SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ---------------------
Commission file number 1-720
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PHILLIPS PETROLEUM COMPANY
(Exact name of registrant as specified in its charter)
Delaware 73-0400345
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Phillips Building, Bartlesville, Oklahoma 74004
(Address of principal executive offices) (Zip Code)
918-661-6600
(Registrant's telephone number, including area code)
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
The registrant has 262,067,668 shares of common stock, $1.25 par value,
outstanding at October 31, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
- ---------------------------------------------------------------------
Consolidated Statement of Income Phillips Petroleum Company
Millions of Dollars
---------------------------------
Three Months Nine Months
Ended Ended
September 30 September 30
---------------------------------
1995 1994* 1995* 1994*
---------------------------------
Revenues
Sales and other operating revenues $3,369 3,315 10,047 9,194
Equity in earnings of affiliated
companies 38 23 106 62
Other revenues 8 9 22 43
- ---------------------------------------------------------------------
Total Revenues 3,415 3,347 10,175 9,299
- ---------------------------------------------------------------------
Costs and Expenses
Purchased crude oil and products 2,083 2,056 6,149 5,526
Production and operating expenses 527 554 1,589 1,645
Exploration expenses 49 52 138 151
Selling, general and
administrative expenses 142 139 363 365
Depreciation, depletion and
amortization 190 191 682 596
Taxes other than income taxes 62 71 201 202
Interest and expense on
indebtedness 63 42 199 187
Preferred dividend requirements
of subsidiary 8 8 24 24
- ---------------------------------------------------------------------
Total Costs and Expenses 3,124 3,113 9,345 8,696
- ---------------------------------------------------------------------
Income before income taxes and
subsidiary stock transaction 291 234 830 603
Gain on subsidiary stock
transaction - - - 20
- ---------------------------------------------------------------------
Income before income taxes 291 234 830 623
Provision for income taxes 155 115 470 301
- ---------------------------------------------------------------------
Net Income $ 136 119 360 322
=====================================================================
Per Share of Common Stock
Net Income $ .52 .45 1.37 1.23
Dividends Paid $ .305 .28 .89 .84
- ---------------------------------------------------------------------
Average Common Shares Outstanding
(in thousands) 262,154 261,569 261,954 261,508
- ---------------------------------------------------------------------
See Notes to Financial Statements.
*Certain amounts have been reclassified to conform to current quarter
presentation.
1
<PAGE>
- -----------------------------------------------------------------
Consolidated Balance Sheet Phillips Petroleum Company
Millions of Dollars
-------------------------
September 30 December 31
1995 1994*
-------------------------
Assets
Cash and cash equivalents $ 143 193
Accounts and notes receivable (less
allowances: 1995--$18; 1994--$20) 1,418 1,462
Inventories 585 527
Deferred income taxes 203 203
Prepaid expenses and other current
assets 73 97
- -----------------------------------------------------------------
Total Current Assets 2,422 2,482
Investments and long-term receivables 805 708
Properties, plants and equipment (net) 8,281 8,042
Deferred income taxes 123 122
Deferred charges 108 99
- -----------------------------------------------------------------
Total $11,739 11,453
=================================================================
Liabilities
Accounts payable $ 1,319 1,371
Long-term debt due within one year 28 18
Accrued income and other taxes 1,093 847
Other accruals 338 285
- -----------------------------------------------------------------
Total Current Liabilities 2,778 2,521
Long-term debt 2,876 3,106
Accrued dismantlement, removal and
environmental costs 590 564
Deferred income taxes 1,000 961
Employee benefit obligations 381 341
Other liabilities and deferred credits 610 656
- -----------------------------------------------------------------
Total Liabilities 8,235 8,149
- -----------------------------------------------------------------
Preferred Stock of Subsidiary and Other
Minority Interests 350 351
- -----------------------------------------------------------------
Stockholders' Equity
Common stock--500,000,000 shares
authorized at $1.25 par value
Issued (277,180,511 shares)
Par value 346 346
Capital in excess of par 1,011 996
Treasury stock (at cost:
1995--15,016,507 shares;
1994--15,542,074 shares) (828) (859)
Foreign currency translation adjustments 42 16
Unearned employee compensation--Long-
Term Stock Savings Plan (LTSSP) (423) (451)
Retained earnings 3,006 2,905
- -----------------------------------------------------------------
Total Stockholders' Equity 3,154 2,953
- -----------------------------------------------------------------
Total $11,739 11,453
=================================================================
See Notes to Financial Statements.
*Certain amounts have been reclassified to conform to current
presentation.
2
<PAGE>
- -----------------------------------------------------------------
Consolidated Statement of Phillips Petroleum Company
Cash Flows
Millions of Dollars
-------------------
Nine Months Ended
September 30
-------------------
1995 1994*
-------------------
Cash Flows from Operating Activities
Net income $ 360 322
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 682 596
Dry hole costs and leasehold impairment 44 66
Deferred taxes (10) (9)
Sale of accounts receivable 115 -
Other changes in accounts and
notes receivable (51) (132)
Increase in inventories (55) (24)
Decrease in prepaid expenses and
other current assets 27 44
Decrease in accounts payable (53) (52)
Increase in taxes and other accruals 286 31
Other (66) (53)
- -----------------------------------------------------------------
Net Cash Provided by Operating Activities 1,279 789
- -----------------------------------------------------------------
Cash Flows from Investing Activities
Capital expenditures and investments,
including dry hole costs (880) (702)
Proceeds from asset dispositions 45 207
Long-term advances to affiliates
and other investments (6) (18)
- -----------------------------------------------------------------
Net Cash Used for Investing Activities (841) (513)
- -----------------------------------------------------------------
Cash Flows from Financing Activities
Issuance of debt 327 1,142
Repayment of debt (547) (1,139)
Issuance of company stock 7 8
Purchase of company stock - (1)
Dividends paid (233) (220)
Other (42) (41)
- -----------------------------------------------------------------
Net Cash Used for Financing Activities (488) (251)
- -----------------------------------------------------------------
Increase (Decrease) in Cash and Cash
Equivalents (50) 25
Cash and cash equivalents at beginning
of period 193 119
- -----------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 143 144
=================================================================
See Notes to Financial Statements.
*Certain amounts have been reclassified to conform to current
presentation.
3
<PAGE>
- -----------------------------------------------------------------
Notes to Financial Statements Phillips Petroleum Company
Note 1--Interim Financial Information
The financial information for the interim periods presented in
the financial statements included in this report is unaudited and
includes all known accruals and adjustments which Phillips
Petroleum Company (hereinafter referred to as "Phillips" or "the
company") considers necessary for a fair presentation of the
consolidated financial position of the company and its results of
operations and cash flows for such periods. All such adjustments
are of a normal and recurring nature, except as described in
Note 2.
Note 2--Accounting Change
Effective April 1, 1995, the company adopted Financial Accounting
Standards Board (FASB) Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," which resulted in a before-tax addition of
$95 million to depreciation, depletion and amortization expense
in second quarter 1995. After-tax, the additional charge was
$49 million, $.19 per share.
Under the new Statement, the company now evaluates impairment of
exploration and production assets on a field-by-field basis
rather than using one worldwide cost center for its proved
properties. On this basis, certain fields in North America and
Norway were deemed to be impaired because they were not expected
to recover their entire carrying value through future cash flows.
In addition to the change in grouping of proved properties,
certain idle buildings and land in the company's Corporate and
Chemicals segments were also deemed to be impaired under
Statement No. 121, as the company had no plans to use those
assets in future operations.
The before-tax charges for the above items by segment were
Exploration and Production (E&P), $78 million; Corporate,
$13 million; and Chemicals, $4 million. The after-tax charges
were $39 million, $7 million, and $3 million, respectively. The
fair values of the impaired E&P assets were determined by using
the present value of expected future cash flows. The fair values
of the impaired Corporate and Chemicals assets were determined
based on information about sales and purchases of similar assets.
Note 3--Non-Mineral Operating Leases
In the second quarter of 1995, the company extended the lease
terms on two liquefied natural gas tankers for an additional
two years. Had the new terms been in effect at December 31, 1994,
the company's future minimum lease payments due under
non-cancelable operating leases would have increased by
4
<PAGE>
$12 million, $23 million and $10 million for the years 1998, 1999
and the remaining years, respectively. The company's 70 percent
share of the guaranteed residual value is now $196 million.
Note 4--Inventories
Inventories consisted of the following:
Millions of Dollars
-------------------------
September 30 December 31
1995 1994
-------------------------
Crude oil and petroleum products $213 228
Chemical products 283 204
Materials, supplies and other 89 95
- -----------------------------------------------------------------
$585 527
=================================================================
Note 5--Properties, Plants and Equipment
Properties, plants and equipment (net) included the following:
Millions of Dollars
-------------------------
September 30 December 31
1995 1994
-------------------------
Properties, plants and equipment
(at cost) $18,947 18,293
Less accumulated depreciation,
depletion and amortization 10,666 10,251
- -----------------------------------------------------------------
$ 8,281 8,042
=================================================================
Note 6--Debt
In August 1995, the company replaced its commercial paper
program, which was supported by a direct-pay irrevocable bank
letter of credit, with a $250 million commercial paper program
supported by a portion of the company's unused revolving lines of
credit equal to 100 percent of the commercial paper outstanding.
To facilitate the change in programs and to maintain liquidity
for other uses, the company increased its revolving bank credit
facility from $800 million to $1,100 million, effective in
August 1995. At September 30, 1995, no portion of this facility
or the commercial paper program was outstanding.
Note 7--Income Taxes
The company's effective tax rates for the three- and nine-month
periods ended September 30, 1995, were 53 and 57 percent,
respectively, compared with 49 and 48 percent for each of the
same periods a year ago. The higher 1995 effective tax rates
were due to a higher proportion of foreign income taxed at higher
rates and lower tax credits for fuel produced from non-
5
<PAGE>
conventional sources. The reduction in credits resulted from an
exchange, in late 1994, of a variable interest in the net
proceeds from production of certain coal-seam gas properties
generating the credits.
Note 8--Contingent Liabilities
Environmental--The company is subject to federal, state and local
environmental laws and regulations. These may result in
obligations to remove or mitigate the effects on the environment
of the placement, storage, disposal or release of certain
chemical, mineral and petroleum substances at various sites. The
company is currently participating in environmental assessments
and cleanup under these laws at federal Superfund and comparable
state sites. In the future, the company may be involved in
additional environmental assessments, cleanups and proceedings.
Other Legal Proceedings--The company is a party to a number of
other legal proceedings pending in various courts or agencies for
which, in some instances, no provision has been made.
Other Contingencies--The company has contingent liabilities
resulting from throughput agreements with pipeline and processing
companies in which it holds stock interests. Under these
agreements, Phillips may be required to provide any such company
with additional funds through advances against future charges for
the shipping or processing of petroleum liquids, natural gas and
refined products.
In the case of all known contingencies, the company accrues a
charge for a loss when it is probable and the amount is
reasonably estimable. These accruals are not discounted for
delays in future payment and are not reduced for potential
insurance recoveries. Based on currently available information,
the company believes that it is remote that future costs related
to known contingent liability exposures will exceed current
accruals by an amount that would have a material adverse impact
on the company's financial statements.
As facts concerning contingencies become known to the company,
the company reassesses its position both with respect to accrued
liabilities and other potential exposures. Estimates that are
particularly sensitive to future change include contingent
liabilities recorded for environmental remediation, tax and legal
matters. Estimated future environmental remediation costs are
subject to change due to such factors as the unknown magnitude of
cleanup costs, the unknown time and extent of such remedial
actions that may be required, and the determination of the
company's liability in proportion to other responsible parties.
Estimated future costs related to tax and legal matters are
subject to change as events evolve and as additional information
becomes available during the administrative and litigation
process.
6
<PAGE>
Note 9--Cash Flow Information
Cash payments and non-cash investing and financing activities for
the nine-month periods ended September 30 were as follows:
Millions of Dollars
-------------------
1995 1994
-------------------
Cash payments
Interest
Debt $164 174
Taxes and other 16 41
- -----------------------------------------------------------------
$180 215
=================================================================
Income taxes $293 259
- -----------------------------------------------------------------
Non-cash investing and financing activities
Treasury stock awards issued (canceled)
under incentive compensation plans $ 6 (12)
- -----------------------------------------------------------------
Contribution of non-cash net assets
to equity method affiliate - 107
- -----------------------------------------------------------------
7
<PAGE>
- -----------------------------------------------------------------
Management's Discussion And Analysis Phillips Petroleum Company
RESULTS OF OPERATIONS
Consolidated Results
A summary of the company's net income, by business segment and
consolidated, follows:
Millions of Dollars
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Exploration and Production
(E&P) $ 79 74 254 235
Gas Gathering, Processing
and Marketing (GPM) (6) (2) (14) -
Refining, Marketing and
Transportation (RM&T) 31 57 38 125
Chemicals 118 63 326 182
Corporate and Other (86) (73) (244) (220)
- -----------------------------------------------------------------
Net Income $136 119 360 322
=================================================================
Consolidated net income for the three-month period ended
September 30, 1995, increased 14 percent over the corresponding
period in 1994. For the nine-month period ended September 30,
1995, consolidated net income increased 12 percent, compared with
the same period a year ago.
