<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER 1-9019
UNION TEXAS PETROLEUM HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0040040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1330 POST OAK BLVD.
HOUSTON, TEXAS 77056
(Address of principal
executive offices
and zip code)
(713) 623-6544
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--------- --------
As of July 19, 1996, there were 87,386,991 shares of Union Texas Petroleum
Holdings, Inc. $.05 par value Common Stock issued and outstanding.
<PAGE> 2
FORM 10-Q
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------- ----------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 14,261 $ 11,069
Accounts and notes receivable, less allowance for doubtful accounts . . 88,225 77,517
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,812 42,764
Prepaid expenses and other current assets . . . . . . . . . . . . . . . 44,224 27,924
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 181,522 159,274
Equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,897 108,476
Property, plant and equipment, at cost, less accumulated
depreciation, depletion and amortization* . . . . . . . . . . . . . . . 1,534,939 1,551,198
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,007 17,870
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,839,365 $1,836,818
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 2,292 $ 2,292
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,162 95,768
Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,279 55,779
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . 45,283 41,704
---------- ----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 200,016 195,543
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 644,071 712,132
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 396,473 395,289
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,320 110,064
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 1,349,880 1,413,028
---------- ----------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,391 4,391
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,062 19,405
Cumulative foreign exchange translation adjustment and other . . . . . (74,305) (75,077)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 549,256 479,620
Common stock held in treasury, at cost:
477,038 shares at June 30, 1996 and 247,145 shares at
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . (8,919) (4,549)
---------- ----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 489,485 423,790
---------- ----------
Total liabilities and stockholders' equity . . . . . . . . . . . . $1,839,365 $1,836,818
========== ==========
</TABLE>
* The Company follows the successful efforts method of accounting for oil and
gas activities.
The accompanying notes are an integral part of this financial statement.
1
<PAGE> 3
FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, JUNE 30,
-------- --------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales and operating revenues . . . . . . . . . . $223,192 $200,425 481,370 $439,982
Interest income and other revenues . . . . . . . 900 (377) 1,065 330
Net earnings of equity investee . . . . . . . . 5,658 5,533 14,871 10,941
-------- -------- -------- --------
229,750 205,581 497,306 451,253
Costs and other deductions:
Product costs and operating expenses . . . . . . 81,258 74,386 161,322 153,563
Exploration expenses . . . . . . . . . . . . . . 10,258 22,099 24,465 37,649
Depreciation, depletion and amortization . . . . 48,953 38,102 103,808 84,647
Selling, general and administrative expenses . . 6,424 6,111 12,175 12,281
Interest expense . . . . . . . . . . . . . . . . 6,662 5,242 14,510 10,510
-------- -------- -------- --------
Income before income taxes . . . . . . . . . . . . . 76,195 59,641 181,026 152,603
Income taxes . . . . . . . . . . . . . . . . . . . . 45,358 39,539 102,628 85,825
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . . . $ 30,837 $ 20,102 $ 78,398 $ 66,778
======== ======== ======== ========
Earnings per share of common stock . . . . . . . . . $ .35 $ .23 $ .90 $ .76
======== ======== ======== ========
Dividends per share of common stock . . . . . . . . . $ .05 $ .05 $ .10 $ .10
======== ======== ======== ========
Weighted average number of shares
outstanding (000's) . . . . . . . . . . . . . . 87,547 87,735 87,573 87,687
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
<PAGE> 4
FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,398 $ 66,778
Adjustment to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization . . . . . . . . . . . . . . . 103,808 84,647
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 783 (3,192)
Net income of equity investee . . . . . . . . . . . . . . . . . . . . . (14,871) (10,941)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,691 1,566
-------- ----------
Net cash provided by operating activities before changes in other
assets and liabilities . . . . . . . . . . . . . . . . . . . . . . 169,809 138,858
Increase in accounts and notes receivable . . . . . . . . . . . . . . . (10,696) (18,431)
Decrease in inventories . . . . . . . . . . . . . . . . . . . . . . . . 7,953 3,226
Increase in prepaid expenses and other assets . . . . . . . . . . . . . (15,436) (16,281)
Decrease in accounts payable and other liabilities . . . . . . . . . . (9,061) (8,711)
Increase in income taxes payable . . . . . . . . . . . . . . . . . . . 7,009 2,202
-------- ----------
Net cash provided by operating activities . . . . . . . . . . . . . 149,578 100,863
-------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment . . . . . . . . . . . . . . . . (80,704) (60,788)
Cash provided by equity investee . . . . . . . . . . . . . . . . . . . . . 17,450 13,600
Net cash required by sale of businesses . . . . . . . . . . . . . . . . . (772)
-------- ----------
Net cash required by investing activities . . . . . . . . . . . . . . . (63,254) (47,960)
-------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt . . . . . . . . . . . . . . . 30,013 197,713
Net payments under the credit facilities . . . . . . . . . . . . . . . . . (45,000) (201,353)
Net payments on money market lines of credit . . . . . . . . . . . . . . . (53,167) (35,605)
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,762) (8,767)
Proceeds from issuance of treasury stock . . . . . . . . . . . . . . . . . 1,139 1,407
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . (7,355)
-------- ----------
Net cash required by financing activities . . . . . . . . . . . . . . . (83,132) (46,605)
-------- ----------
Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . 3,192 6,298
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 11,069 8,389
-------- ----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 14,261 $ 14,687
======== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) . . . . . . . . . . . . . . . . . $ 13,341 $ 11,906
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,221 87,197
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
<PAGE> 5
FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NOTE 1 - BASIS OF PRESENTATION - These consolidated financial statements should
be read in the context of the consolidated financial statements and notes
thereto filed with the Commission in the Company's 1995 annual report on Form
10-K. In the opinion of management, the accompanying unaudited consolidated
financial statements reflect all adjustments, consisting only of normal
adjustments, necessary to present fairly the financial position of Union Texas
Petroleum Holdings, Inc. and its consolidated subsidiaries at June 30, 1996,
and the results of operations and cash flows for the three and six months ended
June 30, 1996 and 1995. The results of operations for the six months ended
June 30, 1996, should not necessarily be taken as indicative of the results of
operations that may be expected for the entire year 1996.
NOTE 2 - INVENTORY ACCOUNTING CHANGE - Effective January 1, 1996, the Company
changed the method of accounting for valuing its petrochemical product
inventory from the last-in, first out ("LIFO") method to the first-in, first
out ("FIFO") method. The change did not have a material effect on the results
of operations for prior periods, nor is it anticipated that it will have a
material impact on future periods. The Company believes that use of the FIFO
method will result in a better measurement of operating results and better
reflects the current value of inventory on the balance sheet.
NOTE 3 - ACCOUNTING PRONOUNCEMENTS RECENTLY ISSUED - In October 1995, the
Financial Accounting Standards Board released Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," which establishes
financial and reporting standards for stock based employee compensation plans
that will be effective for the Company's 1996 financial statements. The
statement encourages, but does not require, companies to adopt a fair value
based method of accounting for such plans in place of current accounting
standards. Companies electing to continue to use their existing accounting
methods will be required to make pro forma disclosures of net income assuming a
fair value based method of accounting has been applied. The Company will
continue to use its current accounting methods with additional disclosures.
NOTE 4 - HEDGING ACTIVITIES - The Company may enter into hedging contracts and
other risk management activities, such as swaps or fixed price contracts, in
order to minimize the impact of adverse price fluctuation. Gains or losses on
these activities are recognized in sales revenues when the underlying exposed
hedged production is sold. During the first half of 1996, the Company entered
into financial hedging futures contracts to offset a portion of its North Sea
crude oil. As of June 30, 1996, the Company had open contracts for 714,000
barrels of oil at an average Brent price of $17.14 per barrel which will be
settled at various times from July through December 1996.
NOTE 5 - CONTINGENCIES - The Company and its subsidiaries and related companies
are named defendants in a number of lawsuits and named parties in numerous
government proceedings arising in the ordinary course of business. While the
outcome of contingencies, lawsuits or other proceedings against the Company
cannot be predicted with certainty, management expects that any liability, to
the extent not provided for through insurance or otherwise, will not have a
material adverse effect on the financial statements of the Company.
4
<PAGE> 6
UNION TEXAS PETROLEUM HOLDINGS, INC.
With respect to the unaudited consolidated financial information of Union Texas
Petroleum Holdings, Inc. for the three and six month periods ended June 30,
1996 and 1995, Price Waterhouse LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report dated July 24, 1996 appearing
below, states that they did not audit and they do not express an opinion on
that unaudited consolidated financial information. Price Waterhouse LLP 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 LLP 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" prepared or certified by
Price Waterhouse LLP within the meaning of sections 7 and 11 of the Act.
REPORT ON REVIEW BY INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Union Texas Petroleum Holdings, Inc.
We have reviewed the accompanying consolidated balance sheet of Union Texas
Petroleum Holdings, Inc. and consolidated subsidiaries as of June 30, 1996 and
the related consolidated statements of operations for the three and six month
periods ended June 30, 1996 and 1995 and of cash flows for the six month
periods ended June 30, 1996 and 1995. This financial information is the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial information for it to be in conformity
with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1995, and the related
consolidated statements of operations, of cash flows, and of stockholders'
equity for the year then ended (not presented herein), and in our report dated
February 14, 1996 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet information as of December 31, 1995, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
PRICE WATERHOUSE LLP
Houston, Texas
July 24, 1996
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements, notes, and management's discussion contained in the registrant's
1995 annual report on Form 10-K, and condensed financial statements and notes
contained in this report.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
Net income for the three months ended June 30, 1996, was $31 million, or $.35
per share, as compared to net income of $20 million, or $.23 per share, for the
same period in 1995. The current quarter was favorably impacted by higher
sales volumes of U.K. crude oil and Indonesian LNG along with higher oil and
LNG prices and lower exploration expenses partially offset by lower ethylene
margins.
Sales and operating revenues for the three months ended June 30, 1996, were
$223 million, up from $200 million for the second quarter of 1995.
International revenues totaled $171 million as compared to $145 million for the
second quarter of 1995. In the U.K., sales and operating revenues increased by
$22 million due principally to increased crude oil sales volumes as a result of
the July 1995 acquisition of an interest in the Alba field. In Indonesia,
sales increased $5 million due to higher LNG sales prices and volumes partially
offset by lower oil volumes. In Pakistan, sales decreased $1 million due to
lower oil and gas sales volumes partially offset by higher oil prices.
Average prices received and volumes sold by the Company's major operations
during the second quarter of 1996 and 1995, respectively, were as follows:
<TABLE>
<CAPTION>
PRICES VOLUMES
(000S PER DAY)
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Crude oil (barrels):
U.K. $18.27 $17.79 41 29
Pakistan 16.24 14.90 5 6
Indonesia 19.07 17.85 4 6
Indonesian LNG (Mcf) 3.41 3.19 214 202
Pakistan natural gas (Mcf) 1.29 1.30 42 45
U.K. natural gas (Mcf) 2.25 2.85 22 24
U.S. ethylene (pounds) .21 .28 1,577 1,298
</TABLE>
Petrochemical revenues totaled $52 million as compared to $55 million in the
second quarter of 1995, while operating profit was $7 million as compared to
$19 million in the prior period. The decreased operating profit was primarily
due to lower ethylene sales prices and increased feedstock costs, resulting in
an average ethylene margin of 6 cents per pound in 1996 vs. 16 cents per pound
in 1995. Partially offsetting the reduced ethylene margins were higher
ethylene sales volumes.
Depreciation, depletion and amortization expense (DD&A) increased by $11
million due to higher volumes of U.K. crude oil and Indonesian LNG.
Exploration expenses decreased by $12 million related to reduced new venture
exploratory drilling. Interest expense increased by $1 million during the
period due to higher levels of debt, primarily due to the funding of the Alba
acquisition during the third quarter of 1995.
6
<PAGE> 8
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Net income for the six months ended June 30, 1996, was $78 million, or $.90 per
share, as compared to net income of $67 million, or $.76 per share, reported
for the same period in 1995. The current period was favorably impacted by
higher sales volumes in the U.K., higher Indonesian LNG sales prices and
volumes, higher oil prices and lower exploration expenses, partially offset
by lower ethylene margins.
Sales and operating revenues for the six months ended June 30, 1996 were $481
million, up from $440 million in the prior year. International revenues
totaled $388 million as compared to $329 million for the first six months of
1995. In the U.K., sales and operating revenues increased by $41 million due
to increased sales volumes, primarily as a result of the July 1995 acquisition
of an interest in the Alba field and due to higher crude oil prices. In
Indonesia, sales increased $16 million as compared to 1995 due to higher LNG
and crude oil sales prices and higher LNG volumes. In Pakistan, sales were $2
million above 1995, primarily due to higher crude oil prices.
Average prices received and volumes sold by the Company's major operations
during the first six months of 1996 and 1995, respectively, were as follows:
<TABLE>
<CAPTION>
PRICES VOLUMES
(000S PER DAY)
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Crude oil (barrels):
U.K. $18.18 $16.98 43 33
Pakistan 16.20 14.77 6 6
Indonesia 18.56 17.56 6 6
Indonesian LNG (Mcf) 3.36 3.13 227 222
Pakistan natural gas (Mcf) 1.29 1.30 43 44
U.K. natural gas (Mcf) 2.43 2.96 40 34
U.S. ethylene (pounds) .20 .28 1,379 1,318
</TABLE>
Petrochemical revenues totaled $94 million as compared to $110 million in the
first half of 1995, while operating profit was $12 million as compared to $38
million in the prior period. The decreased operating profit was primarily due
to lower ethylene sales prices and increased feedstock costs, resulting in an
average ethylene margin of 5 cents per pound in 1996 vs. 16 cents per pound in
1995.
DD&A increased by $19 million due to higher volumes of U.K. crude oil and
Indonesian LNG. Exploration expenses decreased by $13 million related to
reduced new venture exploratory drilling. Interest expense increased $4
million during the period due to higher levels of debt, primarily due to the
funding of the Alba acquisition during the third quarter of 1995.
7
<PAGE> 9
FINANCIAL CONDITION
Cash flow from operations: Net cash provided by operating activities was $150
million in the first six months of 1996, an increase of $49 million from the
same period in the prior year. The improvement was primarily the result of
higher sales volumes of U.K. oil and Indonesian LNG and higher oil and LNG
prices, partially offset by lower ethylene margins.
Capital resources: Capital expenditures for the first half of 1996 were $96
million including capitalized interest of $12 million. Capital expenditures
for the first half of 1995 were $90 million including capitalized interest of
$11 million. The increase reflects higher development capital related to the
Britannia field in the U.K. North Sea, partially offset by reduced exploratory
drilling in new venture areas.
Financing activities: The Company had two unsecured credit facilities (the
"Credit Facilities") at June 30, 1996. One of the Credit Facilities is a $100
million revolver that provides for conversion of amounts outstanding on March
15, 1997 to a one-year term loan maturing March 15, 1998. Another Credit
Facility is a $450 million revolver that reduces quarterly by $35 million
beginning June 30, 2000, with a final maturity of March 31, 2001. The $450
million facility allows the Company to borrow up to $300 million in U.S. dollar
loans at interest rates determined in a competitive bid process. Loans under
the $450 million facility 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 or decrease in
certain events. The Credit Facilities contain restrictive covenants, including
maintenance of certain coverage ratios related to the incurrence of additional
indebtedness and limitations on asset sales and mergers or consolidations. The
covenants also require maintenance of stockholders' equity, as adjusted, at
$350 million. 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 certain other
covenants in the Credit Facilities. At June 30, 1996, the Company's adjusted
stockholders' equity was approximately $564 million. At June 30, 1996, $87
million was outstanding under the $450 million facility bearing interest at a
weighted average rate of 5.8% per annum.
The Company has established short-term, uncommitted and unsecured lines of
credit with several banks in both U.S. dollars and pounds sterling. These
money market borrowings, which have a short-term maturity, have been classified
as long-term debt based on the Company's intent to refinance these borrowings
for a period exceeding one year and the ability to refinance them on a
long-term basis through its Credit Facilities. At June 30, 1996, $93 million
was outstanding under these money market lines which bore interest at weighted
average rates of 5.9% per annum. As of June 30, 1996, the Company had
approximately $366 million of available financing under such lines of credit
and the Credit Facilities.
The Company's indirect subsidiary, Union Texas Britannia Limited ("UTBL"), has
a 150 million pounds sterling secured financing from a syndicate of banks. The
financing is used to fund the Company's share of the cost of developing the
Britannia field to production. At June 30, 1996, 39 million pounds sterling
($60 million) was outstanding under UTBL's financing which bore interest at a
weighted average rate of 6.8% per annum.
On April 27, 1994, the Company's Board of Directors authorized the repurchase
of up to 2,000,000 shares of the Company's common stock and pursuant thereto,
the Company had repurchased 946,236 shares as of June 30, 1996, including
333,400 shares repurchased in the second quarter of 1996. The repurchased
stock will be used for general corporate purposes, including fulfilling
employee benefit program obligations. As of June 30, 1996, 477,038 shares of
common stock were held, at cost, as treasury shares.
