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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
<TABLE>
<CAPTION>
(MARK ONE)
<C> <S>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
</TABLE>
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
<TABLE>
<C> <S>
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-9033
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SUN ENERGY PARTNERS, L.P.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2070723
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
13155 NOEL ROAD 75240-5067
DALLAS, TEXAS (Zip code)
(Address of principal executive offices)
</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
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<S> <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 16, 1998, was approximately $32 million.
The number of Depositary Units outstanding as of February 28, 1998, was
421,170,459.
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<PAGE> 2
CERTAIN ABBREVIATIONS AND OTHER MATTERS
As used herein, the following terms have specific meanings:
<TABLE>
<C> <S>
m thousand
mm million
bbl barrel
mb thousand barrels
mmb million barrels
eb equivalent barrel
meb thousand equivalent barrels
mmeb million equivalent barrels
b/d barrels per day
bc/d barrels of condensate per
day
mcf thousand cubic feet
mmcf million cubic feet
bcf billion cubic feet
mmcf/d million cubic feet per day
mmcfe/d million cubic feet
equivalent per day
ED&A exploration, development
and acquisition*
FD&A finding, development and
acquisition per barrel
WTI West Texas Intermediate
spot price
HH Henry Hub spot price
</TABLE>
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* 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 quoted as to working interest, "net" is
determined by multiplying the whole numbers by Sun Energy Partners, L.P.'s
working interest.
FORWARD-LOOKING STATEMENTS
In the following report, Sun Energy Partners, L.P. has included certain
statements (other than statements of historical fact) that constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used
herein, the words "budget", "budgeted", "anticipate", "expects", "believes",
"seeks", "goals", "intends" or "projects" and similar expressions are intended
to identify forward-looking statements. It is important to note that Sun Energy
Partners, L.P.'s actual results could differ materially from those projected by
such forward-looking statements. Although Sun Energy Partners, L.P. believes the
expectations reflected in such forward-looking statements are reasonable and
such forward-looking statements are based upon the best data available at the
time this report is filed with the Securities and Exchange Commission, no
assurance can be given that such expectations will prove correct. Factors that
could cause Sun Energy Partners, L.P.'s results to differ materially from the
results discussed in such forward-looking statements include, but are not
limited to, the following: production variances from expectations, volatility of
oil and gas prices, the need to develop and replace its reserves, the
substantial capital expenditures required to fund its operations, exploration
uses, environmental risks, uncertainties about estimates of reserves,
competition, government regulation and political actions, and the ability of Sun
Energy Partners, L.P. to implement its business strategy. All such
forward-looking statements in this document are expressly qualified in their
entirety by the cautionary statements in this paragraph.
<PAGE> 3
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, 1997, the
Company owned 98.2 percent of Sun Energy Partners. The remaining 1.8 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, 1997, the number of full-time employees of the Company was 1,046.
The Partnership's strategy is to target as future growth opportunities
those areas where its advanced technological capabilities will have the greatest
economic impact.
PROVED RESERVES
As of December 31, 1997, the Partnership's proved reserves were an
estimated 221 mmb of liquids and an estimated 1,193 bcf of natural gas, an
aggregate of 420 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
1997, the Partnership produced 50 mmeb. The Partnership seeks production
replacement through a balanced approach that combines exploration, development
and acquisition. In 1997, the Partnership replaced 145 percent of its production
at an FD&A cost of $5.99 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 209 blocks, of which 192 blocks were held at December 31, 1997, in
various stages of exploration, development and production. The Partnership has
an interest in 38 producing platforms, 21 of which it operates. The Partnership
also holds
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interests in various offshore pipelines and facilities. In 1996, the Partnership
achieved a 12 percent reduction in its offshore operating costs per equivalent
barrel and an additional 6 percent in 1997.
Exploration
Of the Gulf of Mexico blocks in which the Partnership owns an interest, 145
are undeveloped. In 1997, the Partnership spent $32 million to acquire interests
in 80 blocks. The Partnership has 3-D seismic data on over 60 percent of the
blocks and has identified 20 drillable prospects.
In May 1997, the Partnership participated in an exploration discovery,
Garden Banks 215 #4 (Sun Energy Partners 25 percent), the Conger prospect, in
the flex trend. The well encountered approximately 300 feet of net pay thickness
both above and below salt formations. The Garden Banks 215 #4 well was drilled
to a total depth of 21,692 feet subsurface in about 1,500 feet of water depth.
It is adjacent to the Garden Banks 260 Unit (Baldpate), which includes Blocks
215 South, 216, 259 and 260.
In early 1998, the Partnership participated in a successful appraisal well,
Garden Banks 215 #5, which encountered about 300 feet of net pay sands
approximately one and a half miles from the discovery well. Development options
include sub-sea tie-back to a host facility or a separate stand-alone facility.
Considerable pipeline infrastructure is being installed in the Garden Banks
area, which will facilitate product transportation onshore.
In late 1997, the Partnership participated in a subsalt discovery at its
Penn State Deep prospect. The discovery is located at Garden Banks 216 block
(Sun Energy Partners 50 percent). The Penn State Deep discovery well (GB 216 #3)
encountered hydrocarbons at about 20,500 feet subsurface in 1,450 feet of water
depth. It lies below the GB 216 #2 discovery (Penn State Shallow) made in 1996,
which encountered 214 net feet of pay in a shallower structure. The GB 216 #3
well found 123 net feet of subsalt pay. The Partnership is planning to develop
the Penn State Shallow discovery as a sub-sea tie-back to the Baldpate
facilities and is evaluating the deeper discovery as another potential tie-back.
The Penn State wells are located approximately three miles to the northeast of
the Baldpate facility.
In late 1997, the Partnership participated in a discovery at High Island
A-553 (Sun Energy Partners 33 percent) on the continental shelf. The A-7 well
tested at a flow rate of 16 mmcf/d and 800 b/d. The HI A-553 A-7 well was
drilled to a total depth of about 13,000 feet in 260 feet of water depth. The
well encountered approximately 100 feet of net pay in 4 zones.
As of December 31, 1997, the Partnership was drilling or participating in
the drilling of 2 gross (1 net) exploratory wells.
Production and Development
The Partnership owns a 99 percent interest in the High Island A-576 block
located 110 miles off the Texas coast in 290 feet of water. This development
(Sherman) began production in December 1995. In 1996, the HI A-576 #2 well was
tested at 24 mmcf/d and 2,300 bc/d.
The Partnership owns a 99 percent interest in the four-block High Island
384 Unit which is located approximately 112 miles off the Texas coast in water
depths averaging 360 feet. This development (Patton) was originally discovered
in October 1993, began production in January 1995 and in September 1995 achieved
the expected peak production of 20 meb/d.
