<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
{ X } ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1993
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 1-8241
PRESIDIO OIL COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 95-3049484
(State of Incorporation) (I.R.S. Employer Identification No.)
5613 DTC PARKWAY, SUITE 750
ENGLEWOOD, COLORADO 80111-3065
(Address of principal executive offices) (Zip Code)
</TABLE>
(303) 773-0100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
<S> <C>
CLASS A COMMON STOCK, $.10 PAR VALUE PER SHARE AMERICAN STOCK EXCHANGE
CLASS B COMMON STOCK, $.10 PAR VALUE PER SHARE AMERICAN STOCK EXCHANGE
9% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2015 AMERICAN STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. { }
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 8, 1994 was $36,002,000.
The number of shares outstanding of each of the registrant's classes of common
stock as of February 8, 1994 was as follows:
<TABLE>
<CAPTION>
Class Number Outstanding
----- ------------------
<S> <C>
CLASS A COMMON STOCK, $.10 PAR VALUE PER SHARE 25,314,885
CLASS B COMMON STOCK, $.10 PAR VALUE PER SHARE 3,219,785
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Form (Items 10, 11, 12 and 13) is
incorporated by reference from the registrant's Proxy Statement to be filed
pursuant to Regulation 14A with respect to the registrant's Annual Meeting to
be held on or about June 14, 1994.
1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I
<S> <C> <C>
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
BUSINESS STRATEGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EXPLORATION AND PRODUCTION OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
EXPLORATION AND PRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Estimated Proved Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Productive Wells and Developed Acreage . . . . . . . . . . . . . . . . . . . . . . . . 9
Production, Unit Prices and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Undeveloped Acreage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Drilling Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
OFFICE LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . 12
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . 20
INDEPENDENT AUDITORS' REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 31, 1993 and 1992 . . . . . . . . . . . . . . 21
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 27
SCHEDULES:
V - Property, Plant and Equipment for the Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . 45
VI - Accumulated Depletion, Depreciation and Amortization
of Property, Plant and Equipment for the Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
2
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
PART III
<S> <C> <C>
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . 47
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . 47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 48
LIST OF DOCUMENTS FILED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
3
<PAGE> 4
PART I
ITEM 1. BUSINESS.
GENERAL
Presidio Oil Company is an independent oil and gas company organized under the
laws of the State of Delaware in April 1976 to continue the business of
Presidio Exploration, Inc. (organized in 1968) of engaging, primarily through
subsidiaries, in onshore oil and gas exploration, development and production in
selected regions in the continental United States. The Company maintains its
corporate offices at 5613 DTC Parkway, Suite 750, Englewood, Colorado
80111-3065. Its telephone number at that location is (303) 773-0100. Unless
the context otherwise requires, all references in this Annual Report on Form
10-K (this "Report") to "Presidio" or the "Company" are to Presidio Oil Company
and its consolidated subsidiaries.
The Company conducts its exploration, development and production operations in
three regional areas: (i) the Rocky Mountains, with operations primarily in
Wyoming and North Dakota, (ii) the Mid-Continent, with operations primarily in
southeastern New Mexico and west Texas, western Oklahoma and south Louisiana,
and (iii) West Virginia, with operations primarily in southern West Virginia.
Within these regional areas, the Company's operations are concentrated in seven
core areas: the Green River Basin in Wyoming; the Powder River Basin in
Wyoming; the Williston Basin in North Dakota; the Permian Basin in southeastern
New Mexico and west Texas; the Anadarko Basin in western Oklahoma; south
Louisiana; and southern West Virginia.
BUSINESS STRATEGY
The Company is committed to a growth strategy that emphasizes oil and gas
reserve additions in its seven core areas, both through development drilling
and acquisition activity and, to a lesser extent, through exploration drilling.
Because the Company controls the operations of most of its producing
properties, the Company believes that it has achieved overhead and operating
expenses below the independent industry average.
In 1993 Presidio recorded substantial success in adding .8 million barrels
("MMBbls") of oil and 52.2 billion cubic feet ("BCF") of gas to its proved
hydrocarbon reserves, compared to production of 1.4 MMBbls of oil and 15.3 BCF
of gas and sales of lower-margin oil and gas properties consisting of 205,000
barrels of oil and 2.8 BCF of gas, and thereby replacing 204% of its production
and property sales at a cost per equivalent barrel of $2.21. In terms of
natural gas equivalents, the Company added 57 billion equivalent cubic feet of
gas at a finding cost of $.37 per equivalent thousand cubic feet of gas.
Most of this increase in proved reserves resulted from the Company's successful
field extension and other developmental operations, with the remainder being
principally attributable to the acquisition of additional interests in oil and
gas wells operated by the Company (see Note 15 to the Company's Consolidated
Financial Statements contained in Item 8 of this Report for detailed
information concerning the Company's oil and gas reserves, including certain
producing property sales completed subsequent to yearend 1993). Moreover, as a
result of these operations, Presidio's proved developed gas reserves increased
by 25%, or 33.3 BCF during 1993, from 131.2 BCF to 164.5 BCF, after production
of 15.3 BCF during the year.
Presidio's large portfolio of probable reserves, other close-in drilling
locations and undeveloped acreage provides significant opportunities for the
Company to continue to add to its proved oil and gas reserves in 1994 and
thereafter.
4
<PAGE> 5
In 1994 the Company anticipates that its capital expenditures will total
approximately $30.4 million and will be principally devoted to natural gas
field development and exploration activities, as follows:
. $26.1 million on development operations and small producing property
acquisitions. The development operations will be concentrated in several
of the Company's core areas, including: 29 (10 net) wells in the Green
River Basin in Wyoming; 16 (5 net) wells in the Powder River Basin in
Wyoming; 6 (3 net) wells in the Anadarko Basin in western Oklahoma; and 15
(4 net) wells in southern West Virginia, while the property acquisitions
are currently anticipated to involve producing properties located
primarily in Wyoming, Oklahoma and Texas.
. $4.3 million on exploratory projects, principally in Wyoming, Louisiana,
Oklahoma and Texas.
Moreover, during the 1995 - 1996 period, the Company currently plans to spend a
minimum of $25-30 million per annum on capital expenditures, with a substantial
portion of such expenditures being devoted to the development of the Company's
proved undeveloped hydrocarbon reserves, which totaled 3.1 MMBbls of oil and
138.4 BCF of gas as of December 31, 1993, or 41% of the Company's total proved
reserves.
EXPLORATION AND PRODUCTION OPERATIONS
The exploration and production activities of the Company consist of the
geological and geophysical evaluation of prospective oil and gas properties,
the acquisition of oil and gas leases or other interests in exploratory
prospects, the drilling of exploratory test wells, and the development and
operation of properties for the production and sale of oil and gas. The
Company's drilling activities include participation in a substantial amount of
low-risk development drilling operations, as well as in selected high-risk,
high-potential exploration prospects. The Company generates most of its
exploration prospects, particularly in the Rocky Mountains, through its
in-house geological staff. However, exploration and development drilling
prospects may be identified by third parties, including independent petroleum
consultants and other oil and gas companies through joint interest programs,
particularly in the Mid-Continent. All of the drilling activities of the
Company are performed by independent drilling contractors. Each of the
Company's regional operating areas, and the operations conducted therein, are
briefly described below.
ROCKY MOUNTAINS
At December 31, 1993, the Company had 481 gross (193 net) producing wells,
109,300 gross (47,700 net) developed acres and 657,600 gross (248,400 net)
undeveloped acres in this area, primarily located in (i) the Moxa Arch and Red
Desert areas of the Green River Basin in Wyoming, (ii) the Powder River Basin
in Wyoming and (iii) the Williston Basin in North Dakota. The Company operates
349 of these gross wells. For the month ended January 31, 1994, net production
from the Rocky Mountain area averaged approximately 31 million cubic feet
("MMCF") of gas and 3.5 thousand barrels ("MBbls") of oil per day, representing
approximately 77% of the Company's average daily production for such period.
At December 31, 1993 the Rocky Mountain area had proved reserves of 129.5 BCF
of gas and 10.3 MMBbls of oil, representing approximately 50% of the Company's
total proved oil and gas reserves, of which 92.8 BCF of gas and 8.4 MMBbls of
oil were proved developed reserves.
MID-CONTINENT
At December 31, 1993, the Company had 355 gross (100 net) producing wells,
58,800 gross (24,100 net) developed acres and 34,000 gross (11,600 net)
undeveloped acres in this area, primarily located in (i) south Louisiana, (ii)
the Permian Basin in southeastern New Mexico and west Texas and (iii) the
Anadarko Basin in western Oklahoma. The Company operates 112 of these gross
wells. For the month ended January 31, 1994, net production from the
Mid-Continent area averaged approximately 14 MMCF of gas and .3 MBbls of oil
per day, representing approximately 23% of the Company's average daily
production for such period.
5
<PAGE> 6
At December 31, 1993 the Mid-Continent area had proved reserves of 145.4 BCF of
gas and 2.7 MMBbls of oil, representing approximately 42% of the Company's
total proved oil and gas reserves, of which 71.1 BCF of gas and 1.5 MMBbls of
oil were proved developed reserves.
WEST VIRGINIA
At December 31, 1993, as a result of the Company's 1993 drilling program, the
Company had 9 gross (2 net) producing wells and 700 gross (100 net) developed
acres in this area. The Company also had proved reserves of 28.1 BCF of gas in
West Virginia, representing approximately 8% of the Company's total proved oil
and gas reserves, of which .6 BCF of gas are proved developed reserves. The
undeveloped portion of these reserves, along with approximately 172,900 gross
(91,400 net) undeveloped acres, will be developed by the Company and is subject
to a joint drilling participation agreement described in Note 13 to the
Company's Consolidated Financial Statements contained in Item 8 of this report.
EMPLOYEES
As of February 8, 1994, the Company had 133 employees of which 34 were field
employees. The Company's employment level will change over time as required by
its operations. In addition, the Company intends to engage the services of
independent geological, engineering, land, accounting and other consultants
from time to time to assist with its operations.
MARKETS
The Company's gas production has historically been sold under contracts with
marketing and transportation companies and with end-users. In past years a
surplus of gas has been available to the marketplace in certain areas of the
United States, resulting in industry-wide price weakness. During 1993 and
early 1994 gas prices strengthened, and the Company benefitted from such
improved prices since its contracts with third-party purchasers provide for
short-term and/or market sensitive pricing for the majority of its gas
production. Moreover, since gas production is a seasonal business with
production volumes and product prices generally being lower during the warmer
summer months and higher during the colder winter months, the Company has
maintained the ability to shift much of its gas production between markets in
response to price and seasonal demand fluctuations through the use of such
contracts.
The Company markets most of its oil production with independent third-party
resellers and refiners at market ("posted") prices. These posted prices
generally reflect the prices determined by the trading of West Texas
Intermediate ("WTI") oil futures contracts on the New York Mercantile Exchange
("NYMEX"), with adjustments for the geographical area in which the producing
properties are located and for the quality of the oil produced. NYMEX prices
continue to be influenced by worldwide production levels and a variety of
political and economic events over which the Company has no control.
COMPETITION
Competition in the oil and gas industry is intense. Many companies and
individuals compete to acquire prospective oil and gas leases and other mineral
interests, as well as to obtain exploration and development funding. Many of
these competitors are large, well-established companies with substantially
larger operating staffs and greater capital resources than the Company, and
they have been engaged in the energy business for a much longer period than the
Company. The Company may be at a competitive disadvantage with these larger
entities.
6
<PAGE> 7
There is also competition in the marketing of gas, insofar as numerous
companies are active gas marketers, including marketing affiliates of
interstate pipelines, major integrated oil companies, Canadian gas producers
and pipelines, and local and national gas gatherers, brokers and marketers of
widely varying sizes, financial resources and experience. Certain competitors
have capital resources many times greater than the Company's, and they control
substantially greater supplies of gas. Local utilities and distributors of gas
(some of which are customers of the Company) are, in some cases, engaged
directly and through affiliates in marketing activities that compete with those
of the Company.
REGULATION
The Company's oil and gas operations are subject to various federal, state and
local governmental regulations. Matters subject to regulation include
discharge permits for drilling operations, drilling bonds, reports concerning
operations, the spacing of wells, unitization and pooling of properties and
taxation. From time to time, regulatory agencies have imposed price controls
and limitations on production by restricting the rate of flow of oil and gas
wells below actual production capacity in order to conserve supplies of oil and
gas.
Oil and gas operations are also subject to extensive federal, state and local
laws regulating the discharge of materials into the environment or otherwise
relating to the protection of human health and the environment. These
regulations are often difficult and costly to comply with and carry substantial
penalties for failure to comply. In addition, these regulations may restrict
the rate of oil and gas production below the rate that would otherwise exist.
The regulatory burden on the oil and gas industry increases its cost of doing
business and, consequently, affects its profitability. To date, expenditures
by the Company related to compliance with these laws have not been significant.
The Company believes, however, the trend of more expansive and stricter
environmental legislation and regulations, including regulations with respect
to the handling and disposal of oil and gas exploration and production wastes
and oilfield wastes contaminated by naturally occurring radioactive materials,
and the imposition of financial responsibility requirements with respect to
environmental cleanup costs (e.g. regulations requiring environmental liability
insurance or other types of financial assurance) will continue and may result
in additional costs to the Company in the future. For example, amendments to
the Resource Conservation and Recovery Act to regulate further the handling,
transportation, storage and disposal of oil and gas exploration and production
wastes have been considered by Congress and may be adopted. Also, in August
1993 the U.S. Minerals Management Service published an advance notice of its
intent to adopt regulations that may require owners of oil and gas facilities
that could be the source of an oil spill into waters of the United States to
provide $150 million in financial assurances to cover costs that might be
incurred by governmental authorities in responding to and cleaning up an oil
spill. Such legislation or regulations, if enacted or adopted, could have a
significant adverse impact on the Company's operating costs.
ITEM 2. PROPERTIES.
EXPLORATION AND PRODUCTION
The Company's operations are concentrated in seven core areas where the Company
conducts most of its exploration and development drilling and acquisition
activity: the Green River Basin in Wyoming; the Powder River Basin in Wyoming;
the Williston Basin in North Dakota; the Permian Basin in southeastern New
Mexico and west Texas; the Anadarko Basin in western Oklahoma; south Louisiana;
and southern West Virginia. None of the Company's oil and gas production is
subject to long-term supply or similar agreements with foreign governments or
authorities.
7
<PAGE> 8
OPERATIONS
At December 31, 1993, the Company operated approximately 77% of the net
producing wells in which it owned an interest. The operator of a well
supervises production, maintains production records, employs field personnel
and performs other functions on behalf of all owners of such operated wells.
See "Business - Exploration and Production Operations" contained in Item 1 of
this Report for information concerning the Company's operating areas.
The Company's oil and gas operations are subject to all of the operating
hazards and risks normally incident to drilling for and producing oil and gas,
such as fires, explosions, encountering formations with abnormal pressures,
blowouts, cratering and oil spills, any of which can result in loss of
hydrocarbons, environmental pollution, personal injury claims and loss of life.
Such hazards can also severely damage or destroy equipment, sub-surface
structures, surrounding areas or property of others. As protection against
such operating hazards, the Company maintains insurance coverage, including
operator's extra expense, physical damage on certain risks, employer's
liability, comprehensive general liability and workers' compensation. The
Company believes that such insurance is adequate and customary for companies of
a similar size engaged in operations similar to those of the Company, but
losses can occur from uninsurable risks or in amounts in excess of existing
insurance coverage. The Company does not carry business interruption insurance
in respect of its operations and the occurrence of an event that is not fully
covered by insurance could have an adverse impact upon the Company's financial
condition and results of operations.
ESTIMATED PROVED RESERVES
The following tables set forth estimates of proved oil and gas reserves and the
present value of estimated future net revenues attributable to such reserves,
based on the assumptions that oil and gas prices will remain fixed at yearend
levels, with escalation up to prices which prevail under fixed and determinable
escalation provisions of existing oil and gas contracts, and that operating
costs will remain fixed at yearend levels. The present value of the estimated
future net revenues from proved oil and gas reserves at the dates indicated
below was computed by discounting the aggregate estimated future net revenues
by 10% per year. The present value does not represent the fair market value of
such reserves. This information is based primarily upon reserve reports
prepared by the Company and reviewed by Huddleston & Co., Inc., Houston, Texas
(for the years ended December 31, 1993, 1992 and 1991) and Netherland, Sewell &
Associates, Inc., Dallas, Texas (for the year ended December 31, 1991),
independent petroleum and geological engineering firms.
Proved reserves are the estimated quantities of oil, gas and natural gas
liquids which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs under
existing economic and operating conditions. Proved developed reserves are
proved reserves that can be expected to be recovered through existing wells
with existing equipment and operating methods. The estimation of reserves
requires substantial judgment on the part of petroleum engineers resulting in
imprecise determinations, particularly with respect to new discoveries. The
accuracy of any reserve estimate depends on the quality of available data and
engineering and geological interpretation and judgement. Results of drilling,
testing and production subsequent to the date of the estimate may result in
revisions of such estimate. Accordingly, estimates of reserves are often
materially different from the quantities of oil and gas that are ultimately
recovered and such estimates will change as future production and development
information becomes available. The reserve data represents estimates only and
should not be construed as being exact.
8
<PAGE> 9
Estimates of proved reserves at December 31, 1993 have not been previously
filed by the Company with, or included in reports to, any federal authority or
agency.
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------
1993 (1)(3) 1992 (1) 1991
--------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Estimated proved oil and gas reserves:
Oil and condensate (MBbls) 13,036 13,863 15,938
Gas (MMCF) 302,954 268,871 251,190
Present value of future net
revenues (2) $294,650 $284,911 $242,938
Estimated proved developed
oil and gas reserves:
Oil and condensate (MBbls) 9,942 10,001 12,558
Gas (MMCF) 164,530 131,164 163,351
Present value of future net
revenues (2) $184,055 $172,689 $186,882
</TABLE>
(1) Includes proved undeveloped gas reserves of 27.5 BCF and 28.1
BCF at December 31, 1993 and 1992, respectively, which are
subject to a joint drilling participation agreement as
discussed in Note 13 to the Company's Consolidated Financial
Statements contained in Item 8 of this Report.
(2) Represents the present value, discounted at 10%, of the
estimated future net revenues from proved oil and gas
reserves, before a provision for future income taxes.
(3) See Note 14 to the Company's Consolidated Financial Statements
contained in Item 8 of this Report for information concerning
oil and gas property sales completed by the Company subsequent
to yearend 1993.
(4) As of December 31, 1993 approximately 73% of the Company's
proved oil and condensate reserves and approximately 58% of
its proved gas reserves were pledged to secure its debt.
See Note 15 to the Company's Consolidated Financial Statements contained in
Item 8 of this Report for an analysis of changes in proved oil and gas reserves
and changes in the present value of future net revenues.
PRODUCTIVE WELLS AND DEVELOPED ACREAGE
The following table sets forth the Company's developed acreage and productive
wells at December 31, 1993. "Gross" refers to the total acres or wells in
which the Company has a working interest, and "Net" refers to gross acres or
wells multiplied by the percentage of working interest owned by the Company.
