<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
COMMISSION FILE NUMBER 1-9019
UNION TEXAS PETROLEUM HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 76-0040040
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1330 POST OAK BLVD.
HOUSTON, TEXAS 77056
(Address of principal
executive offices
and zip code)
(713) 623-6544
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of July 18, 1997, there were 84,716,634 shares of Union Texas Petroleum
Holdings, Inc. $.05 par value Common Stock issued and outstanding.
<PAGE> 2
FORM 10-Q
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ -----------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................. $ 45,475 $ 43,574
Accounts and notes receivable, less allowance for doubtful accounts... 79,437 96,687
Inventories........................................................... 31,261 39,721
Prepaid expenses and other current assets............................. 48,093 23,560
---------- ----------
Total current assets.............................................. 204,266 203,542
Equity investments.......................................................... 92,220 93,262
Property, plant and equipment, at cost, less accumulated
depreciation, depletion and amortization*............................. 1,580,843 1,632,423
Other assets ............................................................. 11,997 12,777
---------- ----------
Total assets...................................................... $1,889,326 $1,942,004
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .................................... $ 1,144 $ 2,290
Accounts payable...................................................... 89,450 103,225
Taxes payable......................................................... 108,654 126,813
Other current liabilities............................................. 49,983 48,511
---------- ----------
Total current liabilities......................................... 249,231 280,839
Long-term debt.............................................................. 518,681 558,463
Deferred income taxes....................................................... 372,696 391,534
Other liabilities........................................................... 125,613 125,146
---------- ----------
Total liabilities................................................. 1,266,221 1,355,982
---------- ----------
Stockholders' equity:
Common stock.......................................................... 4,391 4,391
Paid in capital....................................................... 18,615 18,863
Cumulative foreign exchange translation adjustment and other.......... (34,205) (21,955)
Retained earnings..................................................... 694,943 614,376
Common stock held in treasury, at cost:
3,142,185 shares at June 30, 1997 and 1,490,322 shares at
December 31, 1996................................................. (60,639) (29,653)
---------- ----------
Total stockholders' equity........................................ 623,105 586,022
---------- ----------
Total liabilities and stockholders' equity........................ $1,889,326 $1,942,004
========== ==========
</TABLE>
* The Company follows the successful efforts method of accounting for oil
and gas activities.
The accompanying notes are an integral part of this financial statement.
1
<PAGE> 3
FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------- --------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Sales and operating revenues....................... $211,686 $223,192 $493,707 $481,370
Interest income and other revenues................. 918 900 3,473 1,065
Net earnings of equity investees................... 4,180 5,658 12,034 14,871
-------- -------- -------- -------
216,784 229,750 509,214 497,306
Costs and other deductions:
Product costs and operating expenses............... 80,723 81,258 162,083 161,322
Exploration expenses............................... 21,150 10,258 31,570 24,465
Depreciation, depletion and amortization........... 46,747 48,953 105,972 103,808
Selling, general and administrative expenses....... 7,156 6,424 11,944 12,175
Interest expense................................... 1,603 6,662 5,587 14,510
-------- -------- -------- --------
Income before income taxes.............................. 59,405 76,195 192,058 181,026
Income taxes............................................ 34,056 45,358 102,939 102,628
-------- -------- -------- --------
Net income.............................................. $ 25,349 $ 30,837 $ 89,119 $ 78,398
======== ======== ======== ========
Earnings per share of common stock...................... $ .30 $ .35 $ 1.05 $ .90
======== ======== ======== ========
Dividends per share of common stock..................... $ .05 $ .05 $ .10 $ .10
======== ======== ======== ========
Weighted average number of shares
outstanding (000's)................................ 84,652 87,547 85,254 87,573
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
<PAGE> 4
FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................................... $ 89,119 $ 78,398
Adjustment to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization.................................... 105,972 103,808
Deferred income taxes....................................................... (12,872) 783
Net income of equity investees.............................................. (12,034) (14,871)
Other....................................................................... 909 1,691
-------- --------
Net cash provided by operating activities before changes in other
assets and liabilities................................................. 171,094 169,809
Decrease (increase) in accounts and notes receivable........................ 16,568 (10,696)
Decrease in inventories..................................................... 8,104 7,953
Increase in prepaid expenses and other assets............................... (23,520) (15,436)
Decrease in accounts payable and other liabilities.......................... (2,654) (9,061)
(Decrease) increase in income taxes payable................................. (16,274) 7,009
-------- --------
Net cash provided by operating activities................................ 153,318 149,578
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment..................................... (86,106) (80,704)
Cash provided by equity investee............................................... 13,076 17,450
-------- --------
Net cash required by investing activities................................... (73,030) (63,254)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt................................... 19,619 31,159
Payments to settle long-term debt.............................................. (1,146) (1,146)
Net payments under the credit facilities....................................... (45,000)
Net payments on money market lines of credit................................... (55,633) (53,167)
Dividends...................................................................... (8,552) (8,762)
Proceeds from issuance of treasury stock....................................... 1,630 1,139
Purchase of treasury stock..................................................... (34,305) (7,355)
-------- --------
Net cash required by financing activities................................... (78,387) (83,132)
-------- --------
Net (decrease) increase in cash and cash equivalents........................... 1,901 3,192
Cash and cash equivalents at beginning of period............................... 43,574 11,069
-------- --------
Cash and cash equivalents at end of period..................................... $ 45,475 $ 14,261
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized)........................................ $ 4,521 $ 13,341
Income taxes................................................................ 131,909 97,221
</TABLE>
The accompanying notes are an integral part of this financial statement.
