agent and (ii) the
First Amendment to Amended and Restated Subsidiary Guaranty Agreement
dated as of November ____, 1994 (the "Guaranty Amendment") among the
Subsidiary Guarantors and the Agent.
Terms defined in the Existing Credit Agreement, as amended by the Credit
Agreement Amendment (the "Credit Agreement"), and not otherwise defined herein
are used herein as defined in the Credit Agreement.
In connection with the opinions expressed below, we have examined
executed counterparts of the following (collectively, the "Financing
Documents"):
(a) the Existing Credit Agreement,
(b) the Credit Agreement Amendment,
<PAGE> 55
To the Banks and the Agent
November ___, 1994
Page 2
(c) the Existing Subsidiary Guaranty Agreement,
(d) the Guaranty Amendment, and
(e) twenty four (24) promissory notes dated _________________,
1994, each substantially in the form of Exhibit A to the Credit
Agreement, one payable to each Bank (collectively, the "Notes").
We have also examined originals or copies, certified or otherwise
identified to our satisfaction, of such other instruments, documents and
records as we deemed necessary to express the opinions hereinafter set forth.
To the extent relevant to our opinion, we have assumed, without independent
verification, (i) the due execution and delivery of each Financing Document by
each party thereto (other than the Obligors), (ii) the genuineness of all
signatures on all documents submitted to us, (iii) that each party (other than
the Obligors) to each of the Financing Documents is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has full power and authority to enter into and to carry out
its obligations under such Financing Documents, (iv) that the execution and
delivery of each of the Financing Documents by each party thereto (other than
the Obligors) and the performance of its obligations under such Financing
Documents have been duly authorized by all necessary proceedings and actions,
(v) that each of the Financing Documents is the legal, valid and binding
obligation of each party thereto (other than the Obligors) enforceable against
such party in accordance with the terms of such Financing Documents, subject to
limitations of the types described herein, and (vi) the authenticity of all
documents submitted to us as originals and the conformity to authentic original
documents of all documents submitted to us as certified, conformed or
photostatic copies. We have relied, to the extent that we deem such reliance
proper, upon certificates of officers of one or more of the Obligors and of
governmental officials as to matters of fact not independently established by
us. We have also examined the representations and warranties of the Company
contained in the Credit Agreement and have relied, to the extent we deem such
reliance proper, upon the relevant facts stated therein.
Based on the foregoing and subject to the qualifications and
limitations set forth below, we are of the opinion that:
1. (a) Each of the Obligors is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate power and authority
required to own its assets and to carry on its business as now conducted.
(b) The execution, delivery and performance by each Obligor of
each Financing Document to which it is a party will not violate the Public
Utility Holding
<PAGE> 56
To the Banks and the Agent
November ___, 1994
Page 3
Company Act of 1935, the Investment Company Act of 1940 or the Interstate
Commerce Act.
2. The execution, delivery and performance of each of the
Financing Documents, and the performance of the Credit Agreement and the
Existing Subsidiary Guaranty Agreement as amended by the Guaranty Amendment
(the "Subsidiary Guaranty Agreement"), by each Obligor which is a party thereto
are within such Obligor's corporate powers, have been duly authorized by all
necessary corporate action, and do not constitute a breach or default under,
any provision of applicable law or regulation known to us after reasonable
inquiry or the certificate of incorporation or bylaws of such Obligor.
3. To the best of our knowledge, the execution, delivery and
performance of each of the Financing Documents, and the performance of the
Credit Agreement and the Subsidiary Guaranty Agreement, by each Obligor which
is a party thereto do not constitute a breach of or default under, or result in
the creation or imposition of any Lien on any material asset of the Company or
any Subsidiary under, any provision of the instruments and agreements
identified in Schedule I hereto.
4. No authorization, consent or approval of any governmental
body, agency or official is required in connection with the execution, delivery
or performance of any of the Financing Documents, or the performance of the
Credit Agreement or the Subsidiary Guaranty Agreement, by any Obligor which is
a party thereto.
5. (a) The Existing Credit Agreement, the Credit Agreement
Amendment and the Notes have been duly executed and delivered by the Company,
and the Credit Agreement, the Credit Agreement Amendment and the Notes
constitute legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms.
(b) The Existing Subsidiary Guaranty Agreement and the
Guaranty Amendment have been duly executed and delivered by each of the
Subsidiary Guarantors, and the Subsidiary Guaranty Agreement and the Guaranty
Amendment constitute legal, valid and binding obligations of each of the
Subsidiary Guarantors, enforceable against each of the Subsidiary Guarantors in
accordance with their respective terms.
6. If all material facts (as we understand them) and issues
of law were presented and properly argued, a Texas court or a federal court
sitting in the State of Texas and applying the laws of the State of Texas
should hold that the consent by the Company in Section 9.09 of the Credit
Agreement, and by each Subsidiary Guarantor in Section 3.05 of the Subsidiary
Guaranty Agreement, to the non-exclusive personal jurisdiction of the courts of
the State of Texas and of any federal court located in the State of Texas is
valid. In this regard we call to your attention that such consents to
non-exclusive jurisdiction are not effective to (1) confer subject matter
jurisdiction that
<PAGE> 57
To the Banks and the Agent
November ___, 1994
Page 4
does not otherwise exist in such court or (2) establish diversity jurisdiction
that does not otherwise exist in an action brought in federal court.
7. Neither the execution, delivery and performance by any
Obligor of the Financing Documents to which it is a party, nor the use of the
proceeds of the Loans in accordance with Section 5.09 of the Credit Agreement,
will violate the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
The opinions set forth above are subject to the following
additional assumptions, limitations and qualifications:
a. Our opinions with respect to the enforceability of the
Financing Documents are subject to the qualification that such enforceability
may be (i) limited by applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or similar laws affecting the rights of
creditors generally, (ii) subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding at law or in
equity), including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing, and (iii) limited by the power of
a court to award damages in lieu of equitable remedies (including specific
performance or injunctive relief) or otherwise to refuse to grant a particular
remedy sought by the parties to the Financing Documents.
b. We express no opinion herein as to (1) the right of any
Bank to set-off against funds held in any special account maintained by the
Company with such Bank or which are otherwise subject to special agreement
between the Company and such Bank; (2) whether the provisions of the Credit
Agreement which permit the Agent, the Co-Agents or any Bank to take action or
make determinations may be subject to a requirement that such action be taken
or such determination be made in good faith; (3) whether the holder of a Note
may, under certain circumstances, be called upon to prove the outstanding
principal amount of the loans evidenced thereby; (4) the effect of the law of
any jurisdiction (other than Texas) wherein any Bank may be located which
limits rates of interest which may be charged or collected by such Bank; and
(5) the enforceability of any provision in the Financing Documents that
purports to (i) require indemnification for the negligence or wilful misconduct
of the indemnitee or to otherwise require any Obligor to provide
indemnification to the extent the same may be in conflict with public policy,
(ii) limit the effect of any delay or omission of enforcement of rights or
remedies or any course of performance or course of dealing between the parties,
(iii) create an agreement to agree, (iv) fix evidentiary standards or venue of
any proceeding, (v) waive rights to a trial by jury, or (vi) waive rights to
notices, legal defenses or other benefits that cannot, as a matter of law, be
effectively waived.
c. Whenever this opinion states the existence or absence of
any fact to the best of our knowledge, such statement is intended to convey
that, during the course of our
<PAGE> 58
To the Banks and the Agent
November ___, 1994
Page 5
representation of the Obligors with respect to matters addressed herein, no
information has come to our attention which has given us actual knowledge of
facts contrary to the statements so expressed herein.
d. In rendering our opinions in paragraph 1 we have relied
upon the description of the properties, assets and businesses of the Obligors
set forth in the Report on Form 10-K for the year ended December 31, 1993,
filed by the Company with the Securities and Exchange Commission, as
supplemented by Reports on Form 10-Q for the quarters ended March 31, 1994 and
June 30, 1994, filed by the Company with the Securities and Exchange
Commission.
e. In rendering the opinions in paragraphs 2 and 5, we have
assumed that (i) there are no fees, points, premiums or other sums contracted
for, charged to or paid or to be paid by the Company to the Banks on account of
the transactions described in the Credit Agreement other than those described
in the Credit Agreement and those described in the letters dated May 13, 1994
from the Agent to us and (ii) the parties to the Financing Documents will
comply strictly with the precise terms of the Financing Documents, including,
without limitation, the usury savings clauses set forth therein with respect to
any consideration contemplated by Financing Documents that will constitute
interest under Texas law.
f. In rendering our opinions in paragraph 7 we have assumed
that the representations of the Company and the Banks set forth in Sections
4.12 and 9.07, respectively, of the Credit Agreement will be true and correct
at all times.
g. The foregoing opinions are rendered only with respect to
the constitutions, laws, rules and regulations which are currently in effect
and applicable court rulings and orders which have been published and are
generally available. In addition, the foregoing opinions are rendered only as
of the date hereof, and we disclaim any obligation to advise you of changes
thereafter.
h. Insofar as our opinion relates to the laws of The
Commonwealth of The Bahamas and The Republic of Indonesia it is, with your
permission and without independent investigation, and subject to the other
qualifications set forth in this paragraph h, given solely in reliance upon and
limited in scope to the opinions of Graham, Thompson & Co. and Mochtar, Karuwin
& Komar, respectively, dated May 13, 1994 (the "May 1994 Opinions") addressed
to each of you as "Banks" under the Existing Credit Agreement, copies of which
May 1994 Opinions have been furnished to each of you, and our opinion
incorporates by reference all qualifications, exceptions and limitations set
forth therein. As you know, neither Graham, Thompson & Co. nor Mochtar,
Karuwin & Komar have reviewed the Credit Agreement Amendment, the Guaranty
Amendment or the Notes, nor have they updated their respective opinions since
May 13, 1994. We have assumed, with your permission and without independent
<PAGE> 59
To the Banks and the Agent
November ___, 1994
Page 6
investigation, that the May 1994 Opinions are true and correct as of the date
hereof as if such opinions were published on the date hereof and the Credit
Agreement Amendment, the Guaranty Amendment and the Notes were included in the
"Financing Documents" referred to therein.
This opinion is limited in all respects to the laws of the State
of Texas, the General Corporation Law of Delaware and federal law of the United
States of America, and, to the limited extent described in paragraph h above,
the laws of The Commonwealth of The Bahamas and The Republic of Indonesia.
This opinion is for the benefit of and may be relied upon by the
Banks, the Agent, the Co-Agents, their respective successors and assigns, their
respective counsel and Participants in connection with the transactions
contemplated by the Credit Agreement, the Credit Agreement Amendment, the
Subsidiary Guaranty Agreement and the Guaranty Amendment and may be relied upon
by Newton W. Wilson, III, General Counsel of the Company, in rendering his
opinion to the Banks in connection with such transactions. Otherwise, this
opinion may not be used, published, circulated or relied upon by any other
Person for any purpose without our prior written consent.
Very truly yours,
ANDREWS & KURTH L.L.P.
<PAGE> 60
SCHEDULE I
I. UNION TEXAS PETROLEUM HOLDINGS, INC. ("UTPH")
A. Indenture dated as of November 15, 1992 between UTPH, the
guarantors named therein, and State Street Bank and Trust Company, as trustee,
relating to the $100,000,000 8.25% Senior Notes due November 15, 1999 issued by
UTPH.
B. $200,000,000 Credit Agreement dated as of May 13, 1994 among
UTPH, the Banks and Co-Agents listed on the signature pages thereof and
NationsBank of Texas, N.A., as Agent.
C. $100,000,000 Credit Agreement dated as of September 27, 1994
among UTPH, the Banks and Co-Agents listed on the signature pages thereof and
NationsBank of Texas, N.A., as Agent.
II. UNION TEXAS PAKISTAN, INC. ("UT PAKISTAN")
A. Finance Agreement dated as of December 20, 1988 between UT
Pakistan and Overseas Private Investment Corporation ("OPIC").
B. Issuing and Paying Agency Agreement dated as of December 20, 1988
among Morgan Guaranty Trust Company of New York, as issuing and paying agent,
OPIC, and UT Pakistan, relating to the Promissory Note dated December 20, 1988
issued by UT Pakistan to Liberty U.S. Government Money Market Trust in the
original principal amount of US$21,250,000.
C. Guaranty Agreement dated as of December 20, 1988 between UTPH
and OPIC.
D. Deed of Floating Charge dated December 20, 1988 by UT Pakistan in
favor of OPIC.
III. UNISTAR, INC. ("UNISTAR") AND UNIMAR COMPANY ("UNIMAR")
A. Amended and Restated Agreement of General Partnership of Unimar
entered into as of September 11, 1990.
B. Indenture dated as of September 25, 1984 between Unimar and
Irving Trust Company, as trustee, relating to 14,077,747 Indonesian
Participating Units, as supplemented by the First Supplemental Indenture dated
as of October 31, 1986 between such parties.
C. Shareholders Agreement dated as of September 11, 1990 among UTPH,
Unistar, Ultramar America Limited, Ultramar Indonesia Limited and Ultrastar,
Inc.
D. Second Shareholders Agreement dated as of August 26, 1993 among
UTPH, Unistar, LASMO America Limited, LASMO Sanga Sanga Limited and LASMO
(USTAR) Inc. (formerly Ultrastar, Inc.)
1
<PAGE> 61
IV. UNION TEXAS EAST KALIMANTAN LIMITED ("UTEK")
A. Production Sharing Contract and related Agreements.
1. Amended and Restated Production Sharing Contract dated April 23,
1990, but effective as of August 8, 1968 among Perusahaan Pertambangan Minyak
Dan Gas Bumi Negara ("Pertamina"), and Roy M. Huffington, Inc., Virginia
Indonesia Company, Virginia International Company, Ultramar Indonesia Limited,
Union Texas East Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Huffington Corporation (all such parties and their predecessors and successors
in interest are herein collectively referred to as the "IJV Contractors"), and
Production Sharing Contract dated April 23, 1990, but effective as of August 8,
1998 among Pertamina and the IJV Contractors.
2. Joint Venture Agreement effective as of August 8, 1968 by and
between Roy M. Huffington, Inc., Virginia International Company, Austral
Petroleum Gas Corporation, Golden Eagle Indonesia Limited and Union Texas Far
East Corporation, as amended by a Settlement Agreement dated as of January 16,
1976 among these parties and Universe Tankships, Inc., an Agreement dated as of
October 1, 1979 among Roy M. Huffington, Inc., Virginia International Company,
Austral Petroleum Gas Corporation, Golden Eagle Indonesia Limited, Universe
Tankships, Inc. and Union Texas Far East Corporation and a Letter dated October
1, 1979 from Roy M. Huffington, Inc. to Virginia International Company, Austral
Petroleum Gas Corporation, Golden Eagle Indonesia Limited, Universe Tankships,
Inc. and Union Texas Far East Corporation.
3. Operating Agreement dated as of August 8, 1968 between Roy M.
Huffington, Inc., as operator, and Union Texas Far East Corporation, Golden
Eagle Indonesia Limited, Virginia International Company and Austral Petroleum
Gas Corporation, as non-operators, as amended by a letter agreement effective
September 15, 1973 among these parties and an Amendment to Operating Agreement
dated as of April 1, 1990 among Roy M. Huffington, Inc., Ultramar Indonesia
Limited, Virginia Indonesia Company, Virginia International Company, Union
Texas East Kalimantan Limited, and Universe Gas & Oil Company, Inc. and a
Letter dated February 8, 1990 from the IJV Contractors to Pertamina.
4. Amended and Restated Bontang Processing Agreement dated as of
February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie,
Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd., and P. T. Badak.
B. Supply Agreements.
1. Amended and Restated Supply Agreement (In support of the Amended
and Restated 1973 LNG Sales Contract) dated September 22, 1993, but effective
as of December 3, 1973, between Pertamina and the IJV Contractors.
2. Supply Agreement for Badak LNG Expansion Project dated as of
April 14, 1981 among Pertamina and the IJV Contractors, as supplemented by the
Memorandum of Understanding dated as of April 14, 1981 among Pertamina, the IJV
Contractors, Total Indonesie, and Union Oil Company of Indonesia, and the
Supplemental Memorandum dated August 24, 1983 among Pertamina and the IJV
Contractors and as amended by the Memorandum dated December 1, 1988 among
Pertamina and the IJV Contractors.
2
<PAGE> 62
3. Badak III LNG Sales Contract Supply Agreement executed October
19, 1987, but effective as of March 19, 1987 among Pertamina and the IJV
Contractors, as supplemented by the Supplemental Memorandum dated as of January
1, 1990 among Pertamina and the IJV Contractors.
4. Amended and Restated Second Supply Agreement for Excess Sales
(Quantities In Kind and LNG Amounts Under Amended and Restated Invoice
Settlement Agreements) dated as of January 19, 1990, but effective December 1,
1988, among Pertamina and the IJV Contractors, as supplemented by the
Supplemental Memorandum dated as of January 1, 1990 among Pertamina and the IJV
Contractors.
5. Badak IV LNG Sales Contract Supply Agreement dated as of August
12, 1991, but effective as of October 23, 1990, among Pertamina and the IJV
Contractors, as supplemented by the Memorandum of Understanding Re: Supply
Agreements and Package IV Sales dated as of August 12, 1991, but effective as
of July 1, 1990, and the Supplemental Memorandum of Understanding dated as of
January 31, 1994, but effective as of July 1, 1990, each among Pertamina, the
IJV Contractors, Total Indonesie, Unocal Indonesia, Ltd., and Indonesia
Petroleum, Ltd., and the Addendum to Badak IV LNG Sales Contract Supply
Agreement dated as of January 31, 1994, but effective as of October 23, 1990
among Pertamina and the IJV Contractors.
C. Miscellaneous Agreements.
1. Amended and Restated Bontang II Trustee and Paying Agent
Agreement dated as of July 15, 1991 among the IJV Contractors, Pertamina, Total
Indonesie, Unocal Indonesia, Ltd., and Indonesia Petroleum Ltd., and
Continental Bank International ("CBI"), as trustee.
2. Amended and Restated Debt Service Allocation Agreement dated as
of February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie,
Indonesia Petroleum, Ltd. and Unocal Indonesia, Ltd.
3. Amended and Restated Badak Trustee and Paying Agent Agreement
dated as of February 9, 1988 among Pertamina, the IJV Contractors, Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum, Ltd., and CBI, as
trustee ("Bontang I Trustee").
D. Bontang Capital Project Financing Tier III-2.
1. Producers Agreement No. 2 dated as of June 9, 1987 among the IJV
Contractors, the lenders named therein, and The Industrial Bank of Japan Trust
Company ("IBJ Trust"), as agent for such lenders, as amended by the Amendment
No. 1 to Producers Agreement No. 2 dated as of February 9, 1988 and Amendment
No. 2 to Producers Agreement No. 2 dated as of May 31, 1988, each among the IJV
Contractors, the lenders named therein, and IBJ Trust, as agent for such
lenders.
2. Bontang Capital Projects Loan Agreement No. 2 dated as of June 9,
1987 among the Bontang I Trustee, the lenders named therein, and IBJ Trust, as
agent for such lenders, as amended by the Amendment No. 1 to Bontang Capital
Projects Loan Agreement No. 2 dated as of February 9, 1988 among the
Bontang I Trustee, the lenders named therein, and IBJ Trust, as agent for
such lenders.
3
<PAGE> 63
E. Train E Financing.
1. Bontang III Producers Agreement dated as of February 9, 1988
among Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum,
Ltd., and Unocal Indonesia, Ltd. in favor of Train E Finance Co., Ltd., as
Tranche A Lender, the banks named therein as Tranche B Lenders and IBJ Trust as
Agent for such Tranche B Lenders, as amended by Amendment No. 1 dated as of May
31, 1988 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia
Petroleum, Ltd., and Unocal Indonesia, Ltd. in favor of Train E Finance Co.,
Ltd., as Tranche A Lender, the banks named therein as Tranche B Lenders and IBJ
Trust as Agent for such Tranche B Lenders.
2. Bontang III Trustee and Paying Agent Agreement dated as of
February 9, 1988 among Pertamina, the IJV Contractors, Total Indonesie,
Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee (the
"Bontang III Trustee"), as amended by Amendment No.1 dated as of December 11,
1992 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia
Petroleum, Ltd., Unocal Indonesia, Ltd. and the Bontang III Trustee.
3. Amended and Restated Bontang Excess Sales Trustee and Paying
Agent Agreement dated as of February 9, 1988 among Pertamina, the IJV
Contractors, Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd.
and CBI, as trustee.
4. Bontang III Loan Agreement dated as of February 9, 1988 among the
Bontang III Trustee, Train E Finance Co., Ltd., as Tranche A Lender, the banks
named therein as Lead Managers and Tranche B Lenders and IBJ Trust as Agent for
such Tranche B Lenders.
F. LPG Financing.
1. Amended and Restated Bontang LPG Trustee and Paying Agent
Agreement dated as of December 31, 1991 among Pertamina, the IJV Contractors,
Total Indonesie, Indonesia Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as
trustee.
2. Advance Payment Agreement dated as of February 18, 1987 between
Pertamina and Arun Bontang Project Finance Co., Ltd.
G. Train F Financing.
1. Bontang IV Producers Agreement dated as of August 26, 1991 among
Pertamina, the IJV Contractors, Total Indonesie, Indonesia Petroleum, Ltd., and
Unocal Indonesia, Ltd. in favor of the lenders named therein and The Chase
Manhattan Bank, N.A. as agent for such lenders.
2. Bontang IV Trustee and Paying Agent Agreement dated as of August
26, 1991 among Pertamina, the IJV Contractors, Total Indonesie, Indonesia
Petroleum, Ltd., Unocal Indonesia, Ltd. and CBI, as trustee (the "Bontang IV
Trustee").