<TABLE>
<CAPTION>
Productive Wells (2)
------------------------------------------------------------------------
Developed Acreage(1) Oil Gas Total
----------------- ------------------- ------------------ ------------------
Gross Net Gross Net Gross Net Gross Net
------- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
168,800 71,900 352 149 493 146 845 295
</TABLE>
(1) Developed acreage is acreage assignable to productive wells.
(2) Productive wells consist of producing wells and wells capable
of production, including gas wells awaiting pipeline
connections or necessary governmental certification to
commence deliveries, and oil wells awaiting connection to
production facilities. Wells which are completed in more than
one producing horizon are counted as one well. The gross
wells reported above which had multiple completions totaled 8.
9
<PAGE> 10
PRODUCTION, UNIT PRICES AND COSTS
Information with respect to production and average unit prices and costs for
the years ended December 31, 1993, 1992 and 1991 is set forth below:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Production:
Oil and condensate (MBbls) 1,436 1,877 2,798
Gas (MMCF) 15,340 19,407 23,303
Average sales price:
Oil and condensate (per Barrel) $14.55 $16.68 $17.53 (1)
Gas (per MCF) (2) $ 1.73 $ 1.71 $ 1.54
Average production costs per
equivalent barrel (3) (4) $ 4.10 $ 4.38 $ 4.84
Average production costs per
equivalent MCF (3) (4) $ .68 $ .73 $ .81
</TABLE>
(1) Before giving effect to the Company's oil hedging
arrangements. The average price increased to $21.19 as a
result of such oil hedging arrangements. Such hedging
arrangements expired December 31, 1991.
(2) In December 1992 the Company sold its West Virginia proved
developed properties which had received an above- market
contract price for gas sales. The Company's pro forma gas
price excluding such West Virginia properties was $1.54 and
$1.38 for the years ended December 31, 1992 and 1991,
respectively.
(3) Oil and gas are converted to a common unit of measure
("equivalent barrel" or "equivalent MCF") on the basis of six
MCF of gas to one barrel of oil.
(4) The components of production costs may vary substantially
among wells, depending on the methods of recovery employed and
other factors, but generally include production taxes,
administrative overhead, workovers, maintenance and repair,
labor and utilities.
UNDEVELOPED ACREAGE
At December 31, 1993, the Company owned 864,500 gross (351,400 net) undeveloped
acres, all of which are located in the continental United States. The table
below sets forth the states in which such acreage is located and the number of
gross and net acres in each.
<TABLE>
<CAPTION>
State Gross Acres Net Acres
----- ----------- ----------
<S> <C> <C>
Wyoming 434,300 184,500
West Virginia (1) 172,900 91,400
Montana 162,200 29,400
North Dakota 34,100 21,400
Louisiana 11,400 4,300
Texas 10,100 2,400
Oklahoma 7,800 4,000
New Mexico 200 100
Other 31,500 13,900
------- -------
TOTAL 864,500 351,400
======= =======
</TABLE>
(1) This acreage is subject to a joint drilling participation
agreement as discussed in Note 13 to the Company's
Consolidated Financial Statements contained in Item 8 of this
Report.
10
<PAGE> 11
DRILLING ACTIVITY
During the periods indicated, the Company drilled or participated in the
drilling of the following exploratory and development wells:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------------------------
1993 1992 1991
---------------------------- ---------------------------- ----------------------------
Success Success Success
Gross Net Ratio Gross Net Ratio Gross Net Ratio
----- ------- ------- ----- ------- ------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Exploratory:
Productive 3 1.57 71.0 3 1.21 45.0 5 3.40 36.6
Non-Productive 2 .64 29.0 6 1.48 55.0 13 5.89 63.4
--- ----- ----- --- ----- ----- --- ----- -----
5 2.21 100.0 9 2.69 100.0 18 9.29 100.0
--- ----- ----- --- ----- ----- --- ----- -----
Development:
Productive 51 12.66 91.7 28 11.49 82.1 58 22.02 71.9
Non-Productive 3 1.14 8.3 6 2.50 17.9 14 8.60 28.1
--- ----- ----- --- ----- ----- --- ----- -----
54 13.80 100.0 34 13.99 100.0 72 30.62 100.0
--- ----- ----- --- ----- ----- --- ----- -----
Total:
Productive 54 14.23 88.9 31 12.70 76.1 63 25.42 63.7
Non-Productive 5 1.78 11.1 12 3.98 23.9 27 14.49 36.3
--- ----- ----- --- ----- ----- --- ----- -----
59 16.01 100.0 43 16.68 100.0 90 39.91 100.0
=== ===== ===== === ===== ===== === ===== =====
</TABLE>
The above well information excludes wells in which the Company has only an
overriding royalty interest.
At December 31, 1993, the Company was participating in the drilling or
completion of 14 gross (5.15 net) wells.
OFFICE LEASES
The Company has entered into certain leases for office space in Denver and New
York City.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Company is a
party, or to which any of its properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock is listed for trading on the American Stock Exchange
and The International Stock Exchange, London. The following table sets forth
the high and low sales prices of the Company's common stock on the American
Stock Exchange:
<TABLE>
<CAPTION>
Class A Class B
------------------------- -------------------------
High Low High Low
------ ----- ------ -----
<S> <C> <C> <C> <C>
1992:
1st Quarter . . . . . . . . . . . . . . . . . . . . . 3 5/8 2 1/2 4 3/4 3 1/2
2nd Quarter . . . . . . . . . . . . . . . . . . . . . 2 7/8 1 7/8 4 5/8 3
3rd Quarter . . . . . . . . . . . . . . . . . . . . . 2 1/8 1 1/4 3 3/4 3
4th Quarter . . . . . . . . . . . . . . . . . . . . . 1 5/8 9/16 3 1/4 1 5/8
1993:
1st Quarter . . . . . . . . . . . . . . . . . . . . . 1 3/8 9/16 1 5/8 1 1/16
2nd Quarter . . . . . . . . . . . . . . . . . . . . . 2 1/8 15/16 2 1 15/16
3rd Quarter . . . . . . . . . . . . . . . . . . . . . 2 1/16 1 5/16 1 15/16 1 3/8
4th Quarter . . . . . . . . . . . . . . . . . . . . . 2 9/16 1 3/8 2 3/8 1 3/8
</TABLE>
At February 8, 1994, the Company estimates that there were approximately 1,050
record holders of Class A Common Stock and 520 record holders of Class B Common
Stock.
The last reported sales prices of the Company's Class A Common Stock and Class
B Common Stock on the American Stock Exchange on February 8, 1994 were $2.00
and $2.25 per share, respectively.
From July 1987 through December 1992, the Company paid a quarterly cash
dividend of $.025 per share on all outstanding shares of Class A Common Stock,
and has never paid dividends on Class B Common Stock. In January 1993 the
Company announced the elimination of Class A Common Stock dividends. The
Company's ability to pay dividends is currently subject to the provisions of
various covenants contained in the Company's revolving credit facility and
certain indentures relating to its public debt.
In addition to the factors discussed above, the determination of the amount of
any future cash dividends to be declared and paid on Class A Common Stock will
depend upon, among other things, the Company's financial condition, its cash
flow from operating activities, the level of the Company's capital and
exploration expenditures and its future business prospects.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data indicates certain trends in the Company's
financial condition and results of operations. For a more complete
presentation of such trends and a discussion of items which affect the
comparability of the information reflected below, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained in
Item 7 of this Report and the Company's Consolidated Financial Statements and
the Notes thereto contained in Item 8 of this Report.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Oil and gas revenues $ 47,476 $ 64,442 $ 95,151 $109,276 $ 60,009
Gross profit (loss) 12,757 1,093 (42,439) 37,366 12,831
Net earnings (loss) from
continuing operations (18,783) (32,696) (76,112) 4,311 (16,777)
Net earnings (loss) attributable
to common shares (7,233) (23,869) (74,268) 393 (20,365)
Net earnings (loss) from
continuing operations per share
of Class A Common Stock (.70) (1.13) (2.65) .16 (1.43)
Net earnings (loss) from
continuing operations per share
of Class B Common Stock (.70) (1.23) (2.75) .06 (1.53)
Earnings (loss) per share of
Class A Common Stock (.27) (.82) (2.58) .03 (1.48)
Loss per share of Class B
Common Stock (.27) (.92) (2.68) (.07) (1.58)
Dividends per share of
Class A Common Stock - .10 .10 .10 .10
AT END OF PERIOD:
Total assets $280,420 $276,959 $440,389 $507,828 $497,774
Long-term bank debt, excluding
current installments 15,000 73,000 187,500 158,945 262,219
Senior Secured Notes 75,000 - - - -
Convertible Subordinated Debentures 50,000 50,000 50,000 50,000 -
Gas Indexed Notes 100,000 100,000 100,000 100,000 100,000
Redeemable Preferred Stock, net - - - - 12,009
Stockholders' equity 3,565 10,851 37,945 124,121 44,378
</TABLE>
The Company's historical results have been affected by a number of transactions
during the five years shown above, the most significant of which were: i) in
December 1989 the Company completed an acquisition for approximately $157
million in cash which was financed through the issuance in February 1990 of $50
million of 9% Convertible Subordinated Debentures, 10 million shares of the
Company's Class A Common Stock at $7.50 per share and the incurrence of bank
debt; ii) as a result of the low oil and gas prices received at certain times
during 1992 and 1991, the Company was required to reduce the carrying value of
its oil and gas properties by $15 million and $68 million, respectively; iii)
in July 1992, the Company completed the sale (the "MGRI Divestiture") of
Mountain Gas Resources, Inc. ("MGRI"), a subsidiary of the Company which then
owned its Wyoming gas gathering and processing business, as well as its
marketing operations (all of which have been accounted for as discontinued
operations) for net cash proceeds of $77.5 million which were used to prepay an
equivalent amount of bank debt; iv) in December 1992, the Company completed the
sale of its proved developed reserves and associated gathering systems in West
Virginia for net cash proceeds of $32.6 million which was used to repay bank
and other indebtedness of the Company; and v) in July 1993 the Company received
$11.6 million from the sale of the Company's remaining equity interest in MGRI
(the "MGRI Equity Sale") (which has been accounted for as discontinued
operations).
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and the Notes thereto contained in Item 8 of
this Report.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity and capital resources have recently improved
substantially as a result of the Company's (i) receipt in July 1993 of $11.6
million from the MGRI Equity Sale, and the subsequent prepayment of an
equivalent amount of bank debt; (ii) sale of $75 million of Senior Secured
Notes, and the subsequent prepayment of $73.8 million of bank debt; (iii)
exchange of $99.8 million of Senior Gas Indexed Notes (the "New Notes") for an
equivalent amount of the Senior Subordinated Gas Indexed Notes (the "Old
Notes"), and the consequent elimination of principal payments of $99.8 million
in respect of the Old Notes during the period 1997 - 1999 and the extension of
the maturity of the New Notes three years later than the Old Notes; (iv)
amendment of its bank facility to provide for a new $25 million revolving
credit facility (the "Revolving Credit Facility"), and the improved financial
flexibility provided thereby; and (v) receipt of $22 million of proceeds from
asset sales completed in January 1994 of which $5 million was utilized to fully
prepay all of the indebtedness outstanding under the Revolving Credit Facility.
RESERVE GROWTH
During 1993 the Company's proved oil and gas reserves increased to 63.5 million
equivalent barrels of oil ("BOE") from 58.7 million BOE at yearend 1992,
notwithstanding the divestiture of .7 million BOE and production of 4 million
BOE during 1993. Most of this growth in reserves resulted from development
drilling operations, principally the extension of existing oil and gas fields;
and, to a lesser extent, from several smaller asset acquisitions. Of such
total 63.5 million BOE of proved reserves at yearend 1993, 26.2 million BOE
(41%) were proved undeveloped reserves. See Note 15 to the Company's
Consolidated Financial Statements contained in Item 8 of this Report for
further information concerning the increase in the Company's reserves in 1993.
REVENUES AND CASH FLOWS
The Company's 1993 oil and gas revenues declined significantly vis-a-vis 1992,
primarily as a result of lower oil and gas production and sharply lower oil
prices, as partially offset by a small increase in gas prices. A substantial
portion of the decrease in the Company's oil production and all of the decrease
in its gas production resulted from the divestiture of various non-strategic
oil and gas producing properties, with the remainder of the decrease in oil
production being due to lower production rates in several fields, all as
discussed in "Results of Operations" below. In particular, the Company's cash
flow relating to operating activities has decreased in each of the past three
years such that the Company used $5.9 million in its operating activities in
1993, as compared to amounts provided by operating activities of $16 million in
1992 and $31.3 million in 1991.
In an effort to reverse this trend, the Company substantially increased its
capital expenditures in 1993 to $21 million, as compared to capital
expenditures of $15.9 million in 1992, and currently plans to spend a minimum
of $25-30 million annually on capital expenditures during the period 1994 -
1996, principally on drilling projects to develop its proved undeveloped
hydrocarbon reserves (which totaled 3.1 MMBbls of oil and 138.4 BCF of gas at
yearend 1993) in order to increase oil and gas production and the revenues and
operating cash flow generated therefrom. The level of the Company's future oil
and gas production and related revenues, and thus its long-term liquidity, will
depend upon the results of such ongoing drilling operations and, in particular,
the development of its proved undeveloped hydrocarbon reserves. These drilling
operations will in turn be affected by the level of funds available for capital
expenditures, as discussed below.
14
<PAGE> 15
LONG-TERM DEBT
At February 8, 1994, the Company had no outstanding borrowings under its
Revolving Credit Facility and, therefore, had available borrowing capacity
thereunder of $25 million. The Company repaid the $15 million of bank debt
which was outstanding at December 31, 1993 with $5 million of the $22 million
of asset sale proceeds received during January 1994 and with $10 million of
cash and cash equivalents on hand at December 31, 1993. Borrowings under the
Revolving Credit Facility are secured by mortgages on certain of the Company's
oil and gas properties (the "Mortgaged Properties") and bear interest at either
prime plus 1% or LIBOR plus 2 1/2%. Borrowings under the Revolving Credit
Facility of up to $20 million may be utilized for developmental drilling and
certain other operations related to the Company's proved hydrocarbon reserves
and borrowings of up to $15 million may be used for seasonal working capital
purposes.
The other long-term debt of the Company consists of $50 million of 9%
Convertible Subordinated Debentures (the "Convertible Subordinated
Debentures"), $75 million of 11.5% Senior Secured Notes, and $100 million of
Gas Indexed Notes (comprised of $99,770,000 of New Notes and $230,000 of Old
Notes) currently bearing interest at 14.05% per annum and which will bear
interest at a rate of 13.925% per annum during the period February 16, 1994 to
May 15, 1994 in accordance with the terms of the indentures relating to such
Gas Indexed Notes. See Note 3 to the Company's Consolidated Financial
Statements contained in Item 8 of this Report for information as to how
increases in spot gas prices resulting in sustained industry-wide average spot
gas prices exceeding a threshold price can trigger increases in the effective
rate of interest payable on the Gas Indexed Notes. The Company is required to
certify at least once annually that the oil and gas properties securing the
Senior Secured Notes meet certain coverage tests; and, at December 31, 1993,
such properties met such tests. If such properties do not meet such tests, the
Company would be required to offer to purchase an amount of the Senior Secured
Notes equal to the deficiency or to cure such deficiency by pledging additional
oil and gas properties.
DEBT SERVICE
Assuming (i) interest on the Gas Indexed Notes to be no greater than 13.925%
(its level during the February 16 - May 15, 1994 period), (ii) the prime rate
to be 6% per annum (its level at February 8, 1994), and (iii) no further
increase in the Company's debt level from that as of February 8, 1994, the
Company would have no required principal payments due until 2000 and during
1994, 1995 and 1996 the Company would have annual estimated interest payments
due on all of its debt of approximately $27 million. Accordingly, a
substantial amount of the Company's operating cash flow will be utilized during
such three-year period to pay interest expense, rather than being utilized in
the Company's development and exploratory drilling operations or in the
acquisition of producing properties.
CAPITAL EXPENDITURES
The Company's capital expenditures for its oil and gas operations totaled
approximately $21 million in 1993, as compared to capital expenditures on such
operations of $15.9 million and $54.6 million in 1992 and 1991, respectively.
Of the capital expenditures made during 1993, $15.4 million was used in
development and recompletion activities, $3.0 million was used in exploratory
activities, and $2.6 million was used in various other activities, including
acquisitions of producing properties and undeveloped acreage. In 1994 the
Company currently anticipates that it will make approximately $30.4 million of
capital expenditures, of which approximately $23.3 million will be used for
development drilling and related activities (principally to develop its proved
undeveloped oil and gas reserves), approximately $4.3 million will be used for
exploratory drilling, and approximately $2.8 million will be used to acquire
producing properties and undeveloped acreage. Additionally, the Company
currently plans to spend a minimum of $25-30 million per annum on capital
expenditures during the 1995 - 1996 period. Except for the Company's
commitment to spend $5 million per year on the Mortgaged Properties during the
three-year period ending October 1, 1996 contained in its Revolving Credit
Facility, the timing of most of the Company's capital expenditures is
discretionary and there
15
<PAGE> 16
are currently no material long-term commitments associated with the Company's
capital expenditure plans. Consequently, the Company has a significant degree
of flexibility to adjust the level of such expenditures as circumstances
warrant.
The Company funded its capital expenditures during 1993 primarily with bank
borrowings and the proceeds of asset sales. In 1994 and thereafter, the
Company plans to increasingly rely upon the improving levels of cash flow from
its oil and gas operations to fund its ongoing capital expenditures, as well as
to meet its debt service obligations under the New Notes, the Senior Secured
Notes, the Old Notes, the Convertible Subordinated Debentures and any
indebtedness outstanding under the Revolving Credit Facility, as the Company
benefits from the increased levels of oil and gas production and related
revenues and cash flows that are anticipated to result from its 1994-1996
capital expenditures. There can be no assurance, however, that such capital
expenditures will be successful and result in a sufficient level of revenues
and cash flow to both fund the Company's ongoing capital expenditures and
enable it to meet its debt service and other obligations; and, accordingly, in
such circumstances, the Company's discretionary capital spending would have to
be correspondingly reduced or it would have to make further asset sales or use
its available borrowing capacity under its Revolving Credit Facility, in order
to continue with its capital expenditures and meet its debt service and other
obligations as hereinabove discussed. In addition, as discussed below, oil and
gas price declines would adversely impact the Company's operating cash flow.
MARKETS AND PRICES
The amount of funding for the Company's capital expenditures program, whether
derived from operating cash flow, bank borrowings or asset sales, may also be
significantly affected by changes in oil and gas prices. Also, in addition to
having a negative impact on oil and gas markets, oil and gas price declines
have an adverse impact on the value of the Company's proved oil and gas
reserves. A downward revision in the value of the Company's proved oil and gas
reserves could (i) impair the ability of the Company to obtain additional
financing in the future for working capital, capital expenditures or other
purposes or (ii) cause the Company to be required to pledge additional oil and
gas properties to secure the Senior Secured Notes as discussed in "Long-Term
Debt" above. Such changes in oil and gas prices depend on a number of factors
outside the control of the Company, such as actions taken by oil and gas
producing nations outside the United States, the availability of imported oil
and gas, the availability and marketing of competitive fuels, the fluctuating
seasonal demand for oil and gas, and the extent of governmental regulation of
the oil and gas industry. As a result, an accurate prediction cannot be made
as to what the prices of oil and gas may be in future periods.