8
<PAGE> 10
Financial condition: In the second quarter of 1996, the Company declared and
paid a dividend of approximately $4.4 million on its common stock. On July 23,
1996, the Company announced a dividend on its common stock of $.05 per share to
stockholders of record as of July 31, 1996, payable on August 15, 1996.
In October 1995, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which establishes financial and reporting standards for stock
based employee compensation plans that will be effective for the Company's 1996
financial statements. The statement encourages, but does not require,
companies to adopt a fair value based method of accounting for such plans in
place of current accounting standards. Companies electing to continue to use
their existing accounting methods will be required to make pro forma
disclosures of net income assuming a fair value based method of accounting has
been applied. The Company will continue to use its current accounting methods
with additional disclosures.
The Company may enter into hedging contracts and other risk management
activities, such as swaps or fixed price contracts in order to minimize the
impact of adverse price fluctuations. Gains or losses on these activities are
recognized in sales revenues when the underlying exposed hedged production is
sold. During the first half of 1996, the Company entered into financial
hedging futures contracts to offset a portion of its North Sea crude. As of
June 30, 1996, the Company had open contracts for 714,000 barrels of oil at an
average Brent price of $17.14 per barrel which will be settled at various times
from July through December 1996. During the second quarter of 1996, the
Company settled crude oil hedging contracts of 528,000 barrels at an average
Brent price of $17.13.
9
<PAGE> 11
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company and its subsidiaries and related companies are named defendants in
numerous lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business. While the outcome of lawsuits or
other proceedings against the Company cannot be predicted with certainty,
management does not expect these matters to have a material adverse effect on
the financial position of the Company. (See Item 3 in the Company's 1995
annual report on Form 10-K.)
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 8, 1996, the 1996 Annual Meeting of Stockholders of the Company was
held. The following persons were elected as proposed in the proxy solicitation
issued pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended, to serve as directors until the next Annual Meeting of Stockholders or
until their successors are elected and qualified: John L. Whitmire, Glen A.
Cox, Saul A. Fox, Edward A. Gilhuly, James H. Greene, Jr., Henry R. Kravis,
Michael W. Michelson, Stanley P. Porter, George R. Roberts, Richard R. Shinn,
and Sellers Stough. Stockholders ratified the appointment of Price Waterhouse
LLP as the Company's independent accountants for the fiscal year ending
December 31, 1996.
There were 80,055,696 shares voted for the election of directors with 1,869,451
withholding votes and no abstentions or broker non-votes. Results by nominated
director were:
<TABLE>
<CAPTION>
VOTED AUTHORITY
FOR WITHHELD
<S> <C> <C>
John L. Whitmire 79,708,616 2,216,531
Glen A. Cox 79,138,179 2,786,968
Saul A. Fox 76,747,945 5,177,202
Edward A. Gilhuly 79,355,131 2,570,016
James H. Greene, Jr. 76,360,200 5,564,947
Henry R. Kravis 76,026,238 5,898,909
Michael W. Michelson 78,881,360 3,043,787
Stanley P. Porter 80,029,693 1,895,454
George R. Roberts 75,926,547 5,998,600
Richard R. Shinn 80,028,396 1,896,751
Sellers Stough 80,040,039 1,885,108
</TABLE>
There were 81,845,625 shares voted for the ratification of the appointment of
Price Waterhouse LLP as the Company's independent public accountants, with
52,908 shares voted against, 26,614 abstentions and no broker non-votes.
ITEM 5 - OTHER INFORMATION
Indonesia. During April 1996, Pertamina established 16.5399% as the
participation percentage of the Indonesian joint venture (in which the Company
owns a 37.81% working interest) in deliveries during the years 2000 to 2017
under long- term LNG sales contracts with the Chinese Petroleum Corporation and
Korea Gas Corporation, respectively, and in certain deliveries under an
extension of a long-term contract, originally signed in 1981, with Japanese
industrial and utility customers.
10
<PAGE> 12
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Third Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees.
10.2 First Supply Agreement for Package V Excess Sales (1998-
1999 LNG Sales to Korea Gas Corporation Under Badak V),
dated as of May 1, 1996, between Pertamina and Virginia
Indonesia Company, Lasmo Sanga Sanga Limited, Opicoil
Houston, Inc., Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia
International Company.
10.3 Second Supply Agreement for Package V Excess Sales (1998-
1999 LNG Sales to Chinese Petroleum Corporation under
Badak VI), dated as of May 1, 1996, between Pertamina and
Virginia Indonesia Company, Lasmo Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company.
10.4 Package VI Supply Agreement for Natural Gas in Support of
2000-2017 LNG Sales to Korea Gas Corporation under Badak
V, dated as of May 1, 1996, between Pertamina and
Virginia Indonesia Company, Lasmo Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company.
10.5 Package VI Supply Agreement for Natural Gas in Support of
2000-2017 LNG Sales to Chinese Petroleum Corporation
under Badak VI, dated as of May 1, 1996, between
Pertamina and Virginia Indonesia Company, Lasmo Sanga
Sanga Limited, Opicoil Houston, Inc., Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Virginia International Company.
10.6 First Supply Agreement for Package VI Excess Sales (2003-
2008 LNG Sales under the Second Amended and Restated 1981
Badak Sales Contract) dated as of May 1, 1996, between
Pertamina and Virginia Indonesia Company, Lasmo Sanga
Sanga Limited, Opicoil Houston, Inc., Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Virginia International Company.
15 Independent Accountants' Awareness Letter.
27.1 Financial Data Schedule for the six-month period ended
June 30, 1996.
</TABLE>
(b) Reports on Form 8-K
The Company filed the following reports on Form 8-K since the
quarterly period ended March 31, 1996:
The Company filed a Form 8-K dated April 26, 1996 to attach a press
release announcing the Company's first quarter earnings.
The Company filed a Form 8-K dated June 17, 1996 to attach press
releases reporting the results of the Company's Annual Stockholders
Meeting and to announce organizational changes in its exploration
and production and petrochemical operations.
11
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TEXAS PETROLEUM HOLDINGS, INC.
Date: July 26, 1996 By: /s/ DONALD M. MCMULLAN
---------------------------------
Donald M. McMullan
Vice President and Controller
(Chief Accounting Officer
and officer duly authorized to
sign on behalf of the registrant)
12
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10.1 Third Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees.
10.2 First Supply Agreement for Package V Excess Sales (1998-
1999 LNG Sales to Korea Gas Corporation Under Badak V),
dated as of May 1, 1996, between Pertamina and Virginia
Indonesia Company, Lasmo Sanga Sanga Limited, Opicoil
Houston, Inc., Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia
International Company.
10.3 Second Supply Agreement for Package V Excess Sales (1998-
1999 LNG Sales to Chinese Petroleum Corporation under
Badak VI), dated as of May 1, 1996, between Pertamina and
Virginia Indonesia Company, Lasmo Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company.
10.4 Package VI Supply Agreement for Natural Gas in Support of
2000-2017 LNG Sales to Korea Gas Corporation under Badak
V, dated as of May 1, 1996, between Pertamina and
Virginia Indonesia Company, Lasmo Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company.
10.5 Package VI Supply Agreement for Natural Gas in Support of
2000-2017 LNG Sales to Chinese Petroleum Corporation
under Badak VI, dated as of May 1, 1996, between
Pertamina and Virginia Indonesia Company, Lasmo Sanga
Sanga Limited, Opicoil Houston, Inc., Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Virginia International Company.
10.6 First Supply Agreement for Package VI Excess Sales (2003-
2008 LNG Sales under the Second Amended and Restated 1981
Badak Sales Contract) dated as of May 1, 1996, between
Pertamina and Virginia Indonesia Company, Lasmo Sanga
Sanga Limited, Opicoil Houston, Inc., Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Virginia International Company.
15 Independent Accountants' Awareness Letter.
27.1 Financial Data Schedule for the six-month period ended
June 30, 1996.
</TABLE>
<PAGE> 1
THIRD AMENDMENT TO
UNION TEXAS PETROLEUM SAVINGS PLAN
FOR SALARIED EMPLOYEES
WHEREAS, UNION TEXAS PETROLEUM HOLDINGS, INC. (the "Company") and
other Employing Companies have heretofore adopted and maintained the UNION
TEXAS PETROLEUM SAVINGS PLAN FOR SALARIED EMPLOYEES (the "Plan") for the
benefit of their eligible employees; and
WHEREAS, the Company desires to amend the Plan on behalf of itself and
the Employing Companies;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of
June 1, 1996:
1. Sections 1.1 (27) and 1.1(36) of the Plan shall be deleted.
2. Article II of Plan shall be deleted and the following shall be
substituted therefor:
"II.
PARTICIPATION
2.1 GENERAL ELIGIBILITY RULE. Any Eligible Employee
shall be eligible to become a Member upon the first day of the month
coincident with or next following his Commencement Date.
2.2 REEMPLOYED MEMBER. An Eligible Employee who was a
Member, or who was eligible to become a Member, prior to a termination
of employment shall be eligible to remain or become a Member
immediately upon his reemployment as an Eligible Employee.
2.3 STATUS AS AN ELIGIBLE EMPLOYEE. An Employee who was
not eligible to become a Member because he was not an Eligible
Employee shall be eligible to become a Member immediately upon
becoming an Eligible Employee as a result of a change in his
employment status. A Member who ceases to be an Eligible Employee but
remains an Employee shall continue to be a Member but, on and after
the date he ceases to be an Eligible Employee, he shall no longer be
entitled to defer Compensation hereunder or share in allocations of
Employer Contributions unless and until he shall again become an
Eligible Employee.
<PAGE> 2
2.4 ELECTION TO BECOME A MEMBER. Membership in the Plan
is voluntary. Any Eligible Employee may become a member upon the date
on which he first becomes eligible by executing and filing with the
Committee, within the time limits prescribed by the Committee, the
Compensation reduction agreement prescribed by the Committee. Any
Eligible Employee who does not become a Member upon the date on which
he first becomes eligible may become a Member on the first day of any
subsequent month by executing and filing with the Committee a
Compensation reduction agreement within the time limits prescribed by
the Committee."
3. An Eligible Employee whose Commencement Date occurred on or
before May 1, 1996, and who was not eligible to become a Member prior to June
1, 1996, because he had not completed the service requirement of the Plan as in
effect prior to this Third Amendment, shall be eligible to become a Member upon
June 1, 1996, if he is an Eligible Employee on such date, or on the first day
of the month coincident with or next following the date he becomes an Eligible
Employee, if he is not an Eligible Employee on such date.
4. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed on this 13th day of May, 1996.
UNION TEXAS PETROLEUM HOLDINGS, INC.
BY /s/ Newton W. Wilson, III
------------------------------------------------
NEWTON W. WILSON, III
GENERAL COUNSEL AND VICE PRESIDENT-ADMINISTRATION
<PAGE> 1
FIRST SUPPLY AGREEMENT FOR PACKAGE V EXCESS SALES
(1998-1999 LNG SALES TO KOREA GAS CORPORATION UNDER BADAK V)
BETWEEN
PERTAMINA
AND
VIRGINIA INDONESIA COMPANY
LASMO SANGA SANGA LIMITED
OPICOIL HOUSTON, INC.
UNION TEXAS EAST KALIMANTAN LIMITED
UNIVERSE GAS & OIL COMPANY, INC.
AND
VIRGINIA INTERNATIONAL COMPANY
DATED: MAY 1, 1996
EFFECTIVE: AUGUST 12, 1995
<PAGE> 2
FIRST SUPPLY AGREEMENT FOR PACKAGE V EXCESS SALES
(1998-1999 LNG SALES TO KOREA GAS CORPORATION UNDER BADAK V)
THIS SUPPLY AGREEMENT, made and entered into in Jakarta on May 1,
1996, by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
("PERTAMINA"), on the one hand, and VIRGINIA INDONESIA COMPANY ("VICO"), LASMO
SANGA SANGA LIMITED, OPICOIL HOUSTON, INC., UNION TEXAS EAST KALIMANTAN
LIMITED, UNIVERSE GAS & OIL COMPANY, INC., and VIRGINIA INTERNATIONAL COMPANY
(herein referred to collectively as "Contractors" and individually as
"Contractor"), on the other hand,
WITNESSETH:
A. WHEREAS, Contractors individually own or control all of
the interest of "Contractors" in that certain Amended and Restated Production
Sharing Contract, dated April 23, 1990, but effective as of August 8, 1968
(such contract as hereafter amended is herein referred to as the "Amended and
Restated Production Sharing Contract") and that certain Production Sharing
Contract dated April 23, 1990, but effective as of August 8, 1998 (such
contract as hereafter amended is herein referred to as the "Renewed
Production Sharing Contract"). The Amended and Restated Production Sharing
Contract and the Renewed Production Sharing Contract are herein referred to
collectively as the "Production Sharing Contracts" and the area covered thereby
is herein referred to as the "VICO Contract Area";
B. WHEREAS, pursuant to the Production Sharing Contracts,
each of PERTAMINA and Contractors is entitled to take and receive, sell and
freely export its respective share of the Natural Gas produced and saved from
the VICO Contract Area (the percentage share of such Natural Gas to which each
of PERTAMINA and Contractors is entitled, as determined under the Production
Sharing Contracts, is herein referred to as the "Production Sharing Percentage"
of such party);
- 1 -
<PAGE> 3
C. WHEREAS, the reserves of Natural Gas in the VICO Contract
Area exceed the reserves of Natural Gas committed to be produced, supplied and
delivered by PERTAMINA and Contractors to meet a portion of PERTAMINA's
existing obligations under LNG sales contracts, LPG sales contracts, and
domestic gas sales contracts;
D. WHEREAS, PERTAMINA, with assistance from Contractors, has
constructed and expanded and is further expanding the Natural Gas liquefaction
and related facilities located at Bontang Bay, on the east coast of Kalimantan,
Indonesia (herein referred to as the "Bontang Plant");
E. WHEREAS, PERTAMINA and Contractors are parties to the
Amended and Restated Bontang Processing Agreement dated as of February 9, 1988
(as from time to time amended, the "Processing Agreement"), which provides for
the operation of the Bontang Plant and the payment of the costs of such
operation (such costs as determined in accordance with the Processing Agreement
are herein referred to as "Plant Operating Costs");
F. WHEREAS, PERTAMINA and Contractors have agreed to use the
Bontang Plant in part for the liquefaction of the VICO Contract Gas (as defined
in Section 2.2 hereof) and the Other Contract Gas (as defined in Section 2.3
hereof);
G. WHEREAS, PERTAMINA, in collaboration with Contractors and
its production sharing contractors in other contract areas in East Kalimantan
(herein referred to as the "Other Contract Areas"), has entered into an LNG
Sales Contract dated August 12, 1995 ("Badak V", and unless otherwise so
stated, any terms defined in Badak V shall have the same meanings when used
herein) with Korea Gas Corporation ("Buyer") pursuant to which PERTAMINA is
obligated to sell to Buyer certain quantities of LNG on an FOB basis;
H. WHEREAS, pursuant to Part Two, paragraph 2(f) II of the
Memorandum of Understanding Re: Supply Agreements and Package V Sales dated
October 5, 1994, between PERTAMINA, Contractors and the production sharing
contractors in the Other Contract Areas
- 2 -
<PAGE> 4
("MOU"), the sales of LNG pursuant to Badak V to be delivered during the years
1998 and 1999 are Package V Sales as that term is defined in the MOU ("Package
V Badak V Quantities");
I. WHEREAS, Badak V provides that the Natural Gas to be
processed into LNG and sold by PERTAMINA under Badak V is to be produced from
the areas in East Kalimantan covered by production sharing contracts between
PERTAMINA and its suppliers, which consist of the VICO Contract Area and the
Other Contract Areas;
J. WHEREAS, PERTAMINA and each Contractor desire to supply
and deliver Natural Gas from the VICO Contract Area in support of the
performance by PERTAMINA of an agreed portion of its obligations under Badak V;
and
K. WHEREAS, each Contractor desires to dispose of its
Production Sharing Percentage of the VICO Contract Gas (as herein defined) in
accordance with the terms of this Supply Agreement,
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
EFFECTIVE DATE AND DURATION
This Supply Agreement shall be effective as of August 12, 1995, and
shall terminate on the date when all rights and obligations of Contractors
hereunder have been satisfied.
- 3 -
<PAGE> 5
ARTICLE 2
SUPPLY COMMITMENT AND QUANTITY
2.1 Net Gas Requirement. The total quantity of net Natural
Gas required to be supplied and delivered out of proved economically
recoverable reserves of Natural Gas in East Kalimantan for liquefaction and
sale as Package V Badak V Quantities is estimated to be 0.1077 trillion
standard cubic feet ("t.s.c.f."). Such quantity is herein referred to as the
"Package V Badak V Net Gas Requirement." The Package V Badak V Net Gas
Requirement is based on the Fixed Quantities which Buyer has committed to
purchase pursuant to the terms of Badak V.