3. Bontang IV Loan Agreement dated as of August 26, 1991 among the
Bontang IV Trustee, the lenders named therein and The Chase Manhattan Bank,
N.A. as agent for such lenders.
4
<PAGE> 64
EXHIBIT H
OPINION OF SPECIAL COUNSEL TO THE AGENT
November 21, 1994
To NationsBank of Texas, N.A., as Agent,
and to each of the Banks referred to below
Ladies and Gentlemen:
We have acted as special counsel to NationsBank of Texas, N.A., acting for
itself and as Agent ("Agent"), in connection with the preparation, execution
and delivery of the First Amendment Agreement dated as of November 21, 1994
(the "Credit Amendment") among Union Texas Petroleum Holdings, Inc., a Delaware
corporation (the "Company"), the Banks and Co-Agents party to the Credit
Agreement (defined below) and the Agent, which Credit Amendment amends the
Amended and Restated Credit Agreement dated as of May 13, 1994 (the "Credit
Agreement") among the Company, the banks listed on the signature pages thereof
(the "Banks"), the Agent and the Co-Agents. Capitalized terms defined in the
Credit Agreement as amended by the Credit Amendment (the "Amended Credit
Agreement") and not defined herein are used herein as therein defined.
In that connection, we have examined counterparts of the Credit Amendment
executed by the Agent and the Company respectively and the following documents:
(1) The Notes delivered to the Agent on the date hereof.
(2) The First Amendment to Amended and Restated Subsidiary Guaranty
Agreement delivered to the Agent on the date hereof (the
"Guaranty Amendment").
(3) The legal opinions delivered to the Agent pursuant to Sections
2.4 and 2.5 of the Credit Amendment.
In our examination of the documents referred to above, we have assumed the
authenticity of all such documents submitted to us as originals, the
genuineness of all signatures and the conformity to the originals of all such
documents submitted to us as copies. We have also assumed the accuracy of all
matters set forth in the certificates delivered to the Agent in connection with
the Credit Amendment or the Credit Agreement and assumed that each of Company,
the Banks, the Agent and the Co-Agents has duly executed and delivered, with
all necessary power and authority (corporate and otherwise), the Credit
Amendment and the Credit Agreement, that the Company has duly executed and
delivered, with all necessary power and authority (corporate and otherwise),
the respective Notes, and that each of the Required Guarantors and the Agent
has duly executed and delivered, with all necessary power and authority
(corporate and otherwise), the Subsidiary Guaranty Agreement and the Guaranty
Amendment. We have also assumed that no Bank has requested multiple Notes
pursuant to Section 2.05(b) of the Amended Credit Agreement.
Based upon the foregoing examination of documents and assumptions and upon such
other investigation as we have deemed necessary, we are of the opinion that the
documents referred to in items (1), (2) and (3) above are substantially
responsive to the requirements of the Credit Amendment.
<PAGE> 65
To the Banks and the Agent
Referred to Below
c/o NationsBank of Texas, N.A. as Agent
November 21, 1994
Page 2
This opinion is delivered to you only in connection with the transactions
contemplated by the Credit Amendment, the Amended Credit Agreement, the
Guaranty Amendment and the Subsidiary Guaranty Agreement and may not be quoted,
circulated or published, in whole or in part, or furnished to any Person, other
than your respective successors and assigns and Participants, without our
written consent.
Very truly yours,
Bracewell & Patterson, L.L.P.
<PAGE> 66
EXHIBIT I
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ___________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), [UNION TEXAS PETROLEUM HOLDINGS, INC.
(the "Company")] and NATIONS BANK OF TEXAS, N.A., as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, this Assignment and Assumption Agreement (this
"Agreement") relates to the Amended and Restated Credit Agreement dated as of
May 13, 1994 among the Company, the Banks (including Assignor) and Co-Agents
parties thereto and the Agent (such Credit Agreement, as amended and as may be
further amended from time to time, is hereinafter referred to as the "Credit
Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has
a $______________ Commitment;
WHEREAS, Committed Loans made by the Assignor under the Credit
Agreement in the aggregate principal amount of [$_____________] [and]
[_____________ pounds sterling] are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of
the rights of the Assignor under the Credit Agreement in respect of a portion
of its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement to
the extent of the Assigned Amount, and the Assignee hereby accepts such
assignment from the Assignor and assumes all of the obligations of the Assignor
under the Credit Agreement to the extent of the Assigned Amount, including the
purchase from the Assignor of the corresponding portion of the principal amount
of the Committed Loans made by the Assignor outstanding at the date hereof.
Upon the execution and delivery hereof by the Assignor, the Assignee[, the
Company] and the Agent and the payment of the amounts specified in Section 3
required to be paid on the date hereof, (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement with a Commitment in an amount equal to the
Assigned Amount plus the amount of the Commitment, if any, of the Assignee
immediately prior to the effectiveness of this Agreement, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by an
amount equal to the Assigned Amount, and the Assignor shall, as of the date
hereof, be released from its obligations under the Credit
<PAGE> 67
Agreement to the extent such obligations have been assumed by the Assignee.
The assignment provided for herein shall be without recourse to the Assignor.
The Assignor hereby certifies that after giving effect to this Agreement, the
Assignor will be in compliance with the last sentence of Section 9.06(c) of the
Credit Agreement. [The Assignor and the Assignee hereby certify that the
Assignee is [an affiliate of the Assignor/another Bank,] and accordingly, the
Company's consent hereto is not required.]
SECTION 3. Payments. As consideration for the assignment and
sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor
on the date hereof [in Federal or other funds immediately available in Houston
an amount equal to $__________](1) [and] [in funds immediately available in
London an amount equal to __________ pounds sterling](2). It is understood
that commitment and/or facility fees accrued to the date hereof are for the
account of the Assignor and such fees accruing from and including the date
hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same in the same currency
to such other party. As contemplated by Section 9.06(c) of the Credit
Agreement, the Assignor agrees to pay to the Agent for its account on the date
hereof in Federal funds an amount equal to $2,500 as an administrative fee for
processing this Agreement.
SECTION 4. Consent. This Agreement is conditioned upon the
consent of [the Company and] the Agent pursuant to Section 9.06(c) of the
Credit Agreement. The execution of this Agreement by [the Company and] the
Agent is evidence of this consent. Pursuant to Section 9.06(c) the Company
agrees to execute and deliver a Note payable to the order of the Assignee to
evidence the assignment and assumption provided for herein.
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Company or any other Obligor, the validity and enforceability of the
obligations of the Company or any other Obligor in respect of the Credit
Agreement, any Note or the Subsidiary Guaranty Agreement or the accuracy of any
Engineering Report. The Assignee acknowledges that it has, independently and
without reliance on the Assignor, and based on such documents
__________________________________
(1) Amount should be expressed in Dollars and should combine principal
together with accrued interest and breakage compensation, if any, to be paid
by the Assignee, net of any portion of any upfront fee to be paid by the
Assignor to the Assignee. It may be preferable in an appropriate case to
specify these amounts generically or by formula rather than as a fixed sum.
(2) Amount should be expressed in Sterling and should combine principal
together with accrued interest and breakage compensation, if any, to be paid by
the Assignee. It may be preferable in an appropriate case to specify these
amounts generically or by formula rather than as a fixed sum.
-2-
<PAGE> 68
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Company and the other Obligors, the Engineering Reports and
other relevant matters.
SECTION 6. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 8. Representation and Agreement. The Assignee
represents that it is either (i) a corporation, association or other entity
organized under the laws of the United States or any state thereof or (ii)
entitled to complete exemption from United States withholding tax imposed on or
with respect to any payments, including fees, to be made to it pursuant to the
Credit Agreement or the Notes. If the Assignee is not organized under the laws
of the United States or any state thereof, it agrees to provide to the Company
and the Agent, on or prior to the date of this Agreement, two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, certifying
in either case that the Assignee is entitled to receive payments from the
Company under the Credit Agreement and the Notes without deduction or
withholding of any United States federal income taxes.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By: ________________________________________
Title:
[ASSIGNEE]
By: ________________________________________
Title:
[UNION TEXAS PETROLEUM
HOLDINGS, INC.
By: ________________________________________
Title:]
-3-
<PAGE> 69
NATIONSBANK OF TEXAS, N.A.,
as Agent
By: ________________________________________
Title:
-4-
<PAGE> 1
EXHIBIT 10.76
SECOND AMENDMENT AGREEMENT
This Second Amendment Agreement dated as of January 31, 1995
("Amendment") is by and among Union Texas Petroleum Holdings Inc, a Delaware
corporation ("Company"), the Banks and Co-Agents party to the Agreement defined
below, and NationsBank of Texas, N.A., as Agent ("Agent"). In consideration of
the mutual covenants contained herein, the Company, the Banks, the Co-Agents
and the Agent agree as set forth herein.
1. Amendment to Credit Agreement. The Amended and Restated
Credit Agreement dated as of May 13, 1994, as amended by the First Amendment
Agreement dated as of November 21, 1994 (as so amended, the "Agreement"), among
the Company, the Banks, the Co-Agents and the Agent, is hereby amended by
inserting, immediately after the first sentence of Section 2.14, the following:
Interest based on the Sterling Interbank Offered Rate shall be
computed on the basis of (i) in the case of any Sterling Loan Interest
Period commencing on or before January 31, 1995, a year of 360 days,
and (ii) in the case of any Sterling Loan Interest Period commending
after January 31, 1995, a year of 365 days (or 366 days in a leap
year), and in each case paid for the actual number of days elapsed
(including the first day but excluding the last day).
2. Effectiveness. The effectiveness of this Amendment is subject
to receipt by the Agent of:
2.1 counterparts of this Amendment signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation
from such party of execution of a counterpart hereof by such party);
and
2.2 the Acknowledgement and Consent dated as of the date
hereof (the "Acknowledgment"), duly executed by each of the Required
Guarantors, substantially in the form of Exhibit A hereto.
3. Miscellaneous.
3.1 Amendments, Etc. No amendment or waiver of any
provision of this Amendment, nor consent to any departure by the
Company therefrom, shall in any event be effective unless effected in
accordance with Section 9.05 of the Agreement.
3.2 Governing Law. This Amendment and the Agreement as
amended hereby shall be construed in accordance with and governed by
the laws of the State of Texas.
3.3 Preservation. Except as specifically modified by the
terms of this Amendment, all of the terms, provisions, covenants,
warranties and agreements contained in the Agreement (including,
without limitation, exhibits thereto) or any other Financing Document
remain in full force and effect. Undefined capitalized terms used
herein are used herein as defined in the Agreement as amended hereby.
<PAGE> 2
3.4 Execution in Counterparts. This Amendment may be
executed in any number of counterparts, each of which when so executed
shall be deemed to be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
3.5 Representations and Warranties. The Company hereby
represents and warrants to the Banks, the Co-Agent and the Agent that
(i) the representations and warranties contained in Article IV of the
Agreement (other than the representations and warranties contained in
Sections 4.04(a) and 4.04(c) thereof) are correct on and as of the
date hereof as though made on and as of the date hereof, with this
Amendment, the Agreement as amended hereby and the Acknowledgment
constituting "Financing Documents" for purposes thereof, and (ii) no
event has occurred and is continuing which constitutes a Default or an
Event of Default.
3.6 Default. Without limiting any other event which may
constitute an Event of Default, in the event that any representation
or warranty set forth herein shall be incorrect or misleading in any
material respect when made, such event shall constitute an "Event or
Default" under the Agreement, as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: /s/ M. N. Markowitz
---------------------------------------
M. N. Markowitz
Vice President and Treasurer
NATIONSBANK OF TEXAS, N.A.,
individually and as Agent
By: /s/ Paul A. Squires
---------------------------------------
Paul A. Squires
Senior Vice President
<PAGE> 3
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
individually and as Co-Agent
By: /s/ Laura B. Shepard
----------------------------------------
Laura B. Shepard
Vice President
UNITED BANK OF SWITZERLAND,
HOUSTON AGENCY, individually and as Co-Agent
By: /s/
----------------------------------------
Name:
--------------------------------------
Authorized Officer
By: /s/
----------------------------------------
Name:
--------------------------------------
Authorized Officer
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Dixon P. Schultz
----------------------------------------
Dixon P. Schultz
Officer
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ R. A. Tollis
----------------------------------------
R. A. Tollis
Authorized Signature
<PAGE> 4
MELLON BANK, N.A.
By: /s/ A. Gary Chace
----------------------------------------
A. Gary Chace
Senior Vice President
THE BANK OF NOVA SCOTIA
By: /s/ F. C. H. Ashby
----------------------------------------
F. C. H. Ashby
Senior Manager Loan Operations
CHEMICAL BANK
By: /s/ Mary Jo Woodford
----------------------------------------
Mary Jo Woodford
Vice President
LTCB TRUST COMPANY
By: /s/ John J. Sullivan
----------------------------------------
John J. Sullivan
Authorized Officer
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Paul E. Cornell
----------------------------------------
Paul E. Cornell
Authorized Officer
<PAGE> 5
BANQUE NATIONALE DE PARIS,
HOUSTON AGENCY
By: /s/ Richard Hite
----------------------------------------
Richard Hite
Authorized Officer
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ Collie C. Michaels
----------------------------------------
Collie C. Michaels
Authorized Officer
THE MITSUBISHI TRUST & BANKING
CORPORATION
By: /s/ Masaaki Yamagishi
----------------------------------------
Masaaki Yamagishi
Authorized Officer
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By: /s/
----------------------------------------
Name:
--------------------------------------
Authorized Officer
<PAGE> 6
BANQUE PARIBAS, HOUSTON AGENCY
By: /s/ Patrick J. Milon
----------------------------------------
Patrick J. Milon
Senior Vice President
Deputy General Manager
By: /s/ Barton D. Schouest
----------------------------------------
Barton D. Schouest
Group Vice President
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED, NEW YORK BRANCH
By: /s/ Gerald T Hill
----------------------------------------
Gerald T. Hill
Authorized Officer
CITIBANK, N.A.
By: /s/ Barbara A. Cohen
----------------------------------------
Barbara A. Cohen
Vice President
NATIONAL WESTMINSTER BANK PLC
By: /s/ David L. Smith
----------------------------------------
David L. Smith
Vice President
<PAGE> 7
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ C. Frickson
----------------------------------------
C. Frickson
Authorized Officer
By: /s/ D. Slusarczyk
----------------------------------------
D. Slusarczyk
Authorized Officer
DEN NORSKE BANK AS
By: /s/
----------------------------------------
Name:
--------------------------------------
Authorized Officer
By: /s/ Anne Marie Rotan
----------------------------------------
Anne Marie Rotan
First Vice President
BANK OF TIAWAN
By: /s/ Kao-Chin Wang
----------------------------------------
Kao-Chin Wang
Vice President and General Manager
BANK OF TOKYO, LTD., DALLAS AGENCY
By: /s/ Michael G. Meiss
----------------------------------------
Michael G. Meiss
Authorized Officer
<PAGE> 8
CHRISTIANIA BANK
By: /s/ Jahn O. Roising
----------------------------------------
Jahn O. Roising
First Vice President
By: /s/ Peter M. Dodge
----------------------------------------
Peter M. Dodge
Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By: /s/ Iain A. Whyte
----------------------------------------
Iain A. Whyte
Assistant Vice President
By: /s/ Mark A. Harrington
----------------------------------------
Mark A. Harrington
Vice President and Regional Manager
<PAGE> 9
EXHIBIT A
ACKNOWLEDGMENT AND CONSENT
January 31, 1995
Reference is made to the Amended and Restated Credit Agreement
dated as of May 13, 1994, as amended by the First Amendment Agreement dated as
of November 21, 1994 (as so amended, the "Credit Agreement"), among Union
Texas Petroleum Holdings, Inc., a Delaware corporation ("Company"), the Banks
and Co-Agents parties thereto, and NationsBank of Texas, N.A., as Agent
("Agent") and to the Second Amendment Agreement dated as of January 31, 1995
(the "Amendment") among the Company, the Banks and Co-Agents parties thereto,
and the Agent. Undefined capitalized terms are used herein as defined in the
Credit Agreement as amended by the Amendment (the "Amended Credit Agreement").
To induce the Agent and the Banks to execute the Amendment,
each of the undersigned Subsidiary Guarantors hereby (a) consents to and agrees
to the terms of the Amendment and the Amended Credit Agreement, (b) agrees that
(i) none of such Subsidiary Guarantor's obligations under or in connection with
the Financing Documents and none of the Banks' or the Agent's rights and
remedies with respect to any Subsidiary Guarantor is released, impaired or
affected thereby or by the foregoing, (ii) neither the Subsidiary Guaranty
Agreement nor any other Financing Document provided by any Subsidiary Guarantor
is released, impaired or affected thereby or by any of the foregoing, and (iii)
this acknowledgment shall not be construed as requiring the consent or
agreement of any Subsidiary Guarantor in any circumstance, (c) ratifies and
confirms all provisions of all Financing Documents executed by such Subsidiary
Guarantor and all documents pertaining thereto or referred to therein, and (d)
agrees that none of such Subsidiary Guarantor's obligations, none of the Banks'
or the Agent's rights and remedies and neither the Subsidiary Guaranty
Agreement, nor any other Financing Document, would be released, impaired or
affected if such Subsidiary Guarantor had not acknowledged the Amendment, the
Amended Credit Agreement or any other Financing Document.
IN WITNESS WHEREOF, the parties hereto have caused this
Acknowledgement and Consent to be duly executed and delivered by their
respective offices thereunto duly authorized, as of the date first above
written.
SUBSIDIARY GUARANTORS:
UNION TEXAS PETROLEUM ENERGY
CORPORATION
By: ______________________________________
M. N. Markowitz
Treasurer
<PAGE> 10
UNION TEXAS PRODUCTS CORPORATION
By:
----------------------------------------
N. Markowitz
Treasurer
UNION TEXAS EAST KALIMANTAN
LIMITED
By:
----------------------------------------
N. Markowitz
Treasurer
UNION TEXAS INTERNATIONAL
CORPORATION
By:
----------------------------------------
N. Markowitz
Treasurer
UNISTAR, INC.
By:
----------------------------------------
N. Markowitz
Treasurer
<PAGE> 1
EXHIBIT 10.79
FIRST AMENDMENT TO AMENDED AND RESTATED
SUBSIDIARY GUARANTY AGREEMENT
This First Amendment to Amended and Restated Subsidiary Guaranty dated
as of November 21, 1994 (this "Guaranty Amendment") is among each of the
Subsidiary Guarantors listed on the signature pages hereof under the caption
"Subsidiary Guarantors" and NationsBank of Texas, N.A. (the "Agent"), as agent
for the banks under the Amended and Restated Credit Agreement dated as of May
13, 1994 (as the same may be amended from time to time, the "Credit Agreement")
among Union Texas Petroleum Holdings, Inc. (the "Company"), the Co-Agents and
lenders parties thereto ("Banks") and the Agent.
In consideration of the mutual covenants contained herein, the parties
hereto agree as follows:
1. Amendments to the Guaranty Agreement. The Amended and
Restated Subsidiary Guaranty Agreement dated as of May 13, 1994 (the "Guaranty
Agreement") executed by the Subsidiary Guarantors and the Agent is hereby
amended as follows:
1.1. The preamble to the Guaranty Agreement is hereby amended
by deleting the parenthetical ("Agreement") and inserting in lieu thereof the
following parenthetical (as may be amended or otherwise modified from time to
time in accordance with the terms hereof, the "Agreement").
1.2. The third recital to the Guaranty Agreement is hereby
amended by deleting the parenthetical ("Amended and Restated Credit Agreement")
and inserting in lieu thereof the following parenthetical:
("1994 Credit Agreement"; and the 1994 Credit Agreement, as it may be
amended or otherwise modified from time to time, is herein called the
"Amended and Restated Credit Agreement")
1.3. The fourth recital to the Guaranty Agreement is hereby
amended by inserting, immediately after the dollar amount "$350,000,000", the
phrase "or such other amount as may be available pursuant thereto".
1.4. The seventh recital to the Guaranty Agreement is hereby
amended to read as follows:
WHEREAS, as a condition to borrowings under the Amended and
Restated Credit Agreement, each Required Guarantor is required to
execute and deliver to the Agent this Agreement whereby such entity
shall, subject to Section 2.08 hereof, guarantee the payment when due
of the principal of and interest on all Loans and all other amounts
payable at any time, whether denominated in
<PAGE> 2
Sterling, Dollars or otherwise, by any Obligor under any of the
Financing Documents or under the 1994 Credit Agreement or any note
issued in connection with the 1994 Credit Agreement, including,
without limitation, interest which accrues during a proceeding which
occurs under the U.S. Bankruptcy Code or which would otherwise accrue
under the terms of any of the Financing Documents, the 1994 Credit
Agreement or any note issued in connection with the 1994 Credit
Agreement, but for a proceeding under the U.S. Bankruptcy Code (such
principal, interest and other amounts being herein called the
"Guaranteed Amounts");
1.5. Section 1.01. The Guaranty Agreement is hereby further
amended by deleting the phrase "under the 1992 Agreement" from the second
sentence of Section 1.01 and inserting in lieu thereof the phrase "under the
1994 Credit Agreement".
1.6. Section 2.09. The Guaranty Agreement is hereby further
amended by inserting, immediately following Section 2.08 of the Guaranty
Agreement, a new Section 2.09 reading as follows:
SECTION 2.09. Obligation Currency. The obligations of each
Subsidiary Guarantor hereunder to make payments in Dollars or in
Sterling (the "Obligation Currency") shall not be discharged or
satisfied by any tender or recovery pursuant to any judgment expressed
in or converted into any currency other than the Obligation Currency
except to the extent to which such tender or recovery shall result in
the effective receipt by the Banks of the full amount of the
Obligation Currency expressed to be payable hereunder, and accordingly
such obligations of each Subsidiary Guarantor shall be enforceable as
an alternate or additional cause of action for the purpose of recovery
in the Obligation Currency of the amount (if any) by which such
effective receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and shall not be
effected by judgment being obtained for any other sums due under this
Agreement.