During 1993, the average prices received for oil and gas by the Company were
$14.55 per barrel and $1.73 per MCF, respectively, as compared to $16.68 per
barrel of oil and $1.71 per MCF of gas in 1992 and $17.53 per barrel of oil
($21.19 after giving effect to the Company's oil hedging arrangements) and
$1.54 per MCF of gas in 1991. During the fourth quarter of 1993 and continuing
into January 1994, oil prices declined to a five-year low, such that during
January 1994 the average price received for oil by the Company was $10.26 per
barrel. The Company estimates that (i) a $1.00 per barrel change in the
average oil price received by the Company would result in an estimated change
of approximately $1.3 million to both the Company's net income and cash flow
for 1994; and (ii) a $.10 per MCF change in the average gas price received by
the Company would result in an estimated change of approximately $1.9 million
to both the Company's net income and cash flow for 1994. Therefore, any
substantial and extended decline in the price of oil or gas could have a
material adverse effect on the Company's financial condition and its results of
operations.
A portion of the gas reserves sold to Belden & Blake in 1992 is subject to a
long-term gas contract providing for prices above the current spot market price
for West Virginia gas. In connection with the sale, the Company guaranteed
certain minimum levels of performance, on an annual basis, by the gas purchaser
under this contract such that should performance under this contract be less
than the levels guaranteed by the Company, Belden & Blake can draw on a letter
of credit entered into by the Company (see Note 13 to the Company's
Consolidated Financial Statements contained in Item 8 of this Report).
16
<PAGE> 17
RESULTS OF OPERATIONS
EARNINGS (LOSS) FROM CONTINUING OPERATIONS
The Company recognized losses from continuing operations of $18,783,000,
$32,696,000 and $76,112,000 for 1993, 1992 and 1991, respectively.
Contributing to the losses during 1992 and 1991 were reductions in the carrying
value of the Company's oil and gas properties amounting to $15,000,000 and
$68,000,000, respectively.
Oil and Gas Revenues. Oil and gas revenues have decreased during the
past two years due primarily to lower oil and gas production and lower
oil prices, as partially offset by increases in gas prices during such
periods. Oil and gas production for 1993 decreased 23% and 21%,
respectively from their levels for 1992. Sales of certain producing
properties accounted for 27% of the decrease in oil production and all
of such decrease in gas production with the remaining decrease in oil
production resulting from lower production rates in several
significant fields. Oil and gas production for 1992 decreased 33% and
17%, respectively, from their levels for 1991. Sales of certain
producing properties accounted for 31% of the decrease in oil
production and 50% of the decrease in gas production with the
remainder being due to lower production rates in several significant
fields. The Company's average oil price for 1993 decreased 13% as
compared to the average price for 1992 and the average oil price for
1992 decreased 21% as compared to the average price for 1991. The
decrease in 1992 as compared to 1991 was due primarily to the absence
in 1992 of certain oil hedging arrangements which resulted in the
receipt of $10,248,000 of additional revenues in 1991, and which
increased the Company's average oil price per barrel for that year
from $17.53 to $21.19.
The following table reflects the average prices received for oil and
gas and the amount of oil and gas production for 1993, 1992 and 1991.
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Average Price:
Oil and condensate (per Bbl) $14.55 $16.68 $17.53 (1)
Gas (per MCF) $ 1.73 $ 1.71 (2) $ 1.54 (2)
Production:
Oil and condensate (MBbls) 1,436 1,877 2,798
Gas (MMCF) 15,340 19,407 23,303
</TABLE>
(1) Before giving effect to the Company's oil hedging arrangements. The
average price increased to $21.19 as a result of such oil hedging
arrangements. Such hedging arrangements expired December 31, 1991.
(2) In December 1992 the Company sold its West Virginia proved developed
properties which had received an above-market contract price for gas
sales. The Company's pro forma gas price excluding such West
Virginia properties was $1.54 and $1.38 for the years ended December
31, 1992 and 1991, respectively.
Operating Expenses. Lease operating expenses, production taxes and
depletion, depreciation and amortization have each decreased when comparing
1993 to 1992 and when comparing 1992 to 1991. The decrease in lease
operating expenses was due primarily to the sale of various higher
operating cost properties, including in particular the December 1992 sale
of the Company's West Virginia proved developed properties, and also due to
the increased operating efficiencies realized by the Company. The decrease
in production taxes resulted from the reduced oil and gas revenues received
when compared to those received a year earlier. The reduced amount of
depletion, depreciation and amortization was due to a decrease in
production (on an equivalent barrel basis), the reductions in the carrying
value of the Company's oil and gas properties as described below, and an
increase in the Company's reserves at a finding cost substantially below
its depletion rate.
17
<PAGE> 18
Under the rules of the Securities and Exchange Commission for companies
utilizing the full cost method of accounting, the carrying value of oil and
gas properties is limited to the present value, as of the end of each
fiscal quarter, of the estimated future net revenues from proved reserves
using current pricing (with consideration of price changes only to the
extent provided by contractual agreements), discounted at 10%, after
adjusting for tax effects. As a result of the declines in oil and gas
prices during 1992 and 1991 the Company was required to reduce the carrying
value of its oil and gas properties by $15,000,000 and $68,000,000,
respectively. No such reduction has been required since the first quarter
of 1992.
The following table shows certain costs associated with oil and gas
revenues per equivalent barrel of oil for 1993, 1992 and 1991.
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(per equivalent barrel)
<S> <C> <C> <C>
Production Costs $4.10 $4.38 $4.84
Depletion, Depreciation and Amortization $4.60 $5.08 $5.57
</TABLE>
General and Administrative Expense. General and administrative expense
decreased 17% and 28% during 1993 and 1992, respectively, due to the
consolidation and downsizing of certain of the Company's division offices
and associated operations during 1991 and during the first half of 1992.
The reduction in general and administrative expense during 1993 is also due
in part to the Company's adoption of a new method of accounting for its
Employee Stock Ownership Plan as discussed in Note 8 to the Company's
Consolidated Financial Statements contained in Item 8 of this Report.
Interest Expense. The Company reduced its level of interest expense in
1993 as compared to 1992 primarily due to a lower level of bank debt during
1993. The Company's bank debt averaged $48.7 million during 1993 as
compared to the $98.8 million associated with continuing operations during
1992. Such decrease was the result of the Company's sale of its West
Virginia proved developed reserves in December 1992 for $32.6 million, the
MGRI Equity Sale in July 1993 for $11.6 million and the sale of a total of
$75 million of Senior Secured Notes in August and November 1993, and the
utilization of the proceeds of each of these sales to prepay bank debt.
Also, the Company reduced the amount of amortization of deferred bank debt
charges during 1993 as compared to 1992, due to the accelerated
amortization of such costs during 1993 and 1992 which are included in debt
repayment expense as discussed below. These reductions to the Company's
interest expense were partially offset by the interest expense on the
Company's Senior Secured Notes issued during 1993 and due to the Company
capitalizing less interest expense in 1993 as compared to 1992.
The Company's bank debt balance averaged $140.5 million during 1992
compared to $174.3 million during 1991. Since $77.5 million of bank debt
was repaid in July 1992 in connection with the MGRI Divestiture, the
interest expense on such debt through such date was charged to discontinued
operations. Therefore, the Company's bank debt balance associated with
continuing operations averaged $98.8 million and $96.8 million during 1992
and 1991, respectively. The Company's interest expense for 1992 is higher
than 1991 due to the increased amortization of deferred bank debt charges
in 1992 and a lower level of interest expense capitalization during 1992
than during 1991. This more than offset the effect of the reduced average
bank borrowing interest rate of 7.3% during 1992, compared to an average
9.4% rate during 1991.
Debt Repayment Expense. Debt repayment expense for 1993 and 1992 includes
the amortization of prepaid loan fees and costs associated with the
Company's bank debt. The Company accelerated the amortization of such
costs in connection with the significant reduction of, and amendments to,
the Company's bank debt during such periods.
18
<PAGE> 19
Income Taxes. The Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") effective as
of January 1, 1991. SFAS 109 represents a new method of accounting for
income taxes, and generally requires that deferred taxes be provided using
an asset and liability approach at currently enacted income tax rates. The
adoption of SFAS 109 had no impact on net income for 1993, 1992 and 1991.
The Company did not record a tax benefit associated with the losses
incurred during 1993, 1992 and 1991, because a valuation allowance was
provided for the deferred assets otherwise recorded.
DISCONTINUED OPERATIONS.
Discontinued operations reflect the results of the Company's Mountain Gas
Resources subsidiary which owned and operated the majority of the Company's gas
gathering, processing and marketing operations and which was sold in July 1992.
The components of the results of discontinued operations are shown in the table
below:
<TABLE>
<CAPTION>
1992 (1) 1991
--------- ----------
<S> <C> <C>
Revenues:
Sale of natural gas liquids $ 6,982 $ 12,135
Transportation revenues 4,509 8,953
Sale of residue and other gas 26,810 37,293
------- -------
Total revenues 38,301 58,381
------- -------
Costs and expenses:
Operating expense 5,437 8,820
Gas purchases 24,895 35,216
General and administrative expenses 1,474 1,749
Depreciation 2,100 3,414
Interest expense 3,376 7,338
------- -------
Total costs and expenses 37,282 56,537
------- -------
Net income $ 1,019 $ 1,844
======= =======
</TABLE>
(1) Reflects operations through July 16, 1992
The results from discontinued operations for 1992 include operations only
through July 1992, while those for 1991 include operations for the entire year.
INFLATION.
In recent years inflation has not had a significant impact on the Company's
operations. Although oil and gas prices have significantly fluctuated during
such periods, the Company has generally experienced a decline in the costs
incurred to acquire quality exploration and development prospects as well as in
the costs of drilling and completing wells.
19
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
Presidio Oil Company:
We have audited the accompanying consolidated balance sheets of Presidio Oil
Company and its subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the List of Documents
Filed at Item 14. These financial statements and the financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Presidio Oil Company and
subsidiaries at December 31, 1993 and 1992 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1993 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Note 8 to the consolidated financial statements, the Company
changed its method of accounting for its employee stock ownership plan
effective January 1, 1993.
DELOITTE & TOUCHE
Denver, Colorado
February 15, 1994
20
<PAGE> 21
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
December 31,
--------------------
1993 1992
-------- --------
(in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 13,559 $ 11,457
Accounts receivable:
Oil and gas sales 6,388 9,871
Joint interest owners and other 8,182 6,157
Other 2,394 1,404
-------- --------
Total current assets 30,523 28,889
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Oil and gas properties using full cost accounting:
Subject to amortization 480,911 449,742
Not subject to amortization 23,601 34,887
Other 3,611 3,636
-------- --------
Total 508,123 488,265
Less accumulated depletion,
depreciation and amortization 269,349 250,553
-------- --------
Net property, plant and equipment 238,774 237,712
-------- --------
OTHER ASSETS:
Deferred charges 8,833 8,141
Other 2,290 2,217
-------- --------
Total other assets 11,123 10,358
-------- --------
$280,420 $276,959
======== ========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 22
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1993 1992
-------- --------
(in thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable:
Oil and gas sales $ 4,739 $ 7,707
Trade and other 13,137 11,066
Accrued interest 3,621 4,462
Accrued ad valorem and severance taxes 4,408 7,717
Other accrued liabilities 1,798 3,362
-------- --------
Total current liabilities 27,703 34,314
-------- --------
BANK DEBT 15,000 73,000
-------- --------
SENIOR SECURED NOTES 75,000 -
-------- ---------
GAS INDEXED NOTES 100,000 100,000
-------- ---------
CONVERTIBLE SUBORDINATED DEBENTURES 50,000 50,000
-------- --------
OTHER NONCURRENT LIABILITIES 9,152 8,794
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Class A Common Stock, $.10 par value; 25,312,000
and 25,216,000 outstanding at December 31, 1993
and 1992, respectively 2,532 2,522
Class B Common Stock, $.10 par value; 3,223,000
and 3,319,000 outstanding at December 31, 1993
and 1992, respectively 322 332
Additional paid-in capital 133,503 133,896
Deferred compensation (7,317) (7,657)
Retained deficit (125,475) (118,242)
-------- --------
Total stockholders' equity 3,565 10,851
-------- --------
$280,420 $276,959
======== ========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 23
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1993 1992 1991
-------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Oil and gas revenues $ 47,476 $ 64,442 $ 95,151
Less - direct costs:
Lease operating 13,431 18,106 26,468
Production taxes 2,931 4,259 5,887
Depletion, depreciation and amortization 18,357 25,984 37,235
Reduction in the carrying value of
oil and gas properties - 15,000 68,000
-------- -------- --------
12,757 1,093 (42,439)
-------- -------- --------
General and administrative expense 5,326 6,410 8,892
-------- -------- --------
Other income (expense):
Interest expense (25,034) (27,865) (25,644)
Debt repayment expense (1,971) (1,954) -
Interest income 31 249 380
Other 760 2,191 483
-------- -------- --------
(26,214) (27,379) (24,781)
-------- -------- --------
Net loss from continuing operations (18,783) (32,696) (76,112)
Discontinued operations:
Earnings from gas gathering,
processing and marketing - 1,019 1,844
Gain on sale 11,550 7,808 -
-------- -------- --------
Net loss $ (7,233) $(23,869) $(74,268)
======== ======== ========
Loss per share of Class A Common Stock:
Loss from continuing operations $ (.70) $ (1.13) $ (2.65)
Discontinued operations .43 .31 .07
-------- -------- --------
Loss per share $ (.27) $ (.82) $ (2.58)
======== ======== ========
Loss per share of Class B Common Stock:
Loss from continuing operations $ (.70) $ (1.23) $ (2.75)
Discontinued operations .43 .31 .07
-------- -------- --------
Loss per share $ (.27) $ (.92) $ (2.68)
======== ======== ========
Dividends per share of Class A Common Stock $ - $ .10 $ .10
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 24
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Class A Class B
Common Stock Common Stock Additional Deferred
------------------ ------------------ Paid-in Compen- Retained
Shares Amount Shares Amount Capital sation Deficit
------ ------ ------ ------ ----------- ---------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1990 26,899 $2,690 3,336 $334 $146,815 $(5,613) $(20,105)
Net loss - - - - - - (74,268)
Dividends on Class A
Common Stock - - - - (2,524) - -
Exchange of Class A Common
Stock for Class B Common
Stock 17 2 (17) (2) - - -
ESOP purchases of stock in excess
of current year contributions - - - - - (1,228) -
Purchase of Treasury Shares (1,733) (173) - - (7,952) - -
Other - (1) - - (30) - -
------- ------ ------- ----- -------- -------- ---------
BALANCE, December 31, 1991 25,183 2,518 3,319 332 136,309 (6,841) (94,373)
Net loss - - - - - - (23,869)
Dividends on Class A
Common Stock - - - - (2,521) - -
Issuance of Class A Common Stock 33 4 - - 108 - -
ESOP purchases of stock in excess
of current year contributions - - - - - (816) -
------- ------ ------- ----- -------- -------- ---------
BALANCE, December 31, 1992 25,216 2,522 3,319 332 133,896 (7,657) (118,242)
Net loss - - - - - - (7,233)
Difference between historical
cost and fair market value
of allocated ESOP shares - - - - (428) - -
ESOP contribution in excess
of ESOP stock purchases - - - - - 340 -
Exchange of Class A Common Stock
for Class B Common Stock 96 10 (96) (10) - - -
Other - - - - 35 - -
------- ------ ------- ----- -------- -------- ---------
BALANCE, December 31, 1993 25,312 $2,532 3,223 $322 $133,503 $(7,317) $(125,475)
======= ====== ======= ===== ======== ======== =========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 25
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1993 1992 1991
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (7,233) $(23,869) $(74,268)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depletion, depreciation and amortization 18,856 29,446 41,988
Reduction in the carrying amount of
oil and gas properties - 15,000 68,000
Gain on sale of discontinued operations (11,550) (7,808) -
Amortization of debt issuance costs included
in interest and debt repayment expense 3,683 5,865 2,606
Other 1,897 1,655 2,878
Changes in other assets and liabilities:
Decrease (increase) in
accounts receivable 1,458 7,291 (161)
Increase in other current assets (2,347) (287) (272)
Payment of loan fees (4,375) (2,588) (814)
Decrease (increase) in other
noncurrent assets (73) (2,373) 770
Decrease in accounts payable (897) (2,583) (6,458)
Decrease in accrued
interest and liabilities (5,714) (3,051) (1,260)
Increase (decrease) in other
noncurrent liabilities 358 (667) (1,675)
-------- -------- --------
Net cash provided by (used in)
operating activities $ (5,937) $ 16,031 $ 31,334
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
25
<PAGE> 26
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Continued)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1993 1992 1991
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment $(21,096) $(18,559) $(64,362)
Proceeds from asset sales 12,684 120,118 12,122
-------- -------- --------
Net cash provided by (used in)
investing activities (8,412) 101,559 (52,240)
-------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings of bank debt 61,900 71,503 92,355
Payments of bank debt (119,900) (186,003) (63,800)
Other noncurrent financing (549) (5,838) (4,926)
Purchase of treasury shares - - (8,125)
Issuance of Senior Secured Notes 75,000 - -
Dividends on Class A Common Stock - (2,521) (2,524)
-------- -------- --------
Net cash provided by (used in)
financing activities 16,451 (122,859) 12,980
-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 2,102 (5,269) (7,926)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 11,457 16,726 24,652
-------- -------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 13,559 $ 11,457 $ 16,726
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
26
<PAGE> 27
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1993, 1992 and 1991
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Consolidated Financial Statements present the financial
position of Presidio Oil Company and its wholly-owned subsidiaries (the
"Company" or "Presidio").
Certain accounts for the years ended December 31, 1992 and 1991 have been
reclassified to conform to the classifications for the year ended December 31,
1993.
The Company's Senior Subordinated Gas Indexed Notes, Senior Gas Indexed Notes
and Senior Secured Notes (collectively the "Notes") are guaranteed by all
significant subsidiaries of the Company (the "Guarantors"). Separate financial
statements of the Guarantors are not included herein because the Guarantors
have fully, unconditionally, jointly and severally guaranteed the Company's
obligations with respect to the Notes and the Company (which is primarily a
holding company and whose operating income is generated by its subsidiaries)
has no separate operations of its own. The operations, assets, liabilities and
equity of the subsidiaries of the Company that are not Guarantors are
inconsequential.
Property, Plant and Equipment and Depletion, Depreciation and Amortization
The Company follows the full cost method of accounting for oil and gas
producing activities whereby all costs incurred in the acquisition, exploration
and development of oil and gas properties are capitalized. Sales of oil and
gas properties are recorded as an adjustment of capitalized costs, with no gain
or loss recognized. Capitalized costs are subject to a ceiling limitation test
based on a computed value of the Company's present value of estimated future
net revenues from proved reserves using current prices (with consideration of
price changes only to the extent provided by contractual arrangements),
discounted at 10%, after adjusting for tax effects at the end of each period.
Due to the low oil and gas prices being received at certain times during 1992
and 1991, the Company was required to reduce the carrying value of its oil and
gas properties by $15,000,000 and $68,000,000, respectively, in such years.
The provision for depletion, depreciation and amortization of oil and gas
properties is calculated by multiplying current period oil and gas production
by a rate which is determined by dividing capitalized oil and gas costs (except
for costs of certain unevaluated acreage discussed below) plus estimated future
development costs, by the quantities of estimated proved oil and gas reserves.
