<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9019
UNION TEXAS PETROLEUM HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0040040
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1330 POST OAK BOULEVARD, HOUSTON, TEXAS 77056
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (713) 623-6544
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<C> <C>
Common Stock, $.05 par value New York Stock Exchange
Pacific Stock Exchange
8.25% Senior Notes due 1999 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filings pursuant to Item
405 of Regulation S-K (sec. 229.405 under the Securities Exchange Act of 1934)
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
As of February 28, 1997, there were 85,753,958 shares of Union Texas
Petroleum Holdings, Inc. $.05 par value Common Stock issued and outstanding,
63,667,148 of which, having an aggregate market value of $1,177,842,238, were
held by non-affiliates of the registrant. For purposes of the above statement
only, all directors and executive officers of the registrant are assumed to be
affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement related to the registrant's 1997 Annual
Stockholders Meeting are incorporated by reference into Part III of this report.
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<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Item 1. Business.................................................... 3
Overview.................................................. 3
Segment Data.............................................. 5
Reserves.................................................. 6
Production................................................ 7
Oil and Gas Prices and Production Costs................... 7
Acreage................................................... 8
Drilling Activities....................................... 8
Exploration and Production................................ 10
U.K. North Sea....................................... 10
Indonesia............................................ 12
Pakistan............................................. 17
Alaska............................................... 19
Other Activities..................................... 19
Petrochemicals............................................ 21
Plant Operations..................................... 21
Storage and Transportation........................... 22
Other Matters............................................. 22
Insurance............................................ 22
Employees............................................ 22
Risk Factors.............................................. 22
Item 2. Properties.................................................. 26
Item 3. Legal Proceedings........................................... 26
Item 4. Submission of Matters to a Vote of Security Holders......... 26
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 27
Item 6. Selected Financial Data..................................... 28
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 29
Item 8. Financial Statements and Supplementary Data................. 34
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 60
PART III
Item 10. Directors and Executive Officers of Registrant.............. 61
Item 11. Executive Compensation...................................... 61
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 61
Item 13. Certain Relationships and Related Transactions.............. 62
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 62
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS.
OVERVIEW
The Company, the successor to a corporation founded in 1896, is a
U.S.-based independent (non-integrated) oil and gas company with worldwide
operations. At December 31, 1996, the Company had proved oil and gas reserves of
443 million barrels of oil equivalent. All of the Company's oil and gas
producing activities are currently conducted outside of the United States in the
United Kingdom (the "U.K.") sector of the North Sea, Indonesia and Pakistan. The
Company also operates a U.S.-based petrochemical business.
The Company's principal current international activities began in the late
1960s with its participation in a joint venture in Indonesia and in two
consortia in the U.K. North Sea. In addition, the Company is currently engaged
in exploration and production activities in several other countries and a
development program of an oil field in Alaska's North Slope. International oil
and gas properties accounted for 93% of the Company's total proved reserves as
of December 31, 1996. All of the Company's net income attributable to its oil
and gas operations in recent periods has been generated by its international
operations.
In 1996, to increase value for all the Company's stockholders, the Company
initiated a major organizational restructuring that enables it to pursue new
growth opportunities while maximizing production and cash flow from its existing
principal oil and gas properties and petrochemical business. The Company has
created three regional business units where the senior managers are responsible
for developing growth programs and building on the Company's existing assets
within their regions. Additionally, four growth teams focus on worldwide
exploration activities, enhanced oil recovery projects, acquisitions and
evaluations of the Company's portfolio of assets and opportunities. Another
element of the Company's strategy includes a new compensation program in 1997
for all employees, which places added emphasis on variable performance-based pay
directly tied to the results of the Company in achieving financial and strategic
objectives.
The Company's principal properties in the North Sea are interests in Alba,
Piper, Claymore, Saltire, Chanter, Scapa and Iona oil fields, the Sean gas
fields and the Britannia gas and condensate field. In 1995, the Company acquired
a 15.5% working interest in Block 16/26, which includes the Alba field that came
on stream in 1994 and is operated by Chevron U.K. Limited. As of December 31,
1996, the Company had recorded approximately 39 million barrels of oil as proved
reserves for the Alba field, of which 23 million barrels of oil are classified
as proved undeveloped. In 1994, the Company also acquired a 9.42% unit interest
in the Britannia gas field, a portion of which underlies the Alba field. The
Britannia field is operated by Britannia Operator Limited, a joint venture
between Conoco (U.K.) Limited and Chevron U.K. Limited. As of December 31, 1996,
the Company had recorded 52 million barrels of oil equivalent of proved
undeveloped reserves for the Britannia field. Production from the Britannia
field is expected to begin in late 1998. The Company owns a 20% working interest
in the Piper, Claymore, Saltire, Chanter, Scapa and Iona oil fields, which are
operated by Elf Exploration UK PLC, and a 25% working interest in the North,
South and East Sean gas fields, which are operated by Shell U.K. Limited.
The Company's Indonesian activities consist primarily of its 37.81% working
interest in the East Kalimantan joint venture that produces natural gas and, to
a lesser extent, oil and condensate from several fields in Indonesia. The
Company holds its interests in this joint venture directly through a wholly
owned subsidiary and also indirectly through its 50% interest in Unimar Company
("Unimar"), which is a partnership with a subsidiary of LASMO plc, a U.K.
company. Unimar owns ENSTAR Corporation and its subsidiaries, including Virginia
Indonesia Company, the operator of the joint venture. The Company's interests in
Unimar are reported on its Consolidated Financial Statements as an equity
investment (the "Equity Partnership"). See Notes 4 and 16 of Notes to
Consolidated Financial Statements for additional information regarding the
Equity Partnership.
Natural gas produced by the East Kalimantan joint venture is converted into
liquefied natural gas ("LNG") at facilities owned by Pertamina, the Indonesian
national oil company. Currently, LNG is principally sold to two groups of
Japanese industrial and utility customers, the national oil company of the
3
<PAGE> 4
Republic of China, a consortium of buyers organized by Osaka Gas, and Korea Gas
Corporation, under long-term contracts originally signed in 1973, 1981, 1987,
1990 and 1991, respectively. In 1995, Pertamina extended its 1973 and 1981
long-term LNG sales contracts and signed agreements for two new long-term LNG
sales contracts. To supply the additional quantities of LNG called for primarily
by the 1973 contract extension, Pertamina commenced construction in 1995 of a
seventh processing train at the Bontang LNG facility and completion is expected
in late 1997. Financing of an eighth train is expected to be consummated in
March 1997 and construction is expected to begin in 1997 primarily to support
the new sales contracts. The Company is also participating in exploration
activities of the East Kalimantan joint venture, as well as exploration
activities independent of that joint venture in other parts of Indonesia.
Since 1977, the Company has operated through joint ventures oil and gas
exploration, development and production activities in the Badin area in
Pakistan. Oil production from the Badin area began in 1982, and gas production
began in 1989. The Company has working interests of either 30% or 25.5% in the
currently producing fields. In 1995, the Company signed a concession agreement
for the Eastern Sindh block in southeastern Pakistan, which covers approximately
1.8 million acres. The Company, as operator, holds a 70% working interest in the
concession.
In 1996, the Company and its co-venturers, ARCO Alaska, Inc. and Anadarko
Petroleum Corp., announced plans to develop the Alpine oil field in the Western
Colville area on Alaska's North Slope. ARCO is the operator of the field. The
Company has a 22% working interest in the Alpine field. As of December 31, 1996,
the Company had recorded 32 million barrels of oil as proved undeveloped
reserves for the field. Production from the Alpine field is expected to begin in
2000.
The Company pursues opportunities and participates worldwide in exploration
for oil and gas in both new venture areas and the Company's producing areas.
Current worldwide activity is in Italy, Tunisia, Alaska and other areas in Latin
America, Australia, Africa, China, the Middle East and Central Asia, as well as
the U.K., Indonesia and Pakistan.
In the United States, the Company operates the Geismar olefins plant in
which it owns a 41.67% interest. Located near Baton Rouge, Louisiana, the
Geismar plant, which currently has a 1.25 billion annual gross pounds capacity
(521 million net), processes gas liquids feedstocks to produce ethylene for sale
to several petrochemical manufacturers for the production of plastics used in
various consumer products. In 1997, the Company will commence construction of a
thirteenth furnace and upgrading nine of the plant's existing furnaces with
completion expected in early 1999. Start-up of the new furnace is scheduled for
late 1997, which is expected to increase annual production capacity to
approximately 1.275 billion gross pounds (531 million net) in 1998. The Company
is studying opportunities for increasing production in its petrochemical
business.
In January 1997, the Board of Directors of the Company approved a $229
million capital expenditure budget for 1997. Approximately $127 million has been
budgeted for oil and gas development projects in the U.K. North Sea, Indonesia,
Pakistan and Alaska, including $43 million for the continued development of the
Britannia field, $10 million for development activities at the Alba field and $8
million for the initial development of the Alpine field. The Company has also
budgeted approximately $68 million for exploration projects in the U.K. North
Sea, Indonesia, Pakistan, Italy, Tunisia and Alaska and new venture exploration
activities primarily in Latin America, Australia, Africa, China and the Middle
East. The Company also has budgeted approximately $32 million for its U.S.
petrochemical interests. The costs of potential acquisitions are not included in
the capital expenditure budget.
Unless the context otherwise requires, references herein to the Company are
not intended to imply exact corporate relationships and include Union Texas
Petroleum Holdings, Inc., its predecessors and its subsidiaries, including their
interests in certain joint ventures and partnerships. Union Texas Petroleum
Holdings, Inc. was organized under the laws of the State of Delaware in 1982.
The address and telephone number of the Company's principal executive offices
are 1330 Post Oak Blvd., Houston, Texas 77056, (713) 623-6544. As of February
28, 1997, the Company had approximately 1,100 full-time employees worldwide. For
a discussion of risks, uncertainties and assumptions affecting the Company's
business, see "-- Risk Factors" and Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations.
4
<PAGE> 5
SEGMENT DATA
The table below summarizes the Company's revenues, net income and
identifiable assets by areas of activity for the past three years(a):
<TABLE>
<CAPTION>
AS OF OR FOR THE
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Exploration and production:
Sales and operating revenues:
United Kingdom...................................... $ 406 $ 323 $ 260
Indonesia........................................... 341 276 278
Pakistan............................................ 66 51 39
Other International................................. 1 1
------ ------ ------
Total.......................................... $ 813 $ 651 $ 578
====== ====== ======
Net income (loss):
United Kingdom...................................... 85 46 27
Indonesia........................................... 121 95 94
Pakistan............................................ 27 14 10
Other International................................. (33) (49) (25)
United States (Alaska).............................. (8) (6) (7)
------ ------ ------
Total.......................................... $ 192 $ 100 $ 99
====== ====== ======
Identifiable assets:
United Kingdom...................................... 1,244 1,168 887
Indonesia........................................... 444 459 473
Pakistan............................................ 60 46 40
Other International................................. 15 9 11
United States (Alaska).............................. 23 13 8
------ ------ ------
Total.......................................... $1,786 $1,695 $1,419
====== ====== ======
Petrochemicals:
Sales and operating revenues........................... $ 193 $ 200 $ 169
Net income (b)......................................... 15 38 15
Identifiable assets.................................... 116 111 108
</TABLE>
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(a) Net income (loss) and identifiable assets do not give effect to general and
administrative items.
See Note 12 of Notes to Consolidated Financial Statements for additional
data.
(b) Includes assumed U.S. taxes at regular statutory tax rates. The Company,
however, was subject to the U.S. corporate alternative minimum tax during
the periods indicated.
As reflected in the preceding table, a significant portion of the Company's
income was generated from its overseas operations, particularly its
participation in the producing fields in the East Kalimantan area of Indonesia
and in the U.K. North Sea. All of the Company's oil and gas and petrochemical
activities are subject to a variety of risks. See "-- Risk Factors" and Item
7 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations.
5
<PAGE> 6
RESERVES
The following table sets forth information regarding the Company's
estimates of its proved net reserves as of December 31, 1996. The Company's
estimates of reserves filed with federal agencies, including the Securities and
Exchange Commission, agree with the information set forth below. See "-- Risk
Factors," Item 7 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations and Note 16 of Notes to Consolidated Financial
Statements.
<TABLE>
<CAPTION>
OIL (MBBLS)(A)(B) GAS (MMCF)(B)
--------------------------------- -----------------------------------
DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL
--------- ----------- ------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
United Kingdom.......... 51,265 39,249 90,514 126,963 236,509 363,472
Indonesia(c)............ 12,071 4,878 16,949 718,721 128,023 846,744
Pakistan................ 4,839 1,907 6,746 57,019 63,008 120,027
Alaska.................. 32,005 32,005
------ ------ ------- --------- ------- ---------
Total................. 68,175 78,039 146,214 902,703 427,540 1,330,243
------ ------ ------- --------- ------- ---------
Equity Partnership:
Indonesia (c)........... 4,944 2,042 6,986 297,841 53,665 351,506
------ ------ ------- --------- ------- ---------
Total................. 73,119 80,081 153,200 1,200,544 481,205 1,681,749
====== ====== ======= ========= ======= =========
<CAPTION>
OIL EQUIVALENTS (MBOE)(A)(B)
---------------------------------
DEVELOPED UNDEVELOPED TOTAL
--------- ----------- -------
<S> <C> <C> <C>
United Kingdom.......... 73,155 80,027 153,182
Indonesia(c)............ 135,988 26,951 162,939
Pakistan................ 14,670 12,770 27,440
Alaska.................. 32,005 32,005
------- ------- -------
Total................. 223,813 151,753 375,566
------- ------- -------
Equity Partnership:
Indonesia (c)........... 56,296 11,295 67,591
------- ------- -------
Total................. 280,109 163,048 443,157
======= ======= =======
</TABLE>
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(a) For the purpose of calculating reserves, oil includes condensate, and for
the U.K., oil also includes natural gas liquids.
(b) Unless otherwise indicated in this Annual Report on Form 10-K, gas volumes
are stated at the legal pressure base of the area or country in which the
reserves are located and at 60 degrees Fahrenheit. As used herein, the term
"BTU" means British thermal unit, the term "TBtu" means trillion BTUs, the
term "MMBtu" means million BTUs, the term "Mcf" means thousand cubic feet,
the term "MMcf" means million cubic feet, the term "Bcf" means billion cubic
feet, the term "Tcf" means trillion cubic feet, the term "Bbl" means barrel,
the term "MBbls" means thousands of barrels, the term "MMBbls" means
millions of barrels, the term "boe" means barrel of oil equivalent, the term
"Mboe" means thousand barrels of oil equivalent and the term "MMboe" means
million barrels of oil equivalent. Gas is converted into a barrel of oil
equivalent based on 5.8 Mcf of gas to one barrel of oil. The term "LNG"
means liquefied natural gas and the term "LPG" means liquefied petroleum
gas.
(c) Information regarding Indonesian reserves relates to the Company's net
interest in a production sharing contract between the Indonesian joint
venture and Pertamina. The joint venture has no ownership interest in the
reserves but does have the right to share revenues and production and is
entitled to recover most field and other operating costs and capital
depreciation. The reserve estimates, which are based on year-end prices, are
subject to revision as product prices and costs fluctuate due to the cost
recovery feature under the production sharing contract. The impact on
reserves is inversely related to price changes and directly related to
changes in field operating and capital costs. In addition, reserve estimates
are subject to revision due to the effect that price fluctuations generally
have on estimates of recoverable reserves. Debt relating to the LNG
processing facilities owned by Pertamina is contractually required to be
serviced from proceeds of LNG sales prior to the distribution of such
proceeds primarily to the members of the joint venture, Pertamina and the
other production sharing contractors. The debt obligation is not the
obligation of the joint venture. Debt service relating to such facilities is
accounted for in the Company's reserve estimates as a cost of production and
operation. Such debt service is deducted in estimating future net revenues
to be distributed among Pertamina and the production sharing contractors,
including the joint venture and the Company's interest therein. See
"Exploration and Production -- Indonesia" below and Note 16 of Notes to
Consolidated Financial Statements.
6
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PRODUCTION
The following table sets forth the Company's average daily production of
oil, natural gas liquids and gas during 1996, 1995 and 1994:
<TABLE>
<CAPTION>
UNITED EQUITY PARTNERSHIP
KINGDOM INDONESIA PAKISTAN INDONESIA
------- --------- -------- ------------------
<S> <C> <C> <C> <C>
Oil (MBbls per day):
1996................................ 43 6 6 2
1995................................ 40 6 5 2
1994................................ 35 6 5 2
Natural gas liquids (MBbls per day):
1996................................ 2 2
1995................................ 2 1
1994................................ 2 1
Gas (MMcf per day):
1996................................ 46 258(a) 41 85(a)
1995................................ 34 251(a) 45 83(a)
1994................................ 24 266(a) 43 88(a)
</TABLE>
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(a) Includes gas consumed in the operation of the Indonesian LNG plant.
OIL AND GAS PRICES AND PRODUCTION COSTS
The Company's average sales prices and production costs of oil, natural gas
liquids and gas for 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
UNITED EQUITY PARTNERSHIP
KINGDOM INDONESIA PAKISTAN INDONESIA
------- --------- -------- ------------------
<S> <C> <C> <C> <C>
Average sales prices:
Per Bbl of oil
1996................................ $19.60 $19.49 $17.75 $19.49
1995................................ 16.14 17.14 14.24 17.14
1994................................ 14.99 15.78 13.43 15.78
Per Bbl of natural gas liquids
1996................................ 14.47 18.04
1995................................ 10.92 18.11
1994................................ 9.46 17.56
Per Mcf of gas
1996................................ 2.83 3.34(a) 1.61 3.34(a)
1995................................ 2.78 2.90(a) 1.32 2.90(a)
1994................................ 2.57 2.72(a) 1.07 2.72(a)
Average production costs per boe(b):
1996................................ 4.31 3.22(c) 2.39 3.05(c)
1995................................ 5.05 3.02(c) 3.55 2.72(c)
1994................................ 5.56 3.06(c) 2.80 2.83(c)
</TABLE>
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(a) Includes natural gas sold to fertilizer plants and a refinery. The average
sales price for LNG for 1996, 1995 and 1994 was $3.52, $3.03 and $2.85 per
Mcf, respectively.
(b) Primarily includes expenditures for operating expenses.
(c) Includes plant processing costs and debt service on the Indonesian LNG
processing facilities.
7
<PAGE> 8
ACREAGE
The following table summarizes the Company's developed and undeveloped
acreage at December 31, 1996, by geographic area. As used herein and in
"Drilling Activities" below, the term "gross" refers to acres or wells in which
the Company owns a working interest, and the term "net" refers to gross acres or
wells multiplied by the percentage of the working interest owned by the Company.
<TABLE>
<CAPTION>
DEVELOPED ACRES UNDEVELOPED ACRES
--------------- -----------------
AREA GROSS NET GROSS NET
---- ------ ---- ------- ------
(NUMBERS IN THOUSANDS)
<S> <C> <C> <C> <C>
United States (Alaska)............................... 405 157
United Kingdom....................................... 148 20 823 140
Indonesia............................................ 97 25 5,598 2,297
Pakistan............................................. 31 9 3,697 1,744
Other International.................................. 9,632 4,676
--- -- ------ -----
Total...................................... 276 54 20,155 9,014
=== == ====== =====
Equity Partnership:
Indonesia.......................................... 97(a) 11 1,046(a) 121
=== == ====== =====
</TABLE>
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(a) The Company also has a direct interest in such gross developed and
undeveloped acreage, which is included above in the Company's gross acreage
for Indonesia.
DRILLING ACTIVITIES
At December 31, 1996, the Company's total gross and net productive oil and
gas wells, including multiple completions, by geographic area, were as shown in
the table below. The gross number of oil and gas wells with multiple completions
was 248.
<TABLE>
<CAPTION>
OIL WELLS GAS WELLS
------------- --------------
AREA GROSS NET GROSS NET
---- ----- ----- ----- ------
<S> <C> <C> <C> <C>
United Kingdom......................................... 70 13.33 29 4.60
Indonesia.............................................. 74 18.60 390 94.81
Pakistan............................................... 44 13.07 44 12.75
Other International....................................
--- ----- --- ------
Total........................................ 188 45.00 463 112.16
=== ===== === ======
Equity Partnership:
Indonesia............................................ 74(a) 8.19 390(a) 41.76
=== ===== === ======
</TABLE>
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(a) The Company also has a direct interest in such wells, which is included
above in the Company's gross wells for Indonesia.
8
<PAGE> 9
The net productive and dry exploratory wells drilled during 1996, 1995 and
1994, by geographic area, were as follows:
<TABLE>
<CAPTION>
EXPLORATORY WELLS
----------------------------------------
PRODUCTIVE DRY
------------------- ------------------
AREA 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
United States (Alaska)....................... 1.41(a) .22 .56
United Kingdom............................... .25 .16 .73 .20
Indonesia.................................... .44 .33 .26
Pakistan..................................... .56 1.42 .56 1.12 1.63 1.11
Other International.......................... 1.90 .75
---- ---- --- ---- ---- ----
Total.............................. 1.97 1.42 .81 1.94 4.59 2.88
==== ==== === ==== ==== ====
Equity Partnership:
Indonesia.................................. .11
====
</TABLE>
- ---------------
(a) Includes net interest in four wells drilled prior to 1996, which were in
suspense pending determination of commerciality.
The net productive and dry development wells drilled during 1996, 1995 and
1994, by geographic area, were as follows:
<TABLE>
<CAPTION>
DEVELOPMENT WELLS
----------------------------------------
PRODUCTIVE DRY
------------------- ------------------
AREA 1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
United Kingdom............................... .87 1.36 1.20 .20 .20
Indonesia.................................... 1.95 3.90 5.59
Pakistan..................................... 1.16 .86 .60 .86 .26 .60
---- ---- ---- ---- --- ---
Total.............................. 3.98 6.12 7.39 1.06 .46 .60
==== ==== ==== ==== === ===
Equity Partnership:
Indonesia.................................. .86 1.72 2.47
==== ==== ====
</TABLE>
At December 31, 1996, wells in progress were as follows:
<TABLE>
<CAPTION>
EXPLORATORY DEVELOPMENT
------------ -------------
AREA GROSS NET GROSS NET
---- ----- ---- ----- ----
<S> <C> <C> <C> <C>
United States (Alaska)................................... 1 .22
United Kingdom........................................... 20 2.16
Indonesia................................................ 5 1.22
Pakistan................................................. 3 .77
Other International...................................... 1 .20
-- ---- -- ----
Total.......................................... 5 1.19 25 3.38
== ==== == ====
Equity Partnership:
Indonesia.............................................. 5(a) .53
== ====
</TABLE>
- ---------------
(a) The Company also has a direct interest in such wells, which is included
above in the Company's gross wells for Indonesia.
At December 31, 1996, there were pressure maintenance programs in the U.K.
North Sea and in Pakistan.
9
<PAGE> 10
EXPLORATION AND PRODUCTION
U.K. NORTH SEA
The Company's principal U.K. North Sea properties include interests in the
Alba, Piper, Claymore, Saltire, Chanter, Scapa and Iona oil fields, the Sean gas
fields and the Britannia gas and condensate field. The Company also owns a 20%
interest in the Flotta terminal and pipeline system located in the Orkney
Islands of northern Scotland, which currently processes approximately 10% of the
U.K.'s oil production.
Alba Field. In July 1995, the Company acquired a 15.5% working and revenue
interest in the central U.K. North Sea's Block 16/26, which includes the Alba
oil field, for $270 million. The Alba field has been developed using a fixed
platform located in the northern part of the field from which oil is pumped to a
permanently moored floating storage unit three miles away. A dedicated shuttle
tanker transports oil to refineries in the U.K. and continental Europe. At
year-end, proved reserves (net) for the Alba field were 39 MMBbls of oil, of
which 23 MMBbls are classified as proved undeveloped. The Company anticipates
recording additional proved reserves based on the field's production history and
future development activity. The Alba field, which commenced production in
January 1994, is expected to produce for over 20 years with production to reach
peak levels in 1997 and 1998. Average daily production (net to the Company) for
1996 was 11 MBbls of oil. During 1996, Alba's production capacity was expanded
to handle over 100,000 gross barrels of oil a day. Chevron U.K. Limited operates
the field. Production from the Alba field is subject to U.K. corporation tax and
the U.K. Petroleum Revenue Tax ("PRT"), but is not subject to U.K. royalty.
Britannia Field. In 1994, the Company acquired a 9.42% unit interest in the
undeveloped Britannia natural gas and condensate field, a portion of which
underlies the Alba field, in the U.K. North Sea for $159 million. The Company's
total share of development costs for its interest in the Britannia field is
estimated to be less than $200 million, at current exchange rates, over a
five-year period from 1994 to 1998. As of December 31, 1996, the Company has
spent $91 million, of which $56 million was spent in 1996, for drilling
activities and initial platform fabrication and facilities work and expects to
spend approximately $43 million in 1997. The Britannia field is operated by
Britannia Operator Limited, a joint venture between Conoco (U.K.) Limited and
Chevron U.K. Limited. Production from Britannia is expected to begin in late
1998 with a production life of approximately 30 years. Long-term agreements have
been reached to sell a substantial portion of the gas production in the U.K.
market to: Kinetica Limited, Mobil Gas Marketing (U.K.) Limited, National Power
plc and Total Gas Marketing Limited. The gas production will be processed at the
SAGE terminal in St. Fergus in northeastern Scotland, which will be expanded by
the SAGE owners to accommodate the Britannia production. A pipeline will be
constructed by the Britannia owners to transport the production from Britannia
to the SAGE terminal. Also, a condensate line from Britannia to the Forties
field is scheduled for completion in 1997. As of December 31, 1996, proved
undeveloped reserves (net) for the Britannia field were 52 MMboe, which included
7 MMboe of reserve additions as a result of successful development drilling in
1996. The Company anticipates recording additional proved reserves based on the
field's development results and future production history. Production from the
Britannia field will be subject to the U.K. corporation tax, but will not be
subject to U.K. royalty or PRT.
Piper and Claymore Fields. In 1971, the Company joined a consortium of
companies, of which Elf Exploration UK PLC is now the operator, to explore for
oil and gas in certain areas of the North Sea. The Company has a 20% working
interest (17.5% revenue interest after government royalty) in the Piper and
Claymore fields discovered in 1972 and 1974, respectively. Production from Piper
and Claymore originally began in late 1976 and late 1977, respectively. After
being shut down in July 1988, Claymore recommenced in 1989, and Piper
recommenced in 1993 from a new fixed platform ("Piper B"). Oil production from
the fields is transferred 135 miles via the joint venture's pipeline to the
Flotta terminal. The proved reserves (net) as of December 31, 1996, contained in
the Piper and Claymore fields were 13 MMboe and 16 MMboe, respectively. Average
daily production of oil and liquids (net to the Company) for 1996 from the Piper
and Claymore fields was 12 MBbls and 7 MBbls, respectively. Saltire, Chanter and
Iona are satellite fields to Piper, and Scapa is a satellite field to Chanter.
Saltire Field. The Company has a 20% working and revenue interest in the
Saltire field, which was discovered by the joint venture in 1988. The field was
developed using a fixed platform connected subsea to
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<PAGE> 11
the Piper B platform. The Saltire platform was completed and production began in
May 1993. Average daily production (net to the Company) for 1996 was 9 MBbls of
oil and liquids. Proved reserves (net) at December 31, 1996, for Saltire were 6
MMboe.
Chanter Field. The Company has a 20% working and revenue interest in the
Chanter field, which is comprised of two reservoirs, one oil and the other
natural gas and condensate. Production from the Chanter field began in May 1993.
The Chanter field was developed as a subsea satellite to the Piper B platform.
Average daily production (net to the Company) for 1996 was 401 Bbls of oil and
liquids. The proved reserves (net) at December 31, 1996, for Chanter were 2
MMboe.
Iona Field. The Company has a 20% working and revenue interest in the Iona
field, which is a small edge oil field discovered in 1984. Following development
of the Saltire field and advances in extended reach drilling, the field is being
developed by drilling deviated wells from the Saltire platform. Government
approval of the development plan was received in October 1996. The first well
commenced production in late January 1997. Production will be from three
separate reservoirs. It is anticipated that the production data from testing of
the first well will lead to a staged development of other nearby fault blocks
that are known to contain oil within the Iona field boundary.
Scapa Field. The Scapa field, in which the Company has a 20% working and
revenue interest, was discovered in 1975 and is produced using a subsea
production facility tied to the Claymore platform. Average daily production (net
to the Company) for 1996 was 4 MBbls of oil and liquids. Proved reserves (net)
at December 31, 1996, for the Scapa field were 4 MMboe.
The Piper and Claymore fields are currently subject to PRT at a 50%
statutory rate, which is based on the net value of oil and gas produced from
each field and on pipeline tariffs. The U.K. tax structure has encouraged
development of fields in the North Sea by exempting all or part of their
production from PRT. These fields, such as the Saltire, Chanter and Scapa
fields, are referred to as edge oil fields because they generally have separate
field designations, incur little or no PRT, have no government royalty interest
burden and are developed as satellites from an existing platform. It is
anticipated that only small amounts of PRT, if any, will be paid on the
production from these fields. All production from any field receiving
development consent after March 16, 1993, such as the Britannia and Iona fields,
is exempt from PRT. Production exempted from PRT provides a greater contribution
to cash flow on a per-barrel basis. All production is subject to the U.K.
corporation tax, which is at the current rate of 33% (27.5% effective rate after
benefits provided by the U.K./U.S. tax treaty). Under current U.S. tax law, the
PRT and U.K. corporation tax may be credited against U.S. taxes.
Sean Fields. The Company has a 25% working interest (24.375% revenue
interest after overriding royalty) in the North, South and East Sean gas fields
located in the southern portion of the U.K. North Sea and operated by Shell U.K.
Limited. The proved reserves (net) as of December 31, 1996, contained in the
fields were 21 MMboe.
The Sean platforms, which currently serve the North, South and East Sean
fields, made their first deliveries in December 1986. Under the terms of a
long-term gas sales contract with British Gas Trading Limited ("BGT"), an
assignee of British Gas plc ("BG"), the Company will deliver, during each winter
contract period, an average minimum of 3.1 Bcf (net to the Company) from the
North and South Sean fields, up to the maximum field contractual reserve of 425
Bcf (104 Bcf net to the Company). This peak-shaving gas sales agreement also
provides that currently proved gas reserves from the North and South Sean fields
are dedicated to the buyer. The price under the gas sales agreement is based
upon the volume of gas taken and various U.K. price indices. The average price
for 1996 was $3.51 per Mcf. During the fall and winter months, the Company also
earns a capacity charge, which is independent of production levels, to ensure
field deliverability of 600 MMcf (gross) per day. The capacity charge for 1996
totaled $36 million (net to the Company), and the revenue for the volume of gas
taken on 56 days of production was $29 million (net to the Company). Production
from the North and South Sean fields is subject to U.K. corporation tax and PRT,
but is not subject to U.K. royalty.
