<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
Registration No. 033-58735
PROSPECTUS
[UNION TEXAS PETROLEUM HOLDINGS LOGO]
10,000,000 SHARES
UNION TEXAS PETROLEUM HOLDINGS, INC.
COMMON STOCK
($.05 PAR VALUE)
The shares of Common Stock, $.05 par value per share (the "Common Stock"), of
Union Texas Petroleum Holdings, Inc. (the "Company") offered hereby (the
"Shares") are being sold by the Selling Shareholder. See "Selling Shareholder
and Principal Shareholder." The Company will not receive any of the proceeds
from the sale of the Shares offered hereby. Upon completion of the Offerings (as
defined below), the Selling Shareholder will hold approximately 27% (or 25%, if
the Underwriters exercise their over-allotment options in full) of the Company's
outstanding Common Stock.
Of the Shares being offered, 8,000,000 shares are being offered hereby in the
United States and Canada (the "U.S. Offering") and 2,000,000 shares are being
offered in a concurrent international offering outside the United States and
Canada (the "International Offering" and collectively with the U.S. Offering,
the "Offerings"), subject to transfers between the U.S. Underwriters and the
International Underwriters. The Price to Public and Underwriting Discount per
Share will be identical for the U.S. Offering and the International Offering.
See "Underwriting." The closing of the U.S. Offering and the International
Offering are conditioned upon each other.
The Common Stock is listed on the New York Stock Exchange under the symbol
"UTH." On May 18, 1995, the last reported sale price of the Common Stock on the
New York Stock Exchange Composite Transactions Tape was $22.125 per share. See
"Market and Dividend Information."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT SHAREHOLDER(1)
<S> <C> <C> <C>
Per Share............................ $22.125 $0.71 $21.415
Total(2)............................. $221,250,000 $7,100,000 $214,150,000
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated expenses of $700,000 will be payable by the Company pursuant to
its obligations under a registration agreement with the Selling Shareholder.
See "Selling Shareholder and Principal Shareholder."
(2) The Selling Shareholder has granted to the U.S. Underwriters and the
International Underwriters 30-day options to purchase up to an aggregate of
1,500,000 additional shares of Common Stock at the Price to Public, less
Underwriting Discount, solely to cover over-allotments, if any. If the
Underwriters exercise such options in full, the total Price to Public,
Underwriting Discount and Proceeds to Selling Shareholder will be
$254,437,500, $8,165,000 and $246,272,500, respectively. See "Underwriting."
The Shares are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Shares will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about May 25, 1995.
SALOMON BROTHERS INC
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
The date of this Prospectus is May 18, 1995.
<PAGE> 2
AVAILABLE INFORMATION
Union Texas Petroleum Holdings, Inc. is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at 7 World Trade
Center, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, IL 60601. Copies of such materials can be obtained by mail from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, at prescribed rates. In addition, the
Company's Common Stock is listed on the New York Stock Exchange and the Pacific
Stock Exchange, and the Company's 8.25% Senior Notes due 1999 are listed on the
New York Stock Exchange. The Company's reports, proxy statements and other
information filed under the Exchange Act may also be inspected and copied at the
offices of the New York Stock Exchange, 20 Broad Street, New York, NY 10005 and
the Pacific Stock Exchange, 301 Pine Street, San Francisco, CA 94104.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement, and to the
exhibits and schedules filed therewith. All of these documents may be inspected
without charge at the Commission's principal office in Washington, D.C., and
copies thereof may be obtained from the Commission at the prescribed rates or
may be examined without charge at the public reference facilities of the
Commission.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-9019)
pursuant to the Exchange Act are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994;
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995;
(3) The Company's Current Reports on Form 8-K dated January 20, 1995,
February 7, 1995, February 22, 1995, March 16, 1995, March 17, 1995, April
10, 1995, April 28, 1995, May 4, 1995 and May 18, 1995;
(4) The description of the Company's Common Stock, which is contained
in the Registration Statement on Form 8-A dated August 6, 1987, filed by
the Company to register such securities under Section 12 of the Exchange
Act, as amended by amendments on Form 8 dated September 16, 1987, September
21, 1987 and September 24, 1987; and
(5) All other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering made hereby.
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified shall not be deemed to constitute a part of
this Prospectus except as so modified, and any statement so superseded shall not
be deemed to constitute part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the request of any such person, a copy of any
or all documents which are incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to the Company, at
its principal executive offices at 1330 Post Oak Boulevard, Houston, TX 77056,
Attention: Corporate Secretary, telephone (713) 623-6544.
Quantities of natural gas are expressed in this Prospectus in terms of
thousand cubic feet ("Mcf"), million cubic feet ("MMcf") or billion cubic feet
("Bcf"). Oil is quantified in terms of barrels ("Bbls"). Gas is converted into a
barrel of oil equivalent ("boe") based on 5.8 Mcf of gas to one barrel of oil.
------------------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK AND PACIFIC STOCK EXCHANGES OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. As used herein, the
"Company" means Union Texas Petroleum Holdings, Inc. and its subsidiaries unless
the context requires otherwise. The address and telephone number of the
Company's principal executive offices are 1330 Post Oak Boulevard, Houston,
Texas 77056, (713) 623-6544. Unless indicated otherwise, the information
contained in this Prospectus assumes that the Underwriters' over-allotment
options are not exercised.
THE COMPANY
The Company, the successor to a corporation founded in 1896, is an
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
boe. The Company's average net daily oil and gas production during 1994 and the
first three months of 1995 was approximately 48,000 Bbls and 421 MMcf and 50,000
Bbls and 473 MMcf, respectively. All of the Company's oil and gas producing
activities are presently conducted outside of the U.S., primarily in the U.K.
sector of the North Sea, Indonesia and Pakistan. Approximately 90% of the
Company's oil and gas revenues are indexed to world crude oil prices. The
Company also owns an interest in and operates a U.S.-based petrochemicals
business, which includes a 41.67% interest in a plant with a gross capacity to
produce approximately 1.2 billion pounds of ethylene annually.
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 current exploration activities include interests in Alaska, Argentina,
Tunisia, Vietnam, Ireland, the U.K., Italy, Pakistan and eastern Indonesia.
Also, as part of its growth strategy, the Company recently acquired an interest
in the Britannia field, the largest undeveloped natural gas and condensate field
in the U.K. North Sea.
Capital expenditures (excluding capitalized interest and acquisition costs)
by the Company in 1994 totaled $131 million. Capital expenditures for 1995 are
estimated to be $212 million, of which approximately one-third is allocated to
exploration activities.
U.K. North Sea Operations. The Company's principal properties in the U.K.
North Sea are interests in the Piper, Claymore, Scapa, Saltire and Chanter oil
fields, in each of which the Company owns a 20% working interest, and the Sean
gas fields, in which the Company owns a 25% working interest. Major development
projects undertaken by the Company at the Piper and Saltire fields were
substantially completed in 1993. The Company's net daily production from the
Piper and Claymore blocks averaged approximately 38,000 boe in 1994 as compared
to 28,300 boe in 1993 and 13,200 boe in 1992.
