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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
---------------------------------
Date of Report (Date of earliest event reported): April 23, 1998
Union Texas Petroleum Holdings, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 1-9019 76-0040040
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1330 Post Oak Boulevard, Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 623-6544
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Item 5. OTHER EVENTS.
Azerbaijan. Union Texas Lok Batan Limited, an indirect subsidiary of the
Registrant, has entered into an agreement with BMB Oil, Inc. to acquire 75% of
BMB's interest in a production sharing agreement with the State Oil Company of
the Azerbaijan Republic. Union Texas will serve as operator of the enhanced oil
recovery project and onshore exploration program. The concession area, known as
the West Apsheron block, totals approximately 225,000 acres and is located 30
miles west of Baku, the capital of Azerbaijan. Union Texas will provide
technology and expertise to reestablish production from existing fields in the
West Apsheron block. The venture plans to drill three wells in these fields in
1998 and also expects to initiate an exploration program by evaluating several
leads and prospects beginning in late 1998. Initial reserve bookings are not
anticipated until the work program is well underway. The Registrant is also
pursuing additional opportunities in Azerbaijan.
Exploration. The exploratory well drilled on the Ramla block offshore
Tunisia was unsuccessful. The related expenses were included in the first
quarter of the 1998 financial statements.
Press Release. The information set forth in the press release of the
Registrant dated April 23, 1998, which is filed as an exhibit hereto, is
incorporated herein by reference.
This Current Report contains forward-looking statements within the meaning
of and in reliance upon the "safe harbor" provisions of the Private Securities
Litigation Reform Act, as set forth in Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, 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 Registrant's publicly available SEC reports, which could cause
actual results to differ materially.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits:
Exhibit
Number Description
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99.1 Press release
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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.
By: /s/ ALAN R. CRAIN, JR.
-----------------------------------
Alan R. Crain, Jr.
Vice President and General Counsel
Date: April 23, 1998
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INDEX TO EXHIBITS
Exhibit
Number Description
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99.1 Press release
<PAGE> 1
EXHIBIT 99.1
- --------------------------------------------------------------------------------
[UNION TEXAS PETROLEUM LOGO] NEWS RELEASE
================================================================================
UNION TEXAS PETROLEUM REPORTS 1998 FIRST QUARTER RESULTS
SHARPLY LOWER PRICES AFFECT FIRST QUARTER EARNINGS
Contact: Carol Cox
713-968-2714
Houston, April 23, 1998 -- Union Texas Petroleum Holdings, Inc. (NYSE:
UTH) today reported 1998 first quarter diluted earnings of 9 cents per share,
compared to 74 cents per share in 1997's corresponding period, resulting from $8
million in net income applicable to common stockholders for 1998's first three
months, down from $64 million a year ago. Sales and operating revenues for
1998's first quarter totaled $190 million, versus $282 million in 1997's same
period.
Union Texas attributed the decline in 1998's first quarter earnings to
a sharp fall in prices from 1997's corresponding period. Commenting on the
company's performance, Chairman and CEO John Whitmire said, "Union Texas has
been significantly affected by the decrease in oil prices, which in March were
at their lowest level for the past 10 years. For the first quarter of 1998, our
average sales price for oil worldwide, excluding our operating service fee for
activities in Venezuela, dropped to $13.13 per barrel, versus $19.45 in 1997's
same period. We also experienced lower sales prices for liquefied natural gas
(LNG) and ethylene in the first three months of 1998 from 1997's first quarter.
In addition, our 1998 first quarter results reflected higher exploration
expenses, lower natural gas sales volumes in the U.K. North Sea and an
anticipated decrease in LNG sales volumes in Indonesia."
During the first quarter of 1998, Union Texas' worldwide oil sales
volumes rose by 11% over the same period a year ago, primarily as a result of
the company's operations at the DZO unit in western Venezuela beginning in early
February 1998. The company also benefited from higher gas volumes in Pakistan
during the first quarter of 1998 versus year-ago levels.
In the U.K. North Sea, gas sales volumes fell 76% in 1998's first three
months from the same period in 1997 due primarily to lower gas sales volumes
from the Sean fields. In Indonesia, LNG sales volumes were down 9% in 1998's
first quarter from year-ago levels, due mainly to an anticipated decline in the
company's participation share in LNG volumes delivered.
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At its petrochemical operations in Louisiana, Union Texas' ethylene
sales volumes increased from 105 million pounds in 1997's first quarter to 113
million pounds in 1998's first three months. Ethylene margins for 1998's first
quarter averaged about 6 cents per pound, down from 8 cents a year ago due
primarily to lower ethylene sales prices.