11
<PAGE> 12
Discovered in 1994, the East Sean field is separated from the producing
reservoirs of the North and South Sean fields, and as a result, production from
the East Sean field is not dedicated to the peak-shaving contract with BGT.
During 1996, the Company's share of gas from the East Sean field was sold, on
the U.K.'s short term gas market, to a number of companies. Average daily
production (net to the Company) for 1996 was 12.3 MMcf per day. Production from
the East Sean Field is subject to U.K. corporation tax but is not subject to
U.K. royalty or PRT.
Customers. For 1996, the Company's U.K. operations had crude oil sales at
prevailing market prices to Elf Trading, a major international oil and gas
company, equal to 12% of the Company's total sales and operating revenues.
Because of the market for Northwest European crude oil, the Company believes
that the loss of this customer would not have a material adverse effect on the
Company. See Note 11 of Notes to Consolidated Financial Statements. The Company
has not been involved in any negotiations with BG in relation to BG's publicly
declared strategy to renegotiate its gas purchase agreements with producers in
the U.K. As part of its corporate reorganization, BG transferred its gas supply
business into a new public subsidiary company named Centrica plc ("Centrica"),
which has resulted in the Company's North and South Sean fields and Piper area
gas purchase agreements being assigned to BGT, a subsidiary of Centrica. The
Company cannot predict what effect, if any, such actions will have on the
Company.
Other Information. Production from the Company's interest in the U.K.
fields totaled 19 MMboe during 1996, an increase of 10% from 1995. In 1997, the
Company expects to maintain this 1996 production level. Payment to the Company
with respect to oil production from the Alba, Piper, Claymore, Saltire, Chanter,
Iona and Scapa fields is made in U.S. dollars, and payments for gas production,
including under the Sean gas sales agreements, are made in pounds sterling.
There are no significant restrictions on the repatriation of funds from the
Company's U.K. subsidiary to the U.S. Dividends paid to the Company by its U.K.
subsidiary are subject to a 25% U.K. advance corporation tax. Approximately
27.5% of this tax (or approximately 6.9% of the dividend paid) is available for
immediate refunding to the Company by the U.K. government. All of this tax
(including the refunded portion) may be credited against the U.K. corporation
tax paid by the Company's U.K. subsidiary.
In 1996, the Company completed an asset swap in the U.K. North Sea
resulting in a 20% working interest in Block 15/12b, which covers 19,570 acres
and lies immediately north of Block 15/17 containing the Piper field. One of the
identified prospects may be considered an edge oil accumulation. The operator, a
subsidiary of Texaco Inc., has budgeted an exploration well in Block 15/12b for
the fourth quarter of 1997. Also, the Company has an average 23% working
interest in Block 21/2 and will participate in an exploration well during the
first half of 1997.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
INDONESIA
The Company is engaged in oil and gas exploration, development and
production in Indonesia, primarily through a joint venture group it joined in
1969. Under a production sharing contract with Pertamina, the Indonesian
national oil company, which currently covers approximately 1.1 million acres,
the joint venture produces gas and, to a lesser extent, oil and condensate, in
the Sanga Sanga block in the East Kalimantan area. Substantially all of the
natural gas produced by the joint venture is supplied, pursuant to long-term
contracts with Pertamina, to a liquefaction plant owned by Pertamina at Bontang
Bay, approximately 35 miles from the production areas. At the Bontang plant, gas
is converted into LNG in parallel processing units ("trains") by reducing the
temperature of the gas to approximately minus 161 degrees Celsius. The Bontang
plant currently has six trains in operation, and construction of the seventh
train by Pertamina is scheduled for completion in late 1997. The financing of an
eighth train is expected to be consummated in March 1997 and construction is
expected to begin in 1997. After conversion, the LNG is pumped into specially
designed tankers (owned by third parties) and transported to purchasers in the
Pacific Rim, where it is returned to its original gaseous form and used for fuel
by electric utilities and industry. The Bontang plant also processes LPG.
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<PAGE> 13
Production Sharing Contract and Drilling. The joint venture's production
sharing contract with Pertamina grants the joint venture the right to share in
the production and revenues from the contract area, but not ownership rights in
the oil and gas reserves. The joint venture's contract area in East Kalimantan
includes substantial portions of two fields, Badak and Nilam, as well as several
other fields. The joint venture has relinquished 20% of the area covered by the
production sharing contract since 1990 when the contract was extended and is
required to relinquish the following additional amounts of the area covered by
the contract: 10% by August 7, 1998, 10% by December 31, 2000, 15% by December
31, 2002, and 15% by December 31, 2004. The joint venture, however, is not
obligated to relinquish any area from which oil or natural gas is produced.
The production sharing contract originally expired in 1998, but in 1990,
Pertamina and the joint venture amended the production sharing contract and
extended the joint venture's right to explore, develop and produce oil and gas
in the contract area until 2018 through a second production sharing contract,
containing terms and conditions generally similar to the amended production
sharing contract. References herein to the production sharing contract mean the
production sharing contract in effect for the applicable time period. The
production sharing contract entitles the joint venture participants to recover
most field and other operating costs, as well as capital depreciation, and to
receive, net of Indonesian taxes, 35% of the remaining gas production until
August 1998, and 25% or 30%, depending upon the applicable sales contract, with
some exceptions, of such production for the remaining term of the contract. The
production sharing contract also entitles the joint venture participants to take
their respective shares of oil and condensate production in kind, and after
recovering operating expenses and capital depreciation, to retain 15% of the
proceeds from sales of such production, net of Indonesian taxes. Proceeds from
the sale of oil and condensate (except for that sold pursuant to the joint
venture's domestic market obligation discussed below) are currently based on
official Indonesian crude oil prices and reflect world market prices.
The Company owns a 37.81% working interest in the joint venture (26.25%
directly and 11.56% through subsidiaries of Unimar, the Equity Partnership). The
Company's 11.56% indirect interest is subject to the right of holders of
Unimar's Indonesian Participating Units ("IPUs") to receive a percentage of
certain cash flow resulting from Unimar's interest in the joint venture until
September 25, 1999, at which time the IPUs will expire with no residual value to
the holder. In 1996, approximately one-fourth of the Company's interest in such
cash flow of Unimar was burdened by such payment obligation. Virginia Indonesia
Company, a participant in the joint venture and a subsidiary of Unimar, acts as
operator of the joint venture. The vote of participants holding 66 2/3% of the
total joint venture ownership interest is generally required for approval of
significant matters pertaining to the joint venture.
At December 31, 1996, proved reserves (net) attributable to the Company's
total interest in the joint venture were approximately 1.2 Tcf of gas and 24
MMBbls of oil and condensate. For a discussion of factors that impact Indonesian
reserve estimates, see "Reserves" above and Note 16 of Notes to Consolidated
Financial Statements. Substantially all of the joint venture's natural gas
production and reserves are committed to several long-term supply agreements
with Pertamina, which obligate the joint venture to supply certain minimum
quantities of natural gas. The Company believes that there are adequate reserves
in the joint venture's production sharing contract area to supply natural gas
under the joint venture's contractual commitments outstanding as of December 31,
1996. Pertamina continues to make progress in marketing additional LNG volumes.
The percentage of the natural gas supplied by the joint venture in support of
future LNG or LPG sales contracts, or renewals or extensions of existing
long-term sales contracts, is dependent primarily upon the uncommitted reserves
of natural gas that the joint venture has in its production sharing contract
area at the time that Pertamina establishes the allocation of the natural gas
supply for such sales contracts among the various contractor groups in the East
Kalimantan area, which participation percent has decreased. See "Sales
Contracts" below.
In 1996 and 1995, 8 and 16 successful development wells, respectively, were
drilled in fields in East Kalimantan. During 1997, the Company expects to spend
approximately $33 million on development projects. In addition, the joint
venture plans to continue exploration efforts in 1997 by seismic data
acquisition and exploratory drilling. The joint venture also continues to
evaluate the East Kalimantan area to identify
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<PAGE> 14
additional oil and gas prospects. All of these expenditures will be cost
recoverable pursuant to the production sharing contract.
The joint venture participants are required collectively to sell
approximately 8.5% of the total oil and condensate production from most existing
fields in the contract area at $0.20 per barrel for domestic Indonesian
consumption. The domestic market obligation is suspended, however, for the first
60 months of production from new fields in the contract area, after which the
price will be 10% of the realized Indonesian export price. These obligations are
factored into the Company's net reserves estimates. Each participant's remaining
oil and condensate production is generally sold in world oil markets. In
addition to the oil and condensate sold for domestic use, the joint venture
supplies gas for domestic consumption, and the amount supplied for such purposes
may increase or decrease in the future. Profits from gas supplied for domestic
consumption, which was sold at an average price of $1.08 per Mcf in 1996, are
less than from gas supplied for LNG. Gas supplied for domestic consumption
constituted less than 7% of the joint venture's gas production during 1996.
Bontang Plant. At the Bontang plant, natural gas supplied by the joint
venture and other production sharing contractors is converted to LNG, and
shipped in LNG tankers ("cargoes"). These specially designed tankers vary in
size, and the term "cargo" as used herein means 125,000 cubic meters of LNG.
During 1993, the completion of the debottlenecking project on the first four
trains and the completion of the sixth train increased the production capacity
of the Bontang plant, which currently has limited unused processing capacity.
See "Sales Contracts" below for more information. The amount of revenue that the
Company receives as a result of the production of natural gas in support of the
sale of LNG by Pertamina is dependent upon the number of cargoes shipped each
year, the Company's ultimate participation in each cargo, the price the buyers
must pay for the LNG purchased and the costs to be deducted from the proceeds of
sales of LNG.
The Bontang plant is owned by Pertamina and operated on a
cost-reimbursement basis by a corporation owned in part by the joint venture.
The financing of the original two trains was repaid in 1990, and the financing
for the second two trains was repaid in 1993. Financing for construction of the
fifth train at the Bontang plant was provided principally from Japanese sources
through a funding arrangement under which debt service is paid to the lenders by
the Trustee (as defined below) from the proceeds of LNG sales, primarily under
the contract signed in 1987 with Chinese Petroleum Corporation ("CPC"), the
national oil company of the Republic of China (Taiwan). Final repayment is
scheduled in 2000. In 1991, Pertamina arranged $750 million under a similar
financing arrangement for the construction of the sixth train and associated
facilities at the Bontang plant. Construction began in 1991 and was completed in
late 1993 at a cost of approximately $700 million. Repayment began in 1994 from
proceeds of the Osaka contract (as defined below), and final repayment is
scheduled in 2004. In July 1995, a $969.5 million financing was completed for
the seventh train, third dock, LPG expansion and other support facilities. The
financing was provided from Japanese sources through arrangements similar to
those used to finance the Bontang plant's fifth and sixth trains. Repayment is
scheduled to begin in 1998 principally from the proceeds of the short-term LNG
sales contracts with CPC and Korea Gas Corporation ("KGC") and starting in 2000,
from the proceeds of the extension of the 1973 contract. The construction of the
seventh train began in 1995 and is scheduled for completion in late 1997. In
March 1997, the $1,127 million financing of the eighth train to support the new
sales contracts discussed below is expected to be consummated and construction
is expected to begin in 1997. Financing of the fifth, sixth, seventh trains are,
and the eighth train will be, nonrecourse to both Pertamina and the joint
venture.
Sales Contracts. The joint venture currently has gas supply agreements with
Pertamina that support the long-term and short-term LNG sales contracts and
obligate the joint venture to provide certain quantities of natural gas for
fulfillment of Pertamina's obligations pursuant to the LNG sales contracts. The
supply agreements terminate concurrently with the expirations of their
respective LNG sales contracts. The Company's right to receive revenues from the
sale of LNG and LPG under existing contracts as well as any future new contracts
or extensions or renewals of existing contracts is affected by the allocation of
the gas supply obligation in support of Pertamina's sales contracts among the
joint venture and the other production sharing contractors supplying gas to the
Bontang plant, which allocations vary among the sales contracts. This allocation
is set by Pertamina and is primarily based upon uncommitted reserves of natural
gas available at the
14
<PAGE> 15
time Pertamina makes the allocation. The allocation to the Company's joint
venture in such contracts has declined over time since the initial 1973 sales
contract allocation at 97.9%, when the joint venture was virtually the only
supplier to the Bontang plant, to the present when there are two other major
production sharing contractors supplying gas to the Bontang plant and sharing in
the allocation of volumes. In 1996 and 1995, 106 Bcf and 99 Bcf, respectively,
net to the Company, were delivered to Pertamina under these supply agreements.
Production for the joint venture in Indonesia has peaked. The joint venture's
share, which also includes the Company's net interest, in LNG volumes from the
Bontang plant is expected to decline in 1997 by approximately 15% as compared to
1996 primarily due to a reduction in deliveries under the initial 1973 contract
in which the joint venture has a high allocation interest. The effect of such
lower gas supplies will not have as significant an impact on the Company's total
annual cash flow. A further decline in the joint venture's participation
percentage in LNG volumes is expected in 1998. See the table below for more
information.
LNG is currently sold by Pertamina to two groups of Japanese industrial and
utility customers and to CPC under long-term contracts signed in 1973, 1981 and
1987, respectively. Additionally, sales of LNG began in November 1994 under a
long-term contract signed in 1990 with a consortium of buyers organized by Osaka
Gas, a Japanese utility (the "Osaka contract"). LNG is also sold by Pertamina
under additional long-term contracts with KGC signed in 1983 and 1991 (the
"Korean Carryover" and "Korea II" contracts, respectively) and under the
long-term Mid-Cities Gas Companies ("MCGC") contract signed in 1992. Some of the
added capacity from the expansion of the LNG facilities during 1993 is also used
to supply LNG sold under short-term contracts to Japanese, Korean and Taiwanese
buyers. The sales price under the LNG sales contracts is tied to an average of
prices for exported Indonesian crude oil.
In 1995, Pertamina finalized agreements to extend the LNG contracts
originally signed in 1973 and 1981 until 2010 and 2011, respectively. Pertamina
also signed agreements for two new long-term LNG sales contracts with CPC (Badak
VI) and KGC (Badak V), which provide for LNG sales from 1998 until 2017. To
support the supply of the additional quantities of LNG required primarily by the
1973 extended contract, Pertamina is currently constructing the seventh train
with completion scheduled in late 1997. Following consummation of the financing
expected in March 1997, construction of an eighth train is expected to begin in
1997, primarily to support the supply of quantities of LNG required by the new
CPC and KGC long-term contracts.
The 1973 and 1981 contracts (including extensions thereof) and the CPC, CPC
(Badak VI), Osaka, Korean Carryover, Korea II, KGC (Badak V) and MCGC contracts
(collectively, the "long-term contracts") contain take-or-pay provisions that
generally require that the purchasers either take the contracted quantities or
pay for such quantities even if not taken. Prior to any extensions, the initial
term of each long-term contract is approximately 20 years. The other contracts
described in the table below are short-term contracts and generally have a term
of ten years or less. Of the remaining LNG sales volumes to be delivered after
December 31, 1996, under all of the contracts described in the table below, the
long-term contracts and the short-term contracts represent approximately 97% and
3%, respectively, of such deliveries.
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<PAGE> 16
The following table sets forth information regarding the Bontang LNG
plant's share of LNG sales contracts at December 31, 1996:
<TABLE>
<CAPTION>
JOINT
VENTURE'S
SHARE OF
REMAINING REMAINING
LNG LNG
SALES JOINT VENTURE SALES
CONTRACT VOLUMES PARTICIPATION VOLUMES
TERM (TBTU) %(A)(B) (TBTU)(C)
--------- --------- ------------- ---------
<S> <C> <C> <C> <C>
LONG-TERM:
1973..................................... 1977-1999 535 97.9/27.2 207
1973 Extension........................... 2000-2010 4,800 (d) (d)
1981..................................... 1983-2003 1,176 66.4/29.6 741
1981 Extension........................... 2003-2008 939 16.5 155
1981 Extension........................... 2008-2011 564 (e) (e)
CPC...................................... 1990-2009 1,166 29.6 345
CPC (Badak VI)........................... 1998-2017 1,722 21.6/16.5 287
Osaka (Badak IV)......................... 1994-2013 1,985 27.2 540
Korean Carryover......................... 1986-2006 145 50.0 72
Korea II................................. 1994-2014 844 27.2 230
KGC (Badak V)............................ 1998-2017 1,040 21.6/16.5 177
MCGC..................................... 1996-2015 349 27.2 95
SHORT-TERM:
Toho..................................... 1988-2000 20 29.6/27.2 6
KGC MOA.................................. 1995-1999 202 21.6 44
CPC MOA.................................. 1998-1999 46 21.6 10
KGC MOA.................................. 1996-1999 194 21.6 42
MOA (Aquarius)........................... 1997-1999 43 21.6 9
</TABLE>
- ---------------
(a) The joint venture's participation percentage is set by Pertamina based upon
uncommitted reserves of the various production sharing contractors supplying
gas to the Bontang plant. The participation percentages determined by
Pertamina apply to new contracts, or amendments or extensions of contracts,
entered into during certain time periods. During 1996, Pertamina set the
joint venture's participation percentage at 16.5%, based upon the joint
venture's uncommitted natural gas reserves certified as of April 30, 1995,
for the first five and a half years of the 1981 extension, 2000-2017 period
of the CPC (Badak VI) and the KGC (Badak V) long-term contracts, which
percentage was lower than the 21.6% set in 1995 based upon such reserves as
of May 31, 1994. For other future sales contracts, including the remaining
term of the 1981 extension and the final year of the 1973 extension, the
Company cannot predict the participation percentage of the joint venture in
such contracts, although absent the discovery of significant additional gas
reserves in the joint venture's contract area, the participation percentage
is expected to be less than 16.5%.
(b) Those contracts that show two joint venture participation percentages have
been amended or extended to provide for additional deliveries. The second
percentage indicates the portion of gas to be supplied under the amendment
or extension of such contract by the joint venture. The joint venture has a
97.9% and 27.2% interest in 87 and 448 remaining TBtus, respectively, of the
total 535 TBtus remaining to be sold under the 1973 contract; a 66.4% and
29.6% interest in 1,068 and 108 remaining TBtus, respectively, of the total
1,176 TBtus remaining to be sold under the 1981 contract; a 21.6% and 16.5%
interest in the 44 and 1,678 remaining TBtus, respectively, of the total
1,722 TBtus remaining to be sold under the CPC (Badak VI) contract; a 21.6%
and 16.5% interest in the 104 and 936 remaining TBtus, respectively, of the
total 1,040 TBtus remaining to be sold under the KGC (Badak V) contract; and
a 29.6% and 27.2% interest in the 6 and 14 remaining TBtus, respectively, of
the total 20 TBtus remaining to be sold under the Toho contract.
(Notes continued on following page)
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<PAGE> 17
(c) The joint venture's share of remaining LNG sales volumes represents volumes
available to the joint venture under the sales contracts for servicing its
share of plant operating and debt service costs, as applicable, for
recovering exploration, development and production costs and for profit
sharing between the joint venture and Pertamina.
(d) The joint venture's participation in the 1973 extension is 21.6% for the
period 2000-2009. The joint venture's share of the contracted volumes for
such period is 943 TBtus. As discussed in footnote (a) above, the joint
venture's participation in the final year of the 1973 extension has not been
determined by Pertamina and is not expected before 1999.
(e) As discussed in footnote (a) above, the joint venture's participation in the
remaining term of the 1981 extension has not been determined by Pertamina
and is not expected before 1999.
In general, the processing and operating costs of the Bontang plant are
charged to each LNG and LPG sales contract during each year based upon the ratio
of the sum of BTUs of LNG and LPG processed by the Bontang plant for each
contract to the total number of BTUs processed by the Bontang plant.
Under the 1973, extended 1973, extended 1981, Korean Carryover, MCGC, CPC,
certain KGC (Badak V) and CPC (Badak VI) long-term contracts and, in general,
the short-term contracts, LNG is sold on a delivered basis (i.e., title and risk
of loss do not pass until the LNG is unloaded at the customers' facilities).
Under the 1981, Osaka, Korea II and the remaining KGC (Badak V) contracts, LNG
is delivered F.O.B. (i.e., title and risk of loss pass upon loading at
Pertamina's port facility). Payments for LNG under all of the LNG sales
contracts are, or will be, made by the purchasers in U.S. dollars directly to a
bank in the U.S. that acts as trustee and paying agent (the "Trustee") with
respect to sales proceeds. Bontang plant processing fees, debt service with
respect to plant financings, transportation (as required) and other costs are
deducted from sales proceeds, and the balance is then distributed to Pertamina,
the members of the joint venture and the other production sharing contractors.
At December 31, 1996, the average LNG price under all contracts supplied
from the Bontang plant was $3.61 per MMBtu, or $3.99 per Mcf. Prices under the
contracts are subject to monthly adjustments. As of December 31, 1996, January
31, 1997, and March 1, 1997, the average price for the group of crude oils used
to determine the price of LNG was $23.12, $24.09 and $21.42 per Bbl,
respectively. The Company is unable to predict the amount or timing of future
changes in the price of this group of crude oils. Every $1.00 change in the
average of the price of this group of crude oils results in approximately a
$0.17 per Mcf change in the price of LNG.
Pertamina also sells LPG produced at the LPG processing facilities at the
Bontang plant under seven contracts with Japanese purchasers, each of which is
for a ten-year term. In 1997, the Bontang plant is expected to deliver an
aggregate of up to 1,000,000 metric tons of LPG (7.4 MMboe) per year to support
these contracts. The joint venture currently has 29.6% and 21.6% participations
in the gas processed at the Bontang plant to supply quantities of LPG to be sold
under the LPG contracts. Pertamina may from time to time sell quantities of LPG
outside of the seven LPG contracts, and to the extent that such sales are made,
the joint venture currently will have a 21.6% participation in the gas processed
at the Bontang plant to supply those additional sales. A significant portion of
the LPG sales proceeds from sales under the seven contracts is dedicated to the
repayment of financing of the LPG processing facilities at the Bontang plant.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
PAKISTAN
Badin Concessions
Since 1977, the Company has operated through joint ventures the exploration
for, and development and production of, oil and gas in the Badin area of the
Sindh Province in southeastern Pakistan. The Company's activities are conducted
under three concession agreements.
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1977 Concession. In April 1977, the Pakistan government granted exploration
rights in the Badin area to the Company and its co-venturers (the "1977
concession" or the "Badin-I concession"). The Company is the operator of a joint
venture that includes the Oil and Gas Development Corporation, a Pakistan
government-owned company. The oil and gas reserves discovered under the 1977
concession continue to be produced under leases granted by the Pakistan
government. The terms of such leases are 30 years from the date that they were
first granted. The Company has a 30% working interest (26.25% revenue interest)
in the 1977 concession area.
1992 Concession. In 1992, the joint venture was granted a three-year
extension of the exploration license that it originally received in 1977 (the
"1992 concession" or the "Badin-II concession"). The oil and gas reserves
discovered under the 1992 concession will be produced under 20-year leases
granted by the Pakistan government. Production from the 1992 concession began
during 1995. The Company has a 25.5% working interest (22.3% revenue interest)
in the 1992 concession area.
1995 Concession. The exploration license granted by the Pakistan government
in 1992 under the Badin II concession expired in January 1995. In December 1994,
the joint venture and the Pakistan government signed a new petroleum concession
agreement (the "1995 concession"). The 1995 concession provides that the
exploration license will expire in January 1998 and that the Company will act as
operator and will bear 38% of the costs of exploration, including 12.5%
attributable to the Pakistan government. Under the 1995 concession, the Company
will explore for and develop oil and gas on the 1.6 million acres in the Badin
area not covered by leases granted under the 1977 concession or the 1992
concession. As discoveries are made, the joint venture will apply for individual
20-year leases in which the Company will have a 25.5% working interest (22.3%
revenue interest), provided the Pakistan government elects to exercise its
option to increase its working interest in each such discovery to 25%.
The Pakistan government is contractually obligated under the 1992 and 1995
concession agreements to issue leases upon the determination of a commercial
discovery and the fulfillment by the joint venture of the conditions of the
concession agreements and the exploration license.
Proved reserves (net) at December 31, 1996, for the Company's interest in
the Badin concessions were 7 MMBbls of oil and 120 Bcf of gas. The joint venture
under the 1977 and 1992 concessions produced approximately 42% of Pakistan's
total domestic oil output and 9% of the country's gas production in 1996.
Average daily production (net to the Company) during 1996 was 6.2 MBbls of oil
and 41.4 MMcf of gas. The Company's share of the oil produced from the 1977 and
1992 concessions is sold for both Pakistan domestic use and for export. The
price received for oil sold domestically is tied to the average spot market
price of Middle Eastern crude oil. In 1996, the Company supplied 1.43 MMBbl of
oil (net to the Company) for export at prices based on competitive spot market
rates. The Company and its co-venturers sell natural gas produced from the 1977
concession area to Sui Southern Gas Company, Ltd. ("SSGC"). The contract expires
in 2003 and provides that SSGC must either take or pay for the contracted
quantities of natural gas. Natural gas produced from the 1992 concession area is
also sold to SSGC under a contract with terms similar to the SSGC contract
covering production from the 1977 concession.
During 1996, the Company drilled six exploratory wells in the Badin
concessions, two of which were discoveries. The discoveries included two oil
fields. During 1997, the Company plans to drill up to 10 exploration wells and
up to seven development wells in the Badin concessions.
Eastern Sindh Concession
In April 1995, the Company signed a concession agreement with the Pakistan
government covering 1.8 million acres in the Eastern Sindh block in the Sindh
Province of southeastern Pakistan for which the Company was granted an
exploration license in December 1994. The concession agreement and the
exploration license provide the Company with the right to explore for oil and
gas for an initial period of three years, with an option for three extensions of
one year each, and upon a commercial discovery, the right to apply for a 20-year
lease with the Pakistan government. The Company is the operator and has a 70%
working interest in the concession and exploration license, which is subject to
reduction if the Pakistan government elects to participate upon discovery of
commercial production. During 1996, the Company conducted seismic
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and other geological and geophysical studies. During 1997, the Company plans to
drill its initial exploration well on this concession.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
ALASKA
The Company pursues development and exploration projects in Alaska. At
year-end 1996, the Company held acreage primarily in Western Colville, the Kenai
Peninsula and offshore the Beaufort Sea in Alaska.
Western Colville. In 1996, the Company reported plans to develop the Alpine
oil field in the Western Colville area on Alaska's North Slope 34 miles west of
the Kuparuk River oil field. ARCO Alaska, Inc., the operator, Anadarko Petroleum
and the Company have a 56%, 22% and 22% working interest in Alpine,
respectively. Pending issuance of local, state and federal permits, field
construction and development would begin in the winter season of 1997 to 1998.
Production from Alpine is scheduled to begin in 2000 at an anticipated initial
rate of 30,000 barrels of oil per day gross, increasing to 60,000 barrels per
day gross in 2001. The field is anticipated to produce for about 25 years. Oil
from Alpine will be moved to market through a new 34-mile pipeline that will
connect Alpine to the Trans Alaska Pipeline via the Kuparuk pipeline system. As
of December 31, 1996, the Company recorded approximately 32 MMBbls as proved
undeveloped reserves for the Alpine field. The Company anticipates recording
additional proved reserves based on the field's development drilling and future
production performance. Development of the Alpine field is expected to cost $700
to $800 million gross. The Company expects to spend $8 million in 1997 for the
initial development of the field. In addition, the three companies were the high
bidders on five new leases covering 5,900 gross acres in the Colville area at
the state lease sale held in October 1996 by the State of Alaska.
Kenai Peninsula. Effective November 1, 1993, the Company entered into an
exploration agreement with Cook Inlet Region, Inc. ("CIRI"), an Alaska Native
Regional Corporation. As of March 1, 1997, the Company exercised options to
lease an additional 9,780 gross acres in the Kenai Peninsula in south central
Alaska. Under the agreement, the Company will bear 100% of the exploration costs
and may acquire leases on prospects identified, subject to CIRI's option to
participate in the leases and the exploration, drilling and development of such
prospects. In 1996 lease sales held by the State of Alaska and the University of
Alaska, the Company acquired four onshore blocks in the Kenai Peninsula. CIRI
has an election to acquire a 20% working interest in such leases under the terms
of the exploration agreement. As of February 15, 1997, the Company has
approximately 67,043 gross and 53,278 net acres under lease on the Kenai
Peninsula. Acquisition of additional seismic will begin in early 1997, and,
subject to the review and favorable results of such seismic, drilling is
scheduled to commence in late 1997.
Kuvlum. The Company holds a 100% working interest in the Kuvlum federal
exploratory oil and gas unit in the Beaufort Sea offshore Northern Alaska for
further analysis. The Company has determined that the Kuvlum unit is not
commercial as a stand-alone development, and is determining industry interest in
a joint development for the eastern Beaufort Sea and North Slope area.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
OTHER ACTIVITIES
In addition to the activities described above, the Company conducts
evaluations as well as undertakes exploration activities worldwide to expand its
reserve base. The Company has budgeted a total of $68 million for exploration
activities during 1997 in international areas, $30 million of which will be
spent in the U.K., Indonesia and Pakistan and $38 million in new ventures,
including primarily the activities described below. The Company is also pursuing
downstream opportunities in Pakistan, Indonesia and Latin America, including
electrical power generation, LPG and petrochemical projects.
Italy. The Company had interests in a total of 385,668 gross (112,155 net)
acres in the Southern Apennines oil play onshore southern Italy by the end of
1996. In 1996, the Company acquired interests in
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three onshore exploration permits covering approximately 100,630 gross (25,158
net) acres in the Basilicata Region in this play. The Company holds a 25%
working interest in each permit and, pending government approval, has acquired
an additional 25% interest. Triton Mediterranean Oil and Gas N.V. serves as
operator. In 1995, the Company acquired interests in three onshore exploration
permits covering 216,000 gross acres in the same region. The Company serves as
operator of and holds an 82% working interest in the Serra Corneta permit. The
Company also holds a 33.33% working interest in the Tempa dei Mercanti permit,
operated by Edison Gas, and a 20% working interest in the Forenza permit,
operated by LASMO International Limited. Geological and seismic studies on the
six permit areas were conducted in 1996 and will continue in 1997. In 1995 the
Company also acquired a 20% working interest in the onshore Baragiano permit,
which covers about 68,913 gross acres in the Basilicata Region, from Enterprise
Oil Exploration Ltd. ("Enterprise"). Enterprise serves as operator, and the
permit's first exploration well is currently drilling.
Tunisia. In 1993, the Company obtained an oil and gas exploration permit on
the one-million-acre Ramla block offshore Tunisia from the Government of
Tunisia. The block is situated about 80 miles offshore in the Gulf of Gabes,
approximately 140 miles southeast of the city of Tunis. The Company serves as
operator and bears 50% of the exploration costs. In the event of a commercial
discovery, the Tunisian national oil company has the right to participate for up
to a 50% working interest. The permit, which expires in January 1998, may be
extended for up to an additional two-year term under certain conditions. The
Company drilled one exploration well in 1995, which found a significant oil
column and an active hydrocarbon system, but poor reservoir quality at that
location made the accumulation non-commercial. At least one additional
exploration well is planned for 1997.