1.7. Section 3.10 of the Guaranty Agreement is hereby amended
to read as follows:
SECTION 3.10. Judgment Currency. Each Subsidiary Guarantor
agrees to indemnify the Agent and each Bank against any loss incurred
by it as a result of any judgment or order being given or made and
expressed and paid in a currency (the "Judgment Currency") other than
the Obligation Currency and as a result of any variation as between
(i) the rate of exchange at which the Obligation Currency amount is
converted into the Judgment Currency for the purpose of such judgment
or order and (ii) the spot rate of exchange in the Sterling Lending
Office of the Agent or any Bank at which the Agent or such Bank on the
date of payment of such judgment or order is able to purchase
Obligation Currency with the amount of the Judgment Currency actually
received by the Agent or such Bank. The foregoing indemnity shall
constitute a separate and independent obligation of each Subsidiary
Guarantor and shall continue in full
-2-
<PAGE> 3
force and effect notwithstanding any such judgment or order as
aforesaid. The term "spot rate of exchange" shall include any
premiums and costs of exchange payable in connection with the purchase
of, or conversion into, the Obligation Currency.
2. Acknowledgement and Consent. To induce the Agent and the
Banks to execute the First Amendment Agreement dated as of November 21, 1994
among the Company, the Banks and Co-Agents parties thereto, and the Agent (the
"Credit Agreement Amendment") and other Financing Documents, each of the
undersigned Subsidiary Guarantors hereby (a) consents to and agrees to the
terms of the Credit Agreement Amendment and the Credit Agreement as amended
thereby and the other Financing Documents, (b) agrees that (i) none of such
Subsidiary Guarantor's obligations under or in connection with the Financing
Documents and none of the Banks' or the Agent's rights and remedies with
respect to any Subsidiary Guarantor is released, impaired or affected thereby
or by the foregoing, (ii) neither the Guaranty Agreement as amended hereby nor
any other Financing Document provided by any Subsidiary Guarantor is released,
impaired or affected thereby or by any of the foregoing, and (iii) this
acknowledgement shall not be construed as requiring the consent or agreement of
any Subsidiary Guarantor in any circumstance, (c) ratifies and confirms all
provisions of all Financing Documents executed by such Subsidiary Guarantor and
all documents pertaining thereto or referred to therein, and (d) agrees that
none of such Subsidiary Guarantor's obligations, none of the Banks' or the
Agent's rights and remedies and neither the Guaranty Agreement as amended
hereby, nor any other Financing Document, would be released, impaired or
affected if such Subsidiary Guarantor had not acknowledged the Credit Agreement
Amendment and other Financing Documents.
3. Miscellaneous.
3.1. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty Amendment, and no consent to any departure by any
Subsidiary Guarantor, any Bank or the Agent herefrom, shall in any event be
effective unless effected in accordance with Section 3.03 of the Guaranty
Agreement. This Guaranty Amendment shall become effective upon the execution
of this Guaranty Amendment by the Subsidiary Guarantors and the Agent.
3.2. Texas Law. This Guaranty Amendment, and the Guaranty
Agreement as amended hereby, shall be construed in accordance with and governed
by the laws of the State of Texas.
3.3. Preservation. Except as specifically modified by the
terms of this Amendment, all of the terms, provisions, covenants, warranties
and agreements contained in the Guaranty Agreement remain in full force and
effect. Each of the undersigned Subsidiary Guarantors hereby ratifies and
confirms the Guaranty Agreement as amended hereby. Terms used herein which are
not defined herein and are defined in the Credit Agreement, as amended by the
Credit Agreement Amendment, are used herein as defined in the Credit Agreement,
as amended by the Credit Agreement Amendment. References
-3-
<PAGE> 4
in the Guaranty Agreement as amended hereby to "the Agreement", "the Guaranty
Agreement", "this Guaranty Agreement" or to "this Agreement" or to words of
similar effect (such as "herein") shall mean the Guaranty Agreement as amended
hereby.
3.4. Execution in Counterparts. This Guaranty Amendment may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
3.5. Authority, etc. Each of the undersigned Subsidiary
Guarantors hereby represents and warrants to the Agent and each of the Banks
that (a) the execution and delivery by such Subsidiary Guarantor of the
Guaranty Agreement and this Guaranty Amendment, and the performance of the
Guaranty Agreement as amended hereby and this Guaranty Amendment, (i) are
within such Subsidiary Guarantor's corporate powers, (ii) have been duly
authorized by all necessary corporate action of such Subsidiary Guarantor,
(iii) do not contravene or constitute a default under any provision of
applicable law or regulation and (iv) require no authorization, consent or
approval of any governmental body, agency or official other than those
authorizations, consents and approvals that have been obtained and are in full
force and effect, and (b) the Guaranty Agreement and this Guaranty Amendment
have been duly executed and delivered by such Subsidiary Guarantor and this
Guaranty Amendment and the Guaranty Agreement as amended hereby constitute
legal, valid and binding obligations of such Subsidiary Guarantor.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized, as of the date first above written.
SUBSIDIARY GUARANTORS:
UNION TEXAS PETROLEUM ENERGY CORPORATION
By: /s/ M. N. Markowitz
Name: M. N. Markowitz
Title: Treasurer
UNION TEXAS PRODUCTS CORPORATION
By: /s/ M. N. Markowitz
Name: M. N. Markowitz
Title: Treasurer
UNION TEXAS EAST KALIMANTAN LIMITED
By: /s/ M. N. Markowitz
Name: M. N. Markowitz
Title: Treasurer
UNION TEXAS INTERNATIONAL CORPORATION
By: /s/ M. N. Markowitz
Name: M. N. Markowitz
Title: Treasurer
-5-
<PAGE> 6
UNISTAR, INC.
By: /s/ M. N. Markowitz
Name: M. N. Markowitz
Title: Vice President
AGENT:
NATIONSBANK OF TEXAS, N.A., as Agent
By: /s/ Paul A. Squires
Name: Paul A. Squires
Title: Senior Vice President
-6-
<PAGE> 1
EXHIBIT 10.87
PETROLEUM CONCESSION AGREEMENT
BETWEEN
THE PRESIDENT OF PAKISTAN
AND
UNION TEXAS PAKISTAN, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
<S> <C> <C> <C>
Article I - Definitions 1
Article II - Rights and Liabilities 4
Article III - Work Obligations and Surrender of Licence 5
Article IV - Optional Additional Working Interest 7
Article V - Mining Leases 8
Article VI - Assignment, Surrender of Areas,
and Termination of Agreement 9
Article VII - Wellhead Value 11
Article VIII - Natural Gas 13
Article IX - Right of Export of Petroleum 14
Article X - Disposal of Petroleum 16
Article XI - Foreign Exchange 16
Article XII - Imports and Exports 17
Article XIII - Taxation 22
Article XIV - Force Majeure 23
Article XV - Management and Operations 24
Article XVI - Contributions to Joint Operation 25
Article XVII - Arbitration 25
Article XVIII - Refinery 26
Article XIX - Other Minerals 26
Article XX - Audit 27
Article XXI - Production Bonuses 27
Article XXII - Insurance 28
Article XXIII - Miscellaneous 28
Annexure I - Map of the Subject Area
Annexure I-A - Description of the Subject Area
Annexure II - Form of Licence
Annexure III - Form of Operating Agreement
Annexure IV - Form of Lease
Annexure V - Concessionary Imports
</TABLE>
<PAGE> 3
PETROLEUM CONCESSION AGREEMENT
THIS AGREEMENT, made and entered into between the PRESIDENT OF PAKISTAN
(which term shall include his successors and assigns) of the one part,
hereinafter referred to as the "PRESIDENT", and UNION TEXAS PAKISTAN, INC.
(which term shall include its successors and assigns), a Delaware corporation,
of the second part, hereinafter referred to as "UNION TEXAS",
WITNESSETH:
WHEREAS, the PRESIDENT is desirous that exploration be undertaken for
the discovery and production of Petroleum in Pakistan; and
WHEREAS, UNION TEXAS is experienced in the business of exploring for,
developing and producing Petroleum and is interested in undertaking the
exploration, development and production of Petroleum in Pakistan as a business
venture; and
WHEREAS, the PRESIDENT is willing to grant UNION TEXAS certain Petroleum
concessions and other rights in and to the Subject Area hereinafter described
and desires to participate in such concession and other rights as a Working
Interest Owner, as hereinafter more particularly set forth;
NOW, THEREFORE, the PRESIDENT and UNION TEXAS do hereby agree as
follows:
ARTICLE I - DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
following meanings:
1.1 "Accounting Procedure" shall mean Exhibit A to the Operating
Agreement.
1.2 "Act" shall mean the Regulation of Mines and Oil-fields and
Mineral Development (Government Control) Act, 1948, as amended and in effect on
the date of execution of this Agreement.
1.3 "Affiliate" shall mean a company controlling or controlled by a
party to this Agreement. The term "control", as used in this Article 1.3, shall
mean the right to exercise, directly or indirectly, more than 50% of the voting
rights in the company controlled at its general meeting.
1.4 "Annexure" shall mean one of the Annexures annexed to this
Agreement, all of which are made a part hereof.
1.5 "Article" shall mean an article of this Agreement.
1.6 "Barrel" shall mean a quantity of Crude Oil equivalent in volume
to forty-two (42) United States Gallons adjusted to sixty degrees Fahrenheit
(60) after correction for basic sediment and water (BS&W).
<PAGE> 4
-2-
1.7 "Calendar Quarter" means a period of three (3) consecutive
months, according to the Gregorian Calendar, which begins with January 1, April
1, July 1 or October 1.
1.8 "Calendar Year" shall mean the period from January 1 to December
31, both inclusive, according to the Gregorian Calendar. The tax year of
Working Interest Owners shall be the period from July 1 to June 30, both
inclusive, according to the Gregorian Calendar.
1.9 "Commercial Discovery" shall mean the discovery of a Petroleum
field by two or more wells, which field in the opinion of the Operator with the
concurrence of the PRESIDENT (which concurrence shall not be unreasonably
withheld) would justify, particularly by its quality, quantity, gravity and
place and depth where found, its development, and would assure a continuous
Commercial Production.
1.10 "Commercial Discovery Notice Date" shall mean the date when the
Operator formally notifies the Director of Petroleum Concessions that a
Commercial Discovery has been made.
1.11 "Commercial Production" shall mean the production of Petroleum
of a quantity and quality which Operator reasonably estimates with the
concurrence of the PRESIDENT (which concurrence shall not be unreasonably
withheld) to be sufficient, over the life of the field, for the recovery of all
Expenditures directly attributable to the discovery and development of the field
and the earning of a reasonable profit.
1.12 "Concession Year" shall mean the period commencing with the
Effective Date of this Agreement or anniversary thereof and terminating with the
preceding day of the next Calendar Year.
1.13 "Date of Commercial Production" shall mean the date of first
sale of Crude Oil or Natural Gas from a Commercial Discovery.
1.14 "Director of Petroleum Concessions" shall mean the person from
time to time holding the office so styled under the Act or, in the absence of
such office, any person so designated by the PRESIDENT.
1.15 "Effective Date of this Agreement" shall mean the date when this
Agreement as well as the Licence have been executed.
1.16 "Expenditure", for purposes other than assessment to Income Tax,
shall mean expenditure incurred in connection with or incidental to the conduct
of Joint Operations whether chargeable to capital or revenue account including
operating cost whether or not with respect to producing wells and other assets
or prepayments acquired for subsequent use in the operations. Such Expenditures
are more particularly classified and identified as set forth in the Accounting
Procedure set forth in Annexure III, Exhibit A.
1.17 "Initial Period" shall mean the period between the Effective
Date of the Agreement and the Date of Commercial Discovery.
<PAGE> 5
-3-
1.18 "Joint Operations" shall mean all Petroleum exploration,
prospecting, developing and producing activities conducted by working Interest
Owners under and pursuant to this Agreement and the Operating Agreement. It
includes any gas-oil separation, pressure maintenance pipeline and other
transportation, Crude Oil storage or other activity necessary to facilitate the
production of Petroleum. It does not include the construction or operation of
any liquefied Natural Gas plant, Natural Gas products plant or Crude Oil
refinery.
1.19 "Lease" shall mean an oil mining lease in the form described in
Annexure IV covering one or more parts of the Subject Area.
1.20 "Licence" shall mean an oil exploration and prospecting licence
in the form of Annexure II covering the original Subject Area in its entirety.
1.21 "Operating Agreement" shall mean an agreement in the form of
Annexure III.
1.22 "Operator" shall mean the person so designated from time to time
pursuant to the Operating Agreement, which person shall initially be UNION
TEXAS.
1.23 "Petroleum", "Crude Oil", "Natural Gas", and "Casinghead
Petroleum Spirit" shall have the respective meanings stated in the Rules.
1.24 "Proportionate Share" shall mean the proportion, expressed in
terms of per cent, that a Working Interest Owner's Working Interest bears to the
aggregate of all Working Interests.
1.25 "Rules" shall mean the Pakistan Petroleum (Production) Rules,
1949, including all Schedules, as amended and in effect on the date of execution
of this Agreement.
1.26 "Subject Area" shall mean the area outlined on the map contained
in Annexure I and more particularly described in Annexure I-A, as reduced from
time to time by Surrenders pursuant to this Agreement.
1.27 "Surrender" shall mean the termination of rights with respect to
all or a specified part of the Subject Area as a result of relinquishment by the
Private Working Interest Owners as provided in this Agreement.
1.28 "Working Interest" shall mean all or any undivided interest in
the entirety of the Petroleum concession and other rights granted and
obligations and liabilities imposed by this Agreement, the Licence and any Lease
granted pursuant to this Agreement, including the enjoyment of the exclusive
right to explore for, prospect for, develop, produce, own, sell and otherwise
dispose of Petroleum from all or part of the Subject Area and which interest is
chargeable with and currently obligated to bear and pay its proportionate part
of all costs and expenditures (including royalties on production and rental)
incurred by Working Interest Owners in exploring and prospecting for, drilling,
developing, producing, selling and otherwise disposing of Petroleum from all or
part of the Subject Area.
<PAGE> 6
-4-
1.29 "Working Interest Owner" shall mean a person owning a Working
Interest. "Private Working Interest Owner" shall mean a working Interest Owner
other than the PRESIDENT.
ARTICLE II - RIGHTS AND LIABILITIES
2.1 The PRESIDENT hereby grants to UNION TEXAS, subject to the
provisions of this Agreement, the Petroleum concession and other rights more
particularly described in this Agreement, including but not limited to the right
of being granted the Annexed Licence and Leases and of conducting or causing to
be conducted Petroleum exploration, prospecting, development and production
operations hereunder including the transportation (whether by pipeline or
otherwise), storage, terminaling and marketing of Petroleum.
2.2 Without limiting the generality of Article 2.1, the PRESIDENT
hereby agrees to grant UNION TEXAS, promptly upon the execution of this
Agreement, the Licence covering the entire original Subject Area.
2.3 Simultaneously with said grant to UNION TEXAS of the Licence the
PRESIDENT and UNION TEXAS shall sign the Operating Agreement, the PRESIDENT
hereby becoming the owner of a ten per cent (10%) Working Interest and thereby
becoming obligated, as from the Effective Date of this Agreement, to bear a ten
per cent (10%) Proportionate Share of all Expenditures including without
limitation the minimum Expenditure obligations of the Working Interest Owners
provided in Article III but excluding any production bonuses to be paid by the
Private Working Interest Owners pursuant to Article XXI. The PRESIDENT may pay
his Proportionate Share of all Expenditures in rupees.
2.4 This Agreement contemplates Petroleum operations which will or
may require the construction and operation of temporary or permanent
exploration, prospecting and production of facilities (including pipelines) both
within and without the Subject Area. The PRESIDENT agrees to assist the
Operator in the carrying out of all Petroleum operations contemplated hereby
including the construction and operation of such facilities and in obtaining for
the Operator and its contractors and subcontractors such communication (radio,
telex, etc.) or other clearances, permits and authorizations as shall be
necessary or convenient in this regard.
2.5 The PRESIDENT shall upon request use his good offices and assist
in acquiring at reasonable cost for the sole account of the Working Interest
Owners any surface rights required in carrying out any Petroleum operations
contemplated hereby including but not limited to acquisition of land for the
construction and operation of a harbor and terminal facilities together with the
necessary means of communication and transportation between such facilities and
the Subject Area.
2.6 The rights, duties, and obligations of the PRESIDENT (acting in
the capacity of a Working Interest Owner) and those of the Private Working
Interest Owners respectively shall be several and not joint or collective and,
except as otherwise
<PAGE> 7
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provided in this Agreement, each such party shall be liable only for its
Proportionate Share of all expenditures and liabilities incurred, accrued or
assumed in connection with Petroleum operations authorized hereby. Nothing
herein contained shall be construed as creating a partnership or joint venture
of any kind, an association or a trust or any taxable entity or as imposing upon
such parties any partnership duty, obligation or liability.
ARTICLE III - WORK OBLIGATIONS AND
SURRENDER OF LICENCE
3.1 Subject to the further provisions of this Article III and the
provisions of Article VI, the Working Interest Owners shall spend not less than
the following amounts (or their equivalent in other currencies) during the
following Concession Years in the following operations under the Licence:
<TABLE>
<CAPTION>
Concession Expenditure
Year Proposed Operations (U.S. dollars)
---- ------------------- -------------
<S> <C> <C>
1 and 2 Geological, geophysical and drilling $1,500,000*
3 Geological, geophysical and/or drilling $1,500,000
4 Geological, geophysical and/or drilling $1,500,000
5 Geological, geophysical and/or drilling $1,500,000
6 Geological, geophysical and/or drilling $1,500,000
7 Geological, geophysical and/or drilling $1,500,000
8 Geological, geophysical and/or drilling $1,500,000
</TABLE>
3.2 Expenditures, whether direct or indirect and whether incurred
in Pakistan or elsewhere, shall qualify for purposes of Article 3.1 if
reasonably related to the indicated operations and properly incurred for the
Joint Account pursuant to the Accounting Procedure. Expenditures made solely
in connection with development operations under a Lease as provided in
Article 5.6 shall not qualify for purposes of Article 3.1.
3.3 (a) If a well has not been drilled previously, the Working
Interest Owners shall hold a meeting prior to the end of the twenty-first month
following the Effective Date of this Agreement to consider drilling a well.
Ninety (90) days before the end of the second Concession Year the Working
Interest Owners shall advise the PRESIDENT by written notice given by the
Operator that they will either (i) surrender the Licence effective at the end of
the said first two (2) Concession Years, or (ii) immediately begin preparation
to commence the drilling of a well prior to the twenty-fourth month following
the Effective Date of this Agreement, and continue the Licence beyond the end of
the said first two (2) Concession Years.
(b) In the event the Working Interest Owners have not
fulfilled the minimum Expenditure obligation due in the first two (2) Concession
Years as provided in Article 3.1, and have notified the PRESIDENT that they will
surrender the
*$1,000,000 of the $1,500,000 is firm seismic obligation during first year.
<PAGE> 8
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Licence in accordance with (i) above, they shall pay to the PRESIDENT the amount
remaining unspent of the minimum Expenditure obligation for the first two (2)
Concession Years. If the Working Interest Owners have notified the PRESIDENT
that they will continue the Licence beyond the first two (2) Concession Years in
accordance with (ii) above, they may carry forward to subsequent Concession
Years the said amount remaining unspent.
3.4 In the event the Working Interest Owners do not fulfill the
minimum Expenditure obligation due in the third or any succeeding Concession
Year as provided in Article 3.1, the amount remaining unspent shall be carried
forward as an obligation to be spent during subsequent Concession Years;
provided, that at the end of the eighth (8th) Concession Year or upon the sooner
Surrender of the entire Subject Area remaining under the Licence, whichever
shall first occur, the Working Interest Owners shall pay to the PRESIDENT the
aggregate unspent amount so carried forward from all preceding Concession Years.
3.5 The Working Interest Owners shall be entitled to carry forward
from the first two Concession Years, and thereafter from Concession Year to
Concession Year, any cumulative excess Expenditure as provided in Articles 3.3
and 3.4
3.6 The Working Interest Owners shall (i) commence operations
incident to the initial programme of work hereunder within three (3) months
after the Effective Date of this Agreement and (ii) commence minimum six (6)
months seismic programme within six (6) months after the effective date of this
Agreement.
3.7 Compliance by the Working Interest Owners with the obligations
provided in Articles 3.1 through 3.6 shall constitute compliance in full by
UNION TEXAS with all work obligations, express or implied, under this Agreement,
the Licence, the Act and the Rules with respect to the Subject Area for the full
term of the Licence, including without limitation the obligations provided in
Rules 19 and 26 but excluding the obligations under any Lease.
3.8 The Working Interest Owners shall reduce the area subject to the
Licence by Surrender from time to time of one or more parts of the Subject Area
so that all parts of the Subject Area retained under the Licence (excluding
parts covered by any Leases) shall not exceed the following aggregate sizes at
the following times:
<TABLE>
<CAPTION>
At the end of The aggregate area of the retained parts
Concession Year of the Subject Area shall not exceed
--------------- ----------------------------------------
<S> <C>
4 Seventy-five per cent (75%) of the
original Subject Area
6 Fifty per cent (50%) of the original
Subject Area
</TABLE>
3.9 The Surrender at any time of all parts of the Subject Area then
retained under the Licence shall terminate the Licence and shall excuse
performance by UNION TEXAS of any obligation
<PAGE> 9
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under the Licence or under this Agreement with respect to the Licence which has
not theretofore accrued, including without limitation any obligation with
respect to the Licence provided in the Act or Rules and any Expenditure or
drilling obligation provided in Articles 3.1 through 3.6 which correspond solely
to Concession Years subsequent to such Surrender.
