<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-K
(MARK ONE)
[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
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9033
------------------------------
SUN ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<C> <C>
DELAWARE 75-2070723
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
13155 NOEL ROAD
DALLAS, TEXAS 75240-5067
(Address of principal executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code:
(972) 715-4000
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>
Depositary Units New York Stock Exchange, Inc.
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy of information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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 ____
The aggregate market value of the Depositary Units held by nonaffiliates of
the Registrant as of March 6, 1997, was approximately $36 million.
The number of Depositary Units outstanding as of February 28, 1997, was
7,543,100.
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<PAGE> 2
CERTAIN ABBREVIATIONS AND OTHER MATTERS
As used herein, the following terms have specific meanings:
<TABLE>
<S> <S> <C> <C>
m thousand mm million
bbl barrel mb thousand barrels
mmb million barrels mcf thousand cubic feet
mmcf million cubic feet bcf billion cubic feet
eb equivalent barrel meb thousand equivalent barrels
b/d barrels per day mmeb million equivalent barrels
WTI West Texas Intermediate spot mmcf/d million cubic feet per day
price
HH Henry Hub spot price mmcfe/d million cubic feet equivalent per
day
ED&A exploration, development and FD&A finding, development and
acquisition * acquisition
bc/d barrels of condensate per day
</TABLE>
- ------------------------------
* ED&A outlays represent capital expenditures and cash exploration costs,
excluding capitalized interest.
Natural gas equivalents are determined under the relative energy content
method by using the ratio of 6 mcf of natural gas to 1 bbl of crude oil,
condensate or natural gas liquids.
With respect to information on the working interest in wells, drilling
locations and acreage, "net" oil and gas wells, drilling locations and acres are
determined by multiplying the whole numbers by Sun Energy Partners, L.P.'s
working interest.
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
GENERAL
Sun Energy Partners, L.P. (Sun Energy Partners) engages in the oil and gas
exploration and production business in the United States. Sun Energy Partners is
controlled by Oryx Energy Company and certain of its affiliates (together the
Company), which is the managing general partner. As of December 31, 1996, the
Company owned 98 percent of Sun Energy Partners. The remaining 2 percent
interest is comprised of limited partnership interests held by public
unitholders in the form of depositary units (Units). Eighty-five percent of the
Company's Board of Directors must approve any additional issuance, sale or
transfer of units that would reduce the Company's holdings below 85 percent of
the outstanding units.
Sun Energy Partners' business is conducted through Sun Operating Limited
Partnership, a Delaware limited partnership, and several other operating
partnerships (collectively, the Operating Partnerships). In all of the
partnerships which comprise the Operating Partnerships, Sun Energy Partners
holds a 99 percent interest as the sole limited partner, while the Company holds
a 1 percent interest as the managing general partner.
Sun Energy Partners and the Operating Partnerships (collectively, the
Partnership), are managed by the Company. The holders of limited partnership
units have no power to direct or participate in the control of the Partnership.
The Company makes all decisions regarding exploration, development, production
and marketing for properties belonging to the Partnership, all decisions
regarding the sale of less than substantially all of such properties or the
acquisition of properties by the Partnership and all other decisions regarding
the Partnership's business or operations.
The Partnership has no officers or employees. Officers and employees of the
Company perform all management functions required for Sun Energy Partners. As of
December 31, 1996, the number of full-time employees of the Company was 976.
<PAGE> 3
The Partnership's strategy is to target as future growth opportunities
those areas where its advanced technological capabilities will have the greatest
economic impact.
RESERVES
As of December 31, 1996, the Partnership's proved reserves were an
estimated 205 mmb of liquids and an estimated 1,162 bcf of natural gas which
represents an aggregate of 399 mmeb of reserves. More information on the
estimated quantities of proved oil and gas reserves and information on proved
developed oil and gas reserves, as well as information concerning the
standardized measure of discounted future net cash flows from estimated
production of proved oil and gas reserves (Standardized Measure), are presented
in the "Consolidated Financial Statements Supplementary Financial and Operating
Information." The Partnership files oil and gas reserve estimates with various
governmental regulatory authorities and agencies, the variability of which does
not exceed 5 percent.
The Partnership's production is exclusively in the United States and in
1996, the Partnership produced 48 mmeb. The Partnership seeks production
replacement through a balanced approach that combines exploration, development
and acquisition. In 1996, the Partnership replaced 77 percent of its production
at an FD&A cost of $8.68 per eb.
OFFSHORE
The Partnership has identified the Gulf of Mexico as the primary focus of
its growth strategy.
The Partnership has a significant presence in the Gulf of Mexico with an
interest in 148 blocks in various stages of exploration, development and
production. The Partnership has an interest in 39 producing platforms, 21 of
which it operates. The Partnership also holds interests in various offshore
pipelines and facilities. In 1996, the Partnership achieved a 7 percent
reduction in its offshore operating costs.
Exploration
As of December 31, 1996, the Partnership held 325 thousand net undeveloped
acres offshore, as compared to 272 thousand as of December 31, 1995. Of the 148
Gulf of Mexico blocks in which the Partnership owns interests, 81 are
undeveloped. In 1996, the Partnership spent $22 million to acquire interests in
34 blocks.
In early 1996, the partnership participated in a discovery well, Garden
Banks (GB) 216 #2, which encountered 214 net feet of pay in 3 zones. The well is
located approximately 3 miles to the northeast of the GB 260 development
project. Also in early 1996, the Partnership drilled a discovery well on the
Brazos A-21 Block which encountered 108 net feet of pay in 3 zones. The well
began producing at about 18 mmcf/d during the summer. The partnership is
operator of the Block with a 51 percent interest.
As of December 31, 1996, 2 exploratory wells were being drilled. The
Partnership drilled 9 gross (3 net) exploratory wells offshore in 1996 and 6
gross (3 net) in 1995. Of the wells drilled in 1996, 2 gross (1 net) wells were
successful.
Production and Development
Average daily production of crude oil and condensate offshore was 15, 16
and 10 mbbls in 1996, 1995 and 1994. Average daily production of natural gas
offshore was 187, 178 and 201 mmcf in 1996, 1995 and 1994.
The Partnership owns a 99 percent interest in the High Island A-576 block.
In 1994, the HI A-576 #1 discovery well encountered 168 feet of net pay from the
Lower Pleistocene sands. The well is located 110 miles off the Texas coast in
290 feet of water. This development, which has been named the Sherman Project,
began production in December 1995. In 1996, the HI A-576 #2 well was tested at
24 mmcf and 2,300 barrels of condensate per day.
The Partnership owns a 99 percent interest in the four-block High Island
384 unit. The High Island 384 unit is located approximately 112 miles off the
Texas coast in water with an average depth of 360 feet. In
2
<PAGE> 4
1993, the Partnership announced an oil discovery in High Island 379 which
encountered 179 feet of oil pay. In the early part of 1994, the Partnership
announced an oil and gas discovery in High Island 385. The High Island 385
discovery encountered 80 feet of net pay. This new development, which has been
named the Patton Project, began production in January 1995 and in September 1995
achieved the expected peak production of 20 meb per day.
Late in 1995, the Partnership confirmed the presence of natural gas
reserves in a previously untested area of the High Island 384 Unit. The High
Island 385 #3 well encountered 158 feet of net gas pay. Two subsequent
delineation wells found the same pay interval in nearby fault blocks. In the
second phase of Patton, the Partnership installed the "D" platform in 360 feet
of water and developed the new gas reservoir. First production occurred in the
fourth quarter of 1996 with gross production of 35 mmcf/d. In addition, two
wells were drilled and the "E" platform installed to develop a previously
discovered reservoir on High Island 379. These wells came on stream during the
fourth quarter of 1996 at 24 mmcfe/d.
In 1995, the Partnership approved a plan for the development of Viosca
Knoll 826 which lies 80 miles off the Alabama coast in water depths of 1,500 to
2,500 feet. This development has been named the Neptune Project. The Partnership
operates the four-block Viosca Knoll unit and owns a 50 percent interest. The
project is utilizing a new type of floating production facility called a spar.
The spar is a cylindrical-shaped vessel which floats in a vertical position,
similar to a buoy. Production risers have been routed through the cylinder to
allow the spar to float around them. The field will be developed in multiple
phases with the spar being moved from location to location. The spar was
installed in the fourth quarter of 1996. First production occurred in March
1997.
In early 1995, the Partnership confirmed the presence of hydrocarbons in a
previously untested fault block on the GB 260 discovery in the Gulf of Mexico.
The GB 215 #2 well, which drilled a new fault block about 2 miles north of the
original discovery well on GB 260, encountered approximately 170 feet of net
pay. The GB 259 #2 well was then drilled as a side-track, and encountered over
115 feet of new pay in the same reservoir sands. This development, which has
been named the Baldpate Project, is in federal waters offshore Louisiana in
water depths of approximately 1,700 feet. In 1995, the Partnership entered into
a plan of development to install a compliant tower platform and processing
facility. The Partnership expects to begin production in 1998 with gross peak
production of 50-60 meb per day. The Partnership owns a 50 percent interest in a
four-block area.
As of December 31, 1996, the Partnership was drilling 3 gross (2 net)
offshore development wells. The Partnership drilled 30 gross (19 net)
development wells offshore in 1996 and 14 gross (11 net) in 1995. Of the
development wells drilled in 1996, 26 gross (17 net) were successful.
ONSHORE
The onshore area continues to be a major contributor of production volumes
and cash flow with relatively modest investment needs. In 1995, the partnership
initiated significant cost-reduction measures at its operated fields. As a
result, the partnership achieved an overall 19 percent reduction in onshore
operating costs in 1996. The Partnership has interests in 60 major onshore
fields in 5 states and operates about 75 percent of its production. In addition,
the Partnership has increased its drilling activity to more rapidly exploit its
onshore asset portfolio.
The Partnership is applying 3-D technology creating opportunities in new
fault blocks and deeper pool horizons which provide new volumes. To optimize
cash flow, the Partnership will continue to exploit its waterflood operations.
Onshore will be managed for maximum cash flow generation.
Exploration
The Partnership drilled no exploratory wells onshore in 1996, and at
December 31, 1996, none were being drilled.
3
<PAGE> 5
Production and Development
Average daily production of crude oil and condensate onshore was 28, 29 and
37 mb in 1996, 1995 and 1994. The decrease in 1996 crude oil and condensate
production compared to 1995 and in 1995 compared to 1994 was due primarily to
asset sales and normal declines. Average daily net production of natural gas
onshore was 299, 286 and 332 mmcf in 1996, 1995 and 1994.
Development wells drilled in 1996 and their test results include Seabreeze
#12, 21 mmcf/d and 500 bc/d; Belle Isle 3-10, 15 mmcf/d and 700 bc/d; Belle Isle
11-5, 18 mmcf/d and 600 bc/d; Belle Isle 10-4, 15 mmcf/d and 500 bc/d; Garcia
#20, 9 mmcf/d and 500 bc/d and Alabama Coushatta #7, 9 mmcf/d and 900 bc/d.
As of December 31, 1996, the Partnership was drilling or participating in
the drilling of 18 gross (12 net) development wells onshore. Of the 148 gross
(103 net) development wells drilled onshore during 1996, 134 gross (93 net) were
successful.