2.2 VICO Contract Gas. PERTAMINA and Contractors hereby
commit and agree to supply and deliver from proved economically recoverable
reserves of Natural Gas in specific fields within the VICO Contract Area
sufficient Natural Gas (and LNG resulting from the liquefaction thereof) to
meet a portion of the Package V Badak V Net Gas Requirement over the term of
this Supply Agreement consisting of 0.0233 t.s.c.f., or 21.5956% thereof.
Such quantities of net Natural Gas committed to be supplied pursuant to this
Supply Agreement are herein referred to as the "VICO Contract Gas," and the
above-stated percentage is herein referred to as the "Producers' Percentage."
The specific fields from which the VICO Contract Gas will be committed are
identified in the Package V Supplemental Memorandum of Understanding entered
into among PERTAMINA, Contractors and the production sharing contractors in the
Other Contract Areas pursuant to the MOU ("Package V Supplemental Memorandum").
The VICO Contract Area participating fields and the quantities in each field
comprising the VICO Contract Gas are as follows:
<TABLE>
<CAPTION>
Participating Fields Quantity of Gas (t.s.c.f.)
-------------------- --------------------------
<S> <C>
Badak 0.0077
Lampake 0.0007
Mutiara 0.0031
Nilam 0.0081
Pamaguan 0.0001
</TABLE>
- 4 -
<PAGE> 6
<TABLE>
<S> <C>
Semberah 0.0036
</TABLE>
The quantities committed from each field are subject to revision from time to
time, as the reserves from the fields may be updated and as additional data,
from deliverability studies and otherwise, become available.
2.3 Other Contract Gas. To meet the balance of the Package V
Badak V Net Gas Requirement, constituting 0.0844 t.s.c.f., or 78.4044%
thereof, sufficient Natural Gas (and LNG resulting from the liquefaction
thereof) will be committed for supply and delivery by PERTAMINA and its
production sharing contractors from proved economically recoverable reserves of
Natural Gas in the Other Contract Areas by separate supply agreements, similar
hereto and compatible herewith, executed and delivered concurrently herewith
(such amounts are herein collectively referred to as the "Other Contract Gas").
The specific fields from which the Other Contract Gas will be committed are
also identified in the Package V Supplemental Memorandum.
2.4 DeGolyer and MacNaughton Certification. The amounts of
net Natural Gas constituting the VICO Contract Gas and the Other Contract Gas
are part of the estimates of proved economically recoverable reserves of
Natural Gas as certified by the independent consultant firm of DeGolyer and
MacNaughton in written statements based on data available on May 31, 1994.
The quantities for the VICO Contract Gas and the Other Contract Gas
set forth in Sections 2.2 and 2.3 hereof and the Producers' Percentage were
established by PERTAMINA at a meeting on May 29, 1995, of the East Kalimantan
Gas Reserves Management Committee.
ARTICLE 3
COORDINATION OF GAS SUPPLY
The VICO Contract Gas and the Other Contract Gas may be produced from
participating fields at times and production rates which may change from time
to time during the term hereof
- 5 -
<PAGE> 7
so as to secure the optimal ultimate recovery of Natural Gas. The supply of
Natural Gas from the VICO Contract Area and the Other Contract Areas will be
coordinated by PERTAMINA so as to conserve and permit full utilization of such
Natural Gas. The sources of supply, producing rates, quality of gas, metering
and related matters shall be matters for study by the East Kalimantan Gas
Reserves Management Committee, consisting of representatives from PERTAMINA,
VICO, TOTAL Indonesie and Unocal Indonesia Company.
ARTICLE 4
ADMINISTRATION AND CONSULTATION
4.1 LNG Sales Contract. PERTAMINA shall be responsible for
the due and prompt administration of Badak V for the benefit of PERTAMINA and
Contractors. All matters which affect Badak V or the sale and delivery of LNG
thereunder will be administered by a representative to be appointed by
PERTAMINA and the representative appointed by Contractors under Article 9
hereof. It is understood, however, that it will be necessary from time to time
for PERTAMINA, as seller under Badak V, to take certain administrative and
operational actions without prior consultation where immediate action is
required. Contractors will be promptly advised of any such action.
4.2 Consultation. PERTAMINA and Contractors agree to consult
with each other freely on all matters relating to Badak V. PERTAMINA and
Contractors shall confer and agree as to any amendment to Badak V or to any
permitted action or election thereunder which constitutes a material adjustment
in the quantities of LNG to be sold and delivered thereunder or a change in the
terms thereof. At the request of any party hereto, a memorandum evidencing any
such agreement shall be prepared as soon as feasible and signed by each party
hereto.
- 6 -
<PAGE> 8
ARTICLE 5
TITLE, DELIVERY AND INVOICING
5.1 Title. PERTAMINA will cause the LNG resulting from the
liquefaction of the VICO Contract Gas and the Other Contract Gas to be
delivered to Buyer at the Delivery Point. Title to each Contractor's share of
the LNG resulting from the liquefaction of the VICO Contract Gas shall pass to
PERTAMINA at the same time as the passage of title from PERTAMINA to Buyer
pursuant to Badak V.
5.2 Delivery and Invoicing. At the time of delivery of each
cargo of LNG to Buyer at the Delivery Point, PERTAMINA will furnish Contractors
with appropriate documentation to evidence the quantity and quality of LNG
delivered, together with copies of the invoices to Buyer in respect of the sale
of LNG in question. PERTAMINA will also furnish Contractors with a copy of
each invoice or billing delivered to Buyer on account of interest or other
payment obligation of Buyer pursuant to Badak V concurrently with its being
furnished to Buyer. Calculation of the Contract Sales Price, the amount of
sales invoices and other billings to Buyer, and any adjustments, shall be
reviewed and approved by PERTAMINA and Contractors prior to presentation to
Buyer.
ARTICLE 6
ENTITLEMENT AND PAYMENT
6.1 Contractors' Entitlement. The amounts to be paid to each
Contractor for its share of the LNG resulting from the liquefaction of Natural
Gas to be supplied under this Supply Agreement shall be its Production Sharing
Percentage of the Producers' Percentage of the sum of:
(a) all amounts to be paid by Buyer to PERTAMINA for Package
V Badak V Quantities;
- 7 -
<PAGE> 9
(b) all other amounts which Buyer shall become obligated to
pay pursuant to Badak V with regard to deliveries of Package V Badak V
Quantities thereunder including, but not limited to, any interest accruing on
overdue invoice payments;
(c) amounts payable by insurers in respect of LNG resulting
from the liquefaction of the VICO Contract Gas and the Other Contract Gas; and
(d) interest earned on any of the amounts referred to in this
Section 6.1.
6.2 PERTAMINA Assignment of Contractor Percentage Share. In
order to arrange for the receipt by each Contractor of the payments to which
such Contractor is entitled under Section 6.1 hereof, PERTAMINA hereby assigns
to each Contractor that Contractor's Production Sharing Percentage of the
Producers' Percentage of all amounts referred to in Section 6.1 hereof.
6.3 Method of Payment. Throughout the term of this Supply
Agreement, all those payments referred to in Section 6.1 hereof shall be paid
in U.S. Dollars, directly to BankAmerica International in New York City (or
such other leading bank in the United States as shall be selected by PERTAMINA
and approved by Contractors) pursuant to that certain Amended and Restated
Bontang Excess Sales Trustee and Paying Agent Agreement, dated as of February
9, 1988, among PERTAMINA, Contractors, the production sharing contractors in
the Other Contract Areas and the Trustee thereunder, as the same may be from
time to time amended. Amounts so received by the Trustee shall be used for
payment of (i) an agreed portion of Plant Operating Costs; and (ii) other costs
approved by PERTAMINA and Contractors. Amounts received by the Trustee, to the
extent that they are not used for payment of the costs referred to in the
preceding sentence, shall, insofar as they are applicable to the VICO Contract
Gas, be disbursed to PERTAMINA and each Contractor in accordance with its
Production Sharing Percentage at a bank or banks of its choice.
- 8 -
<PAGE> 10
6.4 Contractors' Right to Payment. The right of Contractors
to the payments provided for in this Article 6 shall extend throughout the term
of this Supply Agreement and shall not be affected by the production rates or
sources of Natural Gas supplied from the VICO Contract Gas or the Other
Contract Gas from time to time during the term hereof.
ARTICLE 7
DELIVERABILITY
7.1 Oversupply of VICO Contract Gas. If the quantities of
net Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement exceed in the aggregate
the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be increased, and Contractors, together with PERTAMINA, will be
credited with and have the right to receive revenue from future marketing
opportunities in respect of a quantity of net Natural Gas from reserves in the
Other Contract Areas equal to such excess quantities.
7.2 Shortfall of VICO Contract Gas. If the quantities of net
Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement are in the aggregate less
than the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be reduced, and the production sharing contractors in the Other
Contract Areas and any new contract area, together with PERTAMINA, will be
credited with and have the right to receive revenue from future marketing
opportunities in respect of a quantity of net Natural Gas from reserves in the
VICO Contract Area equal to excess quantities delivered from sources within the
Gas Supply Area.
- 9 -
<PAGE> 11
ARTICLE 8
ARBITRATION AND GOVERNING LAW
8.1 Arbitration. All disputes arising in connection with
this Supply Agreement shall be finally settled by arbitration conducted in the
English language in Paris, France, by three arbitrators under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce.
Judgment upon the award rendered may be entered in any court having
jurisdiction, or application may be made to such court for a juridical
acceptance of the award and an order of enforcement, as the case may be.
8.2 Governing Law. This Supply Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York, United
States of America.
ARTICLE 9
CONTRACTORS' REPRESENTATIVE
VICO is designated representative by Contractors for performance on
behalf of Contractors of their obligations under Section 4.1 hereof and for the
giving of notices, responses or other communications to and from Contractors
under this Supply Agreement. Such representative may be changed by written
notice to such effect from Contractors to PERTAMINA.
ARTICLE 10
NOTICES
Any notices to the parties shall be in writing and sent by mail,
cable, telex or facsimile to the following addresses:
- 10 -
<PAGE> 12
To PERTAMINA:
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
(PERTAMINA)
Jalan Medan Merdeka Timur 1 A
Jakarta 10110, Indonesia
Attention: Head of BPPKA
Cable: PERTAMINA, Jakarta, Indonesia
Telex: PERTAMINA, 44134 Jakarta
Facsimile: 3846932
To Contractors:
VIRGINIA INDONESIA COMPANY (VICO)
6th Floor, Kuningan Plaza
South Tower
Jl. H.R. Rasuna Said Kav. C11-14
P.O. Box 2828
Jakarta Selatan, Indonesia
Attention: President - VICO Indonesia
Cable: VICO
Telex: 62458 or 62468
Facsimile: 523-6100
cc: VIRGINIA INDONESIA COMPANY
One Houston Center
1221 McKinney
Suite 700
P.O. Box 1551
Houston, Texas 77251-1551
U.S.A.
Attention: Chairman
Telex: 166-100
Facsimile: (713) 754-6698
A party may change its address by written notice to the other parties.
- 11 -
<PAGE> 13
ARTICLE 11
MISCELLANEOUS
11.1 Amendment. This Supply Agreement shall not be amended or
modified except by written agreement signed by the parties hereto.
11.2 Successors and Assigns. This Supply Agreement shall inure to
the benefit of, and be binding upon, PERTAMINA and each Contractor, their
respective successors and assigns, provided that this Supply Agreement shall be
assignable by a Contractor only if such Contractor concurrently assigns to the
same assignee an equal interest in the Production Sharing Contracts.
11.3 Exclusivity. The parties to this Supply Agreement shall be
the only persons or entities entitled to enforce the obligations hereunder of
the other parties hereto, and no persons or entities not parties to this Supply
Agreement shall have the right to enforce any of the obligations hereunder of
any of the parties hereto.
11.4 Headings and Subheadings. The Article headings and
subheadings used herein are for convenience of reference only.
IN WITNESS WHEREOF, PERTAMINA and Contractors have caused their duly
authorized representatives to execute this Supply Agreement as of the day and
year first written above.
CONTRACTORS:
PERUSAHAAN PERTAMBANGAN MINYAK VIRGINIA INDONESIA COMPANY
DAN GAS BUMI NEGARA (PERTAMINA)
By /s/ F. ABDA'OE By /s/ C. M. REIMER
------------------------------ -------------------------------------
F. Abda'oe C. M. Reimer
- 12 -
<PAGE> 14
LASMO SANGA SANGA LIMITED
By /s/ J. HOGAN
-----------------------------------
J. Hogan
OPICOIL HOUSTON, INC.
By /s/ C.Y. CHUNG
-----------------------------------
C.Y. Chung
UNION TEXAS EAST KALIMANTAN LIMITED
By /s/ L.D. KALMBACH
-----------------------------------
L.D. Kalmbach
UNIVERSE GAS & OIL COMPANY, INC.
By /s/ T. NORIMATSU
-----------------------------------
T. Norimatsu
VIRGINIA INTERNATIONAL COMPANY
By /s/ J. HOGAN
-----------------------------------
J. Hogan
- 13 -
<PAGE> 1
SECOND SUPPLY AGREEMENT FOR PACKAGE V EXCESS SALES
(1998-1999 LNG SALES TO
CHINESE PETROLEUM CORPORATION UNDER BADAK VI)
BETWEEN
PERTAMINA
AND
VIRGINIA INDONESIA COMPANY
LASMO SANGA SANGA LIMITED
OPICOIL HOUSTON, INC.
UNION TEXAS EAST KALIMANTAN LIMITED
UNIVERSE GAS & OIL COMPANY, INC.
AND
VIRGINIA INTERNATIONAL COMPANY
DATED: MAY 1, 1996
EFFECTIVE: OCTOBER 25, 1995
<PAGE> 2
SECOND SUPPLY AGREEMENT FOR PACKAGE V EXCESS SALES
(1998-1999 LNG SALES TO
CHINESE PETROLEUM CORPORATION UNDER BADAK VI)
THIS SUPPLY AGREEMENT, made and entered into in Jakarta on May 1st,
1996, by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
("PERTAMINA"), on the one hand, and VIRGINIA INDONESIA COMPANY ("VICO"), LASMO
SANGA SANGA LIMITED, OPICOIL HOUSTON, INC., UNION TEXAS EAST KALIMANTAN
LIMITED, UNIVERSE GAS & OIL COMPANY, INC., and VIRGINIA INTERNATIONAL COMPANY
(herein referred to collectively as "Contractors" and individually as
"Contractor"), on the other hand,
WITNESSETH:
A. WHEREAS, Contractors individually own or control all of
the interest of "Contractors" in that certain Amended and Restated Production
Sharing Contract, dated April 23, 1990, but effective as of August 8, 1968
(such contract as hereafter amended is herein referred to as the "Amended and
Restated Production Sharing Contract") and that certain Production Sharing
Contract dated April 23, 1990, but effective as of August 8, 1998 (such
contract as hereafter amended is herein referred to as the "Renewed
Production Sharing Contract"). The Amended and Restated Production Sharing
Contract and the Renewed Production Sharing Contract are herein referred to
collectively as the "Production Sharing Contracts" and the area covered thereby
is herein referred to as the "VICO Contract Area";
B. WHEREAS, pursuant to the Production Sharing Contracts,
each of PERTAMINA and Contractors is entitled to take and receive, sell and
freely export its respective share of the Natural Gas produced and saved from
the VICO Contract Area (the percentage share of such Natural Gas to which each
of PERTAMINA and Contractors is entitled, as determined under the Production
Sharing Contracts, is herein referred to as the "Production Sharing Percentage"
of such party);
- 1 -
<PAGE> 3
C. WHEREAS, the reserves of Natural Gas in the VICO Contract
Area exceed the reserves of Natural Gas committed to be produced, supplied and
delivered by PERTAMINA and Contractors to meet a portion of PERTAMINA's
existing obligations under LNG sales contracts, LPG sales contracts, and
domestic gas sales contracts;
D. WHEREAS, PERTAMINA, with assistance from Contractors, has
constructed and expanded and is further expanding the Natural Gas liquefaction
and related facilities located at Bontang Bay, on the east coast of Kalimantan,
Indonesia (herein referred to as the "Bontang Plant");
E. WHEREAS, PERTAMINA and Contractors are parties to the
Amended and Restated Bontang Processing Agreement dated as of February 9, 1988
(as from time to time amended, the "Processing Agreement"), which provides for
the operation of the Bontang Plant and the payment of the costs of such
operation (such costs as determined in accordance with the Processing Agreement
are herein referred to as "Plant Operating Costs");
F. WHEREAS, PERTAMINA and Contractors have agreed to use the
Bontang Plant in part for the liquefaction of the VICO Contract Gas (as defined
in Section 2.2 hereof) and the Other Contract Gas (as defined in Section 2.3
hereof);
G. WHEREAS, PERTAMINA, in collaboration with Contractors and
its production sharing contractors in other contract areas in East Kalimantan
(herein referred to as the "Other Contract Areas"), has entered into an LNG
Sales Contract dated October 25, 1995 ("Badak VI," and unless otherwise so
stated, any terms defined in Badak VI shall have the same meanings when used
herein) with Chinese Petroleum Corporation ("Buyer") pursuant to which
PERTAMINA is obligated to sell to Buyer certain quantities of LNG on an ex ship
basis;
H. WHEREAS, pursuant to Part Two, paragraph 2(f) II of the
Memorandum of Understanding Re: Supply Agreements and Package V Sales dated
October 5, 1994, between PERTAMINA, Contractors and the production sharing
contractors in the Other Contract Areas
- 2 -
<PAGE> 4
("MOU"), the sales of LNG pursuant to Badak VI to be delivered during the years
1998 and 1999 are Package V Sales as that term is defined in the MOU ("Package
V Badak VI Quantities");
I. WHEREAS, arrangements for the transportation of the
Package V Badak VI Quantities and for the payment of costs respecting such
transportation will be on terms mutually agreeable to PERTAMINA and Contractors
(herein referred to as "Transportation Costs");
J. WHEREAS, Badak VI provides that the Natural Gas to be
processed into LNG and sold by PERTAMINA under Badak VI is to be produced from
the areas in East Kalimantan covered by production sharing contracts between
PERTAMINA and its suppliers, which consist of the VICO Contract Area and the
Other Contract Areas;
K. WHEREAS, PERTAMINA and each Contractor desire to supply
and deliver Natural Gas from the VICO Contract Area in support of the
performance by PERTAMINA of an agreed portion of its obligations under Badak
VI; and
L. WHEREAS, each Contractor desires to dispose of its
Production Sharing Percentage of the VICO Contract Gas (as herein defined) in
accordance with the terms of this Supply Agreement,
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
EFFECTIVE DATE AND DURATION
This Supply Agreement shall be effective as of October 25, 1995 and
shall terminate on the date when all rights and obligations of Contractors
hereunder have been satisfied.