ARTICLE IV - OPTIONAL ADDITIONAL WORKING INTEREST
4.1 Within thirty (30) days after the first Commercial Discovery
Notice Date the Operator shall submit to the PRESIDENT an estimate of the total
gross Expenditures which were paid or incurred by the Working Interest Owners
from the Effective Date of this Agreement to the Commercial Discovery Notice
Date inclusive and charged to the Joint Account provided for in the Operating
Agreement. The operator shall update said estimate with a definitive statement
of paid total gross Expenditures as soon thereafter as all relevant data are
available to the Operator. Said estimated gross Expenditures as modified by
said updated statement are hereinafter called the "Pre-Discovery Expenditures".
The PRESIDENT shall have the option, exercisable by written notice given to the
Operator within thirty (30) days after the receipt of said estimate, to acquire
with effect from the first Commercial Discovery Notice Date an additional thirty
per cent (30%) Working Interest. Should the PRESIDENT exercise such option the
Private Working Interest Owners, shall promptly assign said thirty percent (30%)
Working Interest to the PRESIDENT and the PRESIDENT shall reimburse the Private
Working Interest Owners in an amount equal to thirty per cent (30%) of the
Pre-Discovery Expenditures. The PRESIDENT shall have the option to make such
reimbursement by either of the following means, and in said written notice
shall indicate which of said means the PRESIDENT shall use:
(a) By delivery in kind to the Private Working Interest Owners of
not less than one-fourth (1/4) of the PRESIDENT's
Proportionate Share of Petroleum produced and saved under this
Agreement, such deliveries to commence promptly after said
first Commercial Discovery Notice Date and to continue until
the aggregate value of the Petroleum so delivered equals the
sum to be reimbursed; or
(b) By payment in cash to the Private Working Interest Owners of
installments equal to the wellhead value as hereinafter
defined in Article VII of one-fourth (1/4) of the PRESIDENT's
Proportionate Share of Petroleum produced and saved under this
Agreement after said first Commercial Discovery Notice Date,
one such installment to be paid thirty (30) days following
each Calendar Quarter commencing with the Calendar Quarter
during which said first Commercial Discovery Notice Date
occurs and continuing until the aggregate payments so made
equal the sum to be reimbursed.
<PAGE> 10
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4.2 Petroleum delivered to the Private Working Interest Owners
pursuant to Article 4.1(a) shall be free and clear of all costs to the Private
Working Interest Owners and the value thereof shall be computed on the basis of
wellhead value as defined in Articles 7.1(c)(ii) and 7.2(c) respectively.
4.3 The reimbursement of Pre-Discovery Expenditures, whether in cash
or kind, provided in Article 4.1 shall not be computed as taxable income of the
Private Working Interest Owners either for income tax or for capital gains
purposes, provided the Private Working Interest Owners reduce their claim of
actual total Expenditure by the amount of such reimbursement. Nor shall such
reimbursement or the assignment or acquisition of said additional Working
Interest be subject to any sales, transfer or other tax.
4.4 The assignment of Working Interest provided in Article 4.1 shall
not be governed by the provisions of Article VI.
4.5 The Private Working Interest Owners shall be free to export all
Petroleum delivered to them by the PRESIDENT pursuant to Article 4.1(a) above.
ARTICLE V - MINING LEASES
5.1 Subject to the due performance of the terms and conditions of
this Agreement and upon proper application therefor being filed by the Operator
from time to time the PRESIDENT hereby agrees to grant to the Working Interest
Owners a Lease corresponding to each Commercial Discovery made within the
Subject Area during the term of the Licence.
5.2 Each such Lease shall be issued as of the corresponding
Commercial Discovery Notice Date by undivided interests in the names of, and
shall obligate in accordance with their respective Proportionate Shares, all
Working Interest Owners hereunder, including the PRESIDENT as a Working Interest
Owner.
5.3 Each such Lease shall cover such part or parts of the Subject
Area as the Operator may designate but not to aggregate less than ten (10)
square miles nor more than fifty (50) square miles.
5.4 Each such Lease shall be granted for an initial term of thirty
(30) years, and with the approval of the PRESIDENT for another four (4) renewals
of five (5) years each; each such approval shall not be unreasonably withheld if
Commercial Production can reasonably be expected to continue into the succeeding
renewal period.
5.5 Before each renewal takes place, the PRESIDENT and the Private
Working Interest Owners shall negotiate and revise the Lease in the light of
then prevailing circumstances. The revised Lease which shall govern the
relationship between the Parties during the renewed period shall be based on the
most progressive features of agreements related to similar oil operations in
Pakistan and shall include the most advantageous to Pakistan of the terms and
conditions of such agreements, taking into account all other relevant facts and
conditions.
<PAGE> 11
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5.6 The Working Interest Owners shall commence within the Concession
Year next following the granting of each such Lease, and subsequently continue,
such development operations under such Lease as are indicated by good oil field
practice.
5.7 The Surrender at any time of any part or parts of the Subject
Area then retained which are covered by any Lease shall terminate such Lease and
shall excuse performance by the Working Interest Owners of any unaccrued
obligation under such Lease and any unaccrued obligation provided in the Act,
the Rules or this Agreement with respect to the area covered by such Lease.
5.8 In the event the PRESIDENT declines to grant a Lease which the
Operator has applied for pursuant to Article 5.1, and in the further event that
the issue of the obligation of the PRESIDENT to grant such Lease is submitted to
arbitration as provided in Article XVII, then no Lease or other Petroleum rights
covering the area applied for by the operator shall be granted to any third
party until the final decision and award have been made in such arbitration.
ARTICLE VI - ASSIGNMENT, SURRENDER OF AREAS,
AND TERMINATION OF AGREEMENT
6.1 No Private Working Interest Owner shall assign, encumber, or
otherwise dispose of all or any part of its Working Interest or any right to
future production corresponding thereto without the previous consent in writing
of the PRESIDENT and all other Working Interest Owners except as hereinafter
provided in this Article VI.
6.2 Provided the proposed assignor gives written notice of the
proposed assignment to all Working Interest Owners and further provided the
PRESIDENT does not inform the proposed assignor in writing of the PRESIDENT's
objection thereto (which objection shall not unreasonably be made) within sixty
(60) days after such notice is given, such consent shall be deemed to have been
given.
6.3 In determining whether to give his consent to any assignment,
the PRESIDENT shall take into consideration the nationality of the person to
whom assignment is to be made and such person's past experience and ability to
fulfill the obligations and responsibilities under this Agreement, the Licence
and any Leases granted pursuant to this Agreement. The PRESIDENT may require as
a condition to giving such consent that the assignee at his expense, execute a
deed of covenant to observe and perform such obligations and responsibilities.
6.4 In the event the PRESIDENT wishes to assign all or any part of
the Working Interest to a third party, the consent of the Private Working
interest Owners shall not be unreasonably withheld, taking into consideration
such proposed assignee's past experience and ability to fulfill the
responsibilities and obligations under this Agreement, the Licence and any
Lease. The Private Working Interest may require as a condition of such consent
that the assignee, at his expense, execute a deed of covenant to observe and
perform such responsibilities and obligations.
<PAGE> 12
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6.5 To the extent of any such assignment, the rights and privileges
granted to and the obligations assumed by the assignor under and pursuant to
this Agreement shall inure to the benefit of and be binding upon the assignee to
the exclusion of the assignor, provided that in the case of an assignment to an
Affiliate the assignor shall remain bound by such obligations unless released in
writing by all other Working Interest Owners.
6.6 Any assignment covering less than an entire ten per cent (10%)
Working Interest shall not serve to increase the number of management
representatives provided for in the Operating Agreement and assignor and
assignee shall in such cases agree upon a single management representative to
represent their combined Working Interests.
6.7 If the Private Working Interest Owners shall deem it advisable
to Surrender all or any part of the Licence or any Lease at the time when the
PRESIDENT owns any Working Interest therein the Private Working Interest Owners
shall notify the PRESIDENT in writing of the proposed Surrender. If, within
thirty (30) days thereafter, the PRESIDENT notifies the Private Working Interest
Owners in writing that the PRESIDENT wishes to acquire the rights and
obligations of the Private Working Interest Owners in the Licence or Lease, or
part thereof, proposed to be Surrendered, the Private Working Interest Owners
shall, to the extent that they legally may, assign all rights and obligations
therein to the PRESIDENT in substitution for the Private Working Interest
Owners. If no such written notification is given by the PRESIDENT, the Private
Working Interest Owners shall be free to Surrender such Licence or Lease, or
applicable part thereof, and the PRESIDENT (acting in the PRESIDENT's capacity
as a Working Interest Owner) shall join with the Private Working Interest Owners
in such Surrender.
6.8 In the event a Surrender effected under Article 6.7 covers the
entire remaining Subject Area, the Licence and all Leases then outstanding, this
Agreement shall be terminated, and the Working interest Owners shall after such
Surrender have no further obligation under the Act, the Rules, this Agreement,
the Licence or any such Lease except for obligations which have accrued prior to
such Surrender.
6.9 If no Commercial Discovery is made within the first seven (7)
Concession Years the PRESIDENT shall have the right to terminate this Agreement
and the Licence after giving one (1) year's notice to the Private Working
Interest Owners.
6.10 Notwithstanding the provisions of Articles 3.8 and 6.9, the term
of this Agreement shall continue, and the obligation of the Working Interest
Owners to reduce the area of the retained parts of the Subject Area to nil shall
be postponed, until the completion or abandonment of any well being drilled at
the end of the seventh Concession Year and, in the event such well results in a
Commercial Discovery, thereafter until the corresponding Lease has expired.
6.11 Upon the termination of this Agreement, the Licence, and all
Leases then outstanding each Working Interest Owner
<PAGE> 13
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shall be entitled to share in any unobligated and unexpended funds of the
Working Interest Owners to the extent of such Working Interest Owner's
contribution thereto.
6.12 No consent shall be required for (a) the assignment to other
Working Interest Owners of a person's entire Working Interest or Petroleum
attributable thereto pursuant to the default and forfeiture provisions of the
Operating Agreement or (b) the transfer among Working Interest Owners of
disproportionate rights to Petroleum pursuant to the sole risk provisions of the
Operating Agreement.
ARTICLE VII - WELLHEAD VALUE
7.1 Notwithstanding Rule 2 or any other provision of the Rules, the
wellhead value of Crude Oil shall be calculated on the following bases:
(a) With respect to sales made through arm's-length
transactions with non-affiliated third parties for
delivery outside Pakistan, the basis shall be the
actual price received reduced by all transportation
and other costs incurred from the point of production
(wellhead) within Pakistan to the point of delivery
to the buyer outside Pakistan.
(b) With respect to sales made for delivery in Pakistan,
including sales required to be made pursuant to
Article IX to meet the internal requirements of
Pakistan, the basis shall be the actual price
received, reduced by all transportation and other
costs incurred from the point of production
(wellhead) within Pakistan to the point of delivery
to the buyer in Pakistan.
(c) With respect to (1) sales made to affiliated
companies, (2) sales by barter or exchange, and (3)
sales not otherwise specified in Article 7.1(b) which
are made otherwise than through arm's-length
transactions with non-affiliated third parties, the
basis shall be the greater of paragraphs 7.1(c)(i)
and 7.1(c)(ii) below, namely:
(i) The actual price or value received, reduced
by all transportation and other costs
incurred from the point of production
(wellhead) within Pakistan to the point of
delivery to the buyer; or
(ii) The sum of the following components:
(1) the official Saudi Arabian
Government sales price to third
party buyers of Arabian Light Crude
Oil, f.o.b. Ras Tanura, Saudi
Arabia,
<PAGE> 14
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(2) plus the cost (based on then current
one-year time charters) of marine
transportation from Ras Tanura,
Saudi Arabia to Karachi, Pakistan,
(3) plus or minus a yield quality
differential between Arabian Light
Crude Oil and the Pakistani Crude
Oil produced under this Agreement,
and
(4) minus all transportation and other
costs incurred from the point of
production (wellhead) within
Pakistan to the point of delivery to
the buyer.
(d) For purposes of Article 7.1(c)(ii)(3) the yield
quality of Arabian Light Crude Oil shall be deemed to
be as follows:
05 to 330 degrees F. 21.2 LV% Regular
Gasoline
331 degrees F. to 700 35.8 LV% Gas Oil
degrees F.
701 degrees F. plus 41.1 LV% Fuel Oil
The yield quality of Pakistani Crude Oil produced
under this Agreement shall be determined by
distilling a representative sample thereof in
accordance with the latest revisions of the
appropriate ASTM Test Method. The yield quality
differential (plus or minus) shall be multiplied by
the average price of Arabian Light Crude Oil as
reported by Platt's Oilgram Price Service under the
heading "Middle East Products - Ras Tanura" for each
component product fraction.
7.2 Notwithstanding Rule 2, or any other provision of the Rules, the
wellhead value of Natural Gas and other gaseous substances whether produced in
association with Crude Oil or otherwise shall be calculated on the following
bases:
(a) If sold to a third party at the wellhead in its
natural state the basis shall be the gross amount
realized from such sale; or
(b) If sold to a third party not at the wellhead or not
in its natural state but after processing for sale,
the basis shall be gross amount realized from such
sale reduced by all transportation and other costs
incurred from the point of production (wellhead) to
the point of delivery to the buyer including but
<PAGE> 15
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not limited to the costs of gathering, transporting
to processing facility, processing, compressing,
treating dehydrating, liquefying and purifying; or
(c) If used by the Working Interest Owners for purposes
other than the production and transportation of
Petroleum (which use is hereby expressly permitted
free of any royalty obligations), the basis shall be
the gross amount for which the Working Interest
Owners could have sold the Natural Gas or other
substance to a third party under the conditions of
(a) or (b) above, which gross amount shall be
determined on the basis of the most recent prices for
comparable Natural Gas or other substances sold
within Pakistan less applicable transportation
and other costs.
7.3 To facilitate computations the wellhead value for any Calendar
Quarter shall be determined within two (2) months after the end of such Calendar
Quarter, on a weighted average basis. Crude Oil values shall be expressed on
the basis of barrels and Natural Gas on the basis of millions of British Thermal
Units (BTU's).
7.4 The wellhead value calculated pursuant to this Article VII shall
be the basis for income and other taxation in Pakistan, for the assessment of
royalty, for the evaluation of Petroleum for purposes of reimbursing the Private
Working Interest Owners pursuant to Articles 4.1(a) and 4.1(b), and for the
purpose of all other contractual and legal relationships under this Agreement,
the Licence and any Lease.
ARTICLE VIII - NATURAL GAS
8.1 If following a discovery of Natural Gas the Private Working
Interest Owners shall determine at any time that they do not wish to participate
in the development of the Natural Gas field or to maintain their rights therein
while waiting improved economic conditions, they shall so notify the PRESIDENT
in writing, and in that event the PRESIDENT shall have the right to develop the
Natural Gas field at the PRESIDENT's sole cost. If the Private Working Interest
Owners desire to maintain their rights in the Natural Gas field while awaiting
improved economic conditions, but the PRESIDENT wishes to develop the Natural
Gas field forthwith, the PRESIDENT shall present to the Private Working Interest
Owners in writing all the PRESIDENT's reasons and evidence supporting immediate
development, and the Private Working Interest Owners shall have six (6) months
from the date of receipt of such reasons and evidence to elect whether they will
join the PRESIDENT in the immediate development of the Natural Gas field. If
the Private Working Interest Owners elect not to join the PRESIDENT in the
development of the Natural Gas field, the PRESIDENT shall have the right to
develop the Natural Gas field
<PAGE> 16
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at the PRESIDENT's sole cost. If the PRESIDENT proceeds to develop the Natural
Gas field at the PRESIDENT's sole cost, the Private Working Interest Owners
shall assign to the PRESIDENT their Working Interests in their rights to Natural
Gas fields under all Leases acquired or to be acquired in connection with the
Natural Gas field, without prejudice to the rights of the Private Working
Interest owners with respect to any other Petroleum deposit in the area covered
by such Leases. The Private Working Interest owners shall have no liability for
obligations under such Leases which accrue after the date of such assignment,
unless there is another Commercial Discovery of Crude Oil under such Leases in
which case the Private Working Interest Owners shall remain liable for their
pro-rata share of such obligations.
8.2 Notwithstanding the provisions of Article 8.1 the Working
Interest Owners may extract, take in kind and separately dispose of Casinghead
Petroleum Spirit obtained from Natural Gas by field distillation or similar
processes, and reinject into the producing formation Natural Gas remaining after
such extraction. In such event (a) all Casinghead Petroleum Spirit so extracted
shall be accounted for on the same basis as Crude oil for the assessment of
royalty and for purposes of reimbursing the Private Working Interest Owners
pursuant to Article 4.1 and 4.2, and (b) the provisions of Article 8.1 shall
apply only to the Natural Gas which is so reinjected after the extraction of
such Casinghead Petroleum Spirit.
8.3 The Working Interest Owners shall use their best endeavours not
to flare associated Natural Gas but to use it for recycling or another
commercial purpose. Any associated Natural Gas that would otherwise be flared
shall be offered to the PRESIDENT free of cost at the downstream flange of the
gas/oil separation facilities. If the PRESIDENT for whatsoever reason elects not
to take delivery of the associated Natural Gas at such flange the Working
Interest Owners shall have the right to flare such associated Natural Gas
without any liability until such time as the PRESIDENT elects to take delivery
thereof. Any taking and disposition of such Natural Gas by the PRESIDENT shall
be effected in a manner which does not interfere with Crude Oil production or
transportation facilities. The PRESIDENT shall bear all costs of gathering,
treating, compressing, transporting and processing such Natural Gas as is taken
by the PRESIDENT.
ARTICLE IX - RIGHT OF EXPORT OF PETROLEUM
9.1 Notwithstanding Rule 39(a), Clause 58 of the Standard Form of
Oil Mining Leases, or any other provision of the Act or the Rules, the Private
Working Interest Owners shall have the right to export from Pakistan, free of
any export restriction, duty or tax, their respective Proportionate Shares of
all Petroleum produced under this Agreement, the Licence, and any Leases,
excepting only (a) Crude Oil and/or products thereof which are pre-empted
pursuant to Article 40 of the Licence, (b) Petroleum attributable to any royalty
which the PRESIDENT takes in kind and does not deliver to
<PAGE> 17
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Private Working Interest Owners under Article 4.1(a), and (c) Crude Oil required
to be sold for internal consumption within Pakistan as provided in Article 9.2.
The PRESIDENT shall issue or cause to be issued within a reasonable time any
permits or licenses required for such export.
9.2 The PRESIDENT shall have the right from time to time to require
the Private Working Interest Owners to sell within Pakistan Crude Oil (excluding
Natural Gas and Casinghead Petroleum Spirit) for internal consumption within
Pakistan, subject to the following limitations:
(a) The PRESIDENT shall inform the Private Working
Interest Owners in writing not later than six (6)
months in advance of each Calendar Year of the
quantities, prices, purchasers, delivery dates and
points of delivery of Crude Oil required to be sold
in Pakistan during such Calendar Year.
(b) The Private Working Interest Owners shall not be
required to sell in Pakistan more than forty per cent
(40%) of their Proportionate Shares of Crude Oil
produced under this Agreement during any Calendar
Year after deduction of production attributable to
royalty, whether paid in kind or in cash.
(c) Forty per cent (40%) of the Crude Oil sold in
Pakistan during each Calendar Year pursuant to this
Article 9.2 shall be sold at ninety per cent (90%) of
international price. The remaining sixty per cent
(60%) of such Crude Oil so sold during each Calendar
Year shall be sold at international price. In either
case the price shall be paid to the Private Working
Interest Owners in U.S. dollars or other freely
exchangeable currency within thirty (30) days after
the date of delivery to the purchaser. As used in
this Article 9.2 "international price" means a price
determined as provided in Article 7.1(c)(ii), plus
any transportation and other costs incurred from the
point of delivery to the buyer.
(d) As used in this Article 9.2(d) "Government Crude Oil"
means Crude Oil attributable to the royalty and
Working Interests of the PRESIDENT, OGDC, and any
other state entity or governmental agency of
Pakistan, and "Private Crude Oil" means all Crude Oil
other than Government Crude Oil. No Private Working
Interest Owner shall be required, during any Calendar
Year, to sell pursuant to this Article 9.2 a greater
volume of Crude Oil than the proportion of the
production of Private Crude Oil in Pakistan during
such Calendar Year that the Private Crude Oil
production during such Calendar Year attributable to
the Working Interest of such
<PAGE> 18
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Private Working Interest Owner (after deduction of
production attributable to royalty, whether paid in
cash or kind) bears to all Private Crude Oil
production in Pakistan during such Calendar Year,
due allowance being given to the grade and quality
of Crude Oil produced.
(e) The provisions of this Article 9.2 shall be limited
to Crude Oil for internal consumption within Pakistan
and shall not extend to Crude Oil to be exported from
Pakistan, whether in natural or processed form.
ARTICLE X - DISPOSAL OF PETROLEUM
10.1 Each Working Interest Owner shall at all times take in kind and
separately dispose of its Proportionate Share of all Petroleum.