Earnings included the following special items on an after-tax
basis:
Millions of Dollars
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Property impairments $ (1) - (50) -
Gain on subsidiary stock
transaction - - - 20
Work force reduction
charges (5) (22) (18) (27)
Foreign currency gains
(losses) (2) - (1) 1
Pending claims and
settlements (11) 7 (11) 24
Losses on asset sales - (2) - (2)
Other items 4 (5) (10) (4)
- -----------------------------------------------------------------
Total special items $(15) (22) (90) 12
=================================================================
8
<PAGE>
Net operating income, which excludes special items, was
$151 million for the third quarter of 1995, compared with
$141 million in the third quarter of 1994. For the nine-month
period ending September 30, net operating income was $450 million
in 1995, compared with $310 million in 1994.
The 7 percent improvement in net operating income in the third
quarter of 1995, compared with the third quarter of 1994, is
attributable to substantially higher chemicals margins,
particularly for ethylene, paraxylene and polyethylene. In
addition, the company benefited from higher crude oil and natural
gas production. These positive factors were partially offset by
lower motor fuel margins and lower U.S. natural gas prices.
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
Phillips at a Glance 1995 1994 1995 1994
------------------ -----------------
U.S. crude oil
production (MBD) 77 90 80 91
Worldwide crude oil
production (MBD) 214 196 220 203
U.S. natural gas
production (MMCFD) 1,068 1,013 1,076 1,031
Worldwide natural gas
production (MMCFD) 1,413 1,324 1,489 1,388
Worldwide natural gas
liquids production (MBD) 162 167 160 165
Liquefied natural gas
sales (MMCFD) 146 127 125 113
Refinery utilization
rate (%) 106 105 103 99
U.S. automotive gasoline
sales (MBD) 352 339 332 310
U.S. distillates
sales (MBD) 125 141 131 131
Worldwide petroleum
products sales (MBD) 688 732 692 696
Natural gas liquids
processed (MBD) 202 212 202 202
Ethylene production
(MMlbs)* 630 695 1,889 1,936
Polyethylene
production (MMlbs)* 450 469 1,364 1,389
- -----------------------------------------------------------------
*Includes equity in affiliates.
Consolidated Income Statement Analysis
Operating revenues increased 2 percent and 9 percent for the
third quarter and first nine months of 1995, respectively,
compared with the corresponding periods in 1994. For the 1995
third quarter, higher crude oil revenues were mostly offset by
lower petroleum products revenues. For the 1995 nine-month
period, operating revenues were higher primarily as a result of
higher crude oil and petroleum products revenues. The company's
9
<PAGE>
average worldwide crude oil price was 14 percent higher for the
first nine months of 1995, compared with the same period in 1994.
Petroleum products revenues for the nine-month period benefited
from higher motor fuel sales volumes and prices. Higher
chemicals and plastics sales prices for key products benefited
both the quarter and nine-month periods, while lower natural gas
revenues had a negative effect on both 1995 periods.
Equity in earnings from affiliated companies increased 65 percent
and 71 percent, respectively, for the third quarter and
nine-months ended September 30, 1995, compared with the same
periods in the prior year. Higher earnings from the company's
Chemicals joint venture operations were primarily responsible for
the increase from a year ago.
Purchase costs increased slightly in the third quarter, and
11 percent for the first nine months of 1995, compared with the
corresponding periods in 1994. The year-to-date costs were
higher due to higher crude oil feedstock costs for the company's
refineries, as well as higher petroleum products purchases, due
to higher volumes of product exchanges to deliver product to
market in a more cost effective manner.
After adjusting for work force reduction charges and other
special items, production and operating costs were 6 percent and
5 percent lower for the third quarter and the first nine months
of 1995, respectively, compared with the same periods last year,
reflecting the company's continued emphasis on cost control and
best in class performance.
Exploration expenses were lower for the third quarter and nine
months of 1995, compared with the same periods in 1994, because
the 1994 periods included higher dry hole charges, primarily in
the Gulf of Mexico and foreign exploratory locations.
After adjusting for special items, primarily work force reduction
charges, selling, general and administrative (SG&A) expenses
increased for the third quarter and first nine months of 1995,
respectively, compared with the same periods last year. The
company's 1995 lump-sum merit program provided for in the third
quarter contributed to the higher SG&A costs.
After adjusting for the second quarter 1995 adoption of FASB
Statement No. 121, depreciation, depletion and amortization
decreased slightly in the third quarter and first nine months of
1995, compared with the corresponding periods in 1994.
Taxes other than income taxes were $9 million--13 percent--lower
in the third quarter of 1995 than the third quarter of 1994.
Adjustments to accrued amounts, based on revised estimates or
actual payment history, primarily contributed to the variance
between the two quarters. For the current year-to-date period,
taxes other than income taxes were down slightly.
10
<PAGE>
Interest expense in the third quarter of 1995 was $21 million
higher than the third quarter of 1994, primarily due to the
reversal of accrued interest expense as a result of a favorable
contingency settlement in 1994. For the nine-month period ending
September 30, 1995, compared with the corresponding period in
1994, interest expense increased 6 percent, due to the favorable
contingency settlement in 1994. Both 1995 periods' interest
expense benefited from lower average debt and higher capitalized
interest associated with the J-Block development in the U.K.
sector of the North Sea.
Segment Results
E&P Millions of Dollars
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Reported net income $79 74 254 235
Less special items (3) (12) (59) (2)
- -----------------------------------------------------------------
Net operating income $82 86 313 237
=================================================================
The E&P segment's net operating income in the third quarter of
1995 decreased $4 million--5 percent--from the same quarter in
1994, primarily due to lower U.S. natural gas prices. Adequate
supplies and storage levels continue to keep U.S. natural gas
prices lower than 1994 levels. The third quarter 1995 average
U.S. natural gas sales price of $1.28 was the lowest quarterly
average price in over 15 years. Benefiting earnings were higher
liquefied natural gas revenues, lower exploration expenses and
lower U.S. lifting costs.
For the nine-month period in 1995, E&P net operating income
increased 32 percent over the first nine months of 1994. The
increase is attributable to higher crude oil, natural gas liquids
and liquefied natural gas revenues, along with lower U.S. lifting
costs and lower exploration expenses. These items were partially
offset by lower U.S. natural gas prices.
11
<PAGE>
Sales prices, exploration expenses and operating statistics for
worldwide E&P were:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Average Sales Prices
Crude oil (per barrel)
United States $14.50 14.63* 15.13 13.16
Foreign 16.24 16.91 17.21 15.45
Worldwide 15.64 15.88* 16.48 14.46*
Natural gas--lease (per
thousand cubic feet)
United States 1.28 1.56* 1.32 1.76*
Foreign 2.53 2.36 2.48 2.31
Worldwide 1.70 1.82* 1.75 1.96*
- -----------------------------------------------------------------
*Restated.
Millions of Dollars
-------------------------------------
Worldwide Exploration
Expenses
Geological and geophysical $32 30 90 80
Leasehold impairment 8 7 24 19
Dry holes 7 13 20 47
Lease rentals 2 2 4 5
- -----------------------------------------------------------------
$49 52 138 151
=================================================================
Thousands of Barrels Daily
-------------------------------------
Operating Statistics
Crude Oil Produced
United States 77 90 80 91
Norway 99 74 98 79
United Kingdom 4 5 4 5
Nigeria 23 22 23 23
China 6 - 10 -
Canada 5 5 5 5
- -----------------------------------------------------------------
214 196 220 203
=================================================================
Natural Gas Liquids Produced
United States 6 6 5 6
Norway 8 6 9 7
Other areas 1 1 1 1
- -----------------------------------------------------------------
15 13 15 14
=================================================================
12
<PAGE>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Millions of Cubic Feet Daily
-------------------------------------
Natural Gas Produced
United States (less gas
equivalent of liquids
shown above) 1,068 1,013 1,076 1,031
Norway* 283 245 303 254
United Kingdom* 7 25 52 56
Canada 55 41 58 47
- -----------------------------------------------------------------
1,413 1,324 1,489 1,388
=================================================================
*Dry basis.
Liquefied Natural Gas
Sales 146 127 125 113
- -----------------------------------------------------------------
U.S. E&P Millions of Dollars
- -------- -------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Reported net income $64 64 166 191
Less special items - (3) (37) 6
- -----------------------------------------------------------------
Net operating income $64 67 203 185
=================================================================
Net operating income from the company's U.S. E&P operations
decreased 4 percent for the three-month period ended
September 30, 1995, compared with the same period in 1994.
Revenues from both natural gas and crude oil were lower than a
year ago, as a result of 18 percent lower average natural gas
sales prices and lower crude oil sales volumes. Partially
offsetting these items were higher liquefied natural gas
revenues, lower lifting costs and lower depreciation, depletion
and amortization.
For the nine-month period ended September 30, 1995, net operating
income increased 10 percent, compared with the corresponding
period in 1994. Higher crude oil revenues, due to higher average
sales prices; higher natural gas liquids and liquefied natural
gas revenues, as a result of higher sales volumes; lower lifting
costs; lower exploration expenses; and lower depreciation,
depletion and amortization all contributed to the improved
earnings. However, these positive items were significantly
offset by lower natural gas revenues, resulting from 25 percent
lower average sales prices.
U.S. crude oil production was lower in both the third quarter and
first nine months of 1995, compared with the same periods in
1994. General production declines, primarily from Prudhoe Bay
and Point Arguello, and the effect of property dispositions,
contributed to the lower crude oil production rates. U.S.
13
<PAGE>
natural gas production was 5 percent and 4 percent higher in the
third quarter and nine-month period of 1995, respectively, than
in the corresponding periods a year ago. The increases were
primarily due to higher production in the San Juan Basin, New
Mexico, and new production from the Garden Banks (Seastar) field
in the Gulf of Mexico, which came online in June.
Special items in the nine-month period in 1995 included property
impairments on an after-tax basis of $33 million, along with work
force reduction charges. Special items in the third quarter of
1994 consisted of work force reduction charges. In addition, the
nine-month period of 1994 included favorable settlements related
to the company's Alaska operations and a net profits interest,
partially offset by a contingency accrual.
Foreign E&P Millions of Dollars
- ----------- -------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Reported net income $15 10 88 44
Less special items (3) (9) (22) (8)
- -----------------------------------------------------------------
Net operating income $18 19 110 52
=================================================================
Net operating income from the company's foreign E&P operations
was essentially the same in the third quarters of 1995 and 1994.
For the nine-month period, net operating income more than
doubled, compared with the first nine months of 1994. The
primary reason for the $58 million increase was higher crude oil
revenues, due to higher average sales prices and higher sales
volumes. Also contributing to the improved earnings were higher
natural gas sales volumes. These items were partly offset by
higher depreciation, depletion and amortization charges as a
result of higher production rates and new production from
offshore China.
Foreign crude oil production was higher in both the third quarter
and first nine months of 1995, compared with the corresponding
periods in 1994. The increases are attributable to continued
higher production in Norway, as a result of the water reinjection
program, and new production from offshore China. Foreign natural
gas production was also higher in both the third quarter and
nine-month period of 1995, due to higher production in Norway and
Canada.
Special items in the third quarter of 1995 consisted of a
contract settlement. In addition to this item, the nine-month
period of 1995 included work force reduction charges, property
impairments and a tax contingency accrual. Special items in both
the third quarter and nine-month period of 1994 consisted
primarily of a Norway income tax related item.
14
<PAGE>
GPM Millions of Dollars
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Reported net loss $(6) (2) (14) -
Less preferred dividend
requirement of Phillips
Gas Company (8) (8) (24) (24)
Less special items (2) (3) (2) (3)
- -----------------------------------------------------------------
Net operating income $ 4 9 12 27
=================================================================
The company's GPM operations are conducted primarily through GPM
Gas Corporation, a wholly owned subsidiary of Phillips Gas
Company. The effect of Phillips Gas Company's preferred dividend
requirements has been excluded in determining GPM's net operating
income.
Sales prices and operating statistics for GPM were:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Average Sales Prices
U.S. residue gas (per
thousand cubic feet) $1.34 1.66 1.41 1.87
U.S. natural gas liquids
(per barrel--
unfractionated) 9.66 10.10 9.98 9.49
- -----------------------------------------------------------------
Millions of Cubic Feet Daily
-------------------------------------
Operating Statistics
Natural Gas Purchases
Outside Phillips 1,261 1,181 1,246 1,154
Phillips 194 214 196 208
- -----------------------------------------------------------------
1,455 1,395 1,442 1,362
=================================================================
Raw Gas Throughput 1,650 1,506 1,619 1,498
- -----------------------------------------------------------------
Residue Gas Sales
Outside Phillips 812 853 836 856
Phillips 206 83 181 85
- -----------------------------------------------------------------
1,018 936 1,017 941
=================================================================
Thousands of Barrels Daily
------------------------------------
Natural Gas Liquids
Production
From Phillips E&P
leasehold gas 19 22 19 22
From gas purchased
outside Phillips 128 132 126 129
- -----------------------------------------------------------------
147 154 145 151
=================================================================
15
<PAGE>
GPM had lower net operating income for the third quarter and
first nine months of 1995, compared with the corresponding
periods in 1994. Abundant supplies continue to keep residue gas
sales prices below 1994 levels. For the quarter, residue gas
sales prices were 19 percent lower and for the first nine months,
they were 25 percent lower. Natural gas liquids prices were
4 percent lower for the third quarter, compared with the third
quarter of 1994, due primarily to lower ethane prices, as a
result of decreased demand for ethane as an olefins feedstock.
Raw gas throughput volumes increased as a result of the company's
expansion in the Austin Chalk area of Central Texas, the December
1994 acquisition of the Linam Ranch plant and system in New
Mexico, and a June 1995 system acquisition in New Mexico.
Two projects currently under way that will increase the company's
NGL production are the conversion of its Linam Ranch plant in New
Mexico to a cryogenic plant and installation of seven miles of
steel pipe in the Austin Chalk area which will allow additional
volumes of gas to be processed at the company's Quarry plant.