- 3 -
<PAGE> 5
ARTICLE 2
SUPPLY COMMITMENT AND QUANTITY
2.1 Net Gas Requirement. The total quantity of net Natural
Gas required to be supplied and delivered out of proved economically
recoverable reserves of Natural Gas in East Kalimantan for liquefaction and
sale as Package V Badak VI Quantities is estimated to be 0.0452 trillion
standard cubic feet ("t.s.c.f."). Such quantity is herein referred to as the
"Package V Badak VI Net Gas Requirement." The Package V Badak VI Net Gas
Requirement is based on the Fixed Quantities which Buyer has committed to
purchase pursuant to the terms of Badak VI.
2.2 VICO Contract Gas. PERTAMINA and Contractors hereby
commit and agree to supply and deliver from proved economically recoverable
reserves of Natural Gas in specific fields within the VICO Contract Area
sufficient Natural Gas (and LNG resulting from the liquefaction thereof) to
meet a portion of the Package V Badak VI Net Gas Requirement over the term of
this Supply Agreement consisting of 0.0098 t.s.c.f., or 21.5956% thereof.
Such quantities of net Natural Gas committed to be supplied pursuant to this
Supply Agreement are herein referred to as the "VICO Contract Gas," and the
above-stated percentage is herein referred to as the "Producers' Percentage."
The specific fields from which the VICO Contract Gas will be committed are
identified in the Package V Supplemental Memorandum of Understanding entered
into among PERTAMINA, Contractors and the production sharing contractors in the
Other Contract Areas pursuant to the MOU ("Package V Supplemental Memorandum").
The VICO Contract Area participating fields and the quantities in each field
comprising the VICO Contract Gas are as follows:
<TABLE>
<CAPTION>
Participating Fields Quantity of Gas (t.s.c.f.)
-------------------- --------------------------
<S> <C>
Badak 0.0032
Lampake 0.0003
Mutiara 0.0013
Nilam 0.0034
Semberah 0.0015
</TABLE>
- 4 -
<PAGE> 6
The quantities committed from each field are subject to revision from time to
time, as the reserves from the fields may be updated and as additional data,
from deliverability studies and otherwise, become available.
2.3 Other Contract Gas. To meet the balance of the Package V
Badak VI Net Gas Requirement, constituting 0.0354 t.s.c.f., or 78.4044%
thereof, sufficient Natural Gas (and LNG resulting from the liquefaction
thereof) will be committed for supply and delivery by PERTAMINA and its
production sharing contractors from proved economically recoverable reserves of
Natural Gas in the Other Contract Areas by separate supply agreements, similar
hereto and compatible herewith, executed and delivered concurrently herewith
(such amounts are herein collectively referred to as the "Other Contract Gas").
The specific fields from which the Other Contract Gas will be committed are
also identified in the Package V Supplemental Memorandum.
2.4 DeGolyer and MacNaughton Certification. The amounts of
net Natural Gas constituting the VICO Contract Gas and the Other Contract Gas
are part of the estimates of proved economically recoverable reserves of
Natural Gas as certified by the independent consultant firm of DeGolyer and
MacNaughton in written statements based on data available on May 31, 1994.
The quantities for the VICO Contract Gas and the Other Contract Gas
set forth in Sections 2.2 and 2.3 hereof and the Producers' Percentage were
established by PERTAMINA at a meeting on May 29, 1995, of the East Kalimantan
Gas Reserves Management Committee.
ARTICLE 3
COORDINATION OF GAS SUPPLY
The VICO Contract Gas and the Other Contract Gas may be produced from
participating fields at times and production rates which may change from time
to time during the term hereof so as to secure the optimal ultimate recovery of
Natural Gas. The supply of Natural Gas from the VICO Contract Area and the
Other Contract Areas will be coordinated by PERTAMINA so as
- 5 -
<PAGE> 7
to conserve and permit full utilization of such Natural Gas. The sources of
supply, producing rates, quality of gas, metering and related matters shall be
matters for study by the East Kalimantan Gas Reserves Management Committee,
consisting of representatives from PERTAMINA, VICO, TOTAL Indonesie and Unocal
Indonesia Company.
ARTICLE 4
ADMINISTRATION, INSURANCE AND CONSULTATION
4.1 LNG Sales Contract. PERTAMINA shall be responsible for
the due and prompt administration of Badak VI for the benefit of PERTAMINA and
Contractors. All matters which affect Badak VI or the sale, transportation and
delivery of LNG thereunder will be administered by a representative to be
appointed by PERTAMINA and the representative appointed by Contractors under
Article 9 hereof. It is understood, however, that it will be necessary from
time to time for PERTAMINA, as seller under Badak VI, to take certain
administrative and operational actions without prior consultation where
immediate action is required. Contractors will be promptly advised of any such
action.
4.2 Insurance. PERTAMINA shall ensure that the interests of
it and each Contractor in respect of each cargo of LNG transported by PERTAMINA
from the Bontang Plant to Buyer shall be adequately insured pursuant to
arrangements mutually agreed to by PERTAMINA and each Contractor. PERTAMINA
and each Contractor shall be entitled to receive its Production Sharing
Percentage of the Producers' Percentage of any proceeds paid under a marine
insurance policy covering a cargo of LNG being transported from the Bontang
Plant. Such proceeds shall be remitted by the insurer directly to the bank
designated as Trustee pursuant to Article 6 hereof.
4.3 Consultation. PERTAMINA and Contractors agree to consult
with each other freely on all matters relating to Badak VI. PERTAMINA and
Contractors shall confer and agree as to any amendment to Badak VI or to any
permitted action or election thereunder which
- 6 -
<PAGE> 8
constitutes a material adjustment in the quantities of LNG to be sold and
delivered thereunder or a change in the terms thereof. At the request of any
party hereto, a memorandum evidencing any such agreement shall be prepared as
soon as feasible and signed by each party hereto.
ARTICLE 5
TITLE, DELIVERY AND INVOICING
5.1 Title. PERTAMINA will cause the LNG resulting from the
liquefaction of the VICO Contract Gas and the Other Contract Gas to be
delivered to Buyer at the Delivery Point. Title to each Contractor's share of
the LNG resulting from the liquefaction of the VICO Contract Gas shall pass to
PERTAMINA at the same time as the passage of title from PERTAMINA to Buyer
pursuant to Badak VI.
5.2 Delivery and Invoicing. At the time of delivery of each
cargo of LNG to Buyer at the Delivery Point, PERTAMINA will furnish Contractors
with appropriate documentation to evidence the quantity and quality of LNG
delivered, together with copies of the invoices to Buyer in respect of the sale
of LNG in question. PERTAMINA will also furnish Contractors with a copy of
each invoice or billing delivered to Buyer on account of interest or other
payment obligation of Buyer pursuant to Badak VI concurrently with its being
furnished to Buyer. Calculation of the Contract Sales Price, the amount of
sales invoices and other billings to Buyer, and any adjustments shall be
reviewed and approved by PERTAMINA and Contractors prior to presentation to
Buyer.
ARTICLE 6
ENTITLEMENT AND PAYMENT
6.1 Contractors' Entitlement. The amounts to be paid to each
Contractor for its share of the LNG resulting from the liquefaction of Natural
Gas to be supplied under this Supply
- 7 -
<PAGE> 9
Agreement shall be its Production Sharing Percentage of the Producers'
Percentage of the sum of:
(a) all amounts to be paid by Buyer to PERTAMINA for Package
V Badak VI Quantities;
(b) all other amounts which Buyer shall become obligated to
pay pursuant to Badak VI with regard to deliveries of Package V Badak VI
Quantities thereunder including, but not limited to, any interest accruing on
overdue invoice payments;
(c) amounts payable by insurers in respect of LNG resulting
from the liquefaction of the VICO Contract Gas and the Other Contract Gas; and
(d) interest earned on any of the amounts referred to in this
Section 6.1.
6.2 PERTAMINA Assignment of Contractor Percentage Share. In
order to arrange for the receipt by each Contractor of the payments to which
such Contractor is entitled under Section 6.1 hereof, PERTAMINA hereby assigns
to each Contractor that Contractor's Production Sharing Percentage of the
Producers' Percentage of all amounts referred to in Section 6.1 hereof.
6.3 Method of Payment. Throughout the term of this Supply
Agreement, all those payments referred to in Section 6.1 hereof shall be paid
in U.S. Dollars, directly to BankAmerica International in New York City (or
such other leading bank in the United States as shall be selected by PERTAMINA
and approved by Contractors) pursuant to that certain Amended and Restated
Bontang Excess Sales Trustee and Paying Agent Agreement, dated as of February
9, 1988, among PERTAMINA, Contractors, the production sharing contractors in
the Other Contract Areas and the Trustee thereunder, as the same may be from
time to time amended. Amounts so received by the Trustee shall be used for
payment of (i) an agreed portion of Plant Operating Costs; (ii) Transportation
Costs; and (iii) other costs approved by PERTAMINA and
- 8 -
<PAGE> 10
Contractors. Amounts received by the Trustee, to the extent that they are not
used for payment of the costs referred to in the preceding sentence, shall,
insofar as they are applicable to the VICO Contract Gas, be disbursed to
PERTAMINA and each Contractor in accordance with its Production Sharing
Percentage at a bank or banks of its choice.
6.4 Contractors' Right to Payment. The right of Contractors
to the payments provided for in this Article 6 shall extend throughout the term
of this Supply Agreement and shall not be affected by the production rates or
sources of Natural Gas supplied from the VICO Contract Gas or the Other
Contract Gas from time to time during the term hereof.
ARTICLE 7
DELIVERABILITY
7.1 Oversupply of VICO Contract Gas. If the quantities of
net Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement exceed in the aggregate
the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be increased, and Contractors, together with PERTAMINA, will be
credited with and have the right to receive revenue from future marketing
opportunities in respect of a quantity of net Natural Gas from reserves in the
Other Contract Areas equal to such excess quantities.
7.2 Shortfall of VICO Contract Gas. If the quantities of net
Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement are in the aggregate less
than the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be reduced, and the production sharing contractors in the Other
Contract Areas and any new contract area, together with PERTAMINA, will be
credited with and have the right to receive revenue from future marketing
opportunities in respect of a quantity of net Natural
- 9 -
<PAGE> 11
Gas from reserves in the VICO Contract Area equal to excess quantities
delivered from sources within the Gas Supply Area.
ARTICLE 8
ARBITRATION AND GOVERNING LAW
8.1 Arbitration. All disputes arising in connection with
this Supply Agreement shall be finally settled by arbitration conducted in the
English language in Paris, France, by three arbitrators under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce.
Judgment upon the award rendered may be entered in any court having
jurisdiction, or application may be made to such court for a juridical
acceptance of the award and an order of enforcement, as the case may be.
8.2 Governing Law. This Supply Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York, United
States of America.
ARTICLE 9
CONTRACTORS' REPRESENTATIVE
VICO is designated representative by Contractors for performance on
behalf of Contractors of their obligations under Section 4.1 hereof and for the
giving of notices, responses or other communications to and from Contractors
under this Supply Agreement. Such representative may be changed by written
notice to such effect from Contractors to PERTAMINA.
- 10 -
<PAGE> 12
ARTICLE 10
NOTICES
Any notices to the parties shall be in writing and sent by mail,
cable, telex or facsimile to the following addresses:
To PERTAMINA:
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
(PERTAMINA)
Jalan Medan Merdeka Timur 1 A
Jakarta 10110, Indonesia
Attention: Head of BPPKA
Cable: PERTAMINA, Jakarta, Indonesia
Telex: PERTAMINA, 44134 Jakarta
Facsimile: 3846932
To Contractors:
VIRGINIA INDONESIA COMPANY (VICO)
6th Floor, Kuningan Plaza
South Tower
Jl. H.R. Rasuna Said Kav. C11-14
P.O. Box 2828
Jakarta Selatan, Indonesia
Attention: President - VICO Indonesia
Cable: VICO
Telex: 62458 or 62468
Facsimile: 523-6100
cc: VIRGINIA INDONESIA COMPANY
One Houston Center
1221 McKinney
Suite 700
P.O. Box 1551
Houston, Texas 77251-1551
U.S.A.
Attention: Chairman
Telex: 166-100
Facsimile: (713) 754-6698
- 11 -
<PAGE> 13
A party may change its address by written notice to the other parties.
ARTICLE 11
MISCELLANEOUS
11.1 Amendment. This Supply Agreement shall not be amended or
modified except by written agreement signed by the parties hereto.
11.2 Successors and Assigns. This Supply Agreement shall inure to
the benefit of, and be binding upon, PERTAMINA and each Contractor, their
respective successors and assigns, provided that this Supply Agreement shall be
assignable by a Contractor only if such Contractor concurrently assigns to the
same assignee an equal interest in the Production Sharing Contracts.
11.3 Exclusivity. The parties to this Supply Agreement shall be
the only persons or entities entitled to enforce the obligations hereunder of
the other parties hereto, and no persons or entities not parties to this Supply
Agreement shall have the right to enforce any of the obligations hereunder of
any of the parties hereto.
11.4 Headings and Subheadings. The Article headings and
subheadings used herein are for convenience of reference only.
- 12 -
<PAGE> 14
IN WITNESS WHEREOF, PERTAMINA and Contractors have caused their duly
authorized representatives to execute this Supply Agreement as of the day and
year first written above.
CONTRACTORS:
PERUSAHAAN PERTAMBANGAN MINYAK VIRGINIA INDONESIA COMPANY
DAN GAS BUMI NEGARA (PERTAMINA)
BY /s/ F. ABDA'OE BY /s/ C. M. REIMER
----------------------------- -----------------------------------
F. Abda'oe C. M. Reimer
LASMO SANGA SANGA LIMITED
BY /s/ J. HOGAN
-----------------------------------
J. Hogan
OPICOIL HOUSTON, INC.
BY /s/ C.Y. CHUNG
-----------------------------------
C.Y. Chung
UNION TEXAS EAST KALIMANTAN LIMITED
BY /s/ L.D. KALMBACH
-----------------------------------
L.D. Kalmbach
UNIVERSE GAS & OIL COMPANY, INC.
BY /s/ T. NORIMATSU
-----------------------------------
T. Norimatsu
- 13 -
<PAGE> 15
VIRGINIA INTERNATIONAL COMPANY
BY /s/ J. HOGAN
-----------------------------------
J. Hogan
- 14 -
<PAGE> 1
PACKAGE VI SUPPLY AGREEMENT
FOR NATURAL GAS IN SUPPORT OF
2000-2017 LNG SALES TO KOREA GAS CORPORATION UNDER BADAK V
BETWEEN
PERTAMINA
AND
VIRGINIA INDONESIA COMPANY
LASMO SANGA SANGA LIMITED
OPICOIL HOUSTON, INC.
UNION TEXAS EAST KALIMANTAN LIMITED
UNIVERSE GAS & OIL COMPANY, INC.