The Company excludes investments in unevaluated acreage from costs to be
amortized pending determination as to the existence of proved reserves on such
acreage. The Company's unevaluated acreage is subject to a periodic review for
impairment and, if necessary, the amount of impairment is included in the costs
to be amortized. The Company capitalizes interest on unevaluated properties
not subject to amortization. The Company capitalized interest of $1,278,000,
$2,639,000, and $4,882,000 (out of total interest costs, including amounts
associated with discontinued operations, of $26,312,000, $33,880,000 and
$37,864,000) for the years ended December 31, 1993, 1992 and 1991,
respectively.
27
<PAGE> 28
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
Income Taxes
The Company files a consolidated income tax return and provides deferred tax
liabilities and assets for the future tax consequences of events that have been
recognized in the Company's consolidated financial statements or tax returns
(see Note 5).
Loss Per Common Share
Loss per common share is computed as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1993 1992 1991
-------- -------- --------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Weighted average number of common shares
outstanding 28,535 28,535 28,635
Less: Weighted average number of unallocated
shares held by the Company's Employee Stock
Option Plan (see Note 8) (1,479) N/A (1) N/A (1)
-------- -------- --------
27,056 28,535 28,635
======== ======== ========
Net loss from continuing operations $(18,783) $(32,696) $(76,112)
Dividends on Class A Common Stock - (2,521) (2,524)
-------- -------- --------
Loss from continuing operations
attributable to common shares after
dividends on Class A Common Stock (18,783) (35,217) (78,636)
Discontinued operations 11,550 8,827 1,844
-------- -------- --------
Loss attributable to common shares after
dividends on Class A Common Stock $ (7,233) $(26,390) $(76,792)
======== ======== ========
Loss from continuing operations per
share of Class B Common Stock $ (.70) $ (1.23) $ (2.75)
Dividends per share of Class A Common Stock - .10 .10
-------- -------- --------
Loss from continuing operations
per share of Class A Common Stock $ (.70) $ (1.13) $ (2.65)
======== ======== ========
Discontinued operations per share of Class A
and Class B Common Stock $ .43 $ .31 $ .07
======== ======== ========
Loss per share of Class A Common Stock $ (.27) $ (.82) $ (2.58)
======== ======== ========
Loss per share of Class B Common Stock $ (.27) $ (.92) $ (2.68)
======== ======== ========
</TABLE>
(1) As of January 1, 1993 the Company adopted a new method of accounting for
its Employee Stock Ownership Plan ("ESOP") which requires unallocated
shares held by the ESOP to be excluded from outstanding shares for purposes
of calculating loss per share. The N/A for the years ended December 31,
1992 and 1991 indicates that such new accounting method does not apply to
such years and, therefore, the weighted average number of unallocated
shares held by the ESOP for the years ended December 31, 1992 and 1991 of
1,324,000 and 1,032,000, respectively, were reflected as outstanding for
purposes of calculating loss per common share.
28
<PAGE> 29
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
Deferred Charges
The Company records the fees and expenses associated with its bank and public
debt as deferred charges and amortizes such costs to interest expense over the
life of the debt using the effective interest method. Debt repayment expense
reflects the accelerated amortization of certain of such costs during the years
ended December 31, 1993 and 1992.
Consolidated Statements of Cash Flows
The Company considers investments purchased with an original maturity of three
months or less to be cash equivalents. Included in the Consolidated Statements
of Cash Flows is $23,945,000, $29,365,000 and $28,901,000 of interest paid,
including amounts paid associated with discontinued operations, net of amounts
capitalized, during the years ended December 31, 1993, 1992 and 1991,
respectively. During the year ended December 31, 1993, $99,770,000 of Senior
Subordinated Gas Indexed Notes were exchanged for an equivalent amount of
Senior Gas Indexed Notes (see Note 3); and, insofar as such exchange was a
non-cash transaction, it was not reflected in the Consolidated Statements of
Cash Flows.
Gas Balancing Arrangements
The Company uses the entitlement method of recording gas revenues. Under such
method, sales are recorded based upon the Company's proportionate share of gas
sold. The Company then records a receivable (payable) to the extent it sells
less (more) than its proportionate share of the revenues. At December 31, 1993
and 1992, the Company had net gas balancing liabilities of $3,930,000
associated with approximately 2.1 billion cubic feet ("BCF") of gas and
$4,170,000 associated with 2 BCF of gas, respectively.
2. BANK DEBT
At December 31, 1993, the Company had bank debt of $15,000,000 outstanding
under a $25 million revolving credit facility (the "Revolving Credit
Facility"). The Company had $73,000,000 outstanding under an $80 million bank
credit agreement at December 31, 1992. The substantial decrease in the
Company's bank debt balance at December 31, 1993 as compared to December 31,
1992 is primarily due to repayments resulting from the sale of the Company's
Senior Secured Notes as discussed in Note 3.
Borrowings under the Revolving Credit Facility are secured by mortgages on
certain of the Company's oil and gas properties (the "Mortgaged Properties")
and bear interest at either prime plus 1% or LIBOR plus 2 1/2%. Borrowings
under the Revolving Credit Facility of up to $20 million may be utilized for
developmental drilling and certain other operations related to the Company's
proved hydrocarbon reserves and borrowings of up to $15 million may be used for
seasonal working capital purposes. The Revolving Credit Facility requires (i)
regular quarterly commitment reductions of approximately $1.56 million
beginning on October 1, 1995 through July 1, 1999, (ii) additional commitment
reductions equal to 100% of the proceeds realized from the sale of Mortgaged
Properties, (iii) 75% of the proceeds realized from the sale of certain other
assets to be utilized to develop hydrocarbon reserves, (iv) capital
expenditures of not less than $5 million per annum during the three-year period
ending October 1, 1996 in respect of the development of the Mortgaged
Properties, and (v) the Company's ratio of bank debt to total capitalization
(excluding the effect of any reduction in the carrying amount of oil and gas
properties) to be no greater than .15 on the last day of each quarter, and its
29
<PAGE> 30
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
ratio of each quarter's operating cash flow plus the net proceeds of asset
sales to cash dividends, cash interest and scheduled debt payments due within
the following quarter to be greater than 1.
At December 31, 1993, the estimated minimum principal repayments associated
with the Revolving Credit Facility were $0, $10,000,000 $0, $0 and $313,000
in each of the years 1994 through 1998. However, subsequent to December 31,
1993 the Company fully prepaid the indebtedness outstanding under the
Revolving Credit Facility with a portion of the proceeds from the sale of
certain oil and gas properties as discussed in Note 14, and thus no repayments
are due under the Revolving Credit Facility.
3. GAS INDEXED NOTES; SENIOR SECURED NOTES
On August 6, 1993, the Company completed various transactions (the "Private
Exchange") with certain holders (and their affiliates) (the "Holders") of the
Company's Senior Subordinated Gas Indexed Notes Due 1999 (the "Old Notes"),
pursuant to which a total of $75 million aggregate principal amount of the Old
Notes was exchanged for an equivalent principal amount of the Company's
newly-issued Senior Gas Indexed Notes Due 2002 (the "New Notes") and the
Holders purchased $56.25 million aggregate principal amount of the Company's
11.5% Senior Secured Notes Due 2000 (the "Senior Secured Notes"). The net
proceeds of the sale of the Senior Secured Notes were used to prepay $55
million of bank debt.
On November 30, 1993, the Company completed a public exchange offer (the
"Exchange Offer") pursuant to which (i) $24.77 million of the $25 million of
the Old Notes remaining after the Private Exchange were exchanged for an
equivalent principal amount of the New Notes and (ii) $18.75 million of Senior
Secured Notes were sold with the proceeds of such sale being used to prepay
bank debt.
The terms of the New Notes are generally the same as those of the Old Notes,
except that the New Notes: (i) rank pari passu with other senior debt of the
Company (including bank debt and the Senior Secured Notes, as discussed below,
which are also secured by mortgages on certain of the Company's oil and gas
properties which provide preferential claims to such properties) and rank senior
to the Old Notes; (ii) mature in 2002 and have no sinking fund requirements;
(iii) have a 15% maximum interest rate above which the 13.25% base interest
rate may not be increased as a result of the gas indexing feature as discussed
below (which is the same as that in the Old Notes), instead of the 18% maximum
contained in the Old Notes; and (iv) are redeemable, at the option of the
Company, at the prices (expressed as a percentage of principal amount) and
during the indicated years beginning August 15: 1996 - 106%; 1997 - 103%; and
1998 - 100%. Both the Old Notes and New Notes bear interest at a base rate of
13.25% per annum. Concurrently with each quarterly interest payment the
Company will pay to the holders additional interest, if any, based upon the
amount by which the average gas spot price ("Average Spot Price") based upon
spot gas prices published by Natural Gas Clearinghouse, Inc., exceeds $1.75 per
million British Thermal Units (MMBTU) during a twelve-month period preceding
such quarterly interest payment period up to a maximum overall interest rate of
15% per annum for the New Notes and 18% for the Old Notes. At December 31,
1993, the twelve-month Average Spot Price was $2.02 per MMBTU resulting in an
interest rate of 13.925% per annum for the period February 16, 1994 to May 15,
1994.
The Senior Secured Notes: (i) rank pari passu with other senior debt of the
Company (including bank debt and the New Notes) and rank senior to the Old
Notes and the Company's Convertible Subordinated Debentures; (ii) are secured
by a mortgage on certain of the Company's oil and gas properties, with the
amount and type of such properties being subject to adjustment, based upon the
value of the properties and
30
<PAGE> 31
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
certain other factors; and (iii) are redeemable, at the option of the Company,
at the prices (expressed as a percentage of principal amount) and during the
indicated years beginning September 15: 1996 - 103%; 1997 -102%; 1998 - 101%;
and 1999 - 100%.
4. CONVERTIBLE SUBORDINATED DEBENTURES
In February 1990 the Company issued $50,000,000 in aggregate principal amount
of its 9% Convertible Subordinated Debentures Due 2015 (the "Convertible
Subordinated Debentures"). The Convertible Subordinated Debentures are
currently convertible at any time prior to redemption or maturity into Class A
Common Stock, at a conversion price per share of $9.38, subject to adjustment.
The Convertible Subordinated Debentures will be redeemable through the
operation of a mandatory sinking fund pursuant to which on March 15 in each of
the years 2000 to 2014 (the "Redemption Period") 5% of the outstanding
principal amount of the Convertible Subordinated Debentures will be redeemed at
100% of the principal amount thereof plus accrued interest. At its option, the
Company may make additional sinking fund payments in amounts sufficient to
redeem annually up to an additional 10% of the outstanding principal amount of
the Convertible Subordinated Debentures. The Convertible Subordinated
Debentures are redeemable, otherwise than through the mandatory sinking
fund, at the Company's option, at 107% of their principal amount plus accrued
interest through March 15, 1994 and thereafter reducing by 1% each year to
100% of their principal amount plus accrued interest at March 15, 2000 and
thereafter.
5. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("SFAS 109") effective as of January 1, 1991.
SFAS 109 represents a new method of accounting for income taxes, and it
generally requires that deferred taxes be calculated using an asset and
liability approach at currently enacted income tax rates. The adoption of SFAS
109 had no cumulative effect on the date of adoption or effect on net income
for the year ended December 31, 1991. The Company recorded no benefit from
income taxes during the years ended December 31, 1993, 1992 and 1991, because a
valuation allowance was provided for the deferred assets otherwise recorded.
Actual tax expense (benefit) differs from the statutory rate as shown below:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------
1993 1992 1991
------------------- ------------------ ----------------
Amount % Amount % Amount %
------ ----- ------ ----- ------ -----
(in thousands, except percent amounts)
<S> <C> <C> <C> <C> <C> <C>
Income tax based on Federal statutory rate $(2,459) (34.0) $(8,115) (34.0) $(25,251) (34.0)
Valuation allowance against deferred tax asset 2,459 34.0 8,115 34.0 25,251 34.0
-------- ------- ------- ------ -------- ------
Total actual tax expense $ - - $ - - $ - -
======== ======= ======== ======= ======== =======
</TABLE>
31
<PAGE> 32
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
The components of the Company's tax assets and liabilities under SFAS 109 are
shown below:
<TABLE>
<CAPTION>
December 31,
------------------------------------------------
1993 1992 1991
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Assets
------
Net operating loss carryforwards $ 76,546 $ 65,493 $ 61,675
Capital loss carryforwards - 23 1,088
Statutory depletion carryforwards 3,263 3,263 3,263
Excess of financial statement depletion,
depreciation and amortization over
income tax amounts 55,934 53,294 35,814
Investment tax credit carryforwards 583 610 621
Valuation allowance (41,610) (39,151) (31,036)
------- -------- --------
94,716 83,532 71,425
------- -------- --------
Liabilities
-----------
Intangible drilling costs and other costs
capitalized for financial statement purposes
and deducted for income tax purposes 92,985 81,914 69,595
Other 1,731 1,618 1,830
------- -------- --------
94,716 83,532 71,425
------- -------- --------
$ - $ - $ -
======= ======== ========
</TABLE>
At December 31, 1993 the Company had net operating loss carryforwards for
income tax purposes of approximately $225,136,000 expiring 1994 through 2008 if
not previously utilized. The Company's net operating losses are subject to
various restrictions that could significantly limit their utilization. The
Company has investment tax credit carryforwards of approximately $583,000
expiring 1994 through 2000 if not previously utilized. The Company also has
statutory depletion carryforwards of approximately $9,596,000 which may be
carried forward until utilized.
6. COMMON STOCK
The Company has two classes of common stock, Class A Common Stock and Class B
Common Stock. Each share of Class B Common Stock is convertible into one share
of Class A Common Stock. Both classes of common stock are $.10 par value per
share. There are 80,000,000 authorized shares of Class A Common Stock and
20,000,000 authorized shares of Class B Common Stock.
From July 1987 through December 1992, the Company paid a quarterly cash
dividend of $.025 on its Class A Common Stock. In January 1993 the Company
announced the elimination of Class A Common Stock dividends. If cash dividends
are paid on Class B Common Stock, a cash dividend must also be paid on Class A
Common Stock in an amount equal to 110% of the per share amount of the cash
dividend paid on Class B Common Stock. The Company's ability to pay dividends
is subject to the provisions of certain covenants contained in the Revolving
Credit Facility and the indentures relating to the New Notes and the Old Notes.
Holders of Class A Common Stock are entitled to one-twentieth of one vote per
share and holders of Class B Common Stock are entitled to one vote per share.
32
<PAGE> 33
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
The Class B Common Stock is subject to certain restrictions on transfer
designed to prevent the sale of "control blocks" of Class B Common Stock at a
premium price not available to all holders of Class A Common Stock and Class B
Common Stock. No transfer of Class B Common Stock may be made (i) if the
transferee thereof would, as a result of such transfer, have acquired from such
transferor, within the last twelve months, in excess of 15% of the total voting
power of all outstanding shares of the Class A Common Stock and the Class B
Common Stock, (a "Control Block"), and (ii) if any of the shares held by the
transferee comprising the Control Block were acquired by such transferee within
twelve months of the proposed transfer at a price in excess of the market price
when acquired; unless such transferee, concurrently with the proposed transfer,
offers to purchase all of the outstanding shares of both the Class A Common
Stock and the Class B Common Stock at a price not less than the highest price
per share paid, within twelve months of the proposed transfers by such
transferee, to the transferor with respect to any of the shares comprising the
Control Block. Presidio can refuse to recognize any transfer of shares made in
violation of this limitation, including for purposes of voting and dividend
rights, and to require the sale of any such shares. Except for this
limitation, shares of both the Class A Common Stock and the Class B Common
Stock are freely transferable.
In the fiscal year ended June 30, 1986, George P. Giard, Jr., Chairman of the
Board and Chief Executive Officer of the Company, purchased for $90,000 a
warrant to acquire 120,000 shares of the Company's common stock at an exercise
price of $4.00 per share which was the market value of the common stock on the
date of purchase. Such warrant, which expires in 1997, has been subsequently
adjusted for a 10% stock dividend and during 1993 was amended and restated such
that the warrant now provides for the acquisition of 94,091 shares of Class B
Common Stock and 9,409 shares of Class A Common Stock at a price of $3.64 per
share and 16,206 shares of Class B Common Stock and 1,621 shares of Class A
Common Stock at $2.50 per share.
During the six month period ended December 31, 1987, George P. Giard, Jr., and
Robert L. Smith, President and Chief Operating Officer of the Company,
purchased warrants from the Company for $75,000 and $40,000, respectively.
These warrants, which expire in 1997, were to acquire 75,000 shares and 40,000
shares of the Company's Class B Common Stock at an exercise price of $4.625 per
share, which equalled or exceeded the market value of such stock on the date of
purchase. During 1993 Mr. Giard's and Mr. Smith's warrants were amended and
restated and now provide for Mr. Giard to acquire 46,912 shares of Class B
Common Stock at $2.50 per share and Mr. Smith to acquire 20,000 shares of Class
B Common Stock at $4.625 per share and 10,811 shares of Class B Common Stock at
$2.50 per share.
During 1993 Christopher S. Hardesty, Treasurer and Chief Financial Officer of
the Company, purchased for $2,000 a warrant to acquire 15,000 shares of the
Company's Class A Common Stock at an exercise price of $1.0625 per share, which
equalled or exceeded the market value of such stock on the date of purchase.
This warrant expires ten years after the date of purchase.
33
<PAGE> 34
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
The Company also has issued warrants to acquire: (i) 150,000 shares of Class A
Common Stock at $7.125 per share which expire in 1999; (ii) 10,000 shares of
Class A Common Stock at $7.00 per share which expire in 1995; (iii) 10,000
shares of Class A Common Stock at $10.00 per share which expire in 1995; and
(iv) 50,000 shares of Class B Common Stock at $4.625 per share which expire in
1997.
During 1991 the Company purchased (and returned to authorized but unissued
shares) 1,733,000 shares of its Class A Common Stock for $8,125,000. The
Company also returned to authorized but unissued shares the balance of its
treasury stock.
7. RELATED PARTY TRANSACTIONS
In connection with the sale of Mountain Gas Resources ("MGRI") (see Note 12),
George P. Giard, Jr. and Robert L. Smith entered into consulting agreements
with MGRI which provided for Mr. Giard and Mr. Smith to provide consulting
services to MGRI for a minimum period of two years; and, in respect of such
consulting services, they each received options to purchase 6,000 shares of
Class A Common Stock of MGRI at an exercise price of $60.00 per share. In July
1993 Mr. Giard and Mr. Smith each received proceeds of $281,000 as a result of
the sale of such options in connection with the MGRI Equity Sale.
See Note 6 for information as to the purchase of warrants from the Company by
certain of the Company's officers.
8. BENEFIT PLANS
On May 17, 1990 the Company's stockholders amended the 1985 Incentive and
Non-Qualified Stock Option and Stock Appreciation Rights Plan. Under such
amended plan, options to purchase up to 6,000,000 shares of the Company's Class
A Common Stock or Class B Common Stock may be granted to key employees at an
exercise price not less than the market price of the stock at the date of
grant. The amended plan also allows for the issuance of stock appreciation
rights in conjunction with the issuance of options to key employees and
provides for granting of non-qualified stock options or incentive stock
options. The Compensation Committee of the Board of Directors determines the
number of options and exercise prices under which stock options or stock
appreciation rights are issued. At December 31, 1993, no stock appreciation
rights had been granted. The stock options either: (i) vest incrementally
over four years; or (ii) vest after one year but are not exercisable until the
closing price of the Company's Class B Common Stock has been $6.00 per share or
greater for sixty consecutive trading days.