In 1994, the Company also acquired a 65% working interest in the onshore
Jeffara exploration permit, which covers 970,000 acres in the Medenine Region of
southeastern Tunisia. The Company's interest is subject to the Tunisian national
oil company's right to participate for up to a 50% working interest in the event
of a commercial discovery. The Jeffara exploration permit, which is operated by
the Company, has been extended through 1998. One exploration well is planned for
1997 following one unsuccessful exploration well drilled in 1995.
Ireland and U.K. The Company has a 25% working and revenue interest in two
full and two part offshore blocks encompassing 194,000 acres in St. George's
Channel offshore Ireland operated by Marathon Oil Company ("Marathon"). The
joint venture expects to study the results from the initial unsuccessful
exploration well to determine future drilling plans, which will be completed
prior to conversion or expiration of the license option in May 1997. In 1996 the
Company was awarded a one year option of operatorship and 100% equity of two
full and two part offshore blocks adjacent to the above acreage. These option
blocks cover 182,000 acres. The Company is currently processing seismic data to
evaluate the potential of these blocks.
The Company has acquired a 15% working and revenue interest in eight
offshore blocks covering 400,000 acres in St. George's Channel offshore Western
England operated by Marathon. This acreage contains a small gas discovery and is
complementary to the offshore Ireland acreage described above. An exploration
well in 1995 was unsuccessful and the joint venture plans to drill two
additional wells in 1997, one of which will be targeted at delineation of such
small gas discovery.
In 1995, the Company was awarded a 15% working and revenue interest in five
and one-half blocks, covering 344,000 acres in the Porcupine basin, offshore
southwest Ireland. In 1994, the Company acquired a 30% working and revenue
interest in 11 blocks offshore Ireland that cover 650,000 acres and are located
in the Atlantic Ocean about 43 miles west of Ireland in the Slyne/Erris basins.
Each of the Porcupine and the Slyne/Erris joint venture, operated by Statoil
(U.K.) Ltd., was granted a license to explore for oil and natural gas for a
15-year and 16-year period, subject to certain minimum work requirements at
three-year and four-year intervals, respectively. During the initial terms of
the exploration licenses, each joint venture has acquired seismic data and is
conducting additional geological and geophysical studies to determine whether
the geology warrants drilling any wells and continuing its respective license,
which decisions are required by the end of 1997.
Eastern Indonesia. In Eastern Indonesia, the Company is the operator of one
production sharing contract covering 4.6 million acres in the Maluku (Moluccas)
Island group in the Banda Sea. The Company has a
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44.44% working interest in the Kai production sharing contract. In 1996, the
Company drilled an unsuccessful well in such contract area and is studying
results from this well to determine if a future exploration program should be
undertaken in this area.
Argentina. The Company serves as operator and has a 50% working interest in
the Cuenca Colorado Marina-1 ("CCM-1") covering 2.2 million acres, located in
the South Atlantic Ocean about 310 miles south of Buenos Aires. The exploration
permit granted by the Argentine government currently extends until August 1997
and provides the Company with the option to extend the term of the agreement
until 2001 by meeting certain additional drilling obligations and an additional
two-year extension to 2003 by drilling one well for each year of such extension.
The joint venture has drilled three unsuccessful exploration wells and is
currently evaluating new seismic data and studying results from these wells to
determine future drilling plans, if any.
Australia and Papua New Guinea. The Company has an 80% interest in 81
blocks covering 1.3 million acres in the Canning Basin of Western Australia, for
which the initial exploration period of the permit expires in April 1998. During
1997, the Company plans to acquire seismic data to determine whether to exercise
its option to drill an exploratory well to retain its interest.
The Company also has a 25% interest in a 2.4 million acre prospecting
license located onshore and offshore the Papuan Basin in Papua New Guinea.
Following an unsuccessful well in 1993, the Company plans to conduct a new
seismic survey over the area in 1997 and may drill an exploration well in 1998.
Also, the Company is negotiating an agreement to participate in an onshore
exploration block.
Other. In 1997, the Company plans to participate in several new exploration
venture areas, pending government and certain partner approvals, including an
exploration well in Bolivia, a seismic program and up to two exploration wells
in Yemen, two stratigraphic test wells in the Hashemite Kingdom of Jordan, two
exploration wells in the People's Republic of China and seismic studies onshore
Greece. The Company is also pursuing opportunities in additional new exploration
ventures, including the Middle East, Central Asia, Latin America and Africa.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
PETROCHEMICALS
Plant Operations. The Company's petrochemical business consists primarily
of the Company's 41.67% interest in the jointly owned Geismar olefins plant
located on the Mississippi River near Baton Rouge, Louisiana. The joint owners
are BASF Corporation with a 41.67% interest and GE Petrochemicals, Inc. with a
16.66% interest. The plant began operations in 1968. The Company operates the
plant, with production costs and plant production being shared by the three
joint owners according to their ownership interests. The plant has the capacity
to produce approximately 1.25 billion gross pounds (521 million net) of ethylene
and 92 million gross pounds (38 million net) of polymer-grade propylene
annually. In 1996, the Company reported plans to construct a thirteenth ethylene
furnace at the plant. As part of the construction project, the Company also will
upgrade nine of the facility's furnaces. Construction of the new furnace and
upgrading of the nine original furnace units is expected to begin in May 1997
and be completed in February 1999. The new furnace is scheduled to commence
start-up operations in the fourth quarter of 1997. The additional furnace is
expected to increase the plant's annual production capacity by about 26 million
gross pounds, or 2%, to approximately 1.275 billion gross pounds (531 million
net). The total cost of the new furnace and upgrading project is estimated to be
approximately $27.8 million gross ($11.6 million net to the Company).
In 1996 and 1995, the Company's net ethylene sales were 509.6 million
pounds and 462 million pounds, respectively, and its net propylene sales were
33.6 million pounds and 35 million pounds, respectively. The Company sells its
share of the ethylene produced by the plant to a number of major customers for
the manufacture of plastics used in various consumer products. The sales price
of ethylene averaged $0.22 per pound in 1996 and $0.25 per pound in 1995. Sales
of propylene, used in the manufacture of various products
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such as building materials, clothing and tires, averaged $0.16 per pound and
$0.19 per pound in 1996 and 1995, respectively.
During 1996, the average margin per pound of the Company's ethylene was
$0.06 per pound as compared to $0.13 per pound for 1995. The Company's ethylene
margin is primarily affected by the price received for the ethylene and the cost
of feedstock (natural gas liquids) and natural gas.
Capital expenditures for the petrochemical business were $8 million (net to
the Company) during 1996. The Company plans to spend $32 million (net to the
Company) in capital expenditures for the petrochemical business during 1997,
which include costs for the 13th furnace and an upgrade to the feedstock supply
system as well as other projects to enhance production, safety and efficiency.
The Company completed a two week maintenance turnaround in January 1997.
Storage and Transportation. In addition to the Geismar plant, the Company
owns and operates a 192-mile ethane feedstock pipeline system, which transports
feedstock to its ethylene plant from several major suppliers, including the
Company's natural gas liquids fractionation plant and supporting 133-mile
pipeline system in Rayne, Louisiana. The Company plans to extend this system in
1997 to connect with a pipeline system that has access to Texas in order to
expand the Company's market for transporting ethane and other feedstocks from
Texas to manufacturers in Louisiana. The Company also operates underground
storage terminals and a 78-mile ethylene pipeline system, portions of which are
jointly owned, to serve the Geismar facility and several other petrochemical
plants primarily in the Baton Rouge area. In 1997, the Company also intends to
participate in pipeline connections to a gas liquids fractionator in
Napoleonville, Louisiana, which has access to new natural gas liquids
(feedstocks) associated with new Gulf of Mexico gas production.
See "-- Risk Factors" and Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.
OTHER MATTERS
Insurance. As is customary in the oil and gas and petrochemical industries,
the Company reviews its safety equipment and procedures and carries insurance
against some, but not all, risks of the business. See "Risk Factors." Losses and
liabilities would reduce revenues and increase costs to the Company to the
extent not covered by insurance. The oil and gas and petrochemical businesses
can be hazardous, involving unforeseen circumstances such as blowouts,
explosions or environmental damage. To address the hazards inherent in the oil
and gas and petrochemical businesses, the Company maintains a comprehensive
insurance program covering its worldwide interests. This insurance coverage
includes physical damage coverage, third party general liability insurance, as
well as redrill, well control, environmental and pollution and other coverage,
although coverage for environmental and pollution-related losses is subject to
significant limitations. In addition, the Company maintains business
interruption insurance on its major international oil and gas producing
interests and on its petrochemical business. The scope, terms, retentions,
amount and cost of all such insurances vary depending upon various market
factors and other considerations.
Employees. As of February 28, 1997, the Company had approximately 1,100
employees. The Company believes that its relations with its employees are good.
RISK FACTORS
Forward-Looking Statements. All statements other than statements of
historical fact contained in this report, including statements in Item
7 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations are forward-looking statements. When used herein, the words "budget,"
"anticipate," "expects," "believes," "seeks," "goals," "plans," "strategy,"
"intends," or "projects" and similar expressions are intended to identify
forward-looking statements. It is important to note that the Company's actual
results could differ materially from those projected by such forward-looking
statements and no assurance can be given that the expectations will prove
correct. In reliance upon the Private Securities Litigation Reform Act of 1995,
factors identified by the Company that could cause the Company's future results
to differ materially from the
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results discussed in such forward-looking statements include the following risks
described under "Risk Factors." All forward-looking statements in this report
are expressly qualified in their entirety by the cautionary statements in this
paragraph and shall be deemed in the future to be modified in their entirety by
the Company's public pronouncements, including those contained in all future
reports and other documents filed by the Company with the Securities and
Exchange Commission.
Volatility of Prices and Availability of Markets. The Company's revenues,
profitability and future rate of growth are highly dependent upon the prices of
and demand for oil and gas, which can be extremely volatile. The volatile energy
market makes it difficult to estimate future prices and sales volumes of natural
gas, crude oil and LNG, which are affected by a number of factors beyond the
control of the Company, including worldwide supplies of and demand for oil and
gas, changing international economic and political conditions, contract
enforceability, insolvency of other parties, domestic and foreign energy
legislation, weather, environmental conditions, regulations and events, and
actions of major petroleum producers including members of the Organization of
Petroleum Exporting Countries. If oil prices decline, the price for a
significant portion of the natural gas produced from the Company's properties,
including the sales price for LNG, will also decline. The ethylene business is
cyclical and the Company cannot predict the duration of any trends in the
business. The Company's ethylene margins have averaged approximately $0.06,
$0.13 and $0.06 during 1996, 1995 and 1994, respectively. The marketing and
prices received by the Company for its ethylene petrochemical business are
affected by worldwide and U.S. demand for petrochemicals, inventory levels,
feedstock costs and availability, plant utilization rates, plant operations and
costs and competitive capacity expansion. The marketability of the Company's
natural gas, crude oil, LNG and ethylene production depends in part upon the
availability, proximity and capacity of gathering systems and processing
facilities. The Company's financial condition, operating results and liquidity
may be materially affected by any significant fluctuations in its sales prices.
The Company's ability to service its long-term obligations and to generate funds
internally for capital expenditures will be similarly affected.
Business Risks. The Company's activities are subject to the risks normally
associated with oil and gas operations and petrochemical operations. The nature
of the oil and gas business involves a variety of risks usually associated with
exploration for, and development and production and transportation of, oil and
gas, including blowouts, cratering, oil spills, fires, geologic uncertainties
and adverse or seasonal weather conditions. Offshore operations are also subject
to marine perils and extensive governmental regulations, as well as interruption
or termination by governmental authorities based on environmental or other
considerations. The Company's operations, including its petrochemical
operations, are subject to certain additional risks, including the breakdown or
failure of equipment, downtime of production units due to turnarounds, the
performance of equipment at levels below those originally projected, and
explosions, fires, floods and other catastrophic events. In certain cases, the
Company is also at risk in regards to any interruptions in related facilities,
which are not under its control. For example, in Indonesia, the Bontang plant's
ability to manufacture and ship quantities of LNG is dependent upon the
continued operation of the Bontang plant without mechanical failure and without
the shutdown of any processing units in excess of scheduled maintenance periods.
The sale of LNG is also dependent upon the availability of shipping without
interruption and upon the continued operation of the buyers receiving terminals.
The manufacture, shipment, receipt and distribution of products produced, sold
or distributed by the Company, including LNG, can be interrupted or adversely
impacted by severe weather, acts of nature or other events. The costs associated
with transportation of certain products, including LNG, such as repair and
maintenance or replacement of LNG tankers, are beyond the control of the
Company. The occurrence of any of these events could cause injury to life or
property, interruptions in operations, failure to produce oil or gas in
commercial quantities, inability to fully produce discovered reserves, loss of
revenues and margins or increases in the costs of operations.
Uncertainties in Reserve Estimation, Production Success and Reserve
Replacement. There are numerous uncertainties inherent in estimating quantities
of reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
producer. The reserve data set forth in this report represent only estimates.
Underground accumulations of oil and gas cannot be measured in an exact way. The
accuracy of any reserve estimate is a function of the quality and quantity of
available data and of engineering and geological interpretation and judgment. As
a result, estimates by
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different engineers often vary. In addition, results of drilling, testing and
production subsequent to the date of an estimate may justify revision of such
estimate. Accordingly, reserve estimates at a specific point in time are often
different from the quantities of oil and gas that are ultimately recovered,
which differences may be significant. Additionally, the estimates of future net
revenues from proved reserves of the Company and the present value of future net
revenues are based upon certain assumptions about future production levels,
prices and costs that may not prove correct over time. The meaningfulness of
such estimates is highly dependent upon the assumptions upon which they were
based.
In general, the Company's volume of production from oil and gas properties
declines with the passage of time. Except to the extent the Company acquires
additional properties containing proved reserves or conducts successful
exploration or development activities, or both, the proved reserves of the
Company, and the revenues generated from production thereof (assuming no price
increases), will decline as reserves are produced. Drilling activities are
expensive and subject to numerous risks, including the risk that no commercially
viable oil or gas production will be obtained. The decision to purchase a
property interest or explore or develop a property will depend in part on
geophysical and geological analysis and engineering studies, the results of
which may be inconclusive or subject to varying interpretations. The cost of
drilling, completing and operating wells is often uncertain. Drilling may be
curtailed, delayed or canceled as a result of many factors, including title
problems, project approvals by joint venture partners, weather conditions,
compliance with government regulation, shortages or delays in obtaining
equipment, or limitations in the transportation, storage or market for products.
No assurance can be given that wells will be able to sustain production rates
commensurate with the drill stem tests. Increases or decreases in prices of oil
and gas and in cost levels, along with the timing of development projects, will
also affect revenues generated by the Company and the present value of estimated
future net cash flows from its properties. Revenues generated from future
activities of the Company are highly dependent upon the level of success in
finding, developing or acquiring additional reserves.
For the Company's reserves in Indonesia, the reserve estimates, which are
based on year-end prices, for the Company's net interest in the production
sharing contract are subject to revision as product prices and costs fluctuate
due to the cost recovery feature under the contract. The impact on reserves is
inversely related to price changes and directly related to changes in field
operating and capital costs. In addition, reserves are subject to revision due
to the effect that price fluctuations generally have on estimates of recoverable
reserves. See Note 16 of Notes to Consolidated Financial Statements. The
Company's right to receive revenues under its future new sales contracts or
extensions of renewals of existing contracts is affected by the gas supply
obligation in support of such contracts among the joint venture and other
production sharing contractors. The allocation to the Company's joint venture in
such contracts has declined significantly over time. Because a substantial
portion of the joint venture's reserves of natural gas has been committed to
support existing LNG sales contracts, the Company expects that absent the
discovery of significant additional natural gas reserves in the joint venture's
contract area, the joint venture's participation in future new sales contracts
for LNG and LPG, or in extensions or renewals of existing long-term contracts,
will be less than its current participation in existing contracts.
Governmental Actions, Regulation and Taxation. Petroleum and petrochemical
operations are subject to various types of regulation throughout the world. The
Company believes that its operations and facilities are in general compliance
with existing regulations. Nevertheless, the risks of substantive costs and
liabilities are inherent in operations such as the Company's, and there can be
no assurance that significant costs and liabilities will not be incurred in the
future. Legislation affecting these businesses is under regular review for
amendment or expansion, frequently increasing the regulatory burden. For
example, statutes and regulations require permits for drilling operations,
drilling bonds and reports concerning operations. Also, numerous departments and
agencies are authorized by statute to issue and have issued rules and
regulations binding on the oil and gas industry, the petrochemicals industry and
individual members of these industries. Such rules and regulations pose
difficult and costly compliance and reporting requirements, some of which carry
substantial penalties for the failure to comply. Most of the foreign countries
in which the Company operates have statutes and regulations governing the
Company's operations, including the unitization or pooling of oil and gas
properties, rates of production from oil and gas wells and taxation of sales and
production. The
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regulatory burden on the oil and gas industry and the petrochemical industry
increases the costs of doing business and, consequently, affects profitability.
The Company's international operations are subject to certain risks,
including expropriation of assets, governmental reinterpretation of applicable
laws and contract terms, increases in or assessments of taxes and government
royalties, renegotiation of contracts with governments or customers, government
approvals of lease, permit or similar applications and of exploration and
development plans, political and economic instability, guerilla activity,
disputes between governments, payment delays, export and import restrictions,
limits on allowable levels of exploration and production and currency shortages,
currency rate fluctuations, exchange losses and repatriation restrictions, as
well as changes in laws and policies governing operations of companies with
overseas operations, including more strict environmental regulation. In
addition, in the event of a dispute arising from foreign operations, the Company
may be subject to the exclusive jurisdiction of foreign courts or may not be
successful in subjecting foreign persons to the jurisdiction of courts in the
U.S. The Company may also be hindered or prevented from enforcing its rights
with respect to a governmental instrumentality because of the doctrine of
sovereign immunity. Foreign operations and investments may also be subject to
laws and policies of the U.S. affecting foreign trade, investment and taxation,
including but not limited to credibility of foreign taxes, that could affect the
conduct and profitability of those operations.
Competition. The Company operates in a highly competitive environment. The
Company actively competes with major and independent energy companies for
exploration leases, licenses, concessions and acquisitions of desirable
properties as well as for the equipment and labor required to develop and
operate such properties and market the products produced. Likewise, the Company
competes with other large domestic producers of ethylene in product price,
product quality, product deliverability and production capacity. Many of these
competitors have greater financial and other resources, such as technical
capabilities and human resources, substantially greater than those of the
Company. In addition, some of the Company's competitors have greater experience,
especially in certain international areas where the Company is currently seeking
to acquire interests or expand production capacity.
Environmental. Various international, federal, state and local laws and
regulations, including the preparation of environmental assessments and impact
studies that can delay drilling activity as well as covering the discharge of
materials, or otherwise relating to the protection of the environment, affect
the Company's operations and costs. In particular, the Company's petrochemical
wastes are subject to stringent environmental regulations relating to, among
other things, solid and hazardous waste management and disposal, air emissions,
waste water treatment and other matters that may affect the environment.
Environmental regulations have had an increasing impact upon the Company's
operations. The Company is committed to managing its operations in a safe and
environmentally responsible manner and believes that its operations and
facilities are in general compliance with applicable environmental regulations.
Environmental capital expenditures for 1996 were not material, nor are they
expected to be material during 1997. Nevertheless, the risks of substantial
costs and liabilities are inherent in operations such as the Company's. There
can be no assurance that significant costs and liabilities will not be incurred
by the Company in the future.
The Company has, in the past, owned, leased or operated numerous properties
in the U.S. that have been used for the production of oil and gas for many years
and currently participates in exploration and development activities in Alaska.
Although the Company believes that its past operating and disposal practices
were standard in the industry at the time and were generally in compliance with
then-existing rules and regulations, certain wastes may have been disposed of or
released or contamination may have occurred on or under the properties owned,
leased or operated by the Company. State and federal laws applicable to oil and
gas wastes and properties have gradually become more strict. In addition, the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
also known as the "superfund" law, and comparable state laws impose liability,
without regard to fault or the legality of the original conduct, on certain
classes of persons that have contributed to the release of a "hazardous
substance" into the environment. Under these laws, the Company could be required
with respect to past, existing and future properties, to remove or remediate
previously disposed of wastes or property contamination (including groundwater
contamination at onshore locations), to perform remedial plugging operations to
prevent future contamination or to clean up disposal sites where "hazardous
substances" from its operations have been taken.
25
<PAGE> 26
The Company's foreign operations are similarly subject to foreign laws
covering environmental and worker safety matters. Although these laws generally
have been less comprehensive than their U.S. counterparts, countries in which
the Company does business are increasing their environmental regulatory and
compliance standards. The Company's operations in the U.K. are subject to the
Prevention of Oil Pollution Act, the Environmental Protection Act and related
statutes and orders, as well as certain European Union agreements. The foreign
laws, however, have not had, and are not presently expected to have, a material
adverse effect on the Company's financial statements.
Hedging. The Company may enter into hedging contracts from time to time in
order to minimize the impact of adverse price fluctuations, including futures
contracts. To the extent the Company engages in such activities it may be
prevented from realizing the benefits of price increases above the levels of the
hedges. Risks related to hedging activities include the risk that counter
parties to hedge transactions will default on obligations to the Company. There
are also foreign exchange risks inherent in operations such as the Company's.
The Company's revenues are predominantly based upon the world market price for
crude oil, which is denominated in U.S. dollars. The functional currency for
translating the accounts of the Company's foreign subsidiaries is the U.S.
dollar, except for subsidiaries in the U. K. where the functional currency is
pounds sterling. Certain operating costs, taxes, capital costs and intercompany
transactions represent commitments settled in foreign currency. The Company
periodically enters into foreign exchange contracts as a hedge against
fluctuations in foreign currency rates. The Company cannot predict with any
certainty the results of currency exchange rate fluctuations. See Item
7 -- Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ITEM 2. PROPERTIES.
For a description of the Company's properties, see Item 1 of Part I of this
Annual Report on Form 10-K.
ITEM 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries and related entities are named defendants
in numerous lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business.
While the outcome of the contingencies, lawsuits or other proceedings
against the Company cannot be predicted with certainty, management expects that
such liability, to the extent not provided for through insurance or otherwise,
will not have a material adverse effect on the financial statements of the
Company. See Item 1 -- Business -- Risk Factors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to stockholders' vote during the fourth quarter
of the fiscal year ended December 31, 1996.
26
<PAGE> 27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Since September 24, 1987, the Company's common stock, $.05 par value (the
"Common Stock"), has been traded on the New York Stock Exchange and the Pacific
Stock Exchange under the symbol "UTH." As of February 28, 1997, there were
approximately 87,753,958 shares of Common Stock outstanding held by
approximately 284 stockholders of record. Beginning with the second quarter of
1988, the Company has paid regular quarterly dividends on the Common Stock of
$.05 per share each quarter. See Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations.
The following table shows the high and low sales prices of the Common Stock
from the New York Stock Exchange Composite Transactions Tape for 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------- ---------------------------------------
QUARTER ENDED QUARTER ENDED
--------------------------------------- ---------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High................. 20 1/4 20 1/4 21 3/4 23 23 1/8 23 7/8 21 1/2 19 7/8
Low.................. 17 5/8 18 18 5/8 20 5/8 18 1/4 21 18 17 1/8
</TABLE>
The last reported sale price of the Common Stock on the New York Stock
Exchange on February 28, 1997, was $18 1/2.
27
<PAGE> 28
ITEM 6. SELECTED FINANCIAL DATA.
The financial data as of and for the years ended December 31, 1992 through
1996 were derived from the audited consolidated financial statements of the
Company and should be read in connection with the consolidated financial
statements and related notes included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues...................................... $1,036,449 $ 876,029 $ 769,595 $ 696,663 $ 714,012
Costs and other deductions:
Product costs and operating expenses........ 341,057 299,133 299,586 301,276 316,985
Exploration expenses........................ 51,765 77,185 53,532 93,640 67,129
Depreciation, depletion and amortization.... 212,470 191,503 168,570 242,704 77,143
Selling, general and administrative
expenses.................................. 26,945 26,098 24,525 23,780 27,008
Interest expense............................ 25,173 28,783 11,399 6,369 3,958
Preferred dividends of a subsidiary......... 1,911 2,398
Other charges (credits), net................ 6,185
---------- ---------- ---------- ---------- ----------
Income before income taxes, extraordinary
items and cumulative effect of changes in
accounting principles....................... 379,039 253,327 211,983 26,983 213,206
Income taxes (benefit)........................ 226,812 150,977 145,245 (3,686) 103,808
---------- ---------- ---------- ---------- ----------
Income before extraordinary items and
cumulative effect of changes in accounting
principles.................................. 152,227 102,350 66,738 30,669 109,398
Extraordinary items(a)........................ (19,682)
Cumulative effect of changes in accounting
principles.................................. (3,743) (76,080)(b)
---------- ---------- ---------- ---------- ----------
Net income.................................... $ 152,227 $ 102,350 $ 66,738 $ 26,926 $ 13,636
========== ========== ========== ========== ==========
Net income (loss) applicable to common
stockholders................................ $ 152,227 $ 102,350 $ 66,738 $ 26,926 $ (16,586)
========== ========== ========== ========== ==========
Earnings (loss) per share of common stock:
Income before extraordinary items and
cumulative effect of changes in accounting
principles................................ $ 1.75 $ 1.17 $ .76 $ .35 $ .86
Extraordinary items......................... (.23)
Cumulative effect of changes in accounting
principles................................ (.04) (.89)
---------- ---------- ---------- ---------- ----------
Net income (loss)........................... $ 1.75 $ 1.17 $ .76 $ .31 $ (.26)
========== ========== ========== ========== ==========
Weighted average shares outstanding........... 87,155,028 87,686,777 87,642,451 87,218,027 85,823,320
Dividends per share of common stock........... $ .20 $ .20 $ .20 $ .20 $ .20
========== ========== ========== ========== ==========
BALANCE SHEET DATA (AT END OF PERIOD):
Net working capital........................... $ (77,297) $ (36,269) $ (44,439) $ (52,035) $ 33,630
Property, plant and equipment -- net.......... 1,632,423 1,551,198 1,286,278 1,088,884 1,198,949
Total assets.................................. 1,942,004 1,836,818 1,544,634 1,338,741 1,580,645
Long-term debt................................ 558,463 712,132 536,117 447,374 474,189
Redeemable preferred stock.................... 75,000
Common stock and other stockholders' equity... 586,022 423,790 349,499 281,246 269,197
</TABLE>
- ---------------
(a) In the first quarter of 1992, the Company recognized an extraordinary loss
of $20 million as a result of the early redemption of its Senior
Subordinated Reset Notes and 13% Subordinated Notes.
(b) In 1992, the Company adopted, effective January 1, 1992, two new accounting
standards for income taxes and postretirement benefits, respectively.
28
<PAGE> 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
1996 Compared with 1995. Net income for the year ended December 31, 1996
was $152 million, or $1.75 per share as compared to net income of $102 million,
or $1.17 per share for the year ended December 31, 1995. The 1996 earnings were
favorably impacted by higher worldwide oil prices, higher sales volumes in the
U.K., higher Indonesian LNG sales prices and volumes and lower exploration
expenses, partially offset by lower ethylene margins and the cost of a special,
one-time voluntary retirement program.
Sales and operating revenues for 1996 were $1,008 million, up from $852
million in 1995. International revenues totaled $813 million as compared to $651
million in 1995. In the U.K., sales and operating revenues increased by $83
million due to higher prices and increased sales volumes, which were primarily a
result of the July 1995 acquisition of an interest in the Alba field. In
Indonesia, sales increased $64 million due to higher LNG sales prices and
volumes and higher crude oil prices. In Pakistan, sales were $15 million above
1995 due to higher crude oil and gas prices, partially offset by lower gas
volumes.
The Company's participation share in LNG volumes delivered from its
Indonesian operations is expected to decline by approximately 15% in 1997 as LNG
cargo deliveries under certain sales contracts are replaced by ones in which the
Company has a lower average participation interest. The effect of such lower LNG
deliveries will not have as significant an impact on the Company's total annual
cash flow. Further declines are expected in 1998.
Petrochemical revenues totaled $193 million in 1996 as compared to $200
million in the prior year, while operating profit was $24 million as compared to
$62 million in 1995. 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. 13 cents per pound in 1995. The
effect of lower sales prices and increased feedstock costs was partially offset
by higher ethylene sales volumes.
Average prices received and volumes sold by the Company's major operations
during 1996 and 1995, respectively, were as follows:
<TABLE>
<CAPTION>
VOLUMES
PRICES (000S PER DAY)
---------------- --------------
1996 1995 1996 1995
------ ------ ----- -----
<S> <C> <C> <C> <C>
Crude oil (barrels):
U.K................................................. $19.60 $16.14 43 40
Pakistan............................................ 17.75 14.24 6 6
Indonesia........................................... 19.49 17.14 6 6
Indonesian LNG (Mcf).................................. 3.52 3.03 218 205
Pakistan natural gas (Mcf)............................ 1.61 1.32 41 45
U.K. natural gas (Mcf)................................ 2.83 2.78 46 34
U.S. ethylene (pounds)................................ .22 .25 1,392 1,267
</TABLE>
Exploration expenses decreased by $25 million due to lower new venture
drilling. Product costs and operating expenses and Depreciation, Depletion and
Amortization (DD&A) increased by $42 million and $21 million, respectively, due
principally to the increased volumes. Interest expense decreased by $4 million
reflecting the Company's reduced outstanding debt level.
1995 Compared with 1994. Net income for the year ended December 31, 1995
was $102 million, or $1.17 per share as compared to net income of $67 million,
or $.76 per share reported for the year ended December 31, 1994. The 1995
earnings were favorably impacted by higher U.S. ethylene margins and sales
volumes, higher volumes and prices in the U.K. and Pakistan and higher
Indonesian LNG prices, partially offset by higher exploration expenses, higher
interest expense and lower LNG volumes in Indonesia.
Sales and operating revenues for 1995 were $852 million, up from $748
million in 1994. International revenues totaled $651 million as compared to $578
million in 1994. In the U.K., sales and operating revenues
29
<PAGE> 30
increased by $63 million due to higher prices and increased sales volumes which
were primarily a result of the July 1995 acquisition of an interest in the Alba
field. In Indonesia, sales were $2 million below 1994 as a result of lower LNG
volumes, partially offset by higher prices. Lower LNG volumes were attributable
to a lower average participation interest in cargoes delivered during 1995 and
the timing of deliveries. In Pakistan, sales were $12 million above 1994 due to
higher volumes and prices.