AND
VIRGINIA INTERNATIONAL COMPANY
DATED: MAY 1, 1996
EFFECTIVE: AUGUST 12, 1995
<PAGE> 2
PACKAGE VI SUPPLY AGREEMENT
FOR NATURAL GAS IN SUPPORT OF
2000-2017 LNG SALES TO KOREA GAS CORPORATION UNDER BADAK V
THIS SUPPLY AGREEMENT, made and entered into in Jakarta on May 1st,
1996, by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
("PERTAMINA"), on the one hand, and VIRGINIA INDONESIA COMPANY ("VICO"), LASMO
SANGA SANGA LIMITED, OPICOIL HOUSTON, INC., UNION TEXAS EAST KALIMANTAN
LIMITED, UNIVERSE GAS & OIL COMPANY, INC., and VIRGINIA INTERNATIONAL COMPANY
(herein referred to collectively as "Contractors" and individually as
"Contractor"), on the other hand,
WITNESSETH:
A. WHEREAS, Contractors individually own or control all of the
interest of "Contractors" in that certain Amended and Restated Production
Sharing Contract, dated April 23, 1990, but effective as of August 8, 1968
(such contract as hereafter amended is herein referred to as the "Amended and
Restated Production Sharing Contract") and that certain Production Sharing
Contract dated April 23, 1990, but effective as of August 8, 1998 (such
contract as hereafter amended is herein referred to as the "Renewed
Production Sharing Contract"). The Amended and Restated Production Sharing
Contract and the Renewed Production Sharing Contract are herein referred to
collectively as the "Production Sharing Contracts" and the area covered thereby
is herein referred to as the "VICO Contract Area"; and
B. WHEREAS, pursuant to the Production Sharing Contracts, each of
PERTAMINA and Contractors is entitled to take and receive, sell and freely
export its respective share of the Natural Gas produced and saved from the
VICO Contract Area (the percentage share of such Natural Gas to which each of
PERTAMINA and Contractors is entitled, as determined under the Production
Sharing Contracts, is herein referred to as the "Production Sharing Percentage"
of such party); and
- 1 -
<PAGE> 3
C. WHEREAS, the reserves of Natural Gas in the VICO Contract Area
exceed the reserves of Natural Gas committed to be produced, supplied and
delivered by PERTAMINA and Contractors to meet a portion of PERTAMINA's
existing obligations under LNG sales contracts, LPG sales contracts, and
domestic gas sales contracts; and
D. WHEREAS, PERTAMINA, with assistance from Contractors, has
constructed and expanded and is further expanding the Natural Gas liquefaction
and related facilities located at Bontang Bay, on the east coast of Kalimantan,
Indonesia (herein referred to as the "Bontang Plant"); and
E. WHEREAS, funds for the expansion of the liquefaction plant
will be provided to PERTAMINA through financing of the cost of such expansion
on terms, mutually agreeable to PERTAMINA and Contractors, which provide for
the repayment of funds provided pursuant to such financing and the cost of such
funds (repayment of funds and the cost of such funds are hereinafter referred
to as "Financing Costs"); and
F. WHEREAS, PERTAMINA and Contractors are parties to the Amended
and Restated Bontang Processing Agreement dated as of February 9, 1988 (as from
time to time amended, the "Processing Agreement"), which provides for the
operation of the Bontang Plant and the payment of the costs of such operation
(such costs as determined in accordance with the Processing Agreement are
herein referred to as "Plant Operating Costs"); and
G. WHEREAS, PERTAMINA and Contractors have agreed to use the
Bontang Plant in part for the liquefaction of the VICO Contract Gas (as defined
in Section 2.2 hereof) and the Other Contract Gas (as defined in Section 2.3
hereof); and
H. WHEREAS, PERTAMINA, in collaboration with Contractors and its
production sharing contractors in other contract areas in East Kalimantan
(herein referred to as the "Other Contract Areas"), has entered into an LNG
Sales and Purchase Contract dated August 12, 1995 ("Badak V", and unless
otherwise so stated, any terms defined in Badak V shall have the same
- 2 -
<PAGE> 4
meanings when used herein) with Korea Gas Corporation ("Buyer") pursuant to
which PERTAMINA is obligated to sell to Buyer certain quantities of LNG on an
FOB basis; and
I. WHEREAS, pursuant to Part Two, paragraph 2(f) of the
Memorandum of Understanding Re: Supply Agreements and Package VI Sales dated
October 27, 1995, between PERTAMINA, Contractors and the production sharing
contractors in the Other Contract Areas ("MOU"), the sales of LNG pursuant to
Badak V in respect of the period 2000 to 2017 are Package VI Sales as that term
is defined in the MOU ("Package VI Badak V Quantities"); and
J. WHEREAS, Badak V provides that the Natural Gas to be processed
into LNG and sold by PERTAMINA under Badak V is to be produced from the areas
in East Kalimantan covered by production sharing contracts between PERTAMINA
and its suppliers, which consist of the VICO Contract Area and the Other
Contract Areas; and
K. WHEREAS, PERTAMINA and each Contractor desire to supply and
deliver Natural Gas from the VICO Contract Area in support of the performance
by PERTAMINA of an agreed portion of its obligations under Badak V; and
L. WHEREAS, each Contractor desires to dispose of its Production
Sharing Percentage of the VICO Contract Gas (as herein defined) in accordance
with the terms of this Supply Agreement,
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
EFFECTIVE DATE AND DURATION
This Supply Agreement shall be effective as of August 12, 1995, and
shall terminate on the date when all rights and obligations of Contractors
hereunder have been satisfied.
- 3 -
<PAGE> 5
ARTICLE 2
SUPPLY COMMITMENT AND QUANTITY
2.1 Net Gas Requirement. The total quantity of net Natural Gas
required to be supplied and delivered out of proved economically recoverable
reserves of Natural Gas in East Kalimantan for liquefaction and sale as Package
VI Badak V Quantities is estimated to be 0.9692 trillion standard cubic feet
("t.s.c.f."). Such quantity is herein referred to as the "Package VI Badak V
Net Gas Requirement". The Package VI Badak V Net Gas Requirement is based on
the Fixed Quantities for the years 2000-2017 which Buyer has committed to
purchase pursuant to the terms of Badak V.
2.2 VICO Contract Gas. PERTAMINA and Contractors hereby commit
and agree to supply and deliver from proved economically recoverable reserves
of Natural Gas in specific fields within the VICO Contract Area sufficient
Natural Gas (and LNG resulting from the liquefaction thereof) to meet a portion
of the Package VI Badak V Net Gas Requirement over the term of this Supply
Agreement consisting of 0.2093 t.s.c.f., or 21.6% thereof, subject to
adjustment as provided in Section 2.4 hereof. Such quantities of net Natural
Gas committed to be supplied pursuant to this Supply Agreement are herein
referred to as the "VICO Contract Gas", and the above-stated percentage is
herein referred to as the "Producers' Percentage". The specific fields from
which the VICO Contract Gas will be committed, as well as the quantities
committed from each field, will be identified in a supplemental memorandum of
understanding to be entered into among PERTAMINA, Contractors and the
production sharing contractors in the Other Contract Areas pursuant to the MOU
("Package VI Supplemental Memorandum").
The quantities committed from each field are subject to revision from
time to time, as the reserves from the fields may be updated and as additional
data, from deliverability studies and otherwise, become available.
2.3 Other Contract Gas. To meet the balance of the Package VI
Badak V Net Gas Requirement, constituting 0.7599 t.s.c.f., or 78.4% thereof,
subject to adjustment as provided in
- 4 -
<PAGE> 6
Section 2.4 hereof, sufficient Natural Gas (and LNG resulting from the
liquefaction thereof) will be committed for supply and delivery by PERTAMINA
and its production sharing contractors from proved economically recoverable
reserves of Natural Gas in the Other Contract Areas by separate supply
agreements, similar hereto and compatible herewith, executed and delivered
concurrently herewith (such amounts are herein collectively referred to as the
"Other Contract Gas"). The specific fields from which the Other Contract Gas
will be committed, as well as the quantities committed from each field, will be
identified in the Package VI Supplemental Memorandum.
2.4 DeGolyer and MacNaughton Certification. The amounts of
net Natural Gas constituting the VICO Contract Gas and the Other Contract Gas
are part of the estimates of proved economically recoverable reserves of
Natural Gas as certified by the independent consultant firm of DeGolyer and
MacNaughton in written statements based on data available on April 30, 1995.
The quantities for the VICO Contract Gas and the Other Contract Gas
set forth in Sections 2.2 and 2.3 hereof and the Producers' Percentage were
established by PERTAMINA at a meeting on May 29, 1995 of the East Kalimantan
Gas Reserves Management Committee to be used only on a provisional basis until
such time as the identity of the participating fields and the quantities in
each field which comprise the VICO Contract Gas and the Other Contract Gas and
the Producers' Percentage shall be adjusted and documented in the Package VI
Supplemental Memorandum in accordance with the MOU.
2.5 Addendum. Upon completion of the adjustments provided
for in Section 2.4 hereof but not later than April 30, 1996, PERTAMINA and
Contractors shall execute an addendum to this Supply Agreement confirming the
VICO Contract Area participating fields, the quantities in each field which
comprise the VICO Contract Gas and the Other Contract Gas and the Producers'
Percentage. Pending completion of such adjustments, the Producers' Percentage
set out in Section 2.2 hereof shall be used on a provisional basis.
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<PAGE> 7
ARTICLE 3
COORDINATION OF GAS SUPPLY
The VICO Contract Gas and the Other Contract Gas may be produced from
participating fields at times and production rates which may change from time
to time during the term hereof so as to secure the optimal ultimate recovery of
Natural Gas. The supply of Natural Gas from the VICO Contract Area and the
Other Contract Areas will be coordinated by PERTAMINA so as to conserve and
permit full utilization of such Natural Gas. The sources of supply, producing
rates, quality of gas, metering and related matters shall be matters for study
by the East Kalimantan Gas Reserves Management Committee, consisting of
representatives from PERTAMINA, VICO, TOTAL Indonesie, Unocal Indonesia Company
and Indonesia Petroleum, Ltd.
ARTICLE 4
ADMINISTRATION AND CONSULTATION
4.1 LNG Sales Contract. PERTAMINA shall be responsible for
the due and prompt administration of Badak V for the benefit of PERTAMINA and
Contractors. All matters which affect Badak V or the sale and delivery of LNG
thereunder will be administered by a representative to be appointed by
PERTAMINA and the representative appointed by Contractors under Article 9
hereof. It is understood, however, that it will be necessary from time to time
for PERTAMINA, as seller under Badak V, to take certain administrative and
operational actions without prior consultation where immediate action is
required. Contractors will be promptly advised of any such action.
4.2 Consultation. PERTAMINA and Contractors agree to consult
with each other freely on all matters relating to Badak V. PERTAMINA and
Contractors shall confer and agree as to any amendment to Badak V or to any
permitted action or election thereunder which constitutes a material adjustment
in the quantities of LNG to be sold and delivered thereunder or
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<PAGE> 8
a change in the terms thereof. At the request of any party hereto, a
memorandum evidencing any such agreement shall be prepared as soon as feasible
and signed by each party hereto.
ARTICLE 5
TITLE, DELIVERY AND INVOICING
5.1 Title. PERTAMINA will cause the LNG resulting from the
liquefaction of the VICO Contract Gas and the Other Contract Gas to be
delivered to Buyer at the Delivery Point. Title to each Contractor's share of
the LNG resulting from the liquefaction of the VICO Contract Gas shall pass to
PERTAMINA at the same time as the passage of title from PERTAMINA to Buyer
pursuant to Badak V.
5.2 Delivery and Invoicing. At the time of delivery of each
cargo of LNG to Buyer at the Delivery Point, PERTAMINA will furnish Contractors
with appropriate documentation to evidence the quantity and quality of LNG
delivered, together with copies of the invoices to Buyer in respect of the sale
of LNG in question. PERTAMINA will also furnish Contractors with a copy of
each invoice or billing delivered to Buyer on account of interest or other
payment obligation of Buyer pursuant to Badak V concurrently with its being
furnished to Buyer. Calculation of the Contract Sales Price, the amount of
sales invoices and other billings to Buyer, and any adjustments, shall be
reviewed and approved by PERTAMINA and Contractors prior to presentation to
Buyer.
ARTICLE 6
ENTITLEMENT AND PAYMENT
6.1 Contractors' Entitlement. The amounts to be paid to each
Contractor for its share of the LNG resulting from the liquefaction of Natural
Gas to be supplied under this Supply Agreement shall be its Production Sharing
Percentage of the Producers' Percentage of the sum of:
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<PAGE> 9
(a) all amounts to be paid by Buyer to PERTAMINA for Package
VI Badak V Quantities;
(b) all other amounts which Buyer shall become obligated to
pay pursuant to Badak V with regard to deliveries of
Package VI Badak V Quantities, including, but not limited
to: (i) amounts payable by Buyer for its failure to take
quantities it is obligated to purchase under Badak V;
(ii) any incremental payments applicable to make-up
deliveries; and (iii) any interest accruing on overdue
invoice payments;
(c) amounts payable by insurers in respect of LNG resulting
from the liquefaction of the VICO Contract Gas and the
Other Contract Gas; and
(d) interest earned on any of the amounts referred to in this
Section 6.1.
6.2 PERTAMINA Assignment of Contractor Percentage Share. In
order to arrange for the receipt by each Contractor of the payments to which
such Contractor is entitled under Section 6.1 hereof, PERTAMINA hereby assigns
to each Contractor that Contractor's Production Sharing Percentage of the
Producers' Percentage of all amounts referred to in Section 6.1 hereof.
6.3 Method of Payment. Throughout the term of this Supply
Agreement, all those payments referred to in Section 6.1 hereof shall be paid
in U.S. Dollars, directly to BankAmerica International in New York City (or
such other leading bank in the United States as shall be selected by PERTAMINA
and approved by Contractors) pursuant to a Trustee and Paying Agent Agreement,
the parties to which shall be PERTAMINA, Contractors, the production sharing
contractors in the Other Contract Areas and the Trustee thereunder, as the same
may be from time to time amended. Amounts so received by the Trustee shall be
used for payment of (i) an agreed portion of Plant Operating Costs; (ii)
Financing Costs; and (iii) other costs approved by PERTAMINA and Contractors.
Amounts received by the Trustee, to the extent that they are not
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<PAGE> 10
used for payment of the costs referred to in the preceding sentence, shall,
insofar as they are applicable to the VICO Contract Gas, be disbursed to
PERTAMINA and each Contractor in accordance with its Production Sharing
Percentage at a bank or banks of its choice.
6.4 Contractors' Right to Payment. The right of Contractors
to the payments provided for in this Article 6 shall extend throughout the term
of this Supply Agreement and shall not, except in the event of an occurrence
contemplated in Section 7.3, be affected by the production rates or sources of
Natural Gas supplied from the VICO Contract Gas or the Other Contract Gas from
time to time during the term hereof.
ARTICLE 7
DELIVERABILITY
7.1 Oversupply of VICO Contract Gas. If the quantities of
net Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement exceed in the aggregate
the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be increased, except in the event of an occurrence contemplated in
Section 7.3, and Contractors, together with PERTAMINA, will be credited with
and have the right to receive revenue from future marketing opportunities in
respect of a quantity of net Natural Gas from reserves in the Other Contract
Areas equal to such excess quantities.
7.2 Shortfall of VICO Contract Gas. If the quantities of net
Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement are in the aggregate less
than the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be reduced, except in the event of an occurrence contemplated in
Section 7.3, and the production sharing contractors in the Other Contract Areas
and any new contract area, together with PERTAMINA, will be credited with and
have the right to receive revenue from
- 9 -
<PAGE> 11
future marketing opportunities in respect of a quantity of net Natural Gas from
reserves in the VICO Contract Area equal to excess quantities delivered from
sources within the Gas Supply Area.
7.3 Insufficiency of Deliverable Reserves. If an
insufficiency of deliverable reserves of Natural Gas shall occur which
precludes the delivery from participating field(s) within the VICO Contract
Area or from participating field(s) within any of the Other Contract Areas of
the aggregate amount of Natural Gas committed therefrom pursuant to this Supply
Agreement or to any of the supply agreements referred to in Section 2.3 hereof
over the term thereof, then such insufficiency shall be delivered from
field(s), including but not limited to the participating field(s) within the
area(s) not then experiencing an insufficiency of deliverable reserves, and the
Producers' Percentage shall thereupon be adjusted (together with a
corresponding adjustment to the VICO Contract Gas) to reflect the revised share
of the net Natural Gas in support of PERTAMINA's obligations under Badak V in
respect of the period 2000-2017 which will be supplied and delivered from the
VICO Contract Area over the term hereof, such adjustment in the Producers'
Percentage to apply only to payments provided for in Article 6 received after
the date thereof. The procedure for determining (i) an insufficiency in
deliverable reserves, (ii) the allocation of the right to supply such
insufficiency among the VICO Contract Area, the Other Contract Areas and any
new contract area and (iii) the calculation of the future Producers'
Percentage, shall be made in accordance with principles to be decided upon by
PERTAMINA.
ARTICLE 8
ARBITRATION AND GOVERNING LAW
8.1 Arbitration. All disputes arising in connection with
this Supply Agreement shall be finally settled by arbitration conducted in the
English language in Paris, France, by three arbitrators under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce.