3
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FORM 10-Q
UNION TEXAS PETROLEUM HOLDINGS, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
NOTE 1 - BASIS OF PRESENTATION - These consolidated financial statements should
be read in the context of the consolidated financial statements and notes
thereto filed with the Securities and Exchange Commission ("SEC") in the
Company's 1996 annual report on Form 10-K. In the opinion of management, the
accompanying unaudited consolidated financial statements reflect all
adjustments, consisting only of normal adjustments, necessary to present fairly
the financial position of Union Texas Petroleum Holdings, Inc. and its
consolidated subsidiaries at June 30, 1997, and the results of operations and
cash flows for the three and six months ended June 30, 1997 and 1996. The
results of operations for the six months ended June 30, 1997, should not
necessarily be taken as indicative of the results of operations that may be
expected for the entire year 1997.
NOTE 2 - ACCOUNTING PRONOUNCEMENT RECENTLY ISSUED - In 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 128 - "Earnings per Share" effective for interim and annual periods
after December 15, 1997. This statement replaces primary earnings per share
("EPS") with a newly defined basic EPS and modifies the computation of diluted
EPS. Upon adoption, restatement of prior years EPS will be required. The Company
does not expect the implementation of SFAS 128 to have a material impact on its
EPS.
NOTE 3 - SUBSEQUENT EVENTS - In July 1997, the Company filed a registration
statement with the SEC, covering the issuance of up to $500 million of several
types of securities, including debt securities, common stock, preferred stock
and warrants. These securities may be offered from time to time and on such
terms as the Company deems appropriate.
During July 1997, the British government announced proposed changes in the U.K.
corporate tax laws. If the legislation is enacted as proposed, the Company
expects to record during the third quarter of 1997 (the anticipated date of
enactment) a one-time, non-cash charge to deferred tax expense of approximately
$15 million.
NOTE 4 - CONTINGENCIES - The Company and its subsidiaries and related companies
are named defendants in a number of lawsuits and named parties in numerous
government proceedings arising in the ordinary course of business. While the
outcome of contingencies, lawsuits or other proceedings against the Company
cannot be predicted with certainty, management expects that any liability, to
the extent not provided for through insurance or otherwise, will not have a
material adverse effect on the financial statements of the Company.
4
<PAGE> 6
UNION TEXAS PETROLEUM HOLDINGS, INC.
With respect to the unaudited consolidated financial information of Union Texas
Petroleum Holdings, Inc. for the three and six month periods ended June 30,
1997 and 1996, Price Waterhouse LLP reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report dated July 21, 1997 appearing
below, states that they did not audit and they do not express an opinion on
that unaudited consolidated financial information. Price Waterhouse LLP has not
carried out any significant or additional audit tests beyond those which would
have been necessary if their report had not been included. Accordingly, the
degree of reliance on their report on such information should be restricted in
light of the limited nature of the review procedures applied. Price Waterhouse
LLP is not subject to the liability provisions of section 11 of the Securities
Act of 1933 for their report on the unaudited consolidated financial
information because that report is not a "report" prepared or certified by
Price Waterhouse LLP within the meaning of sections 7 and 11 of the Act.
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
of Union Texas Petroleum Holdings, Inc.
We have reviewed the accompanying consolidated balance sheet of Union Texas
Petroleum Holdings, Inc. and consolidated subsidiaries as of June 30, 1997 and
the related consolidated statements of operations for the three and six month
periods ended June 30, 1997 and 1996 and of cash flows for the six month
periods ended June 30, 1997 and 1996. This financial information is the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial information for it to be in conformity
with generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1996, and the related
consolidated statements of operations, of cash flows, and of stockholders'
equity for the year then ended (not presented herein), and in our report dated
February 14, 1997 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet information as of December 31, 1996, is
fairly stated in all material respects in relation to the consolidated balance
sheet from which it has been derived.
PRICE WATERHOUSE LLP
Houston, Texas
July 21, 1997
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements, notes, and management's discussion contained in the registrant's
1996 annual report on Form 10-K, and condensed financial statements and notes
contained in this report.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1996
Net income for the three months ended June 30, 1997, was $25 million, or $.30
per share, as compared to net income of $31 million, or $.35 per share, for the
same period in 1996. The current quarter was unfavorably impacted by
anticipated declines in Indonesian LNG volumes, lower U.K. oil prices and
higher new venture exploration expenses partially offset by higher worldwide
crude oil sales volumes, higher Petrochemical operating profit, lower interest
expense and the sale of a small interest in a U.K. North Sea field.