These projects are expected to add approximately 9 thousand
barrels per day of NGL production and should be completed by the
end of 1995.
The special items in both 1995 and 1994 represent work force
reduction charges.
RM&T Millions of Dollars
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Reported net income $31 57 38 125
Less special items (5) (2) (6) (2)
- -----------------------------------------------------------------
Net operating income $36 59 44 127
=================================================================
Sales prices and operating statistics for RM&T were:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Average Sales Prices
(per gallon)
Automotive gasoline $.58 .62 .59 .57
Distillates .52 .52 .51 .51
Propane .37 .35 .36 .35
- -----------------------------------------------------------------
Operating Statistics
Refinery crude oil
capacity utilization 106% 105 103 99
- -----------------------------------------------------------------
16
<PAGE>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Thousands of Barrels Daily
-------------------------------------
Crude Oil Refined 340 337 331 318
- -----------------------------------------------------------------
Petroleum Products Outside
Sales
United States
Automotive gasoline 335 317 323 288
Aviation fuels 29 32 30 32
Distillates 125 141 131 131
Propane 16 18 21 22
Other products 18 20 19 19
- -----------------------------------------------------------------
523 528 524 492
Foreign 32 50 44 54
- -----------------------------------------------------------------
555 578 568 546
=================================================================
RM&T's net operating income for the third quarter of 1995 was
39 percent lower than the third quarter of 1994, primarily due to
lower motor fuel margins. Crude oil feedstock costs were up
slightly in the third quarter of 1995, compared with 1994, while
average wholesale gasoline prices were down 6 percent. Crude oil
runs to refineries continued at a high level in the third
quarter, marking the third consecutive quarterly increase in this
key measure of operating consistency.
For the nine-month period ending September 30, 1995, net
operating income decreased $83 million, compared with the same
period in 1994. Higher crude oil feedstock costs, particularly
in the first six months of the year, could not be fully recovered
in the motor fuel and distillates markets, which resulted in
lower motor fuel and distillates margins. For the nine-month
period, the company's refineries ran at operating capacity.
Special items in the third quarter of 1995 included a $3 million
after-tax charge associated with the company's withdrawal from
the Marine Preservation Association. In addition to this item,
the nine-month period includes work force reduction charges.
Special items for the third quarter and first nine months of 1994
consisted of work force reduction charges.
17
<PAGE>
Chemicals Millions of Dollars
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Reported net income $118 63 326 182
Less special items 4 (3) (4) 24
- -----------------------------------------------------------------
Net operating income $114 66 330 158
=================================================================
Operating statistics for Chemicals were:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Millions of Pounds,
Except as Indicated
-------------------------------------
Operating Statistics
Production*
Ethylene 630 695 1,889 1,936
Polyethylene 450 469 1,364 1,389
Propylene 105 95 324 275
Polypropylene 109 95 328 320
Paraxylene 140 132 398 385
Cyclohexane (millions
of gallons) 42 54 89 155
- -----------------------------------------------------------------
*Includes equity in affiliates.
Thousands of Barrels Daily
-------------------------------------
U.S. Petroleum Products
Outside Sales
Automotive gasoline 17 22 9 22
Liquefied petroleum gas 79 90 77 86
Other products 37 42 38 42
- -----------------------------------------------------------------
133 154 124 150
=================================================================
Natural Gas Liquids
Processed 202 212 202 202
- -----------------------------------------------------------------
Natural Gas Liquids
Processing Capacity 227 227 227 227
- -----------------------------------------------------------------
The company's chemicals segment reported net operating income of
$114 million in the third quarter of 1995, compared with
$66 million in the third quarter last year. The 73 percent
improvement is attributable primarily to higher ethylene,
paraxylene and polyethylene margins, as well as higher
polypropylene licensing income. Ethylene production was
9 percent lower in the third quarter of 1995, compared with the
third quarter of 1994, due to a scheduled turnaround started late
in the 1995 quarter. For the nine-month period, net operating
income increased $172 million over the corresponding period in
1994, primarily due to higher ethylene and polyethylene margins.
18
<PAGE>
However, industry demand for ethylene and propylene softened
throughout the third quarter, while the industry produced without
major operating disruptions. As a result, olefins sales prices
and margins declined during the quarter and industry olefins
inventories increased.
Polyethylene margins, though higher than a year ago, decreased
during the third quarter as a result of flat industry domestic
sales, coupled with a softening export market. The polypropylene
market slowed in the third quarter due to normal seasonality and
customer inventory reductions.
Special items in the third quarter of 1995 included a favorable
income tax adjustment, partly offset by a contingency accrual.
The first nine months of 1995 included property impairments and
an adjustment to a pipeline abandonment charge. Special items in
the third quarter of 1994 included a work force reduction charge.
The nine-month period of 1994 also included an after-tax gain of
$20 million from a subsidiary stock transaction.
Corporate and Other Millions of Dollars
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Reported Corporate and
Other $(86) (73) (244) (220)
Less special items (9) (2) (19) (5)
- -----------------------------------------------------------------
Adjusted Corporate and
Other $(77) (71) (225) (215)
=================================================================
Adjusted Corporate and Other includes:
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
Corporate general and
administrative expenses $(35) (27) (94) (88)
Net interest (43) (45) (130) (139)
Other 1 1 (1) 12
- -----------------------------------------------------------------
Adjusted Corporate and
Other $(77) (71) (225) (215)
=================================================================
The company provided for a 1995 lump-sum merit program in the
third quarter, which contributed to higher corporate general and
administrative expenses in the third quarter and first nine
months of 1995, compared with the same periods last year. In
addition, benefit costs were higher in 1995, due in part to
favorable accrual reversals in the 1994 period.
19
<PAGE>
Net interest represents interest income and expense, net of
capitalized interest. Net interest for both the third quarter
and nine-month period declined relative to 1994, due primarily to
higher capitalized interest associated with the J-Block
development in the U.K. sector of the North Sea.
Other consists primarily of the company's insurance operations,
along with income tax and other items that are not directly
associated with the operating segments on a stand-alone basis.
Other was adversely impacted in the 1995 nine-month period by
higher contingency accruals.
Special items in the third quarter of 1995 consisted of work
force reduction charges and a $7 million after-tax contingency
accrual. In addition to these items, the first nine months of
1995 also included property impairments on an after-tax basis of
$7 million. Special items in the third quarter of 1994 included
after-tax work force reduction charges of $13 million, partially
offset by interest applicable to various favorable settlements of
claims. The nine-month period in 1994 also included losses from
asset sales.
CAPITAL RESOURCES AND LIQUIDITY
Financial Indicators
Millions of Dollars
---------------------------------------
At At At
September 30 December 31 September 30
1995 1994 1994
---------------------------------------
Current ratio 0.9 1.0 1.0
Long-term debt $2,876 3,106 3,213
Preferred stock of
subsidiary $ 345 345 345
Stockholders' equity $3,154 2,953 2,854
Percent of long-term
debt to capital* 45% 49 50
Percent of floating-rate
debt to total debt 17% 23 25
- -----------------------------------------------------------------
*Capital includes long-term debt, preferred stock of subsidiary
and stockholders' equity.
Cash from operations increased $490 million, 62 percent, during
the first nine months of 1995, compared with the same period in
1994. This increase can be attributed in part to a $38 million
increase in net income, the sale of $115 million of accounts
receivable, and a decrease in net, non-cash working capital,
primarily due to an increase of $255 million in taxes and other
accruals over the same period last year. During the first nine
months of 1994, a $79 million tax payment for a previously
recorded accrual also contributed significantly to the variation
in cash from operating activities between the two periods.
Late in August 1995, the company met one of its key financial
objectives when Moody's Investors Service upgraded the rating of
Phillips' senior, unsecured debt from Baa2 to Baa1, which has
lowered the company's cost of debt.
20
<PAGE>
Earlier that month, the company replaced its commercial paper
program, which was supported by a direct-pay irrevocable bank
letter of credit, with a $250 million commercial paper program
supported by a portion of the company's unused revolving lines of
credit equal to 100 percent of the commercial paper outstanding.
To facilitate the change in programs and to maintain liquidity
for other uses, the company increased its revolving bank credit
facility from $800 million to $1,100 million, effective August 4,
1995. At September 30, 1995, no portion of this facility or the
commercial paper program was outstanding.
During the first quarter of 1995, the company and a bank-
sponsored entity entered into a one-year agreement which provides
for the revolving sale of receivables generated by credit card
sales and includes four one-year renewal options. The agreement
limits the amount of receivables which may be sold and
outstanding to $115 million, all of which was outstanding at
September 30, 1995.
The company anticipates also entering into a one-year agreement
with a bank-sponsored entity during the fourth quarter of 1995
for the revolving sale of trade receivables. This agreement also
includes four one-year renewal options. The maximum aggregate
sale of receivables under both agreements will be limited to
$200 million. Proceeds from the sale will be used for general
corporate purposes and acquisitions.
Phillips owns a 50 percent interest in Sweeny Olefins Limited
Partnership (SOLP), which owns and operates a 1.5 billion-pound-
per-year ethylene plant located adjacent to the company's Sweeny,
Texas, refinery. During the third quarter 1995, SOLP entered
into a second subordinated loan agreement with American Olefins,
Incorporated, a wholly owned subsidiary of Phillips, to fund
three new furnaces for the ethylene plant. This debottlenecking
project will increase SOLP's annual capacity to approximately 2
billion pounds upon completion, which is scheduled for the third
quarter of 1996. At September 30, 1995, no portion of this loan
had been drawn.
Phillips' U.S. E&P operations conducted sales of non-strategic
assets during the third quarter resulting in proceeds of
approximately $16 million. These property dispositions are not
expected to have a material impact on reserves, production or
associated earnings.
In the third quarter of 1995, the company approved a lump-sum
merit pay program which resulted in an accrual of approximately
$11 million, all of which was paid during October of this year.
21
<PAGE>
Capital Expenditures and Investments
Millions of Dollars
-------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
E&P $223 129 546 488
GPM 43 21 115 65
RM&T 35 27 93 61
Chemicals 31 22 107 72
Corporate and Other (1) 7 19 16
- -----------------------------------------------------------------
$331 206 880 702
=================================================================
United States $189 129 532 445
Foreign 142 77 348 257
- -----------------------------------------------------------------
$331 206 880 702
=================================================================
In October, the company announced it had signed an agreement to
purchase Amerada Hess Limited's (Amerada) 1.76 percent interest
in the Britannia field, an undeveloped gas discovery located in
the U.K. Sector of the North Sea, bringing Phillips' total
interest in Britannia to 6.78 percent. The agreement, which also
includes the purchase of portions of Amerada's interests in
certain exploration acreage on two blocks in the same area, is
subject to the approval of other Britannia field partners and the
U.K. President of the Board of Trade.
With production scheduled to begin in 1998, Phillips' interest in
Britannia field production is expected to be approximately
2,700 barrels of natural gas liquids and 35.7 million cubic feet
of gas per day by 1999.
The company's subsidiary, GPM Gas Corporation, continues to
pursue its previously announced acquisition of two subsidiaries
of Enron Corp. with gathering facilities located in the Texas and
Oklahoma Panhandles. To obtain Federal Trade Commission (FTC)
clearance, an amendment was signed in June 1995, to reduce the
scope of the acquisition. As revised, it now includes
approximately 3,200 miles of gathering line and 22 compressor
stations, gathering approximately 260 million cubic feet per day
of natural gas from 1,900 meter stations. In August, the FTC
cleared the acquisition. Completion of the acquisition is
pending, awaiting Enron Corp.'s receipt of Federal Energy
Regulatory Commission approval to abandon gas service. Phillips
Gas Company, GPM Gas Corporation's parent, will be required to
make arrangements to fund the purchase price and is reviewing
several options with Phillips to meet its future liquidity
requirements--including additional borrowing from the company or
the contribution of additional equity by Phillips.
22
<PAGE>
Contingencies
Legal and Tax Matters
On September 26, 1995, the U.S. Court of Appeals for the Tenth
Circuit heard the Internal Revenue Service's appeal of the U.S.
Tax Court's rulings related to the company's sales of liquefied
natural gas in Japan. The Tax Court's rulings supported the
company's position that more than 50 percent of the income at
issue was from a foreign source. Though a final, favorable
outcome of this litigation would have a material, positive effect
on Phillips' net income and cash position, and an unfavorable
result could have a material impact on cash flows in a particular
quarter, it remains too early to determine the outcome or the
final financial effect.
Phillips accrues for contingencies when a loss is probable and
the amounts can be reasonably estimated. Based on currently
available information, the company believes that it is remote
that future costs related to known contingent liability exposures
will exceed current accruals by an amount that would have a
material adverse impact on the company's financial statements.
Environmental
Most aspects of the businesses in which the company engages are
subject to various federal, state, local and foreign
environmental laws and regulations. Similar to other companies
in the petroleum and chemical industries, the company incurs
costs for preventive and corrective actions at facilities and
waste disposal sites.
Phillips may be obligated to take remedial action as the result
of the enactment of laws, such as the federal Superfund law, the
issuance of new regulations, or as a result of leaks and spills.
In addition, an obligation may arise when a facility is closed or
sold. Most of the expenditures to fulfill these obligations
relate to facilities and sites where past operations followed
practices and procedures that were considered appropriate under
regulations, if any, existing at the time, but may now require
investigatory or remedial work to adequately protect the
environment or address new regulatory requirements.