Judgment upon the award rendered may be entered in any court having
jurisdiction, or application may be made to such court for a juridical
acceptance of the award and an order of enforcement, as the case may be.
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<PAGE> 12
8.2 Governing Law. This Supply Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York, United
States of America.
ARTICLE 9
CONTRACTORS' REPRESENTATIVE
VICO is designated representative by Contractors for performance on
behalf of Contractors of their obligations under Section 4.1 hereof and for the
giving of notices, responses or other communications to and from Contractors
under this Supply Agreement. Such representative may be changed by written
notice to such effect from Contractors to PERTAMINA.
ARTICLE 10
NOTICES
Any notices to the parties shall be in writing and sent by mail,
cable, telex or facsimile to the following addresses:
To PERTAMINA:
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
(PERTAMINA)
Jalan Medan Merdeka Timur 1 A
Jakarta 10110, Indonesia
Attention: Head of BPPKA
Cable: PERTAMINA, Jakarta, Indonesia
Telex: PERTAMINA, 44134 Jakarta
Facsimile: 384-6932
To Contractors:
VIRGINIA INDONESIA COMPANY (VICO)
6th Floor, Plaza Kuningan
Menara Selatan
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<PAGE> 13
Jl. H.R. Rasuna Said Kav. C11-14
P.O. Box 2828
Jakarta 12940, Indonesia
Attention: President - VICO Indonesia
Cable: VICO
Telex: 62458
Facsimile: 523-6894
cc: VIRGINIA INDONESIA COMPANY
One Houston Center
1221 McKinney
Suite 700
P.O. Box 1551
Houston, Texas 77251-1551
U.S.A.
Attention: Chairman
Telex: 166-100
Facsimile: (713) 754-6698
A party may change its address by written notice to the other parties.
ARTICLE 11
MISCELLANEOUS
11.1 Amendment. This Supply Agreement shall not be amended or
modified except by written agreement signed by the parties hereto.
11.2 Successors and Assigns. This Supply Agreement shall inure to
the benefit of, and be binding upon, PERTAMINA and each Contractor, their
respective successors and assigns, provided that this Supply Agreement shall be
assignable by a Contractor only if such Contractor concurrently assigns to the
same assignee an equal interest in the Production Sharing Contracts.
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<PAGE> 14
11.3 Exclusivity. The parties to this Supply Agreement shall be
the only persons or entities entitled to enforce the obligations hereunder of
the other parties hereto, and no persons or entities not parties to this Supply
Agreement shall have the right to enforce any of the obligations hereunder of
any of the parties hereto.
11.4 Headings and Subheadings. The Article headings and
subheadings used herein are for convenience of reference only.
IN WITNESS WHEREOF, PERTAMINA and Contractors have caused their duly
authorized representatives to execute this Supply Agreement as of the day and
year first written above.
CONTRACTORS:
PERUSAHAAN PERTAMBANGAN VIRGINIA INDONESIA COMPANY
MINYAK DAN GAS BUMI
NEGARA (PERTAMINA)
By /s/ F. ABDA'OE By /s/ C. M. REIMER
------------------------------------- ---------------------------------
F. Abda'oe C. M. Reimer
LASMO SANGA SANGA LIMITED
By /s/ J. HOGAN
---------------------------------
J. Hogan
OPICOIL HOUSTON, INC.
By /s/ C.Y. CHUNG
---------------------------------
C.Y. Chung
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<PAGE> 15
UNION TEXAS EAST KALIMANTAN LIMITED
By /s/ L.D. KALMBACH
---------------------------------
L.D. Kalmbach
UNIVERSE GAS & OIL COMPANY, INC.
By /s/ T. NORIMATSU
---------------------------------
T. Norimatsu
VIRGINIA INTERNATIONAL COMPANY
By /s/ J. HOGAN
---------------------------------
J. Hogan
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<PAGE> 1
PACKAGE VI SUPPLY AGREEMENT
FOR NATURAL GAS IN SUPPORT OF 2000-2017 LNG SALES TO
CHINESE PETROLEUM CORPORATION UNDER BADAK VI
BETWEEN
PERTAMINA
AND
VIRGINIA INDONESIA COMPANY
LASMO SANGA SANGA LIMITED
OPICOIL HOUSTON, INC.
UNION TEXAS EAST KALIMANTAN LIMITED
UNIVERSE GAS & OIL COMPANY, INC.
AND
VIRGINIA INTERNATIONAL COMPANY
DATED: MAY 1, 1996
EFFECTIVE: OCTOBER 25, 1995
<PAGE> 2
PACKAGE VI SUPPLY AGREEMENT
FOR NATURAL GAS IN SUPPORT OF 2000-2017 LNG SALES TO
CHINESE PETROLEUM CORPORATION UNDER BADAK VI
THIS SUPPLY AGREEMENT, made and entered into in Jakarta on May 1st,
1996, by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
("PERTAMINA"), on the one hand, and VIRGINIA INDONESIA COMPANY ("VICO"), LASMO
SANGA SANGA LIMITED, OPICOIL HOUSTON, INC., UNION TEXAS EAST KALIMANTAN
LIMITED, UNIVERSE GAS & OIL COMPANY, INC., and VIRGINIA INTERNATIONAL COMPANY
(herein referred to collectively as "Contractors" and individually as
"Contractor"), on the other hand,
WITNESSETH:
A. WHEREAS, Contractors individually own or control all of the
interest of "Contractors" in that certain Amended and Restated Production
Sharing Contract, dated April 23, 1990, but effective as of August 8, 1968
(such contract as hereafter amended is herein referred to as the "Amended and
Restated Production Sharing Contract") and that certain Production Sharing
Contract dated April 23, 1990, but effective as of August 8, 1998 (such
contract as hereafter amended is herein referred to as the "Renewed Production
Sharing Contract"). The Amended and Restated Production Sharing Contract and
the Renewed Production Sharing Contract are herein referred to collectively as
the "Production Sharing Contracts" and the area covered thereby is herein
referred to as the "VICO Contract Area"; and
B. WHEREAS, pursuant to the Production Sharing Contracts, each of
PERTAMINA and Contractors is entitled to take and receive, sell and freely
export its respective share of the Natural Gas produced and saved from the
VICO Contract Area (the percentage share of such Natural Gas to which each of
PERTAMINA and Contractors is entitled, as determined under the
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<PAGE> 3
Production Sharing Contracts, is herein referred to as the "Production Sharing
Percentage" of such party); and
C. WHEREAS, the reserves of Natural Gas in the VICO Contract Area
exceed the reserves of Natural Gas committed to be produced, supplied and
delivered by PERTAMINA and Contractors to meet a portion of PERTAMINA's
existing obligations under LNG sales contracts, LPG sales contracts, and
domestic gas sales contracts; and
D. WHEREAS, PERTAMINA, with assistance from Contractors, has
constructed and expanded and is further expanding the Natural Gas liquefaction
and related facilities located at Bontang Bay, on the east coast of Kalimantan,
Indonesia (herein referred to as the "Bontang Plant"); and
E. WHEREAS, funds for the expansion of the liquefaction plant
will be provided to PERTAMINA through financing of the cost of such expansion
on terms, mutually agreeable to PERTAMINA and Contractors, which provide for
the repayment of funds provided pursuant to such financing and the cost of such
funds (repayment of funds and the cost of such funds are hereinafter referred
to as "Financing Costs"); and
F. WHEREAS, PERTAMINA and Contractors are parties to the Amended
and Restated Bontang Processing Agreement dated as of February 9, 1988 (as from
time to time amended, the "Processing Agreement"), which provides for the
operation of the Bontang Plant and the payment of the costs of such operation
(such costs as determined in accordance with the Processing Agreement are
herein referred to as "Plant Operating Costs"); and
G. WHEREAS, PERTAMINA and Contractors have agreed to use the
Bontang Plant in part for the liquefaction of the VICO Contract Gas (as defined
in Section 2.2 hereof) and the Other Contract Gas (as defined in Section 2.3
hereof); and
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<PAGE> 4
H. WHEREAS, PERTAMINA, in collaboration with Contractors and its
production sharing contractors in other contract areas in East Kalimantan
(herein referred to as the "Other Contract Areas"), has entered into an LNG
Sales and Purchase Contract dated October 25, 1995 ("Badak VI", and unless
otherwise so stated, any terms defined in Badak VI shall have the same meanings
when used herein) with Chinese Petroleum Corporation ("Buyer") pursuant to
which PERTAMINA is obligated to sell to Buyer certain quantities of LNG on an
ex ship basis; and
I. WHEREAS, pursuant to Part Two, paragraph 2(f) 2 of the
Memorandum of Understanding Re: Supply Agreements and Package VI Sales dated
October 27, 1995, between PERTAMINA, Contractors and the production sharing
contractors in the Other Contract Areas ("MOU"), the sales of LNG pursuant to
Badak VI in respect of the period 2000 to 2017 are Package VI Sales as that
term is defined in the MOU (herein referred to as "Package VI Badak VI
Quantities"); and
J. WHEREAS, arrangements for the transportation of the Package VI
Badak VI Quantities and for the payment of costs respecting such transportation
will be on terms mutually agreeable to PERTAMINA and Contractors (herein
referred to as "Transportation Costs"); and
K. WHEREAS, Badak VI provides that the Natural Gas to be
processed into LNG and sold and delivered by PERTAMINA under Badak VI is to be
produced from the areas in East Kalimantan covered by production sharing
contracts between PERTAMINA and its suppliers, which consist of the VICO
Contract Area and the Other Contract Areas; and
L. WHEREAS, PERTAMINA and each Contractor desire to supply and
deliver Natural Gas from the VICO Contract Area in support of the performance
by PERTAMINA of an agreed portion of its obligations under Badak VI; and
M. WHEREAS, each Contractor desires to dispose of its Production
Sharing Percentage of the VICO Contract Gas (as herein defined) in accordance
with the terms of this Supply Agreement,
- 3 -
<PAGE> 5
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
EFFECTIVE DATE AND DURATION
This Supply Agreement shall be effective as of October 25, 1995 and
shall terminate on the date when all rights and obligations of Contractors
hereunder have been satisfied.
ARTICLE 2
SUPPLY COMMITMENT AND QUANTITY
2.1 Net Gas Requirement. The total quantity of net Natural Gas
required to be supplied and delivered out of proved economically recoverable
reserves of Natural Gas in East Kalimantan for liquefaction and sale as Package
VI Badak VI Quantities is estimated to be 1.7531 trillion standard cubic feet
("t.s.c.f."). Such quantity is herein referred to as the "Package VI Badak VI
Net Gas Requirement". The Package VI Badak VI Net Gas Requirement is based on
the Fixed Quantities for the years 2000-2017 which Buyer has committed to
purchase pursuant to the terms of Badak VI.
2.2 VICO Contract Gas. PERTAMINA and Contractors hereby commit
and agree to supply and deliver from proved economically recoverable reserves
of Natural Gas in specific fields within the VICO Contract Area sufficient
Natural Gas (and LNG resulting from the liquefaction thereof) to meet a portion
of the Package VI Badak VI Net Gas Requirement over the term of this Supply
Agreement consisting of 0.3787 t.s.c.f., or 21.6% thereof, subject to
adjustment as provided in Section 2.4 hereof. Such quantities of net Natural
Gas committed to be supplied pursuant to this Supply Agreement are herein
referred to as the "VICO Contract Gas", and the above-stated percentage is
herein referred to as the "Producers' Percentage". The specific fields from
which the VICO Contract Gas will be committed, as well as the quantities
committed
- 4 -
<PAGE> 6
from each field, will be identified in a supplemental memorandum of
understanding to be entered into among PERTAMINA, Contractors and the
production sharing contractors in the Other Contract Areas pursuant to the MOU
("Package VI Supplemental Memorandum").
The quantities committed from each field are subject to revision from
time to time, as the reserves from the fields may be updated and as additional
data, from deliverability studies and otherwise, become available.
2.3 Other Contract Gas. To meet the balance of the Package
VI Badak VI Net Gas Requirement, constituting 1.3744 t.s.c.f., or 78.4%
thereof, subject to adjustment as provided in Section 2.4 hereof, sufficient
Natural Gas (and LNG resulting from the liquefaction thereof) will be committed
for supply and delivery by PERTAMINA and its production sharing contractors
from proved economically recoverable reserves of Natural Gas in the Other
Contract Areas by separate supply agreements, similar hereto and compatible
herewith, executed and delivered concurrently herewith (such amounts are herein
collectively referred to as the "Other Contract Gas"). The specific fields
from which the Other Contract Gas will be committed, as well as the quantities
committed from each field, will be identified in the Package VI Supplemental
Memorandum.
2.4 DeGolyer and MacNaughton Certification. The amounts of
net Natural Gas constituting the VICO Contract Gas and the Other Contract Gas
are part of the estimates of proved economically recoverable reserves of
Natural Gas as certified by the independent consultant firm of DeGolyer and
MacNaughton in written statements based on data available on April 30, 1995.
The quantities for the VICO Contract Gas and the Other Contract Gas
set forth in Sections 2.2 and 2.3 hereof and the Producers' Percentage were
established by PERTAMINA at a meeting on May 29, 1995, of the East Kalimantan
Gas Reserves Management Committee to be used only on a provisional basis until
such time as the identity of the participating fields and the quantities in
each field which comprise the VICO Contract Gas, and the Other Contract Gas and
the
- 5 -
<PAGE> 7
Producers' Percentage shall be adjusted and documented in the Package VI
Supplemental Memorandum in accordance with the MOU.
2.5 Addendum. Upon completion of the adjustments provided
for in Section 2.4 hereof but not later than April 30, 1996, PERTAMINA and
Contractors shall execute an addendum to this Supply Agreement confirming the
VICO Contract Area participating fields, the quantities in each field which
comprise the VICO Contract Gas and the Other Contract Gas and the Producers'
Percentage. Pending completion of such adjustments, the Producers' Percentage
set out in Section 2.2 hereof shall be used on a provisional basis.
ARTICLE 3
COORDINATION OF GAS SUPPLY
The VICO Contract Gas and the Other Contract Gas may be produced from
participating fields at times and production rates which may change from time
to time during the term hereof so as to secure the optimal ultimate recovery of
Natural Gas. The supply of Natural Gas from the VICO Contract Area and the
Other Contract Areas will be coordinated by PERTAMINA so as to conserve and
permit full utilization of such Natural Gas. The sources of supply, producing
rates, quality of gas, metering and related matters shall be matters for study
by the East Kalimantan Gas Reserves Management Committee, consisting of
representatives from PERTAMINA, VICO, TOTAL Indonesie, Unocal Indonesia Company
and Indonesia Petroleum, Ltd.
ARTICLE 4
ADMINISTRATION, INSURANCE AND CONSULTATION
4.1 LNG Sales Contract. PERTAMINA shall be responsible for
the due and prompt administration of Badak VI for the benefit of PERTAMINA and
Contractors. All matters which affect Badak VI or the sale, transportation and
delivery of LNG thereunder will be
- 6 -
<PAGE> 8
administered by a representative to be appointed by PERTAMINA and the
representative appointed by Contractors under Article 9 hereof. It is
understood, however, that it will be necessary from time to time for PERTAMINA,
as seller under Badak VI, to take certain administrative and operational
actions without prior consultation where immediate action is required.
Contractors will be promptly advised of any such action.
4.2 Insurance. PERTAMINA shall ensure that the interests of
it and each Contractor in respect of each cargo of LNG transported by PERTAMINA
from the Bontang Plant to Buyer shall be adequately insured pursuant to
arrangements mutually agreed to by PERTAMINA and each Contractor. PERTAMINA
and each Contractor shall be entitled to receive its Production Sharing
Percentage of the Producers' Percentage of any proceeds paid under a marine
insurance policy covering a cargo of LNG being transported from the Bontang
Plant. Such proceeds shall be remitted by the insurer directly to the bank
designated as Trustee pursuant to Article 6 hereof.
4.3 Consultation. PERTAMINA and Contractors agree to consult
with each other freely on all matters relating to Badak VI. PERTAMINA and
Contractors shall confer and agree as to any amendment to Badak VI or to any
permitted action or election thereunder which constitutes a material adjustment
in the quantities of LNG to be sold and delivered thereunder or a change in the
terms thereof. At the request of any party hereto, a memorandum evidencing any
such agreement shall be prepared as soon as feasible and signed by each party
hereto.
ARTICLE 5
TITLE, DELIVERY AND INVOICING
5.1 Title. PERTAMINA will cause the LNG resulting from the
liquefaction of the VICO Contract Gas and the Other Contract Gas to be
delivered to Buyer at the Delivery Point. Title to each Contractor's share of
the LNG resulting from the liquefaction of the VICO Contract
- 7 -
<PAGE> 9
Gas shall pass to PERTAMINA at the same time as the passage of title from
PERTAMINA to Buyer pursuant to Badak VI.