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 was 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.
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In 1995, the Partnership approved a plan for the development of Viosca
Knoll 826 (Sun Energy Partners 50 percent and operator) which lies 80 miles off
the Alabama coast in water depths of 1,500 to 2,500 feet. The Neptune
development utilizes a new type of floating production facility called a spar.
The spar is a cylindrical-shaped vessel anchored vertically to the sea floor.
First production occurred in March 1997 and in late 1997 expected peak
production of 30 meb per day was achieved.
In early 1995, the Partnership confirmed the presence of hydrocarbons in a
previously untested fault block on the GB 260 discovery (Sun Energy Partners 50
percent) in the Gulf of Mexico. The GB 215 #2 well, which drilled a new fault
block about two 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.
The Baldpate development 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 August 1998.
To facilitate the orderly execution of its deep water strategy, in early
1998, the Partnership secured drilling commitments for a substantial portion of
its deep water drilling plans. The Partnership along with two partners, has
entered into a five-year contract for a deep water semi-submersible drilling
rig, capable of drilling in water depths of up to 6,000 feet. The term of the
contract is five years, plus options to extend, with rig delivery currently
scheduled for the second quarter of 1999. The Partnership has rights to
one-third of the term. The Partnership is currently in discussions with a
partner in 54 deep water blocks, which has entered into a five-year contract for
50-percent of the use of a drill ship. The newly-built vessel will have the
capacity to drill in water depths of up to 7,500 feet and will become available
in the fourth quarter of 1999.
As of December 31, 1997, the Partnership was drilling or participating in
the drilling of 5 gross (2 net) offshore development wells.
ONSHORE
The onshore area continues to be a major contributor of production volumes
and cash flow with relatively modest reinvestment needs. This is important for
the funding of the Partnership's plans in other strategic areas. 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 U.S. operating costs per equivalent barrel in 1996 and an additional 4
percent reduction in 1997. The Partnership has interests in 60 major onshore
fields in five 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 to create opportunities in new
fault blocks and deeper pool horizons which provide new volumes and reserves.
The Partnership will continue to exploit its waterflood operations. The onshore
will be managed for maximum cash flow generation.
Exploration
The Partnership drilled 2 exploration wells (Sun Energy Partners 99 percent
and operator) at the Seabreeze field in southeast Texas that tested a total of
33 mmcf/d and 1,160 b/d. The wells were drilled into new fault blocks as a
result of a continuing 3-D seismic program around the Partnership's larger
onshore fields.
At December 31, 1997, the Partnership was drilling or participating in the
drilling of 2 gross (2 net) onshore exploratory wells.
Production and Development
In 1997, the Partnership has increased production at the Northwest Chitwood
Unit, (Sun Energy Partners 69 percent and operator) located in south-central
Oklahoma, through an ongoing reservoir waterflood program. Since the beginning
of 1997, daily oil production has increased from about 1,700 barrels to 5,400.
The Partnership expects continued reservoir response and is planning further
development drilling this year.
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As of December 31, 1997, the Partnership was drilling or participating in
the drilling of 13 gross (9 net) development wells onshore.
TABULAR INFORMATION
The following table sets forth the Partnership's undeveloped and developed
oil and gas acreage (in thousands) held at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
GROSS NET
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1997 1996 1997 1996
----- ----- ----- ----
<S> <C> <C> <C> <C>
Undeveloped Acreage
Onshore.................................................. 908 916 503 501
Offshore................................................. 889 472 521 325
----- ----- ----- ---
Total................................................. 1,797 1,388 1,024 826
===== ===== ===== ===
Developed Acreage
Onshore.................................................. 982 987 552 552
Offshore................................................. 248 222 116 103
----- ----- ----- ---
Total................................................. 1,230 1,209 668 655
===== ===== ===== ===
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The following table sets forth the Partnership's net exploratory and
development oil and gas wells drilled in 1997, 1996 and 1995:
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<CAPTION>
EXPLORATORY WELLS DEVELOPMENT WELLS
------------------ ------------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Oil
Onshore........................................... -- -- -- 29 43 41
Offshore.......................................... 1 -- 1 4 9 7
--- --- --- --- --- ---
1 -- 1 33 52 48
--- --- --- --- --- ---
Gas
Onshore........................................... 3 -- -- 39 50 39
Offshore.......................................... -- 1 -- 4 8 4
--- --- --- --- --- ---
3 1 -- 43 58 43
--- --- --- --- --- ---
Dry
Onshore........................................... -- -- -- 4 10 9
Offshore.......................................... 3 2 2 2 2 --
--- --- --- --- --- ---
3 2 2 6 12 9
--- --- --- --- --- ---
Total.......................................... 7 3 3 82 122 100
=== === === === === ===
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The following table sets forth the Partnership's gross and net producing
oil and gas wells at December 31, 1997:
<TABLE>
<CAPTION>
GROSS* NET
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OIL GAS OIL GAS
----- ----- ----- ---
<S> <C> <C> <C> <C>
Onshore................................................. 2,761 882 1,551 530
Offshore................................................ 97 165 55 85
----- ----- ----- ---
Total.............................................. 2,858 1,047 1,606 615
===== ===== ===== ===
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* Gross producing wells include 131 multiple completion wells (more than one
formation producing into the same well bore).
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The following table sets forth the Partnership's average daily net
production for 1997, 1996 and 1995:
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<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Crude and Condensate (mb):
Onshore................................................... 27 28 29
Offshore.................................................. 19 15 16
--- --- ---
46 43 45
Processed Natural Gas (mb):................................. 7 7 6
--- --- ---
53 50 51
=== === ===
Natural Gas (mmcf):
Onshore................................................... 286 299 286
Offshore.................................................. 199 187 178
--- --- ---
485 486 464
=== === ===
</TABLE>
The following table sets forth the Partnership's average revenues and
production costs per unit of oil and gas production for 1997, 1996 and 1995:
<TABLE>
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1997 1996 1995
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<S> <C> <C> <C>
Revenues:
Crude oil and condensate (per bbl)....................... $18.75 $20.43 $16.44
Natural gas (per mcf).................................... $ 2.40 $ 2.14 $ 1.73
Average production cost per unit of oil and gas
production (per eb):*
Operating cost........................................ $ 2.99 $ 3.14 $ 3.63
Production taxes...................................... .87 .87 .67
------ ------ ------
Total production costs.............................. $ 3.86 $ 4.01 $ 4.30
====== ====== ======
</TABLE>
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* Excludes natural gas liquids production.