TABULAR INFORMATION
The following table sets forth the Partnership's undeveloped and developed
oil and gas acreage (in thousands) held at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
GROSS NET
-------------- ------------
1996 1995 1996 1995
----- ----- ---- ----
<S> <C> <C> <C> <C>
Undeveloped Acreage
Onshore.................................................. 916 983 501 528
Offshore................................................. 472 380 325 272
----- ----- --- ---
Total................................................. 1,388 1,363 826 800
===== ===== === ===
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
-------------- ------------
1996 1995 1996 1995
----- ----- ---- ----
<S> <C> <C> <C> <C>
Developed Acreage
Onshore.................................................. 987 982 552 545
Offshore................................................. 222 231 103 101
----- ----- --- ---
Total................................................. 1,209 1,213 655 646
===== ===== === ===
</TABLE>
The following table sets forth the Partnership's net exploratory and
development oil and gas wells drilled in 1996, 1995 and 1994:
<TABLE>
<CAPTION>
EXPLORATORY WELLS DEVELOPMENT WELLS
-------------------- --------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Oil
Onshore......................................... -- -- -- 43 41 11
Offshore........................................ -- 1 -- 9 7 2
---- ---- ---- ---- ---- ----
-- 1 -- 52 48 13
---- ---- ---- ---- ---- ----
Gas
Onshore......................................... -- -- -- 50 39 23
Offshore........................................ 1 -- 1 8 4 3
---- ---- ---- ---- ---- ----
1 -- 1 58 43 26
---- ---- ---- ---- ---- ----
Dry
Onshore......................................... -- -- -- 10 9 4
Offshore........................................ 2 2 2 2 -- 1
---- ---- ---- ---- ---- ----
2 2 2 12 9 5
---- ---- ---- ---- ---- ----
Total........................................ 3 3 3 122 100 44
==== ==== ==== ==== ==== ====
</TABLE>
4
<PAGE> 6
The following table sets forth the Partnership's gross and net producing
oil and gas wells at December 31, 1996:
<TABLE>
<CAPTION>
GROSS* NET*
------------ ------------
OIL GAS OIL GAS
----- --- ----- ---
<S> <C> <C> <C> <C>
Onshore.................................................... 2,855 830 1,571 507
Offshore................................................... 88 165 48 80
----- --- ----- ---
Total................................................. 2,943 995 1,619 587
===== === ===== ===
</TABLE>
- ------------------------------
* Gross producing wells include 132 multiple completion wells (more than one
formation producing into the same well bore).
The following table sets forth the Partnership's average daily net
production for 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Crude and Condensate (mb):
Onshore................................................... 28 29 37
Offshore.................................................. 15 16 10
--- --- ---
43 45 47
Processed Natural Gas (mb):................................. 7 6 6
--- --- ---
50 51 53
=== === ===
Natural Gas (mmcf):
Onshore................................................... 299 286 332
Offshore.................................................. 187 178 201
--- --- ---
486 464 533
=== === ===
</TABLE>
The following table sets forth the Partnership's average revenues and
production costs per unit of oil and gas production for 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Revenues:
Crude oil and condensate (per bbl)........................ $20.43 $16.44 $14.69
Natural gas (per mcf)..................................... $ 2.14 $ 1.73 $ 1.87
Average production cost per unit of oil and gas production
(per eb)
Operating cost.......................................... $ 3.14 $ 3.63 $ 3.95
Production taxes........................................ .87 .67 .83
------ ------ ------
Total production costs............................... $ 4.01 $ 4.30 $ 4.78
====== ====== ======
</TABLE>
ASSET DISPOSALS
Assets are managed on a portfolio basis. The Partnership will continue to
buy and sell assets with the intention of upgrading its asset base.
RECOVERY METHODS
During 1996, the Partnership obtained 61 and 39 percent of its crude
production from primary and secondary recovery methods. This compares to 62 and
37 percent, plus 1 percent from tertiary, of its crude oil production in 1995.
At December 31, 1996, the Partnership was participating in no major tertiary oil
recovery programs.
The terms "secondary recovery" and "tertiary recovery" relate to those
methods used to increase the quantity of crude oil and condensate and natural
gas that can be recovered in excess of the quantity
5
<PAGE> 7
recoverable using the primary energy found in a reservoir. Secondary recovery
methods include pressure maintenance by waterflooding or natural gas injection.
MARKETING OF OIL AND GAS
Distribution
Crude oil, condensate and natural gas are distributed through pipelines
and/or trucks to traders, end users, gatherers and transportation companies.
Sufficient distribution systems exist and are readily available in the areas of
the Partnership's production to enable the Partnership to effectively market its
oil and gas. In some instances, the Partnership owns an interest in these
systems.
Crude Oil and Condensate
During 1996, sales of crude oil and condensate to the Partnership's top
purchaser totaled approximately 8 percent of crude oil and condensate revenue.
No other customer purchased more than 8 percent of the Partnership's sales of
crude oil and condensate.
Since most of the Partnership's crude oil and condensate is produced in
areas where there are other buyers offering to purchase at market prices, the
Partnership believes that the loss of any major purchaser would not have a
material adverse effect on the Partnership's business. In 1996, the 10 largest
customers accounted for approximately 33 percent of such sales.
Currently, approximately 79 percent of sales are made pursuant to
arrangements that are cancelable upon 30 days' written notice by the Partnership
or the purchaser, with substantially all of the remainder of the production
being sold pursuant to contracts of varying terms of up to 8 years in length.
Natural Gas
During the fourth quarter of 1995, the Company, Apache Corporation and
Parker & Parsley Petroleum Company formed Producers Energy Marketing, LLC
(ProEnergy). ProEnergy purchases the Partnership's gas production at index
prices.
During 1996, ProEnergy purchased approximately 51 percent of the
Partnership's natural gas produced. During 1996, no individual customer, other
than ProEnergy, accounted for more than 10 percent of the Partnership's natural
gas sales.
Hedging
Because of the volatility of oil and gas prices, the Partnership
periodically enters into crude oil and natural gas hedging activities.
REGULATION
General
The oil and gas industry is subject to regulation by national, state and
local governments relating to such matters as the award of exploration and
production interests, the imposition of specific drilling obligations,
environmental protection controls, control over the development and abandonment
of a field (including restrictions on production and abandonment of production
facilities). The industry is also subject to the payment of royalties and taxes,
which tend to be high compared to those levied on other commercial activities.
The Partnership cannot predict the impact of future regulatory and taxation
initiatives.
Natural Gas
The domestic gas industry remains under federal regulation pursuant to the
Natural Gas Act and the Natural Gas Policy Act.
6
<PAGE> 8
Environmental Matters
The Partnership is subject to, and makes every effort to comply with,
various environmental quality control regulations of national and local
governments. Although environmental requirements can have a substantial impact
upon the energy industry, generally these requirements do not appear to affect
the Partnership any differently or to any greater or lesser extent than other
exploration and production companies.
The Partnership has been named as a potentially responsible party (PRP) at
4 sites pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended. At 2 of these sites, the Partnership has been
named as a de minimis party and therefore expects its liability to be small. At
a third site, the Partnership is reviewing its options and anticipates that it
will participate in steering committee activities with the Environmental
Protection Agency (EPA). At the fourth and largest site, the Operating
Industries, Inc. site in California, the Partnership has participated in a
steering committee consisting of 139 companies. The steering committee and other
PRP's previously entered into 2 partial consent decrees with the EPA providing
for remedial actions which have been or are to be completed. The steering
committee has recently successfully negotiated a third partial consent decree
which provides for the following remedial actions: a clay cover, methane
capturing wells and leachate destruction facilities. The remaining work at the
site involves groundwater evaluation and long-term operation and maintenance.
Based on the facts outlined above and the Partnership's ongoing analyses of
the actions where it has been identified as a PRP, the Partnership believes that
it has accrued sufficient reserves to absorb the ultimate cost of such actions
and that such costs will not have a material impact on the Partnership's
financial condition. While liability at superfund sites is typically joint and
several, the Partnership has no reason to believe that defaults by other PRP's
will result in liability of the Partnership materially larger than expected.
COMPETITION
The oil and gas industry is highly competitive. Integrated companies,
independent companies and individual producers and operators are active bidders
for desirable oil and gas properties, as well as for the equipment and labor
required to operate and develop such properties. Although several of these
competitors have financial resources substantially greater than those of the
Partnership, management of the Company believes that the Partnership is in a
position to compete effectively.
The availability of a ready market for the Partnership's oil and gas
production depends on numerous factors beyond its control, including the level
of prices and consumer demand, the extent of worldwide oil and gas production,
the cost and availability of alternative fuels, the cost and proximity of
pipelines and other transportation facilities, regulation by national and local
authorities and the cost of compliance with applicable environmental
regulations.
TECHNOLOGY
The Partnership's exploration, development and production activities depend
upon the use of applied technology. In support of this, the Partnership, through
the Company, has 24 engineers, geoscientists, technicians and support personnel
focusing on the technology used in the exploration for, and development and
production of, energy resources. The Partnership's expenditures on technology
activities, including its share of the Company's employee-related costs, were $8
million, $8 million and $11 million for the years 1996, 1995 and 1994,
respectively.
CONFLICTS OF INTEREST
Certain conflicts of interest may arise as a result of the relationships
between the Company and the Partnership. The directors and officers of the
Company have fiduciary duties to manage the Company in the best interest of its
stockholders.
The Company, as managing general partner of the Partnership, has a
fiduciary duty to manage the Partnership in a manner that is fair to the public
unitholders. The duty of the directors of the Company to its stockholders may
therefore come into conflict with the duties of the Company to the public
unitholders.
7
<PAGE> 9
The Audit Committee of the Board of Directors of the Company (Audit
Committee), none of whose members is affiliated with the Company except as
Company directors or stockholders or as holders of units, reviews policies and
procedures developed by the Company for dealing with various matters as to which
a conflict of interest may arise. The Audit Committee also monitors the
application of such policies and procedures.
OTHER
The Partnership's financial condition and business operations are affected
from time to time by political developments and laws and regulations which
relate to such matters as production, taxes, property, imports, pricing and
environmental controls. The Company makes no representations as to future events
and developments which could affect the Partnership's operations and financial
condition. Oil and gas prices are subject to supply and demand. Political
developments (especially in the Middle East) and the decisions of OPEC can
particularly affect world oil supply and oil prices. Furthermore, the
Partnership's business and financial condition could be affected by, among other
things, competition, future price changes or controls, material and labor costs,
legislation, transportation regulations, tariffs, embargoes and armed conflicts.
ITEM 3. LEGAL PROCEEDINGS
The historical method used by the oil industry in the United States to
establish the price at which crude oil is bought and sold is being challenged.
Buyers and sellers have traditionally determined the market price of crude oil
by reference to "posted prices", which are prices published by certain crude oil
buyers such as crude oil refiners and transporters as the price at which they
are willing to buy. A number of suits have been brought alleging that posted
prices have been set consistently below market value, and that, as a result,
royalties have been underpaid.