Petrochemical revenues totaled $200 million in 1995 as compared to $169
million in the prior year, while operating profit was $62 million as compared to
$24 million in 1994. The increase in operating profit was primarily due to
higher ethylene sales prices and lower feedstock cost, which resulted in an
increase in ethylene margins to 13 cents per pound in 1995 vs. 6 cents per pound
in 1994, as well as higher volumes.
Exploration expenses increased by $24 million primarily due to drilling
expenditures in Argentina, Ireland, Tunisia, Vietnam and Eastern Indonesia.
Interest expense increased by $17 million during the year due to higher levels
of debt associated with the Alba acquisition and to higher interest rates. The
effective tax rate decreased from the prior year due primarily to the increase
in U.S. petrochemical income, which is taxed at lower rates, partially offset by
higher new venture exploration expenses, most of which generate no tax benefits.
FINANCIAL CONDITION AND LIQUIDITY
General. In order to increase value for all the Company's stockholders, the
Company's long-term growth strategy is an active program focused on development
of core producing assets, participation in a diversified exploration program,
growth of its petrochemical business, participation in enhanced production
ventures and achievement of quality acquisitions. The Company will pursue
opportunities worldwide in Italy, Tunisia, Alaska, Latin America, Australia,
Africa, China, the Middle East and Central Asia as well as in its core areas in
the U.K., Indonesia and Pakistan. An important key to growth for the Company is
finding, developing or acquiring new reserves to replace its reserves that are
depleted by production and that are at normal decline in production rates as
well as to offset the significant lesser participation share of the gas volumes
the Company has and will have to support Indonesian LNG sales contracts. In
1997, the Company plans to participate in 25 to 30 exploration wells including
exploration programs at its producing ventures in the U.K. North Sea, Indonesia
and Pakistan. At year-end 1996, estimated proved worldwide reserves grew to 443
MMboe from 435 MMboe at year-end 1995 and the Company replaced about 144% of its
worldwide production over the three year period 1994 through 1996. The Company's
oil and gas production costs per barrel of oil equivalent averaged $3.61 per
barrel in 1996, down from $3.95, $3.98, $4.73 and $5.46 in 1995, 1994, 1993 and
1992, respectively. The Company replaced approximately 117% of its 1996
worldwide production. In addition to growth in its oil and gas business, the
Company is studying opportunities for increasing production in its Gulf Coast
petrochemical business. Achievement of the Company's growth strategy will
require significant capital investments as well as success capturing and
implementing investment opportunities in a very competitive industry
environment.
The Company's capital expenditures for 1997 are estimated to be $229
million, excluding capitalized interest, and reflect a focus on core holdings
and a diversified exploration program. Approximately $127 million of the 1997
capital budget is allocated for oil and gas development projects, including $43
million for the continued development of the Britannia field and $10 million for
development activities at the producing Alba oil field. The Company has budgeted
approximately $68 million for exploration projects in Italy, Tunisia, Alaska,
Latin America, Australia, Africa, China and the Middle East, as well as the
U.K., Indonesia and Pakistan where the Company currently has operations. The
Company has also budgeted approximately $32 million for its petrochemical
interests in the United States, including the construction and installation of
an additional furnace at its jointly-owned ethylene plant in Geismar, Louisiana
and enhancement of its feedstock supply system. During 1997, the Company also
intends to evaluate opportunities worldwide for acquisitions of both developed
and undeveloped oil and gas reserves and petrochemical interests, the costs of
which are not included in the capital expenditure budget. Based on existing
economic and market conditions, the Company believes operating cash flow will be
sufficient to fund its 1997 development and exploration activities and that its
available equity and financial credit strength give the Company financial
resources to make acquisitions.
30
<PAGE> 31
The Company's business and strategy are impacted by prices the Company
receives for its crude oil, LNG, natural gas and ethylene that are subject to
many factors beyond the Company's control. Although the Company cannot predict
with any degree of certainty the prices it will receive in 1997 and future years
for its products, it estimates that a change of $1.00 in the average price of
crude oil and LNG impacts the Company's net income and cash flow by
approximately $19 million and $23 million, respectively. Also, the Company
estimates that a margin change of an average one cent per pound of ethylene for
an entire year at full capacity production can affect net income and cash flow
on an annualized basis for the petrochemical business of the Company by
approximately $4 million.
Cash flow from operations. Net cash provided by operating activities was
$384 million in 1996, an increase of $150 million from the prior year. The
increase was primarily the result of improved worldwide oil prices, higher sales
volumes in the U.K. and higher Indonesian LNG prices and volumes partially
offset by lower ethylene margins.
Capital resources. Capital expenditures for 1996 were $186 million, an
increase from the prior year's expenditures of $172 million. This increase was
primarily the result of higher development capital related to the Britannia
field in the U.K. North Sea. In 1996, 1995 and 1994, total Company capital costs
incurred, including capitalized interest and the 1995 Alba and 1994 Britannia
acquisitions, totaled $212 million, $465 million and $309 million, respectively.
On July 18, 1995, the Company, through its subsidiary, Union Texas
Petroleum Limited ("UTPL"), acquired from Oryx UK Energy Company ("Oryx") a
15.5% working interest in Block 16/26 in the central U.K. North Sea, which
includes the Alba field. UTPL paid Oryx $270 million for the interest. The
effective date of the transaction was July 1, 1995.
Financing activities. During 1996 the Company utilized cash flow from
operations to pay down $154 million of its debt and to repurchase $32 million of
its outstanding common stock. The Company had two unsecured credit facilities
(the "Credit Facilities") at December 31, 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. The other 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 Company is
in negotiations to replace the $100 million credit facility and extend the
maturity of the $450 million facility. At December 31, 1996, no amounts were
outstanding under the Credit Facilities. The $450 million revolver 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 revolver
may be made in both pounds sterling and U.S. dollars at the option of the
Company. Loans under the Credit Facilities bear interest at floating market
rates based on, at the Company's option, the agent bank's base rate or LIBOR,
plus applicable margins, subject to increase 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 December 31, 1996, the Company's adjusted stockholders' equity
was approximately $608 million. The Credit Facilities provide the Company with
the ability to borrow on a long-term basis.
Due to the Company's ability to obtain favorable interest rates on
short-term borrowings, uncommitted and unsecured lines of credit were
established with several banks 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 ability to refinance them on a
long-term basis through its Credit Facilities. At December 31, 1996, $57 million
was outstanding under these money market lines which bore interest at a weighted
average rate of 6.5% per annum. At February 28, 1997, $0 million and $18 million
were outstanding under the Credit Facilities and the uncommitted lines of
credit, respectively. As of such date, the Company had approximately $532
million of such available financing.
31
<PAGE> 32
In May 1995, the Company's indirect subsidiary, Union Texas Britannia
Limited ("UTBL"), which is a wholly owned subsidiary of UTPL, entered into 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 (including interest and other financing costs
incurred prior to completion and potential cost overruns), and any remaining
availability after completion may, subject to certain coverage ratios being met,
be used for UTBL's general corporate purposes. Except for certain support by
UTPL related to any potential cost overruns in excess of the facility amount
(limited to 30 million pounds sterling), insurance, tax benefits and
administrative services, the lenders' recourse will be limited to the Britannia
field project assets and is nonrecourse to the Company. The financing has a
final maturity in September 2005. At December 31, 1996, 58 million pounds
sterling ($99 million) was outstanding under UTBL's financing which bore
interest at a weighted average rate of 7.1% per annum.
The Company has outstanding $100 million principal amount of 8.25% Senior
Notes due 1999, $125 million principal amount of 8 3/8% Senior Notes due 2005
and $75 million principal amount of 8 1/2% Senior Notes due 2007 (collectively
the "Senior Notes"). In 1995 the Company issued $100 million aggregate principal
amount of medium term notes ("MTN") with terms of seven and twelve years and
interest rates varying from 6.51% to 6.81%. The Senior Notes and MTN are
referred to herein as the "Notes." The Notes represent general unsecured
obligations of the Company and rank pari passu in right of payment with the
Company's obligations under its Credit Facilities, and senior in right of
payment to any future subordinated indebtedness of the Company. Each of the
Notes contain similar restrictive covenants. The Notes are redeemable at any
time, at the option of the Company, in whole or in part, at a price equal to
100% of their principal amount plus accrued interest plus a make-whole premium
relating to the then-prevailing Treasury Yield and the remaining life of the
Notes.
At the 1995 Annual Meeting of Stockholders, the Company's stockholders
approved the authorization of a new class of 15 million shares of preferred
stock. The preferred stock, none of which is outstanding, provides the Company
additional financing flexibility to issue such stock from time to time based on
current market conditions.
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, all of which
were repurchased by the end of 1996, including 1,445,464 shares during 1996. On
October 24, 1996, the Company's Board of Directors authorized the repurchase of
up to an additional 2,000,000 shares of the Company's common stock, and pursuant
thereto, the Company had repurchased 178,736 shares as of December 31, 1996.
During 1996 the Company repurchased a total of 1,624,200 shares at an average
price of $19.92 per share. The repurchased stock will be used for general
corporate purposes, including fulfilling employee benefit program obligations.
At December 31, 1996, 1,490,322 shares of common stock were held, at cost, as
treasury shares.
As of December 31, 1996, the Company's scheduled maturities of long-term
debt outstanding for the five-year period of 1997 through 2001 are approximately
$2 million, $0 million, $117 million, $34 million and $94 million, respectively.
The Company believes that it will have sufficient sources of funds to satisfy
these scheduled maturities. The Company may enter into interest rate swap
contracts from time to time. However, the Company did not enter into any
interest rate swap contracts during 1996.
Financial Condition. In each of the four quarters ended December 31, 1996,
the Company declared and paid a dividend of approximately $4.4 million on its
common stock. On January 17, 1997, the Company announced a dividend on its
common stock of $.05 per share to stockholders of record as of January 31, 1997,
which was paid on February 15, 1997.
The Company has made approximately $24 million of alternative minimum tax
("AMT") payments, which can be applied to future U.S. Federal tax liabilities.
In addition, the Company has approximately $115 million of Net Operating Loss
("NOL") carryforwards, which could be applied against future U.S. taxable
income. A full valuation allowance has been provided against these carryforwards
due to the uncertainty of their application.
32
<PAGE> 33
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. In 1996, the Company entered into financial futures contracts to hedge a
portion of its North Sea crude oil production. In 1996 the Company settled crude
oil hedging contracts of 1,488,000 barrels at average Brent prices of $17.21 per
barrel. As of February 28, 1997, the Company did not have any open contracts.
The functional currency for translating the accounts of foreign
subsidiaries is the U.S. dollar, except for subsidiaries in the U.K. where the
functional currency is pounds sterling. The Company's revenues are predominantly
based upon the world market price for crude oil, which is denominated in U.S.
dollars. Certain operating costs, taxes, capital costs and intercompany
transactions represent commitments settled in foreign currencies. Exchange rate
fluctuations on transactions in currencies other than the functional currency
are recognized as gains and losses in current period income. The Company
periodically enters into foreign exchange contracts as a hedge against
fluctuations in foreign currency rates. These contracts are generally of a
short-term nature. At December 31, 1996, the Company had open contracts with a
net value of 9 million pounds sterling. However, there are foreign exchange
risks inherent in operations such as the Company's, and the Company cannot
predict with any certainty the results of currency exchange rate fluctuations.
The foregoing discussion of the Company's financial condition and liquidity
includes in several instances forward-looking statements, which are based upon
management's good faith assumptions relating to the financial, market, operating
and other relevant environments that will exist and affect the Company's
business and operations in the future. No assurance can be made that the
assumptions upon which management based its forward-looking statements will
prove to be correct, or that the Company's business and operations will not be
affected in any substantial manner by other factors not currently foreseeable by
management or beyond the Company's control. All forward-looking statements
involve risks and uncertainty, including, but not limited to, the following:
volatility of crude oil, LNG, natural gas and ethylene prices, production
variances from expectations, the need to develop and replace reserves,
environmental risks, drilling and operating risks, risks related to exploration
and development projects, uncertainties about estimates of reserves,
competition, government actions and regulations, and the ability of the Company
to implement its business strategy. For additional discussion of such risks,
uncertainties and assumptions, see Item 1. Business -- Risk Factors.
33
<PAGE> 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 35
Consolidated Balance Sheet, December 31, 1996 and 1995...... 36
Consolidated Statement of Operations, Years Ended December
31, 1996, 1995 and 1994................................... 37
Consolidated Statement of Cash Flows, Years Ended December
31, 1996, 1995 and 1994................................... 38
Consolidated Statement of Stockholders' Equity, Years Ended
December 31, 1996, 1995 and 1994.......................... 39
Notes to Consolidated Financial Statements.................. 40
</TABLE>
34
<PAGE> 35
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Directors of
Union Texas Petroleum Holdings, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Union Texas Petroleum Holdings, Inc. and its subsidiaries at
December 31, 1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Houston, Texas
February 14, 1997
35
<PAGE> 36
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 43,574 $ 11,069
Accounts and notes receivable, less allowance for doubtful
accounts............................................... 96,687 77,517
Inventories............................................... 39,721 42,764
Prepaid expenses and other current assets................. 23,560 27,924
---------- ----------
Total current assets.............................. 203,542 159,274
Equity investment........................................... 93,262 108,476
Property, plant and equipment, at cost, less accumulated
depreciation, depletion and amortization*................. 1,632,423 1,551,198
Other assets................................................ 12,777 17,870
---------- ----------
Total assets...................................... $1,942,004 $1,836,818
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 2,290 $ 2,292
Accounts payable.......................................... 103,225 95,768
Taxes payable............................................. 126,813 55,779
Other current liabilities................................. 48,511 41,704
---------- ----------
Total current liabilities......................... 280,839 195,543
Long-term debt.............................................. 558,463 712,132
Deferred income taxes....................................... 391,534 395,289
Other liabilities........................................... 125,146 110,064
---------- ----------
Total liabilities................................. 1,355,982 1,413,028
---------- ----------
Stockholders' equity:
Common stock.............................................. 4,391 4,391
Paid in capital........................................... 18,863 19,405
Cumulative foreign exchange translation adjustment and
other.................................................. (21,955) (75,077)
Retained earnings......................................... 614,376 479,620
Common stock held in treasury, at cost, 1,490,322 shares
at December 31, 1996 and 247,145 shares at December 31,
1995................................................... (29,653) (4,549)
---------- ----------
Total stockholders' equity........................ 586,022 423,790
---------- ----------
Total liabilities and stockholders' equity........ $1,942,004 $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.
36
<PAGE> 37
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- -------- --------
<S> <C> <C> <C>
REVENUES:
Sales and operating revenues............................ $1,008,476 $851,601 $747,883
Interest income and other revenues...................... 1,836 3,557 1,268
Net income of equity investee........................... 26,137 20,871 20,444
---------- -------- --------
1,036,449 876,029 769,595
COSTS AND OTHER DEDUCTIONS:
Product costs and operating expenses.................... 341,057 299,133 299,586
Exploration expenses.................................... 51,765 77,185 53,532
Depreciation, depletion and amortization................ 212,470 191,503 168,570
Selling, general and administrative expenses............ 26,945 26,098 24,525
Interest expense........................................ 25,173 28,783 11,399
---------- -------- --------
Income before income taxes................................ 379,039 253,327 211,983
Provision for income taxes................................ 226,812 150,977 145,245
---------- -------- --------
Net income................................................ $ 152,227 $102,350 $ 66,738
========== ======== ========
EARNINGS PER SHARE OF COMMON STOCK:
Net income.............................................. $ 1.75 $ 1.17 $ .76
========== ======== ========
DIVIDENDS PER SHARE OF COMMON STOCK....................... $ .20 $ .20 $ .20
========== ======== ========
Weighted average number of shares outstanding (000's)..... 87,155 87,687 87,642
========== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
37
<PAGE> 38
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 152,227 $ 102,350 $ 66,738
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization........... 212,470 191,503 168,570
Deferred income taxes.............................. (31,588) (19,576) (11,962)
Net income of equity investee...................... (26,137) (20,871) (20,444)
Other.............................................. 2,981 3,581 4,027
--------- --------- ---------
Net cash provided by operating activities before
changes in other assets and liabilities....... 309,953 256,987 206,929
(Increase) in accounts and notes receivable...... (17,793) (22,667) (4,510)
(Increase) decrease in inventories............... 4,228 1,351 (8,187)
(Increase) decrease in prepaid expenses and other
assets........................................ 10,569 (6,628) 6,303
Increase in accounts payable and other
liabilities................................... 8,410 3,233 19,719
(Decrease) increase in income taxes payable...... 68,630 1,649 (5,618)
--------- --------- ---------
Net cash provided by operating activities........ 383,997 233,925 214,636
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment............ (181,967) (412,039) (299,578)
Cash provided by equity investee...................... 41,351 26,900 9,050
Cash required by sale of businesses, net.............. (809) (2,488)
--------- --------- ---------
Net cash required by investing activities............. (140,616) (385,948) (293,016)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from long-term debt...................... 61,440 327,103 80,503
Payments to settle long-term debt..................... (2,292) (2,292) (37,292)
Net payments under credit facilities.................. (132,000) (193,503)
Net (payments)/proceeds from money market lines of
credit............................................. (92,069) 43,151 47,130
Purchase of treasury stock............................ (32,360) (4,136) (6,089)
Proceeds from issuance of treasury stock.............. 3,876 1,916 1,593
Proceeds from issuance of common stock................ 311
Dividends paid........................................ (17,471) (17,536) (17,530)
--------- --------- ---------
Net cash provided (required) by financing
activities......................................... (210,876) 154,703 68,626
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents........................................ 32,505 2,680 (9,754)
Cash and cash equivalents at beginning of year.......... 11,069 8,389 18,143
--------- --------- ---------
Cash and cash equivalents at end of year................ $ 43,574 $ 11,069 $ 8,389
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)............... $ 22,882 $ 29,765 $ 11,933
Income taxes....................................... 190,517 168,140 154,669
</TABLE>
The accompanying notes are an integral part of this financial statement.
38
<PAGE> 39
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK (SHARES)
Authorized........................................ 200,000,000 200,000,000 200,000,000
=========== =========== ===========
Issued:
Beginning of year.............................. 87,829,283 87,829,283 87,805,095
Issuance of stock.............................. 24,188
----------- ----------- -----------
Ending balance................................. 87,829,283 87,829,283 87,829,283
=========== =========== ===========
COMMON STOCK AT PAR VALUE ($.05 PER SHARE)
Beginning of year................................. $ 4,391 $ 4,391 $ 4,390
Issuance of stock................................. 1
----------- ----------- -----------
Ending balance.................................... $ 4,391 $ 4,391 $ 4,391
=========== =========== ===========
PAID IN CAPITAL
Beginning balance................................. $ 19,405 $ 19,889 $ 20,436
Issuance of stock................................. 312
Reissuance of treasury stock...................... (542) (484) (859)
----------- ----------- -----------
Ending balance.................................... $ 18,863 $ 19,405 $ 19,889
=========== =========== ===========
CUMULATIVE FOREIGN EXCHANGE TRANSLATION ADJUSTMENT
AND OTHER
Beginning balance................................. $ (75,077) $ (65,476) $ (86,545)
Translation adjustments........................... 53,044 (9,406) 20,182
Supplemental pension plan minimum liability....... 78 (195) 887
----------- ----------- -----------
Ending balance.................................... $ (21,955) $ (75,077) $ (65,476)
=========== =========== ===========
RETAINED EARNINGS
Beginning balance................................. $ 479,620 $ 394,806 $ 345,598
Net income........................................ 152,227 102,350 66,738
Dividends on common stock......................... (17,471) (17,536) (17,530)
----------- ----------- -----------
Ending balance.................................... $ 614,376 $ 479,620 $ 394,806
=========== =========== ===========
TREASURY STOCK, AT COST
Beginning balance................................. $ (4,549) $ (4,111) $ (2,633)
Purchases......................................... (32,360) (4,136) (6,089)
Issues............................................ 7,256 3,698 4,611
----------- ----------- -----------
Ending balance.................................... $ (29,653) $ (4,549) $ (4,111)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
39
<PAGE> 40
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company is engaged in oil and gas exploration and production
principally overseas and petrochemical manufacturing in the United States.
International activities are conducted primarily in Indonesia, the United
Kingdom sector of the North Sea, Pakistan and other strategic areas. Two limited
partnerships (the "KKR Partnerships"), organized and controlled by an affiliate
of Kohlberg Kravis Roberts & Co. ("KKR"), own approximately 25% of the Company's
issued and outstanding common stock.
Principles of consolidation
The consolidated financial statements include the accounts of Union Texas
Petroleum Holdings, Inc. ("UTPH"), its wholly owned subsidiaries and
proportionate interests in the assets, liabilities and operations of
unincorporated joint ventures (referred to herein individually and collectively
as the "Company"). Investments in which the Company has between a 20% to 50%
ownership interest are accounted for using the equity method. All material
intercompany transactions are eliminated.
Use of estimates
The consolidated financial statements are prepared in conformity with
general accepted accounting principles, which require management to make certain
estimates and assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the related reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Management believes that the estimates are reasonable.
Inventories
Finished product inventories are valued at the lower of cost or market
using the first-in, first-out method ("FIFO"). Materials and supplies
inventories are valued at the lower of average cost or market. 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.
Property, plant and equipment
Oil and gas exploration and production activities are accounted for
employing the successful efforts method. Under this method, costs of successful
exploratory wells, development wells and acreage are capitalized. Costs of
unsuccessful exploratory wells are expensed upon the determination that the well
does not justify commercial development. Other exploration costs including
geological and geophysical costs in exploration areas, delay rentals, production
costs and overhead are charged to expense as incurred.
Major renewals and improvements are capitalized, and the assets replaced
are retired. Maintenance and repairs are expensed as incurred.
Depreciation, depletion and amortization of the capitalized costs of
producing properties, both tangible and intangible, are provided for on the
units-of-production basis. Unit-of-production rates are based on estimated
recoverable oil and gas reserves. Annually, or whenever significant events or
changes in circumstances occur, oil and gas producing properties are reviewed to
determine whether it is probable that impairment of the capitalized cost of
specific producing asset groups has occurred. Amortization of
40
<PAGE> 41
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
undeveloped acreage from date of acquisition is based upon such factors as lease
term, estimated evaluation period and prior experience. The Company reviews its
leases and related amortization rates periodically.
Estimated dismantlement, restoration and abandonment costs net of estimated
salvage value are taken into account in determining amortization. Depreciable
assets other than oil and gas properties are depreciated using the straight-line
method based on estimated asset service lives from 5 to 31 years.
Foreign currency
The functional currency for translating the accounts of foreign
subsidiaries is the U.S. dollar, except for subsidiaries in the United Kingdom,
where the functional currency is the local currency. Translation adjustments of
this local currency, which represent unrealized increases and decreases in the
Company's net investment in foreign operations as the result of exchange rate
changes, are included in stockholders' equity as the cumulative foreign exchange
translation adjustment. Transaction gains and losses resulting from the effect
of exchange rate fluctuations on transactions in currencies other than the
functional currency are included in determining net income. Foreign exchange
losses included in the determination of net income for the years 1996, 1995, and
1994 were $54, $768 and $178, respectively.
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 1996, the Company entered into financial hedging futures contracts
to offset a portion of its North Sea crude oil production. As of December 31,
1996, the Company did not have any open contracts.
Other
The fair value of financial instruments included in the Company's assets
and liabilities approximates carrying value. Cash equivalents are comprised of
highly liquid debt instruments purchased at a maturity of three months or less.
NOTE 2 -- ACCOUNTS AND NOTES RECEIVABLE
At December 31, 1996 and 1995, accounts and notes receivable consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accounts receivable, trade.................................. $96,687 $77,593
Less -- allowance for doubtful accounts..................... (76)
------- -------
$96,687 $77,517
======= =======
</TABLE>
Most of the Company's worldwide business activity is with major marketing
companies, industrial users and joint venture partners. Those receivables
considered a significant credit risk are backed by letters of credit. Typically,
credit terms are of a short-term nature.
41
<PAGE> 42
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 3 -- INVENTORIES
At December 31, 1996 and 1995, inventories consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Products.................................................... $15,804 $16,225
Materials and supplies...................................... 23,917 26,539
------- -------
$39,721 $42,764
======= =======
</TABLE>
NOTE 4 -- EQUITY INVESTMENT
At December 31, 1996 and 1995, an investment, accounted for using the
equity method, consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------- --------
<S> <C> <C>
Unimar Company.............................................. $93,262 $108,476
======= ========
</TABLE>
The Company has a 50% interest in Unimar Company ("Unimar"), a partnership
through which the Company has an additional 11.56% working interest in the
Indonesian joint venture, resulting in a total working interest for the Company
of 37.81%.
The Company's share of selected financial data for its equity investee are
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net revenues....................................... $126,326 $101,010 $ 98,963
Gross profit....................................... 90,547 67,777 63,880
Net income reported by equity partnership.......... $ 25,707 $ 20,071 $ 16,552
Other.............................................. 430 800 3,892
-------- -------- --------
Net income of equity investee...................... $ 26,137 $ 20,871 $ 20,444
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current assets.............................................. $ 14,172 $ 12,754
Total assets................................................ 191,738 203,607
Current liabilities......................................... 20,047 15,731
Partners' account........................................... 87,219 102,533
</TABLE>
NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT
At December 31, 1996 and 1995, property, plant and equipment consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Land and land improvements................................ $ 13,055 $ 12,635
Oil and gas properties and equipment...................... 2,812,546 2,578,742
Plants and equipment...................................... 164,167 158,121
Other facilities.......................................... 12,082 10,683
Construction and wells in progress........................ 205,261 91,073
----------- -----------
3,207,111 2,851,254
Less -- accumulated depreciation, depletion and
amortization............................................ (1,574,688) (1,300,056)
----------- -----------
$ 1,632,423 $ 1,551,198
=========== ===========
</TABLE>
42
<PAGE> 43
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
On July 18, 1995, the Company, through its subsidiary, Union Texas
Petroleum Limited ("UTPL"), acquired from Oryx UK Energy Company ("Oryx") their
15.5% working interest in Block 16/26 in the central U.K. North Sea, which
includes the Alba field. UTPL paid Oryx $270 million for the interest. The
effective date of the transaction was July 1, 1995. The Company funded the
acquisition under its bank credit facilities and its uncommitted and unsecured
lines of credit. The Company increased plant, property and equipment by $328
million, the sum of the purchase price of $270 million and a deferred tax
payable of $58 million arising from the purchase.
NOTE 6 -- DEBT
At December 31, 1996 and 1995, long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Credit facilities........................................... $ 0 $132,000
8.25% Senior Notes due November 15, 1999.................... 100,000 100,000
8 3/8% Senior Notes due 2005................................ 125,000 125,000
8 1/2% Senior Notes due 2007................................ 75,000 75,000
Medium Term Notes........................................... 100,000 100,000
Britannia financing......................................... 98,588 29,368
Subsidiary production loan.................................. 2,290 4,582
Money market lines of credit and other...................... 59,875 148,474
-------- --------
560,753 714,424
Less -- portion due within one year......................... (2,290) (2,292)
-------- --------
$558,463 $712,132
======== ========
</TABLE>
Credit Facilities
The Company had two unsecured credit facilities (the "Credit Facilities")
at December 31, 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. The other 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 Company is in negotiations to
replace the $100 million credit facility and extend the maturity of the $450
million facility. At December 31, 1996, no amounts were outstanding under the
Credit Facilities. 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
December 31, 1996, the Company's adjusted stockholders' equity was approximately
$608 million. The Credit Facilities provide the Company with the ability to
borrow on a long-term basis.
43
<PAGE> 44
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Senior Notes
In March 1995, the Company publicly issued $125 million principal amount of
8 3/8% Senior Notes due 2005 (the "8 3/8% Senior Notes") at an initial public
offering price of 99.431%. In April 1995, the Company publicly issued $75
million principal amount of 8 1/2% Senior Notes due 2007 (the "8 1/2% Senior
Notes") at an initial public offering price of 99.658%. The net proceeds from
the sale of the 8 3/8% Senior Notes and the 8 1/2% Senior Notes were
approximately $123.5 million and $74.2 million, respectively (after deducting
underwriting discount, commissions and offering expenses). The Company used such
proceeds to reduce debt under its existing credit facility and its uncommitted
and unsecured lines of credit. The Company's $100 million principal amount of
8.25% Senior Notes due 1999 ("the 8.25% Senior Notes") discussed below together
with the 8 1/2% Senior Notes and the 8 3/8% Senior Notes are referred to herein
as the "Senior Notes."
In November 1992, the Company sold $100 million principal amount, at an
initial offering price of 99.424%, of 8.25% Senior Notes for approximately $98
million (after deducting underwriting discounts, commission and offering
expenses). The Company used such proceeds to reduce then outstanding debt under
its credit facility. The Senior Notes represent general unsecured obligations of
the Company and rank pari passu in right of payment with the Company's
obligations under its Credit Facilities and senior in right of payment to any
future subordinated indebtedness of the Company. Each of the Senior Notes
contain similar restrictive covenants. The Senior Notes are redeemable at any
time, at the option of the Company, in whole or in part, at a price equal to
100% of the principal amount plus accrued interest plus a make-whole premium
relating to the then-prevailing Treasury Yield and the remaining life of the
Senior Notes.
Medium Term Notes
During 1995, the Company issued $100 million aggregate principal amount of
medium term notes ("MTN") with terms of seven and twelve years and interest
rates varying from 6.51% to 6.81%. The net proceeds from the sale of the MTN
were approximately $99.4 million and were used to reduce debt under the
Company's credit facility and its uncommitted and unsecured lines of credit.
These MTN represent general unsecured obligations of the Company and rank pari
passu in right of payment with the Company's obligations under its Credit
Facilities and Senior Notes and senior in right of payment to any future
subordinated indebtedness of the Company. Each of the MTN contain similar
restrictive covenants as the Senior Notes. The MTN are redeemable at any time,
at the option of the Company, in whole or in part, at a price equal to 100% of
the principal amount plus accrued interest plus a make-whole premium relating to
the then-prevailing Treasury Yield and the remaining life of the MTN.
Britannia Financing
The Company's indirect subsidiary, Union Texas Britannia Limited ("UTBL"),
which is a wholly owned subsidiary of UTPL, 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
(including interest and other financing costs incurred prior to completion and
potential cost overruns), and any remaining availability after completion may,
subject to certain coverage ratios being met, be used for UTBL's general
corporate purposes. Except for certain support by UTPL related to any potential
cost overruns in excess of the facility amount (limited to 30 million pounds
sterling), insurance, tax benefits and administrative services, the lenders'
recourse will be limited to the Britannia field project assets and is
nonrecourse to the Company. The financing has a final maturity in September
2005. At December 31, 1996, 58 million pounds sterling ($99 million) was
outstanding under UTBL's financing which bore interest at a weighted average
rate of 7.1% per annum.