In November 1994, the Company acquired a 9.42% interest in the Britannia
field for L100.6 million (approximately $159 million). The Company's share of
total development costs for Britannia, at current exchange rates, is estimated
to be approximately $200 million, with initial production expected in late 1998.
At year-end 1994, the Company recorded 38 million boe of proved undeveloped
reserves associated with this acquisition.
Indonesia 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 natural gas is converted into liquefied natural gas ("LNG") at
the Indonesian-owned LNG plant at Bontang Bay and is sold under contracts at
prices that are based on a "basket" of world crude oil prices. In 1994,
shipments from this plant were 247 cargoes (108 Bcf net to the Company). The
Company holds its interests in this joint venture both directly through a wholly
owned subsidiary and indirectly through Unimar Company ("Unimar"), a 50/50
partnership with a subsidiary of LASMO plc, a U.K. company.
Pakistan Operations. The Company also participates through joint ventures
in Pakistan in the exploration and production of oil and gas with working
interests of 30% and 25.5% in the currently
3
<PAGE> 4
producing fields. The Company is operator of the joint venture which produced
approximately one-third of Pakistan's total domestic oil output in 1994.
Petrochemicals Business. In the United States, the Company operates the
Geismar ethylene plant near Baton Rouge, Louisiana, in which it owns a 41.67%
interest. The plant has the gross capacity to produce approximately 1.2 billion
pounds of ethylene annually. Improved ethylene margins during the last six
months of 1994 had a positive impact on the Company's cash flow and net income.
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. During the first quarter of
1995, ethylene margins averaged 16 cents per pound.
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Selling Shareholder:
United States Offering........................ 8,000,000 shares
International Offering........................ 2,000,000 shares
Total(1).............................. 10,000,000 shares
Common Stock to be outstanding before and after
the Offerings(2).............................. 87,666,148 shares
NYSE symbol for the Common Stock................ UTH
Use of Proceeds................................. The Shares are being offered by the
Selling Shareholder. The Company will not
receive any of the proceeds.
</TABLE>
- ------------
(1) Does not include up to 1,500,000 shares of Common Stock which may be sold by
the Selling Shareholder pursuant to the Underwriters' over-allotment
options. See "Underwriting."
(2) Based upon outstanding shares as of March 31, 1995 and exclusive of up to
3,519,788 shares issuable on the exercise of stock options in connection
with Company benefit plans. See "Capitalization" and "Management
Developments."
SELLING SHAREHOLDER AND PRINCIPAL SHAREHOLDER
The Common Stock is being offered on behalf of two limited partnerships,
Petroleum Associates, L.P. and KKR Partners II, L.P. (the "KKR Partnerships" or,
collectively, the "Selling Shareholder"), both of which are affiliated with
Kohlberg Kravis Roberts & Co. ("KKR"). Following the Offerings and assuming no
exercise of the over-allotment options, the Selling Shareholder will own
23,333,334 shares of Common Stock, representing approximately 27% of the
outstanding Common Stock. The KKR Partnerships and their general partners will
continue to be able to exercise effective control over the Company through their
representation on the Board of Directors of the Company (the "Board") and by
reason of their substantial voting power with respect to the election of
directors and actions submitted to a vote of stockholders. See "Selling
Shareholder and Principal Shareholder."
4
<PAGE> 5
SUMMARY FINANCIAL DATA
The following summary financial data for the three years ended December 31,
1994, has been derived from the consolidated financial statements of the Company
and should be read in conjunction with the consolidated financial statements and
notes thereto incorporated herein by reference and "Capitalization," "Selected
Consolidated Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus. The financial information presented below for the three-month
periods ended March 31, 1994 and 1995, reflects all normal and recurring
adjustments which, in the opinion of management, are necessary for a fair
presentation of the Company's consolidated results of operations and financial
position for such periods. The information shown for the three-month periods is
not necessarily indicative of full year results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------- ---------------------
1992 1993 1994 1994 1995
------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues......................................... $ 714 $ 697 $ 770 $ 201 $ 246
Net income before extraordinary items and the
cumulative effect of changes in accounting
principles........................................... 110 31 67 27 47
Net income(a).......................................... 14 27 67 27 47
Net income (loss) applicable to common
stockholders(a)...................................... (17) 27 67 27 47
Share data:
Net income (loss) per share of common stock............ (.26) .31 .76 .30 .53
Common stock dividends per share....................... .20 .20 .20 .05 .05
Average number of shares outstanding................... 85.8 87.2 87.6 87.7 87.6
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.............................. $ 101 $ 18 $ 8 $ 11 $ 14
Total assets........................................... 1,581 1,339 1,545 1,324 1,564
Total debt............................................. 483 450 538 443 510
Redeemable preferred stock............................. 75 -- -- -- --
Stockholders' equity................................... 269 281 349 305 403
CASH FLOW DATA:
Net cash provided by operating activities.............. $ 241 $ 191 $ 215 $ 47 $ 61
Capital expenditures(b)................................ 308 192 131 23 34
</TABLE>
- ------------
(a) In 1992, the Company recognized a $76 million charge for the cumulative
effect of adopting two new accounting standards and an extraordinary loss of
$20 million as a result of the early redemption of debt.
(b) Capital expenditures include the Company's proportional share of such
expenditures through Unimar, an equity partnership.
5
<PAGE> 6
SUMMARY OPERATING INFORMATION
The following summary of operating information has been derived from the
supplementary oil and gas data to the Company's consolidated financial
statements and other records of the Company and should be read in conjunction
with such data in the Company's consolidated financial statements incorporated
herein by reference.
The proved reserves and production statistics for the Company set forth
below and elsewhere in this Prospectus are net of royalties and operating
interests owned by others, unless otherwise indicated. Gas is converted into a
boe based on 5.8 Mcf of gas to one barrel of oil.