ARTICLE XI - FOREIGN EXCHANGE
11.1 The Operator may call for contributions to the Joint Account to
be made in such currency components (i.e., rupees or U.S. dollars and other
freely convertible foreign exchange) as the Operator may from time to time
specify, giving due consideration to the currency aspects of Expenditures
anticipated to be made under this Agreement. Each Working Interest Owner shall
contribute its Proportionate Share of each such currency component.
11.2 The Operator shall be allowed to keep the foreign exchange
contributions of the Working Interest Owners, as may be required for incurring
Expenditures in foreign exchange, in a bank account outside Pakistan, and shall
be free to utilize the amount thereof for incurring foreign exchange
Expenditures under the Operating Agreement subject to appropriate documentation
of the amounts utilized. Such bank account outside Pakistan shall be opened
with the approval of the State Bank of Pakistan, which approval shall not be
unreasonably delayed.
11.3 If the PRESIDENT exercises his option to acquire a Working
Interest under Article 4.1 and to pay in cash under 4.1 (b) such exercise shall
constitute the undertaking of the PRESIDENT (a) to reimburse the Private Working
Interest Owners therefor in a mixture of currencies (U.S. dollars and other
freely convertible currency) which is identical to the mixture of currencies
which the Private Working Interest Owners contributed to the corresponding
Pre-Discovery Expenditures including currencies to purchase rupees for such
Expenditures, and (b) to allow the Private Working Interest Owners to retain
abroad and freely dispose of all currencies included in such reimbursement.
11.4 If the PRESIDENT has exercised his option to acquire a Working
Interest under Article 4.1, all sums due under the provisions of Article 16,
shall be paid by the PRESIDENT to the Operator in the currency called for by
Operator.
<PAGE> 19
-17-
11.5 If any Private Working Interest Owner assigns an interest to a
non-Pakistani assignee pursuant to Article VI, such Private Working Interest
Owner shall be allowed to retain abroad and freely dispose of all proceeds
resulting from such assignment.
11.6 The Private Working Interest Owners shall be entitled (a) to
receive in non-rupee currencies payment for their export of Petroleum produced
under this Agreement, the Licence and any Lease granted pursuant to this
Agreement, and (b) to retain abroad and freely dispose of such payments.
11.7 To the extent the Private Working Interest Owners have available
in Pakistan from time to time rupees received from the sale of Petroleum or from
other operations conducted pursuant to this Agreement, the Licence or any Lease,
they shall be allowed to convert such rupees into foreign exchange and to remit
such foreign exchange from Pakistan.
11.8 The Working Interest Owners may meet any rupee obligation which
may be discharged within Pakistan (including without limitation obligations to
contribute rupees to the Joint Account and obligations to pay taxes and other
sums to agencies of the Government of Pakistan) with rupees obtained pursuant to
this Agreement. The PRESIDENT undertakes that the State Bank of Pakistan will
make available for sale to the Private Working Interest Owners, as requested
rupees in sufficient amounts to meet the Private Working Interest Owner needs.
11.9 The Working Interest Owners shall effect all purchases and sales
of rupees contemplated in this Agreement (including without limitation the
purchase of rupees for contribution to the Joint Account as provided in Article
11.1, the sale of rupees for the remittances permitted in Article 11.7, and the
purchase of rupees to meet local obligations as provided in Article 11.8) at the
official rate of exchange established by the State Bank of Pakistan on the day
of the relevant purchase or sale. The PRESIDENT undertakes that such rate of
exchange shall never be as to constitute a discrimination against any Private
Working Interest Owner in particular or the Petroleum industry (Pakistani or
foreign) in general.
11.10 The Private Working Interest Owners may pay cash royalties in
the currencies for which the corresponding production was sold.
11.11 The Private Working Interest Owners shall remit funds to
Pakistan through normal banking channel sufficient to meet all Pakistan rupee
obligations under the Agreement to the extent rupees are not available in
Pakistan.
11.12 The Private Working Interest Owners shall not avail itself of
any rupee borrowing facilities.
ARTICLE XII - IMPORTS AND EXPORTS
12.1 Prior to Commercial Discovery, the Private Working Interest
Owners, the Operator and their respective contractors and sub-contractors
engaged in carrying on operations under this
<PAGE> 20
-18-
Agreement (hereinafter collectively called the "Concessionary Importer") shall
be permitted to import into Pakistan, free of duty and sales and other tax, all
machinery, ancillary equipment, specialized vehicles, materials and supplies
required for use in connection with the Joint Operations under this Agreement
including without limitation all items described in Annexure V. Following a
Commercial Discovery, the Private Working Interest Owners, the Operator and
their respective contractors and sub- contractors engaged in carrying on
operations under this Agreement shall be permitted to import into Pakistan, free
of duty and sales and other tax, all machinery, ancillary equipment, specialized
vehicles, materials and supplies required for use in connection with exploration
activity unrelated to the development of any existing Commercial Discovery.
12.2 A concessionary consolidated rate of 5 1/4 per cent customs-duty
ad valorem, including sales tax and any surcharge related thereto, shall be
charged on import of machinery and equipment required for development of each
commercial discovery until twenty-four (24) months from the effective date of
the mining lease granted with respect to each such discovery, and thereafter the
normal rate of customs-duty, sales tax and any other duty shall be applicable.
12.3 The Concessionary Importer shall not be permitted to import any
items with respect to which it is proved that it was available in Pakistan on
the same delivery date, of the same quality, and in the quantity needed and at
the same or a lesser price when such prices are compared on a delivered,
duty-paid basis; provided, however, that when the Concessionary Importer has
made a good faith effort to procure any such item within Pakistan and has been
unable to do so, the Operator shall so notify the Director of Petroleum
Concessions; whereupon, the Director of Petroleum Concessions shall forthwith
recommend to the Chief Controller of Imports and Exports that any and all
necessary import licences and/or permits be promptly issued with respect to the
import of the item concerned and shall diligently assist in expediting the
securing of such licenses and/or permits.
12.4 Subject to declaration to customs upon entry for residence into
Pakistan and on certification by a responsible representative of the Operator as
to the entitlement of the employee, each expatriate employee of the Private
Working Interest Owners shall be permitted to import into Pakistan, free of duty
and sales and other tax, personal and household effects, excluding motor
vehicles for personal use, for the use of such employee or members of his
family, provided such effects were acquired by or in the possession of such
employee or members of his family before his or their arrival in Pakistan for
residence and are imported within six (6) months after such arrival of the
employee or members of the employee's family whichever is earlier. All such
effects may thereafter be exported freely by the individual who imported the
same. Such effects shall, however, not be sold or disposed of or transferred in
Pakistan except with prior permission of the Federal Government of Pakistan (in
the Ministry of Commerce) on payment of duty and taxes as assessed by the
Collector of Customs at the rate and value operating on the date the effects
were first imported into Pakistan.
<PAGE> 21
-19-
12.5 In addition to the concessionary rates provided in Articles 12.1
and 12.2, each foreign national employed by a licensee or lessee or its
contractor shall be allowed to import commissary goods free of customs-duty and
sales tax to the extent of $550 per annum, subject to the condition that the
same shall not be sold or otherwise disposed of in Pakistan.
12.6 In the event agreement cannot be reached between the Customs
Authorities and the importer within seventy-two (72) hours after the time of
requested importation of any item or items as to whether duty or other taxes are
leviable, and if so, the extent thereof, or as to the description or valuation
of such items, the Customs Authorities will release such item or items to the
importer not later than the expiry of said seventy-two (72) hours period against
delivery of an appropriate bank guarantee as determined by the Collector of
Customs to secure such release.
12.7 All items certified by a responsible representative of the
Operator as coming within the provisions of Article 12.1 shall, in the event of
any dispute between the Customs Authorities and the Concessionary Importer with
respect to the status or description thereof, be released to the Concessionary
Importer within seventy-two (72) hours following the time importation is sought;
provided, however, that in the event of such release, the Concessionary Importer
shall deliver an appropriate bank guarantee as determined by the Collector of
Customs to secure such release.
12.8 In the event that an emergency condition occurs in connection
with operations under this Agreement which seriously endangers life or property,
the Director of Petroleum Concessions or one authorized by him to do so shall
declare an emergency and the Operator shall be allowed without formalities or
delay to import under intimation to the Federal Government in the Ministry of
Commerce any item or items which are, in the opinion of the Operator, required
to correct or deal with such emergency condition; and the formalities and duties
shall be attended to thereafter as promptly as practicable.
12.9 Items imported into Pakistan pursuant to Article 12.1 which
thereafter become scrap or used may be sold by the Concessionary Importer in
Pakistan subject to the permission by Government (which shall not unreasonably
be withheld) and on payment of import duty and taxes leviable on the basis of
the value thereof at the time of sale. The Concessionary Importer shall have
the right to abandon in favor of the Government of Pakistan in the Ministry of
Fuel, Power and Natural Resources any item which was imported into Pakistan
pursuant to Article 12.1 provided the Operator notifies the Collector of Customs
one month in advance in writing under registered acknowledgment due cover of the
intention to do so.
12.10 The Concessionary Importer shall be entitled to export, without
restriction and without the payment of any fee, tax, or export duty, such of the
items imported pursuant to Article 12.1 as are not required for the Joint
Operations.
12.11 The Private Working Interest Owners, the Operator and their
respective contractors and sub-contractors shall be
<PAGE> 22
-20-
entitled to export such of its items as are not required for the Joint
Operations without restriction and without the payment of any fee, tax or export
duty. The PRESIDENT shall repay duties paid, as drawbacks, for items thus
exported in the following manner:
(a) Repayment of duty as drawback in respect of goods other than
motor vehicles taken into use between their importation and subsequent
exportation shall be made according to the period and the amount specified in
the table below:
TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Length of period between date of importation or Amount of duty to be paid
clearance from bond, as the case may be, and date of as drawback.
shipment for re-exportation.
- -----------------------------------------------------------------------------------
<S> <C>
(i) Not more than 12 months. 4/5ths of the duty
(ii) More than 12 months but not more than 24 3/5ths of the duty
months.
(iii) More than 24 months but not more than 36 2/5th of the duty
months.
(iv) More than 36 months but not more than 60 1/5th of the duty
months.
(v) More than 60 months. Nil
- -----------------------------------------------------------------------------------
</TABLE>
and,
(b) Repayment of duty as drawback in respect of motor vehicles taken
into use between their importation and subsequent exportation shall be made
according to the period and the amount specified in table below:
TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Length of period between date of importation or Amount of duty to be paid
clearance from bond, as the case may be, and date of as drawback.
shipment for re-exportation.
- -----------------------------------------------------------------------------------
<S> <C>
Not more than 4 months. 3/4ths of the duty
More than 4 months but not more than 8 months. 5/8ths of the duty
More than 8 months but not more than 12 months. 1/2 of the duty
More than 12 months but not more than 24 months. 1/4th of the duty
More than 24 months but not more than 36 months. 1/8th of the duty
More than 36 months. Nil
- -----------------------------------------------------------------------------------
</TABLE>
12.12 The Concessionary Importer shall be entitled at any time and
from time to time to export any item or items from Pakistan for repair or
modification, and to return the same to Pakistan without the payment of any
additional Customs duties, sales tax, or other surcharge related thereto.
12.13 Import of the items permitted under this Article XII shall be
allowed subject to the following conditions:
<PAGE> 23
-21-
(a) Import of the said items shall be allowed against Import
Permits to be issued on application made on behalf of the
Concessionary Importer. In each case, the number and CIF
value of such items shall be specified in the application and
included in the Import Permits.
(b) A condition shall be stamped on the Import Permits that these
items shall not be sold in Pakistan except with prior
permission of the Government of Pakistan in the Ministry of
Commerce. If the Government grants permission for sale --
(i) sales shall be effected to or through the Department
of Investment Promotion and Supplies (IP & S); and
(ii) subject to the provisions of Article XI, the sale
proceeds shall not be repatriated abroad in foreign
exchange, unless the items shall be sold (through the
Department of IP & S) to a buyer against foreign
exchange raised by the buyer himself.
The permission required under this Article 12.13(b) shall not
be necessary with respect to the transfer of title to any
property made pursuant to or incidental to any assignment by a
Working Interest Owner of all or any part of its Working
Interest under the provisions of Article VI of this Agreement.
(c) The Operator shall maintain proper account statements of all
consumable stores received and expected and shall send copies
thereof (in duplicate) to the (Import) Licencing Authority
concerned by the 15th of January each year and finally within
fifteen (15) days of the closing of operations in Pakistan.
(d) The condition (b) shall also apply to cars or other vehicles
or equipment like refrigerators, air-conditioners, if
imported for the personal use of the expatriate employees
employed by the Concessionary Importer.
(e) (i) If any commissary stores are imported after the first
arrival of an expatriate employee of the
Concessionary Importer, they shall be confined to the
items shown in the List-I attached with Annexure V
excepting such items as are locally available of
proper standard and shall be specified by the Chief
Controller of Imports and Exports once each year in
the month of January.
(ii) The scale at which these items shall be allowed for
each expatriate employee will be the same specified
in the List II attached to Annexure V.
(iii) These items shall not be sold to Pakistani personnel
employed by the Concessionary Importer.
<PAGE> 24
-22-
(iv) As soon as an expatriate employee arrives in Pakistan
an application will be made for grant of Import
Permit for the commissary stores required for him
indicating the duration of his programmed stay in
Pakistan.
(v) Account of the sale of liquor and tobacco (if
imported) and drugs will be maintained for each
individual while those of the other items will be
maintained on an over-all basis.
(vi) Items of food and other commissary goods will be
stamped clearly to avoid resale in the market.
(vii) Ration Cards will be maintained by individuals.
(f) The import of any other items of personal use, e.g., arms and
ammunition, pets, etc., will not be permitted unless the
conditions for their import such as arms licences from
district authorities, quarantine requirements, etc., are
fulfilled.
12.14 Subject to the rights granted under the provision of this
Agreement and particularly those granted under this Article XII, any items
banned for import into Pakistan under the Import Policy, in force from time to
time shall not be permitted without specific permission to be obtained before
shipment of goods from abroad.
ARTICLE XIII - TAXATION
13.1 The profits or gains of the Private Working Interest Owners
derived from the Joint Operations carried out pursuant to this Agreement shall,
except as otherwise expressly provided in this Agreement, be computed for
purposes of income taxes in accordance with the provisions of the Income Tax
Act, 1922, and the Rules contained in the Second Schedule to that Act as amended
and in force on the Effective Date of this Agreement.
13.2 For purposes of the allowance under Rule 2(i) in the Second
Schedule to the Income Tax Act, 1922, the expenditures allocable to a
Surrendered Area and to the drilling of a dry hole shall be allowed to the
Private Working Interest Owners in accordance with the amount actually spent by
each Private Working Interest Owner.
13.3 For purposes of Rule 4(1) in the Second Schedule to the Income
Tax Act, 1922, the sum of payments to the Government and taxes on income of each
Private Working Interest Owner shall equal fifty per cent (50%) of the profits
or gains derived from the business or part of the business to which the
provisions of the said Schedule apply before deduction of payments to the
Government and the additional allowance referred to in Rule 3 of said
Schedule. In computing taxes on income for this purpose, the income tax rate
applicable on the Effective Date of this Agreement shall be applied and,
pursuant to Rule 5 of said Second Schedule, an additional income tax shall be
paid or an abatement of income tax allowed, as the case may be.
<PAGE> 25
-23-
13.4 Neither a private Working Interest Owner nor its parent
corporation will be obligated to withhold any tax under the Income Tax Act,
1922, on the remittance of undistributed profits of the said Working Interest
Owner which are derived from the business or part of the business to which the
provisions of the Second Schedule to the Income Tax Act, 1922, apply, on which
taxes have been paid, provided the recipient thereof is not a resident of
Pakistan as defined in the Income Tax Act, 1922, for the time being in force.
13.5 The benefits extended with respect to technicians in accordance
with and subject to the provisions of Clauses (xiii) and (xiii a) of Subsection
(3) of Section 4 of the Income Tax Act, 1922, as in force on the Effective Date
of this Agreement, shall remain in effect for the term of this Agreement with
respect to technicians employed by a Private Working Interest Owner and its
contractors and sub-contractors in all cases where such technicians and their
employers qualify for such benefits.
13.6 In case of any conflict in respect of taxation matters between
any of the provisions of this Agreement, including its Annexures, and the
provisions of the Income Tax Act, 1922, or its Second Schedule, then, not
withstanding anything contained in this Agreement or its Annexures, the
provisions of the Income Tax Act, 1922, or the Second Schedule thereto shall
prevail as amended as in force on the Effective Date of this Agreement.
ARTICLE XIV - FORCE MAJEURE
14.1 Performance under and pursuant to this Agreement by any Private
Working Interest Owner (including the Operator) shall be excused in the event
such performance is prevented by act of God, by law, war, strikes, lockout,
fires, floods, tornadoes, cyclones, typhoons, lightning, explosions, acts of
public enemy, riot, insurrection or civil disturbance, acts of omissions to act
of authorities, or other happenings beyond the control of any Private Working
Interest Owner (including the Operator). None of these events shall give the
PRESIDENT any claim against any Private Working Interest owner (including the
Operator) or be deemed to be a breach of this Agreement, the Licence or any
Mining Lease granted pursuant to this Agreement, provided however the Private
Working Interest Owner will be required to use reasonable diligence in
overcoming the obstacle, and the performance will be resumed within a reasonable
time after the obstacle has been removed.
14.2 The period provided in this Agreement for performance by any
Private Working Interest Owner of any obligation the performance of which was
prevented or delayed by an event of force majeure shall, together with such
period as may be necessary for the restoration of any damage done during such
non-performance or delay, be added to the time given to such Private Working
Interest Owner in this Agreement for the performance of such obligation and for
the performance of any obligation depending thereon and to the term of this
Agreement. Without limiting the generality of the foregoing
<PAGE> 26
-24-
such extension shall apply to the annual periods of expenditure and other
performance provided in Article III.
ARTICLE XV - MANAGEMENT AND OPERATIONS
15.1 Under this Agreement Joint Operations shall be conducted in
accordance with the Operating Agreement. UNION TEXAS, as initial Operator,
shall submit the first working programme and budget to the Working Interest
Owners within ninety (90) days after the Effective Date of this Agreement.
Thereafter such annual working programmes and budgets shall be prepared and
submitted to the Working Interest Owners as provided in the Operating Agreement.
15.2 The Operator shall furnish to the Director of Petroleum
Concessions a report at quarterly intervals during each Concession Year
indicating the operations undertaken in the Subject Area. Such report shall
include full particulars of the drilling of any wells in the Subject Area and
any indications of Petroleum or Petroleum-bearing strata in the Subject Area and
also of any discovery of minerals, other than Petroleum, of commercial value or
treasures of archaeological or other value. Such reports shall include a
statement of all Petroleum recovered by the Operator as such from the Subject
Area during the said period. Such report should contain a map, when
applicable, showing the true topographical position of any lands in the Subject
Area geologically or geographically surveyed and the location of any wells or
boreholes drilled in the Subject Area during such period.
15.3 The Operator shall submit to the Director of Petroleum
Concessions within three (3) months after the end of each Concession Year a
statement of accounts showing the Expenditures made by the respective Working
Interest Owners during said period. With respect to each Expenditure such
statement shall reflect whether the Expenditure was funded with rupees or
foreign exchange.
15.4 The Operator shall furnish to the Director of Petroleum
Concessions such other plans and information as to the programmes of operations
in the Subject Area as the Director of Petroleum Concessions may from time to
time reasonably require.
15.5 The Operator shall submit to the Director of Petroleum
Concessions as soon as possible all plans and information relating to all
geological, geophysical and drilling operations including but not limited to
copies of primary data (field and reservoir data included), interpretations,
graphs, charts and well logs.
15.6 The Private Working Interest owners shall on Surrender of the
entire Subject Area or part thereof during the term of this Agreement deliver to
the PRESIDENT all data in original including but not limited to geological,
geophysical surveys and drilling operations together with interpretations,
shotpoints, vibrated points, plans and charts thereof. On receipt of the above,
the PRESIDENT shall enjoy sole proprietory rights thereto, provided that each
Private Working Interest Owner may retain a copy thereof for use in evaluating
any retained part of the Subject Area.
<PAGE> 27
-25-
15.7 The Operator shall as far as reasonably practicable correctly
label and preserve for a period of twelve (12) months for reference
characteristic samples of strata or water encountered in any bore-hole or well
and samples of any Petroleum discovered in the Subject Area. The characteristic
samples of said strata shall include, but shall not be limited to, cuts of all
cores, and cuts of all ditch samples. All characteristic samples, including
ditch and core samples, shall be supplied by the Operator to the PRESIDENT,
automatically without any request being made by the PRESIDENT.
15.8 Any person or persons authorized by the Director of Petroleum
Concessions shall be entitled to be present during any or all of the operations
conducted pursuant to this Agreement.
ARTICLE XVI - CONTRIBUTIONS TO JOINT OPERATION
16.1 During the Initial Period except as otherwise specifically
provided herein, all costs and expenses of exploration and other work performed
hereunder within the scope of Joint Operations as defined in Article 1.18 shall
be shared and borne by the Working Interest Owners in proportion to their
Working Interests.
16.2 At least thirty (30) days prior to the first day of each
calendar quarter, the Operator shall submit an itemized estimate of such costs
and expenses for each month of the quarter, and each Non-operator shall pay to
the Operator its Proportionate Share of the quarterly estimates in monthly
installments. Each monthly installment shall be paid on or before the 15th day
of the calendar month.
16.3 After the Date of Commercial Discovery and assignment of Working
Interest to the PRESIDENT according to Article 4.1, if assigned, each working
Interest Owner shall pay its Proportionate Share of costs and expenses for
further exploration, development and production, etc., on the basis of estimates
submitted (to be adjusted subsequently on the basis of invoices) by the Operator
in the same manner as specified in Article 16.1 and 16.2 above.