SUCCESSFUL 1998 WINTER DRILLING IN ALASKA
During the 1998 winter drilling season, Union Texas and its
co-venturers at the Alpine oil field on Alaska's North Slope drilled three
successful wells, including two horizontal wells and one extension well. As a
result of the successful drilling activity during the 1998 winter season, Union
Texas said that it expects to record an additional 10 million barrels in proved
undeveloped oil reserves at Alpine. The additional reserves are anticipated to
boost Union Texas' share of proved undeveloped reserves at Alpine from 32
million barrels at the end of 1997 to approximately 42 million barrels at
year-end 1998. A subsidiary of Union Texas has a 22% working interest in Alpine,
which is expected to begin production in the first half of 2000 at an initial
rate of 40,000 gross barrels of oil a day, building to a peak production rate of
70,000 gross barrels a day in 2001.
VENEZUELA OPERATIONS
A key event for Union Texas during the first quarter of 1998 was the
acquisition of a company that holds a 100% interest in the DZO operating service
contract with PDVSA Petroleo y Gas, S.A. The DZO unit is located in western
Venezuela near Lake Maracaibo and currently is producing at a peak rate of
26,540 barrels of oil a day. Pursuant to the operating service contract, the
company receives certain fees that are based on a predetermined formula for each
barrel of crude oil produced. The average fee received in the first quarter of
1998 was $4.37 per barrel. In February 1998, Union Texas recorded 114 million
barrels of proved oil reserves for the DZO unit.
1998 CAPITAL SPENDING
In light of the current low oil price environment, Union Texas expects
its 1998 capital spending to be about 15% below its original budget of
approximately $413 million.
FINANCING ACTIVITIES
During the first four months of 1998, Union Texas initiated several
steps to improve its credit quality and liquidity. The company replaced bank
debt by issuing 1.75 million shares of 7.14% cumulative preferred stock, which
is not convertible into or exchangeable for any other property or securities of
the company; net proceeds to the company were approximately $171.3 million.
Union Texas also refinanced short-term bank debt with a $150 million issue of
7.0% MAndatory Putable/remarketable Securities (MAPS(SM)) due 2038, which are
subject to mandatory tender on April 15, 2008. After issuance of the preferred
stock and MAPS, Union Texas' available bank credit increased to $521 million as
of April 15, 1998, up from $214 million as of February 20, 1998.
"Union Texas took advantage of current low interest rates to lock in
long-term rates with the preferred stock and MAPS offerings. Today we have
significant liquidity and financial flexibility which strengthen our financial
position during this difficult environment of reduced oil prices," said
Whitmire.
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ANNUAL WORLDWIDE PRODUCTION EXPECTED TO DOUBLE BY 2002
In February 1998, Union Texas announced that it expects to double its
annual oil and gas production over the next five years, with significant growth
coming from the successful development of its operations in Venezuela, the U.K.
North Sea and Alaska. By 2002, the company anticipates that its annual worldwide
production will reach 90 million barrels of oil equivalent, more than twice its
1997 production of 44 million barrels of oil equivalent. During 1998, Union
Texas expects to produce about 53 million barrels of oil equivalent, a 20%
increase from 1997.
One of the largest independent producers located in the U.S.,
Houston-based Union Texas Petroleum Holdings, Inc. explores for and produces oil
and gas overseas primarily in the U.K. North Sea, Indonesia, Venezuela, Pakistan
and other strategic areas. The company has petrochemical operations in
Louisiana.
This news release contains forward-looking statements within the
meaning of the Securities Litigation Reform Act that involve risks and
uncertainties, including price volatility, exploration, development, operational
and implementation risks, successful and timely integration of projects, and
other factors described from time to time in the company's publicly available
SEC reports, which could cause actual results to differ materially.
Comparative financial highlights follow (amounts in millions, except
per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Net income applicable to common
stockholders ................................................. $ 8 $ 64
Earnings per share(a) .............................................. $ .09 $ .74
Sales and operating revenues ........................................ $ 190 $ 282
Average common shares outstanding
including potential common shares ............................ 85.5 86.2
</TABLE>
Additional financial and operating information appears on the attached pages.
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UNION TEXAS PETROLEUM
FINANCIAL SUMMARY
(amounts in millions, except per share data)
<TABLE>
<CAPTION>
FIRST QUARTER
-------------
1998 1997
------ ------
<S> <C> <C>
Sales and operating revenues $ 190 $ 282
Net income applicable to common stockholders $ 8 $ 64
Major operations (b)
Indonesia $ 20 $ 36
U.K. North Sea $ 16 $ 38
Venezuela(c) $ (1) --
Pakistan $ 5 $ 9
Petrochemicals $ 2 $ 1
Earnings per share of
common stock (a) $ .09 $ .74
Discretionary cash flow (d) $ 91 $ 131
Major operations (b)
Indonesia $ 36 $ 49
U.K. North Sea $ 55 $ 77
Venezuela(c) -- --
Pakistan $ 11 $ 14
Petrochemicals $ 5 $ 3
Average common shares outstanding
including potential common shares 85.5 86.2
</TABLE>
See footnotes on page 7.