The Partnership was named as a defendant in such a case filed in state
court in Starr County, Texas in April, 1995 and a co-defendant in cases filed in
state courts in Lee County, Texas and in Louisiana and in federal court in
Alabama. All of these lawsuits seek certification as class actions on behalf of
royalty owners in specific geographic areas, except the Alabama case, which
seeks certification of a nationwide class of royalty owners. The Alabama case
also alleges that the co-defendants have conspired and acted in concert to
establish the price of crude oil in violation of antitrust statutes. These suits
are similar to those brought in Texas by the Texas General Land Office, and in
Texas, New Mexico, Oklahoma and Florida by private royalty owners against major
crude oil producers. Suits are also being brought by natural gas royalty
interest owners regarding royalty valuation and deductions of post-production
costs from royalty.
In addition to these suits, the Minerals Management Service ("MMS") of the
United States Department of the Interior is challenging the prices on which
royalties were assessed. The MMS has claimed that a number of crude oil
producers including the Partnership underpaid royalties owed the federal
government on California crude oil production from 1980 to 1988 and has sent
Orders to Pay to a number of producers including the Partnership. The MMS is
also auditing royalty valuation in other parts of the country. The Department of
Justice is independently investigating whether oil and gas producers have
violated the False Claims Act in connection with royalty payments on production
from federal and Indian lands.
While a number of claims and suits against the Partnership and other crude
oil and natural gas producers have already been brought by a variety of
governmental and private plaintiffs in a number of jurisdictions, the fact that
these suits challenge practices common to the industry suggests that additional
lawsuits against the Partnership may be filed. The suits filed to date, to
include the actions in which the Partnership is a party, are in the preliminary
stage. The Partnership believes it has meritorious defenses and intends to
defend these claims and lawsuits vigorously.
The Partnership is involved in a number of other legal and administrative
proceedings arising in the ordinary course of its oil and gas business. Although
the ultimate outcome of these proceedings cannot be ascertained at this time, it
is reasonably possible that some of the proceedings could be resolved
unfavorably to the Partnership. Management of the Company believes that any
liabilities which may arise out of legal claims or proceedings would not be
material in relation to its financial position at December 31, 1996. The Company
8
<PAGE> 10
intends to maintain liability and other insurance for the Partnership of the
type customary in the oil and gas business with such coverage limits as the
Company deems prudent.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNITHOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP
UNITS AND RELATED SECURITY HOLDER MATTERS
The depositary units of Sun Energy Partners, L.P. are traded on the New
York Stock Exchange, Inc. The following table sets forth the high and low sales
prices per unit, as reported on the New York Stock Exchange Composite
Transactions quotations, for the periods indicated:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter........................................... 4$1/8 $3 5/8 4$1/2 $3 7/8
Second Quarter.......................................... 4$3/4 $3 5/8 4$3/4 $4 1/8
Third Quarter........................................... $ 5 $4 1/8 4$3/4 $4 1/8
Fourth Quarter.......................................... 5$5/8 $4 1/2 4$5/8 $3 5/8
</TABLE>
The Partnership had approximately 1,899 holders of record of depositary
units as of March 6, 1997.
For the years 1996 and 1995, the quarterly cash distributions per unit paid
to unitholders were as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
First Quarter............................................... $.02 $.14
Second Quarter.............................................. .07 .14
Third Quarter............................................... .06 .16
Fourth Quarter.............................................. .01 .02
---- ----
Total.................................................. $.16 $.46
==== ====
</TABLE>
The fourth quarter cash distribution for 1996 in the amount of $.15 per
unit was paid in March 1997. Cash distributions in 1995 included $.27 per unit
related to proceeds from asset sales. Future quarterly cash distributions to
unitholders are expected to be paid on or about the 10th day of March, June,
September and December in each year. (See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Cash Distribution Policy.")
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<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
For the Period
Revenues.............................. $ 686 $ 552 $ 613 $ 676 $ 937
Income before cumulative effect of
accounting change (1)............... $ 248 $ 99 $ 100 $ 44 $ 120
Net income (loss) (1)................. $ 248 $ 99 $ (477) $ 44 $ 120
Net income per unit before cumulative
effect of accounting change (1)..... $ .59 $ .24 $ .24 $ .11 $ .29
Net income (loss) per unit (1)........ $ .59 $ .24 $(1.13) $ .11 $ .29
Cash distributions paid to unitholders
(2)................................. $ 67 $ 194 $ 114 $ 340 $ 360
Cash distributions paid per unit
(2)................................. $ .16 $ .46 $ .27 $ .82 $ .87
Weighted average units outstanding (in
thousands).......................... 421.2 421.2 421.2 414.7 412.5
Capital expenditures.................. $ 314 $ 206 $ 166 $ 199 $ 100
At End of Period
Total assets.......................... $1,299 $1,143 $1,181 $1,822 $2,038
Long-term debt (3).................... $ 51 $ 62 $ 74 $ 86 $ 100
Partners' capital..................... $1,020 $ 839 $ 934 $1,525 $1,751
</TABLE>
- ------------------------------
(1) Effective January 1, 1994, the Partnership adopted a new policy for
determining the ceiling test for its oil and gas properties. A one-time
non-cash charge of $577 million for the cumulative effect of the change was
recognized in the earnings for 1994 (see Note 7 to the Consolidated
Financial Statements). The net income for 1993 includes a $7 million loss
from the sale of assets. The net income of 1992 includes gains from sales of
assets of $115 million.
(2) In the fourth quarter of 1993, the Company announced that it would no longer
purchase newly issued Partnership units to fund the Partnership's capital
outlays. The Partnership will fund its capital outlays from internally
generated funds and make distributions to partners from the cash flow
remaining after such outlays (see Note 13 to the Consolidated Financial
Statements).
(3) Includes $51 million, $62 million, $72 million, $82 million and $91 million
of long-term debt due to the Company. The Partnership prepaid $213 million
of such debt in 1992.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis of the Partnership's financial
condition and results of operations which follow should be read in conjunction
with the Consolidated Financial Statements and Selected Financial Data included
in this report.
RESULTS OF OPERATIONS
Net income in 1996 was $248 million. The realized oil price in 1996
increased 24 percent to $20.43 per barrel. The increase in 1996 followed a 12
percent increase in 1995 compared to 1994. The Partnership's realized gas price
in 1996 increased 24 percent to $2.14 per mcf. Total costs and expenses
decreased 3 percent to $438 million in 1996. Operating costs decreased 14
percent in 1996 due to cost efficiency measures. Production taxes increased 27
percent in 1996 due to higher prices.
Net income in 1995 was $99 million. In 1995, production volumes decreased
10 percent due to the sale of producing assets. Total costs and expenses
decreased 12 percent to $453 million in 1995. Operating costs decreased 17
percent due primarily to cost efficiency measures.
The net loss in 1994 was $477 million, which included a $577 million
cumulative effect of an accounting change (see Note 7 to the Consolidated
Financial Statements). Production volumes decreased 4 percent due to the sale of
producing assets. Depreciation, depletion and amortization expense declined 36
percent because of the accounting change which decreased the partnership's
producing property balance by $577 million. (See Note 7 to the Consolidated
Financial Statements).
10
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
ED&A outlays were $317 million in 1996, $216 million in 1995 and $184
million in 1994. In 1996, 22 percent of the Partnership's total ED&A investment
was for exploration and 78 percent was for development and acquisition. In 1997,
total ED&A outlays are expected to be approximately $350 million of which 70
percent is targeted for development and 30 percent for exploration.
In 1996, cash flow from operating activities increased $58 million from
1995 primarily due to higher oil and gas prices and lower costs and expenses
partially offset by lower production volumes. Cash flow from investing
activities used $323 million in 1996 compared to $144 million in 1995. Proceeds
from divestments were $67 million lower in 1996 while capital expenditures
increased by $108 million. Cash flow used for financing activities decreased by
$127 million in 1996 primarily because of the reduced distributions to
unitholders.
In 1995, cash flow from operating activities increased $57 million compared
to 1994 primarily due to favorable increases in cash flow working capital
components. Cash flow from investing activities used $144 million in 1995
compared to a use of $136 million in 1994. Capital expenditures were $40 million
higher in 1995 and proceeds from divestments were $33 million higher in 1995.
Cash flow from financing activities used $205 million in 1995 compared to a use
of $128 million in 1994. Cash distributions paid to unitholders were $80 million
higher in 1995 than 1994.
In December 1995, the Partnership adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
Adoption did not impact results of operations.
During the fourth quarter of 1995, the Company, Apache Corporation and
Parker & Parsley Petroleum Company formed Producers Energy Marketing, LLC
(ProEnergy). ProEnergy purchases substantially all of the Partnership's gas
production at index prices.
In 1994, cash flow from operating activities decreased $129 million
compared to 1993 primarily due to lower oil volumes, lower average prices for
oil and gas and unfavorable decreases in cash flow working capital components.
Cash flow from investing activities used $136 million in 1994 compared to a use
of $148 million in 1993. Capital expenditures were $33 million lower and
proceeds from divestments were $17 million lower in 1994. Cash flow from
financing activities used $128 million in 1994 compared to a use of $284 million
in 1993. Cash distributions paid to unitholders were $226 million lower in 1994
than 1993 and 1993 included $70 million of cash flow from the sale of limited
partnership units. No such sale occurred in 1994.
The Partnership's investing levels will be governed by its cash flow from
operating activities which will continue to be affected by prevailing oil and
gas prices, cost levels and production volumes. Volatility in oil and gas prices
experienced over the past several years is expected to continue. Any shortfall
in expected cash flow from operating activities may require adjustment of the
business plans. Options include deferral of discretionary ED&A outlays and the
sale of Partnership units. The Partnership's long-term cash generation
capability is ultimately tied to the value of proved reserves.
RESERVE REPLACEMENT
The ability to sustain cash flow is dependent, among other things, on the
level of the Partnership's oil and gas reserves, oil and gas prices and cost
containment. Replacement of proved reserves through extensions and discoveries,
improved recovery, purchases and revisions to prior reserve estimates in 1996
was 122 percent of liquids production and 49 percent of gas production. Reserve
replacement rates of liquids and gas were 79 and 112 percent in 1995 and 35 and
109 percent in 1994.
HEDGING ARRANGEMENTS
The Partnership, from time to time, enters into arrangements to hedge oil
and natural gas prices. The Partnership has entered into contracts to hedge
approximately 22 percent of its estimated 1997 crude oil production. Collar
agreements were employed to hedge approximately 11 percent of production at an
average floor price of $19.90 WTI per barrel and an average ceiling price of
$22.49 WTI per barrel, put contracts
11
<PAGE> 13
comprise 9 percent of production at an average floor price of $19.65 WTI per
barrel and swap agreements hedge 2 percent of production at an average price of
$19.25 WTI per barrel. Approximately 35 percent of its estimated 1997 gas
production is under hedging agreements at an average price of $2.08 HH per mmbtu
comprised of 18 percent hedged using collars at an average floor price of $2.13
HH per mmbtu and an average ceiling price of $2.51 HH per mmbtu, 14 percent
hedged via put contracts at an average floor price of $2.02 HH per mmbtu and 3
percent utilizing swap agreements at an average price of $2.06 HH per mmbtu.
(See Note 2 to the Consolidated Financial Statements.)