5.2 Delivery and Invoicing. At the time of delivery of each
cargo of LNG to Buyer at the Delivery Point, PERTAMINA will furnish Contractors
with appropriate documentation to evidence the quantity and quality of LNG
delivered, together with copies of the invoices to Buyer in respect of the sale
of LNG in question. PERTAMINA will also furnish Contractors with a copy of
each invoice or billing delivered to Buyer on account of interest or other
payment obligation of Buyer pursuant to Badak VI concurrently with its being
furnished to Buyer. Calculation of the Contract Sales Price, the amount of
sales invoices and other billings to Buyer, and any adjustments, shall be
reviewed and approved by PERTAMINA and Contractors prior to presentation to
Buyer.
ARTICLE 6
ENTITLEMENT AND PAYMENT
6.1 Contractors' Entitlement. The amounts to be paid to each
Contractor for its share of the LNG resulting from the liquefaction of Natural
Gas to be supplied under this Supply Agreement shall be its Production Sharing
Percentage of the Producers' Percentage of the sum of:
(a) all amounts to be paid by Buyer to PERTAMINA for Package
VI Badak VI Quantities;
(b) all other amounts which Buyer shall become obligated to
pay pursuant to Badak VI with regard to deliveries of
Package VI Badak VI Quantities, including, but not
limited to: (i) amounts payable by Buyer for its failure
to take quantities it is obligated to purchase under
Badak VI; (ii) any incremental
- 8 -
<PAGE> 10
payments applicable to make-up deliveries; and (iii) any
interest accruing on overdue invoice payments;
(c) amounts payable by insurers in respect of LNG resulting
from the liquefaction of the VICO Contract Gas and the
Other Contract Gas; and
(d) interest earned on any of the amounts referred to in this
Section 6.1.
6.2 PERTAMINA Assignment of Contractor Percentage Share. In
order to arrange for the receipt by each Contractor of the payments to which
such Contractor is entitled under Section 6.1 hereof, PERTAMINA hereby assigns
to each Contractor that Contractor's Production Sharing Percentage of the
Producers' Percentage of all amounts referred to in Section 6.1 hereof.
6.3 Method of Payment. Throughout the term of this Supply
Agreement, all those payments referred to in Section 6.1 hereof shall be paid
in U.S. Dollars, directly to BankAmerica International in New York City (or
such other leading bank in the United States as shall be selected by PERTAMINA
and approved by Contractors) pursuant to a trustee and paying agent agreement,
the parties to which shall be PERTAMINA, Contractors, the production sharing
contractors in the Other Contract Areas and the Trustee thereunder, as the same
may be from time to time amended. Amounts so received by the Trustee shall be
used for payment of (i) an agreed portion of Plant Operating Costs; (ii)
Financing Costs; (iii) Transportation Costs; and (iv) other costs approved by
PERTAMINA and Contractors. Amounts received by the Trustee, to the extent that
they are not used for payment of the costs referred to in the preceding
sentence, shall, insofar as they are applicable to the VICO Contract Gas, be
disbursed to PERTAMINA and each Contractor in accordance with its Production
Sharing Percentage at a bank or banks of its choice.
6.4 Contractors' Right to Payment. The right of Contractors
to the payments provided for in this Article 6 shall extend throughout the term
of this Supply Agreement and shall not, except in the event of an occurrence
contemplated in Section 7.3, be affected by the
- 9 -
<PAGE> 11
production rates or sources of Natural Gas supplied from the VICO Contract Gas
or the Other Contract Gas from time to time during the term hereof.
ARTICLE 7
DELIVERABILITY
7.1 Oversupply of VICO Contract Gas. If the quantities of
net Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement exceed in the aggregate
the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be increased, except in the event of an occurrence contemplated in
Section 7.3, and Contractors, together with PERTAMINA, will be credited with
and have the right to receive revenue from future marketing opportunities in
respect of a quantity of net Natural Gas from reserves in the Other Contract
Areas equal to such excess quantities.
7.2 Shortfall of VICO Contract Gas. If the quantities of net
Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement are in the aggregate less
than the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be reduced, except in the event of an occurrence contemplated in
Section 7.3, and the production sharing contractors in the Other Contract Areas
and any new contract area, together with PERTAMINA, will be credited with and
have the right to receive revenue from future marketing opportunities in
respect of a quantity of net Natural Gas from reserves in the VICO Contract
Area equal to excess quantities delivered from sources within the Gas Supply
Area.
7.3 Insufficiency of Deliverable Reserves. If an
insufficiency of deliverable reserves of Natural Gas shall occur which
precludes the delivery from participating field(s) within
- 10 -
<PAGE> 12
the VICO Contract Area or from participating field(s) within any of the Other
Contract Areas of the aggregate amount of Natural Gas committed therefrom
pursuant to this Supply Agreement or to any of the supply agreements referred
to in Section 2.3 hereof over the term thereof, then such insufficiency shall
be delivered from field(s), including but not limited to the participating
field(s) within the area(s) not then experiencing an insufficiency of
deliverable reserves, and the Producers' Percentage shall thereupon be adjusted
(together with a corresponding adjustment to the VICO Contract Gas) to reflect
the revised share of the net Natural Gas in support of PERTAMINA's obligations
under Badak VI in respect of the period 2000 to 2017 which will be supplied and
delivered from the VICO Contract Area over the term hereof, such adjustment in
the Producers' Percentage to apply only to payments provided for in Article 6
received after the date thereof. The procedure for determining (i) an
insufficiency in deliverable reserves, (ii) the allocation of the right to
supply such insufficiency among the VICO Contract Area, the Other Contract
Areas and any new contract area and (iii) the calculation of the future
Producers' Percentage, shall be made in accordance with principles to be
decided upon by PERTAMINA.
ARTICLE 8
ARBITRATION AND GOVERNING LAW
8.1 Arbitration. All disputes arising in connection with
this Supply Agreement shall be finally settled by arbitration conducted in the
English language in Paris, France, by three arbitrators under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce.
Judgment upon the award rendered may be entered in any court having
jurisdiction, or application may be made to such court for a juridical
acceptance of the award and an order of enforcement, as the case may be.
8.2 Governing Law. This Supply Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York, United
States of America.
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<PAGE> 13
ARTICLE 9
CONTRACTORS' REPRESENTATIVE
VICO is designated representative by Contractors for performance on
behalf of Contractors of their obligations under Section 4.1 hereof and for the
giving of notices, responses or other communications to and from Contractors
under this Supply Agreement. Such representative may be changed by written
notice to such effect from Contractors to PERTAMINA.
ARTICLE 10
NOTICES
Any notices to the parties shall be in writing and sent by mail,
cable, telex or facsimile to the following addresses:
To PERTAMINA:
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
(PERTAMINA)
Jalan Medan Merdeka Timur 1 A
Jakarta 10110, Indonesia
Attention: Head of BPPKA
Cable: PERTAMINA, Jakarta, Indonesia
Telex: PERTAMINA, 44134 Jakarta
Facsimile: 384-6932
To Contractors:
VIRGINIA INDONESIA COMPANY (VICO)
6th Floor, Plaza Kuningan
Menara Selatan
Jl. H.R. Rasuna Said Kav. C11-14
P.O. Box 2828
Jakarta 12940, Indonesia
Attention: President - VICO Indonesia
Cable: VICO
- 12 -
<PAGE> 14
Telex: 62458
Facsimile: 523-6894
cc: VIRGINIA INDONESIA COMPANY
One Houston Center
1221 McKinney
Suite 700
P.O. Box 1551
Houston, Texas 77251-1551
U.S.A.
Attention: Chairman
Telex: 166-100
Facsimile: (713) 754-6698
A party may change its address by written notice to the other parties.
ARTICLE 11
MISCELLANEOUS
11.1 Amendment. This Supply Agreement shall not be amended or
modified except by written agreement signed by the parties hereto.
11.2 Successors and Assigns. This Supply Agreement shall inure to
the benefit of, and be binding upon, PERTAMINA and each Contractor, their
respective successors and assigns, provided that this Supply Agreement shall be
assignable by a Contractor only if such Contractor concurrently assigns to the
same assignee an equal interest in the Production Sharing Contracts.
11.3 Exclusivity. The parties to this Supply Agreement shall be
the only persons or entities entitled to enforce the obligations hereunder of
the other parties hereto, and no persons or entities not parties to this Supply
Agreement shall have the right to enforce any of the obligations hereunder of
any of the parties hereto.
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<PAGE> 15
11.4 Headings and Subheadings. The Article headings and
subheadings used herein are for convenience of reference only.
IN WITNESS WHEREOF, PERTAMINA and Contractors have caused their duly
authorized representatives to execute this Supply Agreement as of the day and
year first written above.
CONTRACTORS:
PERUSAHAAN PERTAMBANGAN VIRGINIA INDONESIA COMPANY
MINYAK DAN GAS BUMI
NEGARA (PERTAMINA)
By /s/ F. ABDA'OE By /s/ C. M. REIMER
---------------------------- ---------------------------------
F. Abda'oe C. M. Reimer
LASMO SANGA SANGA LIMITED
By /s/ J. HOGAN
---------------------------------
J. Hogan
OPICOIL HOUSTON, INC.
By /s/ C.Y. CHUNG
---------------------------------
C.Y. Chung
UNION TEXAS EAST KALIMANTAN LIMITED
By /s/ L.D. KALMBACH
---------------------------------
L.D. Kalmbach
UNIVERSE GAS & OIL COMPANY, INC.
By /s/ T. NORIMATSU
---------------------------------
T. Norimatsu
- 14 -
<PAGE> 16
VIRGINIA INTERNATIONAL COMPANY
By /s/ J. HOGAN
---------------------------------
J. Hogan
- 15 -
<PAGE> 1
FIRST SUPPLY AGREEMENT FOR PACKAGE VI EXCESS SALES
(2003-2008 LNG SALES UNDER THE SECOND AMENDED
AND RESTATED 1981 BADAK SALES CONTRACT)
BETWEEN
PERTAMINA
AND
VIRGINIA INDONESIA COMPANY
LASMO SANGA SANGA LIMITED
OPICOIL HOUSTON, INC.
UNION TEXAS EAST KALIMANTAN LIMITED
UNIVERSE GAS & OIL COMPANY, INC.
AND
VIRGINIA INTERNATIONAL COMPANY
DATED: MAY 1, 1996
EFFECTIVE: AUGUST 3, 1995
<PAGE> 2
FIRST SUPPLY AGREEMENT FOR PACKAGE VI EXCESS SALES
(2003-2008 LNG SALES UNDER THE SECOND AMENDED
AND RESTATED 1981 BADAK SALES CONTRACT)
THIS SUPPLY AGREEMENT, made and entered into in Jakarta on May 1st,
1996, by and between PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
("PERTAMINA"), on the one hand, and VIRGINIA INDONESIA COMPANY ("VICO"), LASMO
SANGA SANGA LIMITED, OPICOIL HOUSTON, INC., UNION TEXAS EAST KALIMANTAN
LIMITED, UNIVERSE GAS & OIL COMPANY, INC., and VIRGINIA INTERNATIONAL COMPANY
(herein referred to collectively as "Contractors" and individually as
"Contractor"), on the other hand,
WITNESSETH:
A. WHEREAS, Contractors individually own or control all of the
interest of "Contractors" in that certain Amended and Restated Production
Sharing Contract, dated April 23, 1990, but effective as of August 8, 1968
(such contract as hereafter amended is herein referred to as the "Amended and
Restated Production Sharing Contract") and that certain Production Sharing
Contract dated April 23, 1990, but effective as of August 8, 1998 (such
contract as hereafter amended is herein referred to as the "Renewed Production
Sharing Contract"). The Amended and Restated Production Sharing Contract and
the Renewed Production Sharing Contract are herein referred to collectively as
the "Production Sharing Contracts" and the area covered thereby is herein
referred to as the "VICO Contract Area"; and
B. WHEREAS, pursuant to the Production Sharing Contracts, each of
PERTAMINA and Contractors is entitled to take and receive, sell and freely
export its respective share of the Natural Gas produced and saved from the VICO
Contract Area (the percentage share of such Natural Gas to which each of
PERTAMINA and Contractors is entitled, as determined under the
- 1 -
<PAGE> 3
Production Sharing Contracts, is herein referred to as the "Production Sharing
Percentage" of such party); and
C. WHEREAS, the reserves of Natural Gas in the VICO Contract Area
exceed the reserves of Natural Gas committed to be produced, supplied and
delivered by PERTAMINA and Contractors to meet a portion of PERTAMINA's
existing obligations under LNG sales contracts, LPG sales contracts, and
domestic gas sales contracts; and
D. WHEREAS, PERTAMINA, with assistance from Contractors, has
constructed and expanded and is further expanding the Natural Gas liquefaction
and related facilities located at Bontang Bay, on the east coast of Kalimantan,
Indonesia (herein referred to as the "Bontang Plant"); and
E. WHEREAS, PERTAMINA and Contractors are parties to the Amended
and Restated Bontang Processing Agreement dated as of February 9, 1988 (as from
time to time amended, the "Processing Agreement"), which provides for the
operation of the Bontang Plant and the payment of the costs of such operation
(such costs as determined in accordance with the Processing Agreement are
herein referred to as "Plant Operating Costs"); and
F. WHEREAS, PERTAMINA and Contractors have agreed to use the
Bontang Plant in part for the liquefaction of the VICO Contract Gas (as defined
in Section 2.2 hereof) and the Other Contract Gas (as defined in Section 2.3
hereof); and
G. WHEREAS, PERTAMINA, in collaboration with Contractors and its
production sharing contractors in other contract areas in East Kalimantan
(herein referred to as the "Other Contract Areas"), has entered into that
certain Amended and Restated 1981 Badak LNG Sales Contract dated as of January
1, 1990 (hereafter referred to as the "1981 Sales Contract") with Chubu
Electric Power Co., Inc., The Kansai Electric Power Co., Inc., Osaka Gas Co.,
Ltd., and Toho Gas Co., Ltd. (herein referred to collectively as "Buyers" and
individually as "Buyer"); and
- 2 -
<PAGE> 4
H. WHEREAS, on August 3, 1995, PERTAMINA and Buyers entered into
a Second Amended and Restated 1981 LNG Sales Contract ("Second A/R," and unless
otherwise so stated, any terms defined in the Second A/R shall have the same
meanings when used herein) extending the 1981 Sales Contract for the period
April 1, 2003 to March 31, 2011; and
I. WHEREAS, pursuant to Part Two, paragraph 2(f) of the
Memorandum of Understanding Re: Supply Agreements and Package VI Sales dated
October 27, 1995, between PERTAMINA, Contractors and the production sharing
contractors in the Other Contract Areas ("MOU"), the sales of LNG pursuant to
the Second A/R in respect of the Fixed Quantities for the period April 1, 2003
to March 31, 2008 ("Package VI Extension Period") are Package VI Sales as that
term is defined in the MOU ("Package VI Extension Quantities"); and
J. WHEREAS, the Second A/R provides that the Natural Gas to be
processed into LNG and sold by PERTAMINA as Package VI Extension Quantities is
to be produced from the Gas Supply Area, which consists of the VICO Contract
Area and the Other Contract Areas; and
K. WHEREAS, PERTAMINA and each Contractor desire to supply and
deliver Natural Gas from the VICO Contract Area in support of the performance
by PERTAMINA of an agreed portion of its obligations to deliver Package VI
Extension Quantities under the Second A/R; and
L. WHEREAS, each Contractor desires to dispose of its Production
Sharing Percentage of the VICO Contract Gas (as herein defined) in accordance
with the terms of this Supply Agreement,
NOW, THEREFORE, the parties agree as follows:
- 3 -
<PAGE> 5
ARTICLE 1
EFFECTIVE DATE AND DURATION
This Supply Agreement shall be effective as of August 3, 1995 and
shall terminate on the date when all rights and obligations of Contractors
hereunder have been satisfied.
ARTICLE 2
SUPPLY COMMITMENT AND QUANTITY
2.1 Net Gas Requirement. The total quantity of net Natural Gas
required to be supplied and delivered out of proved economically recoverable
reserves of Natural Gas in East Kalimantan for liquefaction and sale as
Package VI Extension Quantities is estimated to be 0.9555 trillion standard
cubic feet ("t.s.c.f."). Such quantity is herein referred to as the "1981
Extension Package VI Net Gas Requirement." The 1981 Extension Package VI Net
Gas Requirement is based on the Package VI Extension Quantities.
2.2 VICO Contract Gas. PERTAMINA and Contractors hereby commit
and agree to supply and deliver from proved economically recoverable reserves
of Natural Gas in specific fields within the VICO Contract Area sufficient
Natural Gas (and LNG resulting from the liquefaction thereof) to meet a portion
of the 1981 Extension Package VI Net Gas Requirement over the term of this
Supply Agreement consisting of 0.2064 t.s.c.f., or 21.6000% thereof, subject to
adjustment as provided in Section 2.4 hereof. Such quantities of net Natural
Gas committed to be supplied pursuant to this Supply Agreement are herein
referred to as the "VICO Contract Gas", and the above-stated percentage is
herein referred to as the "Producers' Percentage". The specific fields from
which the VICO Contract Gas will be committed, as well as the quantities
committed from each field, will be identified in a supplemental memorandum of
understanding to be entered into among PERTAMINA, Contractors and the
production sharing contractors in the Other Contract Areas pursuant to the MOU
("Package VI Supplemental Memorandum").