The Company's stockholders approved Non-Employee Director Stock Option Plans
which granted options to purchase up to 294,900 shares of the Company's Class B
Common Stock to non-employee directors. Stock options granted under these
plans: (i) vest incrementally over four years; or (ii) vest after one year but
are not exercisable until the closing price of the Company's stock has been
$6.00 per share or greater for sixty consecutive trading days. These options
were granted at an exercise price of not less than the market price of the
stock on the date of grant and expire after ten years.
34
<PAGE> 35
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
At December 31, 1993 and 1992 options to purchase shares of common stock were
as follows:
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
------------------------------ ------------------------------
December 31, December 31,
------------------------------ ------------------------------
1993 1992 1993 1992
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Employee Stock Option Plan (1)
- --------------------------
At year end -
Options outstanding (2) 954,500 11,500 873,600 1,268,000
Options exercisable 11,500 11,500 569,000 789,000
Option price $1.06-$4.09 $3.64-$4.09 $2.50-$6.00 $3.64-$6.38
Non-Employee Director Stock Option Plans (1)
- ----------------------------------------
At year end -
Options outstanding (3) - - 294,900 399,000
Options exercisable - - 184,800 266,000
Option price $ - $ - $2.50-$4.75 $4.63-$6.38
</TABLE>
(1) No options have been exercised under either the Employee Stock
Option Plan or the Non-Employee Director Stock Option Plans
during the years ended December 31, 1993, 1992 and 1991.
(2) Of which at December 31, 1993 and 1992 options to purchase
287,000 shares and 310,000 shares, respectively, of Class B
Common Stock are not exercisable until the Company's Class B
Common Stock has been $6.00 per share or greater for sixty
consecutive trading days.
(3) Of which at December 31, 1993 and 1992 options to purchase
90,000 shares of Class B Common Stock are not exercisable
until the Company's Class B Common Stock has been $6.00 per
share or greater for sixty consecutive trading days.
The Company has an Employee Stock Ownership Plan ("ESOP") which allows the
Company to make contributions as determined each year by the Compensation
Committee of the Company's Board of Directors. The ESOP is leveraged with
loans provided by the Company. Shares are allocated to
participants based on the principal payments made each year in respect of such
loans by the ESOP. All full-time employees are eligible to participate in the
ESOP after one year of service. The amounts charged to general and
administrative expense in connection with the ESOP for the years ended
December 31, 1992 and 1991 were based upon the historical cost paid by the
ESOP for the shares contributed to the participant accounts during such years.
Effective January 1, 1993 the Company adopted a new method of accounting for
the ESOP which requires the amounts charged to expense (which is associated
with the shares contributed each year to the participants accounts) to be
based on the market price of the Company's Common Stock, with the difference
between the historical cost paid by the ESOP for such shares and the average
market price of the Company's Common Stock, to be charged to additional
paid-in capital. In addition, George P. Giard, Jr. and Robert L. Smith
receive retirement benefits from the Company under a supplemental employee
retirement plan ("SERP") in excess of the contributions which may be made on
their behalf by the Company to the ESOP. The total amounts charged to general
and administrative expense in connection with the ESOP and the SERP for the
years ended December 31, 1993, 1992 and 1991, were $438,000, $1,056,000 and
$1,339,000, respectively.
35
<PAGE> 36
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
At December 31, 1993 the ESOP held the following shares of Common Stock:
<TABLE>
<S> <C>
Shares of Common Stock allocated to participants accounts 679,000
Shares of Common Stock committed to be released to
participants accounts in connection with such years
contribution 220,000
Unallocated shares of Common Stock held for future
years contributions 1,621,000
---------
2,520,000
=========
</TABLE>
The fair market value of the unallocated shares of Common Stock held for future
contributions totaled $3.3 million at December 31, 1993.
9. COMMITMENTS AND CONTINGENCIES
The Company has lease commitments for various office facilities and computer
equipment. Future minimum annual rental payments required under such leases
for the years ending December 31, 1994 through 1998 and thereafter will be
$1,387,000, $1,020,000, $752,000, $667,000, $535,000 and $134,000,
respectively. Such annual rental payments for the years ended December 31,
1993, 1992 and 1991 totaled $1,025,000, $1,291,000 and $2,459,000,
respectively.
See Note 13 concerning the letter of credit that the Company entered into in
connection with the sale of its West Virginia proved developed reserves and
associated gathering systems.
36
<PAGE> 37
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 requires disclosure in
respect of the fair value of various financial instruments owned or issued by
the Company. The estimated fair values of such financial instruments are as
follows:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value (1) Amount Value (1)
------ ------- ------ -------
(in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents (2) $ 13,559 $ 13,559 $ 11,457 $11,457
Long-term bank debt (3) 15,000 15,000 73,000 73,000
Senior Secured Notes (4) 75,000 77,625 - -
Senior Gas Indexed Notes (4) 99,770 104,758 - -
Senior Subordinated Gas Indexed Notes (4) 230 237 100,000 74,000
9% Convertible Subordinated Debentures (4) 50,000 42,875 50,000 27,750
Letters of Credit (5) - 788 - 834
</TABLE>
The following methods and assumptions were used to estimate the fair value for
each class of financial instruments:
(1) The fair value is an estimate and does not necessarily represent the
amount that would be paid in an actual sale.
(2) The carrying amount approximates fair value because of the short
maturity of those instruments.
(3) The carrying amount approximates fair value because such debt is
secured by a portion of the Company's oil and gas assets and bears
interest at the prime rate plus 1% which approximates current market
conditions.
(4) The fair value was estimated based on quoted market prices.
(5) The fair value was estimated based on the fees to be incurred in
connection with the letters of credit since, under present
circumstances, no amounts will be required to be drawn against such
letters of credit.
11. MAJOR PURCHASERS
Sales to two purchasers of $11,541,000 and $9,078,000 accounted for 24% and
19%, respectively, of the Company's oil and gas revenues during the year ended
December 31, 1993. Sales to two purchasers of $12,423,000 and $9,088,000
accounted for 19% and 14%, respectively, of the Company's oil and gas revenues
during the year ended December 31, 1992. Sales to two purchasers of
$10,665,000 and $10,613,000 each accounted for 11% of the Company's oil and gas
revenues during the year ended December 31, 1991. A discontinuance of oil and
gas sales to these two purchasers would not have a material impact on the
Company's operations because the Company believes that a number of other
companies are available to purchase its oil and gas production.
12. DISCONTINUED OPERATIONS
In July 1992 the Company completed a transaction with MS Gas Resources, Inc., a
newly-formed subsidiary of The Morgan Stanley Leveraged Equity Fund II, L.P.
(the "Morgan Stanley Fund"), pursuant to which the Company's wholly-owned
subsidiary, Mountain Gas Resources, Inc., was merged into MS Gas Resources (the
"MGRI Divestiture") whose name was then changed to Mountain Gas Resources, Inc.
("MGRI"). Prior to the MGRI Divestiture, Mountain Gas Resources owned and
operated all of the Company's natural gas gathering and processing facilities
in the Green River Basin in southwestern Wyoming and marketed natural gas and
natural gas liquids. The cash consideration received in the MGRI Divestiture
was $80.7 million; and, as adjusted for working capital, capital expenditures
and other items, resulted in net cash proceeds of $77.5 million which was used
to prepay an equivalent amount of bank debt. Also, in connection with the MGRI
Divestiture, the Company received an equity interest in MGRI. Such interest
provided the Company with the
37
<PAGE> 38
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
right to share in any profits realized upon a subsequent sale of MGRI prior to
December 31, 1996. In July 1993 the Company received $11.6 million from the
sale (the "MGRI Equity Sale") of such equity interest in MGRI. The proceeds of
the MGRI Equity Sale were used to prepay an equivalent amount of the Company's
bank debt.
The MGRI Divestiture and the MGRI Equity Sale have been recorded as a sale of a
segment of the Company's business. Accordingly, the gas gathering, processing
and marketing operations of Mountain Gas Resources prior to the MGRI
Divestiture (which includes interest expense of $3,376,000 and $7,338,000 for
the years ended December 31, 1992 and 1991, respectively, that was associated
with the $77.5 million of bank debt that was repaid with the net cash proceeds
of the MGRI Divestiture), as well as the gain on the sale of MGRI Divestiture
and the MGRI Equity Sale have been reflected in the Company's Consolidated
Statements of Operations as discontinued operations. Such discontinued
operations had revenues of $38,301,000 and $58,381,000 for the years ended
December 31, 1992 and 1991, respectively (including $941,000 and $2,510,000 of
intercompany sales).
13. WEST VIRGINIA PROPERTY SALE
In December 1992 the Company completed the sale of the common stock of its
wholly-owned subsidiaries, Peake Energy, Inc. and Peake Operating Company (the
"Subsidiaries"), to Belden & Blake Acquisition, Inc. ("Belden & Blake"). The
proceeds of the transaction totaled $35 million; and, after adjustments for
capital expenditures, net operating cash flow and other items, the net cash
proceeds were $32.6 million, which were utilized to repay bank and other
indebtedness of the Company. The Subsidiaries held assets which included
approximately 43 BCF of proved developed gas reserves and associated gathering
systems, as well as 50,000 barrels of oil reserves located in West Virginia.
The Company retained approximately 28 BCF of proved undeveloped gas reserves
and over 90,000 net undeveloped acres in West Virginia subsequent to the sale,
and such reserves and acreage will be developed by the Company and Belden &
Blake in accordance with a joint drilling participation agreement. This
agreement gives Belden & Blake the option to participate, to the extent of 50%
of the Company's interest (or more by mutual consent), in the development of
such reserves and acreage. The consideration for Belden & Blake's
participation in each well drilled pursuant to the joint drilling participation
agreement is (i) payment of its share of drilling and completion costs, (ii)
payment to the Company of an additional $90 per net acre for its share of the
drillsite acreage allocated to each such well and (iii) payment to the Company
of an overriding royalty of 3.125% (proportionately reduced) in accordance with
its net interest in the revenues attributable to each such well. The Company
believes that virtually all of its proved undeveloped gas reserves and unproved
undeveloped acreage will be fully developed prior to the termination of the
joint drilling participation agreement in 2008; however, the agreement provides
that 50% of any such reserves and/or acreage that might be retained by the
Company as of such termination date would be conveyed to Belden & Blake for
no additional consideration.
A portion of the gas reserves sold to Belden & Blake is subject to a long-term
gas contract providing for prices above the current spot market price for West
Virginia gas. In connection with the sale, the Company guaranteed certain
minimum levels of performance, on an annual basis, by the gas purchaser under
this contract such that should performance under this contract be less than the
levels guaranteed by the Company, Belden & Blake can draw on a letter of credit
entered into by the Company. During the years ending April 1, 1994 through
1999, respectively, the following amounts can be drawn by Belden & Blake on
such letter of credit: $1,942,000, $1,877,000, $1,790,000, $1,735,000,
$1,692,000 and $1,656,000.
38
<PAGE> 39
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
14. EVENTS SUBSEQUENT TO DECEMBER 31, 1993
In January 1994 the Company realized $22 million as a result of certain oil and
gas property sales, including $7 million from its ongoing program to sell
miscellaneous small, non-operated oil and gas properties, as well as $15
million from the sale of a 50% interest in a partly- developed gas field in
Louisiana. Approximately $5 million of the net cash proceeds from these sales
was utilized to prepay all of the outstanding indebtedness under the Revolving
Credit Facility and the remaining $17 million was added to the Company's
working capital and will be utilized to fund a portion of the Company's 1994
capital expenditure program.
15. OIL AND GAS COST AND RESERVE INFORMATION
Capitalized Costs Related to Oil and Gas Producing Activities
The Company's oil and gas operations are conducted entirely in the United
States. Aggregate capitalized costs relating to such operations and related
accumulated depletion, depreciation and amortization are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1993 1992
---------- ---------
(in thousands)
<S> <C> <C>
Oil and gas properties:
Proved $ 477,756 $ 446,569
Unproved:
Subject to amortization 3,155 3,173
Not subject to amortization 23,601 34,887
Accumulated depletion,
depreciation and amortization (267,254) (248,897)
--------- ---------
Net oil and gas properties $ 237,258 $ 235,732
========= =========
</TABLE>
Results of Operations for Oil and Gas Producing Activities
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1993 1992 1991
---------- ---------- ----------
(in thousands)
<S> <C> <C> <C>
Revenues $ 47,476 $ 64,442 $ 95,151 (1)
Production costs (16,362) (22,365) (32,355)
Depletion, depreciation and amortization (18,357) (25,984) (37,235)
Reduction in the carrying value of
oil and gas properties - (15,000) (68,000)
--------- -------- --------
Results of operations before tax 12,757 1,093 (42,439)
Income tax expense - - -
-------- -------- --------
Results of operations for oil
and gas producing activities $ 12,757 $ 1,093 $(42,439)
======== ======== ========
</TABLE>
(1) Includes $10,248,000 of revenues associated with the Company's
oil hedging arrangements.
39
<PAGE> 40
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
Costs Incurred in Oil and Gas Producing Activities
Costs incurred in oil and gas operations and related depletion, depreciation
and amortization per equivalent barrel are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1993 1992 1991
-------- -------- --------
(in thousands, except per barrel amounts)
<S> <C> <C> <C>
Property acquisition costs:
Proved $ 1,003 $ 306 $ 4,726
Unproved 1,571 4,343 12,350
------- ------- -------
$ 2,574 $ 4,649 $17,076
======= ======= =======
Exploration costs $ 2,965 $ 3,963 $11,482
======= ======= =======
Development costs $15,478 $ 7,262 $26,064
======= ======= =======
Depletion, depreciation and amortization $18,357 $25,984 $37,235
======= ======= =======
Depletion, depreciation and amortization
per equivalent barrel $ 4.60 $ 5.08 $ 5.57
======= ======= =======
Reduction in the carrying value of
oil and gas properties $ - $15,000 $68,000
======= ======= =======
</TABLE>
Estimated Quantities of Proved Oil and Gas Reserves (Unaudited)
Reserve information presented below is based upon reports reviewed by the
Company's independent petroleum engineering firms. Reserve estimates are
inherently imprecise and estimates of new discoveries are more imprecise than
those of producing oil and gas properties. Accordingly, these estimates are
expected to change as future information becomes available.
Proved oil and gas reserves are the estimated quantities of oil, gas and
natural gas liquids which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions. Proved developed oil and gas
reserves are those expected to be recovered through existing wells with
existing equipment and operating methods.
40
<PAGE> 41
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
Net quantities of proved reserves and proved developed reserves of oil
(including condensate and natural gas liquids) and gas for the Company as of
the beginning and the end of the years ended December 31, 1993, 1992 and 1991,
as well as the changes in proved reserves during such periods, are set forth in
the tables below.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1993 (2) 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Oil reserves (thousands of barrels):
- -----------------------------------
Proved oil reserves, beginning of period 13,863 15,938 21,744
Revisions of previous estimates 304 (766) (928)
Extensions, discoveries and other additions 397 1,329 1,694
Purchases of reserves in place 113 432 337
Sales of reserves in place (205) (1,193) (4,111)
Production (1,436) (1,877) (2,798)
------- ------- -------
Proved oil reserves, end of period 13,036 13,863 15,938
======= ======= =======
Proved developed oil reserves, end of period 9,942 10,001 12,558
======= ======= =======
Gas reserves (MMCF):
- ------------------
Proved gas reserves, beginning of period 268,871 251,190 265,097
Revisions of previous estimates 15,450 14,665 (9,533)
Extensions, discoveries and other additions 31,113 68,892 22,263
Purchases of reserves in place 5,618 5,226 685
Sales of reserves in place (2,758) (51,695) (4,019)
Production (15,340) (19,407) (23,303)
------- -------- -------
Proved gas reserves, end of period (1) 302,954 268,871 251,190
======= ======== =======
Proved developed gas reserves, end of period 164,530 131,164 163,351
======= ======== =======
</TABLE>
(1) Includes proved undeveloped gas reserves at December 31, 1993
and 1992 of 27.5 BCF and 28.1 BCF, respectively, which are
subject to a joint drilling participation agreement as
discussed in Note 13.
(2) Includes proved reserves sold subsequent to December 31, 1993
of 26.3 BCF of gas and 1.4 MMBbls of oil, of which 11.4 BCF
of gas and 1 MMBbls of oil were proved developed reserves.
41
<PAGE> 42
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
Discounted Future Net Cash Flows Relating to Proved Oil and Gas Reserves
(Unaudited)
Future net cash flows presented below are computed using period-end prices and
costs with consideration of price changes only to the extent provided by
contractual arrangements. Future income tax expenses are estimated after
consideration of statutory tax rates, permanent differences and tax credits.
Future general and administrative expenses and interest expense have not been
considered.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1993 (2) 1992 1991
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Future oil and gas sales $848,193 $811,097 $789,586
Future production costs 241,204 216,166 277,045
Future development costs 68,172 70,289 62,751
-------- -------- --------
Future net cash flows before income tax 538,817 524,642 449,790
Discount at 10% per annum 244,167 239,731 206,852
-------- -------- --------
Discounted future net cash flows
before income taxes (1) 294,650 284,911 242,938
Future income taxes, discounted
at 10% per annum 33,011 32,687 8,619
-------- -------- --------
Standardized measure of discounted
future net cash flows, after tax $261,639 $252,224 $234,319
======== ======== ========
</TABLE>
(1) Includes proved undeveloped gas reserves at December 31, 1993
and 1992 with a present value of future net revenues
discounted at 10% of $3,260,000 and $10,857,000, respectively,
which are subject to a joint drilling participation agreement
as discussed in Note 13.
(2) Includes proved reserves sold subsequent to December 31, 1993
having future net revenues before income taxes, discounted at
10% per annum, of $36.1 million.