At year-end 1994, Phillips reported 56 sites where it had
information indicating that it might have been identified as a
Potentially Responsible Party (PRP). Since then, 15 of these
sites were resolved through consent decrees, deposits into trust
funds or otherwise. Seven sites were added during the nine-month
period. Of the 48 sites remaining at September 30, 1995, the
company believes it has a legal defense or its records indicate
no involvement for 16 sites. At eight other sites, present
information indicates that it is probable that the company's
exposure is less than $100,000 per site. At 11 sites, Phillips
has had no communication or activity with government agencies or
other PRPs in more than two years. Of the 13 remaining sites,
the company has provided for any probable costs that can be
reasonably estimated.
23
<PAGE>
Phillips does not consider the number of sites at which it has
been designated potentially responsible by state or federal
agencies as a relevant measure of liability. Some companies may
be involved in few sites but have much larger liabilities than
companies involved in many more sites. Although liability of
those potentially responsible is generally joint and several for
federal sites and frequently so for state sites, the company is
usually but one of many companies cited at a particular site. It
has, to date, been successful in sharing cleanup costs with other
financially sound companies. Many of the sites at which the
company is potentially responsible are still under investigation
by the Environmental Protection Agency (EPA) or the state
agencies concerned. Prior to actual cleanup, those potentially
responsible normally assess site conditions, apportion
responsibility and determine the appropriate remediation. In
some instances, Phillips may have no liability or attain a
settlement of liability. Actual cleanup costs generally occur
after the parties obtain EPA or equivalent state agency approval.
At September 30, 1995, accruals of $7 million had been made for
the company's unresolved PRP sites. In addition, the company has
accrued $90 million for other planned remediation activities,
including resolved state, PRP, and other federal sites, as well
as sites where no claims have been asserted, and $13 million for
other environmental contingent liabilities, for total
environmental accruals of $110 million. No one site represents
more than 10 percent of the total.
After an assessment of environmental exposures for cleanup and
other costs, the company makes accruals on an undiscounted basis
for planned investigation and remediation activities for sites
where it is probable that future costs will be incurred and these
costs can be reasonably estimated. These accruals have not been
reduced for possible insurance recoveries. Based on currently
available information, the company believes that it is remote
that future costs related to known contingent liability exposures
will exceed current accruals by an amount that would have a
material adverse impact on the company's financial statements.
OUTLOOK
High-pressure water injection technology has increased Phillips
Petroleum Company Norway's production to approximately 98,000 net
barrels per day for the first nine months of 1995, a 24 percent
increase over the same period last year. This technology is
expected to increase overall oil recovery from the Ekofisk field
by 550 million gross barrels of oil over the remaining productive
life of the field.
In September, Phillips announced its intent to seek Board
approval to enter the methyl mercaptan market by constructing a
facility at its Borger, Texas, complex capable of producing
100 million pounds of the sulphur-based chemical annually, with a
target start-up date late in 1998.
24
<PAGE>
During the third quarter 1995, the company received approval from
the FERC to abandon gas service in the company's Seagas Pipeline.
Phillips signed agreements with ARCO Pipeline Company earlier
this year to form a new partnership, Seaway Pipeline Company, to
transport crude oil through pipelines from the Houston Gulf Coast
area to refineries and other markets in the mid-continent area.
Phillips plans to contribute its Seagas Pipeline to the jointly
owned partnership late in the fourth quarter of this year, at
which time the company expects to receive cash from ARCO and an
interest in the partnership.
In mid-June, Xijiang production in China was shut in due to
pipeline damage. Production resumed in mid-August. Since then,
production has been constrained by severe weather, but higher
than expected well flow rates have again been realized.
The Xijiang 30-2 field began producing in October 1995. Phillips
and its co-venturers expect total oil production from the Xijiang
24-3 and 30-2 fields to increase to a peak rate of 100,000 gross
barrels a day by the end of 1996.
Discussions continue with Phillips' co-venturer in the Sunfish
prospect regarding the transfer of the co-venturer's lease
interests in the South Cook Inlet to the company. The next
appraisal well is included in the 1996 exploration capital
budget.
Average oil production volumes from the Point Arguello field
declined further in the third quarter to approximately 9,600 net
barrels per day, down from approximately 13,700 net barrels per
day in the fourth quarter of 1994. Recently well workovers,
tubing changeouts and other measures have increased production
somewhat. However, Phillips and the operator continue to monitor
production levels closely.
In September, the company announced that, for commercial reasons,
start-up volumes from the Judy/Joanne project operated by its
Phillips Petroleum Company United Kingdom Limited unit may be
delayed or lower than had been estimated. The long-term
economics of the project remain favorable, but delays in
production are expected to reduce Phillips' net earnings and cash
flows in the near term.
The gas reserves in blocks 30/7a and 30/12a (J-Block) are
dedicated to a single gas purchaser, Enron Europe Limited (EEL),
under long-term take-or-pay gas sales agreements guaranteed by
its parent, Enron Corp. Under the agreements, EEL is required to
pay for gas at a predetermined rate even if it elects not to take
actual deliveries. EEL has recently advised that its present
non-binding, bona fide estimate of future total daily nominations
for delivery of J-Block gas is zero through September 1997. The
commissioning date of the facilities and commencement of the
periods during which EEL's obligations to take or pay are yet to
be finally determined.
25
<PAGE>
As both gas and liquids are produced in association with each
other, crude oil and condensate volumes will fluctuate with gas
production. Accordingly, the exact timing of production from
J-Block remains uncertain and depends largely on the gas
purchaser's elections and alternative production plans being
evaluated by J-Block owners.
In view of EEL's present estimate of takes under the gas sales
agreements, the J-Block owners are evaluating alternative
arrangements to commence production. The J-Block owners also own
the reserves in a block (block 30/6b) immediately adjacent to
J-Block, which are in communication with J-Block reserves but not
dedicated under the above contract. The reserves in block 30/6b
would be produced from the facilities being completed on J-Block.
The 30/6b owners are discussing arrangements for the early
production of these reserves. In addition, the J-Block owners
are continuing evaluation of possible gas injection alternatives
which would, if completed, permit the production of liquids from
J-Block even if gas production is deferred.
As announced previously, it is anticipated that all production
facilities, located in block 30/7a of the U.K. North Sea, and
related third-party transportation facilities will be ready for
full operation in early 1996. The J-Block and block 30/6b are
operated by Phillips Petroleum Company United Kingdom Limited,
which owns a 36.5 percent interest.
Worldwide crude oil prices for the remainder of 1995 will depend
upon market reaction to changing political and economic
environments, which continue to remain uncertain. Due to a
decline in storage levels and the threat of hurricane related
supply disruptions, gas prices improved toward the end of the
third quarter, but retain potential for further limited increases
from seasonal demand.
Chemicals margins tightened during the third quarter of 1995,
continuing a trend begun during the latter part of the second
quarter, in response to a slowing of industry demand. The
company anticipates that demand will continue to soften during
the remainder of the year.
Phillips' results for the first nine months of 1995 reflect the
benefit of the company's ongoing efforts to contain costs.
Controllable costs are lower in 1995, even though production
levels are higher. Plans for best-in-class improvements are
currently being developed which are expected to further reduce
costs across all the company's business lines.
To meet its liquidity requirements, including funding its capital
program, the company will look primarily to cash generated from
operations and financing.
26
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
- --------
3(ii) Bylaws of Phillips Petroleum Company, as amended
effective September 11, 1995
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
Reports on Form 8-K
- -------------------
During the three months ended September 30, 1995, the company has
not filed any reports on Form 8-K.
27
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PHILLIPS PETROLEUM COMPANY
/s/ L. F. Francis
----------------------------------
L. F. Francis
Controller and General Tax Officer
(Chief Accounting and Duly
Authorized Officer)
November 10, 1995
28
<PAGE>
Exhibit 3(ii)
BYLAWS
PHILLIPS PETROLEUM COMPANY
(INCORPORATED UNDER THE LAWS OF DELAWARE)
SEPTEMBER 11, 1995
<PAGE>
TABLE OF CONTENTS
ARTICLE I
LOCATION OF OFFICES
SECTION 1. LOCATION: ..................................... 1
ARTICLE II
STOCKHOLDERS MEETINGS
SECTION 1. ANNUAL MEETING: NOTICE: ....................... 1
SECTION 2. SPECIAL MEETINGS: NOTICE: ..................... 1
SECTION 3. QUORUM: ....................................... 2
SECTION 4. VOTING RIGHTS: PROXIES:
RECORD DATE: LIST OF STOCKHOLDERS: ........... 2
SECTION 5. CHAIRMAN AND SECRETARY OF MEETINGS: ........... 3
SECTION 6. ELECTION OF DIRECTORS: ........................ 3
SECTION 7. INSPECTORS: ................................... 4
SECTION 8. INDEPENDENT PUBLIC ACCOUNTANTS: ............... 5
SECTION 9. STOCKHOLDER ACTION: ........................... 5
SECTION 10. NOMINATIONS AND STOCKHOLDER BUSINESS: ......... 5
- i -
<PAGE>
ARTICLE III
DIRECTORS
SECTION 1. POWERS: ....................................... 8
SECTION 2. FIRST MEETING OF NEWLY ELECTED
BOARD OF DIRECTORS: ........................... 8
SECTION 3. REGULAR MEETINGS: ............................. 8
SECTION 4. SPECIAL MEETINGS: NOTICE: ..................... 9
SECTION 5. QUORUM AND VOTING: ............................ 9
SECTION 6. VACANCIES: ................................... 10
SECTION 7. COMMITTEES, APPOINTMENT AND
LIMITATION OF POWERS: ........................ 10
SECTION 8. AUDITING OF ACCOUNTS: ........................ 11
SECTION 9. CHANGE IN NUMBER OF DIRECTORS: ............... 11
SECTION 10. OTHER INTERESTS OF DIRECTORS: ................ 11
SECTION 11. SUBMISSION OF ACTS TO STOCKHOLDERS: .......... 11
SECTION 12. COMPENSATION TO DIRECTORS: ................... 12
SECTION 13. ELIGIBILITY OF DIRECTORS: .................... 12
SECTION 14. INDEMNIFICATION: ............................. 12
- ii -
<PAGE>
ARTICLE IV
EXECUTIVE COMMITTEE
SECTION 1. MEMBERS: ..................................... 15
SECTION 2. POWERS: ...................................... 15
SECTION 3. MEETINGS: .................................... 15
SECTION 4. QUORUM: ...................................... 15
SECTION 5. OFFICERS: SUBCOMMITTEES: ..................... 16
SECTION 6. VACANCIES: ................................... 16
ARTICLE V
COMMITTEE ON DIRECTORS' AFFAIRS
SECTION 1. MEMBERS: ..................................... 16
SECTION 2. POWERS: ...................................... 16
SECTION 3. MEETINGS: .................................... 17
SECTION 4. QUORUM AND VOTING: ........................... 17
SECTION 5. FAILURE TO ACT: .............................. 17
SECTION 6. RIGHTS OF STOCKHOLDERS: ...................... 17
- iii -
<PAGE>
ARTICLE VI
AUDIT COMMITTEE
SECTION 1. MEMBERS: ..................................... 18
SECTION 2. POWERS: ...................................... 18
SECTION 3. DEFINITION: .................................. 19
SECTION 4. MEETINGS: .................................... 20
SECTION 5. STAFF: ....................................... 20
ARTICLE VII
COMPENSATION COMMITTEE
SECTION 1. MEMBERS: ..................................... 20
SECTION 2. POWERS: ...................................... 20
SECTION 3. MEETINGS: .................................... 21
SECTION 4. STAFF: ....................................... 21
ARTICLE VIII
PUBLIC POLICY COMMITTEE
SECTION 1. MEMBERS: ..................................... 21
SECTION 2. POWERS: ...................................... 22
SECTION 3. MEETINGS: .................................... 23
SECTION 4. STAFF: ....................................... 23
- iv -
<PAGE>
ARTICLE IX
OFFICERS
SECTION 1. DESIGNATION: ................................. 23
SECTION 2. ELECTION: TERM OF OFFICE: .................... 24
SECTION 3. REMOVAL FROM OFFICE:
FAILURE TO PERFORM DUTIES: ................... 24
SECTION 4. CHAIRMAN OF THE BOARD OF DIRECTORS:
VICE CHAIRMAN: PRESIDENT: .................... 24
SECTION 5. CHIEF EXECUTIVE OFFICER: ..................... 25
SECTION 6. EXECUTIVE VICE PRESIDENTS:
VICE PRESIDENTS: ............................. 25
SECTION 7. SECRETARY: ................................... 25
SECTION 8. TREASURER: ................................... 26
SECTION 9. CONTROLLER: .................................. 26
SECTION 10. GENERAL: ..................................... 27
ARTICLE X
CAPITAL STOCK
SECTION 1. CERTIFICATES: FACSIMILE SIGNATURES:
LOST STOCK: .................................. 27
SECTION 2. TRANSFERS: PRESERVATION OF
CANCELED CERTIFICATES: FRACTIONAL SHARES:
TRANSFER AGENTS: ............................. 28
SECTION 3. DATE FOR DETERMINATION
OF STOCKHOLDERS: ............................. 28
SECTION 4. ADDITIONAL REGULATIONS: ...................... 29
- v -
<PAGE>
ARTICLE XI
POLITICAL ACTIVITIES
SECTION 1. COMPLIANCE WITH LAWS CONCERNING
POLITICAL CONTRIBUTIONS: ..................... 29
SECTION 2. POLITICAL CONTRIBUTIONS: ..................... 29
SECTION 3. POLITICAL COMMITTEE
AUTHORIZED BY FEDERAL LAW: ................... 30
SECTION 4. NONFEDERAL POLITICAL COMMITTEES: ............. 30
SECTION 5. OTHER POLITICAL ACTIVITIES: .................. 31
ARTICLE XII
MISCELLANEOUS
SECTION 1. CHECKS, NOTES AND DRAFTS: .................... 31
SECTION 2. SEAL: ........................................ 31
SECTION 3. DIVIDENDS AND RESERVES: ...................... 32
SECTION 4. WAIVER OF NOTICE: ............................ 32
SECTION 5. CHAIRMAN OF THE BOARD EMERITUS: .............. 32
SECTION 6. AMENDMENTS: .................................. 32
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BYLAWS
OF
PHILLIPS PETROLEUM COMPANY
ARTICLE I
LOCATION OF OFFICES
ARTICLE I. SECTION 1. LOCATION:
The statutory registered office shall be in Dover, Delaware,
and the principal operating offices shall be in Bartlesville,
Oklahoma. The company may also have offices or agencies in New
York, New York, and in such other places as the Board of
Directors or the Executive Committee may designate.