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 1997, the Partnership obtained 63 and 37 percent of its crude
production from primary and secondary recovery methods. This compares to 61 and
39 percent of its crude oil production in 1996. At December 31, 1997, 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 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 or barges 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.
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Crude Oil and Condensate
During 1997, sales to Sun Company, Inc., Amoco Production Company and Koch
Oil Company totaled approximately 18, 16 and 13 percent of the Partnership's
sales of crude oil and condensate. No other customer purchased more than 10
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 1997, the 10 largest
customers accounted for approximately 84 percent of such sales.
Currently, approximately 57 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 seven years in
length.
Natural Gas
The Partnership sold approximately 52 percent of its natural gas production
in 1997 to Producers Energy Marketing Company, LLC (ProEnergy). ProEnergy
purchases the majority of its members' gas at index prices. No other customer
purchased more than 10 percent of the Partnership's natural gas. Approximately
32 percent of the Partnership's natural gas was purchased by various local
distribution companies, end users and processors of natural gas under term
contracts predating the formation of ProEnergy. Most of these agreements will
come to term within four years.
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 and 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,
taxation and royalty initiatives.
Natural Gas
The domestic gas industry remains under federal regulation pursuant to the
Natural Gas Act and the Natural Gas Policy Act.
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.
In 1997, the Company received the Conservation Award for Respecting the
Environment (CARE) by the U.S. government's Minerals Management Service. The
Company was commended for its demonstrated commitment to instill an
environmental ethic throughout the Company; for its extraordinary commitment to
pollution prevention; and for its leadership as an independent operator in
seeking to improve industry practices. Cited as most impressive were the
Company's willingness to go beyond minimum standards and common practice and to
test new technology to protect air and water quality. Noteworthy accomplishments
include the
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Company's support and stewardship of the Flower Garden Banks National Marine
Sanctuary, its cooperation with the Coast Guard in area-wide oil-spill
contingency planning and its environmental action through growing participation
in the Texas General Land Office Adopt-a-Beach program.
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 two 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
PRPs previously entered into two 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 PRPs
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 these competitors may
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 27 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 $9
million, $8 million and $8 million for the years 1997, 1996 and 1995.
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 Partnership to the public
unitholders.
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,
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<PAGE> 10
reviews policies and procedures regarding matters of potential conflict of
interest. 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 Alabama and in federal
court in Texas. All of these lawsuits seek certification as class actions on
behalf of royalty owners in specific geographic areas, except the Texas and
Alabama cases, which seek certification of a nationwide class of royalty owners.
These cases also allege 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 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, results of operations or
liquidity at December 31, 1997. The Company 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.
9
<PAGE> 11
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>
1997 1996
---------------------- ----------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter......................................... $5 5/8 $4 3/8 $4 1/8 $3 5/8
Second Quarter........................................ $5 3/8 $4 1/4 $4 3/4 $3 5/8
Third Quarter......................................... $6 1/16 $5 1/8 $5 $4 1/8
Fourth Quarter........................................ $5 5/8 $4 1/4 $5 5/8 $4 1/2
</TABLE>
The Partnership had approximately 1,662 holders of record of depositary
units as of February 28, 1998.
For the years 1997 and 1996, the quarterly cash distributions per unit paid
to unitholders were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
First Quarter............................................... $.15 $.02
Second Quarter.............................................. .08 .07
Third Quarter............................................... .02 .06
Fourth Quarter.............................................. -- .01
---- ----
Total.................................................. $.25 $.16
==== ====
</TABLE>
The fourth quarter cash distribution for 1997 of $.02 per unit was paid in
March 1998. Any 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. Distributions will fluctuate due to oil and gas prices, production
volumes, operating costs and the timing and amount of capital expenditures and
divestment proceeds. (See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Cash Distribution Policy.")
10
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)
<S> <C> <C> <C> <C> <C>
For the Period
Revenues......................................... $ 728 $ 686 $ 552 $ 613 $ 676
Income before cumulative effect of accounting
change(1)..................................... $ 239 $ 248 $ 99 $ 100 $ 44
Net income (loss)(1)............................. $ 239 $ 248 $ 99 $ (477) $ 44
Net income per unit before cumulative effect of
accounting change(1).......................... $ .57 $ .59 $ .24 $ .24 $ .11
Net income (loss) per unit(1).................... $ .57 $ .59 $ .24 $(1.13) $ .11
Cash distributions paid to unitholders(2)........ $ 105 $ 67 $ 194 $ 114 $ 340
Cash distributions paid per unit(2).............. $ .25 $ .16 $ .46 $ .27 $ .82
Weighted average units outstanding (in
thousands).................................... 421.2 421.2 421.2 421.2 414.7
Capital expenditures............................. $ 410 $ 314 $ 206 $ 166 $ 199
At End of Period
Total assets..................................... $1,468 $1,299 $1,143 $1,181 $1,822
Long-term debt(3)................................ $ 38 $ 52 $ 62 $ 74 $ 86
Partners' capital................................ $1,154 $1,020 $ 839 $ 934 $1,525
</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. The net income for 1993 includes a $7
million loss from the sale of assets.
(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 11 to the Consolidated
Financial Statements).
(3) Includes $38 million, $51 million, $62 million, $72 million and $82 million
of long-term debt due to the Company.
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 1997 was $239 million. Production volumes increased 2 percent
in 1997 compared to 1996 primarily due to offshore development. The realized oil
price in 1997 decreased 8 percent to $18.75 per barrel. The realized gas price
in 1997 increased 12 percent to $2.40 per mcf. Exploration costs increased 45
percent primarily from increased offshore dry hole costs and increased
geological and geophysical expense due to increased activity. Depreciation,
depletion and amortization expense increased 19 percent primarily because of
additional development and higher production volumes.
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.
11
<PAGE> 13
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.
LIQUIDITY AND CAPITAL RESOURCES
ED&A outlays were $427 million in 1997, $317 million in 1996 and $216
million in 1995. In 1997, 71 percent of the Partnership's total ED&A investment
was for development and acquisition and 29 percent was for exploration. In 1998,
total ED&A outlays are expected to be approximately $460 million of which 64
percent is targeted for development and 36 percent for exploration. In 1997, the
Partnership replaced 145 percent of its production at an FD&A cost of $5.99 per
eb.
In 1997, cash flow from operating activities increased $143 million
compared to 1996 primarily due to favorable increases in cash flow working
capital components. Cash flow from investing activities used $421 million in
1997 compared to $323 million in 1996. Capital expenditures were $96 million
higher in 1997 while proceeds from divestments were $7 million lower. Cash flow
from financing activities used $117 million in 1997 compared to a use of $78
million in 1996. Cash distributions paid to unitholders were $38 million higher
in 1997 than 1996.