42
<PAGE> 43
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
Standardized Measure of Discounted Future Net Cash Flows, After Tax (Unaudited)
The following are the principal sources of change in the standardized measure
of discounted future net cash flows, after tax, excluding oil and gas
properties held for resale:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1993 1992 1991
-------- -------- --------
(in thousands)
<S> <C> <C> <C>
Beginning of period $252,224 $234,319 $ 350,516
Sales and transfers of oil and gas
produced, net of production costs (31,114) (42,077) (62,796)
Sales of reserves in place (2,737) (45,019) (18,403)
Purchases of reserves in place 5,783 8,026 2,966
Net changes in price and
production costs (18,931) 39,865 (107,472)
Extensions, discoveries and improved
recovery, less related costs 25,356 68,817 20,223
Previously estimated development
costs incurred during the year 7,216 2,385 7,638
Revisions of previous quantity estimates 15,036 9,241 (6,725)
Accretion of discount 28,491 24,294 25,263
Net change in income taxes (324) (24,068) 53,497
Changes in production rates and other (19,361) (23,559) (30,388)
-------- -------- ---------
End of period $261,639 $252,224 $ 234,319
======== ======== =========
</TABLE>
43
<PAGE> 44
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Continued)
16. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- ------- -----
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993: (4)
Oil and gas revenues $ 12,329 $ 12,352 $ 10,963 $ 11,832 $ 47,476
Gross profit 3,465 3,816 2,233 3,243 12,757
Net loss from continuing operations (3,775) (3,564) (7,055) (4,389) (18,783)
Net earnings (loss) (3,775) (3,564) 4,495 (3) (4,389) (7,233)
Net loss from continuing operations per share
of Class A Common Stock (.14) (.13) (.26) (.16) (.70)
Net loss from continuing operations per share
of Class B Common Stock (.14) (.13) (.26) (.16) (.70)
Earnings (loss) per share of Class A Common Stock (.14) (.13) .17 (.16) (.27)
Earnings (loss) per share of Class B Common Stock (.14) (.13) .17 (.16) (.27)
Year ended December 31, 1992:
Oil and gas revenues $ 16,668 $ 15,822 $ 16,098 $ 15,854 $ 64,442
Gross profit (loss) (12,542) (1) 3,803 4,274 5,558 1,093
Net loss from continuing operations (21,318) (4,516) (3,642) (3,220) (32,696)
Net earnings (loss) (20,402) (4,463) 4,216 (2) (3,220) (23,869)
Net loss from continuing operations per share
of Class A Common Stock (.74) (.15) (.12) (.11) (1.13)
Net loss from continuing operations per share
of Class B Common Stock (.77) (.18) (.15) (.13) (1.23)
Earnings (loss) per share of Class A Common Stock (.71) (.16) .15 (.11) (.82)
Earnings (loss) per share of Class B Common Stock (.74) (.18) .13 (.13) (.92)
Year ended December 31, 1991:
Oil and gas revenues $ 24,926 $ 23,994 $ 22,698 $ 23,533 $ 95,151
Gross profit (loss) (18,905) (1) (14,989) (1) 5,884 (14,429) (1) (42,439)
Net loss from continuing operations (27,134) (23,452) (2,328) (23,198) (76,112)
Net loss (27,040) (23,902) (1,755) (21,571) (74,268)
Net loss from continuing operations per share
of Class A Common Stock (.94) (.82) (.08) (.81) (2.65)
Net loss from continuing operations per share
of Class B Common Stock (.96) (.84) (.10) (.84) (2.75)
Loss per share of Class A Common Stock (.93) (.83) (.06) (.75) (2.58)
Loss per share of Class B Common Stock (.96) (.86) (.08) (.78) (2.68)
</TABLE>
(1) Due to low oil and gas prices which were being received during these
periods, the Company was required to reduce the carrying value of its
oil and gas properties (see Note 1).
(2) Includes a $7.8 million gain on the divestiture of the Company's
discontinued gas gathering, processing and marketing operations (see
Note 12).
(3) Includes a $11.6 million gain on the sale of the Company's remaining
equity interest in its discontinued gas gathering, processing and
marketing operations (see Note 12).
(4) Per share amounts have been restated for the first three quarters of
1993 due to a change of accounting method adopted by the Company
during the fourth quarter of 1993 (see Notes 1 and 8).
44
<PAGE> 45
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Schedule V - Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Balance at Retirements Balance
Beginning Additions and at End
of Period at Cost Sales Other of Period
---------- --------- ----------- ------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Oil and gas properties $484,629 $ 21,017 $ (1,134) $ - $504,512
Gas gathering and processing systems 911 - (5) - 906
Other properties 2,725 79 (99) - 2,705
-------- -------- --------- --------- --------
$488,265 $ 21,096 $ (1,238) $ - $508,123
======== ======== ========= ========= ========
YEAR ENDED DECEMBER 31, 1992:
Oil and gas properties $499,697 $ 15,874 $ (30,942) (1) $ - $484,629
Gas gathering and processing systems 88,508 2,426 (90,023) (2) - 911
Other properties 4,666 259 (2,200) - 2,725
-------- -------- --------- --------- --------
$592,871 $ 18,559 $(123,165) $ - $488,265
======== ======== ========= ========= ========
YEAR ENDED DECEMBER 31, 1991:
Oil and gas properties -
Retained $451,797 $ 54,622 $ (12,122) $ 5,400 $499,697
Held for resale 5,400 - - (5,400) -
Gas gathering and processing systems 80,121 8,711 (324) - 88,508
Other properties 3,743 1,029 (106) - 4,666
-------- -------- --------- --------- --------
$541,061 $ 64,362 $ (12,552) $ - $592,871
======== ======== ========= ========= ========
</TABLE>
(1) $20.4 million relates to the sale of the Company's proved developed
gas reserves in West Virginia as discussed in Note 13.
(2) Relates to the divestiture of the Company's discontinued gas
gathering, processing and marketing operations as discussed in Note 12
and its gathering systems in West Virginia as discussed in Note 13.
45
<PAGE> 46
PRESIDIO OIL COMPANY AND SUBSIDIARIES
Schedule VI - Accumulated Depletion, Depreciation and
Amortization of Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
Balance at Additions Retirements Balance
Beginning Charged to and at end
of Period Income Sales of Period
---------- ---------- ----------- ---------
(in thousands)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Oil and gas properties $248,897 $ 18,357 $ - $267,254
Gas gathering and processing systems 161 76 - 237
Other properties 1,495 423 (60) 1,858
-------- -------- -------- --------
$250,553 $ 18,856 $ (60) $269,349
======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1992:
Oil and gas properties $207,913 $ 40,984 $ - $248,897
Gas gathering and processing systems 10,662 2,759 (13,260) (1) 161
Other properties 2,086 703 (1,294) 1,495
-------- -------- -------- --------
$220,661 $ 44,446 $(14,554) $250,553
======== ======== ======== ========
YEAR ENDED DECEMBER 31, 1991:
Oil and gas properties $102,678 $105,235 $ - $207,913
Gas gathering and processing systems 6,596 4,071 (5) 10,662
Other properties 1,487 682 (83) 2,086
-------- -------- ------- --------
$110,761 $109,988 $ (88) $220,661
======== ======== ======= ========
</TABLE>
(1) Relates to the divestiture of the Company's discontinued gas
gathering, processing and marketing operations as discussed in Note 12
and its gathering systems in West Virginia as discussed in Note 13.
46
<PAGE> 47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference to "Election of Directors", "Other Executive
Officers" and "Compliance with Section 16(a)" included in the Proxy Statement
for the Company's Annual Meeting of Stockholders to be held on or about June
14, 1994.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference to "Executive Compensation and Other
Information" and "Compensation of Directors" included in the Proxy Statement
for the Company's Annual Meeting of Stockholders to be held on or about June
14, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Incorporated herein by reference to "Security Ownership of Certain Beneficial
Owners and Management" included in the Proxy Statement for the Company's Annual
Meeting of Stockholders to be held on or about June 14, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference to "Certain Transactions and Relationships"
included in the Proxy Statement for the Company's Annual Meeting of
Stockholders to be held on or about June 14, 1994.
47
<PAGE> 48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) LIST OF DOCUMENTS FILED
(1) Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets as of December 31, 1993 and
1992
Consolidated Statements of Operations for the Years
Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1993, 1992 and 1991
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules:
V - Property, Plant and Equipment for the Years Ended
December 31, 1993, 1992 and 1991
VI - Accumulated Depletion, Depreciation and Amortiza-
tion of Property, Plant and Equipment for the
Years Ended December 31, 1993, 1992 and 1991
(3) Exhibits:
3.1 Restated Certificate of Incorporation of the Company as
filed on March 17, 1987 with the Secretary of State of
the State of Delaware, as amended by the Certificate of
Amendment filed on December 15, 1987 and the Second
Certificate of Amendment filed on June 8, 1990 with the
Secretary of State of the State of Delaware.
(Incorporated herein by reference to Exhibit 4.1 to
Presidio's Registration Statement on Form S-3,
Registration No. 33-37747.)
3.2 The Company's Bylaws, as amended to February 27, 1991.
(Incorporated herein by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1990.)
4.1 Third Amendment and Restatement of Credit Agreement
dated as of May 29, 1992 among the Company, Presidio
Exploration, Inc., a Colorado corporation and
wholly-owned subsidiary of the Company ("Exploration"),
certain other wholly-owned subsidiaries of the Company
and each bank which is a signatory thereto, and The
Chase Manhattan Bank (National Association) ("Chase")
(the "1987 Credit Agreement"). (Incorporated herein by
reference to Exhibit 4.1 to the Company's Current Report
on Form 8-K dated June 10, 1992.)
4.2 Amendment No. 1, dated as of July 16, 1992 relating to
the 1987 Credit Agreement. (Incorporated herein by
reference to Exhibit 2.2 to the Company's Current Report
on Form 8-K dated July 16, 1992.)
48
<PAGE> 49
4.3 Amendment No. 2, dated as of August 13, 1992 relating to
the 1987 Credit Agreement. (Incorporated herein by
reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the nine months ended September
30, 1992.)
4.4 Amendment No. 3, dated as of October 6, 1992 relating to
the 1987 Credit Agreement. (Incorporated herein by
reference to Exhibit 4.3 to the Company's Quarterly
Report on Form 10-Q for the nine months ended September
30, 1992.)
4.5 Amendment No. 4, dated as of December 22, 1992 relating
to the 1987 Credit Agreement. (Incorporated herein by
reference to Exhibit 4.2 to the Company's Current Report
on Form 8-K dated December 22, 1992.)
4.6 Amendment and Restatement of Amendment, Restatement and
Consolidation of Credit Agreement dated as of August 6,
1993 among the Company, Exploration, each bank which is
a signatory thereto and Chase, as agent (the "Amended
Exploration Credit Agreement"). (Incorporated herein by
reference to Exhibit 4.1 to the Company's Quarterly
Report on Form 10-Q for the six months ended June 30,
1993.)
* 4.7 Amendment No. 1, dated as of December 28, 1993 relating
to the Amended Exploration Credit Agreement.
4.8 Amendment, Restatement and Consolidation of Credit
Agreement dated as of August 17, 1990 among the Company,
Exploration, each bank which is a signatory thereto and
Chase (the "Exploration Credit Agreement").
(Incorporated herein by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1990.)
4.9 Amendment No. 1, dated as of November 22, 1992 relating
to the Exploration Credit Agreement. (Incorporated
herein by reference to Exhibit 4.10 to the Company's
Annual Report on Form 10-K for the year ended December
31, 1991.)
4.10 Amendment No. 2, dated as of May 29, 1992 relating to
the Exploration Credit Agreement. (Incorporated herein
by reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K dated June 10, 1992.)
4.11 Amendment No. 3, dated as of July 16, 1992 relating to
the Exploration Credit Agreement. (Incorporated herein
by reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K dated July 16, 1992).
4.12 Amendment No. 4, dated as of August 13, 1992 relating to
the Exploration Credit Agreement. (Incorporated herein
by reference to Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q for the nine months ended September
30, 1992.)
4.13 Amendment No. 5, dated as of October 6, 1992 relating to
the Exploration Credit Agreement. (Incorporated herein
by reference to Exhibit 4.4 to the Company's Quarterly
Report on Form 10-Q for the nine months ended September
30, 1992.)
4.14 Amendment No. 6, dated as of November 19, 1992 relating
to the Exploration Credit Agreement. (Incorporated
herein by reference to Exhibit 4.5 to the Company's
Quarterly Report on Form 10-Q for the nine months ended
September 30, 1992.)
49
<PAGE> 50
4.15 Amendment No. 7, dated as of December 22, 1992 relating
to the Exploration Credit Agreement. (Incorporated
herein by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated December 22, 1992.)
4.16 Second Amended and Restated Pledge Agreement dated as of
December 22, 1992, among the Company, Exploration and
Chase, as agent for certain banks, and Chase as
collateral agent for such banks. (Incorporated herein
by reference to Exhibit 4.14 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992.)
4.17 Guaranty dated as of December 1, 1989, from the Company
to each of the financial institutions party to the
Exploration Credit Agreement. (Incorporated herein by
reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1989.)
4.18 Indenture dated as of February 16, 1989 among the
Company, the subsidiaries of the Company listed on the
signature pages thereto and United States Trust Company
of New York, a New York banking corporation (the
"Trustee"), relating to the Company's Senior
Subordinated Gas Indexed Notes Due 1999 (the "GIN
Indenture"). (Incorporated herein by reference to
Exhibit 10.15 to the Company's Registration Statement on
Form S-2, Registration No. 33-32202.)
4.19 Indenture dated as of February 14, 1990 among the
Company and Bank of Montreal Trust Company, relating to
the Company's 9% Convertible Subordinated Debentures Due
2015. (Incorporated herein by reference to Exhibit 4.9
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1989.)
4.20 First Supplemental Indenture to the GIN Indenture dated
as of August 5, 1993 among the Company, the subsidiaries
of the Company listed on the signature pages thereto, as
Guarantors (the "Guarantors") and the Trustee, relating
to the Company's Senior Subordinated Gas Indexed Notes
Due 1999. (Incorporated herein by reference to Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q for
the six months ended June 30, 1993.)
4.21 Indenture dated as of August 6, 1993 among the Company,
the Guarantors and the Trustee, relating to the
Company's Senior Gas Indexed Notes Due 2002.
(Incorporated herein by reference to Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q for the six
months ended June 30, 1993.)
4.22 Indenture dated as of August 6, 1993 among the Company,
the Guarantors and the Trustee, relating to the
Company's 11.5% Senior Secured Notes Due 2000.
(Incorporated herein by reference to Exhibit 4.4 to the
Company's Quarterly Report on Form 10-Q for the six
months ended June 30, 1993.)
4.23 Pledged Assets Agency Agreement dated as of August 6,
1993 between the Trustee, as Pledged Asset Agent, and
Exploration relating to the Company's 11.5% Senior
Secured Notes Due 2000. (Incorporated herein by
reference to Exhibit 4.5 to the Company's Quarterly
Report on Form 10-Q for the six months ended June 30,
1993.)
50
<PAGE> 51
4.24 Exchange Agreement dated as of July 19, 1993 by and
among the Company and The Prudential Insurance Company
relating to the Company's Senior Subordinated Gas
Indexed Notes Due 1999 (and such other beneficial
holders as set forth on Schedule A attached thereto).
(Incorporated herein by reference to Exhibit 4.6 to the
Company's Quarterly Report on Form 10-Q for the six
months ended June 30, 1993.)
4.25 Subscription Agreement dated as of July 27, 1993 between
the Company and The Prudential Insurance Company
relating to the Company's 11.5% Senior Secured Notes Due
2000 (and such other subscribers thereunder as set forth
on Schedule A attached thereto). (Incorporated herein
by reference to Exhibit 4.7 to the Company's Quarterly
Report on Form 10-Q for the six months ended June 30,
1993.)
Executive Compensation Plans
10.1 The Company's Incentive and Non-Qualified Stock Option
and Stock Appreciation Rights Plan as approved by the
Company's board of directors (the "Board of Directors")
on October 22, 1987 and approved by the Company's
stockholders (the "Stockholders") on December 9, 1987
(the "Stock Plan"). (Incorporated herein by reference
to Part I of the Company's Registration Statement on
Form S-8, Registration No. 33-20496.)
10.2 Amendment to the Stock Plan dated May 25, 1989.
(Incorporated herein by reference to Exhibit 10.12 to
the Company's Registration Statement on Form S-3,
Registration No. 33-34350.)
10.3 Second Amendment to the Stock Plan dated May 17, 1990.
(Incorporated herein by reference to Exhibit 10.13 to
the Company's Registration Statement on Form S-3,
Registration No. 33-34350.)
* 10.4 Supplemental Executive Retirement Agreement dated as of
October 8, 1993 between the Company and George P.
Giard, Jr.
* 10.5 Supplemental Executive Retirement Agreement dated as of
October 8, 1993 between the Company and Robert L. Smith.
Director Compensation Plans
10.6 The Company's Stock Option Plan for Non-Employee
Directors (the "1988 Plan") as approved by the Board of
Directors on October 22, 1987 and approved by the
Stockholders on December 9, 1987. (Incorporated herein
by reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the six months ended December
31, 1987.)
10.7 First Amendment to the Company's 1988 Plan executed May
25, 1989, to be effective January 1, 1989. (Incorporated
herein by reference to Exhibit 10.15 to the Company's
Registration Statement on Form S-3, Registration No.
33-34350.)
10.8 The Company's 1989 Stock Option Plan for Non-Employee
Directors as approved by the Board of Directors on March
30, 1989 and approved by the Stockholders on May 25,
1989. (Incorporated herein by reference to Exhibit
10.3 to the Company's Registration Statement on Form
S-2, Registration No. 33-32202.)
51
<PAGE> 52
10.9 The Company's 1990 Stock Option Plan for Non-Employee
Directors as approved by the Board of Directors on March
15, 1990 and by the Stockholders on May 17, 1990.
(Incorporated herein by reference to Exhibit 10.17 to
the Company's Registration Statement on Form S-3,
Registration No. 33-34350.)
10.10 The Company's 1991 Stock Option Plan for Non-Employee
Directors as approved by the Board of Directors on
December 27, 1991 and by the Stockholders on May 14,
1992. (Incorporated herein by reference to Exhibit 10.8
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.)
10.11 The Company's 1992 Stock Option Plan for Non-Employee
Directors as approved by the Board of Directors on April
16, 1993 and by the Stockholders on June 16, 1993.
(Incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the six
months ended June 30, 1993.)
Management Warrants
10.12 Amended and Restated Warrant Agreement dated as of April
16, 1993, between the Company and Oil and Gas Finance
Limited (a company wholly owned by George P. Giard,
Jr.). (Incorporated herein by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
nine months ended September 30, 1993.)
10.13 Amended and Restated Warrant Agreement dated as of April
16, 1993 between the Company and Oil and Gas Finance
Limited (a company wholly owned by George P. Giard,
Jr.). (Incorporated herein by reference to Exhibit 10.2
to the Company's Quarterly Report on Form 10-Q for the
nine months ended September 30, 1993.)
10.14 Amended and Restated Warrant Agreement dated as of April
16, 1993 between the Company and Robert L. Smith.
(Incorporated herein by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the nine
months ended September 30, 1993.)
* 10.15 Warrant Agreement dated as of January 15, 1993 between
the Company and Christopher S. Hardesty.
Other Warrants
10.16 Warrant Agreement dated as of September 18, 1987 between
the Company and Grant E. Thayer. (Incorporated herein
by reference to Exhibit 10.7 to the Company's Annual
Report on Form 10-K for the six months ended December
31, 1987.)
10.17 Warrant Agreement dated as of September 13, 1989 between
the Company and InterLiberty Investments, Inc.
(Incorporated herein by reference to Exhibit 10.37 to
the Company's Registration Statement on Form S-3,
Registration No. 33-34350.)
52
<PAGE> 53
Option Agreements
10.18 Option Agreement dated as of November 3, 1987 between
the Company and Philip S. Sirianni ("Sirianni").
(Incorporated herein by reference to Exhibit 10.38 to
the Company's Registration Statement on Form S-3,
Registration No. 33-34350.)
10.19 Option Agreement dated as of December 16, 1988 between
the Company and Sirianni. (Incorporated herein by
reference to Exhibit 10.39 to the Company's Registration
Statement on Form S-3, Registration No. 33-34350.)
10.20 Option Agreement dated as of September 13, 1989 between
the Company and Sirianni. (Incorporated herein by
reference to Exhibit 10.40 to the Company's Registration
Statement on Form S-3, Registration No. 33-34350.)