44
<PAGE> 45
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Subsidiary Production Loan
Union Texas Pakistan, Inc., a wholly owned subsidiary of the Company, has a
nonrecourse loan with a remaining balance of $2,290, payable from production
proceeds, which matures in 1997 and bears interest at the 182-day Treasury bill
rate plus 1.0%. At December 31, 1996, such interest rate was 6.3%.
Money Market Lines of Credit
Due to the Company's ability to obtain favorable interest rates on
short-term borrowings, uncommitted and unsecured lines of credit were
established with several banks 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 ability to refinance them on a
long-term basis through its Credit Facilities. At December 31, 1996, $57 million
was outstanding under these money market lines which bore interest at a weighted
average rate of 6.5% per annum.
Interest capitalized for the years 1996, 1995, and 1994 was $26,017,
$23,081, and $18,774, respectively.
Scheduled maturities of long-term debt outstanding during the five years
1997 through 2001 are $2,290, $0, $116,998, $33,996 and $93,871, respectively.
NOTE 7 -- INCOME TAXES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
United States (Current):
Federal.......................................... $ 2,393 $ 2,935 $ 3,756
State............................................ (2,014) 4,767 4,713
-------- -------- --------
379 7,702 8,469
-------- -------- --------
Foreign:
Current.......................................... 258,021 162,851 148,738
Deferred......................................... (31,588) (19,576) (11,962)
-------- -------- --------
226,433 143,275 136,776
-------- -------- --------
$226,812 $150,977 $145,245
======== ======== ========
</TABLE>
A deferred tax liability or asset is recorded for future tax consequences
arising from differences between the financial accounting and tax basis of the
assets and liabilities of the Company. An impairment evaluation, with reserves
recorded as necessary for any tax benefit not expected to be realized, is
required of deferred tax assets. Deferred tax liabilities or assets are adjusted
for changes in income tax laws or rates when enacted. Deferred tax expense or
benefit is derived from changes in deferred tax liabilities or assets. A current
tax expense or benefit is recognized for the estimated taxes payable or
refundable on tax returns for the current year.
Under the corporate alternative minimum tax ("AMT"), the Company's U.S. tax
liability is the greater of its regular tax or the AMT. To the extent that the
Company's AMT liability exceeds its otherwise determined tax liability, an AMT
credit may be generated and this credit may be applied against future tax
liabilities. As of December 31, 1996 the Company has an AMT credit of
approximately $24 million. In addition, the Company has approximately $115
million of Net Operating Loss ("NOL") carryforwards which could be applied
against future U.S. taxable income. A full valuation allowance has been provided
against these carryforwards due to the uncertainty of their application.
45
<PAGE> 46
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The principal items accounting for the difference in taxes on income
computed at the United States statutory rate and as recorded are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Computed tax at 35% of pretax income............... $132,664 $ 88,664 $ 74,194
Taxes in excess of the U.S. tax rate on foreign
earnings......................................... 77,613 56,353 52,270
Alternative Minimum Tax............................ 2,393 2,935 3,756
Domestic operating losses generating no tax
benefit.......................................... 16,156 10,313
All other items, net............................... (2,014) 3,025 4,712
-------- -------- --------
$226,812 $150,977 $145,245
======== ======== ========
</TABLE>
Deferred tax liabilities (assets) are comprised of the effects of temporary
differences as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Gross deferred tax liabilities:
Property differences pertaining to depreciation and other
expenditures........................................... $457,112 $399,665
Acquisitions.............................................. 57,858
Gross deferred tax assets:
U.K. Corporation Tax effect of deferred Petroleum Revenue
Tax.................................................... (30,439) (29,537)
Dismantlement and removal provision....................... (35,139) (32,697)
-------- --------
$391,534 $395,289
======== ========
</TABLE>
NOTE 8 -- PENSION BENEFITS
The Union Texas Petroleum Salaried Employees' Pension Plan (the "Pension
Plan") covers substantially all employees. Plan benefits are generally based on
years of service and an employee's compensation levels during the last years of
employment. The Company's funding policy is to contribute annually an amount at
least equal to the minimum funding requirement of the Employee Retirement Income
Security Act of 1974.
The Union Texas Petroleum Supplemental Retirement Plans ("Supplemental
Retirement Plans") cover certain employees whose pension benefits were affected
by changes in the Internal Revenue Code of 1986, as amended, and certain other
benefit limitations of the Internal Revenue Code. The supplemental plans are
unfunded.
46
<PAGE> 47
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Pension Plan has assets in excess of the projected benefit obligation
for 1996. The assets of this plan are held by trustees and are invested in
common stock, fixed rate and real estate investments. The following table sets
forth the plans' funded status at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
SUPPLEMENTAL
PENSION PLAN RETIREMENT PLANS
------------------- -----------------
1996 1995 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefits............................ $114,078 $122,084 $ 4,273 $ 4,050
Nonvested benefits......................... 4,692 4,464 246 207
-------- -------- ------- -------
Total accumulated benefit
obligation....................... 118,770 126,548 4,519 4,257
Amounts related to projected pay
increases............................... 9,584 9,288 2,254 1,856
-------- -------- ------- -------
Total projected benefit
obligation....................... 128,354 135,836 6,773 6,113
Net assets available for plan benefits held
by trustees................................ 136,623 142,742
-------- -------- ------- -------
Net assets over (under) projected benefit
obligation................................. 8,269 6,906 (6,773) (6,113)
Unrecognized net obligation at the date of
initial application of FAS 87 (1/1/86)..... 1,241 1,657
Unrecognized prior service cost.............. 2,670 3,220 917 1,323
Adjustment required to recognize minimum
liability.................................. (1,574) (2,058)
Unrecognized net (gain) loss................. (6,682) (7,807) 2,911 2,591
-------- -------- ------- -------
Prepaid pension cost (pension liability)..... $ 5,498 $ 3,976 $(4,519) $(4,257)
======== ======== ======= =======
</TABLE>
Net periodic pension cost for 1996, 1995 and 1994 included the following
components:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the period...... $ 2,917 $ 2,310 $ 2,474
Interest cost on projected benefit obligation....... 10,015 10,469 10,173
Return on plan assets............................... (19,113) (30,625) 477
Net amortization and deferral....................... 9,635 22,560 (9,381)
-------- -------- -------
Net periodic pension cost before effect of
settlement loss, curtailment loss and termination
benefits.......................................... 3,454 4,714 3,743
Settlement (gain) loss.............................. (822) 596
Curtailment loss.................................... 359
Termination benefits................................ 2,586
-------- -------- -------
Net periodic pension cost........................... $ 5,577 $ 4,714 $ 4,339
======== ======== =======
</TABLE>
The 1994 settlement loss resulted from certain lump sum payments to
employees who terminated from participation in the Supplemental Retirement Plans
during the year. The 1996 settlement gain, curtailment loss and the termination
benefits resulted from a 1996 voluntary retirement program. During the third
quarter of 1996, the Company offered a voluntary retirement program for 77 of
its 1,100 employees who met certain criteria and were either nearing retirement
eligibility or were already eligible, providing such employees the special
one-time opportunity to retire with enhanced benefits. A total of 47 employees
elected to participate in the program.
47
<PAGE> 48
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The assumed average rate of return on plan assets was 8% in 1996, 1995 and
1994 for the plans. Measurement of the projected benefit obligation was based on
an assumed discount rate of 7.25% and 7% in 1996, 7.25% and 7% in 1995 and 8.5%
and 7% in 1994 for normal and lump sum eligible participants, respectively, for
the Pension and Supplemental Retirement Plans and an assumed long-term rate of
compensation increase of 5%, 4.5% and 4.5% for the Pension and Supplemental
Retirement Plans in 1996, 1995 and 1994, respectively.
NOTE 9 -- OTHER POSTRETIREMENT BENEFITS
The Company currently provides postretirement benefits, principally health
care and life insurance benefits, for employees. Under the Company's current
policy, substantially all of the Company's employees may become eligible for
those benefits if they reach normal retirement age with ten years of service
while working for the Company. These benefits are unfunded.
The following table sets forth the plan's status at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees' benefits........................................ $ 33,501 $ 31,481
Other fully eligible participants' benefits............... 3,465 5,247
Other active plan participants' benefits.................. 6,405 7,128
-------- --------
Accumulated postretirement benefit obligation.......... (43,371) (43,856)
Unrecognized amounts:
Prior service cost..................................... (7,831) (11,885)
Net loss............................................... 13,692 17,136
-------- --------
Accrued obligation.......................................... $(37,510) $(38,605)
======== ========
</TABLE>
Net postretirement benefit cost for 1996, 1995 and 1994 included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the period........ $ 603 $ 503 $ 497
Interest cost on projected benefit obligation......... 2,901 3,117 2,735
Net amortization...................................... (3,094) (3,136) (3,051)
------- ------- -------
Net postretirement benefit cost....................... $ 410 $ 484 $ 181
======= ======= =======
</TABLE>
Measurement of the accumulated postretirement benefit obligation was based
on an assumed discount rate of 7.25% for 1996, 7.25% for 1995 and 8.5% for 1994.
For measurement purposes, a 11.25%, 12% and 12.75% annual rate of increase in
the per capita cost of covered health care benefits for those age 65 and older
were assumed for 1996, 1995 and 1994, respectively; the rate was assumed to
decrease linearly to 6% for 2003 and after. The health care cost trend rate
assumption has a significant effect on the amounts reported. Increasing the
assumed health care cost trend rates by 1% in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1996 and 1995,
by $1,898 and $1,988, respectively. Additionally, it would increase the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the years ended December 31, 1996, 1995 and 1994
by $201, $216 and $176, respectively.
48
<PAGE> 49
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 10 -- STOCK OPTIONS
The Company has four stock-based compensation plans, which are described
below. The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its plans and adopted the footnote
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation". Accordingly, no compensation
expense has been recognized for its fixed stock option plans other than options
granted with attached stock appreciation rights, which may, at the employees'
option be settled in cash or the issuance of stock. Had compensation cost for
the Company's stock based compensation plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the method
of Financial Accounting Standards No. 123, the Company's net income and earnings
per share would have been reduced to the pro-forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Net income As Reported...................................... $152,227 $102,350
Pro Forma................................................. $151,188 $102,350*
Primary earnings per share
As Reported............................................... $ 1.75 $ 1.17
Pro Forma................................................. $ 1.73 $ 1.17*
</TABLE>
- ---------------
* No impact on 1995 net income or earnings per share since no stock options
granted after 1994 vested during 1995.
The Company has four fixed stock option plans. Under the terms of the 1994
Incentive Plan, the Company has authorized the issuance of options to employees
and certain members of the board of directors to purchase up to 4 million shares
of common stock. Options are exercisable for a maximum period of ten years at an
exercise price of not less than the fair market value of the underlying common
stock at the time of the grant. The options granted to employees vest at 25% per
annum. A total of 1,252,300 options were granted in 1996, which included grants
in January 1996 to the Company's new Chief Executive Officer ("CEO") of 225,000
shares at $19.3125 per share and 1,027,300 shares at $21.4375 per share in
October 1996 to all U.S.-based employees, including the CEO. Certain officers
have been granted nonqualified options and incentive stock options with
appreciation rights. At December 31, 1996, options outstanding with respect to
842,100 shares of common stock have appreciation rights attached. Following the
adoption of the 1994 Incentive Plan during 1995, all further stock option grants
will be made under the 1994 Incentive Plan only. In 1996, 12,000 options at
$18.3125 per share, were granted to certain directors and these options are 100%
vested.
Under the terms of the 1992 Stock Option Plan, the Company authorized the
issuance of options to employees to purchase up to 4 million shares of common
stock. Options are exercisable for a maximum period of ten years at an exercise
price of not less than the fair market value of the underlying common stock at
the time of the grant. Options granted prior to 1994 vest at 20% per annum.
Options granted in 1994 vest at 25% per annum. At December 31, 1996, options
outstanding with respect to 547,800 shares of common stock have appreciation
rights attached.
Under the terms of the 1985 Stock Option Plan (the "1985 Plan"), the
Company authorized the issuance of options to officers and key employees to
purchase up to 4,466,667 shares of common stock. Options are exercisable for a
maximum period of ten years at an exercise price of not less than the fair
market value of the underlying common stock at the time of the grant. Certain
officers have been granted options with appreciation rights. All options granted
are fully vested. At December 31, 1996, options outstanding with respect to
309,403 shares of common stock have appreciation rights attached.
49
<PAGE> 50
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Under the terms of the 1987 Stock Option Plan, the Company authorized the
issuance of options to purchase up to 1,333,333 shares of common stock to
certain employees not covered under the 1985 Plan. Options are exercisable for a
maximum period of ten years at an exercise price of not less than the fair
market value of the underlying common stock at the time of the grant. All
options granted are fully vested.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995; dividend yield of 1.03%, expected
volatility of 25.32%, risk-free interest rates of 6.36% and 5.87%, respectively,
and expected lives of 6 years.
A summary of the status of the Company's four fixed stock option plans as
of December 31, 1996, 1995 and 1994 and changes during the years ending on those
dates is presented below:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- -------------------------- --------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year..... 4,172,595 $18.08 3,535,396 $17.97 2,819,708 $17.40
Granted.............................. 1,252,300 21.06 896,200 18.06 960,900 18.75
Exercised............................ 260,628 16.17 164,274 14.97 149,894 11.39
Canceled............................. 75,650 19.34 94,727 19.25 95,318 19.23
--------- --------- ---------
Outstanding at end of year........... 5,088,617 18.89 4,172,595 18.08 3,535,396 17.97
========= ========= =========
Options Exercisable at year-end...... 2,319,023 1,787,941 1,387,972
Weighted-average fair value of
options granted during the year.... $7.43 $6.06 $7.09
</TABLE>
The following table summarizes information about the four fixed stock
option plans at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
WEIGHTED NUMBER
NUMBER AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
RANGE OF OUTSTANDING REMAINING AVERAGE AT AVERAGE
EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE 12/31/96 EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$12.25-16.125........................... 660,447 2.5 year $14.19 660,447 $14.19
$18.0625-21.4375........................ 4,428,170 8.1 19.59 1,658,576 19.16
--------- ---------
$12.25-21.4375.......................... 5,088,617 7.3 18.89 2,319,023 17.74
========= =========
</TABLE>
NOTE 11 -- MAJOR CUSTOMERS
During 1996, the Company's U.K. operations had sales to Elf Trading, in the
amount of $120,805 or 12% of the Company's total sales and operating revenues.
During 1995, the Company's U.K. operations had sales to B.P. Oil International
Limited and Elf Trading, in the amount of $107,891 and $109,067, or 13% and 13%,
respectively, of total sales and operating revenues. During 1994, the Company's
U.K. operations had sales to B.P. Oil International Limited and Elf Trading in
the amount of $81,292 and $80,578, 11% and 11%, respectively, of total sales and
operating revenues.
50
<PAGE> 51
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 12 -- SEGMENT FINANCIAL DATA
<TABLE>
<CAPTION>
EXPLORATION AND PRODUCTION
----------------------------------------------------
UNITED OTHER PETRO-
STATES UNITED INTER- CHEMICALS
(ALASKA) KINGDOM INDONESIA PAKISTAN NATIONAL (a) OTHER(a) TOTAL
-------- ------- --------- -------- -------- --------- -------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996
Sales and operating revenues............ $ 406 $341 $66 $193 $ 2 $1,008
====== ==== === ==== ==== ======
Operating profit (loss)................. $(8) $ 163 $233 $39 $(33) $ 24 $(15) $ 403
Interest income......................... 1 1 2
General and administrative expenses..... (27) (27)
Interest expense........................ (4) (1) (20) (25)
Net income of equity investee........... 26 26
--- ------ ---- --- ---- ---- ---- ------
Income (loss) before income taxes....... (8) 160 260 38 (33) 24 (62) 379
Income taxes (benefit).................. 75 139 11 9 (7) 227
--- ------ ---- --- ---- ---- ---- ------
Net income (loss)....................... $(8) $ 85 $121 $27 $(33) $ 15 $(55) $ 152
=== ====== ==== === ==== ==== ==== ======
Identifiable assets..................... $23 $1,244 $444 $60 $ 15 $116 $ 40 $1,942
Capital additions....................... 11 119 23 15 7 8 3 186
Depreciation, depletion and
amortization.......................... 1 156 39 7 1 6 2 212
1995
Sales and operating revenues............ $ 323 $276 $51 $ 1 $200 $ 1 $ 852
====== ==== === ==== ==== ==== ======
Operating profit (loss)................. $(6) $ 84 $178 $19 $(49) $ 62 $ (5) $ 283
Interest income......................... 2 1 1 4
General and administrative expenses..... (26) (26)
Interest expense........................ (6) (1) (22) (29)
Net income of equity investee........... 21 21
--- ------ ---- --- ---- ---- ---- ------
Income (loss) before income taxes....... (6) 80 200 18 (49) 62 (52) 253
Income taxes (benefit).................. 34 105 4 24 (16) 151
--- ------ ---- --- ---- ---- ---- ------
Net income (loss)....................... $(6) $ 46 $ 95 $14 $(49) $ 38 $(36) $ 102
=== ====== ==== === ==== ==== ==== ======
Identifiable assets..................... $13 $1,168 $459 $46 $ 9 $111 $ 31 $1,837
Capital additions....................... 6 353 30 10 2 7 1 409
Depreciation, depletion and
amortization.......................... 139 35 7 4 5 2 192
1994
Sales and operating revenues............ $ 260 $278 $39 $ 1 $169 $ 1 $ 748
====== ==== === ==== ==== ==== ======
Operating profit (loss)................. $(7) $ 57 $174 $13 $(25) $ 24 $(10) $ 226
Interest income......................... 1 1
General and administrative expenses..... (24) (24)
Interest expense........................ 1 (12) (11)
Net income (loss) of equity investee.... 21 (1) 20
--- ------ ---- --- ---- ---- ---- ------
Income (loss) before income taxes....... (7) 59 195 13 (25) 24 (47) 212
Income taxes............................ 32 101 3 9 145
--- ------ ---- --- ---- ---- ---- ------
Net income (loss)....................... $(7) $ 27 $ 94 $10 $(25) $ 15 $(47) $ 67
=== ====== ==== === ==== ==== ==== ======
Identifiable assets..................... $ 8 $ 887 $473 $40 $ 11 $108 $ 18 $1,545
Capital additions....................... 2 219 31 9 8 6 1 276
Depreciation, depletion and
amortization.......................... 2 114 37 7 2 5 2 169
</TABLE>
- ---------------
(a) Petrochemical operations and Other represent United States activities.
51
<PAGE> 52
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
NOTE 13 -- COMMITMENTS
The Company has entered into various commitments and operating agreements
related to the development of and production from certain proved oil and gas
properties. Also during the normal course of business, the Company has issued
various letters of credit, bank guarantees and performance bonds, which at
December 31, 1996, totaled $4 million. At December 31, 1996, the Company had
open foreign exchange contracts with a net value of 9 million pounds sterling.
These contracts hedge economic exposures, based on the Company's assessment of
its net exposure to changes in foreign currency rates. It is management's belief
that such commitments and guarantees will be met without material adverse effect
on the Company's financial position.
The amounts of operating lease obligations due during the five years 1997
through 2001 are $8,642, $8,290, $8,016, $7,243 and $6,582, respectively.
Rental expense for the years 1996, 1995 and 1994 was $8,783, $9,379, and
$9,520, respectively.
NOTE 14 -- CONTINGENCIES
The Company and its subsidiaries and related companies are named defendants
in a number of lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business.
While the outcome of such contingencies, lawsuits or other proceedings
against the Company cannot be predicted with certainty, management expects that
such liability, to the extent not provided for through insurance or otherwise,
will not have a material adverse effect on the financial statements of the
Company.
NOTE 15 -- SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
QUARTER ENDED QUARTER ENDED
------------------------------------------------------ ------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 YEAR MAR. 31 JUNE 30 SEPT. 30
-------- -------- -------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales and operating
revenues............. $258,178 $223,192 $227,284 $299,822 $1,008,476 $239,558 $200,425 $197,255
Gross profit........... 126,518 96,052 100,659 144,915 468,144 117,080 90,736 77,391
Net income............. 47,561 30,837 33,521 40,308 152,227 46,677 20,102 11,723
Per share of common
stock:
Net earnings........... .54 .35 .39 .47 1.75 .53 .23 .13
Dividends.............. .05 .05 .05 .05 .20 .05 .05 .05
Market price:
High................... 20 1/4 20 1/4 21 3/4 23 23 23 1/8 23 7/8 21 1/2
Low.................... 17 5/8 18 18 5/8 20 5/8 17 5/8 18 1/4 21 18
<CAPTION>
1995
QUARTER ENDED
-------------------
DEC. 31 YEAR
-------- --------
<S> <C> <C>
Net sales and operating
revenues............. $214,363 $851,601
Gross profit........... 87,858 373,065
Net income............. 23,848 102,350
Per share of common
stock:
Net earnings........... .27 1.17
Dividends.............. .05 .20
Market price:
High................... 19 7/8 23 7/8
Low.................... 17 1/8 17 1/8
</TABLE>
- ---------------
Source of Market Prices: New York Stock Exchange Composite Transactions Tape
NOTE 16 -- SUPPLEMENTARY OIL AND GAS INFORMATION
Reserve estimation -- (Unaudited)
Oil and gas reserves cannot be measured exactly. Reserve estimates are
based on many factors related to reservoir performance which require evaluation
by the engineers interpreting the available data, as well as price, costs and
other economic factors. The reliability of these estimates at any point in time
depends on both the quality and quantity of the technical and economic data, the
production performance of the reservoirs as well as extensive engineering
judgement. Consequently, reserve estimates are subject to revision as additional
data becomes available during the producing life of a reservoir. When a
commercial reservoir is discovered,
52
<PAGE> 53
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
proved reserves are initially determined based on only limited data from the
first well or wells. Further drilling may better define the extent of the
reservoir and additional production performance, well tests and engineering
studies will likely improve the reliability of the estimate.
Reserves are considered proved if economic producibility is supported by
either actual production or conclusive formation tests. Proved developed
reserves are reserves that can be expected to be recovered through existing
wells with existing equipment and operating methods. Proved undeveloped reserves
are reserves that are expected to be recovered from new wells on undrilled
acreage or from existing wells where a relatively significant expenditure is
required to permit production. These estimates do not include reserves which may
be found by extension of proved areas or reserves recoverable by secondary or
tertiary recovery methods unless these methods are in operation and showing
successful results.
In 1996, the Company and co-venturers ARCO Alaska, Inc. (operator) and
Anadarko Petroleum Corp. announced plans to develop the Alpine oil field in
Alaska. In 1996, the Company recorded 32 million net barrels in proved
undeveloped oil reserves from the Alpine field which is scheduled to begin
production in 2000.
In 1995, the Company purchased an interest in the Alba field in the U.K.
North Sea, adding at July 1, 1995, 45 million barrels of oil equivalent ("boe").
In 1994, the Company purchased an interest in the undeveloped Britannia
field in the U.K. North Sea, adding at year end 1994, 38 million boe to its
proved reserves.
Information presented for the Company's operations in Indonesia relates to
a production sharing contract between a joint venture group in which the Company
is a member and Pertamina. Debt service relating to the Indonesian facility
which liquefies natural gas supplied by the joint venture and other production
sharing contractors is accounted for by the Company as a cost of production and
operation. The debt obligation is non-recourse to the Company. Such debt service
is deducted in estimating future net revenues to be distributed among Pertamina
and the production sharing contractors including the joint venture and the
Company's interest therein. The joint venture has no ownership interest in the
oil and gas reserves but does have the right to share revenues and/or production
and is entitled to recover most field and other operating costs and capital
depreciation. Indonesian reserves associated with the Unimar partnership are
shown under the caption "Non-Consolidated Interests." The reserve estimates,
which are based on year-end prices, are subject to revision as product prices
and costs fluctuate due to the cost recovery feature under the production
sharing contract. The impact on reserves is inversely related to price changes
and directly related to changes in field operating and capital costs. In
addition, reserve estimates are subject to revision due to the effect that price
fluctuations generally have on estimates of recoverable reserves.
Prior to 1993, the Company included in its reported estimates of proved
reserves attributable to its interest in the Indonesian joint venture only those
proved reserves that were committed to be sold under LNG sales contracts or
which the Company expected to be sold in the spot market. Over the past several
years, the Indonesian joint venture experienced better than anticipated field
performance and development drilling successes. Also, Pertamina made progress in
marketing additional LNG volumes that the Company believes will be sold. As a
result, beginning in 1993, the Company booked upward revisions of proved
reserves attributable to its interest in this joint venture.
"Other International" represents an interest in Egypt, which was sold in
December, 1996.
53
<PAGE> 54
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The Company's net quantities of proved developed and undeveloped reserves
of oil and natural gas, by geographic areas and changes therein, were as
follows:
ESTIMATED QUANTITIES OF NET PROVED CRUDE OIL AND NATURAL GAS LIQUIDS RESERVES
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
-------------------------------------------------------------------
UNITED NON-
STATES UNITED OTHER CONSOLIDATED TOTAL
(ALASKA) KINGDOM INDONESIA PAKISTAN INTERNATIONAL TOTAL INTERESTS WORLDWIDE
-------- ------- --------- -------- ------------- ------- ------------ ---------
(THOUSANDS OF BARRELS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Net proved reserves
-- beginning of year....... 105,714 18,942 4,383 19 129,058 7,711 136,769
-- revisions of previous
estimates................ (546) 42 3,589 (4) 3,081 (52) 3,029
-- extensions, discoveries
and other additions...... 32,005 1,498 1,053 34,556 34,556
-- production.............. (16,152) (2,035) (2,279) (15) (20,481) (673) (21,154)
------ ------- ------ ------ --- ------- ----- -------
Net proved reserves
-- end of year............. 32,005 90,514 16,949 6,746 0 146,214 6,986 153,200
====== ======= ====== ====== === ======= ===== =======
Net proved developed reserves
-- beginning of year....... 67,147 17,041 3,215 19 87,422 6,926 94,348
-- end of year............. 51,265 12,071 4,839 0 68,175 4,944 73,119
YEAR ENDED DECEMBER 31, 1995
Net proved reserves
-- beginning of year....... 73,862 19,142 3,842 32 96,878 7,571 104,449
-- revisions of previous
estimates................ 1,995 1,894 1,275 9 5,173 832 6,005
-- purchase of minerals in
place.................... 45,012 45,012 45,012
-- extensions, discoveries
and other additions...... 1,261 1,261 1,261
-- production.............. (15,155) (2,094) (1,995) (22) (19,266) (692) (19,958)
------- ------ ------ --- ------- ----- -------
Net proved reserves
-- end of year............. 105,714 18,942 4,383 19 129,058 7,711 136,769
======= ====== ====== === ======= ===== =======
Net proved developed reserves
-- beginning of year....... 56,773 17,247 2,714 32 76,766 6,835 83,601
-- end of year............. 67,147 17,041 3,215 19 87,422 6,926 94,348
YEAR ENDED DECEMBER 31, 1994
Net proved reserves
-- beginning of year....... 69,199 17,779 4,660 35 91,673 6,809 98,482
-- revisions of previous
estimates................ 8,818 3,371 699 48 12,936 1,426 14,362
-- extensions, discoveries
and other additions...... 278 278 278
-- purchase of minerals in
place.................... 9,241 9,241 9,241
-- production.............. (13,396) (2,008) (1,795) (51) (17,250) (664) (17,914)
------- ------ ------ --- ------- ----- -------
Net proved reserves
-- end of year............. 73,862 19,142 3,842 32 96,878 7,571 104,449
======= ====== ====== === ======= ===== =======
Net proved developed reserves
-- beginning of year....... 33,709 14,503 3,293 35 51,540 5,557 57,097
-- end of year............. 56,773 17,247 2,714 32 76,766 6,835 83,601
</TABLE>
54
<PAGE> 55
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
ESTIMATED QUANTITIES OF NET PROVED NATURAL GAS RESERVES
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
--------------------------------------------- NON-
UNITED CONSOLIDATED TOTAL
KINGDOM INDONESIA PAKISTAN TOTAL INTERESTS WORLDWIDE
------- --------- -------- --------- ------------ ---------
(MILLIONS OF CUBIC FEET)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Net proved reserves
-- beginning of year...................... 344,132 898,374 121,422 1,363,928 365,079 1,729,007
-- revisions of previous estimates........ 4,407 44,909 10,846 60,162 18,352 78,514
-- extensions, discoveries and other
additions............................... 31,791 2,904 34,695 34,695
-- production............................. (16,858) (96,539)(a) (15,145) (128,542) (31,925)(a) (160,467)
------- --------- ------- --------- ------- ---------
Net proved reserves
-- end of year............................ 363,472 846,744(a) 120,027 1,330,243 351,506(a) 1,681,749
======= ========= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year...................... 139,413 758,942 58,642 956,997 307,102 1,264,009
-- end of year............................ 126,963 718,721 57,019 902,703 297,841 1,200,544
YEAR ENDED DECEMBER 31, 1995
Net proved reserves
-- beginning of year...................... 319,621 972,796 97,895 1,390,312 385,834 1,776,146
-- revisions of previous estimates........ 37,079 19,270 24,976 81,325 10,228 91,553
-- extensions, discoveries and other
additions............................... 14,952 14,952 14,952
-- production............................. (12,568) (93,692)(a) (16,401) (122,661) (30,983)(a) (153,644)
------- --------- ------- --------- ------- ---------
Net proved reserves
-- end of year............................ 344,132 898,374(a) 121,422 1,363,928 365,079(a) 1,729,007
======= ========= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year...................... 149,301 812,933 51,883 1,014,117 320,502 1,334,619
-- end of year............................ 139,413 758,942 58,642 956,997 307,102 1,264,099
YEAR ENDED DECEMBER 31, 1994
Net proved reserves
-- beginning of year...................... 139,195 1,008,863 101,753 1,249,811 389,670 1,639,481
-- revisions of previous estimates........ 6,625 63,381 3,303 73,309 29,054 102,363
-- extensions, discoveries and other
additions............................... 15,673 8,618 24,291 24,291
-- purchase of minerals in place.......... 166,828 166,828 166,828
-- production............................. (8,700) (99,448)(a) (15,779) (123,927) (32,890)(a) (156,817)
------- --------- ------- --------- ------- ---------
Net proved reserves
-- end of year............................ 319,621 972,796(a) 97,895 1,390,312 385,834(a) 1,776,146
======= ========= ======= ========= ======= =========
Net proved developed reserves
-- beginning of year...................... 131,002 785,135 38,784 954,921 299,768 1,254,689
-- end of year............................ 149,301 812,933 51,883 1,014,117 320,502 1,334,619
</TABLE>
- ---------------
(a) Includes gas consumed in the operation of the LNG plant, which was
approximately 12 Bcf and 4 Bcf, 11 Bcf and 4 Bcf and 11 Bcf and 4 Bcf
attributable to the Company and its Unimar partnership, respectively, for
1996, 1995 and 1994; and gas sold to fertilizer plants and a refinery.