ENVIRONMENTAL
The Partnership's oil and gas operations are subject to stringent
environmental regulations. The Company is dedicated to the preservation of the
environment and has committed significant resources to comply with such
regulations. Although the Partnership has been named as a potentially
responsible party at sites related to past operations, the Company believes the
Partnership is in general compliance with applicable governmental regulations
and that the potential costs to it, in the aggregate, are not material to its
financial condition. However, risks of substantial costs and liabilities are
inherent in the oil and gas business. Should other developments occur, such as
increasingly strict environmental laws, regulations and enforcement policies or
claims for damages resulting from the Partnership's operations, they could
result in additional costs and liabilities in the future. (See Note 14 to the
Consolidated Financial Statements.)
CASH DISTRIBUTION POLICY
In the fourth quarter of 1993, the Company's Board of Directors elected to
change the Company's investment policy concerning purchase of additional
Partnership units. Effective in 1994, the Company no longer routinely purchases
newly issued Partnership units to fund capital outlays. The Partnership now
funds its capital outlays from internally generated funds, including cash
proceeds from asset sales and makes distributions of only that cash remaining
after such outlays. The policy reduces the cash paid to unitholders but also
ends the ownership dilution caused by the issuance of additional units.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL
AND OPERATING INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 13
Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1996, 1995 and 1994....................... 14
Consolidated Balance Sheets at December 31, 1996 and
1995................................................... 15
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995
and 1994............................................... 16
Notes to Consolidated Financial Statements................ 17
Supplementary Financial and Operating
Information -- (Unaudited):
Oil and Gas Data.......................................... 26
Quarterly Financial Information........................... 28
Quarterly Operating Information........................... 29
</TABLE>
12
<PAGE> 14
SUN ENERGY PARTNERS, L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Sun Energy Partners, L.P. and the Board of Directors of
Oryx Energy Company:
We have audited the accompanying consolidated balance sheets of Sun Energy
Partners, L.P. and its Subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of Oryx Energy Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Sun Energy
Partners, L.P. and its Subsidiaries as of December 31, 1996 and 1995 and the
consolidated 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.
As discussed in Note 7 to the consolidated financial statements, the
Partnership changed its accounting policy for calculating the oil and gas
ceiling test in 1994.
/s/ COOPERS & LYBRAND
Dallas, Texas
February 19, 1997
13
<PAGE> 15
SUN ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Revenues
Oil and gas............................................... $ 700 $ 565 $ 618
Other -- net (Notes 3 and 5).............................. (14) (13) (5)
------ ------ ------
686 552 613
------ ------ ------
Costs and Expenses
Operating costs........................................... 139 162 195
Production taxes (Note 6)................................. 38 30 41
Exploration costs......................................... 42 42 50
Depreciation, depletion and amortization.................. 177 163 163
General and administrative expense (Note 3)............... 41 53 52
Interest and debt expense (Note 3)........................ 17 13 17
Interest capitalized...................................... (16) (10) (5)
------ ------ ------
438 453 513
------ ------ ------
Income Before Cumulative Effect of Accounting Change........ 248 99 100
Cumulative Effect of Accounting Change (Note 7)............. -- -- (577)
------ ------ ------
Net Income (Loss)........................................... $ 248 $ 99 $ (477)
====== ====== ======
Net Income (Loss) Per Unit:
Before cumulative effect of accounting change............. $ .59 $ .24 $ .24
Cumulative effect of accounting change.................... -- -- (1.37)
------ ------ ------
Net income (loss)......................................... $ .59 $ .24 $(1.13)
====== ====== ======
Cash Distributions Paid to Unitholders...................... $ 67 $ 194 $ 114
====== ====== ======
Cash Distributions Paid Per Unit............................ $ .16 $ .46 $ .27
====== ====== ======
Weighted Average Units Outstanding (In Millions)............ 421.2 421.2 421.2
====== ====== ======
</TABLE>
(See Accompanying Notes)
14
<PAGE> 16
SUN ENERGY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------
1996 1995
------ ------
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 2 $ 8
Accounts receivable and other current assets.............. 136 97
------ ------
Total Current Assets........................................ 138 105
Properties, Plants and Equipment (Note 8)................... 1,074 955
Investment in Affiliate (Note 1)............................ 87 83
------ ------
Total Assets................................................ $1,299 $1,143
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Advances from affiliate (Note 3).......................... $ 12 $ 45
Accounts payable.......................................... 91 73
Accrued liabilities (Note 9).............................. 70 79
Current portion of long-term debt due affiliate (Note
10).................................................... 11 11
Current portion of long-term debt (Note 10)............... 1 2
------ ------
Total Current Liabilities................................... 185 210
Long-Term Debt Due Affiliate (Note 10)...................... 51 62
Long-Term Debt (Note 10).................................... 1 --
Deferred Credits and Other Liabilities (Note 14)............ 42 32
Commitments and Contingent Liabilities (Note 11)
Partners' Capital (Notes 12 and 13)
Limited partnership interests............................. 313 257
General partnership interests............................. 707 582
------ ------
Partners' Capital........................................... 1,020 839
------ ------
Total Liabilities and Partners' Capital..................... $1,299 $1,143
====== ======
</TABLE>
- ------------------------------
The successful efforts method of accounting is followed.
(See Accompanying Notes)
15
<PAGE> 17
SUN ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Cash and Cash Equivalents From Operating Activities
Net Income (Loss)........................................... $ 248 $ 99 $(477)
Adjustments to reconcile net income (loss) to net cash
from operating activities
Depreciation, depletion and amortization............... 177 163 163
Dry hole costs and leasehold impairment................ 19 21 27
Loss on sale of assets................................. 2 1 --
Cumulative effect of accounting change................. -- -- 577
Other.................................................. 15 6 6
----- ----- -----
461 290 296
Changes in working capital:
Accounts receivable and other current assets........... (40) (15) 25
Accounts payable, accrued liabilities and advances from
affiliates............................................ (26) 62 (41)
----- ----- -----
Net Cash Flow Provided From Operating Activities............ 395 337 280
----- ----- -----
Cash and Cash Equivalents From Investing Activities
Capital expenditures...................................... (314) (206) (166)
Proceeds from divestments................................. 8 75 42
Other..................................................... (17) (13) (12)
----- ----- -----
Net Cash Flow Used For Investing Activities................. (323) (144) (136)
----- ----- -----
Cash and Cash Equivalents From Financing Activities
Proceeds from borrowings.................................. 2 -- --
Repayments of long-term debt.............................. (13) (11) (14)
Cash distributions paid to unitholders.................... (67) (194) (114)
----- ----- -----
Net Cash Flow Used For Financing Activities................. (78) (205) (128)
----- ----- -----
Changes in Cash and Cash Equivalents........................ (6) (12) 16
Cash and Cash Equivalents at Beginning of Year.............. 8 20 4
----- ----- -----
Cash and Cash Equivalents at End of Year.................... $ 2 $ 8 $ 20
===== ===== =====
</TABLE>
(See Accompanying Notes)
16
<PAGE> 18
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Control
Sun Energy Partners, L.P. (Sun Energy Partners), a Delaware limited
partnership, was formed on October 1, 1985 and prior to December 1, 1985 had no
operations and nominal assets and equity. Effective as of December 1, 1985, Sun
Energy Partners succeeded to all the domestic oil and gas operations of Oryx
Energy Company and certain of its affiliates (collectively, the Company). These
operations consist of the exploration for and development of oil and natural gas
reserves in the United States.
Sun Energy Partners is controlled by the Company, which is the managing
general partner. As of December 31, 1996, the Company had a partnership interest
of 98 percent in Sun Energy Partners. The remaining 2 percent limited
partnership interest is held by public unitholders in the form of depositary
units. Eighty-five percent of the Company's Board of Directors must approve any
additional issuance, sale or transfer of units which would reduce the Company's
holdings in Sun Energy Partners below 85 percent.
Sun Energy Partners operates through Sun Operating Limited Partnership, a
Delaware limited partnership, and several other operating partnerships
(collectively, the Operating Partnerships). In all of the partnerships which
comprise the Operating Partnerships, Sun Energy Partners holds a 99 percent
interest as the sole limited partner, while the Company holds a 1 percent
interest as the managing general partner.
Sun Energy Partners and the Operating Partnerships (collectively, the
Partnership) have no officers or employees. The officers and employees of the
Company perform all management functions.
Basis of Presentation
The Partnership's consolidated financial statements have been prepared
using the proportionate method of consolidation for Sun Energy Partners and its
99 percent interest in the Operating Partnerships. Such financial statements are
prepared in accordance with generally accepted accounting principles which is
different from the basis used for reporting taxable income or loss to
unitholders.
Cash Equivalents
The Partnership considers highly liquid investments with original
maturities of less than 3 months to be cash equivalents. Cash equivalents are
stated at cost which approximates market value.
Properties, Plants and Equipment
The successful efforts method of accounting is followed for costs incurred
in oil and gas operations.
Capitalization Policy. Acquisition costs are capitalized when incurred.
Costs of unproved properties are transferred to proved properties when proved
reserves are added. Exploration costs, including geological and geophysical
costs and costs of carrying unproved properties, are charged against income as
incurred. Exploratory drilling costs are capitalized initially; however, if it
is determined that an exploratory well did not find proved reserves, such
capitalized costs are charged to expense, as dry hole costs, at that time.
Development costs are capitalized. Costs incurred to operate and maintain wells
and equipment are expensed.
Leasehold Impairment and Depreciation, Depletion and Amortization. Periodic
valuation provisions for impairment of capitalized costs of unproved properties
are expensed. The acquisition costs of proved properties are depleted by the
unit-of-production method based on proved reserves by field. Capitalized
exploratory drilling costs which result in the addition of proved reserves and
development costs are amortized by the unit-of-production method based on proved
developed reserves by field.
Ceiling Test. The Partnership performs its ceiling test comparisons on an
individual field basis. In December 1995, the Partnership adopted the provisions
of Statement of Financial Accounting Standards
17
<PAGE> 19
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." Under SFAS No. 121, whenever events or
changes in circumstances indicate that the carrying amount of a long-lived asset
may not be recoverable, the Partnership reviews for impairment by comparing
estimated future cash flows expected to result from the use of an asset and its
eventual disposition to the carrying amount of the asset (Note 7). If impairment
is indicated, the asset is written down to its fair value based upon its
expected future discounted cash flows.
Dismantlement, Restoration and Abandonment Costs. Estimated costs of future
dismantlement, restoration and abandonment are accrued as a component of
depreciation, depletion and amortization expense; actual costs are charged to
the accrual.
Retirements. Gains and losses on the disposals of fixed assets are
generally reflected in income. For certain property groups, the cost less
salvage value of property sold or abandoned is charged to accumulated
depreciation, depletion and amortization except that gains and losses for these
groups are taken into income for unusual retirements or retirements involving an
entire property group.
Investment in Affiliate
Effective in 1988, the Company issued three million shares of its $1 par
value common stock to an operating partnership of the Partnership in exchange
for certain assets. These shares are not entitled to vote at the Company's
annual meetings of shareholders. The Partnership accounts for this investment
under the cost method, whereby investment income is recognized by the
Partnership if and when common dividends are received from the Company. In
January 1994, Oryx Energy Company suspended the payment of quarterly dividends
to holders of its common stock.
Capitalized Interest
The Partnership capitalizes interest costs incurred as a result of the
acquisition and installation of significant assets.