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
NET PROVED DEVELOPED AND UNDEVELOPED OIL AND GAS RESERVES:
Crude oil, including condensate and natural gas liquids (millions of barrels)
United Kingdom..................................................................... 76 69 74
Indonesia.......................................................................... 13 18 19
Pakistan........................................................................... 6 5 4
Equity Partnership................................................................. 5 6 7
------ ------ ------
Total............................................................................ 100 98 104
===== ===== =====
Natural gas (billion cubic feet)
United Kingdom..................................................................... 90 139 320
Indonesia.......................................................................... 798 1,009 973
Pakistan........................................................................... 101 102 98
Equity Partnership................................................................. 295 389 385
------ ------ ------
Total............................................................................ 1,284 1,639 1,776
===== ===== =====
NET PROVED DEVELOPED OIL AND GAS RESERVES:
Crude oil, including condensate and natural gas liquids (millions of barrels)
United Kingdom..................................................................... 25 34 57
Indonesia.......................................................................... 12 15 17
Pakistan........................................................................... 3 3 3
Equity Partnership................................................................. 5 5 7
------ ------ ------
Total............................................................................ 45 57 84
===== ===== =====
Natural gas (billion cubic feet)
United Kingdom..................................................................... 75 131 149
Indonesia.......................................................................... 725 785 813
Pakistan........................................................................... 35 39 52
Equity Partnership................................................................. 267 300 321
------ ------ ------
Total............................................................................ 1,102 1,255 1,335
===== ===== =====
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- ---------
1992 1993 1994 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
AVERAGE NET PRODUCTION PER DAY:
Crude oil, including condensate (thousands of barrels)
United Kingdom(a).................................................. 13 27 35 37
Indonesia.......................................................... 5 6 6 6
Pakistan........................................................... 5 5 5 5
Equity Partnership................................................. 2 2 2 2
------- ------- ------- -------
Total(b)....................................................... 25 40 48 50
====== ====== ====== ======
Natural gas (million cubic feet)
United Kingdom(a).................................................. 7 8 24 44
Indonesia(c)....................................................... 244 242 266 290
Pakistan........................................................... 39 43 43 43
Equity Partnership(c).............................................. 81 80 88 96
------- ------- ------- -------
Total.......................................................... 371 373 421 473
====== ====== ====== ======
AVERAGE SALES PRICE:
Crude oil, including condensate (dollars per barrel)
United Kingdom(a).................................................. $ 18.47 $ 15.10 $ 14.99 $ 16.34
Indonesia.......................................................... 20.69 17.26 15.78 17.28
Pakistan........................................................... 16.32 15.04 13.43 14.62
Equity Partnership................................................. 20.69 17.26 15.78 17.28
Natural gas (dollars per thousand cubic feet)
United Kingdom(a).................................................. 3.69 2.49 2.57 3.01
Indonesia(c)....................................................... 3.22 3.00 2.72 2.94
Pakistan........................................................... 1.09 1.26 1.07 1.30
Equity Partnership(c).............................................. 3.22 3.00 2.72 2.94
</TABLE>
- ------------
(a) Includes Piper activity beginning early 1993 and Saltire and Chanter
activity beginning in the middle of 1993.
(b) Excludes natural gas liquids production of 1,000, 2,000, 3,000 and 3,000
barrels per day for 1992, 1993, 1994 and the three months ended March 31,
1995, respectively.
(c) Includes gas consumed in the operation of the liquefied natural gas plant
in the Company's Indonesian joint venture.
7
<PAGE> 8
USE OF PROCEEDS
All of the shares of Common Stock offered hereby are being offered by the
Selling Shareholder. The Company will not receive any of the proceeds of the
Offerings.
SELLING SHAREHOLDER AND PRINCIPAL SHAREHOLDER
All of the shares of Common Stock offered hereby are being sold by the KKR
Partnerships (which are referred to in this Prospectus as a single shareholder,
the "Principal Shareholder"). Petroleum Associates, L.P. and KKR Partners II,
L.P., currently hold 33,047,334 shares and 286,000 shares, respectively, or
approximately 38% in the aggregate of the outstanding shares of Common Stock.
Shares sold in each of the U.S. Offering and the International Offering,
including shares sold pursuant to any exercise of the over-allotment options,
will be sold by each of the KKR Partnerships in proportion to the amount of
their holdings. Following the Offerings, the Selling Shareholder will hold
approximately 27% of the outstanding shares of Common Stock (assuming no
exercise of the over-allotment options).
As a result of the KKR Partnerships' stock ownership of the Company, the
KKR Partnerships and their general partners will continue to be able to exercise
effective control over the Company, through their representation on the Board
and by reason of their substantial voting power with respect to the election of
directors and actions requiring stockholder approval. KKR Associates, the sole
general partner of the KKR Partnerships, is a limited partnership of which Henry
R. Kravis, George R. Roberts, Michael W. Michelson, Saul A. Fox, James H.
Greene, Jr., Edward A. Gilhuly (each a director of the Company), Robert I.
MacDonnell, Paul E. Raether, Michael T. Tokarz, Perry Golkin, Clifton S. Robbins
and Scott Stuart are the general partners. See "Description of Capital Stock."
The KKR Partnerships and the Company are parties to a consulting agreement
(the "Consulting Agreement"), a copy of which is incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part. Such
Consulting Agreement provides for the payment to KKR by the Company of an annual
fee for financial advisory services. In 1992, 1993 and 1994, KKR was paid
approximately $465,000, $512,000 and $563,000, respectively. The Company will
remain obligated to pay these fees until such time as the KKR Partnerships shall
own less than 20% of the shares of Common Stock outstanding. In addition, each
non-employee director of the Company, including the directors affiliated with
KKR, receives $40,000 per annum for serving on the Board.
During 1992, the Company completed a financial restructuring through a
series of transactions that significantly streamlined its capital structure and
reduced its financing costs. Included in such transactions was the redemption
for $300 million of all its outstanding warrants to purchase Common Stock, $145
million of which was received by the Selling Shareholder. Such warrants were
redeemed with funds borrowed under the Company's then-existing credit facility.
Pursuant to the sale in 1991 of certain U.S. businesses of the Company, the KKR
Partnerships were indemnified as affiliates of the Company by the buyers in such
transactions.
The KKR Partnerships have agreed with the Underwriters not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or
securities convertible into shares of Common Stock for 90 days after the date of
this Prospectus, without the consent of the representatives of the Underwriters.
In addition, the Company and the Company's executive officers have agreed with
the Underwriters not to offer, sell, contract to sell or otherwise dispose of
(other than pursuant to the Company's employee benefit plans or on the
conversion, exchange or exercise of outstanding convertible, exchangeable or
exercisable securities) any shares of Common Stock or securities convertible
into shares of Common Stock for 90 days after the date of this Prospectus
without the consent of the representatives of the Underwriters. If any such
consent is given it would not necessarily be preceded or followed by a public
announcement thereof. See "Underwriting."
The Company and the Principal Shareholder entered into an agreement dated
as of September 30, 1987 (the "Registration Agreement"), a copy of which is
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part, pursuant to which the Company agreed to register the
offer and sale of shares of Common Stock held by the Selling Shareholder,
including the
8
<PAGE> 9
shares of Common Stock offered hereby, under the Securities Act, and the Selling
Shareholder and the Company agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act in connection with
the sale of the shares pursuant to the Registration Agreement. Pursuant to the
Registration Agreement, the Selling Shareholder is required to pay the
underwriting discounts and commissions and transfer taxes, if any, associated
with the Offerings, and the Company is required to pay substantially all
expenses directly associated with the Offerings, including, without limitation,
the cost of registering the shares offered hereby, including applicable
registration and filing fees, printing expenses, certain underwriting expenses
and applicable expenses for legal counsel and accountants incurred by the
Company or the Selling Shareholder.
Certain executive officers and key employees have registration rights with
respect to shares of the Company's Common Stock purchased pursuant to stock
subscription agreements with the Company. These registration rights permit the
purchasers to require the Company to seek to register a pro rata portion of
their shares in the event that the Company seeks to register in a public
offering some or all of the Common Stock owned by the Selling Shareholder. The
executive officers and key employees have waived such registration rights in
connection with the Offerings.