55
<PAGE> 56
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Costs incurred and results of operations
Costs incurred in oil and gas property acquisition, exploration and
development activities whether expensed or capitalized were as follows:
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
-----------------------------------------------------------------
UNITED NON-
STATES UNITED OTHER CONSOLIDATED TOTAL
(ALASKA) KINGDOM INDONESIA PAKISTAN INTERNATIONAL TOTAL INTERESTS WORLDWIDE
-------- ------- --------- -------- ------------- ----- ------------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Property acquisition
(proved and
unproved)
1996............... $ 2 $ 3 $ 5 $ 5
1995............... 1 $275 2 278 278
1994............... 3 159 7 169 169
Exploration
1996............... $13(a) $ 6 $ 7 $11 $28 $ 65 $ 65
1995............... 10 10 8 11 46 85 85
1994............... 4 14 9 10 24 61 $ 1 62
Development
1996............... $ 3 $118(b) $24 $12 $157 $ 8 $165
1995............... 78(b) 31(c) 6 115 10 125
1994............... 55(b) 30 6 91 10 101
</TABLE>
- ---------------
(a) Includes $1 million for capitalized interest.
(b) Includes $25 million, $22 million and $19 million for capitalized interest
in 1996, 1995 and 1994, respectively.
(c) Includes $1 million for capitalized interest.
56
<PAGE> 57
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The aggregate amount of capitalized costs (including construction in
progress) relating to oil and gas producing activities and the aggregate amount
of the related accumulated depreciation, depletion and amortization ("DD&A")
including accumulated valuation allowances at December 31, were as follows:
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
------------------------------------------------------------------
UNITED NON-
STATES UNITED OTHER CONSOLIDATED TOTAL
(ALASKA) KINGDOM INDONESIA PAKISTAN INTERNATIONAL TOTAL INTERESTS WORLDWIDE
-------- ------- --------- -------- ------------- ------ ------------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Proved and unproved
properties
Gross capital
1996............... $37 $2,129 $742 $94 $12 $3,014 $535 $3,549
1995............... 26 1,832 718 79 15 2,670 525 3,195
1994............... 20 1,437 687 68 13 2,225 512 2,737
Accumulated DD&A
(including
valuation
allowances)
1996............... 14 959 436 54 2 1,465 360 1,825
1995............... 13 733 396 48 10 1,200 336 1,536
1994............... 12 599 361 40 7 1,019 316 1,335
Proved properties
Gross capital
1996............... 21 2,118 733 88 2,960 535 3,495
1995............... 1,822 710 75 4 2,611 525 3,136
1994............... 1,428 679 63 4 2,174 512 2,686
Accumulated DD&A
1996............... 956 428 52 1,436 360 1,796
1995............... 731 389 46 4 1,170 336 1,506
1994............... 598 354 39 4 995 316 1,311
</TABLE>
57
<PAGE> 58
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
The results of operations for the Company's oil and gas producing
activities for 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
-----------------------------------------------------------------
UNITED NON-
STATES UNITED OTHER CONSOLIDATED TOTAL
(ALASKA) KINGDOM INDONESIA PAKISTAN INTERNATIONAL TOTAL INTERESTS WORLDWIDE
-------- ------- --------- -------- ------------- ----- ------------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
Net sales............... $406 $341 $66 $813 $126 $939
---- ---- --- ---- ---- ----
Production costs........ 82 60 12 154 12 166
Exploration expenses.... $ 7 5 7 8 $ 25 52 52
DD&A.................... 154 39 6 199 24 223
Other Costs............. 7 7 7
Valuation allowances.... 2 2 1 5 5
--- ---- ---- --- ---- ---- ---- ----
Total costs and
expenses.............. 9 243 106 26 33 417 36 453
--- ---- ---- --- ---- ---- ---- ----
(9) 163 235 40 (33) 396 90 486
Income tax expense(a)... 74 141 11 226 64 290
--- ---- ---- --- ---- ---- ---- ----
Results of
operations(b)......... $(9) $ 89 $ 94 $29 $(33) $170 $ 26 $196
=== ==== ==== === ==== ==== ==== ====
YEAR ENDED DECEMBER 31, 1995
Net sales............... $323 $276 $51 $ 1 $651 $101 $752
---- ---- --- ---- ---- ---- ----
Production costs........ 88 55 17 160 12 172
Exploration expenses.... $ 6 10 8 7 $ 46 77 77
DD&A.................... 138 35 7 180 21 201
Valuation allowances.... 1 4 5 5
--- ---- ---- --- ---- ---- ---- ----
Total costs and
expenses.............. 6 237 98 31 50 422 33 455
--- ---- ---- --- ---- ---- ---- ----
(6) 86 178 20 (49) 229 68 297
Income tax expense(a)... 34 105 5 144 47 191
--- ---- ---- --- ---- ---- ---- ----
Results of
operations(b)......... $(6) $ 52 $ 73 $15 $(49) $ 85 $ 21 $106
=== ==== ==== === ==== ==== ==== ====
YEAR ENDED DECEMBER 31, 1994
Net sales............... $260 $278 $39 $ 1 $578 $ 99 $677
---- ---- --- ---- ---- ---- ----
Production costs........ 83 59 12 154 10 164
Exploration expenses.... $ 6 9 8 7 24 54 1 55
DD&A.................... 114 37 7 158 25 183
Valuation allowances.... 1 1 2 4 4
--- ---- ---- --- ---- ---- ---- ----
Total costs and
expenses.............. 7 207 104 26 26 370 36 406
--- ---- ---- --- ---- ---- ---- ----
(7) 53 174 13 (25) 208 63 271
Income tax expense(a)... 32 102 4 138 43 181
--- ---- ---- --- ---- ---- ---- ----
Results of
operations(b)......... $(7) $ 21 $ 72 $ 9 $(25) $ 70 $ 20 $ 90
=== ==== ==== === ==== ==== ==== ====
</TABLE>
- ---------------
(a) Computed using statutory rates adjusted for permanent differences, tax
credits and allowances that are reflected in the income tax expense for the
respective years.
(b) Excludes overhead and financing costs.
58
<PAGE> 59
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Standardized measure of discounted future net cash flows -- (Unaudited)
The standardized measure of discounted future net cash flows and changes
therein relating to proved oil and gas reserves for 1996, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
CONSOLIDATED SUBSIDIARIES
---------------------------------------------------
UNITED NON-
STATES UNITED CONSOLIDATED TOTAL
(ALASKA) KINGDOM INDONESIA PAKISTAN TOTAL INTERESTS WORLDWIDE
-------- ------- --------- -------- ------- ------------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
Future cash inflows......... $ 658 $ 3,825 $ 3,260 $370 $ 8,113 $1,436 $ 9,549
Future production and
development costs........ (240) (1,258) (1,066) (86) (2,650) (493) (3,143)
Future income tax expense... (142) (804) (1,067) (94) (2,107) (470) (2,577)
----- ------- ------- ---- ------- ------ -------
Future net cash flows(a).... 276 1,763 1,127 190 3,356 473 3,829
10% discount for estimated
timing of cash flows..... (182) (785) (505) (54) (1,526) (223) (1,749)
----- ------- ------- ---- ------- ------ -------
Standardized measure of
discounted future net
cash flows............... $ 94 $ 978 $ 622 $136 $ 1,830 $ 250 $ 2,080
===== ======= ======= ==== ======= ====== =======
DECEMBER 31, 1995
Future cash inflows......... $ 3,437 $ 2,861 $232 $ 6,530 $1,260 $ 7,790
Future production and
development costs........ (1,291) (1,093) (93) (2,477) (507) (2,984)
Future income tax expense... (656) (867) (36) (1,559) (382) (1,941)
------- ------- ---- ------- ------ -------
Future net cash flows(a).... 1,490 901 103 2,494 371 2,865
10% discount for estimated
timing of cash flows..... (661) (403) (30) (1,094) (177) (1,271)
------- ------- ---- ------- ------ -------
Standardized measure of
discounted future net
cash flows............... $ 829 $ 498 $ 73 $ 1,400 $ 194 $ 1,594
======= ======= ==== ======= ====== =======
DECEMBER 31, 1994
Future cash inflows......... $ 2,686 $ 2,622 $180 $ 5,488 $1,155 $ 6,643
Future production and
development costs........ (1,161) (1,043) (74) (2,278) (492) (2,770)
Future income tax expense... (487) (781) (24) (1,292) (344) (1,636)
------- ------- ---- ------- ------ -------
Future net cash flows(a).... 1,038 798 82 1,918 319 2,237
10% discount for estimated
timing of cash flows..... (466) (365) (22) (853) (161) (1,014)
------- ------- ---- ------- ------ -------
Standardized measure of
discounted future net
cash flows............... $ 572 $ 433 $ 60 $ 1,065 $ 158 $ 1,223
======= ======= ==== ======= ====== =======
</TABLE>
- ---------------
(a) Future net cash flows were computed using year-end prices and costs and
statutory tax rates adjusted for permanent differences, tax credits and
allowances.
59
<PAGE> 60
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS UNLESS OTHERWISE INDICATED)
Changes in the standardized measure of discounted future net cash flows for
the consolidated subsidiaries were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Beginning of year........................................ $1,400 $1,065 $ 869
Sales and transfers of oil and gas produced, net of
production costs....................................... (643) (513) (437)
Net changes in prices, development and production
costs.................................................. 673 324 358
Extensions, discoveries and improved recovery, less
related costs.......................................... 200 20 46
Purchase of minerals in place............................ 287 118
Development costs incurred during the period............. 129 92 73
Revisions of previous quantity estimates................. 133 83 105
Increase in present value due to passage of one year..... 233 185 144
Net change in income taxes............................... (295) (143) (211)
------ ------ ------
End of year.............................................. $1,830 $1,400 $1,065
====== ====== ======
</TABLE>
The standardized measure data includes estimates of oil and gas reserve
volumes and forecasts of future production rates over the reserve lives.
Estimates of future production expenditures, including taxes and future
development costs, are based on management's best estimate of such costs
assuming a continuation of current economic and operating conditions. No
provision is included for depletion, depreciation and amortization of property
acquisition costs or indirect costs. The sales prices used in the calculation
are the year-end prices of crude oil, including condensate and natural gas
liquids, and natural gas which as of December 31, 1996, 1995 and 1994 were
$23.48, $18.53 and $15.40 per barrel of U.K. crude oil (Flotta) and $3.62, $2.85
and $2.47 per Mcf (at the plant inlet) of Indonesian LNG, respectively. Because
of the estimated nature of the data presented, changes in price and cost levels,
as well as the timing of future development costs, may have a significant impact
on such data and cause such data not to be representative of production or cash
flows the Company may realize in the future.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
60
<PAGE> 61
PART III
For the information called for by Items 10, 11 and 13, as well as
additional information for Item 12, reference is made to the Company's
definitive proxy statement for its 1997 Annual Meeting of Stockholders, which
will be filed with the Securities and Exchange Commission within 120 days after
December 31, 1996, and portions of which are incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
In July 1985, two limited partnerships (the "KKR Partnerships"), which are
affiliated with Kohlberg Kravis Roberts & Co. ("KKR"), purchased approximately
50% of the then outstanding common stock of the Company from AlliedSignal Inc.
("Allied"). In September 1987, the Company sold 18,000,000 shares of its common
stock in concurrent public offerings in the United States and outside the United
States. In November 1992, Allied sold, in a secondary public offering, its
33,333,334 shares of common stock, which represented approximately 39% of the
Company's then issued and outstanding shares of common stock. In May 1995, the
KKR Partnerships sold, in a secondary public offering, 11,500,000 shares of
their 33,333,334 shares of common stock, which represented approximately 13% of
the Company's then issued and outstanding shares of common stock. Each of these
secondary offerings was registered by the Company under the Securities Act of
1933, as amended (the "Securities Act") pursuant to the Company's agreement with
the KKR Partnerships described below. The Company did not receive any proceeds
from the secondary public offerings.
KKR Associates is a limited partnership of which Henry R. Kravis, George R.
Roberts, Michael W. Michelson, James H. Greene, Jr. and Edward A. Gilhuly,
directors of the Company, are five of the eleven general partners and Messrs.
Kravis and Roberts are also the members of the Executive Committee of KKR
Associates. Saul Fox, a former director of the Company, was also a general
partner through September 1996 and currently is a limited partner of KKR
Associates. KKR Associates is the sole general partner of each of the KKR
Partnerships, and possesses 100% of the voting power and investment power to the
shares owned by the KKR Partnerships. The KKR Partnerships are Petroleum
Associates, L.P. ("Petroleum Associates"), which owns of record approximately
25% of the Company's outstanding shares and KKR Partners II, L.P., which owns of
record less than 1% of the Company's shares. As a result, the KKR Partnerships
and their general partners may be able to exercise substantial influence over
the Company, through their representation with five of the eleven directors on
the Company's Board of Directors and by reason of their significant voting power
with respect to the election of directors and actions submitted to a vote of
stockholders.
The limited partnership agreement pursuant to which Petroleum Associates
was organized will, by its terms, expire on December 31, 1997 unless amended by
all of the limited partners to extend the term beyond such date. If such
partnership agreement expires, the limited partnership will dissolve. There can
be no assurance that KKR Associates, the general partner of Petroleum
Associates, will seek such amendments, or, if sought, that such amendments will
be approved by the limited partners. In the event of the dissolution and winding
up of Petroleum Associates, KKR Associates will have sole discretion regarding
the timing (which may be one or more years after the expiration of the
partnership agreements) and manner of the disposition of any common stock of the
Company held by such partnership, including public or private sales of such
common stock, the distribution of such common stock to the limited partners of
Petroleum Associates, as the case may be, or a combination of the foregoing. If
shares of the Company's common stock are distributed to the limited partners of
Petroleum Associates, each limited partner will thereafter have sole discretion
with respect to its common stock.
The Company has agreed that, upon request of the KKR Partnerships, the
Company will register under the Securities Act and applicable state securities
laws the sale of the Company's common stock owned by the KKR Partnerships as to
which registration has been requested. The Company's obligation is subject to
certain limitations relating to a minimum amount required for registration, the
timing of a registration and other
61
<PAGE> 62
similar matters. The Company is obligated to pay any registration expenses
incidental to such registration, excluding underwriters' commissions and
discounts.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A)1 FINANCIAL STATEMENTS.
The following financial statements and the Report of Independent
Accountants are filed as a part of this report on the pages indicated:
Report of Independent Accountants -- page 35.
Consolidated Balance Sheet -- December 31, 1996 and 1995 -- page 36.
Consolidated Statement of Operations -- For the years ended December
31, 1996, 1995 and 1994 -- page 37.
Consolidated Statement of Cash Flows -- For the years ended December
31, 1996, 1995 and 1994 -- page 38.
Consolidated Statement of Stockholders' Equity -- For the years ended
December 31, 1996, 1995 and 1994 -- page 39.
Selected Quarterly Financial Data for the two years ended December 31,
1996 -- page 52.
Selected Financial Data for the five years ended December 31,
1996 -- page 28.
(A)2 EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.1 -- Restated Certificate of Incorporation of Union Texas
Petroleum Holdings, Inc., as amended on May 10, 1995
(Filed under the identical exhibit number to the
Company's Form 8-K dated May 18, 1995 (Commission File
No. 1-9019) and incorporated herein by reference)
3.2 -- Bylaws of Union Texas Petroleum Holdings, Inc., as
amended (Filed as Exhibit 3.2 to the Company's Form 10-Q
for quarter ended June 30, 1994 (Commission File No.
1-9019) and incorporated herein by reference)
3.3 -- Specimen of Certificate evidencing the Common Stock
(Filed under the identical exhibit number to the
Company's Registration Statement No. 33-16267 and
incorporated herein by reference)
4.1 -- Indenture for 8.25% Senior Notes due November 15, 1999,
dated as of November 15, 1992, between Union Texas
Petroleum Holdings, Inc., the Subsidiaries named therein
and State Street Bank and Trust Company (including form
of note) (Filed as Exhibit 10.1 to the Company's Form
10-Q for quarter ended March 31, 1994 (Commission File
No. 1-9019) and incorporated herein by reference)
4.2 -- Indenture dated as of March 15, 1995, among Union Texas
Petroleum Holdings, Inc., the Subsidiaries named therein
and The First National Bank of Chicago, as trustee (the
"1995 Indenture") (Filed as Exhibit 10.1 to the Company's
Form 10-Q for quarter ended March 31, 1995 (Commission
File No. 1-9019) and incorporated herein by reference)
</TABLE>
62
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.3 -- Specimen Form of 8 3/8% Senior Note due March 15, 2005,
issued by Union Texas Petroleum Holdings, Inc. pursuant
to the 1995 Indenture (Filed as Exhibit 10.2 to the
Company's Form 10-Q for quarter ended March 31, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
4.4 -- Specimen Form of 8 1/2% Senior Note due April 15, 2007,
issued by Union Texas Petroleum Holdings, Inc. pursuant
to the 1995 Indenture (Filed as Exhibit 10.3 to the
Company's Form 10-Q for quarter ended March 31, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
4.5 -- Supplement dated November 7, 1995 to Indenture dated as
of November 15, 1992 for 8.25% Senior Notes due 1999,
between Union Texas Petroleum Holdings, Inc., the
Subsidiaries named therein and State Street Bank and
Trust Company (Filed as Exhibit 4.1 to the Company's Form
8-K dated November 17, 1995 (Commission File No. 1-9019)
and incorporated herein by reference)
4.6 -- Supplement dated November 7, 1995 to the 1995 Indenture
between Union Texas Petroleum Holdings, Inc., the
Subsidiaries named therein and The First National Bank of
Chicago (Filed as Exhibit 4.2 to the Company's Form 8-K
dated November 17, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
4.7 -- Form of Fixed Rate Medium-Term Note issued by the Company
pursuant to the 1995 Indenture (Filed as Exhibit 4.4 to
the Company's Registration Statement No. 33-64049 and
incorporated herein by reference). The Company agrees to
furnish to the Commission upon request a copy of each
instrument with respect to issues of such notes of the
Company, the authorized principal amount of which does
not exceed 10% of the consolidated assets of the Company
and its subsidiaries.
10.1 -- Tax Agreement, dated as of June 27, 1985, among Allied
Corporation and Union Texas Petroleum Holdings, Inc.
(Filed as Exhibit 10.6 to the Company's Registration
Statement No. 33-00312 and incorporated herein by
reference)
10.2+ -- Form of Subscription Agreement between Union Texas
Petroleum Holdings, Inc. and certain employees (Filed as
Exhibit 10.8 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.3+ -- Form of Tagalong Agreement between Union Texas Petroleum
Holdings, Inc. and certain employees (Filed as Exhibit
10.9 to the Company's Registration Statement No. 33-00312
and incorporated herein by reference)
10.4+ -- Amended and Restated Union Texas Petroleum Salaried
Employees' Pension Plan, effective as of January 1, 1994
(Filed under the identical exhibit number to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.5+ -- Union Texas Petroleum Holdings, Inc. 1985 Stock Option
Plan, as amended (Filed as Exhibit 10.10 to Post
Effective Amendment No. 2 to the Company's Registration
Statement No. 33-12800 and incorporated herein by
reference)
10.6+ -- Union Texas Petroleum Holdings, Inc. Executive Severance
Plan (Filed as Exhibit 10.14 to the Company's
Registration Statement No. 33-00312 and incorporated
herein by reference) and Appendix A (Filed as Exhibit
10.6 to the Company's 1993 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.7+ -- Amended and Restated Union Texas Petroleum Savings Plan
for Salaried Employees, effective as of January 1, 1993
(Filed under the identical exhibit number to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
</TABLE>
63
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.8+ -- Amended and Restated Supplemental Non-Qualified Savings
Plan for Executive Employees of Union Texas Petroleum
Holdings, Inc. and its Subsidiaries, effective as of
January 1, 1993 (Filed under the identical exhibit number
to the Company's 1993 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.9+ -- Form of employment letter with executive officers (Filed
as Exhibit 10.18 to the Company's Registration Statement
No. 33-00312 and incorporated herein by reference) and
Exhibit A (Filed as Exhibit 10.10 to the Company's 1992
Form 10-K (Commission File No. 1-9019) and incorporated
herein by reference)
10.10 -- Joint Venture Agreement, dated as of August 8, 1968,
among Roy M. Huffington, Inc., Virginia International
Company, Austral Petroleum Gas Corporation, Golden Eagle
Indonesia Limited and Union Texas Far East Corporation,
as amended (the "Joint Venture Agreement") (Filed as
Exhibit 6.6 to the Registration Statement No. 2-58834 of
Alaska Interstate Company and incorporated herein by
reference)
10.11 -- Supply Agreement, dated as of April 14, 1981, for Badak
LNG Expansion Project among Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara ("Pertamina") and the parties
to the Joint Venture Agreement (Filed as Exhibit 10.14 to
the Company's 1992 Form 10-K (Commission File No. 1-9019)
and incorporated herein by reference)
10.12 -- Indenture, dated as of September 25, 1984, between Unimar
Company, as Issuer, and Irving Trust Company, as Trustee,
providing for 14,077,747 Indonesian Participating Units
(Filed as Exhibit 4 to the Form S-14 Registration
Statement No. 2-93037 of Unimar Company and incorporated
herein by reference)
10.13 -- Amended and Restated Agreement of General Partnership of
Unimar Company, dated as of September 11, 1990 (Filed as
Exhibit 3.1 to the Form 10-Q for quarter ended September
30, 1990 of Unimar Company (Commission File No. 1-8791)
and incorporated herein by reference)
10.14 -- License No. P054 concerning all or part of the following
blocks in the United Kingdom North Sea: 49/15 and 49/25
(Sean Field) (Filed as Exhibit 10.74 to the Company's
Registration Statement No. 33-00312 and incorporated
herein by reference)
10.15 -- License No. P220 concerning all or part of the following
blocks in the United Kingdom North Sea: 9/26, 14/19,
15/11, 15/15, 15/17 and 210/29 (Piper Field) (Filed as
Exhibit 10.75 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.16 -- License No. P249 concerning part of the following block
in the United Kingdom North Sea: 14/19 (Claymore Field)
(Filed as Exhibit 10.76 to the Company's Registration
Statement No. 33-00312 and incorporated herein by
reference)
10.17 -- License No. P250 concerning all or part of the following
blocks in the United Kingdom North Sea: 9/26, 15/11,
15/15, 210/29, 15/17 and 14/19 (Scapa Field) (Filed as
Exhibit 10.77 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.18 -- Restated United Kingdom Continental Shelf Operating
Agreement (Piper License), dated as of August 11, 1977,
among Occidental Petroleum (U.K.) Limited, Occidental of
Britain, Inc., Getty Oil (Britain) Limited, Allied
Chemical (Great Britain) Limited, Allied Chemical (North
Sea) Ltd., Thomson North Sea Limited and the British
National Oil Corporation (Filed as Exhibit No. 10.78 to
the Company's Registration Statement No. 33-00312 and
incorporated herein by reference)
</TABLE>
64
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.19 -- Restated United Kingdom Continental Shelf Operating
Agreement (Claymore License), dated August 11, 1977,
among Occidental Petroleum (Caledonia) Limited,
Occidental of Scotland, Inc., Getty Oil (Britain)
Limited, Allied Chemical (Great Britain) Limited, Allied
Chemical (North Sea) Ltd., Thomson North Sea Limited and
the British National Oil Corporation (Filed as Exhibit
10.79 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.20 -- United Kingdom Continental Shelf Joint Operating
Agreement for Blocks 49/15a and 49/25a (Sean Field),
dated July 3, 1984, among Shell U.K. Limited, Union Texas
Petroleum Limited, Britoil Public Limited Company and
Esso Exploration and Production U.K. Limited (Filed as
Exhibit 10.81 to the Company's Registration Statement No.
33-00312 and incorporated herein by reference)
10.21 -- Agreement for Sale and Purchase of Natural Gas from the
Sean North and Sean South Fields, dated November 7, 1984,
between Union Texas Petroleum Limited and British Gas
Corporation, including list of omitted schedules (Filed
as Exhibit 10.82 to the Company's Registration Statement
No. 33-00312 and incorporated herein by reference)
10.22 -- Badak III LNG Sales Contract, dated March 19, 1987,
between Pertamina, as Seller, and Chinese Petroleum
Corporation, as Buyer (Filed as Exhibit 10.28 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.23 -- Supplemental Indenture, dated as of October 31, 1986, to
the Indenture between Unimar Company and Irving Trust
Company (Exhibit 10.13 above) (Filed as Exhibit 10.114 to
the Company's Registration Statement No. 33-16267 and
incorporated herein by reference)
10.24 -- Amended and Restated Registration Rights Agreement, dated
September 30, 1987, among Union Texas Petroleum Holdings,
Inc. and Certain Holders of Certain Securities of Union
Texas Petroleum Holdings, Inc. (Filed as Exhibit 10.117
to Post Effective Amendment No. 1 to the Company's
Registration Statement No. 33-12800 and incorporated
herein by reference)
10.25+ -- Union Texas Petroleum Holdings, Inc. 1987 Stock Option
Plan and First Amendment to Union Texas Petroleum
Holdings, Inc. 1987 Stock Option Plan (Filed as Exhibit
4.4 to the Company's Registration Statement No. 33-21684
and incorporated herein by reference)
10.26 -- Bontang Capital Projects Loan Agreement No. 2, dated as
of June 9, 1987, among Continental Bank International, as
Trustee under the Badak Trustee and Paying Agent
Agreement (Borrower), the banks named therein as Lead
Managers and Lenders and The Industrial Bank of Japan
Trust Company (Agent) (Filed as Exhibit 10.125 to the
Company's Registration Statement No. 33-16267 and
incorporated herein by reference)
10.27 -- Producers Agreement No. 2, dated as of June 9, 1987, by
Pertamina, Roy M. Huffington, Inc., Virginia
International Company, Ultramar Indonesia Limited,
Virginia Indonesia Company ("VICO"), Union Texas East
Kalimantan Limited, Universe Tankships, Inc. and
Huffington Corporation in favor of The Industrial Bank of
Japan Trust Company as Agent (Filed as Exhibit 10.126 to
the Company's Registration Statement No. 33-16267 and
incorporated herein by reference)
10.28 -- Badak III LNG Sales Contract Supply Agreement, dated
October 19, 1987, among Pertamina and the parties to the
Joint Venture Agreement (Filed as Exhibit 10.132 to Post
Effective Amendment No. 1 to the Company's Registration
Statement No. 33-12800 and incorporated herein by
reference)
</TABLE>
65
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.29 -- $316,000,000 Bontang III Loan Agreement, dated February
9, 1988, among the Trustee under the Bontang III Trustee
and Paying Agent Agreement, Train-E Finance Co., Ltd., as
Tranche A Lender and The Industrial Bank of Japan Trust
Company as Agent for the Tranche B Lenders and as Tranche
B Lender (Filed as Exhibit 10.83 to Post Effective
Amendment No. 2 to the Company's Registration Statement
No. 33-12800 and incorporated herein by reference)
10.30 -- Bontang III Producers Agreement, dated as of February 9,
1988, among Pertamina, Roy M. Huffington, Inc.,
Huffington Corporation, VICO, Virginia International
Company, Ultramar Indonesia Company Limited, Union Texas
East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd., in favor of Train-E Finance Co., Ltd., as Tranche A
Lender, The Industrial Bank of Japan Trust Company as
Agent for the Tranche B Lenders and as Tranche B Lender,
and the other Tranche B Lenders named therein (Filed as
Exhibit 10.84 to the Post Effective Amendment No. 2 to
the Company's Registration Statement No. 33-12800 and
incorporated herein by reference)
10.31 -- Bontang III Trustee and Paying Agent Agreement, dated
February 9, 1988, among Pertamina, Roy M. Huffington,
Inc., Huffington Corporation, Virginia International
Company, VICO, Ultramar Indonesia Limited, Union Texas
East Kalimantan Limited, Universe Tankships, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd. and the Trustee thereunder (Filed as Exhibit 10.42
to the Company's 1991 Form 10-K (Commission File No.
1-9019) and incorporated herein by reference)
10.32 -- $21,250,000 Financing Agreement, dated December 20, 1988,
among Union Texas Pakistan, Inc. and Overseas Private
Investment Corporation (Filed as Exhibit 10.85 to the
Company's 1988 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.33 -- Guaranty Agreement, dated December 20, 1988, between
Union Texas Petroleum Holdings, Inc. and Overseas Private
Investment Corporation (Filed as Exhibit 10.86 to the
Company's 1988 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.34+ -- First Amendment to Union Texas Petroleum Holdings, Inc.
Executive Severance Plan (Filed as Exhibit 10.87 to the
Company's 1989 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.35+ -- Second Amendment to Union Texas Petroleum Holdings, Inc.
Executive Severance Plan (Filed as Exhibit 10.88 to the
Company's 1989 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.36+ -- Third Amendment to Union Texas Petroleum Holdings, Inc.
Executive Severance Plan (Filed as Exhibit 10.93 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.37+ -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1985 Stock Option Plan (Filed as Exhibit 10.95 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.38+ -- Second Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan (Filed as Exhibit 10.96 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.39+ -- Union Texas Petroleum Supplemental Retirement Plan (Filed
as Exhibit 10.99 to the Company's Form 10-Q for quarter
ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
</TABLE>
66
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.40+ -- Amended and Restated Union Texas Petroleum Supplemental
Retirement Plan II, effective January 1, 1994 (Filed
under the identical exhibit number to the Company's 1993
Form 10-K (Commission File No. 1-9019) and incorporated
herein by reference)
10.41+ -- Union Texas Petroleum Supplemental Retirement Plans
Trust, as amended (Filed as Exhibit 10.101 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.42 -- Amended and Restated Production Sharing Contract
effective August 8, 1968-August 7, 1998 among Pertamina,
Roy M. Huffington, Inc., VICO, Virginia International
Company, Ultramar Indonesia Limited, Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc. and
Huffington Corporation (Filed as Exhibit 10.102 to the
Company's Form 10-Q for quarter ended June 30, 1990
(Commission File No. 1-9019) and incorporated herein by
reference)
10.43 -- Production Sharing Contract effective August 8,
1998-August 7, 2018 among Pertamina, Roy M. Huffington,
Inc., VICO, Virginia International Company, Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Huffington
Corporation (Filed as Exhibit 10.103 to the Company's
Form 10-Q for quarter ended June 30, 1990 (Commission
File No. 1-9019) and incorporated herein by reference)
10.44 -- Joint Operating Agreement for the Scapa Field, dated
December 23, 1985, among Occidental Petroleum (Caledonia)
Limited, Texaco Britain Limited, Union Texas Petroleum
Limited, Thomson North Sea Limited, Thomson Scottish
Petroleum Limited and the Oil and Pipelines Agency (Filed
as Exhibit 10.104 to the Company's Form 10-Q for quarter
ended June 30, 1990 (Commission File No. 1-9019) and
incorporated herein by reference)
10.45 -- Amended and Restated 1973 LNG Sales Contract, dated as of
the 1st day of January, 1990, by and between Pertamina,
as Seller, and Chubu Electric Power Co., Inc., The Kansai
Electric Power Co., Inc., Kyushu Electric Power Co.,
Inc., Nippon Steel Corporation, Osaka Gas Co., Ltd. and
Toho Gas Co., Ltd., as Buyers (Filed as Exhibit (10)-8 to
the 1993 Form 10-K of Unimar Company (Commission File No.