Income Taxes
The Operating Partnerships and Sun Energy Partners are treated as
partnerships for income tax purposes and, as a result, income or loss of the
Partnership is includable in the tax returns of the individual unitholders.
Accordingly, no recognition has been given to income taxes in the financial
statements.
At December 31, 1996, 1995 and 1994, the Partnership's financial reporting
bases of assets and liabilities exceeded the tax bases of its assets and
liabilities (net temporary differences) by $596 million, $537 million and $544
million.
Cash Flows
For purposes of reporting cash flows, cash and cash equivalents includes
cash, highly liquid investments with remaining maturities of less than 3 months
(see "Cash Equivalents", above) and advances to affiliate.
Interest paid totaled $17 million, $13 million and $17 million in 1996,
1995 and 1994.
During 1994, the Partnership exchanged its interest in an undeveloped block
in the Gulf of Mexico for a royalty interest in Viosca Knoll 826. This
transaction was accounted for by the Partnership as a non-cash property
exchange. In accordance with Statement of Financial Accounting Standards No. 95,
"Statement of Cash Flows," non-cash transactions are not reflected within the
accompanying Consolidated Statements of Cash Flows.
18
<PAGE> 20
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Sales of Oil and Gas
Sales of oil and gas are recorded on the entitlement method. Differences
between actual production and entitlements result in a receivable when
underproduction occurs and a payable when overproduction occurs.
During 1996, sales of oil to the Partnership's top purchaser totaled
approximately 8 percent, and sales of natural gas to the top purchaser totaled
51 percent. During 1995 and 1994, no individual customer accounted for more than
10 percent of the Partnership's oil or natural gas revenue. The Partnership
believes that the loss of any major purchaser would not have a material adverse
effect on its business.
Oil and Gas Price Hedging Activity
The Partnership, from time to time, enters into futures contracts to hedge
the impact of price fluctuations on anticipated crude oil and natural gas sales.
Advance payments under such contracts are deferred and charged to oil and gas
revenue during the anticipated sales periods. The differentials paid or received
during the terms of such agreements are accrued as oil and gas prices change and
are charged or credited to oil and gas sales (Note 2).
Environmental Costs
The Partnership establishes reserves for environmental liabilities as such
liabilities are incurred (Note 14).
Statement Presentation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain items in years prior to 1996 have been reclassified to conform to
the 1996 presentation.
2) FINANCIAL INSTRUMENTS
Derivatives
As discussed in Note 1, the Partnership enters into hedging arrangements
for crude oil and natural gas prices with major financial institutions. The
Partnership does not enter into derivative transactions for trading purposes.
At December 31, 1996, the Partnership was a party to crude oil hedging
contracts to hedge about 20 percent of its estimated 1997 crude oil production
at an average price of $20.30 per barrel. Approximately 31 percent of its
estimated 1997 natural gas production was hedged at $2.24 per mmbtu. At December
31, 1995, the Partnership was a party to crude oil and natural gas hedging
contracts to hedge about 5 percent of its 1996 crude oil production at $18.27
per barrel and 40 percent of its 1996 natural gas production at $1.81 per mmbtu.
These arrangements serve to reduce the volatility associated with prices of
crude oil and natural gas. The aggregate carrying values of these assets at
December 31, 1996 and 1995 were $10 million and $5 million, and the aggregate
fair values, subject to daily fluctuation, based on quotes from brokers, were
approximately $2 million and $(20) million.
The above mentioned derivative contracts expose the Partnership to credit
risks. The Partnership has established controls to manage this risk and closely
monitors the creditworthiness of its counterparties which
19
<PAGE> 21
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2) FINANCIAL INSTRUMENTS (CONTINUED)
are major financial institutions. The Partnership believes that losses from
nonperformance are unlikely to occur.
Other Financial Instruments
At December 31, 1996 and 1995, the carrying values of the Partnership's
long-term debt, including amounts due within one year, were $64 million and $75
million (Note 10). At December 31, 1996 and 1995, the aggregate fair values of
the Partnership's long-term debt were approximately $68 million and $84 million,
estimated primarily based on current rates offered to the Partnership for debt
of the same remaining maturities.
3) RELATED PARTY TRANSACTIONS
Advances to/from Affiliate
The Company has served as the Partnership's lender and borrower of funds
and a clearing-house for the settlement of intercompany receivables and
payables. Deposits earn interest at a rate equal to the rate paid by a major
money market fund. Demand loans bear interest at a rate based on the prime rate.
Long-Term Debt Due Affiliate
The Partnership is indebted to the Company under a 9.75% note due 1997-2001
(Note 10).
Sales of Natural Gas
During the fourth quarter of 1995, the Company, Apache Corporation and
Parker & Parsley Petroleum Company formed Producers Energy Marketing, LLC
(ProEnergy) to jointly market natural gas. As of December 31, the Company had an
ownership interest of 46 percent in ProEnergy; however, ownership varies based
on the Company's share of natural gas throughput for the preceding quarter. The
Partnership sells the majority of its natural gas production to ProEnergy at
index prices. Full operations commenced in April 1996 and natural gas sales to
ProEnergy totaled $193 million for the 9 months ended December 31, 1996. At
December 31, 1996, the Partnership had an outstanding receivable balance of $48
million from ProEnergy.
Direct and Indirect Cost
The Company is reimbursed by the Partnership for all direct costs incurred
in performing management functions and indirect costs (including payroll and
payroll related costs and the cost of postemployment benefits and management
incentive plans) allocable to the Partnership. The full cost of direct and
indirect costs incurred on behalf of the Partnership by the Company is allocated
to the Partnership based on services rendered and extent of use. Such costs,
which are charged principally to production cost, exploration cost and general
and administrative expense, totaled $61 million, $68 million and $73 million for
the years 1996, 1995 and 1994. The Company does not receive any carried
interests, promotions, back-ins or other similar compensation as the general
partner of the Partnership.
Interest Income
Interest income received from the Company, which is reflected in other
revenues in the consolidated statements of income, was earned on advances to the
Company and totaled $4 million, $2 million and $3 million during the years 1996,
1995 and 1994.
20
<PAGE> 22
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3) RELATED PARTY TRANSACTIONS (CONTINUED)
Interest Cost
Interest cost paid to the Company, which is included in interest and debt
expense in the consolidated statements of income, was primarily incurred on
long-term debt and advances due the Company and totaled $16 million, $12 million
and $16 million during the years 1996, 1995 and 1994 (Note 10).
4) CHANGES IN BUSINESS
In the first quarter of 1994, the Partnership recognized an $84 million
restructuring charge. This provision was revised to zero because of the
accounting change (Note 7).
5) OTHER REVENUES -- NET
The components of other revenues were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C> <C>
Interest income............................................. $ 4 $ 2 $ 3
Loss on sale of assets...................................... (2) (1) --
Miscellaneous............................................... (16) (14) (8)
---- ---- ---
$(14) $(13) $(5)
==== ==== ===
</TABLE>
6) PRODUCTION TAXES
Production taxes consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Severance................................................... $29 $20 $26
Property taxes.............................................. 9 10 15
--- --- ---
$38 $30 $41
=== === ===
</TABLE>
7) ACCOUNTING CHANGE
In December 1995, the Partnership adopted SFAS No. 121 resulting in no
material impact.
Effective January 1, 1994, the Partnership changed its accounting policy
for calculating the oil and gas asset ceiling test from a total Partnership
basis to an individual field basis. The Partnership believes the field basis is
preferable because it is the way the Partnership manages its business. The basis
underlying the calculation of the cumulative effect of this change is a
comparison of the undiscounted cash flows of each field's then existing proved
reserves to its net book value at each quarter-end during the life of the asset.
This subjects the ceiling test valuation to the lowest quarter-end price
experienced over the asset's life. Prior to this change, the Partnership
compared its total undiscounted standardized measure of future net cash flows
from estimated production of proved oil and gas reserves to its net proved
property, plant and equipment. As a result of this change, the Partnership
recognized a non-cash cumulative effect charge of $577 million to 1994 results.
Excluding the cumulative charge, the Partnership's income for 1994 was $100
million ($.24 per unit).
21
<PAGE> 23
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8) PROPERTIES, PLANTS AND EQUIPMENT
At December 31, the Partnership's properties, plants and equipment and
accumulated depreciation, depletion and amortization were as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Gross Investment
Proved properties......................................... $3,664 $3,615
Unproved properties....................................... 60 37
Other..................................................... 29 58
------ ------
3,753 3,710
------ ------
Less Accumulated Depreciation, Depletion and Amortization
Proved properties*........................................ 2,656 2,701
Other..................................................... 23 54
------ ------
2,679 2,755
------ ------
Net Investment.............................................. $1,074 $ 955
====== ======
</TABLE>
- ------------------------------
* Includes $30 million and $29 million for dismantlement, restoration and
abandonment at December 31, 1996 and 1995.
9) ACCRUED LIABILITIES
At December 31, the Partnership's accrued liabilities were comprised of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Drilling and operating costs................................ $44 $48
Taxes payable............................................... 13 11
Other....................................................... 13 20
--- ---
$70 $79
=== ===
</TABLE>
10) LONG-TERM DEBT
At December 31, the Partnership's long-term debt consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
9.75% note payable to affiliate, due 1997-2001, payable in
quarterly installments.................................... $62 $73
Capitalized lease obligations due 1996-1999................. 2 2
--- ---
64 75
Less: Current portion of note payable to affiliate.......... 11 11
Current portion of capitalized lease obligations and
other long-term debt.................................. 1 2
--- ---
$52 $62
=== ===
</TABLE>
22
<PAGE> 24
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10) LONG-TERM DEBT (CONTINUED)
Repayment obligations under the Partnership's long-term debt due affiliate
are $11 million, $13 million, $14 million, $16 million and $8 million in 1997,
1998, 1999, 2000 and 2001.
11) COMMITMENTS AND CONTINGENT LIABILITIES
The Partnership has operating leases for office space and other property
and equipment. Total rental expense for such leases for the years 1996, 1995 and
1994 was $15 million, $38 million and $33 million. Under contracts existing as
of December 31, 1996, future minimum annual rentals applicable to noncancellable
operating leases that have initial or remaining lease terms in excess of 1 year
were as follows (in millions of dollars):
<TABLE>
<S> <C>
Year Ending December 31:
1997...................................................... $ 5
1998...................................................... 3
1999...................................................... 3
2000...................................................... 1
2001...................................................... --
Later years............................................... --
---
Total minimum payments required........................ $12
===
</TABLE>
Several legal and administrative proceedings are pending against the
Partnership. Although the ultimate outcome of these proceedings cannot be
ascertained at this time, and it is reasonably possible that some of them could
be resolved unfavorably to the Partnership, management believes that any
liabilities which may arise would not be material.