ARTICLE II
STOCKHOLDERS MEETINGS
ARTICLE II. SECTION 1.
ANNUAL MEETING: NOTICE:
An annual meeting of the stockholders of the company for the
election of directors and the transaction of such other business
as may properly come before the meeting shall be held, at such
place, on such date and at such time, as shall be determined by
the Board. Notice of the place, date and time of the meeting
shall be given by mailing at least 10 days, but not more than 60
days, previous to such meeting, postage prepaid, a copy of such
notice addressed to each stockholder at his post office address
as recorded on the books of the company. The Board of Directors
may postpone or reschedule any previously scheduled annual
meeting.
ARTICLE II. SECTION 2.
SPECIAL MEETINGS: NOTICE:
Special meetings of the stockholders, other than those
required by statute, may be called at any time by the Chairman of
the Board of Directors, the Vice Chairman, or the President, or
by the Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors. Notice of every
special
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meeting, stating the time, place and purpose, shall be given by
mailing, postage prepaid, at least 10 but not more than 60 days
before each such meeting, a copy of such notice addressed to each
stockholder of the company at his post office address as recorded
on the books of the company. The Board of Directors may
postpone, reschedule or cancel any previously scheduled special
meeting.
Only such business shall be conducted at a special meeting
of stockholders as shall have been brought before the meeting
pursuant to the company's notice of meeting.
ARTICLE II. SECTION 3. QUORUM:
At any meeting of the stockholders the holders of a majority
of the issued and outstanding shares of the common stock, present
in person or by proxy, shall constitute a quorum for all purposes
unless otherwise provided by law.
If the holders of the amount of stock necessary to
constitute a quorum shall fail to attend in person or by proxy at
the time and place fixed for an annual or special meeting, the
person serving as chairman of the meeting may adjourn the
meeting, without notice other than by announcement of the time
and place at the meeting; provided, however, that if the
adjournment is for more than 30 days, or if after the adjournment
a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given in conformity with the
notice requirements for the meeting being adjourned. At any such
adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at
the original meeting.
ARTICLE II. SECTION 4.
VOTING RIGHTS: PROXIES:
RECORD DATE: LIST OF STOCKHOLDERS:
At each stockholders meeting every stockholder shall be
entitled to vote in person or by proxy appointed in accordance
with Delaware law.
The votes for directors shall be by ballot.
All questions shall be determined by a majority vote of the
stock represented at the meeting, unless a different vote is
required by law or by the Certificate of Incorporation of the
company.
For a period of at least 10 days prior to each meeting of
the stockholders, and during such meeting, there shall be
maintained a complete list, in alphabetical order, of all of the
stockholders entitled to vote at such meeting,
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indicating the address of and number of shares held by each,
which list shall be certified by the person in charge of the
stock ledger of the company. Only the persons in whose names
shares of stock are registered on the books of the company on the
record date for such meeting shall be entitled to vote.
Subsequent to the record date for any meeting, and prior to
such meeting, any proxy may submit his power of attorney to the
Secretary for examination. The certificate of the Secretary as
to the regularity of such power of attorney, and as to the number
of shares held by the stockholder who executed such power of
attorney, shall be received as prima facie evidence of the number
of shares represented by the holder of such power of attorney for
the purpose of establishing the presence of a quorum at such
meeting and of organizing the same, and for all other purposes.
ARTICLE II. SECTION 5.
CHAIRMAN AND SECRETARY OF MEETINGS:
The Chairman of the Board of Directors, and in his absence,
the Vice Chairman, and in the absence of both the Chairman and
the Vice Chairman, the President, shall act as chairman of and
preside at all meetings of stockholders. The Board of Directors
may appoint any stockholder to act as chairman of any such
meeting in the absence of the Chairman of the Board of Directors,
the Vice Chairman and the President. The chairman of any meeting
of stockholders shall determine the order of business and the
procedure at the meeting, including the determination of the date
and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at such meeting and
such other regulation of the manner of voting and the conduct of
discussion as he determines to be reasonably in order. The
chairman may adjourn any meeting of stockholders, whether
pursuant to Section 3 of this Article II or otherwise, and notice
of such adjournment need be given only if required by law.
The Secretary shall act at all meetings of the stockholders,
but, in the absence of the Secretary at any such meeting, an
Assistant Secretary of the company shall act in his stead, or the
presiding officer may appoint any other person to act as
secretary of the meeting.
ARTICLE II. SECTION 6.
ELECTION OF DIRECTORS:
The stockholders shall at each annual meeting select by
ballot a Board of Directors consisting of not less than eleven
nor more than twenty-one members, with the exact number to be
fixed from time to time by resolution of the Board. A majority
of the total number of directors elected shall be persons who are
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independent outside directors, as defined in this Section. The
persons receiving votes of a majority of the stock represented at
the meeting shall be directors for the ensuing year or until
their successors shall be elected.
As used in these Bylaws, the term "independent outside
directors" means any person who, on the date of his election, (i)
is not an officer or employee of this company; (ii) is not an
officer or employee of, or does not own directly or indirectly in
excess of 1% of the shares of, a corporation (A) which has
received payments from this company for property or services in
excess of 1% of its gross receipts during any one of the four
calendar years immediately preceding such date, as determined by
its financial statement for the year in question, or (B) which is
proposed to receive during the following year such payments in
excess of 1% of its gross receipts as determined by its financial
statement for the immediately preceding year; (iii) is not a
member, officer, or employee of any business or professional
organization (other than a corporation) which (A) has received
payments from this company for property or services in excess of
$250,000 during any one of the four calendar years immediately
preceding such date, or (B) is proposed to receive such payments
in excess of $250,000 in the following year; (iv) is not a person
who individually (as a share partner or otherwise) has received
payments, directly or indirectly, from this company in excess of
$25,000 (other than fees as a director) for property or services
sold or provided by him during any one of the four calendar years
immediately preceding such date, and is not proposed to receive
such payments in excess of $25,000 in the following year; and (v)
is not a member of or associate in a law firm which is proposed
to be or in the preceding four calendar years has been engaged by
this company. Notwithstanding the foregoing definition, any
person elected a director at this company's l975 annual meeting
of stockholders, who was not an officer or employee of this
company when so elected and is not such an officer or employee on
the date on which his status is determined, shall be considered
within the definition of "independent outside director." As used
in this Section, the term "this company" means Phillips Petroleum
Company or any company which is controlled directly or indirectly
by it; and the term "officer or employee" shall not include any
director of a corporation who is not otherwise an officer or
employee of such corporation.
ARTICLE II. SECTION 7. INSPECTORS:
The company shall, in advance of any meeting of
stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The company may
designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is
able to act at a meeting of stockholders, the person presiding
at the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering
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upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability.
ARTICLE II. SECTION 8.
INDEPENDENT PUBLIC ACCOUNTANTS:
Independent public accountants ("accountants") designated by
the Board of Directors require approval by the stockholders. At
each annual meeting a vote of stockholders shall be taken to
ascertain their approval or disapproval of the accountants
designated by the Board as the accountants to audit the books,
records, and accounts of the company for the current fiscal year.
If the accountants designated by the Board are disapproved by the
stockholders, the Board shall determine whether to replace such
accountants for the current fiscal year, but in any case shall
not designate such accountants for the next fiscal year. If the
accountants designated by the Board are approved by the
stockholders, they shall not be discharged or removed by the
Board prior to the beginning of the next fiscal year, except with
the concurrence of the stockholders acting at a special meeting
called for that purpose. The accountants shall have access at
reasonable times to all records, documents, accounts, and
information of the company, and shall be entitled to require from
directors, officers, and employees of the company such
information and explanation as, in their opinion, are necessary
to enable them to make their certification or render their report
or opinion, or to pursue any inquiry which the Audit Committee
has directed them to conduct.
ARTICLE II. SECTION 9.
STOCKHOLDER ACTION:
Any action required or permitted to be taken by the
stockholders of the company must be effected at a duly called
annual or special meeting of such holders and may not be effected
by any consent in writing by such holders.
ARTICLE II. SECTION 10.
NOMINATIONS AND STOCKHOLDER BUSINESS:
Nominations of persons for election to the Board of
Directors of the company and the proposal of business to be
considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the company's notice of meeting,
(b) by or at the direction of the Board of Directors, or (c) by
any stockholder of the company who was a stockholder of record
at the time of giving of notice provided for in this Section, who
is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section.
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For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to this
Section, the stockholder must have given timely notice thereof in
writing to the Secretary of the company, and such business must
be a proper subject for stockholder action under the Delaware
General Corporation Law. To be timely, a stockholder's notice
shall be delivered to the Secretary at the principal executive
offices of the company not less than 60 days nor more than 90
days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or
delayed by more than 60 days from such anniversary date, notice
by the stockholder to be timely must be so delivered not earlier
than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Such
stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business
that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination
or proposal is made (i) the name and address of such stockholder,
as they appear on the company's books, and of such beneficial
wner, and (ii) the class and number of shares of the company
which are owned beneficially and of record by such stockholder
and such beneficial owner.
Notwithstanding anything in this Section to the contrary, in
the event that the number of directors to be elected to the Board
of Directors of the company is increased and there is no public
announcement specifying the size of the increased Board of
Directors made by the company at least 70 days prior to the first
anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered
to the Secretary at the principal executive offices of the
company not later than the close of business on the 10th day
following the day on which such public announcement is first made
by the company.
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Only such business shall be conducted at a special meeting
of stockholders as shall have been brought before the meeting
pursuant to the company's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be
elected pursuant to the company's notice of meeting (a) by or at
the direction of the Board of Directors or (b) by any stockholder
of the company who is a stockholder of record at the time of
giving of notice provided for in this Section, who shall be
entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section. Nominations by
stockholders of persons for election to the Board of Directors
may be made at such a special meeting of stockholders if the
stockholder's notice required by this Section shall be delivered
to the Secretary at the principal executive offices of the
company not earlier than the 90th day prior to such special
meeting and not later than the close of business on the later of
the 60th day prior to such special meeting or the 10th day
following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting.
Only such persons who are nominated in accordance with the
procedures set forth in this Section shall be eligible for
election as directors at any meeting of stockholders. Only such
business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the
procedures set forth in this Section. The chairman of the
meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in
this Section and, if any proposed nomination or business is not
in compliance with this Section, to declare that such defective
proposal shall be disregarded.
For purposes of this Section, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or
in a document publicly filed by the company with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Exchange Act.
Notwithstanding the foregoing provisions of this Section, a
stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section. Nothing in
this Section shall be deemed to affect any rights of stockholders
to request inclusion of proposals in the company's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
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ARTICLE III
DIRECTORS
ARTICLE III. SECTION 1. POWERS:
The Board of Directors shall have all the powers of the
company and all the management of its business, except as
otherwise provided by law. It shall appoint and remove all
officers, employees, and agents of the company except as
hereinafter stated, prescribe their duties, fix their
compensation except as hereinafter stated, and require, when
deemed advisable, security for their faithful service. It may
make rules and regulations not inconsistent with law and these
Bylaws for the guidance of the company's officers, employees, and
agents. Each director shall have full access to any and all
company records and shall have the right to interview any company
officer or employee with respect to any aspect of the company's
business. It shall cause a report to be made to the annual
meeting of the stockholders showing the business operations and
financial position of the company. It shall generally possess all
the powers and perform all the duties usually exercised by or
imposed upon boards of directors of similar corporations.
Directors who do not qualify as independent outside directors, as
defined in Section 6, Article II of these Bylaws, shall not vote
on the selection or retention of independent public accountants.
Although resignation, death, or removal of one or more
independent outside directors, as defined in Section 6, Article
II, may result in the Board's being composed of less than the
proportion of independent outside directors required by that
Section, the Board shall nevertheless have the same powers as
otherwise, but shall fill each such vacancy with an independent
outside director within a reasonable period of time.
ARTICLE III. SECTION 2.
FIRST MEETING OF NEWLY ELECTED BOARD OF DIRECTORS:
Immediately after each annual meeting of stockholders, the
newly elected directors shall meet at the place where the annual
meeting of stockholders was held, for the purpose of electing
officers and transacting any other business that shall come
before the meeting.
ARTICLE III. SECTION 3. REGULAR MEETINGS:
Regular meetings of the Board of Directors shall be held at
the offices of the company in Bartlesville, Oklahoma, at 8:30
a.m. on the second Monday of each month unless otherwise
designated by the Board, except (i) the meeting for which
provisions have been made in Section 2 of this Article III shall
count as the regular meeting for the month of May, and (ii) no
regular meeting shall be held
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in the months of March, June, August and November. No notice of
any regular meeting shall be necessary.