ARTICLE XVII - ARBITRATION
17.1 Any dispute between one or more Private Working Interest Owners,
as one party, and the PRESIDENT, as the other party, arising out of or in
connection with the terms of this Agreement, or the Licence or any Lease granted
pursuant to this Agreement (regardless of the nature of the question or dispute)
shall, as far as possible, be settled amicably. Failing an amicable settlement
within a reasonable period (which in no event shall exceed three (3) months
after any party to such dispute gives notice to the other of intention to submit
such question or dispute to arbitration), such dispute shall at the request of
any such party be submitted to the International Centre for Settlement of
Investment Disputes (hereinafter called the "Centre") established by the
"Convention on the Settlement of Investment Disputes Between States and
Nationals of Other States" and the PRESIDENT and UNION TEXAS, to the extent
required by said Convention, hereby consent to arbitration thereunder.
<PAGE> 28
-26-
The venue of the arbitration shall be as mutually agreed between the parties to
such dispute, in Pakistan or elsewhere. If such mutual agreement cannot be
reached, the venue shall be decided by the Centre.
17.2 If, for any reason, the request for arbitration proceedings is
not registered by the Centre, or if the Centre fails or refuses to take
jurisdiction over such dispute, such dispute shall finally be settled by
arbitration at The Hague under the Rules of Arbitration of the International
Chamber of Commerce (the "Chamber Rules") and by three (3) arbitrators appointed
in accordance with the Chamber Rules. No such arbitrator shall be a national of
Pakistan or of the United States of America or the national jurisdiction of any
other party to the dispute nor shall any such arbitrator be an employee or agent
or former employee or agent of any party to the dispute.
ARTICLE XVIII - REFINERY
18.1 Neither UNION TEXAS nor any other Private Working Interest Owner
shall be required to erect a refinery, notwithstanding any provisions of the
Rules.
18.2 UNION TEXAS, for itself and all other Private Working Interest
Owners, renounces any claim to participate, on grounds of the production of
Crude Oil in Pakistan, in any refinery which may be erected by the PRESIDENT.
ARTICLE XIX - OTHER MINERALS
19.1 As used in this Article XIX "Other Mineral" means any mineral
other than Petroleum and minerals necessary for the generation of nuclear
energy. In the event any other Mineral is discovered in the course of
operations under this Agreement, and provided the PRESIDENT does not have a
pre-existing policy against development and exploitation of such Other Mineral
by a non-Pakistanti company, the Working Interest Owners shall have the right to
elect, within six (6) months after the date on which the Operator notifies the
Director of Petroleum Concessions of such discovery, to develop and exploit such
Other Mineral subject to reaching an accord after such election with the
appropriate licensing authority as to the terms of exploitation of such Other
Mineral. The minerals necessary for the generation of nuclear energy include,
among other:
1) Uranium
2) Thorium
3) Zirconium
4) Niobium
5) Hafnium
6) Lithium
7) Vanadium
19.2 The discovery of any mineral necessary for the generation of
nuclear energy shall be reported by the Operator to the Director of Petroleum
Concessions.
<PAGE> 29
-27-
19.3 Other than minerals necessary for the generation of nuclear
energy, all other Minerals produced in suspension or combination with Petroleum
shall belong to the Working Interest Owners, subject to payment of royalty if
marketed. Royalty on Other Minerals shall be at the rate specified by the
appropriate authority. Each Working Interest Owner shall at all times take in
kind and separately dispose of its share of such Other Minerals.
19.4 The income derived from Other Minerals, other than those
necessary for the generation of nuclear energy, produced in suspension or
combination with Petroleum shall be governed by the Third Schedule to the Income
Tax Act, 1922, as amended from time to time.
ARTICLE XX - AUDIT
20.1 The accounts of Expenditures for the Joint Operations and of the
amount of any production obtained and of any property acquired by the
expenditure of any further contributions shall be maintained by the Operator as
provided in, and shall be subject to audit in accordance with, the Accounting
Procedure.
20.2 The accounts and supporting vouchers and documents together with
such reasonable facilities as may be required for the purpose of inspection of
the financial affairs of the Joint Operation shall be made available to the
Auditor General of Pakistan who may take such action as he deems fit within two
(2) years from the date of delivery of any audited report delivered pursuant to
the Accounting Procedure to the PRESIDENT. The PRESIDENT and UNION TEXAS may,
where necessary, take appropriate action with regard to any matter arising out
of the Auditor General's report.
ARTICLE XXI - PRODUCTION BONUSES
21.1 The Private Working Interest Owners shall pay the PRESIDENT a
production bonus in cash of One (1) million U.S. dollars within ninety (90) days
after the date a Lease is granted in respect of the first Commercial Discovery
of Petroleum in the Subject Area.
21.2 The Private Working Interest Owners shall pay the PRESIDENT a
further production bonus in cash of Two (2) million U.S. dollars after reaching
in the Subject Area a constant flow rate of at least twenty-five thousand
(25,000) barrels of Crude Oil per day during a period of sixty (60) consecutive
days, and said payment shall be made ninety (90) days after the end of the sixty
(60) days period.
21.3 The Private Working Interest Owners shall pay the PRESIDENT a
still further production bonus in cash of Three (3) million U.S. dollars after
reaching in the Subject Area a constant flow rate of at least fifty thousand
(50,000) barrels of Crude Oil per day during a period of sixty (60) consecutive
days and said payment shall be made ninety (90) days after the end of the sixty
(60) days period.
<PAGE> 30
-28-
21.4 Payments made under this Article are not to be amortized,
expensed, or credited for income tax purposes.
ARTICLE XXII - INSURANCE
22. The Operator shall comply with all workmen's and employers'
liability laws and insurance laws of Pakistan. The operator shall also take out
such insurance for the benefit of the joint account of the parties, naming them
as insured parties, as may be determined by representatives of the parties. The
Operator shall require all contractors engaged in work in the Subject Area under
this Agreement to similarly comply with such insurance as the Operator may
require.
ARTICLE XXIII - MISCELLANEOUS
23.1 The Operator shall conduct all exploration, exploitation,
drilling, development and production operations in accordance with good oil
field practices. Consistently with this requirement the Operator shall
endeavour to obtain low exploration, development, production and operating costs
and to maximize the economic ultimate recovery of Crude Oil.
23.2 The Operator shall not start production from any well before
testing and making sure to the reasonable satisfaction of the PRESIDENT's
representative that the well has been properly completed in accordance with good
oil field practices.
23.3 The Private Working Interest Owners shall not knowingly sell
directly or indirectly any Petroleum produced by them from the Subject Area to
any foreign power hostile or unfriendly to the Republic of Pakistan or to any
subject or citizen of such power.
23.4 In connection with Operations provided for and described in this
Agreement the Operator shall use the helicopters of Pakistan International
Airlines Corporation, as needed, provided helicopters are suitable in the
opinion of Operator and available on terms comparable to those offered by
international operators in comparable areas.
23.5 In connection with the sale and export of Crude Oil, the Private
working Interest Owners shall either use their respective tankers when
available, or, time and circumstance permitting, give first preference for such
transportation to tankers owned by the Republic of Pakistan and/or Pakistani
suppliers provided the rates and terms are effectively the same as those for
similar tankers on a free freight market basis at the moment the offer is made.
23.6 So long as production of Petroleum programmed by the Working
Interest Owners is not unreasonably impaired, the PRESIDENT may use twelve and
one-half per cent (12-1/2%) of the field tank storage capacity owned jointly by
the Working Interest Owners hereunder for storage of royalty Petroleum (other
than Natural Gas and Casinghead Gas) free of charge. If additional storage
capacity is available and is not required by the Working Interest Owners and is
<PAGE> 31
-29-
utilized to store the PRESIDENT's royalty Petroleum, the PRESIDENT shall pay the
Working Interest Owners therefor at the current rate of storage in the oil
fields and, if there shall be no current rate established, then at a fair rate
to be agreed upon in the light of accepted oil field practice. The foregoing
provisions of this Article 23.6 shall not apply to the storage of Petroleum
attributable to the PRESIDENT's Working Interest.
23.7 All pipeline and Crude Oil terminal facilities owned jointly by
the Working Interest Owners hereunder shall be reserved for the transportation
of Petroleum produced by the Working Interest Owners hereunder, provided,
however, that to the extent, from time to time, there is throughput capacity of
the Working Interest Owners not being utilized, such pipeline capacity may be
used by the PRESIDENT for Petroleum purchased from the Working Interest Owners
and by other Petroleum concessionaires in Pakistan, all of whom shall pay the
Working Interest Owners for such use a fee computed on a unit volume/distance
basis after taking into consideration the cost of construction operating and
maintaining such pipeline or pipelines, including depreciations thereof, and
applicable taxes, and, for users other than the PRESIDENT, a reasonable profit.
The Private Working Interest Owners shall not be responsible for the loss during
transportation or storage of Petroleum belonging to the PRESIDENT or such other
Petroleum concessionaries. Income derived from such transportation and storage
shall be governed by the Second Schedule to the Income Tax Act, 1922 as in force
on the date of execution of this Agreement. The Working Interest Owners shall
be entitled to form a separate company for the ownership and operation of any
such pipeline or Crude Oil terminal facility.
23.8 The association of Pakistani capital in connection with the
Joint Operations shall not be required except to the extent of the participation
of the PRESIDENT provided in this Agreement, which participation shall be deemed
to satisfy the obligations of Rule 39(b) and any similar present or future law
or regulation of Pakistan.
23.9 The signature of this Agreement by the PRESIDENT shall be deemed
to satisfy the requirements of Rule 10 providing for written Government orders
to authorize the grant and assignment of Licences and Leases to a company
incorporated outside Pakistan. UNION TEXAS and its assignee Private Working
Interest Owners are hereby exempted from any requirement related to the
incorporation of a company in Pakistan, and this exemption shall be effective
for the entire period of this Agreement.
23.10 This Agreement shall be governed by and shall be given effect
under the laws of Pakistan.
23.11 The Rules in effect on the date of execution of this Agreement
shall remain applicable throughout the term of this Agreement whether or not
subsequently amended or repealed; provided, however, that if any provision of
the Rules is in conflict with any provision of this Agreement, this Agreement
shall prevail.
<PAGE> 32
-30-
23.12 The Operator shall undertake to give on-the-job training to
Pakistan nationals in all phases of Petroleum exploration, development and
production operations then currently conducted under this Agreement. The
following percentage objective shall be kept in view for employment:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
Percentage of Pakistani
Range of monthly salary employment
- -------------------------------------------------------------------
<S> <C> <C>
Less than Rs. 2,300/__________ 100%
Between Rs. 2,300/and Rs. 5,750- 75%
Above Rs. 5,750/__________ 50%
- -------------------------------------------------------------------
</TABLE>
23.13 Notices and other communications required to be given under this
Agreement shall be considered as properly given if written in the English
language and delivered to the addresses respectively shown below:
(a) For the PRESIDENT:
c/o The Director of Petroleum Concessions
Ministry of Petroleum and Natural Resources,
Secretariat Block 'A'
Islamabad, Pakistan
(b) For UNION TEXAS:
c/o Union Texas Petroleum, a
Division of Allied Chemical Corporation
3000 Richmond Avenue
Houston, Texas 77006
U. S. A.
Either party may change its address by notifying the other party thereof
in writing at least ten (10) days before the effective date of such change.
23.14 This Agreement shall remain in full force and effect for the
duration of the Licence and any Lease or extension thereof granted pursuant to
this Agreement.
23.15 This Agreement shall inure to the benefit of and be binding upon
the respective successors of the parties hereto.
23.16 The Article headings are for convenience only and do not form
part of this Agreement.
23.17 The PRESIDENT hereby authorizes, approves and sanctions the
foreign private investment to be made by UNION TEXAS and its assignees pursuant
to this Agreement for all purposes of the Foreign Private Investment (Promotion
and Protection) Act, 1976 of Pakistan, including (a) the repatriation facilities
provided in Article 6 of said Act, (b) remittance by foreign employees as
provided in Article 7 of said Act, and (c) under Article 8 of said Act, the tax
concessions provided in this Agreement.
<PAGE> 33
-31-
23.18 The PRESIDENT hereby approves, on behalf of the Government of
Pakistan, the foreign private investment to be made by UNION TEXAS and its
assignees pursuant to this Agreement for purposes of the issuance of such
investment insurance and other investment incentives as may be available to
UNION TEXAS and its assignees from Overseas Private Investment Corporation, an
agency of the United States Government, or its successors.
23.19 The PRESIDENT shall, simultaneously with the grant of the
Licence to UNION TEXAS, make available to UNION TEXAS, for the use and benefit
of all Working Interest Owners, copies of all data concerning the Subject Area
which are available to the PRESIDENT. As used in this Article 23.19 "data"
includes, without limitation, geological and seismic records and reports, well
logs and records of drilling time, sample logs, electrical logs, logs of
drillstem testing, and cores and other physical samples.
IN WITNESS WHEREOF this Agreement has been duly executed by the
respective parties hereto this 20th day of April, 1977.
For and on behalf of
THE PRESIDENT OF PAKISTAN
WITNESS:
/s/____________________________ /s/________________________________
/s/____________________________
UNION TEXAS PAKISTAN, INC.
WITNESS:
/s/____________________________ By: /s/__________________________
/s/____________________________
<PAGE> 34
List of omitted Annexures to Petroleum Concession Agreement dated April
20, 1977 between the President of Pakistan and Union Texas Pakistan, Inc.
<TABLE>
<CAPTION>
Annexure Description
- -------- -----------
<S> <C>
I Map of the Subject Area
I-A Description of the Subject Area
II Form of Licence
III Form of Operating Agreement
IV Form of Lease
V Concessionary Imports
</TABLE>
<PAGE> 1
EXHIBIT 10.88
AMENDMENT TO
ARUN AND BONTANG
LPG SALES AND PURCHASE CONTRACT
THIS Amendment is dated the 5th day of October, 1994, but effective as
of the 1st day of January 1994, by and between PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA ("Seller"), a State Enterprise of the Republic of Indonesia,
and Nippon Petroleum Gas Co., Ltd. ("Buyer"), a corporation organized under the
laws of Japan.
WHEREAS Seller and Buyer entered into the Arun and Bontang LPG Sales and
Purchase Contract dated July 15, 1986, as amended (the "Sales Contract"); and
WHEREAS Seller and Buyer modified the terms of the Sales Contract by a
Memorandum of Agreement dated March 17, 1994 ("MOA"); and
WHEREAS Seller and Buyer desire to formally amend the Sales Contract to
incorporate the agreements and provisions contained in the MOA and all necessary
and/or consequential changes to the Sales Contract required thereby.
NOW THEREFORE, in consideration of the mutual agreements contained in
this Amendment, Seller and Buyer agree as follows:
ARTICLE I
Article 1.15 of the Sales Contract is hereby amended in its entirety so
as to read as follows:
1
<PAGE> 2
"1.15 Bontang LPG Facilities
The facilities in, at or near the Bontang LNG Facilities,
existing as of January 1, 1994, for separation of LPG from
Natural Gas and for liquefaction and fractionation of LPG, as
well as all related equipment and facilities; Propane and
Butane storage, loading and related facilities including the
Loading Terminal".
ARTICLE II
For the purposes of the Fixed Quantity Periods 1994-1998, Article
5.1 (a) of the Sales Contract is hereby amended in its entirety so as to read
as follows:
"(a) During each annual period specified below (each such period is
hereinafter referred to as a "Fixed Quantity Period"), Seller shall
sell and deliver to Buyer, and Buyer shall purchase, receive and pay
for, at the applicable Contract Sales Prices, the quantity of LPG
specified for Buyer for such period (each such quantity is hereinafter
individually referred to as a "Fixed Quantity" and as "Fixed
Quantities" when referring to more than one such quantity) as follows:
<TABLE>
<CAPTION>
Fixed Quantities Fixed Quantities
Fixed from Arun from Bontang
Quantity LPG Facilities LPG Facilities
Period (Thousands of Metric Tons) (Thousands of Metric Tons) Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan. 1- Dec. 31, 1994 355 164 519
Jan. 1- Dec. 31, 1995 310 187 497
Jan. 1- Dec. 31. 1996 307 190 497
Jan. 1- Dec. 31, 1997 176 190 366
Jan. 1- Dec. 31. 1998 124 190 314
- ----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
ARTICLE III
Article 5.2(d) of the Sales Contract is hereby amended in its
entirety so as to read as follows:
"(d) Seller may increase or decrease the Fixed Quantity for each of
the Fixed Quantity Periods 1991-1993 by an amount not to exceed five
percent (5%) of the Fixed Quantity (as adjusted pursuant to paragraph
(c) above or this paragraph (d), as appropriate) for the preceding
Fixed Quantity Period by giving Buyer notice on or before October 15
of the calendar year preceding the Fixed Quantity Period for which the
Fixed Quantity is to be so adjusted on condition that the Fixed
Quantity so established shall be within ten percent (10%) of the
Fixed Quantity for such Fixed Quantity period set forth in
Article 5.1 (a). Seller shall advise Buyer of its best estimate of
any such increase or decrease on or before September 30 of the
calendar year preceding the Fixed Quantity Period for which such
adjustment is to be made".
ARTICLE IV
Article 5 of the Sales Contract is hereby amended by the addition of a
new Article 5.2(f) reading as follows:
"(f) The Fixed Quantities from Arun LPG Facilities for each Fixed
Quantity Period 1994-1998 assumes that the following aggregate
quantities of LPG will be produced from the Arun Gas Supply Area
("Assumed Arun LPG Production") during such Fixed Quantity Periods:
3
<PAGE> 4
<TABLE>
<CAPTION>
Assumed Arun LPG Production
(Aggregate Quantities
Fixed Quantity Period of LPG in Thousands of Metric Tons)
- -------------------------------------------------------------------------------------
<S> <C>
Jan. 1 - Dec. 31, 1994 1,490
Jan. 1 - Dec. 31, 1995 1,300
Jan. 1 - Dec. 31, 1996 1,290
Jan. 1 - Dec. 31, 1997 740
Jan. 1 - Dec. 31, 1998 520
- -------------------------------------------------------------------------------------
</TABLE>
The Fixed Quantities from Arun LPG Facilities for any Fixed Quantity Period
shall be reduced by an amount equal to twenty three decimal seven nine percent
(23.79%) of the amount by which actual Arun LPG production in any such period is
less than the Assumed Arun LPG Production for such period; and the Fixed
Quantities from Arun LPG Facilities for any such period shall be increased by an
amount equal to twenty three decimal seven nine percent (23.79%) of the amount
by which actual Arun LPG production in any such period is more than the Assumed
Arun LPG Production listed above for such period. Any such reduction or
increase in the Fixed Quantities from Arun LPG Facilities shall result in a
corresponding reduction or increase in the total Fixed Quantities and shall not
affect the Fixed Quantities from Bontang LPG Facilities".
ARTICLE V
Section 6.2(a) of the Sales Contract is hereby amended by replacing
the figure "$3.00" in the formula with the figure "$12.00".
ARTICLE VI
This Amendment shall supersede all of the provisions of the MOA
except for section 1.3 thereof regarding surplus Bontang LPG which shall remain
in full force and
4
<PAGE> 5
effect. Subject to the provisions of section 1.3 of the MOA and notwithstanding
any other provisions of this Amendment or the Sales Contract, Seller shall be
obliged to sell and deliver from the Bontang LPG Facilities only those Fixed
Quantities from Bontang LPG Facilities listed in Article II above.
ARTICLE VII
(i) In the event of any conflict between the terms and conditions
of this Amendment and the Sales Contract the former shall
prevail.
(ii) The capitalized terms used in this Amendment not defined
herein shall have the meanings ascribed thereto in the Sales
Contract.
(iii) Except as otherwise stated herein, all terms and conditions of
the Sales Contract shall remain in full force and effect.
IN WITNESS WHEREOF Seller and Buyer have caused this Amendment to be
executed by their respective duly authorized officer on the 5th day of October,
1994, but effective as of and from the 1st day of January, 1994.
SELLER: BUYER:
PERUSAHAAN PERTAMBANGAN MINYAK NIPPON PETROLEUM GAS CO., LTD
DAN GAS BUMI NEGARA
By: /s/ F. ABDA'OE By: /s/ M. YAGI
--------------------------- -----------------------------
Name: F. Abda'oe Name: M. Yagi
Title: President Director and Title: Director, General
Chief Executive Officer Manager of Supply &
Transportation
Department
5
<PAGE> 6
AMENDMENT TO
ARUN AND BONTANG
LPG SALES AND PURCHASE CONTRACT
THIS Amendment is dated the 5th day of October, 1994, but effective as
of the 1st day of January 1994, by and between PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA ("Seller"), a State Enterprise of the Republic of Indonesia,
and Japan Energy Corporation ("Buyer"), a corporation organized under the laws
of Japan.
WHEREAS Seller and Buyer's predecessor in interest entered into the
Arun and Bontang LPG Sales and Purchase Contract dated July 15, 1986, as
amended (the "Sales Contract"); and
WHEREAS Seller and Buyer modified the terms of the Sales Contract by a
Memorandum of Agreement dated March 17, 1994 ("MOA"); and
WHEREAS Seller and Buyer desire to formally amend the Sales Contract to
incorporate the agreements and provisions contained in the MOA and all necessary
and/or consequential changes to the Sales Contract required thereby.