9
<PAGE> 10
MARKET AND DIVIDEND INFORMATION
The Common Stock of the Company is listed on the New York Stock Exchange
(the "NYSE") and the Pacific Stock Exchange. The following table sets forth the
range of high and low sale prices as reported on the NYSE Composite Transactions
Tape during the periods indicated.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ------ ------
<S> <C> <C>
1992
First Quarter.................................................... $20 7/8 $16 7/8
Second Quarter................................................... 18 3/4 15 5/8
Third Quarter.................................................... 18 7/8 16
Fourth Quarter................................................... 20 1/8 17 1/4
1993
First Quarter.................................................... $24 7/8 $17 7/8
Second Quarter................................................... 26 1/8 21
Third Quarter.................................................... 27 1/2 22 1/2
Fourth Quarter................................................... 26 1/2 19
1994
First Quarter.................................................... $22 $16 5/8
Second Quarter................................................... 20 1/8 16 1/4
Third Quarter.................................................... 20 3/8 17
Fourth Quarter................................................... 21 7/8 18 1/8
1995
First Quarter.................................................... $23 1/8 $18 1/4
Second Quarter (through May 18, 1995)............................ 23 7/8 21 1/4
</TABLE>
The last reported sale price of the Common Stock on the NYSE on May 18,
1995, was $22 1/8 per share.
Holders of Common Stock are entitled to receive cash dividends when
declared by the Board out of funds legally available. Beginning with the second
quarter of 1988, the Company has paid regular quarterly dividends on the Common
Stock of $.05 per share each quarter. On May 15, 1995, the Company paid a
dividend of $.05 per share on the Common Stock to stockholders of record as of
April 28, 1995. The timing and amount of future dividends will depend upon the
Company's earnings and cash requirements and other factors deemed relevant by
the Board. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition and Liquidity" and "Description of
Capital Stock" for certain restrictions imposed by the Company's credit
facilities upon the Company with respect to the payment of dividends on the
Common Stock.
10
<PAGE> 11
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of March 31, 1995. The sale of the shares of the Common Stock in the
Offerings by the Selling Shareholder will not affect the capitalization of the
Company, other than the estimated expenses of approximately $700,000 that will
be paid by the Company, which expenses are not reflected in the table. The
following table should be read in conjunction with the Company's consolidated
financial statements and notes thereto incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
AT
MARCH 31,
1995
---------
(IN MILLIONS)
<S> <C>
Debt(a)
Short-term debt, including current maturities of long-term debt........... $ 74
Long-term debt
Credit facilities...................................................... 207
8.25% Senior Notes due 1999............................................ 100
8 3/8% Senior Notes due 2005........................................... 125
Other.................................................................. 4
-----
Total debt........................................................... 510
-----
Stockholders' equity
Common stock, par value $.05 per share; 200,000,000 shares
authorized(b).......................................................... 4
Capital in excess of par value............................................ 20
Retained earnings......................................................... 437
Treasury stock(c)......................................................... (3)
Cumulative foreign exchange translation adjustment and other.............. (55)
-----
Total stockholders' equity........................................... 403
-----
Total capitalization.............................................. $ 913
=====
</TABLE>
- ------------
(a) In April 1995, the Company issued an aggregate $75 million principal amount
of 8 1/2% Senior Notes due 2007 pursuant to a public offering. The net
proceeds from the offering were approximately $74.1 million, which the
Company used to reduce indebtedness under its $350 million credit facility
and its uncommitted and unsecured lines of credit. Also in April 1995, the
Company's $200 million credit facility was terminated and replaced with a
new $100 million revolver and the Company's $350 million credit facility was
amended to, among other things, increase the amount of the facility to $450
million. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(b) As of March 31, 1995, there were 87,666,148 shares of Common Stock issued
and outstanding. This amount does not reflect 3,519,788 shares issuable as
of such date on the exercise of stock options granted by the Company in
connection with Company benefit plans. See "Management Developments." In
addition, the Company is authorized to issue 15,000,000 shares of preferred
stock. See "Description of Capital Stock."
(c) At March 31, 1995, the Company held in treasury 163,135 shares of Common
Stock at cost, including shares purchased under the Company's stock
repurchase plan adopted in April 1994, which authorized the repurchase of up
to 2,000,000 shares of Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Financial
Condition and Liquidity."
11
<PAGE> 12
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial information has been derived
from the consolidated financial statements of the Company for each of the three
years in the period ended December 31, 1994, which statements have been audited
by Price Waterhouse LLP, and the three-month periods ended March 31, 1994 and
1995. The information set forth below should be read in conjunction with the
Company's consolidated financial statements and notes thereto incorporated
herein by reference and "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. The financial information presented below for the three-month
periods ended March 31, 1994 and 1995, reflects all normal and recurring
adjustments which, in the opinion of management, are necessary for a fair
presentation of the Company's consolidated results of operations and financial
position for such periods. The information shown for the three-month periods is
not necessarily indicative of full year results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ ------------------
1992 1993 1994 1994 1995
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF CONSOLIDATED INCOME DATA:
Revenues
Sales and operating revenues................................... $ 669 $ 682 $ 748 $ 194 $ 240
Interest income and other revenues............................. 32 6 2 -- 1
Net income of equity investee.................................. 13 9 20 7 5
------ ------ ------ ------ ------
Total...................................................... 714 697 770 201 246
Costs and other deductions
Product costs and operating expenses........................... 318 301 300 64 79
Exploration expenses........................................... 67 94 53 13 16
Depreciation, depletion and amortization....................... 77 243(b) 169 47 47
Selling, general and administrative expenses................... 27 24 25 6 6
Interest expense............................................... 4 6 11 1 5
Preferred dividends of a subsidiary............................ 2 2 -- -- --
Other charges.................................................. 6 -- -- -- --
------ ------ ------ ------ ------
Income (loss) before income taxes, extraordinary items and
cumulative effect of changes in accounting principles.......... 213 27 212 70 93
Provision for (benefit from) income taxes........................ 103 (4) 145 43 46
------ ------ ------ ------ ------
Income before extraordinary items and cumulative effect of
changes in accounting principles............................... 110 31 67 27 47
Extraordinary items(a)........................................... (20) -- -- -- --
Cumulative effect of changes in accounting principles............ (76) (4) -- -- --
------ ------ ------ ------ ------
Net income....................................................... $ 14 $ 27 $ 67 $ 27 $ 47
Net income (loss) applicable to common stockholders.............. (17) 27 67 27 47
====== ====== ====== ===== ======
Net income (loss) per share of common stock...................... $ (.26) $ .31 $ .76 $ .30 $ .53
====== ====== ====== ===== ======
Common stock dividends per share................................. $ .20 $ .20 $ .20 $ .05 $ .05
Average number of shares outstanding............................. 85.8 87.2 87.6 87.7 87.6
STATEMENT OF CASH FLOW DATA:
Net cash provided by operating activities........................ $ 241 $ 191 $ 215 $ 47 $ 61
------ ------ ------ ------ ------
Cash flows from investing activities
Additions to property, plant and equipment..................... (296) (144) (300) (37) (27)
Cash (required) provided by equity investee.................... 29 20 9 (6) 8
Cash (required) provided by sale of businesses, net............ (18) (43) (2) (1) (1)
------ ------ ------ ------ ------
Net cash provided (required) by investing activities........... (285) (167) (293) (44) (20)
------ ------ ------ ------ ------
Cash flows from financing activities
Net proceeds from issuance of long-term notes.................. -- -- -- -- 123
Net proceeds (payments) from debt under the credit
facilities................................................... 465 30 81 -- (119)
Payment to settle long-term debt and capitalized lease
obligations.................................................. (529) (118) (37) (35) --
Redemption of Preferred Auction Rate Stock..................... -- (75) -- -- --
Redemption of preferred stock and common stock warrants........ (500) -- -- -- --
Purchase of treasury stock..................................... -- -- (6) -- --
Proceeds from issuance of treasury stock....................... -- -- 1 -- --
Proceeds from issuance of common stock......................... 4 18 -- -- --
Net proceeds (payments) from short-term borrowings............. 6 55 47 29 (36)
Dividends paid................................................. (47) (17) (18) (4) (4)
------ ------ ------ ------ ------
Net cash provided (required) by financing activities....... (601) (107) 68 (10) (36)
------ ------ ------ ------ ------
Net increase (decrease) in cash and cash equivalents............. $ (645) $ (83) $ (10) $ (7) $ 5
====== ====== ====== ===== ======
</TABLE>
- ------------
See accompanying notes.