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 1997, the Partnership adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share" and SFAS No. 129, "Disclosure of
Information about Capital Structure," resulting in no material change. In June
1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 15, 1997. The impact of
these statements when adopted, will not have a material effect on the
Partnership's financial position or results of operations.
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 Partnership, Apache Corporation and
Parker & Parsley Petroleum Company formed Producers Energy Marketing Company,
LLC (ProEnergy). In 1997, Pioneer Natural Resources Company (formerly Parker &
Parsley Petroleum Company) terminated its relationship with ProEnergy. ProEnergy
purchases substantially all of the Partnership's gas production at index prices.
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.
12
<PAGE> 14
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 1997
was 185 percent of liquids production and 119 percent of gas production. Reserve
replacement rates of liquids and gas were 122 and 49 percent in 1996 and 79 and
112 percent in 1995.
HEDGING ARRANGEMENTS
The Partnership, from time to time, enters into commodity futures contracts
to manage its crude oil and natural gas price risk and to maintain specified
margins. The Partnership has entered into collar agreements to hedge
approximately 10 percent of its 1998 crude production at an average floor price
of $19.87 WTI per barrel and an average ceiling price of $21.15 WTI per barrel.
Approximately 25 percent of its estimated 1998 gas production is under hedging
agreements using collars at an average floor price of $2.21 HH per mmbtu and an
average ceiling price of $2.42 HH per mmbtu.
The Partnership utilizes sensitivity analysis to evaluate the effect that
changes in the market value of crude oil and natural gas will have on the fair
value of its derivative instruments. This analysis measures the impact on the
commodity derivative instruments and thereby, does not consider the underlying
exposure related to the commodity. At December 31, 1997, the Partnership
estimates that a 10 percent change in its average crude price would result in a
corresponding $3 million change in net income and a 10 percent per mmbtu change
in its average natural gas sales price would result in a corresponding $5
million change in net income. (See Note 2 to the Consolidated Financial
Statements.)
YEAR 2000 PROJECT
The Partnership has determined that it will be required to modify
significant portions of its software to utilize dates beyond December 31, 1999.
The Partnership presently believes that with modifications to its existing
software, the Year 2000 issue can be managed.
The Partnership is communicating with its significant suppliers, large
customers and partners to determine the extent to which the Partnership is
vulnerable to those third parties' failure to remediate their Year 2000 issue.
The Partnership's total Year 2000 Project cost includes the estimated costs and
time associated with the impact of a third party's Year 2000 issue and are based
on presently available information. However, there can be no guarantee that a
failure to timely convert by another company would not have a material adverse
effect on the Partnership.
The Partnership will utilize both internal and external resources to
reprogram and test the software for Year 2000 modification. The Partnership
plans to complete the Year 2000 Project no later than December 31, 1999. The
total cost of the Year 2000 Project is estimated at $3 million and is being
funded through operating cash flows. To date the Partnership has incurred no
significant costs related to the Year 2000 Project.
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 12 to the
Consolidated Financial Statements.)
13
<PAGE> 15
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........................... 15
Financial Statements:
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995....................... 16
Consolidated Balance Sheets as of December 31, 1997 and
1996................................................... 17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996
and 1995............................................... 18
Notes to Consolidated Financial Statements................ 19
Supplementary Financial and Operating
Information -- (Unaudited):
Oil and Gas Data.......................................... 27
Quarterly Financial Information........................... 29
Quarterly Operating Information........................... 30
</TABLE>
14
<PAGE> 16
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, 1997 and 1996 and the
related consolidated statements of income and cash flows for each of the three
years in the period ended December 31, 1997. 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, 1997 and 1996 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ COOPERS & LYBRAND, L.L.P.
Dallas, Texas
February 17, 1998
15
<PAGE> 17
SUN ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(MILLIONS OF DOLLARS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues
Oil and gas............................................... $ 738 $ 700 $ 565
Other -- net (Notes 3 and 4).............................. (10) (14) (13)
------ ------ ------
728 686 552
------ ------ ------
Costs and Expenses
Operating costs........................................... 138 139 162
Production taxes (Note 5)................................. 39 38 30
Exploration costs......................................... 61 42 42
Depreciation, depletion and amortization.................. 210 177 163
General and administrative expense (Note 3)............... 41 41 53
Interest and debt expense (Note 3)........................ 15 17 13
Interest capitalized...................................... (15) (16) (10)
------ ------ ------
489 438 453
------ ------ ------
Net Income.................................................. $ 239 $ 248 $ 99
====== ====== ======
Net Income Per Unit......................................... $ .57 $ .59 $ .24
====== ====== ======
Cash Distributions Paid to Unitholders...................... $ 105 $ 67 $ 194
====== ====== ======
Cash Distributions Paid Per Unit............................ $ .25 $ .16 $ .46
====== ====== ======
Weighted Average Units Outstanding (In Millions)............ 421.2 421.2 421.2
====== ====== ======
</TABLE>
(See Accompanying Notes)
16
<PAGE> 18
SUN ENERGY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
---------------
1997 1996
------ ------
<S> <C> <C>
Current Assets
Cash and cash equivalents................................. $ 2 $ 2
Accounts receivable and other current assets.............. 124 136
------ ------
Total Current Assets........................................ 126 138
Properties, Plants and Equipment (Note 6)................... 1,254 1,074
Investment in Affiliate (Note 1)............................ 88 87
------ ------
Total Assets................................................ $1,468 $1,299
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Advances from affiliate (Note 3).......................... $ 49 $ 12
Accounts payable.......................................... 80 91
Accrued liabilities (Note 7).............................. 84 70
Current portion of long-term debt due affiliate (Note
8)..................................................... 13 11
Current portion of long-term debt (Note 8)................ 1 1
------ ------
Total Current Liabilities................................... 227 185
Long-Term Debt Due Affiliate (Note 8)....................... 38 51
Long-Term Debt (Note 8)..................................... -- 1
Deferred Credits and Other Liabilities (Note 12)............ 49 42
Commitments and Contingent Liabilities (Note 9)
Partners' Capital (Notes 10 and 11)
Limited partnership interests............................. 354 313
General partnership interests............................. 800 707
------ ------
Partners' Capital........................................... 1,154 1,020
------ ------
Total Liabilities and Partners' Capital..................... $1,468 $1,299
====== ======
</TABLE>
- ------------------------------
The successful efforts method of accounting is followed.