Sales and operating revenues for the three months ended June 30, 1997, were
$212 million, down from $223 million for the second quarter of 1996.
International revenues totaled $167 million as compared to $171 million for the
second quarter of 1996. In the U.K., sales and operating revenues decreased by
$1 million due to lower crude oil prices and gas volumes partially offset by
higher oil volumes. In Indonesia, sales decreased $7 million due to anticipated
lower LNG volumes partially offset by higher crude oil volumes. In Pakistan,
sales increased $4 million due to higher oil volumes and higher gas prices.
Average prices received and volumes sold by the Company's major operations
during the second quarter of 1997 and 1996, respectively, were as follows:
<TABLE>
<CAPTION>
PRICES VOLUMES
(000S PER DAY)
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Crude oil (barrels):
U.K $ 16.11 $ 18.27 43 41
Pakistan 16.65 16.24 7 5
Indonesia 18.97 19.07 6 4
Indonesian LNG (Mcf) 3.39 3.41 178 214
Pakistan natural gas (Mcf) 1.67 1.29 37 42
U.K. natural gas (Mcf) 2.44 2.25 6 22
U.S. ethylene (pounds) .24 .21 1,189 1,577
</TABLE>
Petrochemical revenues totaled $45 million as compared to $52 million in the
second quarter of 1996, while operating profit was $12 million as compared to
$7 million in the prior period. The increased operating profit was due to
higher ethylene sales prices and reduced feedstock costs partially offset by
lower ethylene sales volumes reflecting the timing of spot sales.
Exploration expenses in the second quarter of 1997 were $11 million higher than
the same period of 1996 due primarily to increased geological and geophysical
expenses for new exploration ventures. Interest expense decreased by $5 million
during the period due to a reduction in the Company's debt level and higher
capitalized interest.
6
<PAGE> 8
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996
Net income for the six months ended June 30, 1997, was $89 million, or $1.05
per share, as compared to net income of $78 million, or $.90 per share,
reported for the same period in 1996. The current period was favorably impacted
by higher Indonesian LNG sales prices, higher Petrochemical operating profit,
higher oil sales volumes in Pakistan and the U.K. and lower interest expense,
partially offset by anticipated declines in LNG volumes.
Sales and operating revenues for the six months ended June 30, 1997 were $494
million, up from $481 million in the prior year. International revenues totaled
$401 million as compared to $388 million for the first six months of 1996. In
the U.K., sales and operating revenues increased by $16 million due to
increased sales volumes. In Indonesia, sales decreased $10 million as compared
to 1996 due to lower LNG volumes partially offset by higher LNG and crude oil
prices. In Pakistan, sales were $7 million above 1996, primarily due to higher
crude oil volumes and gas prices.
Average prices received and volumes sold by the Company's major operations
during the first six months of 1997 and 1996, respectively, were as follows:
<TABLE>
<CAPTION>
PRICES VOLUMES
(000S PER DAY)
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Crude oil (barrels):
U.K $ 17.71 $ 18.18 45 43
Pakistan 17.84 16.20 7 6
Indonesia 20.44 18.56 6 6
Indonesian LNG (Mcf) 3.72 3.36 186 227
Pakistan natural gas (Mcf) 1.68 1.29 38 43
U.K. natural gas (Mcf) 2.96 2.43 42 40
U.S. ethylene (pounds) .25 .20 1,178 1,379
</TABLE>
Petrochemical revenues totaled $93 million as compared to $94 million in the
first half of 1996, while operating profit was $14 million as compared to $12
million in the prior period. The increased operating profit was primarily due
to higher ethylene sales prices and reduced feedstock costs partially offset by
lower ethylene sales volumes.
Exploration expenses in the first half of 1997 were $7 million higher than the
same period of 1996 due primarily to increased geological and geophysical
expenses for new exploration ventures. Interest expense decreased $9 million
during the period due to a reduction in the Company's debt level and higher
capitalized interest.
7
<PAGE> 9
FINANCIAL CONDITION
Cash flow from operations: Net cash provided by operating activities was $153
million in the first six months of 1997, an increase of $3 million from the
same period in the prior year. Higher Indonesian LNG prices, higher
Petrochemical operating profit and higher U.K. and Pakistan oil volumes were
largely offset by lower LNG volumes.
Capital resources: Capital expenditures for the first half of 1997 were $77
million excluding capitalized interest of $17 million. Capital expenditures for
the first half of 1996 were $84 million excluding capitalized interest of $12
million. The decline was due to lower Alaska exploration drilling and reduced
development costs for the Britannia field in the U.K. North Sea partially
offset by higher new exploration venture geological and geophysical costs. Full
year 1997 capital expenditures are expected to be higher than 1996's $186
million. In May 1997 the Company increased its full year 1997 capital spending
budget from $229 million (excluding capitalized interest) to $269 million
(excluding capitalized interest). The majority of the increased capital budget
is designated for three new exploration ventures in Kazakstan, Algeria and
China.