(Table continued on following page)
12
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------- --------------------
1992 1993 1994 1994 1995
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 101 $ 18 $ 8 $ 11 $ 14
Property, plant and equipment (net)......................... 1,199 1,089 1,286 1,064 1,295
Total assets................................................ 1,581 1,339 1,545 1,324 1,564
Total debt.................................................. 483 450 538 443 510
Redeemable preferred stock.................................. 75 -- -- -- --
Stockholders' equity........................................ 269 281 349 305 403
</TABLE>
- ------------
(a) In 1992, the Company recognized a $76 million charge for the cumulative
effect of adopting two new accounting standards and an extraordinary loss of
$20 million as a result of the early redemption of debt.
(b) During 1993, the Company recorded a non-cash charge to depreciation,
depletion and amortization of $103 million pretax ($48 million after-tax)
for the write-down of its investment in the U.K. North Sea's Piper field.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and notes contained in the Company's 1994 Annual Report on Form 10-K,
and condensed financial statements and notes contained in the Company's Report
on Form 10-Q for the quarter ended March 31, 1995.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH THREE
MONTHS ENDED MARCH 31, 1994
Net income for the three months ended March 31, 1995, was $47 million, or
$.53 per share as compared to net income of $27 million, or $.30 per share
reported for the same period in 1994. The current quarter was favorably impacted
by higher U.S. ethylene margins and sales volumes and higher international oil
and gas prices partially offset by lower Indonesian LNG volumes.
Sales and operating revenues for the three months ended March 31, 1995,
were $240 million, up from $194 million for the first quarter of 1994.
International revenues totaled $184 million as compared to $163 million for the
first quarter of 1994. In the U.K., sales and operating revenues increased by
$20 million due to higher crude prices and increased sales volumes. In
Indonesia, sales were $1 million below 1994 as higher crude oil and LNG prices
were offset by lower LNG volumes, attributable to the contracted cargo mix which
resulted in a lower average participation interest in cargoes delivered for the
quarter. It is not expected that these lower LNG volumes will be made up during
the remainder of 1995. In Pakistan, sales were $2 million above 1994 primarily
due to higher crude oil and natural gas prices.
Average prices received and volumes sold by the Company's major operations
during the first quarter of 1995 and 1994, respectively, were as follows:
<TABLE>
<CAPTION>
VOLUMES
PRICES (000S PER DAY)
-------------------- ----------------
1995 1994 1995 1994
-------- -------- ------- -----
<S> <C> <C> <C> <C>
Crude oil (barrels):
U.K.......................................... $ 16.34 $ 13.13 37 35
Pakistan..................................... 14.62 12.77 5 4
Indonesia.................................... 17.28 14.72 6 7
Indonesian LNG (Mcf)........................... 3.07 2.72 242 280
Pakistan natural gas (Mcf)..................... 1.30 1.11 43 46
U.K. natural gas (Mcf)......................... 3.01 2.88 44 41
U.S. ethylene (pounds)......................... .28 .15 1,338 904
</TABLE>
Petrochemical revenues totaled $55 million as compared to $31 million in
the first quarter of 1994, while operating profit was $19 million as compared to
$1 million in the prior period. The increase was primarily due to higher
ethylene sales prices which resulted in an increase in ethylene margins to 16
cents per pound in 1995 versus 1 cent per pound in 1994 and due to higher
volumes.
Exploration expenses increased by $3 million reflecting the Company's
expanded 1995 exploration program. Interest expense increased by $4 million
during the period due to higher levels of debt, primarily due to the funding of
the Britannia acquisition during the fourth quarter of 1994 and higher interest
rates. The effective tax rate decreased from the prior year due primarily to the
increase in the U.S. petrochemical income, which is taxed at lower rates.
14
<PAGE> 15
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED
DECEMBER 31, 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 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.
15
<PAGE> 16
RESULTS OF OPERATIONS -- YEAR ENDED DECEMBER 31, 1993 COMPARED WITH YEAR ENDED
DECEMBER 31, 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 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'
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.
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
16
<PAGE> 17
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.
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
$61 million in the first quarter of 1995, an increase of $14 million from the
same period in the prior year. The improvement was primarily the result of
improved ethylene margins and sales volumes and higher international oil and gas
prices, partially offset by lower Indonesian LNG volumes.
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
17
<PAGE> 18
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 16 cents per pound in the first quarter of 1995. The
Company cannot predict the duration of the recent favorable trends in the
ethylene business. The ethylene business is cyclical and there can be no
assurances that margins will remain at their current levels over the near term.
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
petrochemicals, inventory levels, feedstock costs and availability, plant
utilization rates, plant operations and costs and competitive capacity
expansion.
Capital resources. Capital expenditures for the first quarter of 1995 were
$39 million including capitalized interest of $5 million. Capital expenditures
for the first quarter of 1994 were $29 million including capitalized interest of
$6 million. The current quarter increase was principally due to development
costs for the Britannia field and increased exploration spending.
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 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 was 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
was a revolver that provided for conversion of amounts outstanding on September
15, 1995 to a one-year term loan maturing September 15, 1996. The Company has
terminated this Credit Facility effective March 31, 1995 as a result of the
issuance of the new senior notes discussed below. Another Credit Facility was a
$200 million revolver with NationsBank, as agent, Bank of America and UBS, as
co-agents, and certain other banks.