NOW THEREFORE, in consideration of the mutual agreements contained in
this Amendment, Seller and Buyer agree as follows:
ARTICLE I
Article 1.15 of the Sales Contract is hereby amended in its entirety
so as to read as follows:
1
<PAGE> 7
"1.15 Bontang LPG Facilities
The facilities in, at or near the Bontang LNG Facilities,
existing as of January 1, 1994, for separation of LPG from
Natural Gas and for liquefaction and fractionation of LPG, as
well as all related equipment and facilities; Propane and
Butane storage, loading and related facilities including the
Loading Terminal".
ARTICLE II
For the purposes of the Fixed Quantity Periods 1994-1998, Article
5.1 (a) of the Sales Contract is hereby amended in its entirety so as to read
as follows:
"(a) During each annual period specified below (each such period is
hereinafter referred to as a "Fixed Quantity Period"), Seller shall
sell and deliver to Buyer, and Buyer shall purchase, receive and pay
for, at the applicable Contract Sales Prices, the quantity of LPG
specified for Buyer for such period (each such quantity is hereinafter
individually referred to as a "Fixed Quantity" and as "Fixed
Quantities" when referring to more than one such quantity) as follows:
<TABLE>
<CAPTION>
Fixed Quantities Fixed Quantities
Fixed from Arun from Bontang
Quantity LPG Facilities LPG Facilities
Period (Thousands of Metric Tons) (Thousands of Metric Tons) Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan. 1- Dec. 31, 1994 106 49 155
Jan. 1- Dec. 31, 1995 93 56 149
Jan. 1- Dec. 31. 1996 92 57 149
Jan. 1- Dec. 31, 1997 53 57 110
Jan. 1- Dec. 31. 1998 37 57 94
- -----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 8
ARTICLE III
Article 5.2(d) of the Sales Contract is hereby amended in its entirety
so as to read as follows:
"(d) Seller may increase or decrease the Fixed Quantity for each of
the Fixed Quantity Periods 1991-1993 by an amount not to exceed five
percent (5%) of the Fixed Quantity (as adjusted pursuant to paragraph
(c) above or this paragraph (d), as appropriate) for the preceding
Fixed Quantity Period by giving Buyer notice on or before October 15
of the calendar year preceding the Fixed Quantity Period for which the
Fixed Quantity is to be so adjusted on condition that the Fixed
Quantity so established shall be within ten percent (10%) of the Fixed
Quantity for such Fixed Quantity period set forth in Article 5.1 (a).
Seller shall advise Buyer of its best estimate of any such increase or
decrease on or before September 30 of the calendar year preceding the
Fixed Quantity Period for which such adjustment is to be made".
ARTICLE IV
Article 5 of the Sales Contract is hereby amended by the addition of a
new Article 5.2(f) reading as follows:
"(f) The Fixed Quantities from Arun LPG Facilities for each Fixed
Quantity Period 1994-1998 assumes that the following aggregate
quantities of LPG will be produced from the Arun Gas Supply Area
("Assumed Arun LPG Production") during such Fixed Quantity Periods:
3
<PAGE> 9
<TABLE>
<CAPTION>
Assumed Arun LPG Production
(Aggregate Quantities
Fixed Quantity Period of LPG in Thousands of Metric Tons)
- -------------------------------------------------------------------------------
<S> <C>
Jan. 1 - Dec. 31, 1994 1,490
Jan. 1 - Dec. 31, 1995 1,300
Jan. 1 - Dec. 31, 1996 1,290
Jan. 1 - Dec. 31, 1997 740
Jan. 1 - Dec. 31, 1998 520
- -------------------------------------------------------------------------------
</TABLE>
The Fixed Quantities from Arun LPG Facilities for any Fixed Quantity Period
shall be reduced by an amount equal to seven decimal one three percent
(7.13%) of the amount by which actual Arun LPG production in any such period is
less than the Assumed Arun LPG Production for such period; and the Fixed
Quantities from Arun LPG Facilities for any such period shall be increased by an
amount equal to seven decimal one three percent (7.13%) of the amount by which
actual Arun LPG production in any such period is more than the Assumed
Arun LPG Production listed above for such period. Any such reduction or
increase in the Fixed Quantities from Arun LPG Facilities shall result in a
corresponding reduction or increase in the total Fixed Quantities and shall not
affect the Fixed Quantities from Bontang LPG Facilities".
ARTICLE V
Section 6.2(a) of the Sales Contract is hereby amended by replacing
the figure "$3.00" in the formula with the figure "$12.00".
ARTICLE VI
This Amendment shall supersede all of the provisions of the MOA
except for section 1.3 thereof regarding surplus Bontang LPG which shall
remain in full force and
4
<PAGE> 10
effect. Subject to the provisions of section 1.3 of the MOA and notwithstanding
any other provisions of this Amendment or the Sales Contract, Seller shall be
obliged to sell and deliver from the Bontang LPG Facilities only those Fixed
Quantities from Bontang LPG Facilities listed in Article II above.
ARTICLE VII
(i) In the event of any conflict between the terms and conditions
of this Amendment and the Sales Contract the former shall
prevail.
(ii) The capitalized terms used in this Amendment not defined
herein shall have the meanings ascribed thereto in the Sales
Contract.
(iii) Except as otherwise stated herein, all terms and conditions of
the Sales Contract shall remain in full force and effect.
IN WITNESS WHEREOF Seller and Buyer have caused this Amendment to be
executed by their respective duly authorized officer on the 5th day of October,
1994, but effective as of and from the 1st day of January, 1994.
SELLER: BUYER:
PERUSAHAAN PERTAMBANGAN MINYAK JAPAN ENERGY CORPORAWTION
DAN GAS BUMI NEGARA
By: /s/ F. ABDA'OE By: /s/ HIROFUMI TOKITA
--------------------------- -----------------------------
Name: F. Abda'oe Name: Hirofumi Tokita
Title: President Director and Title: General Manager,
Chief Executive Officer Supply Dept.,
LP Gas Div.
5
<PAGE> 11
AMENDMENT TO
ARUN AND BONTANG
LPG SALES AND PURCHASE CONTRACT
THIS Amendment is dated the 5th day of October, 1994, but effective as
of the 1st day of January 1994, by and between PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA ("Seller"), a State Enterprise of the Republic of Indonesia,
and Mitsui Oil & Gas Co., Ltd. ("Buyer"), a corporation organized under the laws
of Japan.
WHEREAS Seller and Buyer entered into the Arun and Bontang LPG Sales and
Purchase Contract dated July 15, 1986, as amended (the "Sales Contract"); and
WHEREAS Seller and Buyer modified the terms of the Sales Contract by a
Memorandum of Agreement dated March 17, 1994 ("MOA"); and
WHEREAS Seller and Buyer desire to formally amend the Sales Contract to
incorporate the agreements and provisions contained in the MOA and all necessary
and/or consequential changes to the Sales Contract required thereby.
NOW THEREFORE, in consideration of the mutual agreements contained in
this Amendment, Seller and Buyer agree as follows:
ARTICLE I
Article 1.15 of the Sales Contract is hereby amended in its entirety
so as to read as follows:
1
<PAGE> 12
"1.15 Bontang LPG Facilities
The facilities in, at or near the Bontang LNG Facilities,
existing as of January 1, 1994, for separation of LPG from
Natural Gas and for liquefaction and fractionation of LPG, as
well as all related equipment and facilities; Propane and
Butane storage, loading and related facilities including the
Loading Terminal".
ARTICLE II
For the purposes of the Fixed Quantity Periods 1994-1998, Article
5.1 (a) of the Sales Contract is hereby amended in its entirety so as to read
as follows:
"(a) During each annual period specified below (each such period is
hereinafter referred to as a "Fixed Quantity Period"), Seller shall
sell and deliver to Buyer, and Buyer shall purchase, receive and pay
for, at the applicable Contract Sales Prices, the quantity of LPG
specified for Buyer for such period (each such quantity is hereinafter
individually referred to as a "Fixed Quantity" and as "Fixed
Quantities" when referring to more than one such quantity) as follows:
<TABLE>
<CAPTION>
Fixed Quantities Fixed Quantities
Fixed from Arun from Bontang
Quantity LPG Facilities LPG Facilities
Period (Thousands of Metric Tons) (Thousands of Metric Tons) Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan. 1- Dec. 31, 1994 142 66 208
Jan. 1- Dec. 31, 1995 124 75 199
Jan. 1- Dec. 31. 1996 123 76 199
Jan. 1- Dec. 31, 1997 71 76 147
Jan. 1- Dec. 31. 1998 50 76 126
- -----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 13
ARTICLE III
Article 5.2(d) of the Sales Contract is hereby amended in its entirety
so as to read as follows:
"(d) Seller may increase or decrease the Fixed Quantity for each of
the Fixed Quantity Periods 1991-1993 by an amount not to exceed five
percent (5%) of the Fixed Quantity (as adjusted pursuant to paragraph
(c) above or this paragraph (d), as appropriate) for the preceding
Fixed Quantity Period by giving Buyer notice on or before October 15
of the calendar year preceding the Fixed Quantity Period for which the
Fixed Quantity is to be so adjusted on condition that the Fixed
Quantity so established shall be within ten percent (10%) of the Fixed
Quantity for such Fixed Quantity period set forth in Article 5.1 (a).
Seller shall advise Buyer of its best estimate of any such increase or
decrease on or before September 30 of the calendar year preceding the
Fixed Quantity Period for which such adjustment is to be made".
ARTICLE IV
Article 5 of the Sales Contract is hereby amended by the addition of a
new Article 5.2(f) reading as follows:
"(f) The Fixed Quantities from Arun LPG Facilities for each Fixed
Quantity Period 1994-1998 assumes that the following aggregate
quantities of LPG will be produced from the Arun Gas Supply Area
("Assumed Arun LPG Production") during such Fixed Quantity Periods:
3
<PAGE> 14
<TABLE>
<CAPTION>
Assumed Arun LPG Production
(Aggregate Quantities
Fixed Quantity Period of LPG in Thousands of Metric Tons)
- -------------------------------------------------------------------------------
<S> <C>
Jan. 1 - Dec. 31, 1994 1,490
Jan. 1 - Dec. 31, 1995 1,300
Jan. 1 - Dec. 31, 1996 1,290
Jan. 1 - Dec. 31, 1997 740
Jan. 1 - Dec. 31, 1998 520
- -------------------------------------------------------------------------------
</TABLE>
The Fixed Quantities from Arun LPG Facilities for any Fixed Quantity Period
shall be reduced by an amount equal to nine decimal five four percent (9.54%) of
the amount by which actual Arun LPG production in any such period is less than
the Assumed Arun LPG Production for such period; and the Fixed Quantities from
Arun LPG Facilities for any such period shall be increased by an amount equal to
nine decimal five four percent (9.54%) of the amount by which actual Arun LPG
production in any such period is more than the Assumed Arun LPG Production
listed above for such period. Any such reduction or increase in the Fixed
Quantities from Arun LPG Facilities shall result in a corresponding reduction or
increase in the total Fixed Quantities and shall not affect the Fixed Quantities
from Bontang LPG Facilities".
ARTICLE V
Section 6.2(a) of the Sales Contract is hereby amended by replacing
the figure "$3.00" in the formula with the figure "$12.00".
ARTICLE VI
This Amendment shall supersede all of the provisions of the MOA
except for section 1.3 thereof regarding surplus Bontang LPG which shall
remain in full force and
4
<PAGE> 15
effect. Subject to the provisions of section 1.3 of the MOA and notwithstanding
any other provisions of this Amendment or the Sales Contract, Seller shall be
obliged to sell and deliver from the Bontang LPG Facilities only those Fixed
Quantities from Bontang LPG Facilities listed in Article II above.
ARTICLE VII
(i) In the event of any conflict between the terms and conditions
of this Amendment and the Sales Contract the former shall
prevail.
(ii) The capitalized terms used in this Amendment not defined
herein shall have the meanings ascribed thereto in the Sales
Contract.
(iii) Except as otherwise stated herein, all terms and conditions of
the Sales Contract shall remain in full force and effect.
IN WITNESS WHEREOF Seller and Buyer have caused this Amendment to be
executed by their respective duly authorized officer on the 5th day of October,
1994, but effective as of and from the 1st day of January, 1994.
SELLER: BUYER:
PERUSAHAAN PERTAMBANGAN MINYAK MITSUI OIL & GAS CO., LTD.
DAN GAS BUMI NEGARA
By: /s/ F. ABDA'OE By: /s/ H. KOBAYASHI
--------------------------- -----------------------------
Name: F. Abda'oe Name: H. Kobayashi
Title: President Director and Title: Director
Chief Executive Officer
5
<PAGE> 16
AMENDMENT TO
ARUN AND BONTANG
LPG SALES AND PURCHASE CONTRACT
THIS Amendment is dated the 5th day of October, 1994, but effective as
of the 1st day of January 1994, by and between PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA ("Seller"), a State Enterprise of the Republic of Indonesia,
and Showa Shell Sekiyu K.K. ("Buyer"), a corporation organized under the laws
of Japan.
WHEREAS Seller and Buyer entered into the Arun and Bontang LPG Sales and
Purchase Contract dated July 15, 1986, as amended (the "Sales Contract"); and
WHEREAS Seller and Buyer modified the terms of the Sales Contract by a
Memorandum of Agreement dated March 17, 1994 ("MOA"); and
WHEREAS Seller and Buyer desire to formally amend the Sales Contract to
incorporate the agreements and provisions contained in the MOA and all necessary
and/or consequential changes to the Sales Contract required thereby.
NOW THEREFORE, in consideration of the mutual agreements contained in
this Amendment, Seller and Buyer agree as follows:
ARTICLE I
Article 1.15 of the Sales Contract is hereby amended in its entirety
so as to read as follows:
1
<PAGE> 17
"1.15 Bontang LPG Facilities
The facilities in, at or near the Bontang LNG Facilities,
existing as of January 1, 1994, for separation of LPG from
Natural Gas and for liquefaction and fractionation of LPG, as
well as all related equipment and facilities; Propane and
Butane storage, loading and related facilities including the
Loading Terminal".
ARTICLE II
For the purposes of the Fixed Quantity Periods 1994-1998, Article
5.1 (a) of the Sales Contract is hereby amended in its entirety so as to read
as follows:
"(a) During each annual period specified below (each such period is
hereinafter referred to as a "Fixed Quantity Period"), Seller shall
sell and deliver to Buyer, and Buyer shall purchase, receive and pay
for, at the applicable Contract Sales Prices, the quantity of LPG
specified for Buyer for such period (each such quantity is hereinafter
individually referred to as a "Fixed Quantity" and as "Fixed
Quantities" when referring to more than one such quantity) as follows:
<TABLE>
<CAPTION>
Fixed Quantities Fixed Quantities
Fixed from Arun from Bontang
Quantity LPG Facilities LPG Facilities
Period (Thousands of Metric Tons) (Thousands of Metric Tons) Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan. 1- Dec. 31, 1994 142 66 208
Jan. 1- Dec. 31, 1995 124 75 199
Jan. 1- Dec. 31. 1996 123 76 199
Jan. 1- Dec. 31, 1997 71 76 147
Jan. 1- Dec. 31. 1998 50 76 126
- -----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 18
ARTICLE III
Article 5.2(d) of the Sales Contract is hereby amended in its entirety
so as to read as follows:
"(d) Seller may increase or decrease the Fixed Quantity for each of
the Fixed Quantity Periods 1991-1993 by an amount not to exceed five
percent (5%) of the Fixed Quantity (as adjusted pursuant to paragraph
(c) above or this paragraph (d), as appropriate) for the preceding
Fixed Quantity Period by giving Buyer notice on or before October 15
of the calendar year preceding the Fixed Quantity Period for which the
Fixed Quantity is to be so adjusted on condition that the Fixed
Quantity so established shall be within ten percent (10%) of the Fixed
Quantity for such Fixed Quantity period set forth in Article 5.1 (a).
Seller shall advise Buyer of its best estimate of any such increase or
decrease on or before September 30 of the calendar year preceding the
Fixed Quantity Period for which such adjustment is to be made".
ARTICLE IV
Article 5 of the Sales Contract is hereby amended by the addition of a
new Article 5.2(f) reading as follows:
"(f) The Fixed Quantities from Arun LPG Facilities for each Fixed
Quantity Period 1994-1998 assumes that the following aggregate
quantities of LPG will be produced from the Arun Gas Supply Area
("Assumed Arun LPG Production") during such Fixed Quantity Periods:
3
<PAGE> 19
<TABLE>
<CAPTION>
Assumed Arun LPG Production
(Aggregate Quantities
Fixed Quantity Period of LPG in Thousands of Metric Tons)
- -------------------------------------------------------------------------------
<S> <C>
Jan. 1 - Dec. 31, 1994 1,490
Jan. 1 - Dec. 31, 1995 1,300
Jan. 1 - Dec. 31, 1996 1,290
Jan. 1 - Dec. 31, 1997 740
Jan. 1 - Dec. 31, 1998 520
- -------------------------------------------------------------------------------
</TABLE>
The Fixed Quantities from Arun LPG Facilities for any Fixed Quantity Period
shall be reduced by an amount equal to nine decimal five four percent (9.54%) of
the amount by which actual Arun LPG production in any such period is less than
the Assumed Arun LPG Production for such period; and the Fixed Quantities from
Arun LPG Facilities for any such period shall be increased by an amount equal to
nine decimal five four percent (9.54%) of the amount by which actual Arun LPG
production in any such period is more than the Assumed Arun LPG Production
listed above for such period. Any such reduction or increase in the Fixed
Quantities from Arun LPG Facilities shall result in a corresponding reduction or
increase in the total Fixed Quantities and shall not affect the Fixed Quantities
from Bontang LPG Facilities".
ARTICLE V
Section 6.2(a) of the Sales Contract is hereby amended by replacing
the figure "$3.00" in the formula with the figure "$12.00".
ARTICLE VI
This Amendment shall supersede all of the provisions of the MOA
except for section 1.3 thereof regarding surplus Bontang LPG which shall
remain in full force and
4
<PAGE> 20
effect. Subject to the provisions of section 1.3 of the MOA and notwithstanding
any other provisions of this Amendment or the Sales Contract, Seller shall be
obliged to sell and deliver from the Bontang LPG Facilities only those Fixed
Quantities from Bontang LPG Facilities listed in Article II above.
ARTICLE VII
(i) In the event of any conflict between the terms and conditions
of this Amendment and the Sales Contract the former shall
prevail.
(ii) The capitalized terms used in this Amendment not defined
herein shall have the meanings ascribed thereto in the Sales
Contract.
(iii) Except as otherwise stated herein, all terms and conditions of
the Sales Contract shall remain in full force and effect.
IN WITNESS WHEREOF Seller and Buyer have caused this Amendment to be
executed by their respective duly authorized officer on the 5th day of October,
1994, but effective as of and from the 1st day of January, 1994.
SELLER: BUYER:
PERUSAHAAN PERTAMBANGAN MINYAK SHOWA SHELL SEKIYU K.K.
DAN GAS BUMI NEGARA
By: /s/ F. ABDA'OE By: /s/ H. WATANABE
--------------------------- -----------------------------
Name: F. Abda'oe Name: H. Watanabe
Title: President Director and Title: Director
Chief Executive Officer
5
<PAGE> 21
AMENDMENT TO
ARUN AND BONTANG
LPG SALES AND PURCHASE CONTRACT
THIS Amendment is dated the 5th day of October, 1994, but effective as
of the 1st day of January 1994, by and between PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA ("Seller"), a State Enterprise of the Republic of Indonesia,
and Idemitsu Kosan Co., Ltd. ("Buyer"), a corporation organized under the laws
of Japan.
WHEREAS Seller and Buyer entered into the Arun and Bontang LPG Sales and
Purchase Contract dated July 15, 1986, as amended (the "Sales Contract"); and
WHEREAS Seller and Buyer modified the terms of the Sales Contract by a
Memorandum of Agreement dated March 17, 1994 ("MOA"); and
WHEREAS Seller and Buyer desire to formally amend the Sales Contract to
incorporate the agreements and provisions contained in the MOA and all necessary
and/or consequential changes to the Sales Contract required thereby.
NOW THEREFORE, in consideration of the mutual agreements contained in
this Amendment, Seller and Buyer agree as follows:
ARTICLE I
Article 1.15 of the Sales Contract is hereby amended in its entirety
so as to read as follows:
1
<PAGE> 22
"1.15 Bontang LPG Facilities
The facilities in, at or near the Bontang LNG Facilities,
existing as of January 1, 1994, for separation of LPG from
Natural Gas and for liquefaction and fractionation of LPG, as
well as all related equipment and facilities; Propane and
Butane storage, loading and related facilities including the
Loading Terminal".
ARTICLE II
For the purposes of the Fixed Quantity Periods 1994-1998, Article
5.1 (a) of the Sales Contract is hereby amended in its entirety so as to read
as follows:
"(a) During each annual period specified below (each such period is
hereinafter referred to as a "Fixed Quantity Period"), Seller shall
sell and deliver to Buyer, and Buyer shall purchase, receive and pay
for, at the applicable Contract Sales Prices, the quantity of LPG
specified for Buyer for such period (each such quantity is hereinafter
individually referred to as a "Fixed Quantity" and as "Fixed
Quantities" when referring to more than one such quantity) as follows:
<TABLE>
<CAPTION>
Fixed Quantities Fixed Quantities
Fixed from Arun from Bontang
Quantity LPG Facilities LPG Facilities
Period (Thousands of Metric Tons) (Thousands of Metric Tons) Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan. 1- Dec. 31, 1994 213 99 312
Jan. 1- Dec. 31, 1995 186 113 299
Jan. 1- Dec. 31. 1996 185 114 299
Jan. 1- Dec. 31, 1997 106 114 220
Jan. 1- Dec. 31. 1998 74 115 189
- -----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 23
ARTICLE III
Article 5.2(d) of the Sales Contract is hereby amended in its entirety
so as to read as follows:
"(d) Seller may increase or decrease the Fixed Quantity for each of
the Fixed Quantity Periods 1991-1993 by an amount not to exceed five
percent (5%) of the Fixed Quantity (as adjusted pursuant to paragraph
(c) above or this paragraph (d), as appropriate) for the preceding
Fixed Quantity Period by giving Buyer notice on or before October 15
of the calendar year preceding the Fixed Quantity Period for which the
Fixed Quantity is to be so adjusted on condition that the Fixed
Quantity so established shall be within ten percent (10%) of the Fixed
Quantity for such Fixed Quantity period set forth in Article 5.1 (a).