Financing Activities: The Company had two unsecured credit facilities (the
"Credit Facilities") at June 30, 1997. One of the Credit Facilities is a $100
million revolver that provides for conversion of amounts outstanding on March
10, 1998 to a one-year term loan maturing March 9, 1999. The other Credit
Facility is a dual currency (U.S. dollars and pounds sterling) $450 million
revolver that reduces quarterly by $35 million beginning June 30, 2001, with a
final maturity of March 31, 2002. At June 30, 1997, no amounts were outstanding
under the Credit Facilities. The Credit Facilities contain restrictive
covenants and require maintenance of stockholders' equity, as adjusted, at $350
million. At June 30, 1997, the Company's adjusted stockholders' equity was
approximately $657 million.
The Company has uncommitted and unsecured lines of credit with several banks in
both U.S. dollars and pounds sterling. At June 30, 1997, no amounts were
outstanding under these money market lines. As of June 30,1997, the Company had
$550 million of available financing under the Credit Facilities.
The Company's indirect subsidiary, Union Texas Britannia Limited ("UTBL"), has
a 150 million pounds sterling secured financing from a syndicate of banks. At
June 30, 1997, 70 million pounds sterling ($116 million) was outstanding under
UTBL's financing which bore interest at a weighted average rate of 7.3% per
annum.
In July 1997, the Company filed a shelf registration statement with the SEC,
covering the issuance of up to $500 million of several types of securities,
including debt securities, common stock, preferred stock and warrants to
purchase securities in any combination that the Company may elect to offer from
time to time on such terms as the Company deems appropriate. The Company
believes the shelf registration provides additional financing flexibility to
meet future funding requirements and to take advantage of potentially
attractive capital market conditions. The Company intends to use the net
proceeds from any offering for general corporate purposes, which may include
the repayment of outstanding indebtedness, working capital increases, capital
expenditures and acquisitions. No securities have yet been issued.
In 1994, the Company's Board of Directors authorized the repurchase of up to
2,000,000 shares of the Company's stock, all of which were repurchased by the
end of 1996. In October, 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, all of which were repurchased by March 31, 1997. The repurchased stock
will be used for general corporate purposes, including fulfilling employee
benefit program obligations. At June 30, 1997, 3,142,185 shares of common stock
were held, at cost, as treasury shares.
Financial condition: In the second quarter of 1997, the Company declared and
paid a dividend of approximately $4.3 million on its common stock. On July 18,
1997, the Company announced a dividend on its common stock of $.05 per share to
stockholders of record as of July 31, 1997, payable on August 15, 1997.
During the second quarter of 1997, the Company's U.K. operations incurred a
one-time pre-tax restructuring charge of $4 million ($1.7 million after-tax).
It is anticipated that this restructuring will result in lower costs in the
future.
During July 1997, the British government announced proposed changes in
U.K. corporate tax laws which, if enacted would impact the Company's U.K.
operations. Under the proposal, the Advanced Corporation Tax (ACT) credit on
dividends paid by U.K. companies would be substantially reduced. In addition,
the proposal would lower the U.K.
8
<PAGE> 10
corporate tax rate from 33% to 31%. These proposed changes are subject to
legislative enactment. If adopted, the proposed reduction in the ACT credit
would become effective April 6, 1999 while the proposed lowering of the
corporate tax rate is expected to be effective April 1, 1997.
If the legislation is enacted as proposed, the Company expects to record during
the third quarter of 1997 a one-time, non-cash charge to deferred tax expense
of approximately $15 million resulting primarily from the reduction of the ACT
credit on future dividends. The proposed tax law change is not anticipated to
have a material impact on the Company's current tax expense (the net effective
U.K. corporation tax rate would increase from 27.5% to 31% after April 6, 1999)
nor is it expected to have a material impact on the standardized measure of
discounted future net cash flows.
9
<PAGE> 11
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company and its subsidiaries and related companies are named defendants in
numerous lawsuits and named parties in numerous governmental proceedings
arising in the ordinary course of business. While the outcome of lawsuits or
other proceedings against the Company cannot be predicted with certainty,
management does not expect these matters to have a material adverse effect on
the financial position of the Company. (See Item 3 in the Company's 1996 annual
report on Form 10-K.)
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 9, 1997, the 1997 Annual Meeting of Stockholders of the Company was
held. The following persons were elected as proposed in the proxy solicitation
issued pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended, to serve as directors until the next Annual Meeting of Stockholders or
until their successors are elected and qualified: John L. Whitmire, Glenn A.
Cox, Edward A. Gilhuly, James H. Greene, Jr., Henry R. Kravis, Michael W.