18
<PAGE> 19
This Credit Facility was terminated effective April 23, 1995 and was replaced
April 24, 1995 with a new $100 million revolver that provides for conversion of
amounts outstanding on April 15, 1996 to a one year term loan maturing April 15,
1997. The Company's remaining Credit Facility is with NationsBank, as agent,
Bank of America and UBS, as co-agents, and certain other banks. Initially this
Credit Facility was a $350 million revolver that reduced quarterly by $25
million beginning July 31, 1997 and had a final maturity of April 30, 1998. On
April 24, 1995, this Credit Facility was amended to increase the amount of the
facility to $450 million, and to provide that the amount of the facility would
reduce quarterly by $35 million beginning July 31, 1998, with a final maturity
of April 30, 1999. In addition, the restriction on total indebtedness discussed
below was increased from $750 million to $775 million, and the availability of
competitive bid loans discussed below was increased from $200 million to $300
million. Loans under the $450 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 $450 million revolver allows the
Company to obtain up to $300 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. 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
$775 million of senior indebtedness (including the aggregate $300 million
principal amount of senior notes described below 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 sum of the senior notes and the commitments under the
Credit Facilities equals $850 million. As a result, the Company is currently
unable to fully utilize the Commitments under the Credit Facilities. However,
the Company is pursuing an amendment to the restriction on total indebtedness
under the Credit Facilities. 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 March 31, 1995, $207 million was outstanding under the Credit
Facilities bearing interest at a weighted average rate of 6.8% per annum and
approximately $250 million was available for additional borrowing under such
existing 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 March 31, 1995, $71 million was outstanding
under these lines. These amounts outstanding bear interest at a weighted average
rate of 6.9% 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.
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.
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<PAGE> 20
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.
In March 1995, the Company publicly issued $125 million principal amount of
8 3/8% Senior Notes due 2005 (the "8 3/8% Senor Notes") at an initial public
offering price of 99.431%. In April 1995, the Company publicly issued $75
million principal amount of 8 1/2% Senior Notes due 2007 (the "8 1/2% Senior
Notes" together with the 8 3/8% Senior Notes referred to as the "Senior Notes")
at an initial public offering price of 99.658%. The net proceeds from the sale
of the 8 3/8% Senior Notes and the 8 1/2% Senior Notes were approximately $123.3
million and $74.1 million, respectively (after deducting underwriting discount,
commissions and offering expenses). The Company used such proceeds to reduce
debt under the $350 million Credit Facility and its uncommitted and unsecured
lines of credit. The Senior 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, its outstanding $100 million principal amount of
8.25% senior notes due 1999, and senior in right of payment to all subordinated
indebtedness of the Company. The Senior Notes are guaranteed by the subsidiaries
of the Company that are also guarantors under the Company's Credit Facilities
and the senior notes due 1999 and contain restrictive covenants similar to the
Company's senior notes due 1999. The Senior Notes are redeemable at any time, at
the option of the Company, in whole or in part, at a price equal to 100% of
their principal amount plus accrued interest plus a make whole premium relating
to the then-prevailing Treasury Yield and the remaining life of the Senior
Notes. In addition, at the 1995 Annual Meeting of Stockholders held May 10,
1995, the Company's stockholders approved the authorization of a new class of
15,000,000 shares of preferred stock. The new preferred stock provides the
Company additional financing flexibility to issue from time to time this form of
equity based on current market conditions. See "Description of Capital Stock."
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 has effected 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 or the first quarter of
1995.
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. No repurchases were made by the
Company during the first quarter of 1995. 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. As of
March 31, 1995, 163,135 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. In the
first quarter of 1995, the Company declared and paid a dividend of approximately
$4.4 million on its Common Stock. On May 15, 1995, the Company paid a dividend
on its Common Stock of $.05 per share to stockholders of record as of April 28,
1995.
In March 1995, the Financial Accounting Standards Board ("FASB") released
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which set forth the criteria for impairment of plant, property and equipment and
other long-lived assets. Adoption of the Statement is required for years
beginning after December 15, 1995. The Company is still reviewing the Statement;
however, the Company believes its
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<PAGE> 21
current policy on oil and gas asset impairment is consistent with this
pronouncement and that the pronouncement will have no material impact on the
Company.
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.
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
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.
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
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<PAGE> 22
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.
MANAGEMENT DEVELOPMENTS
Incentive Plan. The Company's stockholders approved at the 1995 Annual
Meeting of Stockholders held on May 10, 1995, an incentive plan allowing for the
grant to employees of the Company of awards including options, stock
appreciation rights, restricted stock, performance awards, bonus shares and
other stock-based and cash awards relating to up to 4 million shares of Common
Stock. In addition, the plan provides for an automatic initial and annual grant
of options to non-employee directors (other than directors affiliated with the
KKR Partnerships). No additional stock options will be granted under any of the
Company's prior stock option plans.
Succession Committee. In light of its policy mandating retirement of
officers at age 65, the Company has begun to plan for a successor to the
Chairman and Chief Executive Officer of the Company, A. Clark Johnson, who will
be 65 on December 7, 1995. The Board has created a special committee, whose
members consist of current Board members Glenn A. Cox, Edward A. Gilhuly,
Michael W. Michelson and Richard R. Shinn, to study and make recommendations to
the full Board regarding the succession issue so as to provide for an orderly
transfer of responsibilities.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 200,000,000 shares of Common Stock, par
value $.05 per share, and 15,000,000 shares of Preferred Stock, par value $.01
per share ("Preferred Stock"). As of March 31, 1995, 87,666,148 shares of Common
Stock were outstanding. The following summary is qualified in its entirety by
reference to the Company's Restated Certificate of Incorporation, as amended
(the "Charter") and the Company's Bylaws ("Bylaws"), copies of which are
incorporated by reference as exhibits to the Registration Statement of which
this Prospectus is a part.
COMMON STOCK
Voting and Other Rights. The Common Stock possesses ordinary voting rights
for the election of directors and in respect of other corporate matters, each
share being entitled to one vote. There are no cumulative voting rights, meaning
that the holders of a majority of the shares voting for the election of
directors can elect all the directors if they choose to do so. The Common Stock
carries no preemptive rights and is not convertible, redeemable or assessable.
The holders of Common Stock are entitled to dividends in such amounts and at
such times as may be declared by the Board. See "Market and Dividend
Information" for information regarding dividends. The Company currently expects
to be able to pay regular quarterly dividends without restriction under its
Credit Facilities. After the Offerings and assuming no exercise of the
over-allotment options, the Selling Shareholder will hold 23,333,334 shares of
the issued and outstanding Common Stock.
Upon liquidation or dissolution, holders of Common Stock are entitled to
share ratably in all net assets available for distribution to stockholders after
payment of preferential amounts to holders of Preferred Stock, if any. All
outstanding shares of Common Stock, including the shares to be sold by the
Selling Shareholder, are duly authorized, validly issued, fully paid and
nonassessable.
Miscellaneous. First Chicago Trust Company of New York is the transfer
agent and the registrar for the Company's Common Stock.