10.21 Amendment to Stock Option Agreement dated November 1,
1993 between the Company and Sirianni. (Incorporated
herein by reference to Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the nine months ended
September 30, 1993.)
10.22 Option Agreement dated November 1, 1993 between the
Company and Sirianni. (Incorporated herein by reference
to Exhibit 10.5 to the Company's Quarterly Report on
Form 10-Q for the nine months ended September 30, 1993.)
Agreements Related to Acquisition and Divestures
10.23 Agreement and Plan of Merger among Exploration, Mountain
Gas Resources, Inc. and MS Gas Resources, Inc. dated
June 11, 1992. (Incorporated herein by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K
dated June 11, 1992.)
10.24 Amendment No. 1 to the Agreement and Plan of Merger
dated as of July 16, 1992 among Exploration, Mountain
Gas Resources, Inc. and MS Gas Resources, Inc.
("Mountain Gas"). (Incorporated herein by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K
dated July 16, 1992.)
10.25 Shareholders Agreement dated as of July 16, 1992 among
Mountain Gas, Exploration, MSLEF II, and Certain Other
Shareholders. (Incorporated herein by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K
dated July 16, 1992.)
10.26 Consulting Agreement dated as of July 16, 1992 between
Mountain Gas and George P. Giard, Jr. (Incorporated
herein by reference to Exhibit 10.5 to the Company's
Current Report on Form 8-K dated July 16, 1992.)
10.27 Consulting Agreement dated as of July 16, 1992 between
Mountain Gas and Robert L. Smith. (Incorporated herein
by reference to Exhibit 10.6 to the Company's Current
Report on Form 8-K dated July 16, 1992.)
10.28 Stock Purchase Agreement dated as of December 7, 1992 by
and between Exploration, as seller, and Belden & Blake,
as Buyer. (Incorporated herein by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K dated
December 11, 1992.)
53
<PAGE> 54
10.29 Drilling Participation Agreement dated as of December
22, 1992 by and between Presidio West Virginia, Inc. (a
wholly- owned subsidiary of Exploration) and Peake
Operating Company. (Incorporated herein by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K
dated December 22, 1992.)
* 21.1 Subsidiaries of the Registrant.
* 23.1 Consent of Deloitte & Touche.
* 23.2 Consent of Huddleston & Co., Inc.
* 23.3 Consent of Netherland, Sewell & Associates, Inc.
* Filed herewith.
(b) REPORTS ON FORM 8-K
On December 9, 1993, a Form 8-K, dated December 8, 1993, was filed, which
reported under Item 5. "Other Events", the interest rate on the Company's
Senior Subordinated Gas Indexed Notes Due 1999 to be 13.925% for the period
February 16, 1994 to May 15, 1994.
54
<PAGE> 55
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PRESIDIO OIL COMPANY
By: /s/ Robert L. Smith
Date: February 15, 1994
Robert L. Smith
President and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ George P. Giard, Jr. Chairman of the Board, Chief February 15, 1994
George P. Giard, Jr. Executive Officer and Director
(Principal Executive Officer)
/s/ William D. Benjes, Jr. Director February 15, 1994
William D. Benjes, Jr.
/s/ H. S. Erskine Director February 15, 1994
H. S. Erskine
/s/ Vincent Farrell, Jr. Director February 15, 1994
Vincent Farrell, Jr.
/s/ Peter H. Havens Director February 15, 1994
Peter H. Havens
/s/ John W. Hyland, Jr. Director February 15, 1994
John W. Hyland, Jr.
</TABLE>
55
<PAGE> 56
SIGNATURES (Continued)
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Raymond J. Kosi Director February 15, 1994
Raymond J. Kosi
/s/ J. Howard Marshall, II Director February 15, 1994
J. Howard Marshall, II
/s/ Hugh A. L. Mumford Director February 15, 1994
Hugh A. L. Mumford
/s/ Peter Silvester Director February 15, 1994
Peter Silvester
/s/ Robert L. Smith President, Chief Operating Officer February 15, 1994
Robert L. Smith and Director
/s/ Christopher S. Hardesty Treasurer and Chief Financial Officer February 15, 1994
Christopher S. Hardesty (Principal Financial Officer)
/s/ Charles E. Brammeier Controller February 15, 1994
Charles E. Brammeier (Principal Accounting Officer)
</TABLE>
56
<PAGE> 57
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.7 Amendment No. 1, dated as of December 28, 1993 relating to the Amended Exploration Credit Agreement.
10.4 Supplemental Executive Retirement Agreement dated as of October 8, 1993 between the Company and George P. Giard, Jr.
10.5 Supplemental Executive Retirement Agreement dated as of October 8, 1993 between the Company and Robert L. Smith.
10.15 Warrant Agreement dated as of January 15, 1993 between the Company and Christopher S. Hardesty.
21.1 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche
23.2 Consent of Huddleston & Co., Inc.
23.3 Consent of Netherland, Sewell & Associates, Inc.
</TABLE>
<PAGE> 1
EXHIBIT 4.7
AMENDMENT NO. 1
Amendment No. 1 dated as of December 28, 1993 ("Amendment No.
1") to the Amendment and Restatement of Amendment, Restatement and
Consolidation of Credit Agreement dated as of August 6, 1993 (as amended and in
effect from time to time, the "Credit Agreement"), among Presidio Oil Company,
a Delaware corporation (the "Guarantor" or "Presidio"), Presidio Exploration,
Inc., a Colorado corporation (the "Borrower" or "Exploration"; each of the
Borrower and the Guarantor are referred to as an "Obligor" and together, the
"Obligors"), the banks (the "Banks") parties thereto and the Chase Manhattan
Bank (National Association), as agent for the Banks (in such capacity, the
"Agent"). Capitalized terms used but not defined herein shall have the
meanings specified in the Credit Agreement.
WHEREAS, the Obligors have requested that the Banks modify and
amend certain terms of the Credit Agreement to increase the amount of Working
Capital Loans available to the Borrower; and
WHEREAS, the Agent and the Banks are willing to agree to such
modifications and amendments on the terms and subject to the conditions set
forth herein;
NOW, THEREFORE, in consideration of the agreements,
representations and warranties set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
SECTION 1. Amendment
The Credit Agreement is hereby amended as follows:
A. The definition of "Clean Up Period" in Annex I of the
Credit Agreement is deleted in its entirety and replaced by the following:
"Clean Up Period" shall mean, as of December 28, 1993, a
period of three consecutive Business Days chose by Presidio in each 369
calendar day period.
<PAGE> 2
B. The definition of "Working Capital Loan" in Annex I
to the Credit Agreement shall be amended by deleting "$5,000,000" therefrom and
replacing it with "$15,000,000."
C. Section 3.13 of Annex III of the Credit Agreement
shall be amended by deleting the text of clause (c) therefrom and replacing it
with the following: "guaranties by any Subsidiary of Presidio of the payment of
principal and interest on the GINs, Exchange Offer Notes and Senior Secured
Notes and all other obligations of Presidio under the indentures relating
thereto and."
SECTION 2. Representations.
2.1 Each Obligor represents that this Amendment No. 1 has
been duly authorized, executed and delivered by such Obligor and is the valid
and binding obligation of such Obligor enforceable against it in accordance
with its terms.
2.2 Each Obligor represents and warrants that, after
giving effect to this Amendment No. 1, the representations and warranties in
Annex II of the Credit Agreement are true and correct on the date hereof as
though made on and as of such date (except to the extent such representations
and warranties relate to a particular date) and that no Default has occurred
and is continuing or would result from the execution of this Amendment No. 1.
SECTION 3. Conditions Precedent.
The effectiveness of this Amendment No. 1 is subject to the
satisfaction of the following conditions precedent:
A. this Amendment No. 1 shall have been executed and
delivered and be in full force and effect;
B. receipt by the Agent of resolutions of the board of
directors (or the executive committee thereof) of each Obligor authorizing this
Amendment No. 1 together with relevant incumbency certificates, all as
certified by a Secretary or an Assistant Secretary of each Obligor;
2
<PAGE> 3
C. all regulatory approvals, consents and other matters,
if any, necessary to complete this Amendment No. 1 shall be in full force and
effect;
D. the representations and warranties of each Obligor
contained herein and in any Loan Document, after giving effect to this
Amendment No. 1, shall be true and correct on and as of the date hereof (except
to the extent such representations and warranties relate to a particular date);
E. the Agent and the Banks shall have received an
opinion of Bruce DeBoer, counsel to the Borrowers, relating to this Amendment
No. 1, in a form satisfactory to the Agent and the Banks;
F. the Agent and the Banks shall have received
confirmation of the Guaranty by the Guarantor.
SECTION 4. Ratification.
Except as expressly amended hereby or otherwise provided
herein, the Credit Agreement and the other Loan Documents shall remain in full
force and effect. The Credit Agreement, as hereby amended, and all rights and
powers created thereby or thereunder and under the other Loan Documents are in
all respects ratified and confirmed and remain in full force and effect
including, without limitation, the liens and security interests created by the
Mortgages which shall continue to secure the Obligations purported to be
secured thereby under the Credit Agreement as amended hereby. All references
to the Credit Agreement in the Credit Agreement and the other Loan Documents
shall be deemed to be references to the Credit Agreement as amended hereby.
SECTION 6. Expenses.
The Obligors shall pay to the Banks all expenses (including
reasonable fees and disbursements of counsel and local counsel to the Agent)
incurred by them in connection with the preparation, execution and delivery of
this Amendment No. 1.
3
<PAGE> 4
SECTION 7. Governing Law.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8. Miscellaneous.
The headings and captions herein shall be accorded no
significance in interpreting this Amendment No. 1. This Amendment No. 1:
A. shall be binding and inure to the benefit of the
Obligors, the Banks and the Agent and their respective successors, assigns,
receivers and trustees;
B. may be modified or amended only in writing signed by
each party; and
C. may be executed in several counterparts and by the
parties hereto on separate counterparts and each such counterpart, when so
executed and delivered shall constitute but one and the same agreement.
SECTION 9. No Novation.
Except as expressly provided for herein, each Obligor agrees
and acknowledges that this Amendment No. 1 shall not effect a novation or
release of any Obligor in respect of the Obligations.
4
<PAGE> 5
The parties hereto have caused this Amendment No. 1 to be duly
executed as of the day and year first above written.
PRESIDIO OIL COMPANY
PRESIDIO EXPLORATION, INC.
By /s/ Christopher S. Hardesty
Title: Vice President
THE CHASE MANHATTAN BANK
(National Association), as agent
By /s/ Richard F. Betz
Title: Vice President
THE BANK(S)
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By /s/ Richard F. Betz
Title: Managing Director
CITIBANK, N.A.
By /s/ Barbara A. Cohen
Title: Vice President
5
<PAGE> 1
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
EXHIBIT 10.4
PRESIDIO OIL COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the "Agreement") is
made and entered into at Englewood, Colorado, on the 8th day of October, 1993,
by and between PRESIDIO OIL COMPANY (the "Company"), and GEORGE P. GIARD, JR.
(the "Executive").
ARTICLE I
PURPOSE
The Company desires to recognize the Executive's contributions to the
Company through his faithful and competent efforts by entering into this
Agreement for supplemental retirement benefits. The Company highly values the
services of the Executive as an important member of the management team and
recognizes the Executive's services have been instrumental to the Company's
growth. The Company desires to afford additional financial security to the
Executive in recognition of the Executive's past efforts, and further desires
to provide an incentive for the Executive to continue to contribute toward the
Company's growth and profitability.
ARTICLE II
RETIREMENT BENEFITS
2.1 NORMAL OR EARLY RETIREMENT BENEFIT. Upon the Executive's
Normal Retirement, the Company will pay benefits to the Executive in 120
monthly installments, commencing on the last day of the calendar month
beginning after the date of his Normal Retirement. Upon the Executive's Early
Retirement, the Company will pay benefits to the Executive in 120 monthly
installments, commencing on the last day of the calendar month following the
month in which the Executive attains age 65. The Normal Retirement or Early
Retirement annual benefit is equal to the Executive's Retirement Percentage
multiplied by his Final Average Earnings, adjusted pursuant to Sections 2.3 and
2.4 of this Agreement. A monthly installment equals 1/12 of the Normal
Retirement or Early Retirement annual benefit as calculated above.
2.2 VESTING. The Executive is 100% Vested under this Agreement
after he has completed 5 Years of Service (including Service completed prior to
the date of this Agreement) or upon Disability. The Company will not pay any
benefits under this Agreement to the Executive unless he is Vested or is deemed
to be Vested.
-1-
<PAGE> 2
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
2.3 OFFSET OF ESOP VALUE. The Company will reduce the benefits
payable under this Agreement by the adjusted value resulting from any
contributions made by the Company, including any dividends paid thereon, to the
account of the Executive under the Company's employee stock ownership plan
("ESOP"). The offset is computed as follows:
(a) The value of the Executive's ESOP account
attributable to contributions by the Company (including any dividends
paid thereon) is determined as of the last day of the calendar month
preceding the date the Executive's benefits are to commence under this
Agreement;
(b) The value determined in paragraph (a) is increased by
the compounded value of any prior distributions (attributable to
contributions by the Company, including any dividends paid thereon)
from the ESOP to the Executive (compounded from the actual date of
each distribution to the date benefits are to commence, using the
T-Bond Rate as of the last day of the calendar month preceding the
date benefits are to commence); and
(c) The amount of the offset to be applied against each
monthly payment otherwise payable under this Agreement is the monthly
amount which would be payable if the ESOP were to purchase a ten-year
annuity with the Executive's ESOP account (as adjusted under
paragraphs (a) and (b) above). The Company will compute the monthly
payments under the annuity using a discount rate equal to the T-Bond
Rate in (b) above.
2.4 OFFSET FOR BENEFITS PAYABLE UNDER QUALIFIED PLANS. The
Company will reduce the benefits payable under this Agreement by any amounts
that would be payable to the Executive or to his Beneficiary under any other
qualified retirement plans the Company may adopt subsequent to the date of this
Agreement. The Company will compute the offset in the same manner as the
Company calculates the ESOP offset under Section 2.3.
2.5 TERMINATION PRIOR TO RETIREMENT. Upon the Executive's
Termination of employment with the Company (other than a Termination for Cause)
prior to Normal Retirement or Early Retirement and when the Executive is
Vested, he will receive benefits in accordance with Sections 2.1, 2.3 and 2.4
of this Agreement (using his Retirement Percentage and Final Average Earnings
as of the date of Termination of employment), commencing on the last day of the
calendar month following the month in which the Executive attains age 65.
2.6 DISABILITY. Upon the Executive's total and permanent
Disability while an active, full-time employee of the Company, the Executive
will be entitled to receive retirement benefits beginning on the last day of
the calendar month following the month in which the Executive becomes totally
and permanently disabled or attains age 65, whichever is later. The Executive
may apply to the Compensation Committee for payment
-2-
<PAGE> 3
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
of benefits prior to attaining age 65. The Compensation Committee may grant or
deny such application in its sole discretion.
Solely for purposes of determining benefits in the event of
Disability, the Company will treat the Executive as if he were Vested on the
date he becomes totally and permanently disabled, irrespective of his actual
completed Years of Service. The Executive will not accrue Years of Service
during any period of Disability. If the Executive recovers from a Disability,
he will accrue additional Years of Service for purposes of determining Vesting
and Retirement Percentage beginning on the date he returns to Employment.
2.7 DEATH BENEFITS. The Company will not pay any death benefits
under this Agreement if the Executive dies before he is Vested. If the
Executive dies after he is Vested and prior to the payment of any benefits
pursuant to this Agreement, the Company will pay benefits determined in the
manner set forth in section 2.5 to the Executive's Beneficiary, except that
benefits will commence on the last day of the month following the Executive's
death rather than when he would have attained age 65. If the Executive dies
while receiving benefit payments under this Agreement, the Company will
continue paying such benefits to the Executive's Beneficiary for the remainder
of the period during which the Executive would have received such benefits if
he had remained alive.
2.8 TERMINATION FOR CAUSE. Notwithstanding any other provision of
this Agreement, if the Company terminates the Executive's employment for Cause,
the Company will not pay any Retirement Benefit or other benefit under this
Agreement to the Executive or to his Beneficiaries, irrespective of whether the
Executive was eligible for Normal Retirement or Early Retirement.
ARTICLE III
PAYMENT
3.1 WITHHOLDING; UNEMPLOYMENT TAXES. The Company will withhold
from payments under this Agreement any taxes required by law to be withheld.
3.2 DESIGNATION OF BENEFICIARY. The Executive may designate a
Beneficiary to receive all or part of the amounts earned by the Executive under
this Agreement in case of death. A designation of Beneficiary may be replaced
by a new designation or may be revoked by the Executive at any time. A
designation or revocation must be on a form provided for this purposes by the
Company and must be signed by the Executive and delivered to the Company prior
to the Executive's death. If the Executive is married, and chooses to
designate a Beneficiary other than his spouse, a written spousal consent
satisfactory to the Company is required.
-3-
<PAGE> 4
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
In case of the Executive's death, the benefits to be paid to the
Executive under this Agreement will be paid in accordance with this Agreement
to the designated Beneficiary.
The amount payable to the Executive upon death and not subject to the
designation of a Beneficiary will be paid to the Executive's estate. If there
are any questions as to the legal right of any Beneficiary to receive payment
under this Agreement, the Company may pay the amount in question to the
Executive's estate and the Company will have no further liability to anyone
with respect to this amount.
3.3 NO OTHER BENEFITS. The Company will not pay any benefits
under this Agreement to the Executive or to his Beneficiary, whether by reason
of Termination of employment or otherwise, except as specifically provided
under the terms of this Agreement.
ARTICLE IV
CONDITIONS RELATED TO BENEFITS
4.1 ADMINISTRATION OF AGREEMENT. The Compensation Committee will
administer this Agreement and interpret, construe and apply its provisions in
accordance with its terms. All decisions of the Compensation Committee with
respect to this Agreement will be by vote or written consent of the majority of
its members and will be final and binding unless the Board determines
otherwise. The Executive may serve as a member of the Compensation Committee.
4.2 UNSECURED STATUS OF CLAIMS. The Executive and his heirs will
not have any legal or equitable rights, interests or claims in any specific
property or assets of the Company. No assets of the Company will be held under
any trust for the benefit of the Executive or his heirs, or held in any way as
collateral security for the fulfillment of the obligations of the Company under
this Agreement. The Company's obligation under this Agreement will be merely
that of an unfunded and unsecured promise of the Company to pay money in the
future. The Executive does not have any ownership, security or other rights in
any assets of the Company by virtue of entering into this Agreement.
4.3 NO EMPLOYMENT RIGHTS. Nothing in this Agreement will be
construed to create a contract of continuing employment between the Company and
the Executive. The Company reserves the right to elect any person to its
offices and to remove any employee in any manner and upon any basis permitted
by law.
4.4 COMPANY'S RIGHT TO TERMINATE OR AMEND. The Company reserves
the sole right to terminate or to amend this Agreement at any time. However,
no such termination or amendment of this Agreement may reduce the value of the
benefits theretofore accrued by the Executive unless the Executive consents to
such amendment in writing.