(See Accompanying Notes)
17
<PAGE> 19
SUN ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Cash and Cash Equivalents From Operating Activities
Net Income.................................................. $ 239 $ 248 $ 99
Adjustments to reconcile net income to net cash from
operating activities
Depreciation, depletion and amortization............... 210 177 163
Dry hole costs and leasehold impairment................ 27 19 21
Loss on sale of assets................................. 5 2 1
Other.................................................. 5 15 6
----- ----- -----
486 461 290
Changes in working capital:
Accounts receivable and other current assets........... 12 (40) (15)
Accounts payable, accrued liabilities and advances from
affiliates............................................ 40 (26) 62
----- ----- -----
Net Cash Flow Provided From Operating Activities............ 538 395 337
----- ----- -----
Cash and Cash Equivalents From Investing Activities
Capital expenditures...................................... (410) (314) (206)
Proceeds from divestments................................. 1 8 75
Other..................................................... (12) (17) (13)
----- ----- -----
Net Cash Flow Used For Investing Activities................. (421) (323) (144)
----- ----- -----
Cash and Cash Equivalents From Financing Activities
Proceeds from borrowings.................................. -- 2 --
Repayments of long-term debt.............................. (12) (13) (11)
Cash distributions paid to unitholders.................... (105) (67) (194)
----- ----- -----
Net Cash Flow Used For Financing Activities................. (117) (78) (205)
----- ----- -----
Changes in Cash and Cash Equivalents........................ -- (6) (12)
Cash and Cash Equivalents at Beginning of Year.............. 2 8 20
----- ----- -----
Cash and Cash Equivalents at End of Year.................... $ 2 $ 2 $ 8
===== ===== =====
</TABLE>
(See Accompanying Notes)
18
<PAGE> 20
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, 1997, the Company had a partnership interest
of 98.2 percent in Sun Energy Partners. The remaining 1.8 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. In
addition,
19
<PAGE> 21
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
unamortized capital costs at a field level are reduced to fair value if the
sum of expected undiscounted future cash flows is less than net book value.
Dismantlement, Restoration and Abandonment Costs. Such costs are
estimated and 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, 1997, 1996 and 1995, the Partnership's financial reporting
bases of assets and liabilities exceeded the tax bases of its assets and
liabilities (net temporary differences) by $758 million, $596 million and $537
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 $15 million, $17 million and $13 million in 1997,
1996 and 1995.
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 1997 and 1996, sales of oil to the Partnership's top purchaser
totaled approximately 18 percent and 8 percent, and sales of natural gas to the
top purchaser totaled 52 percent and 51 percent. During 1995, 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.
20
<PAGE> 22
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Oil and Gas Price Hedging Activity
The Partnership, from time to time, enters into arrangements to hedge the
impact of price fluctuations on anticipated crude oil and natural gas sales.
Gains or losses on hedging activities are recognized in oil and gas revenues in
the period in which the hedged production is sold (Note 2).
Environmental Costs
The Partnership establishes reserves for environmental liabilities as
incurred (Note 12).
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.
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, 1997, the Partnership was a party to crude oil contracts to
hedge about 9 percent of its estimated 1998 crude oil production at an average
price of $20.17 per barrel. Approximately 20 percent of its estimated 1998
natural gas production was hedged at $2.19 per mmbtu. At December 31, 1996, the
Partnership was a party to crude oil and natural gas contracts to hedge about 20
percent of its estimated 1997 crude oil production at $20.30 per barrel and 31
percent of its estimated 1997 natural gas production at $2.24 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,
1997 and 1996 were $2 million and $10 million, and the aggregate fair values,
subject to daily fluctuation, based on quotes from brokers, were approximately
$5 million and $2 million.
The above mentioned derivative contracts expose the Partnership to credit
risk. The Partnership has established controls to manage this risk and closely
monitors the creditworthiness of its counterparties which are major financial
institutions. In the normal course of business, collateral is not required for
financial instruments with credit risk. The Partnership believes that losses
from nonperformance are unlikely to occur.
Other Financial Instruments
At December 31, 1997 and 1996, the carrying values of the Partnership's
long-term debt, including amounts due within one year, were $52 million and $64
million (Note 8). At December 31, 1997 and 1996, the aggregate fair values of
the Partnership's long-term debt were approximately $55 million and $68 million,
estimated primarily based on current rates offered to the Partnership for debt
of the same remaining maturities.
21
<PAGE> 23
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 1998-2001
(Note 8).
Sales of Natural Gas
During the fourth quarter of 1995, the Partnership, Apache Corporation and
Parker & Parsley Petroleum Company formed Producers Energy Marketing, LLC
(ProEnergy) to jointly market natural gas. In 1997, Pioneer Natural Resources
Company (formerly Parker and Parsley Petroleum Company) terminated its
relationship with ProEnergy. As of December 31, 1997 the Partnership had an
ownership interest of 40 percent in ProEnergy; however, ownership varies based
on the Partnership's share of natural gas throughput for the preceding quarter.
The Partnership accounts for its investment in ProEnergy using the equity
method, and as of December 31, 1997 had an investment in ProEnergy of $4
million. The Partnership sells substantially all of its natural gas production
to ProEnergy at index prices. Full operations commenced in April 1996 and
natural gas sales to ProEnergy totaled $219 million and $193 million for the
year ended December 31, 1997 and the nine months ended December 31, 1996. At
December 31, 1997 and 1996, the Partnership had an outstanding receivable
balance of $22 million and $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, $61 million and $68 million for
the years 1997, 1996 and 1995. 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 -- net" in the Consolidated Statements of Income, was earned on advances
to the Company and totaled $4 million, $4 million and $2 million during the
years 1997, 1996 and 1995.
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 $14 million, $16 million
and $12 million during the years 1997, 1996 and 1995 (Note 8).
22
<PAGE> 24
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4) OTHER -- NET
Other -- net consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Interest income............................................. $ 4 $ 4 $ 2
Loss on sale of assets...................................... (5) (2) (1)
Miscellaneous............................................... (9) (16) (14)
---- ---- ----
$(10) $(14) $(13)
==== ==== ====
</TABLE>
5) PRODUCTION TAXES
Production taxes consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Severance................................................... $28 $29 $20
Property taxes.............................................. 11 9 10
--- --- ---
$39 $38 $30
=== === ===
</TABLE>
6) 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>
1997 1996
--------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Gross Investment
Proved properties......................................... $3,840 $3,664
Unproved properties....................................... 75 60
Other..................................................... 8 29
------ ------
3,923 3,753
------ ------
Less Accumulated Depreciation, Depletion and Amortization
Proved properties*........................................ 2,666 2,656
Other..................................................... 3 23
------ ------
2,669 2,679
------ ------
Net Investment.............................................. $1,254 $1,074
====== ======
</TABLE>
- ------------------------------
* Includes $28 million and $30 million for dismantlement, restoration and
abandonment at December 31, 1997 and 1996.