Regular meetings may be adjourned to be held at any place
within or without the States of Oklahoma and Delaware at the time
and place specified in the resolution of adjournment. No notice
of any adjourned meeting of any regular meeting shall be
necessary.
ARTICLE III. SECTION 4.
SPECIAL MEETINGS: NOTICE:
Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the Vice Chairman, the
President, the Secretary, or an Assistant Secretary, and shall be
called by any of said officers upon the request of at least three
directors. Any such meeting shall be held at the time and place,
within or without the States of Oklahoma and Delaware, specified
in the notice thereof. One day's notice of the time and place of
special meetings shall be given to each director by letter or
telegram sent to the residence or usual place of business of such
director.
No notice of any adjourned meeting of any special meeting
shall be necessary.
ARTICLE III. SECTION 5. QUORUM AND VOTING:
A majority of the total number of directors then in office
shall constitute a quorum for the transaction of business, but
less than a quorum may adjourn from time to time and from place
to place. The affirmative votes of a majority of the total
number of directors then in office shall be required to
constitute action by the Board of Directors, unless the vote of a
greater number shall be required by law and except as may be
otherwise provided in the Certificate of Incorporation of the
company; except that (i) only the affirmative votes of a majority
of the total number of independent outside directors then in
office shall be required on the question of the selection or
retention of independent public accountants, and (ii) only the
affirmative votes of a majority of the disinterested directors,
even though the disinterested directors be less than a quorum,
shall be required on any question involving the compensation of
directors other than those who are employees of the company.
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ARTICLE III. SECTION 6. VACANCIES:
A vacancy occurring in the Board of Directors shall be
filled by a person elected by the remaining members of the Board,
though less than a quorum, to serve until the next annual
election by the stockholders.
ARTICLE III. SECTION 7.
COMMITTEES, APPOINTMENT AND LIMITATION OF POWERS:
All committees shall be appointed by the Board of Directors,
except to the extent otherwise authorized by Section 5, Article
IX of these Bylaws, and except further, that the Executive
Committee may appoint subcommittees, as provided in Section 5,
Article IV of these Bylaws. No committee, whether or not
appointed by the Board, shall have authority to:
(a) declare dividends or distributions;
(b) approve or recommend to stockholders action or
proposals required by law to be approved by
stockholders;
(c) designate candidates for the office of director,
for purposes of proxy solicitation or otherwise,
or fill vacancies on the Board or any committee
thereof;
(d) amend the Bylaws;
(e) reduce earned or capital surplus;
(f) authorize or approve the reacquisition of shares
unless pursuant to a general formula or method
specified by the Board; or
(g) authorize or approve the issuance or sale of, or
any contract to issue or sell, shares or designate
the terms of a series of a class of shares,
provided that the Board, having acted regarding
general authorization for the issuance or sale of
shares, or any contract therefor, and, in the case
of a series, the designation thereof, may,
pursuant to a general formula or method specified
by the Board by resolution or by adoption of a
stock option or other plan, authorize a committee
to fix the terms upon which such shares may be
issued or sold, including, without limitation, the
price, the dividend rate, provisions for
redemption, sinking fund,
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conversion, preferential rights, and provisions
for other features of a class of shares, or a such
committee to adopt any final resolution setting
forth all the terms thereof and to authorize the
statement of the terms of a series for filing with
the Secretary of State of Delaware.
Nothing contained in this Section is intended to prohibit a
committee from submitting recommendations to the Board regarding
any matter.
ARTICLE III. SECTION 8.
AUDITING OF ACCOUNTS:
It shall be the duty of the Board of Directors to cause the
books and accounts of the company and vouchers and papers
relating thereto to be audited at least once a year.
ARTICLE III. SECTION 9.
CHANGE IN NUMBER OF DIRECTORS:
The Board of Directors may increase or decrease the number
of directors from time to time without approval of the
stockholders, provided that the proportion of independent outside
directors shall conform to the provisions of Section 6, Article
II of these Bylaws. Where the number of directors is increased,
the Board shall elect a person to fill each vacancy thus created,
to serve until the next annual election by the stockholders.
ARTICLE III. SECTION 10.
OTHER INTERESTS OF DIRECTORS:
No transaction between this company and any director or
officer or any corporation, partnership, association, or other
organization shall be affected by any personal interest in such
transaction of any director of this company except to the extent
provided by law.
ARTICLE III. SECTION 11.
SUBMISSION OF ACTS TO STOCKHOLDERS:
The Board of Directors may submit any transaction for
approval or ratification at any meeting of the stockholders.
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ARTICLE III. SECTION 12.
COMPENSATION TO DIRECTORS:
Directors, other than those who are employees of the
company, shall be compensated for their services as members of
the Board of Directors and of any committee thereof in such
manners and in such amounts as may be fixed from time to time by
the Board. In fixing such compensation, the Board shall take
into account not only the time required for attendance at
meetings of the Board and committees thereof, but also the time
spent in preparation for such meetings. Upon request, the
company shall furnish to any stockholder, without charge, a
statement of the total annual compensation of any director who is
not an employee of the company, showing the method by which such
compensation was computed. In addition to such compensation any
director may be reimbursed by the company for all reasonable
expenses incurred in attending meetings of the Board and its
committees. Subject to the provisions of Section 6, Article II,
nothing herein shall be construed to preclude any director from
serving the company in any other capacity and receiving
compensation therefor.
ARTICLE III. SECTION 13.
ELIGIBILITY OF DIRECTORS:
Any person shall be eligible for election as a director
unless his seventieth birthday will occur or has occurred on or
before the date of his election. Any employee who is also a
director, including the Chairman of the Board of Directors, shall
resign as a director upon his retirement as an employee.
ARTICLE III. SECTION 14.
INDEMNIFICATION:
Each person who was or is made a party or is threatened to
be made a party to or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact
that he is or was a director, officer or employee of the company
or is or was serving at the request of the company as a director,
officer employee of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with
respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer employee or
in any other capacity while serving as a director, officer
employee, shall be indemnified and held harmless by the company
to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that
such amendment permits the company to provide broader
indemnification rights than such law permitted
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the company to provide prior to such amendment), against all
expense, liability and loss (including attorneys' fees,
judgments, fines, Employee Retirement Income Security Act of 1974
excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in this
Section with respect to proceedings to enforce rights to
indemnification, the company shall indemnify any such indemnitee
in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the company.
The right to indemnification conferred in this Section shall
include the right to be paid by the company the expenses incurred
in defending any such proceeding in advance of its final
disposition (hereinafter an "advancement of expenses"); provided,
however, that, if the Delaware General Corporation Law requires,
an advancement of expenses incurred by an indemnitee in his
capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the company of an
undertaking, by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal
(hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section
or otherwise. The rights to indemnification and to the
advancement of expenses conferred in this Section shall be
contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director, officer or employee
and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
If a claim under this Section is not paid in full by the
company within 60 days after written claim had been received by
the company, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be 20 days,
the indemnitee may at any time thereafter bring suit against the
company to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit
brought by the company to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending
such suit. In (i) any suit brought by the indemnitee to enforce
a right to indemnification hereunder (but not in a suit brought
by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the
company to recover an advancement of expenses pursuant to the
terms of an undertaking the company shall be entitled to recover
such expenses upon a final adjudication that, the indemnitee has
not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. Neither the failure of the
company (including its Board of
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Directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such suit
that indemnification of the indemnitee is proper in the
circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the company (including its
Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in
the case of such a suit brought by the indemnitee, be a defense
to such suit. In any suit brought by the indemnitee to enforce a
right to indemnification or to an advancement of expenses
hereunder, or by the company to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or
to such advancement of expenses, under this Section or otherwise
shall be on the company.
The rights to indemnification and to the advancement of
expenses conferred in this Section shall not be exclusive of any
other right which any person may have or hereafter acquire under
any statute, the company's Certificate of Incorporation, Bylaws,
agreement, vote of stockholders or disinterested directors or
otherwise.
The company may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of
the company or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss,
whether or not the company would have the power to indemnify such
person against such expense, liability or loss under the Delaware
General Corporation Law.
The company may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification, and
rights to be paid by the company the expenses incurred in
defending any proceeding in advance of its final disposition, to
any agent of the company or to any agent of another corporation
or of a partnership, joint venture, trust or other enterprise,
including any employee benefit plan, serving as such agent at the
request of the company, to the fullest extent of the provisions
of this Section with respect to the indemnification and
advancement of expenses of directors, officers and employees of
the company.
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ARTICLE IV
EXECUTIVE COMMITTEE
ARTICLE IV. SECTION 1. MEMBERS:
The Board of Directors, by resolution adopted by a majority
of the whole Board, may establish an Executive Committee, the
members of which shall consist of the Chairman of the Board of
Directors, the President and three independent outside directors
of the Board, as defined in Section 6, Article II of these
Bylaws, designated by the Board. In addition, the Board may from
time to time designate one or more other directors to serve as
members of the Committee, provided that a majority of the members
of the Committee shall be independent outside directors.
ARTICLE IV. SECTION 2. POWERS:
Subject to the limitations stated in Sections 1 and 7 of
Article III and Sections 2 and 3 of Article XI of these Bylaws
and to any limitations imposed by law or imposed by the Board of
Directors, the Executive Committee may exercise all the powers of
the Board in the management of specified matters where such
authority is delegated to it by the Board, and also, subject to
the same limitations, when the Board is not in session, the
Committee shall have, and may exercise, all the powers and
authority of the Board in the management and business of the
company (including the power to authorize the seal of the company
to be affixed to all papers which may require it).
ARTICLE IV. SECTION 3. MEETINGS:
The Executive Committee shall adopt such rules and
regulations for the calling and holding of its meetings and for
the transaction of business at such meetings as to the Committee
shall seem appropriate and not inconsistent with the law or these
Bylaws. As provided by law, the Committee is authorized to hold
meetings by conference telephone or similar communications
equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall
constitute presence in person at such meeting.
ARTICLE IV. SECTION 4. QUORUM:
Three members of the Executive Committee shall constitute a
quorum for the transaction of business, but less than a quorum
may adjourn from time to time and from place to place. The vote
of the majority of the members present
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at a meeting at which a quorum is present or of three members
present at such meeting, whichever is greater, shall be required
to constitute action by the Committee, unless the vote of a
greater number shall be required by law.
ARTICLE IV. SECTION 5.
OFFICERS: SUBCOMMITTEES:
The Chairman of the Board, and in his absence the President,
shall preside at the meetings of the Executive Committee but, in
the absence of both the Chairman of the Board and the President,
the majority of the members of the Committee present at a meeting
shall appoint a member to preside at such meeting. The Secretary
of the company shall serve as secretary of the Committee, but in
the absence of the Secretary, the presiding officer at a meeting
shall appoint any other director or officer of the company to act
as secretary of such meeting. The Secretary shall keep the
records of the Committee. The Committee shall also have power to
appoint such subcommittees as it may deem necessary.
ARTICLE IV. SECTION 6. VACANCIES:
Vacancies occurring in the Executive Committee shall be
filled by the Board of Directors.
ARTICLE V
COMMITTEE ON DIRECTORS' AFFAIRS
ARTICLE V. SECTION 1. MEMBERS:
At the first meeting of each newly elected Board of
Directors, the Board shall appoint a Committee on Directors'
Affairs of the Board containing at least three members and
consisting entirely of independent outside directors of the
Board, as defined in Section 6, Article II of these Bylaws, and
shall designate its chairman. The Board may from time to time
designate one or more independent outside directors as alternate
members of the Committee.
ARTICLE V. SECTION 2. POWERS:
By such date as may be specified by the Board of Directors
each year, the Committee on Directors' Affairs shall recommend
and submit to the Board for its approval a list of persons
proposed for nominations by the Board for election as directors
at the next annual stockholders meeting. If for any reason a
vacancy
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occurs in any slate of persons nominated by the Board for
election as directors, or a vacancy occurs on the Board between
annual meetings, the Committee shall, by the date specified by
the Board, submit to the Board for approval a recommendation of a
person to fill each such vacancy. Except as otherwise provided
in Section 5 of this Article V, only persons recommended by the
Committee shall be eligible for nomination by the Board for
election as directors or to fill a vacancy, but if the Board does
not approve of one or more of the persons recommended by the
Committee, the Committee shall submit a recommendation of other
persons by the date specified by the Board.
ARTICLE V. SECTION 3. MEETINGS:
The Committee on Directors' Affairs shall adopt such rules
and regulations for the calling and holding of its meetings and
for the transaction of business at such meetings as to the
Committee shall seem meet and consistent with law and these
Bylaws.
ARTICLE V. SECTION 4.
QUORUM AND VOTING:
Three members or a majority of the Committee on Directors'
Affairs, whichever is greater, shall constitute a quorum for the
transaction of business, but less than a quorum may adjourn from
time to time and from place to place. The vote of the majority
of the members present at a meeting at which a quorum is present
or of three members present at such meeting, whichever is
greater, shall be required to constitute action by the Committee,
unless the vote of a greater number shall be required by law.
ARTICLE V. SECTION 5.
FAILURE TO ACT:
If for any reason the Committee shall fail or determine not
to make a recommendation of director nominees with respect to any
annual stockholders meeting or with respect to any vacancy on the
Board by the date specified by the Board, the Board shall select
such nominees or fill such vacancy in such manner as it deems
appropriate.
ARTICLE V. SECTION 6.
RIGHTS OF STOCKHOLDERS:
Nothing in this Article V shall affect or restrict the right
of any stockholder to nominate any person for election as a
director where such nomination is
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otherwise authorized by law and made in accordance with Section
10, Article II of these Bylaws.