12) PARTNERS' CAPITAL
<TABLE>
<CAPTION>
LIMITED PARTNERS GENERAL PARTNER
------------------------------------------------------- -----------------
ORYX ENERGY ORYX ENERGY
PUBLIC COMPANY TOTAL COMPANY TOTAL
--------------- ----------------- ----------------- ----------------- -----------------
UNITS DOLLARS UNITS DOLLARS UNITS DOLLARS UNITS DOLLARS UNITS DOLLARS
----- ------- ------- ------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, UNITS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
December 31, 1993............... 7,543 $27 121,628 $441 129,171 $468 292,000 $1,057 421,171 $1,525
Cash distributions............ -- (2) -- (33) -- (35) -- (79) -- (114)
Net loss...................... -- (9) -- (138) -- (147) -- (330) -- (477)
----- --- ------- ---- ------- ---- ------- ------ ------- ------
December 31, 1994............... 7,543 16 121,628 270 129,171 286 292,000 648 421,171 934
Cash distributions............ -- (3) -- (56) -- (59) -- (135) -- (194)
Net income.................... -- 1 -- 29 -- 30 -- 69 -- 99
----- --- ------- ---- ------- ---- ------- ------ ------- ------
December 31, 1995............... 7,543 14 121,628 243 129,171 257 292,000 582 421,171 839
Cash distributions............ -- (1) -- (20) -- (21) -- (46) -- (67)
Net income.................... -- 5 -- 72 -- 77 -- 171 -- 248
----- --- ------- ---- ------- ---- ------- ------ ------- ------
December 31, 1996............... 7,543 $18 121,628 $295 129,171 $313 292,000 $ 707 421,171 $1,020
===== === ======= ==== ======= ==== ======= ====== ======= ======
</TABLE>
13) CASH DISTRIBUTIONS
Distributable cash is defined as revenues (including interest income) less
production costs; seismic, geological and geophysical costs (including related
costs); payments of principal of and interest on debt; general and
administrative expenses including reimbursements to the Company as managing
general partner; capital expenditures (net of proceeds from divestments); and
cash exploration costs. No deduction is made for depreciation, depletion and
amortization.
23
<PAGE> 25
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13) CASH DISTRIBUTIONS (CONTINUED)
Sun Energy Partners' quarterly cash distributions per unit for the years
1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
First Quarter............................................... $.02 $.14 $.08
Second Quarter.............................................. .07 .14 .07
Third Quarter............................................... .06 .16 .07
Fourth Quarter.............................................. .01 .02 .05
---- ---- ----
Total.................................................. $.16 $.46 $.27
==== ==== ====
</TABLE>
Cash distributions included $.27 and $.06 per unit related to proceeds from
asset sales in 1995 and 1994.
14) DEFERRED CREDITS AND OTHER LIABILITIES
At December 31, the Partnership's deferred credits and other liabilities
were comprised of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Accrued environmental cleanup costs......................... $20 $20
Other....................................................... 22 12
--- ---
$42 $32
=== ===
</TABLE>
Environmental cleanup costs have been accrued in response to the
identification of several sites that require cleanup based on environmental
pollution, some of which have been designated as superfund sites by the
Environmental Protection Agency (EPA). The Partnership has been named as a
Potentially Responsible Party (PRP) at four sites pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended. At
2 of these sites, the Partnership has been named as a de minimis party and
therefore expects its liability to be small. At a third site, the Partnership is
reviewing its options and anticipates that it will participate in steering
committee activities with the EPA. At the fourth and largest site, the Operating
Industries, Inc. site in California, the Partnership has participated in a
steering committee consisting of 139 companies. The steering committee and other
PRPs previously entered into 2 partial consent decrees with the EPA providing
for remedial actions which have been or are to be completed. The steering
committee has successfully negotiated a third partial consent decree which
provides for the following remedial actions: a clay cover, methane capturing
wells, and leachate destruction facilities. The remaining work at the site
involves groundwater evaluation and long-term operation and maintenance. The
Partnership is a member of the group that is responsible for carrying out the
first phase of the work, which is expected to take 5 to 8 years. Completion of
all phases is estimated to take up to 30 years. The maximum liability of the
group, which is joint and several for each member of the group, is expected to
range from approximately $450 million to $600 million, of which the
Partnership's share is expected to be approximately $13 million. Cleanup costs
are payable over the period that the work is completed.
Based on the facts outlined above and the Partnership's ongoing analyses of
the actions where it has been identified as a PRP, the Partnership believes that
it has accrued sufficient reserves to absorb the ultimate cost of such actions
and that such costs therefore will not have a material impact on the
Partnership's liquidity, capital resources or financial condition. While
liability at superfund sites is typically joint and several, the Partnership has
no reason to believe that defaults by other PRPs will result in liability of the
Partnership materially larger than expected.
24
<PAGE> 26
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14) DEFERRED CREDITS AND OTHER LIABILITIES (CONTINUED)
In October 1996, Statement of Position (SOP) 96-1, "Environmental
Remediation Liabilities," was issued. It requires companies to recognize the
costs of environmental remediation on an accrual basis. The Partnership
currently recognizes the costs required by the SOP; therefore, adoption in 1997
will have no material impact.
25
<PAGE> 27
SUN ENERGY PARTNERS, L.P.
SUPPLEMENTARY FINANCIAL
AND OPERATING INFORMATION (UNAUDITED)
OIL AND GAS DATA
CAPITALIZED COSTS
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1995
------ ------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Proved properties........................................... $3,664 $3,615
Unproved properties......................................... 60 37
------ ------
Total capitalized costs..................................... 3,724 3,652
Less accumulated depreciation, depletion and amortization... 2,656 2,701
------ ------
Net capitalized costs....................................... $1,068 $ 951
====== ======
</TABLE>
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Property acquisition costs:
Proved............................................. $ 6 $ 6 $ --
Unproved........................................... 24 6 4
Exploration costs.................................... 45 39 38
Development costs.................................... 242 165 142
------ ------ ------
$ 317 $ 216 $ 184
====== ====== ======
</TABLE>
EXPLORATION COSTS
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Dry hole costs....................................... $ 18 $ 12 $ 9
Leasehold impairment................................. 1 9 18
Geological and geophysical........................... 22 20 21
Other................................................ 1 1 2
------ ------ ------
$ 42 $ 42 $ 50
====== ====== ======
</TABLE>
ESTIMATED NET QUANTITIES OF PROVED OIL AND GAS RESERVES
Proved reserve quantities were based on estimates prepared by Company
engineers in accordance with guidelines established by the Securities and
Exchange Commission and were reviewed by Gaffney, Cline & Associates, Inc.,
independent petroleum engineers. The Partnership considers such estimates to be
reasonable; however, due to inherent uncertainties and the limited nature of
reservoir data, estimates of underground reserves are imprecise and subject to
change over time as additional information becomes available.
There has been no major discovery or other favorable or adverse event that
has caused a significant change in estimated proved reserves since December 31,
1996. The Partnership has no long-term supply agreements or contracts with
governments or authorities in which it acts as producer nor does it have any
interest in oil and gas operations accounted for by the equity method. All
reserves are located onshore and offshore within the United States.
26
<PAGE> 28
<TABLE>
<CAPTION>
CRUDE OIL AND NATURAL GAS
CONDENSATE LIQUIDS NATURAL GAS
(MILLIONS OF (MILLIONS OF (BILLIONS OF
BARRELS) BARRELS) CUBIC FEET)*
------------- ------------ ------------
<S> <C> <C> <C>
PROVED RESERVES
BALANCE AT DECEMBER 31, 1993........................ 236 21 1,417
Revisions of previous estimates..................... (2) 3 23
Improved recovery................................... -- -- --
Purchases of minerals in place...................... -- -- 2
Sales of minerals in place.......................... (22) -- (114)
Extensions and discoveries.......................... 6 -- 186
Production.......................................... (17) (3) (194)
--- -- -----
BALANCE AT DECEMBER 31, 1994........................ 201 21 1,320
Revisions of previous estimates..................... (6) 3 60
Improved recovery................................... 5 -- 1
Purchases of minerals in place...................... 1 -- 4
Sales of minerals in place.......................... (10) (4) (55)
Extensions and discoveries.......................... 12 -- 124
Production.......................................... (17) (2) (169)
--- -- -----
BALANCE AT DECEMBER 31, 1995........................ 186 18 1,285
Revisions of previous estimates..................... 9 2 (22)
Improved recovery................................... 1 -- --
Purchases of minerals in place...................... 3 -- 8
Sales of minerals in place.......................... (3) -- (32)
Extensions and discoveries.......................... 5 2 101
Production.......................................... (16) (2) (178)
--- -- -----
BALANCE AT DECEMBER 31, 1996........................ 185 20 1,162
=== == =====
Proved Developed Reserves At:
December 31, 1993................................. 154 16 1,000
December 31, 1994................................. 128 16 898
December 31, 1995................................. 115 13 872
December 31, 1996................................. 117 14 808
</TABLE>
- ------------------------------
* Natural gas volumes include liquefiable hydrocarbons approximating 5 percent
of total gas reserves which are recoverable downstream. Such recoverable
liquids also have been included in natural gas liquids reserve volumes.
STANDARDIZED MEASURE
The standardized measure of discounted future net cash flows from estimated
production of proved oil and gas reserves is presented in accordance with the
provisions of Statement of Financial Accounting Standards No. 69, "Disclosures
about Oil and Gas Producing Activities" (SFAS No. 69). In computing this data,
assumptions other than those mandated by SFAS No. 69 could produce substantially
different results. The Partnership cautions against viewing this information as
a forecast of future economic conditions or revenues.
The standardized measure has been prepared assuming year-end selling prices
adjusted for future fixed and determinable contractual price changes, year-end
development and production and a 10 percent annual discount rate. No future
income tax expense has been provided for the Partnership since it incurs no
income tax liability. (See Summary of Significant Accounting Policies -- Income
Taxes in Note 1 to the Consolidated Financial Statements.) The year-end realized
prices were $23.65 and $17.90 per barrel of oil and $4.09 and $2.28 per mcf of
gas for 1996 and 1995.
27
<PAGE> 29
<TABLE>
<CAPTION>
1996 1995
------- -------
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Future cash inflows......................................... $ 9,385 $ 6,492
Future production and development costs..................... (2,596) (2,592)
------- -------
Future net cash flows....................................... 6,789 3,900
Discount at 10 percent...................................... (2,606) (1,559)
------- -------
Standardized measure........................................ $ 4,183 $ 2,341
======= =======
</TABLE>
SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Balance, beginning of year............................... $2,341 $1,689 $1,136
Increase (decrease) in discounted future net cash flows:
Sales of oil and gas production net of related costs... (523) (375) (382)
Revisions to estimates of proved reserves:
Prices net of production taxes...................... 1,724 563 350
Development costs................................... (9) (4) 304
Production costs.................................... (31) 32 (96)
Quantities.......................................... 59 62 10
Other............................................... (213) (228) (69)
Extensions, discoveries and improved recovery, less
related costs....................................... 336 339 216
Development costs incurred during the period........... 242 165 147
Purchases of reserves in place......................... 38 12 2
Sales of reserves in place............................. (8) (75) (43)
Accretion of discount.................................. 227 161 114
------ ------ ------
Balance, end of year..................................... $4,183 $2,341 $1,689
====== ====== ======
</TABLE>
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C>
Revenue:
1996............................................ $158 $163 $169 $196
==== ==== ==== ====
1995............................................ $144 $153 $119 $136
==== ==== ==== ====
Gross profit:*
1996............................................ $ 68 $ 66 $ 69 $103
==== ==== ==== ====
1995............................................ $ 42 $ 52 $ 32 $ 45
==== ==== ==== ====
Net income:
1996............................................ $ 53 $ 54 $ 57 $ 84
==== ==== ==== ====
1995............................................ $ 23 $ 42 $ 7 $ 27
==== ==== ==== ====
Net income per unit:
1996............................................ $.13 $.13 $.13 $.20
==== ==== ==== ====
1995............................................ $.05 $.10 $.02 $.07
==== ==== ==== ====
</TABLE>
- ------------------------------
* Gross profit equals oil and gas revenues plus gas plant margins less
production cost, exploration cost and depreciation, depletion and
amortization.