23
<PAGE> 25
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7) ACCRUED LIABILITIES
At December 31, the Partnership's accrued liabilities were comprised of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
Drilling and operating costs................................ $62 $44
Taxes payable............................................... 13 13
Other....................................................... 9 13
--- ---
$84 $70
=== ===
</TABLE>
8) LONG-TERM DEBT
At December 31, the Partnership's long-term debt consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS OF
DOLLARS)
<S> <C> <C>
9.75% note payable to affiliate, due 1998-2001, payable in
quarterly installments.................................... $51 $62
Capitalized lease obligations due 1998-1999................. 1 2
--- ---
52 64
Less: Current portion of note payable to affiliate.......... 13 11
Current portion of capitalized lease obligations....... 1 1
--- ---
$38 $52
=== ===
</TABLE>
Repayment obligations under the Partnership's long-term debt due affiliate
are $13 million, $14 million, $16 million and $8 million in 1998, 1999, 2000 and
2001.
9) 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 1997, 1996 and
1995 was $12 million, $15 million and $38 million. Under contracts existing as
of December 31, 1997, 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:
1998...................................................... $ 3
1999...................................................... 3
2000...................................................... 1
2001...................................................... --
2002...................................................... --
Later years............................................... --
---
Total minimum payments required........................ $ 7
===
</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 of the Company believes
that any liabilities which may arise would not be material to the Partnership's
financial position, results of operations or liquidity.
24
<PAGE> 26
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10) 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, 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
----- --- ------- ---- ------- ---- ------- ---- ------- ------
Cash distributions............. -- (2) -- (30) -- (32) -- (73) -- (105)
Net income..................... -- 4 -- 69 -- 73 -- 166 -- 239
----- --- ------- ---- ------- ---- ------- ---- ------- ------
December 31, 1997................ 7,543 $20 121,628 $334 129,171 $354 292,000 $800 421,171 $1,154
===== === ======= ==== ======= ==== ======= ==== ======= ======
</TABLE>
11) CASH DISTRIBUTIONS
Distributable cash is defined as revenues (including interest income) less
operating 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.
Sun Energy Partners' quarterly cash distributions per unit for the years
1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
First Quarter............................................... $.15 $.02 $.14
Second Quarter.............................................. .08 .07 .14
Third Quarter............................................... .02 .06 .16
Fourth Quarter.............................................. -- .01 .02
---- ---- ----
Total.................................................. $.25 $.16 $.46
==== ==== ====
</TABLE>
Cash distributions included $.27 per unit related to proceeds from asset
sales in 1995.
12) DEFERRED CREDITS AND OTHER LIABILITIES
At December 31, the Partnership's deferred credits and other liabilities
were comprised of the following:
<TABLE>
<CAPTION>
1997 1996
---- ----
(MILLIONS
OF DOLLARS)
<S> <C> <C>
Accrued environmental cleanup costs......................... $15 $20
Other....................................................... 34 22
--- ---
$49 $42
=== ===
</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
25
<PAGE> 27
SUN ENERGY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12) DEFERRED CREDITS AND OTHER LIABILITIES (CONTINUED)
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
two 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 two 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 $11 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.
In October 1996, Statement of Position (SOP) 96-1, "Environmental
Remediation Liabilities," was issued. It required companies to recognize the
costs of environmental remediation on an accrual basis. The Partnership was and
continues to recognize the costs required by the SOP, therefore, adoption in
1997 had no material impact on its financial position or results of operations.
26
<PAGE> 28
SUN ENERGY PARTNERS, L.P.
SUPPLEMENTARY FINANCIAL
AND OPERATING INFORMATION (UNAUDITED)
OIL AND GAS DATA
CAPITALIZED COSTS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1997 1996
--------- ---------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Proved properties........................................... $3,840 $3,664
Unproved properties......................................... 75 60
------ ------
Total capitalized costs..................................... 3,915 3,724
Less accumulated depreciation, depletion and amortization... 2,666 2,656
------ ------
Net capitalized costs....................................... $1,249 $1,068
====== ======
</TABLE>
COSTS INCURRED IN OIL AND GAS PRODUCING ACTIVITIES
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Property acquisition costs:
Proved.................................................... $ 9 $ 6 $ 6
Unproved.................................................. 32 24 6
Exploration costs........................................... 90 45 39
Development costs*.......................................... 296 242 165
---- ---- ----
$427 $317 $216
==== ==== ====
</TABLE>
- ---------------
* Excludes capitalized interest of $15 million, $16 million and $10 million
for 1997, 1996 and 1995.
EXPLORATION COSTS
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Dry hole costs.............................................. $23 $18 $12
Leasehold impairment........................................ 4 1 9
Geological and geophysical.................................. 31 22 20
Other....................................................... 3 1 1
--- --- ---
$61 $42 $42
=== === ===
</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 favorable or adverse event that has caused a significant
change in estimated proved reserves since December 31, 1997. 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.
27
<PAGE> 29
<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, 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
Revisions of previous estimates....................... 4 2 (9)
Improved recovery..................................... 3 1 11
Purchases of minerals in place........................ 4 1 19
Sales of minerals in place............................ -- -- (3)
Extensions and discoveries............................ 20 1 190
Production............................................ (17) (3) (177)
---- --- -----
BALANCE AT DECEMBER 31, 1997.......................... 199 22 1,193
==== === =====
Proved Developed Reserves At:
December 31, 1994................................... 128 16 898
December 31, 1995................................... 115 13 872
December 31, 1996................................... 117 14 808
December 31, 1997................................... 121 16 749
</TABLE>
- ------------------------------
* Natural gas reserve 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 costs 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
28
<PAGE> 30
Consolidated Financial Statements.) The year-end realized prices were $17.16 and
$23.65 per barrel of oil and $2.29 and $4.09 per mcf of gas for 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---------- --------
(MILLIONS OF DOLLARS)
<S> <C> <C>
Future cash inflows......................................... $ 6,533 $ 9,385
Future production and development costs..................... (2,507) (2,596)
------- -------
Future net cash flows....................................... 4,026 6,789
Discount at 10 percent...................................... (1,550) (2,606)
------- -------
Standardized measure........................................ $ 2,476 $ 4,183
======= =======
</TABLE>
SUMMARY OF CHANGES IN THE STANDARDIZED MEASURE
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C>
Balance, beginning of year.............................. $ 4,183 $2,341 $1,689
Increase (decrease) in discounted future net cash flows:
Sales of oil and gas production, net of related
costs.............................................. (561) (523) (375)
Revisions to estimates of proved reserves:
Prices net of production taxes..................... (2,023) 1,724 563
Development costs.................................. (167) (9) (4)
Production costs................................... (1) (31) 32
Quantities......................................... 25 59 62
Other.............................................. (52) (213) (228)
Extensions, discoveries and improved recovery, less
related costs...................................... 353 336 339
Development costs incurred during the period.......... 296 242 165
Purchases of reserves in place........................ 26 38 12
Sales of reserves in place............................ (1) (8) (75)
Accretion of discount................................. 398 227 161
------- ------ ------
Balance, end of year.................................... $ 2,476 $4,183 $2,341
======= ====== ======
</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:
1997............................................. $200 $169 $169 $190
==== ==== ==== ====
1996............................................. $158 $163 $169 $196
==== ==== ==== ====
Gross profit:*
1997............................................. $ 98 $ 58 $ 69 $ 67
==== ==== ==== ====
1996............................................. $ 68 $ 66 $ 69 $103
==== ==== ==== ====
Net income:
1997............................................. $ 83 $ 48 $ 51 $ 57
==== ==== ==== ====
1996............................................. $ 53 $ 54 $ 57 $ 84
==== ==== ==== ====
Net income per unit:
1997............................................. $.20 $.11 $.12 $.14
==== ==== ==== ====
1996............................................. $.13 $.13 $.13 $.20
==== ==== ==== ====
</TABLE>
- ------------------------------
* Gross profit equals oil and gas revenues plus gas plant margins less
production cost, exploration cost and depreciation, depletion and
amortization.