1-8791) and incorporated herein by reference)
10.46 -- Amended and Restated Badak LNG Sales Contract, dated as
of the 1st day of January, 1990, by and between
Pertamina, as Seller, and Chubu Electric Power Co., Inc.,
The Kansai Electric Power Co., Inc., Osaka Gas Co., Ltd.
and Toho Gas Co., Ltd., as Buyers (Filed as Exhibit
(10)-11 to the 1993 Form 10-K of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.47+ -- Fourth Amendment to Union Texas Petroleum Holdings, Inc.
Executive Severance Plan (Filed as Exhibit 10.85 to the
Company's 1990 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.48+ -- Fifth Amendment to Union Texas Petroleum Holdings, Inc.
Executive Severance Plan (Filed as Exhibit 10.69 to the
Company's 1991 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.49 -- Amended and Restated Bontang Processing Agreement, dated
February 9, 1988, among Pertamina and Roy M. Huffington,
Inc., Huffington Corporation, VICO, Virginia
International Company, Ultramar Indonesia Limited, Union
Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia
Petroleum, Ltd. and P.T. Badak Natural Gas Liquefaction
Company (Filed as Exhibit (10)-39 to the 1988 Form 10-K
of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
</TABLE>
67
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.50 -- Amended and Restated Debt Service Allocation Agreement,
dated February 9, 1988, among Pertamina and Roy M.
Huffington, Inc., VICO, Ultramar Indonesia Limited,
Virginia International Company, Union Texas East
Kalimantan Limited, Universe Tankships, Inc., Huffington
Corporation, Total Indonesie, Unocal Indonesia, Ltd. and
Indonesia Petroleum, Ltd. (Filed as Exhibit (10)-40 to
the 1988 Form 10-K of Unimar Company (Commission File No.
1-8791) and incorporated herein by reference)
10.51 -- Amendment No. 1 to Bontang III Producers Agreement, dated
as of May 31, 1988, among Pertamina, Roy M. Huffington,
Inc., Huffington Corporation, VICO, Virginia
International Company, Ultramar Indonesia Limited, Union
Texas East Kalimantan Limited, Universe Tankships, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia
Petroleum, Ltd. and Train-E Finance Co., Ltd., as Tranche
A Lender, and The Industrial Bank of Japan Trust Company
on behalf of the Tranche B Lender, (Filed as Exhibit
(10)-21 to the 1993 Form 10-K of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.52 -- Amendment No. 2 to Producers Agreement No. 2, dated as of
May 31, 1988, among Pertamina, Roy M. Huffington, Inc.,
Huffington Corporation, VICO, Virginia International
Company, Ultramar Indonesia Limited, Union Texas East
Kalimantan Limited and Universe Tankships, Inc. (Filed as
Exhibit (10)-44 to the 1988 Form 10-K of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
10.53 -- Badak IV LNG Sales Contract, dated October 23, 1990,
between Pertamina, as Seller, and Osaka Gas Co., Ltd.,
Tokyo Gas Co., Ltd. and Toho Gas Co., Ltd., as Buyer
(Filed as Exhibit (10)-65 to the 1990 Form 10-K of Unimar
Company (Commission File No. 1-8791) and incorporated
herein by reference)
10.54 -- Supply Agreement for Natural Gas to Badak IV LNG Sales
Contract, dated August 12, 1991, by and between
Pertamina, VICO, Opicoil Houston, Inc., Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.80 to the
Company's 1991 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.55 -- LNG Sales and Purchase Contract (Korea II), dated May 7,
1991, between Pertamina, as Seller, and Korea Gas
Corporation, as Buyer (Filed as Exhibit (10)-1 to the
1990 Form 10-Q for quarter ended June 30, 1991 of Unimar
Company (Commission File No. 1-8791) and incorporated
herein by reference)
10.56 -- Amended and Restated Bontang II Trustee and Paying Agent
Agreement, dated as of July 15, 1991, among Pertamina,
VICO, Opicoil Houston, Inc., Virginia International
Company, Ultramar Indonesia Limited, Union Texas East
Kalimantan Limited, Universe Gas & Oil Company, Inc.,
Total Indonesie, Unocal Indonesia, Ltd., Indonesia
Petroleum, Ltd. and the Trustee thereunder (Filed as
Exhibit 10.82 to the Company's 1991 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.57 -- $750,000,000 Bontang IV Loan Agreement, dated as of
August 26, 1991, among the Trustee under the Bontang IV
Trustee and Paying Agent Agreement as Borrower, Chase
Manhattan Asia Limited and The Mitsubishi Bank, Limited
as Coordinators, the other banks and financial
institutions named therein as Arrangers, Co-Arrangers,
Lead Managers, Managers, Co-Managers and Lenders, The
Chase Manhattan Bank, N.A. and The Mitsubishi Bank,
Limited as Co-Agents and The Chase Manhattan Bank, N.A.
as Agent (Filed as Exhibit 10.1 to the Form 10-Q for
quarter ended September 30, 1991 of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
</TABLE>
68
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.58 -- Bontang IV Producers Agreement, dated as of August 26,
1991, by Pertamina, Virginia International Company,
Opicoil Houston, Inc., VICO, Ultramar Indonesia Limited,
Union Texas East Kalimantan Limited, Universe Gas & Oil
Company, Inc., Total Indonesie, Unocal Indonesia, Ltd.
and Indonesia Petroleum, Ltd. in favor of The Chase
Manhattan Bank, N.A., as Agent for the Lenders and as
Lender, and the other Lenders named therein (Filed as
Exhibit 10.2 to the Form 10-Q for quarter ended September
30, 1991 of Unimar Company (Commission File No. 1-8791)
and incorporated herein by reference)
10.59 -- Bontang IV Trustee and Paying Agent Agreement, dated as
of August 26, 1991, among Pertamina, Virginia
International Company, Opicoil Houston, Inc., VICO,
Ultramar Indonesia Limited, Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc., Total
Indonesie, Unocal Indonesia, Ltd., Indonesia Petroleum,
Ltd. and the Trustee thereunder (Filed as Exhibit 10.3 to
the Form 10-Q for quarter ended September 30, 1991 of
Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.60+ -- Sixth Amendment to Union Texas Petroleum Holdings, Inc.
Executive Severance Plan (Filed as Exhibit 10.77 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.61 -- Consulting Agreement, dated as of November 18, 1992,
among Petroleum Associates, L.P., KKR Partners II, L.P.
and Union Texas Petroleum Holdings, Inc. (Filed as
Exhibit 10.81 to the Company's 1992 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.62+ -- Second Amendment to Union Texas Petroleum Supplemental
Retirement Plans Trust (Filed as Exhibit 10.82 to the
Company's 1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.63 -- Amendment No. 1 to Bontang III Trustee and Paying Agent
Agreement, dated as of December 11, 1992, among
Pertamina, VICO, Virginia International Company, Ultramar
Indonesia Limited, Union Texas East Kalimantan Limited,
Opicoil Houston, Inc., Universe Gas & Oil Company, Inc.,
Total Indonesie, Unocal Indonesia Ltd., Indonesia
Petroleum, Ltd. and the Bontang III Trustee (Filed as
Exhibit 10.83 to the Company's 1992 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.64+ -- Key Employee Incentive Compensation Plan (Filed as
Exhibit 10.84 to the Company's 1992 Form 10-K (Commission
File No. 1-9019) and incorporated herein by reference)
10.65+ -- First Amendment to Union Texas Petroleum Supplemental
Retirement Plan (Filed as Exhibit 10.85 to the Company's
1992 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.66+ -- Union Texas Petroleum Holdings, Inc. 1992 Stock Option
Plan (Filed as Exhibit 4.3 to the Company's Registration
Statement No. 33-64928 and incorporated herein by
reference)
10.67 -- Arun and Bontang LPG Sales and Purchase Contract, dated
July 15, 1986, between Pertamina, as Seller, and
Mitsubishi Corporation, Cosmo Oil Co., Ltd., Nippon
Petroleum Gas Co., Ltd., Showa Shell Sekiyu K.K., Kyodo
Oil Co., Ltd., Idemitsu Kosan Co., Ltd. and Mitsui
Liquefied Gas Co., Ltd., as Buyers (Filed as Exhibit
(10)-60 to the 1991 Form 10-K of Unimar Company
(Commission File No. 1-8791) and incorporated herein by
reference)
</TABLE>
69
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.68 -- Petroleum Concession Agreement, dated January 21, 1992,
between the President of the Islamic Republic of Pakistan
and Union Texas Pakistan, Inc., Occidental Petroleum
(Pakistan) Inc. and Oil & Development Corporation (Filed
as Exhibit 10.87 to the Company's Form 10-Q for quarter
ended March 31, 1992 (Commission File No. 1-9019) and
incorporated herein by reference)
10.69 -- Amended and Restated Supply Agreement (In support of the
Amended and Restated 1973 LNG Sales Contract), dated
September 22, 1993, and effective December 3, 1973,
between Pertamina and VICO, LASMO Sanga Sanga Limited,
Opicoil Houston, Inc., Union Texas East Kalimantan
Limited, Universe Gas & Oil Company, Inc. and Virginia
International Company (Filed as Exhibit 10.75 to the
Company's 1993 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.70+ -- Seventh Amendment to Union Texas Petroleum Holdings, Inc.
Executive Severance Plan (Filed as Exhibit 10.5 to the
Company's Form 10-Q for quarter ended June 30, 1994
(Commission File No. 1-9019) and incorporated herein by
reference)
10.71 -- East Sean Gas Sales Agreement, dated August 30, 1994,
between Union Texas Petroleum Limited and Alliance Gas
Limited (Filed as Exhibit 10.3 to the Company's Form 10-Q
for quarter ended September 30, 1994 (Commission File No
1-9019) and incorporated herein by reference)
10.72 -- Share Sale Agreement, dated October 18, 1994, among Union
Texas Petroleum Limited, Fina Petroleum Development
Limited and Fina Exploration Limited (the "Share Sale
Agreement") (Filed as Exhibit 2.1 to the Company's Form
8-K dated November 14, 1994 (Commission File No. 1-9019)
and incorporated herein by reference)
10.73 -- Guarantee, dated October 18, 1994, by Union Texas
International Corporation relating to the Share Sale
Agreement (Filed as Exhibit 2.3 to the Company's Form 8-K
dated November 14, 1994 (Commission File No. 1-9019) and
incorporated herein by reference)
10.74 -- Petroleum Concession Agreement, dated April 20, 1977,
between the President of Pakistan and Union Texas
Pakistan, Inc. (Filed as Exhibit 10.87 to the Company's
1994 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.75 -- Amendments to Arun and Bontang LPG Sales and Purchase
Contract, dated October 5, 1994, between Pertamina, as
Seller, and Mitsubishi Corporation, Cosmo Oil Co., Ltd.,
Nippon Petroleum Gas Co., Ltd., Showa Shell Sekiyu K.K.,
Japan Energy Corporation, Idemitsu Kosan Co., Ltd. and
Mitsui Oil & Gas Co., Ltd., as Buyers (Filed as Exhibit
10.88 to the Company's 1994 Form 10-K (Commission File
No. 1-9019) and incorporated herein by reference)
10.76 -- Amendment to the Amended and Restated 1973 LNG Sales
Contract, dated as of the 1st day of June 1992, by and
between Pertamina, as Seller, and Kyushu Electric Power
Co., Inc., Nippon Steel Corporation and Toho Gas Co.,
Ltd., as Buyers (Filed as Exhibit (10)-9 to the 1993 Form
10-K of Unimar Company (Commission File No. 1-8791) and
incorporated herein by reference)
10.77 -- Facility Agreement, dated May 26, 1995, among Union Texas
Britannia Limited, Chemical Bank, as Arranger,
NationsBank, N.A. Carolinas, as Facility Agent, National
Westminster Bank plc, as Funding Agent, and the
Co-Arrangers, Technical Agents, Account Bank and Banks
named therein (Filed as Exhibit 10.9 to the Company's
Form 10-Q for quarter ended June 30, 1995 (Commission
File No. 1-9019) and incorporated herein by reference)
</TABLE>
70
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<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.78 -- Sponsor Direct Agreement, dated May 26, 1995, among Union
Texas Petroleum Limited, Union Texas Britannia Limited
and NationsBank N.A. Carolinas, as Facility Agent (Filed
as Exhibit 10.10 to the Company's Form 10-Q for quarter
ended June 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.79 -- Sponsor Support Agreement, dated May 26, 1995, between
Union Texas Petroleum Limited and Union Texas Britannia
Limited (Filed as Exhibit 10.11 to the Company's Form
10-Q for quarter ended June 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
10.80+ -- Union Texas Petroleum Holdings, Inc. 1994 Incentive Plan
(Filed as Exhibit 10.12 to the Company's Form 10-Q for
quarter ended June 30, 1995 (Commission File No. 1-9019)
and incorporated herein by reference)
10.81+ -- First Amendment to Union Texas Petroleum Holdings, Inc.
1992 Stock Option Plan (Filed as Exhibit 10.13 to the
Company's Form 10-Q for quarter ended June 30, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
10.82 -- Sale and Purchase Agreement dated May 31, 1995, between
Union Texas Petroleum Limited and Oryx U.K. Energy
Company (Filed as Exhibit 10.14 to the Company's Form
10-Q for quarter ended June 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
10.83 -- Bontang V Loan Agreement, dated as of July 1, 1995, among
BankAmerica International, as Trustee under the Bontang V
Trustee and Paying Agent Agreement, as Borrower, Bontang
Train-G Project Finance Co., Ltd. ("Tranche A Lender"),
the Banks named therein as Tranche B Lenders, The
Long-Term Credit Bank of Japan, Limited, New York Branch
("Facility Agent"), The Fuji Bank, Limited
("Intercreditor Agent"), Credit Lyonnais ("Technical
Agent"), and Credit Lyonnais, The Fuji Bank, Limited and
The Long-Term Credit Bank of Japan, Limited
(collectively, the "Arrangers") (Filed as Exhibit 10.1 to
the Company's Form 10-Q for quarter ended September 30,
1995 (Commission File No. 1-9019) and incorporated herein
by reference)
10.84 -- Bontang V Producers Agreement, dated as of July 1, 1995,
by Pertamina, VICO, OPICOIL Houston, Inc., Virginia
International Company, LASMO Sanga Sanga Limited, Union
Texas East Kalimantan Limited, Universe Gas & Oil
Company, Inc., Total Indonesie, Unocal Indonesia Company
and Indonesia Petroleum, Ltd. (collectively, the
"Producers"), in favor of the Tranche A Lender, the Banks
named therein as Tranche B Lenders and the Facility
Agent, Intercreditor Agent and Technical Agent (Filed as
Exhibit 10.2 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.85 -- Bontang V Trustee and Paying Agent Agreement, dated as of
July 1, 1995, among the Producers and BankAmerica
International, as Trustee and Paying Agent (Filed as
Exhibit 10.3 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.86 -- Amendment No. 1 to Bontang III Loan Agreement, dated as
of July 1, 1995, among Continental Bank International, as
Trustee under the Bontang III Trustee and Paying Agent
Agreement, Train-E Finance Co., Ltd., as Tranche A
Lender, and The Industrial Bank of Japan Trust Company,
as Agent on behalf of the Majority Tranche B Lenders
(Filed as Exhibit 10.6 to the Company's Form 10-Q for
quarter ended September 30, 1995 (Commission File No.
1-9019) and incorporated herein by reference)
</TABLE>
71
<PAGE> 72
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.87 -- Second Amended and Restated 1973 LNG Sales Contract,
dated as of August 3, 1995, between Pertamina, as Seller,
and Chubu Electric Power Co., Inc., The Kansai Electric
Power Co., Inc., Kyushu Electric Power Co., Inc., Nippon
Steel Corporation, Osaka Gas Co., Ltd. and Toho Gas Co.,
Ltd., as the Buyers, with related letter agreement, dated
August 3, 1995, between Seller and Buyers (Filed as
Exhibit 10.7 to the Company's Form 10-Q for quarter ended
September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.88 -- Package V Supply Agreement for Natural Gas in Support of
the 1973 LNG Sales Contract Extension, dated June 16,
1995, effective October 6, 1994, between Pertamina and
VICO, LASMO Sanga Sanga Limited, OPICOIL Houston, Inc.,
Union Texas East Kalimantan Limited, Universe Gas and Oil
Company, Inc. and Virginia International Company (Filed
as Exhibit 10.8 to the Company's Form 10-Q for quarter
ended September 30, 1995 (Commission File No. 1-9019) and
incorporated herein by reference)
10.89+ -- First Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees (Filed as Exhibit 10.9 to the
Company's Form 10-Q for quarter ended September 30, 1995
(Commission File No. 1-9019) and incorporated herein by
reference)
10.90+ -- Second Amendment to Union Texas Petroleum Savings Plan
for Salaried Employees (Filed as Exhibit 10.103 to the
Company's 1995 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.91 -- Second Amended and Restated 1981 Badak LNG Sales
Contract, dated as of August 3, 1995, between Pertamina,
as Seller, and Chubu Electric Power Co., Inc., The Kansai
Electric Power Co., Inc., Osaka Gas Co., Ltd. and Toho
Gas Co., Ltd., as Buyers, with related letter agreement,
dated August 3, 1995, between Seller and Buyers (Filed as
Exhibit 10.104 to the Company's 1995 Form 10-K
(Commission File No. 1-9019) and incorporated herein by
reference)
10.92 -- LNG Sales and Purchase Contract (Badak V), dated August
12, 1995, between Pertamina and Korea Gas Corporation
(Filed as Exhibit 10.105 to the Company's 1995 Form 10-K
(Commission File No. 1-9019) and incorporated herein by
reference)
10.93 -- LNG Sale and Purchase Contract (Badak VI), dated October
25, 1995, between Pertamina and Chinese Petroleum
Corporation (Filed as Exhibit 10.106 to the Company's
1995 Form 10-K (Commission File No. 1-9019) and
incorporated herein by reference)
10.94 -- Badin-II Revised Petroleum Concession Agreement (Filed as
Exhibit 10.107 to the Company's 1995 Form 10-K
(Commission File No. 1-9019) and incorporated herein by
reference)
10.95 -- Second Amended and Restated Credit Agreement dated as of
March 29, 1996 among Union Texas Petroleum Holdings,
Inc., the Banks and Co-Agents listed therein and
NationsBank of Texas, N.A., as Agent (Filed as Exhibit
10.1 to the Company's Form 10-Q for quarter ended March
31, 1996 (Commission File No. 1-9019) and incorporated
herein by reference)
10.96 -- Credit Agreement dated as of March 29, 1996 among Union
Texas Petroleum Holdings, Inc., the Banks and Co-Agents
listed therein and NationsBank of Texas, N.A., as Agent
(Filed as Exhibit 10.2 to the Company's Form 10-Q for
quarter ended March 31, 1996 (Commission File No. 1-9019)
and incorporated herein by reference)
10.97+ -- Third Amendment to Union Texas Petroleum Savings Plan for
Salaried Employees (Filed as Exhibit 10.1 to the
Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by
reference)
</TABLE>
72
<PAGE> 73
<TABLE>
<C> <S>
10.98 -- 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
(Filed as Exhibit 10.2 to the Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by reference)
10.99 -- 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 (Filed as Exhibit 10.3 to the Company's Form 10-Q for quarter
ended June 30, 1996 (Commission File No. 1-9019) and incorporated herein by reference)
10.100 -- 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
(Filed as Exhibit 10.4 to the Company's Form 10-Q for quarter ended June 30, 1996
(Commission File No. 1-9019) and incorporated herein by reference)
10.101 -- 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 (Filed as Exhibit 10.5 to the Company's Form 10-Q for
quarter ended June 30, 1996 (Commission File No. 1-9019) and incorporated herein by
reference)
10.102 -- 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 (Filed as Exhibit 10.6 to the Company's Form 10-Q
for quarter ended June 30, 1996 (Commission File No. 1-9019) and incorporated herein by
reference)
10.103+ -- First Amendment to Supplemental Non-Qualified Savings Plan for Executive Employees
(Filed as Exhibit 10.1 to the Company's Form 10-Q for quarter ended September 30, 1996
(Commission File No. 1-9019) and incorporated herein by reference)
10.104+ -- Second Amendment to the Salaried Employees' Pension Plan (Filed as Exhibit 10.2 to the
Company's Form 10-Q for quarter ended September 30, 1996 (Commission File No. 1-9019)
and incorporated herein by reference)
10.105# -- License No. P213 and Deed of License Assignment covering United Kingdom North Sea
Blocks 16/26 (Britannia and Alba Fields) and 28/5a
10.106+# -- Eighth Amendment to Union Texas Petroleum Holdings, Inc. Executive Severance Plan
10.107+# -- First Amendment to Union Texas Petroleum Holdings, Inc. 1994 Incentive Plan
10.108+# -- Second Amendment to Union Texas Petroleum Holdings, Inc. 1992 Stock Option Plan
</TABLE>
73
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.109+# -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan
10.110+# -- Fourth Amendment to Union Texas Petroleum Holdings, Inc.
1985 Stock Option Plan
10.111+# -- First Amendment to Union Texas Petroleum Supplemental
Retirement Plan II
21.1# -- List of Subsidiaries
23.1 -- Consent of Price Waterhouse LLP is included on page S-1
of this Annual Report on Form 10-K
24.1 -- Power of Attorney, pursuant to which amendments to this
Annual Report on Form 10-K may be filed, is included on
page 75 of this Annual Report on Form 10-K
27.1# -- Financial data schedule
</TABLE>
- ---------------
+ Executive Severance Plan or Arrangement pursuant to Item 601(b)(10)(iii)(A) of
Regulation S-K.
# Filed herewith.
(B) REPORTS ON FORM 8-K
The Company filed Current Reports on Form 8-K dated: (i) October 25, 1996,
to attach press releases announcing the Company's 1996 third quarter results,
estimates of the Company's year-end reserves, plans for an additional furnace at
the Geismar olefins plant in Louisiana, expansion of exploration interests in
Italy's Southern Apennines oil play and the repurchase program of up to two
million shares of the Company's common stock; (ii) January 24, 1997 to report
the resignation of Saul A. Fox, a director, and to attach press releases
announcing the Company's 1996 year-end and fourth quarter results, the Company's
1997 capital spending budget and two oil discoveries in the Sindh province in
southeastern Pakistan; and (iii) February 13, 1997, to report the results of an
exploration well and to attach a press release reporting formation of new
exploration ventures in Bolivia, Yemen, Jordan, Greece and Papua New Guinea.
74
<PAGE> 75
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: /s/ DONALD M. MCMULLAN
-------------------------------------
Donald M. McMullan
Vice President and Controller
Date: March 5, 1997
POWER OF ATTORNEY
We, the undersigned, directors and officers of Union Texas Petroleum
Holdings, Inc. (the "Company"), do hereby severally constitute and appoint John
L. Whitmire, Larry D. Kalmbach and Donald M. McMullan and each or any one of
them, our true and lawful attorneys and agents, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, and to file the same with
all exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys and agents, and
each or any of them, full power and authority to do and perform each and every
act and thing requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN L. WHITMIRE Chairman of the Board and Chief March 5, 1997
- ----------------------------------------------------- Executive Officer (Principal
(John L. Whitmire) Executive Officer)
/s/ LARRY D. KALMBACH Vice President and Chief March 5, 1997
- ----------------------------------------------------- Financial Officer (Principal
(Larry D. Kalmbach) Financial Officer)
/s/ DONALD M. MCMULLAN Vice President and Controller March 5, 1997
- ----------------------------------------------------- (Principal Accounting Officer)
(Donald M. McMullan)
/s/ GLENN A. COX Director March 5, 1997
- -----------------------------------------------------
(Glenn A. Cox)
/s/ EDWARD A. GILHULY Director March 5, 1997
- -----------------------------------------------------
(Edward A. Gilhuly)
/s/ JAMES H. GREENE, JR. Director March 5, 1997
- -----------------------------------------------------
(James H. Greene, Jr.)
</TABLE>
75
<PAGE> 76
<TABLE>
<C> <S> <C>
/s/ HENRY R. KRAVIS Director March 5, 1997
- ------------------------------------------------------
(Henry R. Kravis)
/s/ MICHAEL W. MICHELSON Director March 5, 1997
- ------------------------------------------------------
(Michael W. Michelson)
/s/ STANLEY P. PORTER Director March 5, 1997
- ------------------------------------------------------
(Stanley P. Porter)
/s/ GEORGE R. ROBERTS Director March 5, 1997
- ------------------------------------------------------
(George R. Roberts)
/s/ RICHARD R. SHINN Director March 5, 1997
- ------------------------------------------------------
(Richard R. Shinn)
/s/ SELLERS STOUGH Director March 5, 1997
- ------------------------------------------------------
(Sellers Stough)
Director
- ------------------------------------------------------
(James D. Woods)
</TABLE>
76
<PAGE> 77
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of Union Texas Petroleum Holdings, Inc.'s Registration
Statements on Forms S-8 (Nos. 33-26105, 33-44045, 33-13575, 33-21684, 33-59213
and 33-64928) of our report dated February 14, 1997, appearing on page 35 of
this Form 10-K.
PRICE WATERHOUSE LLP
Houston, Texas
March 5, 1997
S-1
<PAGE> 78
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.105# -- License No. P213 and Deed of License Assignment covering
United Kingdom North Sea Blocks 16/26 (Britannia and Alba
Fields) and 28/5a
10.106+# -- Eighth Amendment to Union Texas Petroleum Holdings, Inc.
Executive Severance Plan
10.107+# -- First Amendment to Union Texas Petroleum Holdings, Inc.
1994 Incentive Plan
10.108+# -- Second Amendment to Union Texas Petroleum Holdings, Inc.
1992 Stock Option Plan
10.109+# -- Third Amendment to Union Texas Petroleum Holdings, Inc.
1987 Stock Option Plan
10.110+# -- Fourth Amendment to Union Texas Petroleum Holdings, Inc.
1985 Stock Option Plan
10.111+# -- First Amendment to Union Texas Petroleum Supplemental
Retirement Plan II
21.1# -- List of Subsidiaries
23.1 -- Consent of Price Waterhouse LLP is included on page S-1
of this Annual Report on Form 10-K
24.1 -- Power of Attorney, pursuant to which amendments to this
Annual Report on Form 10-K may be filed, is included on
page 75 of this Annual Report on Form 10-K
27.1# -- Financial data schedule
</TABLE>
- ---------------
+ Executive Severance Plan or Arrangement pursuant to Item 601(b)(10)(iii)(A) of
Regulation S-K.
# Filed herewith.
<PAGE> 1
LICENCE NO. P. 213
Petroleum (Production) Act 1934
Continental Shelf Act 1964
THE SECRETARY OF STATE FOR TRADE AND INDUSTRY
and
TRANSOCEAN OIL (U.K.) LIMITED
INVENT (U.K.) LIMITED
SEA SEARCH LIMITED
BAYTRUST OIL EXPLORATIONS LIMITED
UNILON OIL EXPLORATIONS LIMITED
TANKS NORTH SEA LIMITED
HUSKY OIL (U.K.) LIMITED
GAO (U.K.) LIMITED
SUNLITE OIL COMPANY (U.K.) LIMITED
KEWANEE OIL COMPANY (U.K.) LIMITED
OXOCO (U.K.) LIMITED
LICENCE
to
Search and Bore for and get petroleum
in Block(s) 15/8, 16/26, 28/5, 29/25
<PAGE> 2
THIS LICENCE made , 1972, between The
SECRETARY OF STATE FOR TRADE AND INDUSTRY
(hereinafter referred to as "the Secretary of State")
for and on behalf of Her Majesty of the one part and
TRANSOCEAN OIL (UK) LIMITED and INVENT (UK) LIMITED,
whose respective registered offices are both at Kempson
House, Camomile Street, London EC3A 7AN; SEA SEARCH
LIMITED whose registered office is at 9 Bishopsgate,
London EC2N 3AD; BAYTRUST OIL EXPLORATIONS LIMITED:
UNILON OIL EXPLORATIONS LIMITED and TANKS NORTH SEA
LIMITED whose respective registered offices are all at
Princes House, 95 Gresham Street, London EC2V 7BS;
HUSKY OIL (UK) LIMITED; GAO (UK) LIMITED; SUNLITE OIL
COMPANY (UK) LIMITED; KEWANEE OIL COMPANY (UK) LIMITED
and OXOCO (UK) LIMITED whose respective registered
offices are all at Kempson House Camomile Street,
London EC3A 7AN (hereinafter referred to as "the
Licensee") of the other part WITNESSETH as follows:
Incorporation of clauses.
Incorporation A. Clause 1 and clauses 4 to 34 of the model
of clauses for production Licences in seaward areas set
clauses. out in Schedule 4 to the Petroleum (Production)
Regulations 1966 (S.I. 1966 No. 898) as amended by the
Petroleum (Production) (Amendment) Regulations 1971
(S.I. 1971 No. 814) shall be incorporated herein and
shall have effect as if herein set out at length.
Term of B. Clause 3 of the said model clauses (the
License. marginal note whereof is "Term of Licence") shall be
incorporated herein and shall have effect as if herein
set out at length, the date 15 March 1972 being
inserted therein as the date next after which the term
of this Licence shall commence.
-1-
<PAGE> 3
Right to search C. In consideration of the payments and royalties
and bore for and hereinafter provided and the performance and observance
get petroleum by the Licensee of all the terms and conditions hereof,
the Secretary of State in exercise of the powers
conferred upon him by the Act of 1934 and the Act of
1964, hereby grants to the Licensee EXCLUSIVE LICENCE
AND LIBERTY during the continuance of this Licence and
subject to the provisions hereof to search and bore for,
and get, petroleum in the sea bed and subsoil under the
seaward area comprising an area of 800.2 square
Kilometres more particularly described in Schedule 1
hereto being the area comprising block(s) No. 15/8,
16/26, 28/5, 29/25 on the reference map deposited at the
office of the Department of Trade and Industry, Thames
House South, Millbank, London, S.W.1.
Provided that nothing in the Licence shall
affect the right of the Secretary of State to grant a
methane drainage licence in respect of the whole or any
part of the licensed area or affect the exercise of any
rights so granted.
Schedules D. The Schedules referred to in the said model
clauses namely clause 8 (the marginal note whereof is
"Payment of consideration for Licence") and clause 12
(the marginal note whereof is "Working Obligations")
are for the purposes of this Licence schedules 2 and 3
respectively hereunder written. IN WITNESS whereof
the Corporate Seal of the Secretary of State and the
Common Seal(s) of the Licensee have been hereunto
affixed the day and the year first above written.