ARTICLE VI
AUDIT COMMITTEE
ARTICLE VI. SECTION 1. MEMBERS:
At the first meeting of each newly elected Board of
Directors, the Board shall appoint an Audit Committee of at least
three members, consisting entirely of independent outside
directors of the Board, as defined in Section 6, Article II of
these Bylaws, and shall designate its chairman. From time to
time the Board may designate one or more independent outside
directors as alternate members of the Committee.
ARTICLE VI. SECTION 2. POWERS:
The Audit Committee shall have the following powers and
duties:
(a) The Committee shall recommend annually to the Board of
Directors the independent public accountants to be
engaged to audit the books, records, and accounts of
the company for the ensuing fiscal year. Only
accountants recommended by the Committee and approved
by the Board shall be engaged. In case of a vacancy in
the position of independent public accountants, the
Committee shall recommend and the Board shall approve
the engagement of other independent public accountants
to fill the vacancy until the next annual stockholders
meeting;
(b) The Committee shall arrange the details of the
engagement of the independent public accountants,
including the remuneration to be paid;
(c) The Committee shall review with the company's
independent public accountants, as well as the
company's Controller and other appropriate company
personnel, the following matters: (i) the company's
general policies and procedures with respect to audits
and accounting and financial controls; and (ii) the
general accounting and reporting principles and
practices which should be applied in preparing the
company's financial statements and conducting financial
audits of its affairs;
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(d) The Committee shall meet with the independent public
accountants as required, but at least twice a year, and
shall review with them the company's interim and
year-end financial statements, any certification,
report, or opinion which the independent public
accountants propose to render in connection with such
statements, and any other appropriate matter;
(e) The Committee shall meet with the company's internal
audit staff as required, but at least twice a year, and
shall review with that staff the company's interim and
year-end financial statements, and the extent to which
the company's accounting staff has implemented any
reforms suggested by the independent public accountants
or the Committee;
(f) The Committee shall have power to direct the
independent public accountants and the company's
internal audit staff to inquire into and report to it
on any corporate contract, transaction, or procedure;
the conduct of any corporate office, division, profit
center, subsidiary, or other unit; or any other matter
having to do with the company's business and affairs;
(g) The Committee shall become and remain apprised of those
matters relating to the payment by the company of
finders', promoters' or consultants' commissions or
fees, or any similar commissions or fees, as shall be
necessary to permit the Committee to recommend to the
Board the policies which the Board should adopt and the
action which the Board should take to prevent any use
of company funds or other assets which is unlawful or
contrary to Board policy; and
(h) The Committee shall make such reports and
recommendations to the Board in connection with the
foregoing functions as it shall deem appropriate or as
the Board may request, and shall take such action
thereon as the Board may direct it to take.
ARTICLE VI. SECTION 3. DEFINITION:
The term "independent public accountants" shall include
individuals, companies, or firms serving as the independent
outside auditors or independent outside public accountants for
the company.
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ARTICLE VI. SECTION 4. MEETINGS:
The Committee may adopt such rules and regulations for the
calling and holding of its meetings and for the transaction of
business at such meetings as shall be considered by the Committee
to be necessary or desirable; provided, that two members of the
Committee shall constitute a quorum for the transaction of the
business and the affirmative vote of a majority of the whole
Committee shall be required to constitute action by the
Committee.
ARTICLE VI. SECTION 5. STAFF:
The Committee may select and appoint such full-time or
part-time staff assistants, as the Committee deems necessary or
desirable, who shall perform such duties and responsibilities as
the Committee shall assign. The compensation of its staff shall
be fixed by the Committee in accordance with general company
policy, and any member of its staff may be discharged only by the
Committee.
ARTICLE VII
COMPENSATION COMMITTEE
ARTICLE VII. SECTION 1. MEMBERS:
At the first meeting of each newly elected Board of
Directors, the Board shall appoint a Compensation Committee of at
least three members, consisting entirely of independent outside
directors of the Board, as defined in Section 6, Article II of
these Bylaws, and shall designate its chairman. From time to
time the Board may designate one or more independent outside
directors as alternate members of the Compensation Committee.
ARTICLE VII. SECTION 2. POWERS:
The Compensation Committee shall have the following powers
and duties:
(a) The Compensation Committee shall review and recommend
to the Board of Directors for its consideration and
determination the salaries of the Chairman of the Board
of Directors and the President, and to determine on its
own initiative the salaries of all other employees who
are members of the Board of Directors or who have
annual salaries of $200,000 or more;
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(b) The Compensation Committee shall consider and make
recommendations to the Board of Directors with respect
to (i) any proposals for the application of new
benefits and incentive compensation plans or programs
to officers who are also directors, and (ii) the
application to such officers of amendments to any then
existing such plans or programs which would
significantly increase the compensation of such
officers; and
(c) The Compensation Committee shall perform such other
duties as may, from time to time, be delegated to the
Compensation Committee under any compensation or
benefit plans.
ARTICLE VII. SECTION 3. MEETINGS:
The Compensation Committee shall adopt such rules and
regulations for the calling and holding of its meetings and for
the transaction of business at such meetings as shall be
considered by the Compensation Committee to be necessary or
desirable; provided, that two members of the Compensation
Committee shall constitute a quorum for the transaction of
business and the affirmative vote of a majority of the whole
Compensation Committee shall be required to constitute action by
the Compensation Committee.
ARTICLE VII. SECTION 4. STAFF:
The Compensation Committee shall be assisted by appropriate
corporate staffs, and in addition, the Compensation Committee may
obtain assistance from such other persons, who need not be
employees of the company, or organizations as it may deem
advisable, with the expenses incurred thereby to be borne by the
company.
ARTICLE VIII
PUBLIC POLICY COMMITTEE
ARTICLE VIII. SECTION 1. MEMBERS:
At the first meeting of each newly elected Board of
Directors, the Board shall appoint a Public Policy Committee of
at least three members, consisting entirely of independent
outside directors of the Board, as defined in Section 6, Article
II of these Bylaws, and shall designate its chairman. From time
to time the Board may designate one or more directors as
alternate members of the Public Policy Committee, provided that
those members and alternates from time to time
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serving as the Public Policy Committee shall at all times consist
entirely of independent outside directors.
ARTICLE VIII. SECTION 2. POWERS:
The Public Policy Committee shall have the following powers
and duties:
(a) The Public Policy Committee shall act in an advisory
capacity to the Board of Directors and the management
of the company in response to current and emerging
public policy issues and in development and review of
policies and budgets in respect of contributions,
including but not limited to contributions to
organizations whose primary purpose is charitable,
civic, cultural or educational;
(b) The Public Policy Committee shall identify, evaluate
and monitor the social, political, environmental,
occupational safety and health trends, issues and
concerns, domestic and foreign, which affect or could
affect the company's business activities and
performance;
(c) The Public Policy Committee shall review information
from company management and approve recommendations to
assist in the formulation and adoption of policies,
programs and practices concerning the matters set forth
in subparagraph (b) above, including but not limited to
ecological and environmental protection, employee
safety, ethical business conduct, consumer affairs,
alcohol and drug abuse, equal opportunity matters and
government relations;
(d) The Public Policy Committee shall exercise the powers
with respect to political activities conferred upon it
by the provisions of Article XI of these Bylaws; and
(e) The Public Policy Committee shall monitor and evaluate
on an ongoing basis the company's compliance with the
policies, programs and practices established under the
Public Policy Committee's oversight.
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ARTICLE VIII. SECTION 3. MEETINGS:
The Public Policy Committee shall adopt such rules and
regulations for the calling and holding of its meetings and for
the transaction of business at such meetings as shall be
considered by the Public Policy Committee to be necessary or
desirable; provided that three members or a majority of the
Public Policy Committee, whichever is greater, shall constitute a
quorum for the transaction of business and the affirmative vote
of a majority of the whole Public Policy Committee shall be
required to constitute action by the Public Policy Committee.
ARTICLE VIII. SECTION 4. STAFF:
The Public Policy Committee shall be assisted by
appropriate corporate staffs, and in addition, the Public Policy
Committee may obtain assistance from such other persons, who need
not be employees of the company, or organizations as it may deem
advisable, with the expenses incurred thereby to be borne by the
company.
ARTICLE IX
OFFICERS
ARTICLE IX. SECTION 1.
DESIGNATION:
The officers of the Company shall consist of a Chairman of
the Board of Directors and a President, each of whom shall be a
director, one or more Executive Vice Presidents, one or more Vice
Presidents, a Secretary, a Treasurer, and a Controller, who need
not be but may be directors, and such other officers, including a
Vice Chairman of the Board of Directors who shall be a director,
as may be elected or appointed by the Board of Directors. Except
for the offices of Chairman of the Board of Directors, Vice
Chairman, President, and Executive Vice President, any two
offices may be held by the same person.
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ARTICLE IX. SECTION 2.
ELECTION: TERM OF OFFICE:
The officers of the company shall be elected by the Board of
Directors at its first meeting after the annual meeting of the
stockholders and thereafter as appropriate. Each officer shall
hold office from the date of his election until the first meeting
of the directors held after the next annual meeting of the
stockholders, or until his successor is elected.
ARTICLE IX. SECTION 3.
REMOVAL FROM OFFICE:
FAILURE TO PERFORM DUTIES:
Any officer of the company may be removed with or without
cause by the Board of Directors. If any officer shall be unable
or refuse or fail to perform any of the duties of his office, the
officer of the company which has been designated the chief
executive officer pursuant to Section 5 of this Article may
designate any other person or persons to perform such duties
until such time as the Board may act with respect thereto.
ARTICLE IX. SECTION 4.
CHAIRMAN OF THE BOARD OF DIRECTORS:
VICE CHAIRMAN: PRESIDENT:
The Chairman of the Board of Directors shall preside at all
meetings of the Board of Directors and of the stockholders. In
the absence of the Chairman, the Vice Chairman, and in the
absence of both the Chairman and the Vice Chairman, the President
shall preside at all such meetings. The Chairman, Vice Chairman,
or the President is empowered to sign any contract, deed,
certificate, or other instrument or document authorized by the
Board or the Executive Committee, or required by law to be signed
by such officer or officers.
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ARTICLE IX. SECTION 5.
CHIEF EXECUTIVE OFFICER:
The Chairman of the Board of Directors shall be the chief
executive officer of the company. The Chairman of the Board of
Directors may designate the Vice Chairman or the President to act
as chief executive officer during the Chairman's absence. The
chief executive officer of the company shall have general and
active supervision over the business, affairs and operations of
the company and over its several officers, agents and employees,
subject, however, to the control of the Board and the Executive
Committee. The chief executive officer shall see that all orders
and resolutions of the Board and the Executive Committee are
carried into effect, and, in general, shall perform all duties
incident to the position of chief executive officer and such
other duties as may from time to time be assigned by the Board or
the Executive Committee. The chief executive officer may
delegate and assign to other officers, employees and agents of
the company or to committees appointed by him such duties as the
chief executive officer considers proper and not inconsistent
with these Bylaws or any delegations and assignments made by the
Board or the Executive Committee.
ARTICLE IX. SECTION 6.
EXECUTIVE VICE PRESIDENTS:
VICE PRESIDENTS:
The Executive Vice Presidents and the Vice Presidents shall
have such authority and shall perform such duties as may be
delegated to them pursuant to these Bylaws. The power of the
Executive Vice Presidents and the Vice Presidents to sign on
behalf of the company any contract, deed, certificate, or other
instrument or document authorized by the Board of Directors or
the Executive Committee shall be coordinate with like powers of
the Chairman of the Board of Directors, the Vice Chairman, and
the President and shall have the same effect as if signed by the
Chairman or the President.
ARTICLE IX. SECTION 7. SECRETARY:
The Secretary shall attend to the giving of all notices of
all meetings of the Board of Directors and stockholders, shall
attend all such meetings and shall record the minutes of such
meetings in books provided for that purpose. He shall be the
custodian of all papers brought before the Board for action or
ordered on file. He shall have the custody of the corporate
seal, and shall, as necessary or appropriate, affix and attest
the same on all documents authorized by the Board or the
Executive Committee. He shall make or cause to be made the
necessary or appropriate determinations as to the owners of stock
pursuant to the establishment of a record date, as provided in
Section 3, Article X of these
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Bylaws, and shall prepare or cause to be prepared the required or
appropriate stockholder lists or records reflecting these
determinations. Such list shall be certified by the Secretary or
other person in charge of the stock ledger of the company.
The Secretary shall have such other authority and duties as
may be assigned to him in accordance with these Bylaws.
The Board may appoint one or more Assistant Secretaries who
shall assist the Secretary in the performance of his duties and
shall perform all the duties of the Secretary in his absence.
ARTICLE IX. SECTION 8. TREASURER:
The Treasurer shall keep full and accurate accounts of all
receipts and disbursements. With the approval of the Board of
Directors he shall deposit all moneys and other valuable effects
in the name and to the credit of the company in such depositories
as he may select and, under direction of the Board, he shall
disburse the same. He shall have authority to receive and give
receipts for all moneys due and payable to the company from any
source whatsoever and to give full discharge for the same, and to
endorse for deposit on behalf of the company all checks, drafts,
notes, warrants, orders and other papers requiring endorsement.
He may be required to give a bond in any amount satisfactory to
the Board for the faithful performance of the duties of his
office and for the restoration to the company in case of his
death, resignation or removal from office, of all books, papers,
vouchers, money or other property of whatever kind in his
possession, belonging to the company.