Michelson, Stanley P. Porter, George R. Roberts, Richard R. Shinn, and Sellers
Stough. Prior to the Annual Meeting, James D. Woods withdrew his name as a
nominee from the slate of directors to be elected due to personal time
commitments that had arisen since Mr. Woods joined the Board earlier in the
year. At a board of directors meeting following the Annual Meeting, the board
appointed Wylie Bernard (Ber) Pieper, retired Vice Chairman and Chief Operating
Officer of Halliburton Company, to fill the vacant board position. Also at the
Annual Meeting, stockholders ratified the appointment of Price Waterhouse LLP
as the Company's independent accountants.
There were 78,359,324 shares voted for the election of directors and no
abstentions or broker non-votes. Results by nominated director were:
<TABLE>
<CAPTION>
VOTED AUTHORITY
FOR WITHHELD
<S> <C> <C>
John L. Whitmire 75,581,064 2,778,260
Glenn A. Cox 75,302,357 3,056,967
Edward A. Gilhuly 75,186,965 3,172,359
James H. Greene, Jr 69,754,981 8,604,343
Henry R. Kravis 69,753,987 8,605,337
Michael W. Michelson 75,187,265 3,172,059
Stanley P. Porter 75,232,737 3,126,587
George R. Roberts 69,760,746 8,598,578
Richard R. Shinn 75,231,042 3,128,282
Sellers Stough 75,231,623 3,127,701
</TABLE>
There were 78,240,861 shares voted for the ratification of the appointment of
Price Waterhouse LLP as the Company's independent public accountants, with
67,481 shares voted against, 50,982 abstentions and no broker non-votes.
ITEM 5 - OTHER INFORMATION
Kazakstan and Caspian Sea: In May 1997, the Company signed agreements to form a
joint venture with Oman Oil Company Limited to explore for, develop and produce
oil and gas onshore Kazakstan and offshore in the Kazakstan sector of the
Caspian Sea. The Company will serve as operator of the new venture and will own
a 75% interest. Oman Oil, a state-owned project development company of Oman,
will retain a 25% interest.
Venezuela: In June 1997, the Company led a successful bid for Venezuela's
Boqueron area under Venezuela's Third Operating Agreement Round. The Company
was named the operator and will have a 66.67% working interest and will work
with its partner, Preussag Energie GmbH of Germany, who will have a 33.33%
working interest, to further develop this currently-producing field. The
Company and Preussag Energie offered $175 million for Boqueron. Under the
10
<PAGE> 12
20-year contract, the Union Texas group will produce oil from Boqueron on
behalf of Lagoven SA, a subsidiary of Petroleos de Venezuela SA which currently
serves as operator, and will receive a service fee for the production of a
"baseline" production profile of approximately 24 million barrels of oil and a
sliding scale incentive fee for production above this baseline level and for
the recovery of costs. The Company anticipates recording approximately 40
million net barrels in proved reserves from Boqueron during 1997 with
additional reserves expected to be recorded in the future as the field is
further developed. The group must invest at least $13 million over the next
three years and expects to spend between $250 million to $300 million in the
area over the next five years. With this additional development spending, the
Company expects to increase current production at Boqueron from 10,000 gross
barrels of oil a day to 50,000 - 60,000 barrels within three to five years.
The foregoing contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act that involve risks and uncertainties,
including price volatility, exploration, development, operational, marketing,
reserve estimates, implementation and opportunity risks, and other factors
described from time to time in the Company's publicity available SEC reports,
which could cause actual results to differ materially.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.1 Union Texas Petroleum Deferred Compensation Plan (Filed as
Exhibit No. 99.1 to the Company's Registration Statement No.
333-30811 on Form S-8 (Commission File No. 1-9019) and
incorporated herein by reference).
10.2 Second Amendment to Union Texas Petroleum Holdings, Inc. 1994
Incentive Plan.
10.3 Third Amendment to Union Texas Petroleum Holdings, Inc. 1992
Stock Option Plan.
10.4 Fourth Amendment to Union Texas Petroleum Holdings, Inc. 1987
Stock Option Plan.
10.5 Fifth Amendment to Union Texas Petroleum Holdings, Inc. 1986
Stock Option Plan.
15 Independent Accountant's Awareness Letter.
27.1 Financial Data Schedule for the six-month period ended June 30,
1997.
</TABLE>
(b) Reports on Form 8-K
The Company filed the following reports on Form 8-K since the
quarterly period ended March 31, 1997:
The Company filed a Form 8-K dated April 23, 1997 to attach a press
release announcing the Company's first quarter earnings.
The Company filed a Form 8-K dated May 7, 1997 to attach press
releases reporting an exploration venture in Algeria and an
exploration venture onshore Kazakstan and offshore in the Capsian Sea.
The Company filed a Form 8-K dated May 12, 1997 to attach press
releases reporting the results of the Company's Annual Stockholders
Meeting, the resignation of Mr. James D. Woods as director and the
appointment of Mr. Wylie Bernard Pieper as director and to announce
the Company's increase in its 1997 capital spending budget and new
guidelines for stock ownership for officers and directors.