28
<PAGE> 30
QUARTERLY OPERATING INFORMATION
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR
-------- ------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C>
Crude oil and condensate:
Net production (thousand barrels daily):
1996................................. 45 43 42 42 43
1995................................. 49 47 44 43 45
Average price (per barrel):
1996................................. $18.13 $20.81 $20.59 $22.31 $20.43
1995................................. $16.26 $17.10 $16.20 $16.15 $16.44
Natural gas:
Net production (million cubic feet
daily):
1996................................. 461 471 489 522 486
1995................................. 504 480 439 437 464
Average price (per thousand cubic feet):
1996................................. $ 2.03 $ 1.95 $ 2.05 $ 2.48 $ 2.14
1995................................. $ 1.69 $ 1.70 $ 1.61 $ 1.92 $ 1.73
</TABLE>
29
<PAGE> 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no employees. The Company, as the managing general
partner of the Partnership, has the responsibility for the Partnership's conduct
of operations. Set forth below is information concerning the 11 current
directors of the Company and the 8 current executive officers of the Company (3
of which are also directors). All elected executive officers of the Company are
elected annually by the Board of Directors of the Company. The directors are
divided into 3 classes with approximately one-third of the directors
constituting the Board being elected each year to serve a three-year term. Class
I directors (whose term expires in 1998) are Mr. Genever-Watling, Mr. Gill, Mr.
Hollingsworth and Mr. Pistor. Class II directors (whose term expires in 1999)
are Mr. Keiser, Mr. Seegers and Mr. White-Thomson. Class III directors (whose
term expires in 2000) are Mr. Box, Mr. Bradford, Dr. Earle and Mr. Moneypenny.
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
Jerry W. Box, 58........................... Mr. Box has been in this position since December 1995.
Executive Vice President, Chief Operating From December 1994 through November 1995 he served as
Officer and Director Executive Vice President, Exploration and Production.
From January 1992 through November 1994, he was Senior
Vice President, Exploration and Production of the
Company.
William E. Bradford, 62.................... Mr. Bradford has been Chairman and Chief Executive
Director Officer of Dresser Industries Inc. since December
1996. Mr. Bradford served as President and Chief
Executive Officer from November 1995 to December 1996
and a director of Dresser Industries, Inc. since March
1992. He was President and Chief Operating Officer of
Dresser Industries, Inc. from March 1992 to November
1995. He was President and Chief Executive Officer of
Dresser-Rand Company from February 1988 to March 1992
and from March 1982 to March 1992, he was Senior Vice
President of Operations of Dresser Industries, Inc.
Sherri T. Durst, 47........................ Ms. Durst assumed this position in December 1993. From
General Auditor February 1990 to December 1993, she served as Manager,
Financial Processes.
Sylvia A. Earle, 61........................ Dr. Earle has been President of Deep Ocean Exploration
Director and Research Inc., a consulting firm, since 1992. From
1993 to 1995 Dr. Earle was Chairman of the Sea Change
Trust and Caribbean Marine Research Center, a
non-profit scientific research organization. From 1992
to 1993 she was an Advisor to the Administrator and
from 1990 to 1992 she was Chief Scientist of the
National Oceanic and Atmospheric Administration.
</TABLE>
30
<PAGE> 32
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
Steven J. Flowers, 36...................... Mr. Flowers assumed this position on November 8, 1996.
Treasurer He joined the Company in August 1995 as Assistant
Treasurer. Prior to joining Oryx, Mr. Flowers held
various financial and planning positions, including
Assistant Treasurer, at Maxus Energy Corporation from
1988 to 1995.
David C. Genever-Watling, 51............... Mr. Genever-Watling served as President and Chief
Director Executive Officer of General Electric Industrial and
Power Systems Business until his retirement in June
1995. From September 1990 to July 1992 he was Senior
Vice President of GE Industrial and Power Systems.
Robert B. Gill, 65......................... Mr. Gill served as Vice Chairman of the Board of J.C.
Director Penney Company, Inc. from 1982 and Chief Operating
Officer of J.C. Penney Stores and Catalog from March
1, 1990 until his retirement on July 1, 1992. Prior to
his retirement, he served as Chairman of the Board of
the J.C. Penney National Bank and the J.C. Penney
Insurance Company.
Frances G. Heartwell, 50................... Ms. Heartwell assumed this position in December 1995.
Vice President, Human Resources and From February 1993 to December 1995, she served the
Administration Company as Director, Human Resources. From December
1991 to February 1993, she was Director of Employee
and Community Relations.
David S. Hollingsworth, 68................. Mr. Hollingsworth served as Chairman of the Board and
Director Chief Executive Officer of Hercules Incorporated from
1987 until his retirement on December 31, 1990. From
1986 to 1987, he was Vice Chairman of the same
company. Previously, he was Vice President with
various responsibilities, including corporate planning
and marketing.
Robert L. Keiser, 54....................... Mr. Keiser assumed this position in December 1994. From
Chairman of the Board, Chief Executive January 1992 through November 1994, he was President
Officer, and President and Chief Operating Officer of the Company.
William C. Lemmer, 52...................... Mr. Lemmer assumed this position in February 1995. From
Vice President, General Counsel and June 1994 until February 1995, he served as Vice
Secretary President and General Counsel to the Company. For the
five previous years, he was Chief Counsel to the
Company.
Edward W. Moneypenny, 55................... Mr. Moneypenny has been in this position since December
Executive Vice President, Finance, Chief 1994. From January 1992 through November 1994, he was
Financial Officer, and Director Senior Vice President, Finance and Chief Financial
Officer of the Company.
Charles H. Pistor, Jr., 66................. Mr. Pistor was the Vice Chair of Southern Methodist
Director University from October 1991 to September 1995. He
served as Chairman of the Board and Chief Executive
Officer of NorthPark National Bank from 1988 to 1990.
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
Paul R. Seegers, 67........................ Mr. Seegers is President of Seegers Enterprises. He was
Director Chairman of the Board of Centex Corporation from July
1988 until his retirement in July 1991.
Robert L. Thompson, 50..................... Mr. Thompson assumed this position in February 1995.
Comptroller and Corporate Planning From February 1993 through January 1995, he served the
Director Company as Director of Business Planning and
Acquisitions. From January 1992 through January 1993,
he was Director of Planning and Analysis.
Ian L. White-Thomson, 60................... Mr. White-Thomson has been President and Chief Executive
Director Officer of U.S. Borax Inc. since 1988 and since April
1, 1995, Chief Executive of the global RTZ Borax
Group.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
The directors, officers, and employees of the Company (the managing general
partner) receive no direct compensation from the Partnership for their services
to the Partnership. Such persons receive compensation from the Company, a
substantial portion of which is generally reimbursed to the Company by the
Partnership as costs allocable to it. (See Note 3 to the Consolidated Financial
Statements.)
The Partnership reimburses the Company for all direct costs and indirect
costs associated with the Partnership's activities. For the year 1996, the
Company received $61 million as reimbursement of costs allocable to the
Partnership. Such amounts included salaries of employees and allocations of
certain executive and administrative expenses. The aggregate amount reimbursed
by the Partnership to the Company in 1996 for the salaries of the Chief
Executive Officer of the Company and each of the four most highly compensated
executive officers of the Company other than the Chief Executive Officer was
approximately $2 million. (See Note 3 to the Consolidated Financial Statements.)
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information regarding beneficial
ownership of the limited partnership units of Sun Energy Partners, L.P. as of
December 31, 1996.
UNITS OF SUN ENERGY PARTNERS, L.P.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
BENEFICIAL OWNER UNITS CLASS
---------------- --------------- ----------------
<S> <C> <C>
Oryx Energy Company
13155 Noel Road
Dallas, TX 75240-5067..................................... 413,627,359 98.2*
All Directors and Executive Officers of Managing General
Partner (Oryx Energy Company) as a Group (13)............. -- --
</TABLE>
- ------------------------------
* Assumes that Oryx Energy Company's 292,000,000 general partnership units are
converted into limited partnership units of Sun Energy Partners, L.P.
32
<PAGE> 34
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In its capacity as managing general partner of the Partnership, the Company
controls the Partnership and its operations, and has served as a lender and
borrower of funds for the Partnership. Following is a table which summarizes
lending activities between the Partnership and the Company during the year ended
December 31, 1996:
<TABLE>
<CAPTION>
BALANCE DUE BALANCE DUE
TO (FROM) TO (FROM)
PARTNERSHIP PARTNERSHIP
DECEMBER 31, 1995 ADDITIONS REPAYMENTS DECEMBER 31, 1996
----------------- --------- ---------- -----------------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Variable Rate Advances to (from) Oryx
Energy Company........................... $ (45) $ (76) $ 109 $ (12)
====== ========= ========== ======
9.75% Note Payable to Oryx Energy
Company.................................. $ (73) $ -- $ 11 $ (62)
====== ========= ========== ======
</TABLE>
During 1996, the largest balance owed to the Partnership by the Company for
variable rate advances was nil. The largest balance owed to the Company by the
Partnership during 1996 resulting from advances from Oryx Energy Company and
amounts due under the 9.75% Note Payable was $55 million. Certain information
required by this section is included in Notes to the Consolidated Financial
Statements. See Notes 1, 3 and 10 included elsewhere in this Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following Documents are filed as a part of this report:
1. Financial Statements:
See Index to Financial Statements, Supplementary Financial and Operating
Information on page 12.
2. Exhibits:
<TABLE>
<C> <S>
3(a) -- Second Amended and Restated Agreement of Limited
Partnership of Sun Energy Partners, L.P., dated
December 10, 1985 (incorporated by reference to Exhibit
3(a) of the Form SE filed March 20, 1986)
3(b) -- Certificate of Limited Partnership of Sun Energy
Partners, L.P., dated October 1, 1985 (incorporated by
reference to Exhibit 3(b) of the Partnership's Form
10-K for the one month ended December 31, 1985)
4(a) -- Deposit Agreement, made as of December 3, 1985 among Sun
Energy Partners, L.P., Manufacturers Hanover Trust
Company, Sun Company, Inc., Oryx Energy Company and All
Limited Partners in Sun Energy Partners, L.P.
(incorporated by reference to Exhibit 4(a) of the Form
SE filed March 20, 1986)
4(b) -- Instruments defining the rights of security holders,
including indentures: The Partnership will provide
copies of the instruments relating to long-term debt to
the SEC upon request
18 -- Accountant's Preferability Letter, dated February 19,
1995 (incorporated by reference to Exhibit 16 of the
Partnership Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, Commission File No.
1-9033, filed with the Commission on March 24, 1995)
21 -- Affiliated Operating Partnerships/Subsidiary Corporations
of Sun Energy Partners. L.P. (incorporated by reference
to Exhibit 22 of the Form SE filed March 18, 1988)
24(a) -- Power of Attorney executed by certain officers and
directors of Oryx Energy Company, managing general
partner of Sun Energy Partners, L.P.