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<PAGE> 23
PREFERRED STOCK
At the 1995 Annual Meeting of Stockholders held May 10, 1995, the Company's
stockholders approved the authorization of the issuance of a new class of up to
15,000,000 shares of preferred stock, $.01 par value ("Preferred Stock"), and
the elimination of the provisions relating to the previously existing class of
preferred stock. The Board can authorize the issuance, at any time or from time
to time, of one or more series of Preferred Stock at its discretion. In
addition, the Board determines all designations, powers, preferences and the
rights of such stock and any qualifications, limitations and restrictions,
including but not limited to: (i) the designation of series and numbers of
shares (up to 15,000,000 shares); (ii) the dividend rights, if any; (iii) the
rights upon liquidation or distribution of the assets of the Company, if any;
(iv) the conversion or exchange rights, if any; (v) the redemption provisions,
if any; and (vi) the voting rights, if any; provided, that the holders of shares
of Preferred Stock will not be entitled to more than one vote per share, when
voting as a class with the holders of shares of the Common Stock and if such
Preferred Stock is convertible into Common Stock, then holders can receive one
vote on an as converted basis.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of the Delaware General Corporation Law ("DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person owning
15% or more of a corporation's outstanding voting stock), from engaging in a
"business combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide participants with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) following the transaction in which such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder. The provisions of
Section 203 may have the effect of delaying, deferring or preventing a change of
control of the Company. The Selling Shareholder is not considered an interested
stockholder of the Company for the purposes of Section 203 of the DGCL.
DIRECTOR LIABILITY
The Charter contains a provision that limits the liability of the Company's
directors to the fullest extent permitted by the DGCL. The provision eliminates
the personal liability of directors to the Company and its stockholders for
monetary damages for breaches of their fiduciary duty of care. As a result,
stockholders may be unable to recover monetary damages against directors for
negligent or grossly negligent acts or omissions in violation of their duty of
care. The provision does not change the liability of a director for breach of
his duty of loyalty to the Company or to stockholders, for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, for the declaration or payment of dividends in violation of Delaware law or
in respect of any transaction from which a director received an improper
personal benefit. The Charter provides that if the DGCL is amended to further
limit such liability, then the liability of Company directors will be limited or
eliminated to the maximum extent permitted by law as so amended.
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UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement
among the Selling Shareholder, the Company and Salomon Brothers Inc, CS First
Boston Corporation, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as representatives of the several U.S. Underwriters (the
"U.S. Representatives"), the Selling Shareholder has agreed to sell to the
entities named below (the "U.S. Underwriters") and each of such U.S.
Underwriters has severally agreed to purchase from the Selling Shareholder, the
respective number of shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER SHARES
---------------- ---------
<S> <C>
Salomon Brothers Inc.................................................... 1,212,500
CS First Boston Corporation............................................. 1,212,500
Goldman, Sachs & Co. ................................................... 1,212,500
Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................................... 1,212,500
Howard, Weil, Labouisse, Friedrichs Incorporated........................ 300,000
Lehman Brothers Inc..................................................... 300,000
Natwest Securities Limited.............................................. 300,000
Oppenheimer & Co., Inc.................................................. 300,000
Prudential Securities Incorporated...................................... 300,000
Smith Barney Inc........................................................ 300,000
S.G. Warburg & Co. Inc.................................................. 300,000
Fahnestock & Co., Inc................................................... 150,000
Gaines, Berland Inc..................................................... 150,000
Johnson Rice & Company L.L.C............................................ 150,000
Neuberger & Berman...................................................... 150,000
Petrie Parkman & Co..................................................... 150,000
Rauscher Pierce Refsnes, Inc............................................ 150,000
Southeast Research Partners, Inc........................................ 150,000
---------
Total......................................................... 8,000,000
=========
</TABLE>
The U.S. Underwriting Agreement provides that the several U.S. Underwriters
will be obligated to purchase all the shares of Common Stock being offered in
the U.S. Offering (other than those subject to the over-allotment option
described below) if any are purchased.
The U.S. Representatives have advised the Company and the Selling
Shareholder that they propose to offer Common Stock directly to the public at
the public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $0.42 per
share. The U.S. Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share on sales to certain other dealers.
After the initial Offering, the price to public and concessions to dealers may
be changed.
The Selling Shareholder has granted to the U.S. Underwriters and the
underwriters of the International Offering (the "International Underwriters")
options to purchase up to an additional 1,200,000 shares and 300,000 shares of
Common Stock, respectively, at the initial offering price less the aggregate
underwriting discounts. Either or both options may be exercised at any time up
to 30 days after the date of this Prospectus. The Company and the Selling
Shareholder have entered into an underwriting agreement (the "International
Underwriting Agreement") with the International Underwriters providing for the
concurrent offer and sale of 2,000,000 shares of Common Stock (in addition to
the shares covered by the over-allotment option described above) in the
International Offering outside the United States and Canada. The price to public
and aggregate underwriting discount per share for the Offerings are identical.
The closing of the U.S. Offering is a condition to the closing of the
International Offering,
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<PAGE> 25
and vice versa. The representatives of the International Underwriters are
Salomon Brothers International Limited, CS First Boston Limited, Goldman Sachs
International and Merrill Lynch International Limited.
For a period of 90 days after the date of this Prospectus, the KKR
Partnerships have agreed not to offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock or securities convertible into,
exercisable for or exchangeable for Common Stock or any such other capital stock
without the consent of the U.S. Representatives and the representatives of the
International Underwriters. In addition, the Company and the Company's executive
officers have agreed not to offer, sell or contract to sell or otherwise dispose
of (other than pursuant to the Company's employee benefit plans or on the
conversion, exchange or exercise of outstanding convertible, exchangeable or
exercisable securities) any shares of Common Stock or any securities convertible
into, exercisable for or exchangeable for shares of Common Stock for 90 days
after the date of this Prospectus without the consent of the U.S.
Representatives and the representatives of the International Underwriters. If
any such consent is given it would not necessarily be preceded or followed by a
public announcement thereof.
The U.S. Underwriters and the International Underwriters have entered into
an Agreement Between U.S. Underwriters and International Underwriters pursuant
to which each U.S. Underwriter has agreed that, as part of the distribution of
the shares of Common Stock offered in the U.S. Offering and subject to certain
exceptions, (a) it is not purchasing any such shares for the account of an
International Person (as defined below), (b) it has not offered or sold, and
will not offer, sell, resell or deliver, directly or indirectly, any shares of
Common Stock or distribute any prospectus relating to the Common Stock to anyone
other than a U.S. or Canadian Person (as defined below) and (c) any dealer to
whom it may sell any of the shares of Common Stock will represent and agree that
it will comply with the restrictions set forth in (a) and (b) and will not
offer, sell, resell or deliver, directly or indirectly, any of the shares or
distribute any prospectus relating to the Common Stock to any other dealer who
does not so represent and agree. In addition, pursuant to the Agreement Between
U.S. Underwriters and International Underwriters, each International Underwriter
has agreed that, as part of the distribution of the shares of Common Stock
offered in the International Offering and subject to certain exceptions, (1) it
is not purchasing any such shares for the account of anyone other than an
International Person, (2) it has not offered or sold, and will not offer, sell,
resell or deliver, directly or indirectly, any shares of Common Stock or
distribute any prospectus relating to the Common Stock to anyone other than an
International Person and (3) any dealer to whom it may sell any of the shares of
Common Stock will represent and agree that it will comply with the restrictions
set forth in (1) and (2) and will not offer, sell, resell or deliver, directly
or indirectly, any of the shares or distribute any prospectus relating to the
Common Stock to any other dealer who does not so represent and agree.