The Treasurer shall have such other authority and duties as
may be assigned to him in accordance with these Bylaws.
The Board may appoint one or more Assistant Treasurers who
shall assist the Treasurer in the performance of his duties and
shall perform all the duties of the Treasurer in his absence.
ARTICLE IX. SECTION 9. CONTROLLER:
The Controller shall be the officer principally in charge of
the accounts of the company, and shall have such other authority
and duties as may be assigned to him in accordance with these
Bylaws.
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The Board of Directors may appoint one or more Deputy
Controllers and Assistant Controllers who shall assist in the
performance of all the duties of the Controller in his absence.
ARTICLE IX. SECTION 10. GENERAL:
All other officers of the company shall have such powers and
duties as may be assigned in accordance with these Bylaws.
ARTICLE X
CAPITAL STOCK
ARTICLE X. SECTION 1. CERTIFICATES:
FACSIMILE SIGNATURES: LOST STOCK:
Certificates of stock shall be issued in numerical order,
and every holder of stock in the company shall be entitled to a
certificate or certificates signed by, or in the name of, the
company, by the Chairman of the Board of Directors, the Vice
Chairman, the President, an Executive Vice President, or a Vice
President, or by two or more of them, and by the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer,
of the company, certifying the number of shares owned by him in
the company. If such certificate is countersigned by a transfer
agent other than the company or its employee, or by a registrar
other than the company or its employee, any other signature on
the certificate may be a facsimile.
In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued
by the company with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
The seal of the company, or a facsimile thereof, may, but
shall not be required to be affixed to certificates for shares of
stock.
The name of each person to whom a certificate of stock shall
be issued, together with the number of shares and the date of
issue, shall be entered upon the books of the company.
If any certificate of stock shall be lost, stolen, mutilated
or destroyed, the Board of Directors shall cause a new
certificate of stock to be issued in the place
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of such certificate and may, in its discretion, require the owner
of the replaced certificate, or his legal representatives, to
give the company a bond, in such form and amount as the Board may
direct, sufficient to indemnify the company and other interested
persons against any loss on account of the issuance or any action
in connection with the issuance of any such new certificate.
ARTICLE X. SECTION 2. TRANSFERS:
PRESERVATION OF CANCELED CERTIFICATES:
FRACTIONAL SHARES: TRANSFER AGENTS:
Transfer of shares of the common stock of the company shall
be made upon its books by the holder thereof, in person or by
attorney duly authorized, upon the surrender of a certificate or
certificates, properly endorsed, for a like number of shares. No
new certificate shall be issued until the former certificate or
certificates for the same number of shares shall have been
surrendered and canceled, except in the case of a certificate
issued in replacement as provided in Section 1 of this Article X.
All certificates surrendered to the company for transfer
shall be canceled and each certificate canceled shall be
preserved for a period of 10 years after cancellation, or for
such shorter or longer period as the Chairman of the Board of
Directors, the Vice Chairman, or the President, with the approval
of the General Counsel of the company, may direct from time to
time.
No certificate for less than one share of the common stock
shall be issued; however, scrip for fractional shares may be
issued on such terms and conditions as the Board of Directors may
prescribe.
The Board of Directors may appoint such stock transfer
agents and assistant transfer agents, and stock registrars, as it
shall deem proper and may require all stock certificates to bear
the signature or facsimile signature of a transfer agent, and of
a registrar, or either of them.
ARTICLE X. SECTION 3.
DATE FOR DETERMINATION OF STOCKHOLDERS:
For the purpose of enabling the company to determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive
payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than 60 nor less than 10
days before the date of such meeting, nor more than 60
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days prior to any other action. In such case, only such persons
in whose names shares of stock are registered on the books of the
company on the date so fixed shall be considered stockholders for
the purpose or purposes for which such determination was made,
notwithstanding any transfer of any stock on the books of the
company after any such record date.
ARTICLE X. SECTION 4.
ADDITIONAL REGULATIONS:
The Board of Directors may at any time adopt such additional
and further rules and regulations relating to common stock and
stock certificates as it deems appropriate and not inconsistent
with the law or these Bylaws.
ARTICLE XI
POLITICAL ACTIVITIES
ARTICLE XI. SECTION 1.
COMPLIANCE WITH LAWS CONCERNING POLITICAL CONTRIBUTIONS:
Any officer or employee of the company who fails to comply
with all federal, state, and local laws regarding corporate
contributions and expenditures in connection with election of
public officials shall be subject to appropriate disciplinary
action, which may include discharge from employment. The Audit
Committee of the Board of Directors shall be responsible for
monitoring compliance with those laws and shall require written
annual assurances by principal corporate officers of their
compliance with these laws and policies adopted by the Board. In
performing that responsibility, the Committee shall utilize the
services of the company's independent public accountants, its
internal audit staff, and its General Counsel.
ARTICLE XI. SECTION 2.
POLITICAL CONTRIBUTIONS:
Except as otherwise provided in the succeeding paragraph,
the Board of Directors shall have the sole and non-delegable
power and authority to authorize the use of company funds and
facilities to make political contributions and expenditures, if
and to the extent permitted by applicable law, to or in support
of political candidates, political committees (including but not
limited to political committees established by the company
pursuant to Section 4 of this Article XI), and political parties,
in connection with nomination and election of candidates for
state or local office.
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The Public Policy Committee (subject to any rules or
restrictions which the Board may establish) shall have and may
exercise the power and authority of the Board to authorize such
contributions, expenditures, and use of company funds and
facilities, if and to the extent permitted by applicable law.
The Public Policy Committee may delegate such power and
authority, in whole or in part, to the Vice President with
responsibility for the Company's government relations activities,
subject to such further rules and restrictions as the Committee
may specify. All contributions made pursuant to the authority
granted by this paragraph shall be reported quarterly to the
Board.
ARTICLE XI. SECTION 3.
POLITICAL COMMITTEE AUTHORIZED BY FEDERAL LAW:
The Board of Directors shall have the sole and non-delegable
power and authority to authorize the establishment,
administration, and solicitation of contributions to a separate
segregated fund to be utilized for political purposes by the
company as authorized by Section 441b of Title 2 of the United
States Code. No such separate segregated fund shall be
established or administered by the company, except through a
political committee, organized as provided in Section 432 of
Title 2 of the United States Code, registered as provided in
Section 433 of such Title, and otherwise operated in compliance
with law. Any decision of the Board authorizing the
establishment of a political committee permitted by Section 441b
of Title 2 shall be noted in its minutes. The minutes shall
include an estimate of the annual cost to the company of
establishing, administering, and soliciting for such committee.
Any such committee which is established shall report in writing
to the Board on its activities not later than March 15 of each
year. Such report shall include a summary of any reports filed
with the Federal Election Commission or any other government
agency, together with a statement of the costs incurred by the
company in connection with such a committee during the preceding
year.
ARTICLE XI. SECTION 4.
NONFEDERAL POLITICAL COMMITTEES:
The Board of Directors or the Public Policy Committee or the
Vice President with responsibility for the Company's government
relations activities (subject to any rules and regulations which
the Public Policy Committee may establish), and each of them
shall have the power and authority to authorize the
establishment, administration, and solicitation of contributions
to one or more political committees, and to authorize use of
corporate funds to pay or bear all costs associated with such
establishment, administration, and solicitation, and to authorize
use of such political committees by the company to make political
contributions and expenditures or otherwise support candidates
for state or local office, authorized committees of such
candidates, and other political committees supporting state or
local candidates; provided, however, that the foregoing
-30-
<PAGE>
authorizations may be granted and committees so established may
be so used only if permitted by applicable state law and only to
the extent, if any, permitted by such law. Such political
committees as may be established by the company shall be
registered if required by applicable state law and shall
otherwise be operated in compliance with law. Any decision of
the Board authorizing establishment of such a committee shall be
noted in its minutes. By March 15 following the calendar year in
which such a committee is otherwise established, such
establishment shall be reported to the Board and noted in its
minutes. Any such committee shall report in writing to the Board
on its activities not later than March 15 of each year. Such
report shall include a summary of any reports filed by the
committee with any government agency, together with a statement
of costs incurred by the company in connection with such
committee during the preceding year.
ARTICLE XI. SECTION 5.
OTHER POLITICAL ACTIVITIES:
Nothing contained in these Bylaws shall be deemed to
prohibit any officer or employee from engaging in political
activities in an individual capacity at his own expense or from
making political contributions or expenditures of his personal
funds or from expressing views and taking appropriate action as a
company officer or employee with respect to legislative or
political matters affecting the company and not pertaining to
election of public officials.
ARTICLE XII
MISCELLANEOUS
ARTICLE XII. SECTION 1.
CHECKS, NOTES AND DRAFTS:
All checks, notes, drafts, warrants, or orders for the
payment of money, shall be executed on behalf of the company by
such person or persons, and in such manner by such method as the
Board of Directors may from time to time specify.
ARTICLE XII. SECTION 2. SEAL:
The seal of the company shall be in the form of a circle and
shall bear the name of the company, the name of the state under
the laws of which it is incorporated, and the year of its
incorporation.
-31-
<PAGE>
ARTICLE XII. SECTION 3.
DIVIDENDS AND RESERVES:
The Board of Directors may declare dividends to the full
extent permitted by the law, provided the Board from time to time
may set apart out of any funds available for dividends a reserve
or reserves for any proper purpose and may abolish any such
reserve.
ARTICLE XII. SECTION 4.
WAIVER OF NOTICE:
Whenever notice is required to be given under any provision
of these Bylaws, the Certificate of Incorporation or the Delaware
General Corporation Law, a written waiver thereof signed by the
person entitled to notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XII. SECTION 5.
CHAIRMAN OF THE BOARD EMERITUS:
The Board of Directors may, from time to time, at its
discretion, create the honorary position of Chairman of the Board
Emeritus, without executive functions, and elect a person to fill
the position so created.
ARTICLE XII. SECTION 6. AMENDMENTS:
Subject to the provisions of the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed
in whole or in part by the stockholders at any annual meeting or
at any special meeting provided that the notice of such special
meeting shall contain a statement of the contemplated alteration,
amendment or repeal. Subject to the laws of the State of
Delaware, the Certificate of Incorporation, and these Bylaws, the
Board of Directors shall have power to make, alter, amend and
repeal these Bylaws in whole or in part, except those Bylaws
adopted by stockholders of the company or those Bylaws as to
which power to make, alter, amend or repeal is reserved to
stockholders of the company.
-32-
<PAGE>
Exhibit 12
PHILLIPS PETROLEUM COMPANY AND CONSOLIDATED SUBSIDIARIES
TOTAL ENTERPRISE
Computation of Ratio of Earnings to Fixed Charges
Millions of Dollars
-------------------
Nine Months Ended
September 30
1995 1994*
-------------------
(Unaudited)
Earnings Available for Fixed Charges
Income before income taxes $ 830 623
Distributions in excess of equity in earnings
of less-than-fifty-percent-owned companies 1 (3)
Fixed charges, excluding capitalized
interest and the portion of the
preferred dividend requirements of a
subsidiary not previously deducted
from income** 270 254
- ---------------------------------------------------------------------------
$1,101 874
===========================================================================
Fixed Charges
Interest and expense on indebtedness,
excluding capitalized interest $ 214 199
Capitalized interest 21 9
Preferred dividend requirements of
a subsidiary 56 47
One-third of rental expense, net of
subleasing income, for operating leases 24 23
- ---------------------------------------------------------------------------
$ 315 278
===========================================================================
Ratio of Earnings to Fixed Charges 3.5 3.1
- ---------------------------------------------------------------------------
*Restated.
**Includes amortization of capitalized interest totaling approximately
$8 million in 1995 and $7 million in 1994.
Earnings available for fixed charges include, if any, the company's equity
in losses of companies owned less than fifty percent and having debt for
which the company is contingently liable. Fixed charges include the
company's proportionate share, if any, of interest relating to the
contingent debt.
In 1990 and 1988, respectively, the company guaranteed a $400 million bank
loan and $250 million of notes payable for the Long-Term Stock Savings Plan
(LTSSP), an employee benefit plan. In 1994, the notes payable were
refinanced with a $131 million term loan, and the $400 million loan was
amended. Consolidated interest expense included $4 million of interest
attributable to the LTSSP borrowings for the first nine months of 1995,
while interest related to LTSSP borrowings during the same period in 1994
was $1 million.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of Phillips Petroleum Company as of September 30,
1995, and the related consolidated statement of income for the nine-month period
ending September 30, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 143
<SECURITIES> 0
<RECEIVABLES> 1,436
<ALLOWANCES> 18
<INVENTORY> 585
<CURRENT-ASSETS> 2,422
<PP&E> 18,947
<DEPRECIATION> 10,666
<TOTAL-ASSETS> 11,739
<CURRENT-LIABILITIES> 2,778
<BONDS> 2,876
<COMMON> 529
0
0
<OTHER-SE> 2,625
<TOTAL-LIABILITY-AND-EQUITY> 11,739
<SALES> 10,047
<TOTAL-REVENUES> 10,175
<CGS> 8,558<F1>
<TOTAL-COSTS> 9,122<F2>
<OTHER-EXPENSES> 24<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> 830
<INCOME-TAX> 470
<INCOME-CONTINUING> 360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 360
<EPS-PRIMARY> 1.37
<EPS-DILUTED> 1.37
<FN>
<F1>Purchased crude oil and products + Production and operating expenses +
Exploration expenses + Depreciation, depletion and amortization.
<F2>CGS + Selling, general and administrative expenses + Taxes other than income
taxes.
<F3>Preferred dividend requirements of subsidiary.
</FN>
</TABLE>