24(b) -- Certified copy of the resolution authorizing certain
officers to sign on behalf of Oryx Energy Company,
managing general partner of Sun Energy Partners, L.P.
</TABLE>
33
<PAGE> 35
27 -- Financial Data Schedule
99(a) -- Agreement of Limited Partnership of Sun Operating Limited
Partnership dated November 18, 1985, as amended
(incorporated by reference to Exhibit 28(a) of the Form
SE filed March 20, 1986)
99(b) -- Certificate of Limited Partnership of Sun Operating
Limited Partnership dated November 19, 1985
(incorporated by reference to Exhibit 28(b) of the
Partnership's Form 10-K for the one month ended
December 31, 1985)
99(c) -- Sun Operating Limited Partnership 9.75% Promissory Note
(incorporated by reference to Exhibit 28(c) of the
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, as amended by Amendment
No. 1 on Form 8 dated July 17, 1992, Commission File
No. 1-9033)
99(d) -- Letter Agreement Dated November 21, 1990, Between Oryx
Energy Company and Atlantic Richfield Company
(incorporated by reference to Exhibit 28(a) of the
Partnership's Current Report on Form 8-K dated January
31, 1991, Commission File No. 1-9033)
99(e) -- Amendment Dated November 28, 1990 to Letter Agreement
Dated November 21, 1990, Between Oryx Energy Company
and Atlantic Richfield Company (incorporated by
reference to Exhibit 28(b) of the Partnership's Current
Report on Form 8-K dated January 31, 1991, Commission
File No. 1-9033)
(b) Reports on Form 8-K:
The Partnership did not file any reports on Form 8-K during the quarter
ended December 31, 1996.
34
<PAGE> 36
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.
SUN ENERGY PARTNERS, L.P.
By: ORYX ENERGY COMPANY
(Managing General Partner)
*By: /s/ EDWARD W.
MONEYPENNY
----------------------------------
Edward W. Moneypenny
Executive Vice President, Finance,
Chief Financial Officer and
Date: March 21, 1997 Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by or on behalf of the following persons on behalf
of the Registrant and in the capacities with Oryx Energy Company, Managing
General Partner, and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
JERRY W. BOX** Executive Vice President, Chief
- ----------------------------------------------------- Operating Officer and Director
Jerry W. Box
WILLIAM E. BRADFORD** Director
- -----------------------------------------------------
William E. Bradford
SYLVIA A. EARLE** Director
- -----------------------------------------------------
Sylvia A. Earle
DAVID C GENEVER-WATLING** Director
- -----------------------------------------------------
David C Genever-Watling
ROBERT B. GILL** Director
- -----------------------------------------------------
Robert B. Gill
DAVID S. HOLLINGSWORTH** Director
- -----------------------------------------------------
David S. Hollingsworth
ROBERT L. KEISER** Chairman of the Board, President,
- ----------------------------------------------------- and Chief Executive Officer
Robert L. Keiser (principal executive officer)
/s/ EDWARD W. MONEYPENNY Executive Vice President, Finance,
- ----------------------------------------------------- Chief Financial Officer
Edward W. Moneypenny (principal financial officer),
and Director
CHARLES H. PISTOR, JR.** Director
- -----------------------------------------------------
Charles H. Pistor, Jr.
PAUL R. SEEGERS** Director
- -----------------------------------------------------
Paul R. Seegers
IAN L. WHITE-THOMSON** Director
- -----------------------------------------------------
Ian L. White-Thomson
**By: /s/ EDWARD W. MONEYPENNY
-----------------------------------------------
Edward W. Moneypenny
Attorney-in-Fact
March 21, 1997
</TABLE>
- ------------------------------
* Attorney-in-Fact pursuant to Resolution of the Board of Directors of the
Managing General Partner which is being filed as an Exhibit to this Form
10-K.
** Original powers of attorney authorizing Robert L. Keiser and Edward W.
Moneypenny or any one of them, to sign this Form 10-K Annual Report on behalf
of Sun Energy Partners, L.P., is being filed as an Exhibit to this Form 10-K.
35
<PAGE> 37
EXHIBIT INDEX
3(a) -- Second Amended and Restated Agreement of Limited
Partnership of Sun Energy Partners, L.P., dated
December 10, 1985 (incorporated by reference to Exhibit
3(a) of the Form SE filed March 20, 1986)
3(b) -- Certificate of Limited Partnership of Sun Energy
Partners, L.P., dated October 1, 1985 (incorporated by
reference to Exhibit 3(b) of the Partnership's Form
10-K for the one month ended December 31, 1985)
4(a) -- Deposit Agreement, made as of December 3, 1985 among Sun
Energy Partners, L.P., Manufacturers Hanover Trust
Company, Sun Company, Inc., Oryx Energy Company and All
Limited Partners in Sun Energy Partners, L.P.
(incorporated by reference to Exhibit 4(a) of the Form
SE filed March 20, 1986)
4(b) -- Instruments defining the rights of security holders,
including indentures: The Partnership will provide
copies of the instruments relating to long-term debt to
the SEC upon request
18 -- Accountant's Preferability Letter, dated February 19,
1995 (incorporated by reference to Exhibit 16 of the
Partnership Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, Commission File No.
1-9033, filed with the Commission on March 24, 1995)
21 -- Affiliated Operating Partnerships/Subsidiary Corporations
of Sun Energy Partners. L.P. (incorporated by reference
to Exhibit 22 of the Form SE filed March 18, 1988)
24(a) -- Power of Attorney executed by certain officers and
directors of Oryx Energy Company, managing general
partner of Sun Energy Partners, L.P.
24(b) -- Certified copy of the resolution authorizing certain
officers to sign on behalf of Oryx Energy Company,
managing general partner of Sun Energy Partners, L.P.
27 -- Financial Data Schedule
99(a) -- Agreement of Limited Partnership of Sun Operating Limited
Partnership dated November 18, 1985, as amended
(incorporated by reference to Exhibit 28(a) of the Form
SE filed March 20, 1986)
99(b) -- Certificate of Limited Partnership of Sun Operating
Limited Partnership dated November 19, 1985
(incorporated by reference to Exhibit 28(b) of the
Partnership's Form 10-K for the one month ended
December 31, 1985)
99(c) -- Sun Operating Limited Partnership 9.75% Promissory Note
(incorporated by reference to Exhibit 28(c) of the
Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991, as amended by Amendment
No. 1 on Form 8 dated July 17, 1992, Commission File
No. 1-9033)
99(d) -- Letter Agreement Dated November 21, 1990, Between Oryx
Energy Company and Atlantic Richfield Company
(incorporated by reference to Exhibit 28(a) of the
Partnership's Current Report on Form 8-K dated January
31, 1991, Commission File No. 1-9033)
99(e) -- Amendment Dated November 28, 1990 to Letter Agreement
Dated November 21, 1990, Between Oryx Energy Company
and Atlantic Richfield Company (incorporated by
reference to Exhibit 28(b) of the Partnership's Current
Report on Form 8-K dated January 31, 1991, Commission
File No. 1-9033)
<PAGE> 1
EXHIBIT 24(a)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert L. Keiser and Edward W. Moneypenny, and
each of them (with full power to each of them to act alone), his true and lawful
attorney-in-fact and his agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities with Oryx Energy Company, in its capacity as managing general partner
of SUN ENERGY PARTNERS, L.P., to sign the Annual Report of Sun Energy Partners,
L.P. for the fiscal year ended December 31, 1996 on Form 10-K pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 and any or all
amendments to the Annual Report and to file the same, with all exhibits thereto
and other documents in connection therewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT L. KEISER Chairman of the Board, Chief March 6, 1997
- ----------------------------------------------------- Executive Officer, President,
Robert L. Keiser and Director (principal
executive officer)
/s/ JERRY W. BOX Executive Vice President, Chief March 6, 1997
- ----------------------------------------------------- Operating Officer, and
Jerry W. Box Director
/s/ EDWARD W. MONEYPENNY Executive Vice President, March 6, 1997
- ----------------------------------------------------- Finance, Chief Financial
Edward W. Moneypenny Officer and Director
(principal financial officer)
/s/ ROBERT L. THOMPSON Comptroller and Corporate March 6, 1997
- ----------------------------------------------------- Planning Director (principal
Robert L. Thompson accounting officer)
/s/ WILLIAM E. BRADFORD Director March 6, 1997
- -----------------------------------------------------
William E. Bradford
/s/ SYLVIA A. EARLE Director March 6, 1997
- -----------------------------------------------------
Sylvia A. Earle
/s/ DAVID C. GENEVER-WATLING Director March 6, 1997
- -----------------------------------------------------
David C. Genever-Watling
/s/ ROBERT B. GILL Director March 6, 1997
- -----------------------------------------------------
Robert B. Gill
/s/ DAVID S. HOLLINGSWORTH Director March 6, 1997
- -----------------------------------------------------
David S. Hollingsworth
/s/ CHARLES H. PISTOR, JR. Director March 6, 1997
- -----------------------------------------------------
Charles H. Pistor, Jr.
/s/ PAUL R. SEEGERS Director March 6, 1997
- -----------------------------------------------------
Paul R. Seegers
/s/ IAN L. WHITE-THOMSON Director March 6, 1997
- -----------------------------------------------------
Ian L. White-Thomson
</TABLE>
<PAGE> 1
EXHIBIT 24(b)
CERTIFICATE
I, Linda L. O'Keefe, hereby certify that I am Assistant Secretary of
ORYX ENERGY COMPANY, a Delaware corporation and that the following is a true
and correct copy of a resolution adopted by the Board of Directors of Oryx
Energy Company on the 6th day of March, 1997:
RESOLVED that the Annual Report of Sun Energy Partners, L.P. ("MLP")
to the Securities and Exchange Commission on Form 10-K for the year
ended December 31, 1996, prepared and to be filed by the Company as
managing general partner of the MLP, is hereby approved in the form
presented to this meeting as Exhibit D, subject to such revisions or
amendments as may be approved by the Executive Vice President, Finance,
and Chief Financial Officer or the Comptroller and Corporate Planning
Director to assure compliance with applicable laws and regulations, and
that said officers or either of them is hereby authorized to sign the
Form 10-K on behalf of the Company.
I further certify that this resolution has not been revoked or amended,
and is now in full force and effect.
Executed this 19th day of March, 1997.
/s/ LINDA L. O'KEEFE
------------------------------
LINDA L. O'KEEFE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE 1996 SUN ENERGY PARTNERS, L.P.
FINANCIAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 117
<ALLOWANCES> 0
<INVENTORY> 3
<CURRENT-ASSETS> 138
<PP&E> 3,753
<DEPRECIATION> 2,679
<TOTAL-ASSETS> 1,299
<CURRENT-LIABILITIES> 185
<BONDS> 51
0
0
<COMMON> 0
<OTHER-SE> 1,020
<TOTAL-LIABILITY-AND-EQUITY> 1,299
<SALES> 700
<TOTAL-REVENUES> 686
<CGS> 354
<TOTAL-COSTS> 354
<OTHER-EXPENSES> 83
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 248
<INCOME-TAX> 0
<INCOME-CONTINUING> 248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 248
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