- 4 -
<PAGE> 6
The quantities committed from each field are subject to revision from
time to time, as the reserves from the fields may be updated and as additional
data, from deliverability studies and otherwise, become available.
2.3 Other Contract Gas. To meet the balance of the 1981
Extension Package VI Net Gas Requirement, constituting 0.7492 t.s.c.f., or
78.4000% thereof, subject to adjustment as provided in Section 2.4 hereof,
sufficient Natural Gas (and LNG resulting from the liquefaction thereof) will
be committed for supply and delivery by PERTAMINA and its production sharing
contractors from proved economically recoverable reserves of Natural Gas in the
Other Contract Areas by separate supply agreements, similar hereto and
compatible herewith, executed and delivered concurrently herewith (such amounts
are herein collectively referred to as the "Other Contract Gas"). The specific
fields from which the Other Contract Gas will be committed, as well as the
quantities committed from each field, will be identified in the Package VI
Supplemental Memorandum.
2.4 DeGolyer and MacNaughton Certification. The amounts of
net Natural Gas constituting the VICO Contract Gas and the Other Contract Gas
are part of the estimates of proved economically recoverable reserves of
Natural Gas as certified by the independent consultant firm of DeGolyer and
MacNaughton in written statements based on data available on April 30, 1995.
The quantities for the VICO Contract Gas and the Other Contract Gas
set forth in Sections 2.2 and 2.3 hereof and the Producers' Percentage were
established by PERTAMINA at a meeting on May 29, 1995, of the East Kalimantan
Gas Reserves Management Committee to be used only on a provisional basis until
such time as the identity of the participating fields and the quantities in
each field which comprise the VICO Contract Gas and the Other Contract Gas and
the Producers' Percentage shall be adjusted and documented in the Package VI
Supplemental Memorandum in accordance with the MOU.
2.5 Addendum. Upon completion of the adjustments provided
for in Section 2.4 hereof but not later than April 30, 1996, PERTAMINA and
Contractors shall execute an
- 5 -
<PAGE> 7
addendum to this Supply Agreement confirming the VICO Contract Area
participating fields, the quantities in each field which comprise the VICO
Contract Gas and the Other Contract Gas and the Producers' Percentage. Pending
completion of such adjustments, the Producers' Percentage set out in Section
2.2 hereof shall be used on a provisional basis.
ARTICLE 3
COORDINATION OF GAS SUPPLY
The VICO Contract Gas and the Other Contract Gas may be produced from
participating fields at times and production rates which may change from time
to time during the term hereof so as to secure the optimal ultimate recovery of
Natural Gas. The supply of Natural Gas from the VICO Contract Area and the
Other Contract Areas will be coordinated by PERTAMINA so as to conserve and
permit full utilization of such Natural Gas. The sources of supply, producing
rates, quality of gas, metering and related matters shall be matters for study
by the East Kalimantan Gas Reserves Management Committee, consisting of
representatives from PERTAMINA, VICO, TOTAL Indonesie, Unocal Indonesia Company
and Indonesia Petroleum, Ltd.
ARTICLE 4
ADMINISTRATION AND CONSULTATION
4.1 LNG Sales Contract. PERTAMINA shall be responsible for
the due and prompt administration of the Second A/R for the benefit of
PERTAMINA and Contractors. All matters which affect the Second A/R or the
sale and delivery of LNG thereunder will be administered by a representative to
be appointed by PERTAMINA and the representative appointed by Contractors under
Article 9 hereof. It is understood, however, that it will be necessary from
time to time for PERTAMINA, as seller under the Second A/R, to take certain
- 6 -
<PAGE> 8
administrative and operational actions without prior consultation where
immediate action is required. Contractors will be promptly advised of any such
action.
4.2 Consultation. PERTAMINA and Contractors agree to consult
with each other freely on all matters relating to the Second A/R. PERTAMINA
and Contractors shall confer and agree as to any amendment to the Second A/R or
to any permitted action or election thereunder which constitutes a material
adjustment in the quantities of LNG to be sold and delivered thereunder or a
change in the terms thereof. At the request of any party hereto, a memorandum
evidencing any such agreement shall be prepared as soon as feasible and signed
by each party hereto.
ARTICLE 5
TITLE, DELIVERY AND INVOICING
5.1 Title. PERTAMINA will cause the LNG resulting from the
liquefaction of the VICO Contract Gas and the Other Contract Gas to be
delivered to Buyer at the Delivery Point. Title to each Contractor's share of
the LNG resulting from the liquefaction of the VICO Contract Gas shall pass to
PERTAMINA at the same time as the passage of title from PERTAMINA to Buyer
pursuant to the Second A/R.
5.2 Delivery and Invoicing. At the time of delivery of each
cargo of LNG to Buyer at the Delivery Point, PERTAMINA will furnish Contractors
with appropriate documentation to evidence the quantity and quality of LNG
delivered, together with copies of the invoices to Buyer in respect of the sale
of LNG in question. PERTAMINA will also furnish Contractors with a copy of
each invoice or billing delivered to Buyer on account of interest or other
payment obligation of Buyer pursuant to the Second A/R concurrently with its
being furnished to Buyer. Calculation of the Contract Sales Price, the amount
of sales invoices and other billings to Buyer, and any adjustments, shall be
reviewed and approved by PERTAMINA and Contractors prior to presentation to
Buyer.
- 7 -
<PAGE> 9
ARTICLE 6
ENTITLEMENT AND PAYMENT
6.1 Contractors' Entitlement. The amounts to be paid to each
Contractor for its share of the LNG resulting from the liquefaction of Natural
Gas to be supplied under this Supply Agreement shall be its Production Sharing
Percentage of the Producers' Percentage of the sum of:
(a) all amounts to be paid by Buyers to PERTAMINA for Package
VI Extension Quantities;
(b) all other amounts which a Buyer shall become obligated to
pay pursuant to the Second A/R with regard to deliveries
of Package VI Extension Quantities, including, but not
limited to: (i) amounts payable by such Buyer for its
failure to take quantities it is obligated to purchase
under the Second A/R; (ii) any incremental payments
applicable to make-up deliveries; and (iii) any interest
accruing on overdue invoice payments;
(c) amounts payable by insurers in respect of LNG resulting
from the liquefaction of the VICO Contract Gas and the
Other Contract Gas; and
(d) interest earned on any of the amounts referred to in this
Section 6.1.
6.2 PERTAMINA Assignment of Contractor Percentage Share. In
order to arrange for the receipt by each Contractor of the payments to which
such Contractor is entitled under Section 6.1 hereof, PERTAMINA hereby assigns
to each Contractor that Contractor's Production Sharing Percentage of the
Producers' Percentage of all amounts referred to in Section 6.1 hereof.
- 8 -
<PAGE> 10
6.3 Method of Payment. Throughout the term of this Supply
Agreement, all those payments referred to in Section 6.1 hereof shall be paid
in U.S. Dollars, directly to BankAmerica International in New York City (or
such other leading bank in the United States as shall be selected by PERTAMINA
and approved by Contractors) pursuant to that certain Amended and Restated
Bontang Excess Sales Trustee and Paying Agent Agreement, dated as of February
9, 1988, among PERTAMINA, Contractors, the production sharing contractors in
the Other Contract Areas and the Trustee thereunder, as the same may be from
time to time amended. Amounts so received by the Trustee shall be used for
payment of (i) an agreed portion of Plant Operating Costs, and (ii) other costs
approved by PERTAMINA and Contractors. Amounts received by the Trustee, to the
extent that they are not used for payment of the costs referred to in the
preceding sentence, shall, insofar as they are applicable to the VICO Contract
Gas, be disbursed to PERTAMINA and each Contractor in accordance with its
Production Sharing Percentage at a bank or banks of its choice.
6.4 Contractors' Right to Payment. The right of Contractors
to the payments provided for in this Article 6 shall extend throughout the term
of this Supply Agreement and shall not, except in the event of an occurrence
contemplated in Section 7.3, be affected by the production rates or sources of
Natural Gas supplied from the VICO Contract Gas or the Other Contract Gas from
time to time during the term hereof.
ARTICLE 7
DELIVERABILITY
7.1 Oversupply of VICO Contract Gas. If the quantities of
net Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement exceed in the aggregate
the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be increased, except in the event of an occurrence contemplated in
Section 7.3, and Contractors, together with PERTAMINA, will be credited with
and have the
- 9 -
<PAGE> 11
right to receive revenue from future marketing opportunities in respect of a
quantity of net Natural Gas from reserves in the Other Contract Areas equal to
such excess quantities.
7.2 Shortfall of VICO Contract Gas. If the quantities of net
Natural Gas produced from the participating fields within the VICO Contract
Area and delivered pursuant to this Supply Agreement are in the aggregate less
than the quantity of the VICO Contract Gas, the Producers' Percentage (and the
percentage of the revenues to be paid to PERTAMINA and Contractors hereunder)
will not be reduced, except in the event of an occurrence contemplated in
Section 7.3, and the production sharing contractors in the Other Contract Areas
and any new contract area, together with PERTAMINA, will be credited with and
have the right to receive revenue from future marketing opportunities in
respect of a quantity of net Natural Gas from reserves in the VICO Contract
Area equal to excess quantities delivered from sources within the Gas Supply
Area.
7.3 Insufficiency of Deliverable Reserves. If an
insufficiency of deliverable reserves of Natural Gas shall occur which
precludes the delivery from participating field(s) within the VICO Contract
Area or from participating field(s) within any of the Other Contract Areas of
the aggregate amount of Natural Gas committed therefrom pursuant to this Supply
Agreement or to any of the supply agreements referred to in Section 2.3 hereof
over the term thereof, then such insufficiency shall be delivered from
field(s), including but not limited to the participating field(s) within the
area(s) not then experiencing an insufficiency of deliverable reserves, and the
Producers' Percentage shall thereupon be adjusted (together with a
corresponding adjustment to the VICO Contract Gas) to reflect the revised share
of the net Natural Gas in support of PERTAMINA's obligations under the Second
A/R in respect of the Package VI Extension Period which will be supplied and
delivered from the VICO Contract Area over the term hereof, such adjustment in
the Producers' Percentage to apply only to payments provided for in Article 6
received after the date thereof. The procedure for determining (i) an
insufficiency in deliverable reserves, (ii) the allocation of the right to
supply such insufficiency among the VICO Contract Area, the Other Contract
Areas and any new contract area and (iii) the calculation of the future
- 10 -
<PAGE> 12
Producers' Percentage, shall be made in accordance with principles to be
decided upon by PERTAMINA.
ARTICLE 8
ARBITRATION AND GOVERNING LAW
8.1 Arbitration. All disputes arising in connection with
this Supply Agreement shall be finally settled by arbitration conducted in the
English language in Paris, France, by three arbitrators under the Rules of
Conciliation and Arbitration of the International Chamber of Commerce.
Judgment upon the award rendered may be entered in any court having
jurisdiction, or application may be made to such court for a juridical
acceptance of the award and an order of enforcement, as the case may be.
8.2 Governing Law. This Supply Agreement shall be governed
by and interpreted in accordance with the laws of the State of New York, United
States of America.
ARTICLE 9
CONTRACTORS' REPRESENTATIVE
VICO is designated representative by Contractors for performance on
behalf of Contractors of their obligations under Section 4.1 hereof and for the
giving of notices, responses or other communications to and from Contractors
under this Supply Agreement. Such representative may be changed by written
notice to such effect from Contractors to PERTAMINA.
- 11 -
<PAGE> 13
ARTICLE 10
NOTICES
Any notices to the parties shall be in writing and sent by mail,
cable, telex or facsimile to the following addresses:
To PERTAMINA:
PERUSAHAAN PERTAMBANGAN MINYAK DAN GAS BUMI NEGARA
(PERTAMINA)
Jalan Medan Merdeka Timur 1 A
Jakarta 10110, Indonesia
Attention: Head of BPPKA
Cable: PERTAMINA, Jakarta, Indonesia
Telex: PERTAMINA, 44134 Jakarta
Facsimile: 384-6932
To Contractors:
VIRGINIA INDONESIA COMPANY (VICO)
6th Floor, Plaza Kuningan
Menara Selatan
Jl. H.R. Rasuna Said Kav. C11-14
P.O. Box 2828
Jakarta 12940, Indonesia
Attention: President - VICO Indonesia
Cable: VICO
Telex: 62458
Facsimile: 523-6894
cc: VIRGINIA INDONESIA COMPANY
One Houston Center
1221 McKinney
Suite 700
P.O. Box 1551
Houston, Texas 77251-1551
U.S.A.
Attention: Chairman
Telex: 166-100
- 12 -
<PAGE> 14
Facsimile: (713) 754-6698
A party may change its address by written notice to the other parties.
ARTICLE 11
MISCELLANEOUS
11.1 Amendment. This Supply Agreement shall not be amended or
modified except by written agreement signed by the parties hereto.
11.2 Successors and Assigns. This Supply Agreement shall inure to
the benefit of, and be binding upon, PERTAMINA and each Contractor, their
respective successors and assigns, provided that this Supply Agreement shall be
assignable by a Contractor only if such Contractor concurrently assigns to the
same assignee an equal interest in the Production Sharing Contracts.
11.3 Exclusivity. The parties to this Supply Agreement shall be
the only persons or entities entitled to enforce the obligations hereunder of
the other parties hereto, and no persons or entities not parties to this Supply
Agreement shall have the right to enforce any of the obligations hereunder of
any of the parties hereto.
11.4 Headings and Subheadings. The Article headings and
subheadings used herein are for convenience of reference only.
- 13 -
<PAGE> 15
IN WITNESS WHEREOF, PERTAMINA and Contractors have caused their duly
authorized representatives to execute this Supply Agreement as of the day and
year first written above.
CONTRACTORS:
PERUSAHAAN PERTAMBANGAN VIRGINIA INDONESIA COMPANY
MINYAK DAN GAS BUMI
NEGARA (PERTAMINA)
By /s/ F. ABDA'OE By /s/ C.M. REIMER
------------------------- ------------------------------------
F. Abda'oe C.M. Reimer
LASMO SANGA SANGA LIMITED
By /s/ J. HOGAN
------------------------------------
J. Hogan
OPICOIL HOUSTON, INC.
By /s/ C.Y. CHUNG
------------------------------------
C.Y. Chung
UNION TEXAS EAST KALIMANTAN LIMITED
By /s/ L.D. KALMBACH
------------------------------------
L.D. Kalmbach
UNIVERSE GAS & OIL COMPANY, INC.
By /s/ T. NORIMATSU
------------------------------------
T. Norimatsu
- 14 -
<PAGE> 16
VIRGINIA INTERNATIONAL COMPANY
By /s/ J. HOGAN
------------------------------------
J. Hogan
- 15 -
<PAGE> 1
Exhibit 15
INDEPENDENT ACCOUNTANTS' AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Union Texas Petroleum Holdings, Inc. has included our report
dated July 24, 1996 (issued pursuant to the provisions of Statement on Auditing
Standards No. 71) in the following registration statements:
Registration Statement on Form S-8 (No. 33-26105) filed on December
21, 1988
Registration Statement on Form S-8 (No. 33-13575) filed on
April 29, 1991
Registration Statement on Form S-8 (No. 33-21684) filed
on April 29, 1991
Registration Statement on Form S-8 (No. 33-44045)
filed on November 19, 1991
Registration Statement on Form S-8 (No. 33-64928) filed on June
24, 1993
Registration Statement on Form S-8 (No. 33-59213) filed on May 10,
1995
Registration Statement on Form S-3 (No. 33-64049) filed on November
7, 1995
We are also aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse LLP
Houston, Texas
July 24, 1996
1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S SEC FORM 10-Q FOR THE PERIOD ENDING JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,261
<SECURITIES> 0
<RECEIVABLES> 88,301
<ALLOWANCES> 76
<INVENTORY> 34,812
<CURRENT-ASSETS> 181,522
<PP&E> 2,937,996
<DEPRECIATION> 1,403,057
<TOTAL-ASSETS> 1,839,365
<CURRENT-LIABILITIES> 200,016
<BONDS> 644,071
<COMMON> 4,391
0
0
<OTHER-SE> 485,094
<TOTAL-LIABILITY-AND-EQUITY> 1,839,365
<SALES> 481,370
<TOTAL-REVENUES> 497,306
<CGS> 161,322
<TOTAL-COSTS> 277,305
<OTHER-EXPENSES> 24,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,510
<INCOME-PRETAX> 181,026
<INCOME-TAX> 102,628
<INCOME-CONTINUING> 78,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,398
<EPS-PRIMARY> .90
<EPS-DILUTED> 0
</TABLE>