29
<PAGE> 31
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):
1997................................. 41 45 49 49 46
1996................................. 45 43 42 42 43
Average price (per barrel):
1997................................. $21.19 $18.20 $17.81 $18.21 $18.75
1996................................. $18.13 $20.81 $20.59 $22.31 $20.43
Natural gas:
Net production (million cubic feet
daily):
1997................................. 507 500 470 462 485
1996................................. 461 471 489 522 486
Average price (per thousand cubic feet):
1997................................. $ 2.77 $ 2.05 $ 2.22 $ 2.55 $ 2.40
1996................................. $ 2.03 $ 1.95 $ 2.05 $ 2.48 $ 2.14
</TABLE>
30
<PAGE> 32
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 12 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>
Marion E. Anglin, 60......................... Mr. Anglin assumed this position on September 4,
Vice President, Worldwide Exploration 1997. From October 1995 to September 1997 he was
General Manager, Offshore USA. From January 1994 to
October 1995 Mr. Anglin was Director for Algeria,
Australia, Ecuador, Kazakhstan and Mexico.
Previously, he served the Company as General
Manager, Oryx Indonesia Energy Company.
Jerry W. Box, 59............................. Mr. Box assumed this position on February 5, 1998.
President, Chief Operating Officer and From December 1995 to February 1998 he was
Director Executive Vice President and Chief Operating
Officer. From December 1994 through November 1995
he served as Executive Vice President, Exploration
and Production. Previously, he served as Senior
Vice President, Exploration and Production of the
Company.
William E. Bradford, 63...................... 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
1992 to 1995. He was President and Chief Executive
Officer of Dresser-Rand Company from 1988 to 1992
and from 1982 to 1992, he was Senior Vice President
of Operations of Dresser Industries, Inc.
</TABLE>
31
<PAGE> 33
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
Warren A. Bryan, 51.......................... Mr. Bryan assumed this position on September 4, 1997.
Vice President, US Onshore Operations From February 1993 to September 1997 he served the
Company as General Manager, Onshore USA.
Previously, he was Manager of Operations, Gulf
Coast Region.
Sherri T. Durst, 48.......................... Ms. Durst has been in this position since December
General Auditor 1993. From February 1990 to December 1993, she
served as Manager, Financial Processes.
Sylvia A. Earle, 62.......................... Dr. Earle has been Chair of Deep Ocean Exploration
Director and Research Inc. since 1992 and Explorer-in-
Residence for the National Geographic Society since
1998. 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.
Steven J. Flowers, 37........................ Mr. Flowers assumed this position on September 4,
Vice President and Treasurer 1997. From November 1996 to September 1997 he
served as Treasurer of the Company. He joined the
Company in August 1995 and served as Assistant
Treasurer until November 1996. Previously, he held
various financial and planning positions, including
Assistant Treasurer, at Maxus Energy Corporation
from 1988 to 1995.
David C. Genever-Watling, 52................. Mr. Genever-Watling has been Managing Director of SMG
Director Management L.L.C. since 1997. From 1992 until his
retirement in 1995 he served as President and Chief
Executive Officer and from 1990 to 1992 he was
Senior Vice President of General Electric
Industrial and Power Systems Business.
Robert B. Gill, 66........................... 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 1990
until his retirement in 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.
David A. Hager, 41........................... Mr. Hager assumed this position on September 4, 1997.
Vice President, US Offshore Operations From December 1995 to September 1997 he was
Director, Operations Planning, Drilling and
Facilities Engineering. Previously, he served the
Company as Project Director, New Areas Exploration
and Production.
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
Frances G. Heartwell, 51..................... 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. Previously,
she was Director of Employee and Community
Relations.
David S. Hollingsworth, 69................... 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.
Patricia L. Horsfall, 44..................... Ms. Horsfall assumed this position on September 4,
Vice President, UK Operations and Managing 1997. From May, 1993 to September 1997 she was
Director, Oryx UK Limited General Manager, UK and Managing Director of Oryx
UK Energy Company. From January 1993 through April
1993 she was on a special project for the Company.
From August 1992 to January 1993, Ms. Horsfall
served the Company as District Manager, Gulf of
Mexico West.
Robert L. Keiser, 55......................... Mr. Keiser assumed this position on February 5, 1998.
Chairman of the Board and Chief Executive From November 1994 to February 1998, he was
Officer Chairman of the Board, Chief Executive Officer and
President. From January 1992 through November 1994,
he was President and Chief Operating Officer of the
Company.
William C. Lemmer, 53........................ Mr. Lemmer has been in this position since February
Vice President, General Counsel and 1995. From June 1994 until February 1995, he served
Secretary as Vice President and General Counsel to the
Company. For the five previous years, he was Chief
Counsel, Corporate of the Company.
Edward W. Moneypenny, 56..................... Mr. Moneypenny has been in this position since
Executive Vice President, Finance, Chief December 1994. From January 1992 through November
Financial Officer, and Director 1994, he was Senior Vice President, Finance and
Chief Financial Officer of the Company.
Charles H. Pistor, Jr., 67................... Mr. Pistor was the Vice Chair of Southern Methodist
Director University from 1991 to 1995. He served as Chairman
of the Board and Chief Executive Officer of
NorthPark National Bank from 1988 to 1990.