-2-
<PAGE> 4
SCHEDULE I
Description of Licensed Area
First the sea area bounded by lines joining the following co-ordinates on
European Datum:
<TABLE>
<S> <C> <C> <C> <C>
(1)58(degrees) 50'00"N: 0(degree) 24'00"E (2)58(degrees) 50'00"N: 0(degree) 36'00"E
(3)58(degrees) 40'00"N: 0(degree) 36'00"E (4)58(degrees) 40'00"N: 0(degree) 24'00"E
Secondly
--------
(1)58(degrees) 10'00"N: 1(degree) 00'00"E (2)58(degrees) 10'00"N: 1(degree) 12'00"E
(3)58(degrees) 00'00"N: 1(degree) 12'00"E (4)58(degrees) 00'00"N: 1(degree) 00'00"E
Thirdly
-------
(1)57(degrees) 00'00"N: 0(degree) 48'00"E (2)57(degrees) 00'00"N: 1(degree) 00'00"E
(3)56(degrees) 50'00"N: 1(degree) 00'00"E (4)56(degrees) 50'00"N: 0(degree) 48'00"E
Fourthly
--------
(1)56(degrees) 20'00"N: 1(degree) 48'00"E (2)56(degrees) 20'00"N: 2(degrees) 00'00"E
(3)56(degrees) 10'00"N: 2(degrees) 00'00"E (4)56(degrees) 10'00"N: 1(degree) 48'00"E
</TABLE>
-3-
<PAGE> 5
SCHEDULE 2
Considerations for Licence
Initial 1. The Licensee shall pay to the Secretary of
payment State upon the grant of the Licence the sum of
$40,059.00
Periodic 2. (1) Upon the date specified in the notice
minimum referred to in clause (the marginal note whereof is
payments "Option to continue Licence as to part the licensed
area"), and on the anniversaries thereof during the
term of the Licence as continuing pursuant to that
clause the Licensee shall pay to the Secretary of State
sums (in this Schedule referred as "periodic payments")
calculated as follows:
<TABLE>
<CAPTION>
<S> <C>
(a) upon the said date L.50 multiplied by the area factor
(b) upon the first anniversary of the said date L.80 multiplied by
the area factor
(c) " " second " " " " L.110 "
(d) " " third " " " " L.140 "
(e) " " fourth " " " " L.170 "
(f) " " fifth " " " " L.200 "
(g) " " sixth " " " " L.230 "
(h) " " seventh " " " " L.260 "
(i) " " eighth " " " " L.290 "
(j) " " ninth " " " " L.320 "
</TABLE>
-4-
<PAGE> 6
(k) " " tenth and every subsequent
anniversary of the said date L.350
multiplied by the area factor.
(2) In this paragraph "the area factor"
means the number of square kilometres comprised in
the licensed area at the date upon which the
periodic payment in question becomes due.
Royalties 3. (1) Within two months after the end of the
half year in which the Licence is granted, and within
two months after the end of every succeeding half
year the Licensee shall pay to the Secretary of State
a royalty in respect of those periods respectively
of twelve and a half pence for every pound of
the value of the petroleum won and saved by the
Licensee in the period from the grant of the Licence
to the end of the half year in which it was granted
and in each succeeding half year respectively without
any deduction except as provided by the next
sub-paragraph.
(2) The Licensee may deduct from the amount
of royalty due in respect of the period from the grant
of the Licence to the end of the half year in which it
was granted and from the amount of royalty due in
respect of each succeeding half year respectively-
(a) If the period in respect of which
that royalty is due is one in
which a periodic payment was due
and paid, one half of that
periodic payment; or
(b) if the period in respect of which
that royalty is due is a half
year next following a half year in
which a periodic
-5-
<PAGE> 7
payment was due and paid, an
amount equal to that periodic payment
less any part thereof deducted from the
amount of royalty due in respect of the
period in which that periodic payment
was due, but if any periodic payment is
greater than the amounts of royalty
which would apart from this paragraph
be payable in respect of the period in
which the periodic payment is due and
paid and in respect of the next
following half year, no repayment to
the Licensee of the whole or any part
thereof shall be made nor shall the
same be taken into account in respect
of the royalty due in respect of any
other half year.
(3) The royalty shall be paid on the
value of petroleum shown by the statement of value
referred to in clause 11 (the marginal note whereof
is "value of petroleum") in respect of each half
year, and in the event of a direction that
paragraph (2) of that clause shall not apply
being such that the Licensee is required to give a
revised statement of value pursuant to paragraph (7)
thereof or in the event of a dispute as to the value
of petroleum, the Licensee shall pay to the Secretary
of State any additional sums due or the Secretary of
State shall pay to the Licensee any amount overpaid as
the case may require, within two months after the
service of the notice containing that direction or
after the award of the arbitrator or any prior
settlement as to the value of the petroleum won and
saved in the period in question, as the case may
require, save that in the event of a provisional
statement of value being
-6-
<PAGE> 8
prescribed royalty shall be paid on the value of
the petroleum shown by the provisional statement of
value in respect of each half year and the Licensee
shall pay to the Secretary of State any additional
sums due or the Secretary of State shall pay to the
Licensee any amount overpaid as the case may require
within two months after the award of the arbitrator
or any prior settlement as to the value of the
petroleum won and saved in the period in question.
-7-
<PAGE> 9
SCHEDULE 3
Working obligations
The Licensee shall during the term of this Licence carry out seismic
survey work in the licensed area and drill therein four exploration
wells.
-8-
<PAGE> 10
The Corporate Seal of the Secretary of State )
for Trade and Industry hereunto affixed is )
authenticated by )
/s/ Assistant Secretary
Authorized by the Secretary of State
The Common Seal of Transocean Oil (U.K.) )
Limited was hereunto affixed in the presence )
of )
/s/ Director
/s/ Secretary
The Common Seal of Invent (U.K.) Limited was )
hereunto affixed in the presence of )
/s/ Director
/s/ Secretary
-9-
<PAGE> 11
The Common Seal of Sea Search Limited was )
hereunto affixed in the presence of )
/s/ Director
/s/ Secretary
The Common Seal of Baytrust Oil Explorations )
Limited was hereunto affixed in the presence )
of )
/s/ Director
/s/ Secretary
The Common Seal of Unilon Oil Explorations )
Limited was hereunto affixed in the presence )
of )
/s/ Director
/s/ Secretary
-10-
<PAGE> 12
The Common Seal of Tanks North Sea Limited )
was hereunto affixed in the presence of )
/s/ Director
/s/ Secretary
The Common Seal of Husky Oil (U.K.) Limited )
was hereunto affixed in the presence of )
/s/ Director
/s/ Secretary
The Common Seal of Gao (U.K.) Limited was )
hereunto affixed in the presence of )
/s/ Director
/s/ Secretary
-11-
<PAGE> 13
The Common Seal of Sunlite Oil Company )
(U.K.) Limited was hereunto affixed in the )
presence of )
/s/ Director
/s/ Secretary
The Common Seal of Kewanee Oil Company )
(U.K.) Limited was hereunto affixed in )
the presence of )
/s/ Director
/s/ Secretary
The Common Seal of Oxoco (U.K.) Limited )
was hereunto affixed in the presence of )
/s/ Director
/s/ Secretary
-12-
<PAGE> 14
DATED 18th of September 1996
- --------------------------------------------------------------------------------
AMERADA HESS LIMITED
BAYTRUST OIL EXPLORATIONS LIMITED
CHEVRON U.K. LIMITED
CONOCO PETROLEUM LIMITED
CONOCO (U.K.) LIMITED
ESSO EXPLORATION AND PRODUCTION UK LIMITED
FINA PETROLEUM DEVELOPMENT LIMITED
MARATHON OIL EXPLORATION (U.K.) LIMITED
ORYX U.K. ENERGY COMPANY
PANCANADIAN NORTH SEA LIMITED
PETROBRAS U.K. LIMITED
PHILLIPS PETROLEUM COMPANY UNITED KINGDOM LIMITED
RANGER OIL (U.K.) LIMITED
SANTA FE EXPLORATION (U.K.) LIMITED
SHELL U.K. LIMITED
STATOIL EXPLORATION (U.K.) LIMITED
UNILON OIL EXPLORATIONS LIMITED
UNION TEXAS BRITANNIA LIMITED
UNION TEXAS PETROLEUM LIMITED
- AND -
THE SECRETARY OF STATE FOR TRADE AND INDUSTRY
--------------------------------------------
DEED OF LICENCE ASSIGNMENT
PETROLEUM PRODUCTION
LICENCE NO. P. 213
--------------------------------------------
Lovell White Durrant
65 Holborn Viaduct
London EC1A 2DY
<PAGE> 15
THIS DEED OF ASSIGNMENT is made the 18th day of September, 1996
BETWEEN:
(1) The parties listed in the Schedule hereto (hereinafter together called
the "Assignors");
(2) The Assignors and Petrobras U.K. Limited whose registered office is at
197 Knightsbridge, London SW7 1RB (hereinafter together called the
"Assignees"); and
(3) The Secretary of State for Trade and Industry (hereinafter called the
"Secretary of State") for and on behalf of Her Majesty.
WHEREAS:
(A) The Assignors are the holders of United Kingdom Petroleum Production
Licence No. P.213 (hereinafter called the "Licence") granted with
effect from and including 16 March 1972 pursuant to the Petroleum
(Production) Act 1934 as applied by the Continental Shelf Act 1964.
(B) The Secretary of State has given his written consent dated 23 July
1996 to this assignment of the Licence by the Assignors to the
Assignees.
NOW THIS DEED WITNESSETH that:
1. The Assignors hereby assign unto the Assignees all the rights,
interests, obligations and liabilities of the Assignors in, under,
pursuant to and in respect of the Licence to hold the same unto the
Assignees subject to the performance and observance by the Assignees
of the terms and conditions contained in the Licence and on the part
of the Licensee therein described to be performed and observed.
-1-
<PAGE> 16
2. The Assignees jointly and severally covenant with and in favour of the
Secretary of State and the Assignors (and each of them) that they will
perform and observe the terms and conditions contained in the Licence
and on the part of the Licensee to be performed and observed.
3. This Deed of Licence Assignment may be executed by way of separate
counterparts all of which taken together shall be deemed to form a
single deed and each of which shall be deemed to be an original
document.
4. The construction, validity and performance of this Deed shall be
governed by and construed in accordance with English law and each
party hereby submits to the jurisdiction of the English Courts.
IN WITNESS WHEREOF the parties (other than the Secretary of State) have
hereunto affixed their respective common or corporate seals the day and year
first above written.
-2-
<PAGE> 17
SCHEDULE
Amerada Hess Limited
Baytrust Oil Explorations Limited
Chevron U.K. Limited
Conoco Petroleum Limited
Conoco (U.K.) Limited
Esso Exploration and Production UK Limited
Fina Petroleum Development Limited
Marathon Oil Exploration (U.K.) Limited
Oryx U.K. Energy Company
PanCanadian North Sea Limited
Phillips Petroleum Company United Kingdom Limited
Ranger Oil (U.K.) Limited
Santa Fe Exploration (U.K.) Limited
Shell U.K. Limited
Statoil Exploration (U.K.) Limited
Unilon Oil Explorations Limited
Union Texas Britannia Limited
Union Texas Petroleum Limited
-3-
<PAGE> 18
( The Common Seal of
( AMERADA HESS LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director
( The Common Seal of
( BAYTRUST OIL EXPLORATIONS LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director/Secretary
( The Common Seal of
( CHEVRON U.K. LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director/Secretary
( The Common Seal of
( CONOCO PETROLEUM LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director/Secretary
-4-
<PAGE> 19
The Common Seal of )
CONOCO (U.K.) LIMITED )
was hereunto affixed in the presence of: )
/s/ Director
/s/ Secretary
The Common Seal of )
ESSO EXPLORATION AND PRODUCTION UK LIMITED )
was hereunto affixed in the presence of: )
/s/ Director
/s/ Director/Secretary
The Common Seal of )
FINA PETROLEUM DEVELOPMENT LIMITED )
was hereunto affixed in the presence of: )
/s/ Director
/s/ Director/Secretary
The Common Seal of
MARATHON OIL EXPLORATION (U.K.) LIMITED )
was hereunto affixed in the presence of: )
/s/ Director
/s/ Director/Secretary
-5-
<PAGE> 20
( The Corporate Seal of
( ORYX U.K. ENERGY COMPANY
( was hereunto affixed in the presence of:
/s/ Director
/s/ Secretary
( The Common Seal of
( PANCANADIAN NORTH SEA LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director/Secretary
( The Common Seal of
( PETROBRAS U.K. LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director/Secretary
( The Common Seal of
( PHILLIPS PETROLEUM COMPANY
( UNITED KINGDOM LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director/Secretary
-6-
<PAGE> 21
The Common Seal of )
RANGER OIL (U.K.) LIMITED )
was hereunto affixed in the presence of: )
/s/ Director
/s/ Secretary
The Common Seal of )
SANTA FE EXPLORATION (U.K.) LIMITED )
was hereunto affixed in the presence of: )
/s/ Director
/s/ Director/Secretary
Given under the Common Seal of )
SHELL U.K. LIMITED )
was hereunto affixed in the presence of: )
/s/ Director
/s/ Assistant Secretary
The Common Seal of )
STATOIL EXPLORATION (U.K.) LIMITED )
was hereunto affixed in the presence of: )
/s/ Director
/s/ Director/Secretary
-7-
<PAGE> 22
( The Common Seal of
( UNILON OIL EXPLORATIONS LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Secretary
( The Common Seal of
( UNION TEXAS BRITANNIA LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director/Secretary
( The Common Seal of
( UNION TEXAS PETROLEUM LIMITED
( was hereunto affixed in the presence of:
/s/ Director
/s/ Director/Secretary
-8-
<PAGE> 1
EIGHTH AMENDMENT TO
UNION TEXAS PETROLEUM HOLDINGS, INC.
EXECUTIVE SEVERANCE PLAN
WHEREAS, Union Texas Petroleum Holdings, Inc. (the "Company") has
heretofore adopted the Union Texas Petroleum Holdings, Inc. Executive Severance
Plan (the "Plan");
WHEREAS, the Company desires to amend the Plan;
NOW THEREFORE, the Plan shall be and is hereby amended, effective as
of October 24, 1996, as follows:
1. Section 2.12 of the Plan shall be deleted and the following
new Section 2.12 shall be substituted therefore:
"2.12 Protected Period - means each and any of the
following periods:
(i) the period ending March 31, 1999; and
(ii) the period beginning with the date of any
Change of Control that occurs after March 31,
1991 and ending twenty-four (24) months after
the date of such Change of Control."
2. AS AMENDED HEREBY, the Plan is specifically ratified and
reaffirmed.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By /s/ John L. Whitmire
------------------------------------
John L. Whitmire
Chairman and Chief Executive Officer
<PAGE> 1
FIRST AMENDMENT TO
UNION TEXAS PETROLEUM HOLDINGS, INC.
1994 INCENTIVE PLAN
WHEREAS, UNION TEXAS PETROLEUM HOLDINGS, INC. (the "Company") has
heretofore adopted the UNION TEXAS PETROLEUM HOLDINGS, INC. 1994 INCENTIVE PLAN
(the "Plan"); and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW THEREFORE, the Plan shall be amended as follows, effective October
24, 1996:
1. The term "non-employee Director" shall be replaced, each and
every time that it appears within the Plan, with the term "Eligible Director";
provided that the new term "Non-Employee Director" when used in the definition
of "Section 16 Committee" as added by Section 2 below shall not be so replaced.
2. Section 2 shall be amended by adding the following defined
term after the definition of "SEC" and before the definition of "Shares":
"Section 16 Committee" shall mean a committee consisting of
two or more members of the Board, each of whom satisfy the
requirements of the definition of "Non-Employee Director" under Rule
16b-3."
3. Section 3 shall be amended by deleting the second sentence of
such Section and by adding the following at the end of such Section:
"Notwithstanding the foregoing, the Section 16 Committee shall have
full power and authority to take any of the actions described in
clauses (i) through (ix) above and any other action necessary or
desirable to ensure compliance with the requirements of, and to
provide the exemption of transactions under the Plan pursuant to,
Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder, and further, to ensure compliance with the
requirements of Section 162(m) of the Code and the rules and
regulations promulgated thereunder, to the extent Awards are intended
to qualify thereunder. References in the Plan to the "Committee"
shall mean the "Section 16 Committee" when it is necessary or
desirable that such action be taken by the Section 16 Committee and
not by the Committee to satisfy such objectives."
4. Section 5 shall be amended by deleting the term "the
Committee" in the first sentence and substituting the term "the Section 16
Committee" therefor.
5. Section 6(h)(vii) shall be amended by deleting the term
"disinterested person" and substituting the term "Non-Employee Director"
therefor.
6. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, this First Amendment has been executed this 24th
day of October, 1996.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By /s/ John L. Whitmire
------------------------------------
John L. Whitmire
Chairman and Chief Executive Officer
<PAGE> 1
SECOND AMENDMENT TO
UNION TEXAS PETROLEUM HOLDINGS, INC.
1992 STOCK OPTION PLAN
WHEREAS, UNION TEXAS PETROLEUM HOLDINGS, INC. (the "Company") has
heretofore adopted the UNION TEXAS PETROLEUM HOLDINGS, INC. 1992 STOCK OPTION
PLAN (the "Plan"); and
WHEREAS, subsequent thereto, the Company has amended the Plan; and
WHEREAS, the Company desires to further amend the Plan in certain
respects;
NOW THEREFORE, the Plan shall be amended as follows, effective October
24, 1996:
1. Article II shall be amended by deleting the second sentence of
the first paragraph such Article and by adding the following at the end of such
Article:
"Notwithstanding the foregoing, a second committee of the
Board of Directors of the Company (the "Section 16 Committee"), which
shall consist of at least two members, each of whom shall be
"Non-Employee Directors" within the meaning of Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), shall have full power and authority to take any
of the actions described above and any other action necessary or
desirable to ensure compliance with the requirements of, and to
provide the exemption of transactions under the Plan pursuant to,
Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder, and further, to ensure compliance with the
requirements of Section 162(m) of the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder, to
the extent options are intended to qualify thereunder. References in
the Plan to the "Committee" shall mean the "Section 16 Committee" when
it is necessary or desirable that such action be taken by the Section
16 Committee and not by the Committee to satisfy such objectives."
2. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, this Second Amendment has been executed this 24th
day of October, 1996.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By /s/ John L. Whitmire
----------------------------------------
John L. Whitmire
Chairman and Chief Executive Officer
<PAGE> 1
THIRD AMENDMENT TO
UNION TEXAS PETROLEUM HOLDINGS, INC.
1987 STOCK OPTION PLAN
WHEREAS, UNION TEXAS PETROLEUM HOLDINGS, INC. (the "Company") has
heretofore adopted the UNION TEXAS PETROLEUM HOLDINGS, INC. 1987 STOCK OPTION
PLAN (the "Plan"); and
WHEREAS, subsequent thereto, the Company has amended the Plan; and
WHEREAS, the Company desires to further amend the Plan in certain
respects;
NOW THEREFORE, the Plan shall be amended as follows, effective October
24, 1996:
1. Article II shall be amended by deleting the second sentence of
the first paragraph such Article and by adding the following at the end of such
Article:
"Notwithstanding the foregoing, a second committee of the
Board of Directors of the Company (the "Section 16 Committee"), which
shall consist of at least two members, each of whom shall be
"Non-Employee Directors" within the meaning of Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), shall have full power and authority to take any
of the actions described above and any other action necessary or
desirable to ensure compliance with the requirements of, and to
provide the exemption of transactions under the Plan pursuant to,
Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder, and further, to ensure compliance with the
requirements of Section 162(m) of the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder, to
the extent options are intended to qualify thereunder. References in
the Plan to the "Committee" shall mean the "Section 16 Committee" when
it is necessary or desirable that such action be taken by the Section
16 Committee and not by the Committee to satisfy such objectives."
2. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, this Third Amendment has been executed this 24th
day of October, 1996.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By /s/ John L. Whitmire
------------------------------------
John L. Whitmire
Chairman and Chief Executive Officer
<PAGE> 1
FOURTH AMENDMENT TO
UNION TEXAS PETROLEUM HOLDINGS, INC.
1985 STOCK OPTION PLAN
WHEREAS, UNION TEXAS PETROLEUM HOLDINGS, INC. (the "Company") has
heretofore adopted the UNION TEXAS PETROLEUM HOLDINGS, INC. 1985 STOCK OPTION
PLAN (the "Plan"); and
WHEREAS, subsequent thereto, the Company has amended the Plan; and
WHEREAS, the Company desires to further amend the Plan in certain
respects;
NOW THEREFORE, the Plan shall be amended as follows, effective October
24, 1996:
1. Article II shall be amended by deleting the second sentence of
the first paragraph such Article and by adding the following at the end of such
Article:
"Notwithstanding the foregoing, a second committee of the
Board of Directors of the Company (the "Section 16 Committee"), which
shall consist of at least two members, each of whom shall be
"Non-Employee Directors" within the meaning of Rule 16b-3 promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), shall have full power and authority to take any
of the actions described above and any other action necessary or
desirable to ensure compliance with the requirements of, and to
provide the exemption of transactions under the Plan pursuant to,
Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder, and further, to ensure compliance with the
requirements of Section 162(m) of the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder, to
the extent options are intended to qualify thereunder. References in
the Plan to the "Committee" shall mean the "Section 16 Committee" when
it is necessary or desirable that such action be taken by the Section
16 Committee and not by the Committee to satisfy such objectives."
2. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, this Fourth Amendment has been executed this 24th
day of October, 1996.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By /s/ John L. Whitmire
------------------------------------
John L. Whitmire
Chairman and Chief Executive Officer
<PAGE> 1
FIRST AMENDMENT TO
UNION TEXAS PETROLEUM
SUPPLEMENTAL RETIREMENT PLAN II
WHEREAS, Union Texas Petroleum Holdings, Inc. (the "Company") and other
Employing Companies have heretofore adopted the Union Texas Petroleum
Supplemental Retirement Plan II as amended and restated effective as of January
1, 1994 (the "Plan"); and
WHEREAS, the Company, on behalf of itself and the other Employing
Companies, desires to amend the Plan;
NOW THEREFORE BE IT RESOLVED, that the Plan shall be and is hereby amended
as follows, effective as of January 1, 1997:
1. The following new Article XVII shall be added to the Plan:
"XVII
SPECIAL SUPPLEMENTAL BENEFIT FOR JOHN L. WHITMIRE
John L. Whitmire ("Whitmire") shall be a Participant in this Supplemental
Plan and shall be entitled to the benefit set forth in this Article XVII in
addition to any other benefit provided by this Supplemental Plan for Whitmire
and without regard to whether Whitmire shall be entitled to a benefit under the
Basic Plan.
The benefit payable to Whitmire or his beneficiary or beneficiaries under
this Article XVII of the Supplemental Plan (the "Article XVII Benefit") shall
be the actuarial equivalent of the excess, if any, of (a) minus (b) where:
(a) is the total benefits which would have been payable to Whitmire or
on his behalf to his beneficiary or beneficiaries under the
Retirement Income Plan of Phillips Petroleum Company, the Key
Employee Supplemental Retirement Plan of Phillips Petroleum
Company, the Key Employee Missed Credited Service Retirement Plan
of Phillips Petroleum Company, and the Phillips Petroleum Company
Supplemental Executive Retirement Plan (collectively the "Phillips
Plans"), with such benefits being determined
(i) based on service and compensation to the earlier of the
date of Whitmire's termination of employment with the
Company and its subsidiaries or the date Whitmire attains
age 65 and determined as if Whitmire had remained an
employee of Phillips Petroleum Company ("Phillips") until
such date and voluntarily terminated employment with
Phillips on such date; and
<PAGE> 2
(ii) as if Whitmire's annual salary and bonus from Phillips for
any year after 1995 would have been Whitmire's 1995
salary and 1996 bonus (accrued in 1995) from Phillips,
each increased by 5% per year beginning with 1996 and with
such increases being deemed to have been effective on
January 1 of each year after 1995; provided, however, that
salary and bonus shall be prorated in the year of
termination of employment or attainment of age 65 based on
completed months of service; and
(iii) as if service is equal to the sum of (1) service included
for calculating Mr. Whitmire's benefit under the
Phillips Plans and (2) service credited under the Basic
Plan; and
(iv) as if the benefit was payable as a single life annuity
commencing on the earlier of the date payment of the
Article XVII Benefit would be made as set forth below or
the date Whitmire attains age 65; and
(v) without regard to any amendments to, or termination of,
the Phillips Plans after January 8, 1996; and
(b) is the total benefits which would in fact be payable to Whitmire
or on his behalf to his beneficiary or beneficiaries under (1)
the Phillips Plans, and (2) the Basic Plan, the Excess Plan, and
the other provisions of this Supplemental Plan (collectively, the
"Company Plans"), with such benefits being determined
(i) in the form of a single life annuity commencing on the
earlier of the date payment of the Article XVII Benefit
would be made as set forth below or the date Whitmire
attains age 65; and
(ii) with respect to the Company Plans, based on service
with and compensation from the Company and its
subsidiaries to the earlier of Whitmire's termination of
employment with the Company and its subsidiaries or
attainment of age 65.
The present value of the Article XVII Benefit shall be paid to Whitmire or
his beneficiary or beneficiaries in a lump sum at the time Whitmire, or his
beneficiary or beneficiaries, commences benefit payments under the Basic Plan
or, if earlier, upon the earlier of (i) the termination of this Supplemental
Plan or (ii) Whitmire's termination of employment with the Company and its
subsidiaries if Whitmire is not entitled to a benefit under the Basic Plan at
the time of his termination of employment. An amendment to this Supplemental
Plan to reduce the Article XVII Benefit shall be considered a termination of
this Supplemental Plan for the purpose of this Article XVII. The present value
of the Article XVII Benefit shall be determined by the Basic Plan's actuary
based on the following actuarial assumptions: UP-1984 Mortality Table and the
interest rate assumption used by the Pension Benefit Guaranty Corporation in
determining the present value of immediate annuities for pension plans
terminating on the date of commencement of the Article XVII Benefit.
Except as otherwise specifically provided for in this Article
<PAGE> 3
XVII, Whitmire's rights under this Article XVII of this Supplemental Plan shall
be governed by the other provisions of this Supplemental Plan".
2. AS AMENDED HEREBY, the Plan is ratified and reaffirmed.
Executed this 21st day of January, 1997.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By /s/ Larry D. Kalmbach
------------------------------------------
Larry D. Kalmbach
Vice President and Chief Financial Officer
<PAGE> 1
SUBSIDIARIES OF THE REGISTRANT
Except as otherwise noted, Union Texas Petroleum Holdings, Inc. (the "Company")
holds, either directly or indirectly, all or substantially all of the voting
stock of the following corporations. Except as otherwise noted, all of the
corporations are incorporated in the state of Delaware.
Union Texas Asia Corporation
Union Texas Acadia Corporation
Union Texas Barakan, Inc.
Union Texas Brasil, Inc.
Union Texas Carthage, Inc.
Union Texas Congolais Limited (1)
Union Texas de Bolivia Limited (1)
Union Texas do Brasil Limited (1)
Four Oaks Insurance, Ltd. (2)
Union Texas Petroleum Energy Corporation
Unicon Producing Company (3)
Union Texas International Corporation
Union Texas Adriatic, Inc.
Union Texas (Argentina) Ltd.
Union Texas Energy Development Limited (4)
Union Texas Finance, Inc.
Union Texas Hellas Limited (1)
Union Texas Jordan Limited (1)
Union Texas Maghreb, Inc.
Union Texas Methane, Inc.
Union Texas (Kai) Limited (1)
Union Texas (Tanimbar) Limited (1)
Union Texas (Rebi) Limited (1)
Union Texas (Transnational) Limited (1)
Union Texas East Kalimantan Limited (1)
Union Texas Espana, Inc.
Union Texas PNG, Inc.
Union Texas Pakistan, Inc.
Union Texas Pakistan Power Limited (1)
Union Texas Petroleum Limited (4)
Union Texas Britannia Limited (4)
Union Texas Trading Corporation
Union Texas Transportation Limited (4)
Union Texas Metropole, S.A. (5)
Union Texas Offshore Corporation
Union Texas Petroleum Alaska Corporation
Union Texas Petroleum Services Corporation
Union Texas Petrochemicals Corporation
Union Texas I Corporation
Union Texas Petrochemicals Pipeline, Inc.
Union Texas Power Development Limited (1)
-1-
<PAGE> 2
Union Texas South Atlantic, Inc.
Union Texas South Pacific, Inc.
Union Texas (South East Asia) Inc.
Union Texas Trinidad Limited (1)
Union Texas Tunisia, Inc.
Union Texas Venezuela Limited (1)
Union Texas Yemen Limited (1)
Unistar, Inc.
Union Texas Development Corporation
Unimar Company (6)
ENSTAR Corporation (7)
VICO 7.5, Inc. (7)
Virginia Indonesia Company (7)
Virginia Services, Ltd. (7)
Purchasing Services Inc. (7)
VICO Services, Inc. (7)
VICO Enterprises, Inc. (7)
ENSTAR Indonesia, Inc. (7)
Virginia International Company (7)
ENSTAR Petroleum, Ltd. (7)(8)
____________________________________
(1) Incorporated under the laws of The Bahamas.
(2) Incorporated under the laws of Bermuda.
(3) A Texas general partnership between a subsidiary of the Company and
Continental Can Europe, Inc.
(4) Incorporated under the laws of the United Kingdom.
(5) Incorporated under the laws of France.
(6) A Texas general partnership between a subsidiary of the Company and a
subsidiary of LASMO plc, a U.K. company.
(7) Direct or indirect subsidiary of Unimar Company.
(8) Incorporated under the laws of Alberta, Canada.
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S SEC FORM 10-K FOR THE PERIOD ENDING DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 43,574
<SECURITIES> 0
<RECEIVABLES> 96,687
<ALLOWANCES> 0
<INVENTORY> 39,721
<CURRENT-ASSETS> 203,542
<PP&E> 3,207,111
<DEPRECIATION> 1,574,688
<TOTAL-ASSETS> 1,942,004
<CURRENT-LIABILITIES> 280,839
<BONDS> 558,463
0
0
<COMMON> 4,391
<OTHER-SE> 581,631
<TOTAL-LIABILITY-AND-EQUITY> 1,942,004
<SALES> 1,008,476
<TOTAL-REVENUES> 1,036,449
<CGS> 341,057
<TOTAL-COSTS> 580,472
<OTHER-EXPENSES> 51,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,173
<INCOME-PRETAX> 379,039
<INCOME-TAX> 226,812
<INCOME-CONTINUING> 152,227
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 152,227
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 0
</TABLE>