The foregoing limitations do not apply to stabilization transactions or to
transactions among the U.S. Underwriters and the International Underwriters
pursuant to the Agreement Between U.S. Underwriters and International
Underwriters. As used herein, "United States" means the United States of America
(including the District of Columbia) and its territories, possessions and other
areas subject to its jurisdiction, "Canada" means Canada, its provinces,
territories, possessions and other areas subject to its jurisdiction and "U.S.
or Canadian Person" means a citizen or resident of the United States or Canada,
a corporation, partnership or other entity created or organized in or under the
laws of the United States or Canada or any political subdivision thereof, or any
estate or trust the income of which is subject to United States or Canadian
income taxation regardless of its source (other than a foreign branch of such
entity), and includes any United States or Canadian branch of a person other
than a U.S. or Canadian Person. As used herein, the term "International Person"
means any person, corporation, partnership or other entity that is not a U.S. or
Canadian Person.
Pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, sales may be made between the International Underwriters and the
U.S. Underwriters of such number of shares of Common Stock as may be mutually
agreed. The price of any shares so sold shall be the initial price to public,
less an amount not greater than the selling concession. To the extent that these
are sales between the U.S. Underwriters and the International Underwriters
pursuant to the Agreement Between U.S. Underwriters and International
Underwriters, the number of shares initially available for sale by the
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<PAGE> 26
International Underwriters or by the U.S. Underwriters may be more or less than
the amount specified on the cover page of this Prospectus.
The Company and each U.S. Underwriter and International Underwriter (a)
have not offered or sold, and will not offer or sell, in the United Kingdom, by
means of any document, any shares of Common Stock other than to persons whose
ordinary business it is to buy or sell shares or debentures, whether as
principal or agent (except under circumstances which do not constitute an offer
to the public within the meaning of the Companies Act of 1985), (b) have
complied and will comply with all applicable provisions of the Financial
Services Act of 1986 (the "1986 Act") with respect to anything done by them in
relation to the shares of Common Stock in, from or otherwise involving the
United Kingdom and (c) have only issued or passed on, and will only issue or
pass on to any person in the United Kingdom, any document received by them in
connection with the issue of the shares of Common Stock to a person who is of a
kind described in Article 9(3) of the 1986 Act (Investment Advertisements)
(Exemptions) Order 1988 or is a person to whom the documents may otherwise
lawfully be issued or passed on.
The shares of Common Stock may not be offered or sold directly or
indirectly in Hong Kong by means of this document or any other offering material
or document other than to persons whose ordinary business it is to buy or sell
shares or debentures, whether as principal or as agent. Unless permitted to do
so by the securities laws of Hong Kong, no person may issue or cause to be
issued in Hong Kong this document or any amendment or supplement thereto or any
other information, advertisement or document relating to the shares of Common
Stock other than with respect to shares of Common Stock intended to be disposed
of to persons outside Hong Kong or to persons whose business involves the
acquisition, disposal or holding of securities, whether as principal or as
agent.
The shares of Common Stock have not been registered under the Securities
and Exchange Law of Japan and are not being offered and may not be offered or
sold directly or indirectly in Japan or to residents of Japan, except pursuant
to applicable Japanese laws and regulations.
No action has been taken or will be taken in any jurisdiction by the
Company or the International Underwriters or U.S. Underwriters that would permit
a public offering of the shares offered hereby in any jurisdiction where action
for that purpose is required, other than the United States. Persons into whose
possession this Prospectus comes are required by the Company and the
International Underwriters and U.S. Underwriters to inform themselves about and
to observe any restrictions as to the offering of the shares offered hereby and
the distribution of this Prospectus.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase in addition to the offering price set forth on the cover
page hereof.
The Company and the Selling Shareholder have agreed to indemnify the U.S.
Underwriters and the U.S. Underwriters have agreed to indemnify the Company and
the Selling Shareholder against certain liabilities, including liabilities under
the Securities Act of 1933, as amended, and to contribute to payments required
to be made in respect thereof.
Each of Salomon Brothers Inc, CS First Boston Corporation, Goldman, Sachs &
Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, and certain of their
international affiliates, from time to time provides investment banking and
other related services to the Company, the Selling Shareholder and their
respective affiliates in the ordinary course of their respective businesses.
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<PAGE> 27
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered in the Offerings will be
passed upon for the Company by Newton W. Wilson, III, Esq., General Counsel of
the Company. As of the date of this Prospectus, Mr. Wilson owned approximately
6,400 shares of Common Stock of the Company (excludes shares held indirectly by
Mr. Wilson in the Company's Savings Plan for Salaried Employees) and owned
directly options to purchase 157,653 shares of Common Stock (includes options to
purchase Common Stock which are not yet vested). The validity of the Shares will
also be passed upon for the Company by Andrews & Kurth L.L.P., New York, New
York. Certain legal matters in connection with the Offerings will be passed upon
for the KKR Partnerships, as Selling Shareholder, by Latham & Watkins, Los
Angeles, California and for the Underwriters by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York.
Certain partners of Latham & Watkins, members of their families, related persons
and others have an indirect interest, through limited partnerships, in less than
1% of the Common Stock. Such persons do not have the power to vote or dispose of
such shares.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K of Union Texas Petroleum Holdings, Inc. for the
year ended December 31, 1994, have been so incorporated in reliance on the
report of Price Waterhouse LLP ("Price Waterhouse"), independent accountants,
given on the authority of said firm as experts in auditing and accounting.
With respect to the unaudited consolidated financial information of Union
Texas Petroleum Holdings, Inc. for the three-month periods ended March 31, 1995
and 1994, incorporated by reference in this Prospectus, Price Waterhouse
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their separate
report dated April 20, 1995 incorporated by reference herein, states that they
did not audit and they do not express an opinion on that unaudited consolidated
financial information. Price Waterhouse has not carried out any significant or
additional audit tests beyond those which would have been necessary if their
report had not been included. Accordingly, the degree of reliance on their
report on such information should be restricted in light of the limited nature
of the review procedures applied. Price Waterhouse is not subject to the
liability provisions of section 11 of the Securities Act of 1933 for their
report on the unaudited consolidated financial information because that report
is not a "report" or a "part" of the registration statement prepared or
certified by Price Waterhouse within the meaning of sections 7 and 11 of the
Act.
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<PAGE> 28
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDER OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Prospectus Summary..................... 3
Use of Proceeds........................ 8
Selling Shareholder and Principal
Shareholder.......................... 8
Market and Dividend Information........ 10
Capitalization......................... 11
Selected Consolidated Financial Data... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 14
Management Developments................ 22
Description of Capital Stock........... 22
Underwriting........................... 24
Validity of Common Stock............... 27
Experts................................ 27
</TABLE>
10,000,000 SHARES
UNION TEXAS
PETROLEUM
HOLDINGS, INC.
COMMON STOCK
($.05 PAR VALUE)
[UNION TEXAS PETROLEUM LOGO]
SALOMON BROTHERS INC
CS FIRST BOSTON
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PROSPECTUS
DATED MAY 18, 1995