Paul R. Seegers, 68.......................... Mr. Seegers is President of Seegers Enterprises. He
Director was Chairman of the Board of Centex Corporation
from 1988 until his retirement in 1991.
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
NAME, AGE AND BUSINESS EXPERIENCE DURING
POSITION WITH THE COMPANY PAST FIVE YEARS
------------------------- --------------------------
<S> <C>
Robert L. Thompson, 51....................... Mr. Thompson assumed this position on September 4,
Vice President, Planning and Controller 1997. From February 1995 to September 1997 he was
Controller and Corporate Planning Director. From
February 1993 through January 1995, he served the
Company as Director of Business Planning and
Acquisitions. Previously, he was Director of
Planning and Analysis of the Company.
Ian L. White-Thomson, 61..................... Mr. White-Thomson has been Chairman since 1996 and
Director President and Chief Executive Officer of U.S. Borax
Inc. since 1988. Since 1995, he has been Chief
Executive Officer of Rio Tinto Borax Limited.
</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 1997, 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 1997 for the salaries of the Chief
Executive Officer of the Partnership and each of the four most highly
compensated executive officers of the Partnership other than the Chief Executive
Officer was approximately $1 million.
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, 1997.
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 (20)............. -- --
</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.
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
34
<PAGE> 36
summarizes lending activities between the Partnership and the Company during the
year ended December 31, 1997:
<TABLE>
<CAPTION>
BALANCE DUE TO BALANCE DUE
(FROM) TO (FROM)
PARTNERSHIP PARTNERSHIP
DECEMBER 31, 1996 ADDITIONS REPAYMENTS DECEMBER 31, 1997
----------------- --------- ---------- -----------------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C>
Variable Rate Advances to (from) Oryx
Energy Company......................... $(12) $(119) $82 $(49)
===== ====== === =====
9.75% Note Payable to Oryx Energy
Company................................ $(62) $ -- $11 $(51)
===== ====== === =====
</TABLE>
During 1997, the largest balance owed to the Partnership by the Company for
variable rate advances was $62 million. The largest balance owed to the Company
by the Partnership during 1997 resulting from advances from Oryx Energy Company
and amounts due under the 9.75% Note Payable was $104 million. Certain
information required by this section is included in Notes to the Consolidated
Financial Statements. See Notes 1, 3 and 8 included elsewhere in this Form 10-K.
35
<PAGE> 37
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 14.
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
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)
</TABLE>
(b) Reports on Form 8-K:
The Partnership did not file any reports on Form 8-K during the quarter
ended December 31, 1997.
36
<PAGE> 38
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
Director
Date: March 20, 1998
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** 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
Director
- -----------------------------------------------------
David S. Hollingsworth
ROBERT L. KEISER** Chairman of the Board and Chief
- ----------------------------------------------------- Executive Officer (principal March 20, 1998
Robert L. Keiser 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
</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.
37
<PAGE> 39
INDEX TO EXHIBITS
<TABLE>
<S> <C>
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
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)
</TABLE>
38
<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, 1997 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, Chief March 5, 1998
- ----------------------------------------------------- Executive Officer and
Robert L. Keiser Director (principal
executive officer)
/s/ JERRY W. BOX President, Chief March 5, 1998
- ----------------------------------------------------- Operating Officer and
Jerry W. Box Director
/s/ EDWARD W. MONEYPENNY Executive Vice March 5, 1998
- ----------------------------------------------------- President, Finance,
Edward W. Moneypenny Chief Financial
Officer, and Director
(principal financial
officer)
/s/ ROBERT L. THOMPSON Vice President Planning March 5, 1998
- ----------------------------------------------------- and Controller
Robert L. Thompson (principal accounting
officer)
/s/ WILLIAM E. BRADFORD Director March 5, 1998
- -----------------------------------------------------
William E. Bradford
/s/ SYLVIA A. EARLE Director March 5, 1998
- -----------------------------------------------------
Sylvia A. Earle
/s/ DAVID C. GENEVER-WATLING Director March 5, 1998
- -----------------------------------------------------
David C. Genever-Watling
/s/ ROBERT B. GILL Director March 5, 1998
- -----------------------------------------------------
Robert B. Gill
Director March 5, 1998
- -----------------------------------------------------
David S. Hollingsworth
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ CHARLES H. PISTOR, JR. Director March 5, 1998
- -----------------------------------------------------
Charles H. Pistor, Jr.
/s/ PAUL R. SEEGERS Director March 5, 1998
- -----------------------------------------------------
Paul R. Seegers
/s/ IAN L. WHITE-THOMSON Director March 5, 1998
- -----------------------------------------------------
Ian L. White-Thomson
</TABLE>
<PAGE> 1
EXHIBIT 24(b)
CERTIFICATE OF AUTHORITY AND INCUMBENCY
ORYX ENERGY COMPANY
I, William C. Lemmer, hereby certify that I am Secretary of ORYX ENERGY
COMPANY, a Delaware corporation, and that the following is a true and correct
copy of resolutions duly adopted by the Board of Directors of Oryx Energy
Company on March 5, 1998:
RESOLVED that the Annual Report of Sun Energy Partners, L.P. ("SEP)
to the Securities and Exchange Commission on Form 10-K for the year
ended December 31, 1997, prepared and to be filed by the Company as
managing general partner of the SEP, is hereby approved in the form
presented to this meeting as Exhibit E, subject to such revisions or
amendments as may be approved by the Chief Financial Officer or the
Controller to assure completeness, accuracy and compliance with
applicable laws and regulations, and that each officer is hereby
authorized to sign the Form 10-K on behalf of the Company.
I further certify that these resolutions have not been revoked or amended,
and are now in full force and effect.
Executed this 18th day of March, 1998.
/s/ WILLIAM C. LEMMER
-----------------------
WILLIAM C. LEMMER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2
<SECURITIES> 0
<RECEIVABLES> 113
<ALLOWANCES> 0
<INVENTORY> 3
<CURRENT-ASSETS> 126
<PP&E> 3,923
<DEPRECIATION> 2,669
<TOTAL-ASSETS> 1,468
<CURRENT-LIABILITIES> 227
<BONDS> 38
0
0
<COMMON> 0
<OTHER-SE> 1,203
<TOTAL-LIABILITY-AND-EQUITY> 1,468
<SALES> 738
<TOTAL-REVENUES> 728
<CGS> 387
<TOTAL-COSTS> 387
<OTHER-EXPENSES> 102
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 239
<INCOME-TAX> 0
<INCOME-CONTINUING> 239
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 239
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