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UNION TEXAS PETROLEUM
DISCRETIONARY CASH FLOW SUMMARY (d)
(amounts in millions)
<TABLE>
<CAPTION>
FIRST QUARTER
-------------
1998 1997
---- ----
<S> <C> <C>
Net income to common stockholders $ 8 $ 64
Less: Equity partnership
income $ (3) $ (8)
Add: DD&A $ 55 $ 59
Deferred taxes -- $ (6)
Exploration expenses $ 23 $ 10
Equity DCF (e) $ 8 $ 12
Discretionary cash flow $ 91 $ 131
</TABLE>
See footnotes on page 7.
OPERATING SUMMARY (f)
<TABLE>
<CAPTION>
FIRST QUARTER
-----------------------
1998 1997
--------- ---------
<S> <C> <C>
Net crude oil sales (MBBLS/D)
U.K. North Sea 40 47
Venezuela(c) 24 --
Indonesia 6 6
Pakistan 6 7
Average crude oil prices (per BBL)
U.K. North Sea $ 12.32 $ 19.17
Venezuela(c) $ 4.37 --
Indonesia $ 18.63 $ 21.79
Pakistan $ 12.76 $ 19.15
Net natural gas sales (MMCF/D)
Indonesian LNG 177 194
U.K. North Sea 19 79
Pakistan 47 38
Average natural gas prices (per MCF)
Indonesian LNG $ 2.96 $ 4.02
U.K. North Sea (g) $ 2.85 $ 3.00
Pakistan $ 1.61 $ 1.71
Ethylene (per LB)
Sales price $ .19 $ .25
Margins $ .06 $ .08
Sales volumes (MLBS/D)(h) 1,256 1,168
</TABLE>
See footnotes on page 7.
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UNION TEXAS PETROLEUM
CONSOLIDATED STATEMENT OF OPERATIONS
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FIRST QUARTER
-------------
1998 1997
---- ----
<S> <C> <C>
Revenues:
Sales and operating revenues $190 $282
Interest income and other revenue 1 2
Net earnings of equity investees 3 8
---- ----
Total revenues 194 292
Costs and other deductions:
Product costs and operating expenses 74 81
Exploration expenses 23 10
Depreciation, depletion and
amortization 55 59
Selling, general and administrative
expenses 6 5
Interest expense(i) 1 4
---- ----
Income before taxes 35 133
Income taxes 26 69
---- ----
Net income $ 9 $ 64
Less: preferred dividends 1 --
---- ----
Net income applicable to common
stockholders $ 8 $ 64
==== ====
Earnings per share of common stock(a) $.09 $.74
==== ====
Dividends per share of common stock $.05 $.05
==== ====
Weighted average number of shares
outstanding, including potential
common shares 85.5 86.2
==== ====
</TABLE>
See footnotes on page 7.
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SELECTED BALANCE SHEET DATA
(AMOUNTS IN MILLIONS)
<TABLE>
<CAPTION>
MARCH 31, 1998 December 31, 1997
-------------- -----------------
<S> <C> <C>
Total assets $ 2,292 $ 2,022
Long-term debt $ 720 $ 626
Shareholders' equity $ 851 $ 669
</TABLE>
FOOTNOTES
(a) The amounts shown for earnings per share are diluted amounts. Basic
earnings per share are $.09 and $.74 for the first quarter of 1998 and
1997, respectively.
(b) Excludes corporate items and other worldwide exploration ventures.
(c) Reflects an operating service fee for an interest in an operating
service contract acquired in February 1998. Reflects 56 days of
production in the first quarter of 1998.
(d) Discretionary cash flow (DCF) is net income (less equity income)
excluding depreciation, deferred taxes, and exploration expenses, plus
the company's estimated share of discretionary cash flow from its
equity interests.
(e) Equity DCF reflects the company's estimated share of discretionary cash
flow primarily from its equity interest in the Unimar partnership.
(f) Excludes the Unimar equity partnership.
(g) Excludes capacity charge of $20 million and $19 million in the first
quarter of 1998 and 1997, respectively, from the North and South Sean
gas fields in the U.K. North Sea.
(h) Represents Union Texas' 41.67% net interest in the jointly-owned
Geismar ethylene plant in Louisiana.
(i) Interest expense is net of amounts capitalized of $14 million and $8
million in the first quarter of 1998 and 1997, respectively.
For additional information, contact:
Carol Cox, media John Zimmerman, analysts and investors
713-968-2714 713-968-2740