The Company filed a Form 8-K dated July 23, 1997 to attach a press
release announcing the Company's second quarter earnings.
11
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION TEXAS PETROLEUM HOLDINGS, INC.
Date: July 25, 1997 By: /s/ DONALD M. MCMULLAN
-----------------------
Donald M. McMullan
Vice President and Controller
(Chief Accounting Officer
and officer duly authorized to
sign on behalf of the registrant)
12
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.1 Union Texas Petroleum Deferred Compensation Plan (Filed as
Exhibit No. 99.1 to the Company's Registration Statement No.
333-30811 on Form S-8 (Commission File No. 1-9019) and
incorporated herein by reference).
10.2 Second Amendment to Union Texas Petroleum Holdings, Inc. 1994
Incentive Plan.
10.3 Third Amendment to Union Texas Petroleum Holdings, Inc. 1992
Stock Option Plan.
10.4 Fourth Amendment to Union Texas Petroleum Holdings, Inc. 1987
Stock Option Plan.
10.5 Fifth Amendment to Union Texas Petroleum Holdings, Inc. 1986
Stock Option Plan.
15 Independent Accountant's Awareness Letter.
27.1 Financial Data Schedule for the six-month period ended June 30,
1997.
</TABLE>
<PAGE> 1
EXHIBIT 10.2
SECOND 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, subsequent thereto, the Company has amended the Plan; and
WHEREAS, the Company desires to amend the Plan in certain respects;
NOW THEREFORE, the Plan shall be amended as follows, effective May 9,
1997:
1. Section (6)(h)(iii)(F) shall be amended by adding (i) the
phrase "except as provided below," after the definition of "Termination
Restriction" and before "the Shares" in the first sentence and (ii) the phrase
"or the disposition of Shares in an amount necessary to pay applicable taxes
that become payable as a result of the exercise of the Option" at the end of
the first sentence after "qualified domestic relations order."
2. The following new Section 6(h)(iii)(G) shall be added:
"(G) Notwithstanding the foregoing, an Option or the
Shares received by the Eligible Director upon the exercise of an
Option may be transferred (in whole or in part) by the Eligible
Director to (i) the spouse, children or grandchildren of the Eligible
Director ("Immediate Director Family Members"), (ii) a trust or trust
for the exclusive benefit of the Immediate Director Family Members
and, if applicable, the Eligible Director, (iii) a partnership,
limited liability company or other entity in which such Immediate
Director Family Members and, if applicable, the Eligible Director are
the only partners, members of stockholders, (iv) an organization
described under Section 501(c)(3) of the Code and which is a private
foundation within Section 509(a) of the Code or any trust the only
beneficiary (other than an Immediate Family Member and if applicable,
the Eligible Director) of which is an organization described under
Section 501(c)(3) of the Code and which organization is a private
foundation within Section 509(a) of the Code or (v) to other persons
or entities as approved by the Board. Following transfer, any such
Option or Shares shall continue to be subject to the same terms and
conditions as were applicable to the Option or Shares immediately
prior to transfer."
3. Sections 6(i)(iii)(A) and 6(i)(iii)(B) shall be amended by
adding the phrase "Except as provided below," to the beginning of each such
Section.
<PAGE> 2
4. Section 6(i)(iii)(C) shall be amended by deleting such Section
(C) and by substituting the following for such Section:
"(C) The Committee may, in its discretion, adopt rules or
guidelines under which any Award (other than an Option intended to
constitute an Incentive Stock Option so long as transferability of an
Incentive Stock Option is prohibited by the Code) previously granted
or to be granted to a Participant may be transferred (in whole or in
part pursuant to such form as approved by the Company) by the
Participant to (i) the spouse, children or grandchildren of the
Participant ("Immediate Family Members"), (ii) a trust or trusts for
the exclusive benefit of the Immediate Family Members and, if
applicable, the Participant, (iii) a partnership, limited liability
company or other entity in which such Immediate Family Members and, if
applicable, the Participant are the only partners, members or
stockholders, (iv) an organization described under Section 501(c)(3)
of the Code and which is a private foundation within Section 509(a) of
the Code or any trust the only beneficiary (other than an Immediate
Family Member and, if applicable, the Participant) of which is an
organization described under Section 501(c)(3) of the Code and which
organization is a private foundation within Section 509(a) of the Code
or (v) to other persons or entities as approved by the Board or the
Committee in its discretion. Following transfer, any such Awards
shall continue to be subject to the same terms and conditions as were
applicable to the Award immediately prior to transfer; provided,
however, that no transferred Award shall be exercisable or payable, as
the case may be, unless arrangements satisfactory to the Company have
been made to satisfy any tax withholding obligations the Company may
have with respect to the Award."
4. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, this Second Amendment has been executed this 9th
day of May, 1997.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: /s/ J. L. WHITMIRE
------------------------------------
J. L. Whitmire
Chairman and Chief Executive Officer
ATTEST:
/s/ LINDA L. MEAGHER
- ---------------------------
L. L. Meagher
Assistant Secretary
<PAGE> 1
EXHIBIT 10.3
THIRD 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 amend the Plan in certain respects;
NOW THEREFORE, the Plan shall be amended as follows, effective May 9,
1997:
1. Paragraph IV shall be amended by adding the term "Except as
provided below," at the beginning of the first sentence, by adding "or pursuant
to a qualified domestic relations order as determined by the Committee" at the
end of the first sentence and by adding the following after the first sentence
of such Section:
"The Committee may, in its discretion, adopt rules or guidelines under
which any Option (other than an Option intended to constitute an
Incentive Stock Option so long as transferability of an Incentive
Stock Option is prohibited by the Code) previously granted to an
Optionee may be transferred (in whole or in part pursuant to such form
as approved by the Company) by the Optionee to (i) the spouse,
children or grandchildren of the Optionee ("Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of the
Immediate Family Members and, if applicable, the Optionee, (iii) a
partnership, limited liability company or other entity in which such
Immediate Family Members and, if applicable, the Optionee are the only
partners, members or stockholders, (iv) the transferee pursuant to a
qualified domestic relations order as determined by the Committee, (v)
an organization described under Section 501(c)(3) of the Code and
which is a private foundation within Section 509(a) of the Code or any
trust the only beneficiary (other than an Immediate Family Member and,
if applicable, the Optionee) of which is an organization described
under Section 501(c)(3) of the Code and which organization is a
private foundation within Section 509(a) of the Code or (vi) to other
persons or entities as approved by the Board or the Committee in its
discretion. Following transfer, any such Option shall continue to be
subject to the same terms and conditions as were applicable to the
Option immediately prior to transfer; provided, however, that no
transferred Option shall be exercisable or payable, as the case may
be, unless arrangements satisfactory to the Company have been made to
satisfy any tax withholding obligations the Company may have with
respect to the Option."
2. Paragraph VIII shall be amended by adding the term "Except as
provided in Paragraph IV," at the beginning of the first sentence of such
Section and by adding the
<PAGE> 2
following phrase ", which arrangement in the discretion of the Committee may
include the relinquishment of a portion of the shares subject to the Option or
delivery of shares of Stock owned by the Optionee" to the end of Paragraph
VIII(b), before the last word "and".
3. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, this Third Amendment has been executed this 9th
day of May, 1997.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: /s/ J. L. WHITMIRE
-------------------------------------
J. L. Whitmire
Chairman and Chief Executive Officer
ATTEST:
/s/ LINDA L. MEAGHER
- ---------------------------
L. L. Meagher
Assistant Secretary
<PAGE> 1
EXHIBIT 10.4
FOURTH 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 amend the Plan in certain respects;
NOW THEREFORE, the Plan shall be amended as follows, effective May 9,
1997:
1. Paragraph IV shall be amended by adding the term "Except as
provided below," at the beginning of the first sentence, by adding "or pursuant
to a qualified domestic relations order as determined by the Committee" at the
end of the first sentence and by adding the following after the first sentence
of such Section:
"The Committee may, in its discretion, adopt rules or guidelines under
which any Option previously granted to an Optionee may be transferred
(in whole or in part pursuant to such form as approved by the Company)
by the Optionee to (i) the spouse, children or grandchildren of the
Optionee ("Immediate Family Members"), (ii) a trust or trusts for the
exclusive benefit of the Immediate Family Members and, if applicable,
the Optionee, (iii) a partnership, limited liability company or other
entity in which such Immediate Family Members and, if applicable, the
Optionee are the only partners, members or stockholders, (iv) the
transferee pursuant to a qualified domestic relations order as
determined by the Committee, (v) an organization described under
Section 501(c)(3) of the Code and which is a private foundation within
Section 509(a) of the Code or any trust the only beneficiary (other
than an Immediate Family member and, if applicable, the Optionee) of
which is an organization described under Section 501(c)(3) of the Code
and which organization is a private foundation within Section 509(a)
of the Code or (vi) to other persons or entities as approved by the
Board or the Committee in its discretion. Following transfer, any
such Option shall continue to be subject to the same terms and
conditions as were applicable to the Option immediately prior to
transfer; provided, however, that no transferred Option shall be
exercisable or payable, as the case may be, unless arrangements
satisfactory to the Company have been made to satisfy any tax
withholding obligations the Company may have with respect to the
Option."
2. Paragraph VIII shall be amended by adding the term "Except as
provided in Paragraph IV," at the beginning of the first sentence of such
Section and by adding the following phrase ", which arrangement in the
discretion of the Committee may include the
<PAGE> 2
relinquishment of a portion of the shares subject to the Option or delivery of
shares of Stock owned by the Optionee" to the end of Paragraph VIII(b), before
the last word "and".
3. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, this Fourth Amendment has been executed this 9th
day of May, 1997.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: /s/ J. L. WHITMIRE
-------------------------------------
J. L. Whitmire
Chairman and Chief Executive Officer
ATTEST:
/s/ LINDA L. MEAGHER
- ----------------------------------
L. L. Meagher
Assistant Secretary
<PAGE> 1
EXHIBIT 10.5
FIFTH 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 amend the Plan in certain respects;
NOW THEREFORE, the Plan shall be amended as follows, effective May 9,
1997:
1. Paragraph IV shall be amended by adding (i) the term "Except
as provided below," at the beginning of the first sentence, (ii) "or pursuant
to a qualified domestic relations order as determined by the Committee" at the
end of the first sentence and (iii) the following after the first sentence of
such Section:
"The Committee may, in its discretion, adopt rules or guidelines under
which any Option previously granted to an Optionee may be transferred
(in whole or in part pursuant to such form as approved by the Company)
by the Optionee to (i) the spouse, children or grandchildren of the
Optionee ("Immediate Family Members"), (ii) a trust or trusts for the
exclusive benefit of the Immediate Family Members and, if applicable,
the Optionee, (iii) a partnership, limited liability company or other
entity in which such Immediate Family Members and, if applicable, the
Optionee are the only partners, members or stockholders (iv) the
transferee pursuant to a qualified domestic relations order as
determined by the Committee, (v) an organization described under
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended
(the "Code") and which is a private foundation within Section 509(a)
of the Code or any trust the only beneficiary (other than an Immediate
Family member and, if applicable, the Optionee) of which is an
organization described under Section 501(c)(3) of the Code and which
organization is a private foundation within Section 509(a) of the Code
or (vi) to other persons or entities as approved by the Board or the
Committee in its discretion. Following transfer, any such Option
shall continue to be subject to the same terms and conditions as were
applicable to the Option immediately prior to transfer; provided,
however, that no transferred Option shall be exercisable or payable,
as the case may be, unless arrangements satisfactory to the Company
have been made to satisfy any tax withholding obligations the Company
may have with respect to the Option."
2. Paragraph VIII shall be amended by adding (i) the term "Except
as provided in Paragraph IV," at the beginning of the first sentence of such
Section and (ii) the following phrase ", which arrangement in the discretion of
the Committee may include the
<PAGE> 2
relinquishment of a portion of the shares subject to the Option or delivery of
shares of Stock owned by the Optionee" to the end of Paragraph VIII(b), before
the last word "and".
3. As amended hereby, the Plan is specifically ratified and
reaffirmed.
IN WITNESS WHEREOF, this Fifth Amendment has been executed this 9th
day of May, 1997.
UNION TEXAS PETROLEUM HOLDINGS, INC.
By: /s/ J. L. WHITMIRE
------------------------------------
J. L. Whitmire
Chairman and Chief Executive Officer
ATTEST:
/s/ LINDA L. MEAGHER
- ----------------------------
L. L. Meagher
Assistant Secretary
<PAGE> 1
Exhibit 15
INDEPENDENT ACCOUNTANTS' AWARENESS LETTER
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Union Texas Petroleum Holdings, Inc. has included our report
dated July 21, 1997 (issued pursuant to the provisions of Statement on
Auditing Standards No. 71) in the following registration statements:
Registration Statement on Form S-8 (No. 33-26105) filed on December 21, 1988
Registration Statement on Form S-8 (No. 33-13575) filed on April 29, 1991
Registration Statement on Form S-8 (No. 33-21684) filed on April 29, 1991
Registration Statement on Form S-8 (No. 33-44045) filed on November 19, 1991
Registration Statement on Form S-8 (No. 33-64928) filed on June 24, 1993
Registration Statement on Form S-8 (No. 33-59213) filed on May 10, 1995
Registration Statement on Form S-8 (No. 333-30807) filed on July 3, 1997
Registration Statement on Form S-8 (No. 333-30805) filed on July 3, 1997
Registration Statement on Form S-8 (No. 333-30811) filed on July 3, 1997
Registration Statement on Form S-3 (No. 333-31039) filed on July 10, 1997
We are also aware of our responsibilities under the Securities Act of 1933.
Yours very truly,
Price Waterhouse LLP
Houston, Texas
July 21, 1997
1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 45,475
<SECURITIES> 0
<RECEIVABLES> 79,437
<ALLOWANCES> 0
<INVENTORY> 31,261
<CURRENT-ASSETS> 204,266
<PP&E> 3,229,952
<DEPRECIATION> 1,649,109
<TOTAL-ASSETS> 1,889,326
<CURRENT-LIABILITIES> 249,231
<BONDS> 518,681
0
0
<COMMON> 4,391
<OTHER-SE> 618,714
<TOTAL-LIABILITY-AND-EQUITY> 1,889,326
<SALES> 211,686
<TOTAL-REVENUES> 216,784
<CGS> 80,723
<TOTAL-COSTS> 134,626
<OTHER-EXPENSES> 21,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,603
<INCOME-PRETAX> 59,405
<INCOME-TAX> 34,056
<INCOME-CONTINUING> 25,349
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<EPS-PRIMARY> .30
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