Seller shall advise Buyer of its best estimate of any such increase or
decrease on or before September 30 of the calendar year preceding the
Fixed Quantity Period for which such adjustment is to be made".
ARTICLE IV
Article 5 of the Sales Contract is hereby amended by the addition of a
new Article 5.2(f) reading as follows:
"(f) The Fixed Quantities from Arun LPG Facilities for each Fixed
Quantity Period 1994-1998 assumes that the following aggregate
quantities of LPG will be produced from the Arun Gas Supply Area
("Assumed Arun LPG Production") during such Fixed Quantity Periods:
3
<PAGE> 24
<TABLE>
<CAPTION>
Assumed Arun LPG Production
(Aggregate Quantities
Fixed Quantity Period of LPG in Thousands of Metric Tons)
- -------------------------------------------------------------------------------
<S> <C>
Jan. 1 - Dec. 31, 1994 1,490
Jan. 1 - Dec. 31, 1995 1,300
Jan. 1 - Dec. 31, 1996 1,290
Jan. 1 - Dec. 31, 1997 740
Jan. 1 - Dec. 31, 1998 520
- -------------------------------------------------------------------------------
</TABLE>
The Fixed Quantities from Arun LPG Facilities for any Fixed Quantity Period
shall be reduced by an amount equal to fourteen decimal three one percent
(14.31%) of the amount by which actual Arun LPG production in any such period is
less than the Assumed Arun LPG Production for such period; and the Fixed
Quantities from Arun LPG Facilities for any such period shall be increased by an
amount equal to fourteen decimal three one percent (14.31%) of the amount by
which actual Arun LPG production in any such period is more than the Assumed
Arun LPG Production listed above for such period. Any such reduction or
increase in the Fixed Quantities from Arun LPG Facilities shall result in a
corresponding reduction or increase in the total Fixed Quantities and shall not
affect the Fixed Quantities from Bontang LPG Facilities".
ARTICLE V
Section 6.2(a) of the Sales Contract is hereby amended by replacing
the figure "$3.00" in the formula with the figure "$12.00".
ARTICLE VI
This Amendment shall supersede all of the provisions of the MOA
except for section 1.3 thereof regarding surplus Bontang LPG which shall
remain in full force and
4
<PAGE> 25
effect. Subject to the provisions of section 1.3 of the MOA and notwithstanding
any other provisions of this Amendment or the Sales Contract, Seller shall be
obliged to sell and deliver from the Bontang LPG Facilities only those Fixed
Quantities from Bontang LPG Facilities listed in Article II above.
ARTICLE VII
(i) In the event of any conflict between the terms and conditions
of this Amendment and the Sales Contract the former shall
prevail.
(ii) The capitalized terms used in this Amendment not defined
herein shall have the meanings ascribed thereto in the Sales
Contract.
(iii) Except as otherwise stated herein, all terms and conditions of
the Sales Contract shall remain in full force and effect.
IN WITNESS WHEREOF Seller and Buyer have caused this Amendment to be
executed by their respective duly authorized officer on the 5th day of October,
1994, but effective as of and from the 1st day of January, 1994.
SELLER: BUYER:
PERUSAHAAN PERTAMBANGAN MINYAK IDEMITSU KOSAN CO., LTD.
DAN GAS BUMI NEGARA
By: /s/ F. ABDA'OE By: /s/ A. INOMOTO
--------------------------- -----------------------------
Name: F. Abda'oe Name: A. Inomoto
Title: President Director and Title: Director & General
Chief Executive Officer Manager
5
<PAGE> 26
AMENDMENT TO
ARUN AND BONTANG
LPG SALES AND PURCHASE CONTRACT
THIS Amendment is dated the 5th day of October, 1994, but effective as
of the 1st day of January 1994, by and between PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA ("Seller"), a State Enterprise of the Republic of Indonesia,
and Cosmo Oil Co., Ltd. ("Buyer"), a corporation organized under the laws
of Japan.
WHEREAS Seller and Buyer entered into the Arun and Bontang LPG Sales and
Purchase Contract dated July 15, 1986, as amended (the "Sales Contract"); and
WHEREAS Seller and Buyer modified the terms of the Sales Contract by a
Memorandum of Agreement dated March 17, 1994 ("MOA"); and
WHEREAS Seller and Buyer desire to formally amend the Sales Contract to
incorporate the agreements and provisions contained in the MOA and all necessary
and/or consequential changes to the Sales Contract required thereby.
NOW THEREFORE, in consideration of the mutual agreements contained in
this Amendment, Seller and Buyer agree as follows:
ARTICLE I
Article 1.15 of the Sales Contract is hereby amended in its entirety
so as to read as follows:
1
<PAGE> 27
"1.15 Bontang LPG Facilities
The facilities in, at or near the Bontang LNG Facilities,
existing as of January 1, 1994, for separation of LPG from
Natural Gas and for liquefaction and fractionation of LPG, as
well as all related equipment and facilities; Propane and
Butane storage, loading and related facilities including the
Loading Terminal".
ARTICLE II
For the purposes of the Fixed Quantity Periods 1994-1998, Article
5.1 (a) of the Sales Contract is hereby amended in its entirety so as to read
as follows:
"(a) During each annual period specified below (each such period is
hereinafter referred to as a "Fixed Quantity Period"), Seller shall
sell and deliver to Buyer, and Buyer shall purchase, receive and pay
for, at the applicable Contract Sales Prices, the quantity of LPG
specified for Buyer for such period (each such quantity is hereinafter
individually referred to as a "Fixed Quantity" and as "Fixed
Quantities" when referring to more than one such quantity) as follows:
<TABLE>
<CAPTION>
Fixed Quantities Fixed Quantities
Fixed from Arun from Bontang
Quantity LPG Facilities LPG Facilities
Period (Thousands of Metric Tons) (Thousands of Metric Tons) Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan. 1- Dec. 31, 1994 248 115 363
Jan. 1- Dec. 31, 1995 217 131 348
Jan. 1- Dec. 31. 1996 215 133 348
Jan. 1- Dec. 31, 1997 123 134 257
Jan. 1- Dec. 31. 1998 87 133 220
- -----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 28
ARTICLE III
Article 5.2(d) of the Sales Contract is hereby amended in its entirety
so as to read as follows:
"(d) Seller may increase or decrease the Fixed Quantity for each of
the Fixed Quantity Periods 1991-1993 by an amount not to exceed five
percent (5%) of the Fixed Quantity (as adjusted pursuant to paragraph
(c) above or this paragraph (d), as appropriate) for the preceding
Fixed Quantity Period by giving Buyer notice on or before October 15
of the calendar year preceding the Fixed Quantity Period for which the
Fixed Quantity is to be so adjusted on condition that the Fixed
Quantity so established shall be within ten percent (10%) of the Fixed
Quantity for such Fixed Quantity period set forth in Article 5.1 (a).
Seller shall advise Buyer of its best estimate of any such increase or
decrease on or before September 30 of the calendar year preceding the
Fixed Quantity Period for which such adjustment is to be made".
ARTICLE IV
Article 5 of the Sales Contract is hereby amended by the addition of a
new Article 5.2(f) reading as follows:
"(f) The Fixed Quantities from Arun LPG Facilities for each Fixed
Quantity Period 1994-1998 assumes that the following aggregate
quantities of LPG will be produced from the Arun Gas Supply Area
("Assumed Arun LPG Production") during such Fixed Quantity Periods:
3
<PAGE> 29
<TABLE>
<CAPTION>
Assumed Arun LPG Production
(Aggregate Quantities
Fixed Quantity Period of LPG in Thousands of Metric Tons)
- -------------------------------------------------------------------------------
<S> <C>
Jan. 1 - Dec. 31, 1994 1,490
Jan. 1 - Dec. 31, 1995 1,300
Jan. 1 - Dec. 31, 1996 1,290
Jan. 1 - Dec. 31, 1997 740
Jan. 1 - Dec. 31, 1998 520
- -------------------------------------------------------------------------------
</TABLE>
The Fixed Quantities from Arun LPG Facilities for any Fixed Quantity Period
shall be reduced by an amount equal to sixteen decimal six seven percent
(16.67%) of the amount by which actual Arun LPG production in any such period is
less than the Assumed Arun LPG Production for such period; and the Fixed
Quantities from Arun LPG Facilities for any such period shall be increased by an
amount equal to sixteen decimal six seven percent (16.67%) of the amount by
which actual Arun LPG production in any such period is more than the Assumed
Arun LPG Production listed above for such period. Any such reduction or
increase in the Fixed Quantities from Arun LPG Facilities shall result in a
corresponding reduction or increase in the total Fixed Quantities and shall not
affect the Fixed Quantities from Bontang LPG Facilities".
ARTICLE V
Section 6.2(a) of the Sales Contract is hereby amended by replacing
the figure "$3.00" in the formula with the figure "$12.00".
ARTICLE VI
This Amendment shall supersede all of the provisions of the MOA
except for section 1.3 thereof regarding surplus Bontang LPG which shall
remain in full force and
4
<PAGE> 30
effect. Subject to the provisions of section 1.3 of the MOA and notwithstanding
any other provisions of this Amendment or the Sales Contract, Seller shall be
obliged to sell and deliver from the Bontang LPG Facilities only those Fixed
Quantities from Bontang LPG Facilities listed in Article II above.
ARTICLE VII
(i) In the event of any conflict between the terms and conditions
of this Amendment and the Sales Contract the former shall
prevail.
(ii) The capitalized terms used in this Amendment not defined
herein shall have the meanings ascribed thereto in the Sales
Contract.
(iii) Except as otherwise stated herein, all terms and conditions of
the Sales Contract shall remain in full force and effect.
IN WITNESS WHEREOF Seller and Buyer have caused this Amendment to be
executed by their respective duly authorized officer on the 5th day of October,
1994, but effective as of and from the 1st day of January, 1994.
SELLER: BUYER:
PERUSAHAAN PERTAMBANGAN MINYAK COSMO OIL CO., LTD.
DAN GAS BUMI NEGARA
By: /s/ F. ABDA'OE By: /s/ M. KATAYAMA
--------------------------- -----------------------------
Name: F. Abda'oe Name: M. Katayama
Title: President Director and Title: General Manager
Chief Executive Officer International
Petroleum Dept. (I)
5
<PAGE> 31
AMENDMENT TO
ARUN AND BONTANG
LPG SALES AND PURCHASE CONTRACT
THIS Amendment is dated the 5th day of October, 1994, but effective as
of the 1st day of January 1994, by and between PERUSAHAAN PERTAMBANGAN MINYAK
DAN GAS BUMI NEGARA ("Seller"), a State Enterprise of the Republic of Indonesia,
and Mitsubishi Corporation ("Buyer"), a corporation organized under the laws
of Japan.
WHEREAS Seller and Buyer entered into the Arun and Bontang LPG Sales and
Purchase Contract dated July 15, 1986, as amended (the "Sales Contract"); and
WHEREAS Seller and Buyer modified the terms of the Sales Contract by a
Memorandum of Agreement dated March 17, 1994 ("MOA"); and
WHEREAS Seller and Buyer desire to formally amend the Sales Contract to
incorporate the agreements and provisions contained in the MOA and all necessary
and/or consequential changes to the Sales Contract required thereby.
NOW THEREFORE, in consideration of the mutual agreements contained in
this Amendment, Seller and Buyer agree as follows:
ARTICLE I
Article 1.15 of the Sales Contract is hereby amended in its entirety
so as to read as follows:
1
<PAGE> 32
"1.15 Bontang LPG Facilities
The facilities in, at or near the Bontang LNG Facilities,
existing as of January 1, 1994, for separation of LPG from
Natural Gas and for liquefaction and fractionation of LPG, as
well as all related equipment and facilities; Propane and
Butane storage, loading and related facilities including the
Loading Terminal".
ARTICLE II
For the purposes of the Fixed Quantity Periods 1994-1998, Article
5.1 (a) of the Sales Contract is hereby amended in its entirety so as to read
as follows:
"(a) During each annual period specified below (each such period is
hereinafter referred to as a "Fixed Quantity Period"), Seller shall
sell and deliver to Buyer, and Buyer shall purchase, receive and pay
for, at the applicable Contract Sales Prices, the quantity of LPG
specified for Buyer for such period (each such quantity is hereinafter
individually referred to as a "Fixed Quantity" and as "Fixed
Quantities" when referring to more than one such quantity) as follows:
<TABLE>
<CAPTION>
Fixed Quantities Fixed Quantities
Fixed from Arun from Bontang
Quantity LPG Facilities LPG Facilities
Period (Thousands of Metric Tons) (Thousands of Metric Tons) Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jan. 1- Dec. 31, 1994 284 131 415
Jan. 1- Dec. 31, 1995 247 150 397
Jan. 1- Dec. 31. 1996 246 152 398
Jan. 1- Dec. 31, 1997 141 152 293
Jan. 1- Dec. 31. 1998 99 152 251
- -----------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 33
ARTICLE III
Article 5.2(d) of the Sales Contract is hereby amended in its entirety
so as to read as follows:
"(d) Seller may increase or decrease the Fixed Quantity for each of
the Fixed Quantity Periods 1991-1993 by an amount not to exceed five
percent (5%) of the Fixed Quantity (as adjusted pursuant to paragraph
(c) above or this paragraph (d), as appropriate) for the preceding
Fixed Quantity Period by giving Buyer notice on or before October 15
of the calendar year preceding the Fixed Quantity Period for which the
Fixed Quantity is to be so adjusted on condition that the Fixed
Quantity so established shall be within ten percent (10%) of the Fixed
Quantity for such Fixed Quantity period set forth in Article 5.1 (a).
Seller shall advise Buyer of its best estimate of any such increase or
decrease on or before September 30 of the calendar year preceding the
Fixed Quantity Period for which such adjustment is to be made".
ARTICLE IV
Article 5 of the Sales Contract is hereby amended by the addition of a
new Article 5.2(f) reading as follows:
"(f) The Fixed Quantities from Arun LPG Facilities for each Fixed
Quantity Period 1994-1998 assumes that the following aggregate
quantities of LPG will be produced from the Arun Gas Supply Area
("Assumed Arun LPG Production") during such Fixed Quantity Periods:
3
<PAGE> 34
<TABLE>
<CAPTION>
Assumed Arun LPG Production
(Aggregate Quantities
Fixed Quantity Period of LPG in Thousands of Metric Tons)
- -------------------------------------------------------------------------------
<S> <C>
Jan. 1 - Dec. 31, 1994 1,490
Jan. 1 - Dec. 31, 1995 1,300
Jan. 1 - Dec. 31, 1996 1,290
Jan. 1 - Dec. 31, 1997 740
Jan. 1 - Dec. 31, 1998 520
- -------------------------------------------------------------------------------
</TABLE>
The Fixed Quantities from Arun LPG Facilities for any Fixed Quantity Period
shall be reduced by an amount equal to nineteen decimal zero three percent
(19.03%) of the amount by which actual Arun LPG production in any such period is
less than the Assumed Arun LPG Production for such period; and the Fixed
Quantities from Arun LPG Facilities for any such period shall be increased by an
amount equal to nineteen decimal zero three percent (19.03%) of the amount by
which actual Arun LPG production in any such period is more than the Assumed
Arun LPG Production listed above for such period. Any such reduction or
increase in the Fixed Quantities from Arun LPG Facilities shall result in a
corresponding reduction or increase in the total Fixed Quantities and shall not
affect the Fixed Quantities from Bontang LPG Facilities".
ARTICLE V
Section 6.2(a) of the Sales Contract is hereby amended by replacing
the figure "$3.00" in the formula with the figure "$12.00".
ARTICLE VI
This Amendment shall supersede all of the provisions of the MOA
except for section 1.3 thereof regarding surplus Bontang LPG which shall
remain in full force and
4
<PAGE> 35
effect. Subject to the provisions of section 1.3 of the MOA and notwithstanding
any other provisions of this Amendment or the Sales Contract, Seller shall be
obliged to sell and deliver from the Bontang LPG Facilities only those Fixed
Quantities from Bontang LPG Facilities listed in Article II above.
ARTICLE VII
(i) In the event of any conflict between the terms and conditions
of this Amendment and the Sales Contract the former shall
prevail.
(ii) The capitalized terms used in this Amendment not defined
herein shall have the meanings ascribed thereto in the Sales
Contract.
(iii) Except as otherwise stated herein, all terms and conditions of
the Sales Contract shall remain in full force and effect.
IN WITNESS WHEREOF Seller and Buyer have caused this Amendment to be
executed by their respective duly authorized officer on the 5th day of October,
1994, but effective as of and from the 1st day of January, 1994.
SELLER: BUYER:
PERUSAHAAN PERTAMBANGAN MINYAK MITSUBISHI CORPORATION
DAN GAS BUMI NEGARA
By: /s/ F. ABDA'OE By: /s/ YUTAKA KASAHARA
--------------------------- -----------------------------
Name: F. Abda'oe Name: Yutaka Kasahara
Title: President Director and Title: General Manager
Chief Executive Officer of LPG Dept.
5
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Except as otherwise noted, Union Texas Petroleum Holdings, Inc. (the "Company")
holds, either directly or indirectly, all or substantially all of the voting
stock of the following corporations. Except as otherwise noted, all of the
corporations are incorporated in the state of Delaware.
Union Texas Asia Corporation
Union Texas Barakan, Inc.
Union Texas Brasil, Inc.
Union Texas Carthage, Inc.
Union Texas Egypt, Inc.
West Gemsa Petroleum Company (1)
Four Oaks Insurance, Ltd. (2)
Union Texas Petroleum Energy Corporation
Unicon Producing Company (3)
Union Texas International Corporation
Union Texas Adriatic, Inc.
Union Texas (Argentina) Ltd.
Union Texas Finance, Inc.
Union Texas Maghreb, Inc.
Union Texas Methane, Inc.
Union Texas (Kai) Limited (4)
Union Texas (Tanimbar) Limited (4)
Union Texas (Rebi) Limited (4)
Union Texas (Transnational) Limited (4)
Union Texas East Kalimantan Limited (4)
Union Texas Espana, Inc.
Union Texas PNG, Inc.
Union Texas Pakistan, Inc.
Union Texas Petroleum Limited (5)
Union Texas Britannia Limited (5)
Union Texas Trading Corporation
Union Texas Petroleum Europe and Middle East, Inc.
Union Texas Metropole, S.A. (6)
Union Texas Petroleum Alaska Corporation
Union Texas Petroleum Services Corporation
Union Texas Products Corporation
Union Texas I Corporation
Union Texas Petrochemicals Pipeline, Inc.
Union Texas (South East Asia) Inc.
Union Texas Tunisia, Inc.
Unistar, Inc.
Union Texas Development Corporation
Unimar Company (7)
ENSTAR Corporation (8)
VICO 7.5, Inc. (8)
Virginia Indonesia Company (8)
Virginia Services, Ltd. (8)
<PAGE> 2
Purchasing Services Inc. (8)
VICO Services, Inc. (8)
ENSTAR Indonesia, Inc. (8)
Virginia International Company (8)
VICO Trading, Inc. (8)
Alaska Interstate Int'l Finance, N.V. (8)(9)
Alaska Interstate Int'l Finance, B.V. (8)(10)
AKI International Finance, N.V. (8)(9)
ENSTAR Petroleum, Ltd. (8)(11)
Unimar Financing Corporation (8)
____________________________________
(1) Incorporated under the laws of Egypt.
(2) Incorporated under the laws of Bermuda.
(3) A Texas general partnership between a subsidiary of the Company and
Continental Can Europe, Inc.
(4) Incorporated under the laws of the Bahamas.
(5) Incorporated under the laws of the United Kingdom.
(6) Incorporated under the laws of France.
(7) A Texas general partnership between a subsidiary of the Company and
a subsidiary of LASMO plc, a U.K. company.
(8) Direct or indirect subsidiary of Unimar Company.
(9) Incorporated under the laws of Curacao, Netherlands Antilles.
(10) Incorporated under the laws of Rotterdam, The Netherlands.
(11) Incorporated under the laws of Alberta, Canada.
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S SEC FORM 10-K FOR THE PERIOD ENDING DECEMBER 31, 1994 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 8,389
<SECURITIES> 0
<RECEIVABLES> 54,776
<ALLOWANCES> 3
<INVENTORY> 43,228
<CURRENT-ASSETS> 137,065
<PP&E> 2,426,863
<DEPRECIATION> 1,140,585
<TOTAL-ASSETS> 1,544,634
<CURRENT-LIABILITIES> 287,536
<BONDS> 430,085
<COMMON> 4,391
0
0
<OTHER-SE> 345,108
<TOTAL-LIABILITY-AND-EQUITY> 1,544,634
<SALES> 747,883
<TOTAL-REVENUES> 769,595
<CGS> 299,586
<TOTAL-COSTS> 492,681
<OTHER-EXPENSES> 53,532
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,399
<INCOME-PRETAX> 211,983
<INCOME-TAX> 145,245
<INCOME-CONTINUING> 66,738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,738
<EPS-PRIMARY> .76
<EPS-DILUTED> 0
</TABLE>