-4-
<PAGE> 5
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
4.5 OFFSET. If, at the time the Company is to make payments or
installments of payments under this Agreement, the Executive or his Beneficiary
or both are indebted to the Company, then the payments remaining to be made to
the Executive or to his Beneficiary, or to both, at the discretion of the
Board, may be reduced by the amount of such indebtedness; provided, however,
that an election by the Board not to reduce any such payment or payments will
not constitute a waiver of the Company's claim for such indebtedness.
ARTICLE V
MISCELLANEOUS
5.1 NONASSIGNABILITY. Neither the Executive nor his Beneficiary,
if any, may assign or transfer any rights under this Agreement.
5.2 FACILITY OF PAYMENT. If the Company receives satisfactory
evidence that (i) the Executive or his Beneficiary, as the case may be, is
physically, mentally, or legally incompetent to receive a Benefit and to give a
valid receipt therefore at the time the Benefit is payable to the Executive or
his Beneficiary, (ii) an individual or institution is then maintaining or has
custody of such person, and (iii) no guardian, committee or other
representative of the estate of such person has been appointed, the Company may
direct the Benefit to be paid to the individual or institution maintaining or
having the custody of such person, and the receipt by such individual or
institution will be deemed payment into such person's hands and will be a valid
and complete discharge of the Company's obligation to pay the Benefit.
5.3 GENDER AND NUMBER. Wherever appropriate in this Agreement,
the masculine may mean the feminine and the singular may mean the plural and
vice versa.
5.4 VALIDITY. If any provision of this Agreement is held invalid,
void or unenforceable, the validity of the remaining provisions of this
Agreement will not be affected.
5.5 APPLICABLE LAW. This Agreement will be governed and construed
in accordance with the laws of the State of Delaware.
5.6 HEADINGS FOR REFERENCE ONLY. Headings used in this Agreement
are for reference only and are not to be used in construing the Agreement or
any provision of the Agreement.
-5-
<PAGE> 6
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
ARTICLE VI
DEFINITIONS
"Agreement" means this Supplemental Executive Retirement Agreement
between the Company and the Executive.
"Beneficiary" means the person or persons designated as such in
accordance with Section 3.2.
"Board" means the Board of Directors of the Company.
"Cause" means the Executive's (a) willful misconduct, dishonesty or
reckless disregard of his duties as an officer or employee of the Company, (b)
any act of fraud, embezzlement or dishonesty towards the Company, or (c)
conviction or plea of guilty or no contest for any felony or misdemeanor
involving moral turpitude (other than any offense relating to driving a motor
vehicle which does not cause death or serious bodily injury).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Compensation Committee" means the Compensation Committee appointed by
the Board, or if the Compensation Committee ceases to exist, "Compensation
Committee" means the Board.
"Constructive Termination" means (a) any material reduction of duties,
salary or target bonus of the Executive, or (b) any mandatory change in
location of the Executive's principal location or business.
"Disability" means any termination of employment prior to Normal
Retirement or Early Retirement that the Compensation Committee, in its complete
and sole discretion, determines is by reason of the Executive's total and
permanent disability. If the Executive makes application for disability
benefits under any long term disability program of the Company or the Social
Security Act, as now in effect or as hereafter amended, and qualifies for such
benefits, he will be presumed to qualify as totally and permanently disabled
under this Agreement, subject to the Compensation Committee's determination
that the disability is such that it may be regarded as total and permanent in
nature. If the Executive fails to qualify for any such disability benefits, he
will be presumed not to be totally and permanently disabled under this
Agreement. However, if the Compensation Committee at any time has reason to
question the existence or non-existence of a condition of total and permanent
disability with respect to the Executive, or if the Executive fails to make
application for any such disability benefits, the Compensation Committee may
require that the Executive submit to an examination by a physician or medical
clinic selected by
-6-
<PAGE> 7
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
the Compensation Committee. On the basis of such medical evidence, the
Compensation Committee's determination of whether a condition of total and
permanent disability exists will be conclusive.
"Early Retirement" means a termination of employment by the Executive
(other than by reason of death) prior to Normal Retirement on or after the date
on which the Executive has both attained the age of 55 and completed five Years
of Service.
"Earnings" for any calendar year or other period of 12 consecutive
months means the Executive's base salary and bonuses (but excluding other forms
of compensation), paid to him by the Company during such period, before
reduction pursuant to any plan or agreement whereby compensation is deferred
including but not limited to a plan whereby compensation is deferred in
accordance with Section 401(k) or reduced in accordance with Section 125 of the
Code.
"Employment" or "Service" refers to full-time or substantially
full-time employment by the Company, or any parent holding company or
subsidiary, including any approved leave of absence.
"Executive" is George P. Giard, Jr., a senior officer of the Company.
"Final Average Earnings" means the average of the Executive's actual
annual Earnings for the 36 calendar months immediately preceding the
Executive's Normal Retirement or Early Retirement, Disability or death.
"Involuntary Termination" means a Termination of employment for any
reason other than for Normal Retirement or Early Retirement, voluntary
resignation, death or Disability.
"Normal Retirement" means a termination of employment by the Executive
other than by reason of death on or after the date on which the Executive
attains age 65.
"Retirement Percentage" is the sum of (i) 2% multiplied by the
Executive's Years of Service through the Year of Service in which the Executive
attains the age of 54 and (ii) 4.6% multiplied by the Executive's Years of
Service commencing with the Year of Service in which the Executive attains the
age of 55 and ending with the Year of Service in which the Executive attains
the age of 64; provided, however, that the Retirement Percentage shall not
exceed 60%.
A "subsidiary" of the Company is any corporation, partnership, venture
or other entity in which the Company has at least a 50% ownership interest.
-7-
<PAGE> 8
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
"T-Bond Rate" means the annual interest rate obtained at the most
recent auction of 10-year United States Treasury Bonds preceding the date for
which such rate is to be determined under this Agreement.
"Termination of employment" means the ceasing of the Executive's
employment for any reason whatsoever, whether voluntarily or involuntarily.
"Vested" refers to the date when the Executive first qualifies for
Normal Retirement Benefits under this Agreement.
A "Year" is a period of twelve (12) consecutive calendar months.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement on the date first written above.
PRESIDIO OIL COMPANY
By: /s/ C. S. HARDESTY
Christopher S. Hardesty
Vice President
EXECUTIVE
By: /s/ GEORGE P. GIARD, JR.
George P. Giard, Jr.
-8-
<PAGE> 1
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
EXHIBIT 10.5
PRESIDIO OIL COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (the "Agreement") is
made and entered into at Englewood, Colorado, on the 8th day of October, 1993,
by and between PRESIDIO OIL COMPANY (the "Company"), and ROBERT L. SMITH (the
"Executive").
ARTICLE I
PURPOSE
The Company desires to recognize the Executive's contributions to the
Company through his faithful and competent efforts by entering into this
Agreement for supplemental retirement benefits. The Company highly values the
services of the Executive as an important member of the management team and
recognizes the Executive's services have been instrumental to the Company's
growth. The Company desires to afford additional financial security to the
Executive in recognition of the Executive's past efforts, and further desires
to provide an incentive for the Executive to continue to contribute toward the
Company's growth and profitability.
ARTICLE II
RETIREMENT BENEFITS
2.1 NORMAL OR EARLY RETIREMENT BENEFIT. Upon the Executive's
Normal Retirement, the Company will pay benefits to the Executive in 120
monthly installments, commencing on the last day of the calendar month
beginning after the date of his Normal Retirement. Upon the Executive's Early
Retirement, the Company will pay benefits to the Executive in 120 monthly
installments, commencing on the last day of the calendar month following the
month in which the Executive attains age 65. The Normal Retirement or Early
Retirement annual benefit is equal to the Executive's Retirement Percentage
multiplied by his Final Average Earnings, adjusted pursuant to Sections 2.3 and
2.4 of this Agreement. A monthly installment equals 1/12 of the Normal
Retirement or Early Retirement annual benefit as calculated above.
2.2 VESTING. The Executive is 100% Vested under this Agreement
after he has completed 5 Years of Service (including Service completed prior to
the date of this Agreement) or upon Disability. The Company will not pay any
benefits under this Agreement to the Executive unless he is Vested or is deemed
to be Vested.
-1-
<PAGE> 2
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
2.3 OFFSET OF ESOP VALUE. The Company will reduce the benefits
payable under this Agreement by the adjusted value resulting from any
contributions made by the Company, including any dividends paid thereon, to the
account of the Executive under the Company's employee stock ownership plan
("ESOP"). The offset is computed as follows:
(a) The value of the Executive's ESOP account
attributable to contributions by the Company (including any dividends
paid thereon) is determined as of the last day of the calendar month
preceding the date the Executive's benefits are to commence under this
Agreement;
(b) The value determined in paragraph (a) is increased by
the compounded value of any prior distributions (attributable to
contributions by the Company, including any dividends paid thereon)
from the ESOP to the Executive (compounded from the actual date of
each distribution to the date benefits are to commence, using the
T-Bond Rate as of the last day of the calendar month preceding the
date benefits are to commence); and
(c) The amount of the offset to be applied against each
monthly payment otherwise payable under this Agreement is the monthly
amount which would be payable if the ESOP were to purchase a ten-year
annuity with the Executive's ESOP account (as adjusted under
paragraphs (a) and (b) above). The Company will compute the monthly
payments under the annuity using a discount rate equal to the T-Bond
Rate in (b) above.
2.4 OFFSET FOR BENEFITS PAYABLE UNDER QUALIFIED PLANS. The
Company will reduce the benefits payable under this Agreement by any amounts
that would be payable to the Executive or to his Beneficiary under any other
qualified retirement plans the Company may adopt subsequent to the date of this
Agreement. The Company will compute the offset in the same manner as the
Company calculates the ESOP offset under Section 2.3.
2.5 TERMINATION PRIOR TO RETIREMENT. Upon the Executive's
Termination of employment with the Company (other than a Termination for Cause)
prior to Normal Retirement or Early Retirement and when the Executive is
Vested, he will receive benefits in accordance with Sections 2.1, 2.3 and 2.4
of this Agreement (using his Retirement Percentage and Final Average Earnings
as of the date of Termination of employment), commencing on the last day of the
calendar month following the month in which the Executive attains age 65.
2.6 DISABILITY. Upon the Executive's total and permanent
Disability while an active, full-time employee of the Company, the Executive
will be entitled to receive retirement benefits beginning on the last day of
the calendar month following the month in which the Executive becomes totally
and permanently disabled or attains age 65, whichever is later. The Executive
may apply to the Compensation Committee for payment
-2-
<PAGE> 3
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
of benefits prior to attaining age 65. The Compensation Committee may grant or
deny such application in its sole discretion.
Solely for purposes of determining benefits in the event of
Disability, the Company will treat the Executive as if he were Vested on the
date he becomes totally and permanently disabled, irrespective of his actual
completed Years of Service. The Executive will not accrue Years of Service
during any period of Disability. If the Executive recovers from a Disability,
he will accrue additional Years of Service for purposes of determining Vesting
and Retirement Percentage beginning on the date he returns to Employment.
2.7 DEATH BENEFITS. The Company will not pay any death benefits
under this Agreement if the Executive dies before he is Vested. If the
Executive dies after he is Vested and prior to the payment of any benefits
pursuant to this Agreement, the Company will pay benefits determined in the
manner set forth in section 2.5 to the Executive's Beneficiary, except that
benefits will commence on the last day of the month following the Executive's
death rather than when he would have attained age 65. If the Executive dies
while receiving benefit payments under this Agreement, the Company will
continue paying such benefits to the Executive's Beneficiary for the remainder
of the period during which the Executive would have received such benefits if
he had remained alive.
2.8 TERMINATION FOR CAUSE. Notwithstanding any other provision of
this Agreement, if the Company terminates the Executive's employment for Cause,
the Company will not pay any Retirement Benefit or other benefit under this
Agreement to the Executive or to his Beneficiaries, irrespective of whether the
Executive was eligible for Normal Retirement or Early Retirement.
ARTICLE III
PAYMENT
3.1 WITHHOLDING; UNEMPLOYMENT TAXES. The Company will withhold
from payments under this Agreement any taxes required by law to be withheld.
3.2 DESIGNATION OF BENEFICIARY. The Executive may designate a
Beneficiary to receive all or part of the amounts earned by the Executive under
this Agreement in case of death. A designation of Beneficiary may be replaced
by a new designation or may be revoked by the Executive at any time. A
designation or revocation must be on a form provided for this purposes by the
Company and must be signed by the Executive and delivered to the Company prior
to the Executive's death. If the Executive is married, and chooses to
designate a Beneficiary other than his spouse, a written spousal consent
satisfactory to the Company is required.
-3-
<PAGE> 4
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
In case of the Executive's death, the benefits to be paid to the
Executive under this Agreement will be paid in accordance with this Agreement
to the designated Beneficiary.
The amount payable to the Executive upon death and not subject to the
designation of a Beneficiary will be paid to the Executive's estate. If there
are any questions as to the legal right of any Beneficiary to receive payment
under this Agreement, the Company may pay the amount in question to the
Executive's estate and the Company will have no further liability to anyone
with respect to this amount.
3.3 NO OTHER BENEFITS. The Company will not pay any benefits
under this Agreement to the Executive or to his Beneficiary, whether by reason
of Termination of employment or otherwise, except as specifically provided
under the terms of this Agreement.
ARTICLE IV
CONDITIONS RELATED TO BENEFITS
4.1 ADMINISTRATION OF AGREEMENT. The Compensation Committee will
administer this Agreement and interpret, construe and apply its provisions in
accordance with its terms. All decisions of the Compensation Committee with
respect to this Agreement will be by vote or written consent of the majority of
its members and will be final and binding unless the Board determines
otherwise. The Executive may serve as a member of the Compensation Committee.
4.2 UNSECURED STATUS OF CLAIMS. The Executive and his heirs will
not have any legal or equitable rights, interests or claims in any specific
property or assets of the Company. No assets of the Company will be held under
any trust for the benefit of the Executive or his heirs, or held in any way as
collateral security for the fulfillment of the obligations of the Company under
this Agreement. The Company's obligation under this Agreement will be merely
that of an unfunded and unsecured promise of the Company to pay money in the
future. The Executive does not have any ownership, security or other rights in
any assets of the Company by virtue of entering into this Agreement.
4.3 NO EMPLOYMENT RIGHTS. Nothing in this Agreement will be
construed to create a contract of continuing employment between the Company and
the Executive. The Company reserves the right to elect any person to its
offices and to remove any employee in any manner and upon any basis permitted
by law.
4.4 COMPANY'S RIGHT TO TERMINATE OR AMEND. The Company reserves
the sole right to terminate or to amend this Agreement at any time. However,
no such termination or amendment of this Agreement may reduce the value of the
benefits theretofore accrued by the Executive unless the Executive consents to
such amendment in writing.
-4-
<PAGE> 5
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
4.5 OFFSET. If, at the time the Company is to make payments or
installments of payments under this Agreement, the Executive or his Beneficiary
or both are indebted to the Company, then the payments remaining to be made to
the Executive or to his Beneficiary, or to both, at the discretion of the
Board, may be reduced by the amount of such indebtedness; provided, however,
that an election by the Board not to reduce any such payment or payments will
not constitute a waiver of the Company's claim for such indebtedness.
ARTICLE V
MISCELLANEOUS
5.1 NONASSIGNABILITY. Neither the Executive nor his Beneficiary,
if any, may assign or transfer any rights under this Agreement.
5.2 FACILITY OF PAYMENT. If the Company receives satisfactory
evidence that (i) the Executive or his Beneficiary, as the case may be, is
physically, mentally, or legally incompetent to receive a Benefit and to give a
valid receipt therefore at the time the Benefit is payable to the Executive or
his Beneficiary, (ii) an individual or institution is then maintaining or has
custody of such person, and (iii) no guardian, committee or other
representative of the estate of such person has been appointed, the Company may
direct the Benefit to be paid to the individual or institution maintaining or
having the custody of such person, and the receipt by such individual or
institution will be deemed payment into such person's hands and will be a valid
and complete discharge of the Company's obligation to pay the Benefit.
5.3 GENDER AND NUMBER. Wherever appropriate in this Agreement,
the masculine may mean the feminine and the singular may mean the plural and
vice versa.
5.4 VALIDITY. If any provision of this Agreement is held invalid,
void or unenforceable, the validity of the remaining provisions of this
Agreement will not be affected.
5.5 APPLICABLE LAW. This Agreement will be governed and construed
in accordance with the laws of the State of Delaware.
5.6 HEADINGS FOR REFERENCE ONLY. Headings used in this Agreement
are for reference only and are not to be used in construing the Agreement or
any provision of the Agreement.
-5-
<PAGE> 6
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
ARTICLE VI
DEFINITIONS
"Agreement" means this Supplemental Executive Retirement Agreement
between the Company and the Executive.
"Beneficiary" means the person or persons designated as such in
accordance with Section 3.2.
"Board" means the Board of Directors of the Company.
"Cause" means the Executive's (a) willful misconduct, dishonesty or
reckless disregard of his duties as an officer or employee of the Company, (b)
any act of fraud, embezzlement or dishonesty towards the Company, or (c)
conviction or plea of guilty or no contest for any felony or misdemeanor
involving moral turpitude (other than any offense relating to driving a motor
vehicle which does not cause death or serious bodily injury).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Compensation Committee" means the Compensation Committee appointed by
the Board, or if the Compensation Committee ceases to exist, "Compensation
Committee" means the Board.
"Constructive Termination" means (a) any material reduction of duties,
salary or target bonus of the Executive, or (b) any mandatory change in
location of the Executive's principal location or business.
"Disability" means any termination of employment prior to Normal
Retirement or Early Retirement that the Compensation Committee, in its complete
and sole discretion, determines is by reason of the Executive's total and
permanent disability. If the Executive makes application for disability
benefits under any long term disability program of the Company or the Social
Security Act, as now in effect or as hereafter amended, and qualifies for such
benefits, he will be presumed to qualify as totally and permanently disabled
under this Agreement, subject to the Compensation Committee's determination
that the disability is such that it may be regarded as total and permanent in
nature. If the Executive fails to qualify for any such disability benefits, he
will be presumed not to be totally and permanently disabled under this
Agreement. However, if the Compensation Committee at any time has reason to
question the existence or non-existence of a condition of total and permanent
disability with respect to the Executive, or if the Executive fails to make
application for any such disability benefits, the Compensation Committee may
require that the Executive submit to an examination by a physician or medical
clinic selected by
-6-
<PAGE> 7
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
the Compensation Committee. On the basis of such medical evidence, the
Compensation Committee's determination of whether a condition of total and
permanent disability exists will be conclusive.
"Early Retirement" means a termination of employment by the Executive
(other than by reason of death) prior to Normal Retirement on or after the date
on which the Executive has both attained the age of 55 and completed five Years
of Service.
"Earnings" for any calendar year or other period of 12 consecutive
months means the Executive's base salary and bonuses (but excluding other forms
of compensation), paid to him by the Company during such period, before
reduction pursuant to any plan or agreement whereby compensation is deferred
including but not limited to a plan whereby compensation is deferred in
accordance with Section 401(k) or reduced in accordance with Section 125 of the
Code.
"Employment" or "Service" refers to full-time or substantially
full-time employment by the Company, or any parent holding company or
subsidiary, including any approved leave of absence.
"Executive" is Robert L. Smith, a senior officer of the Company.
"Final Average Earnings" means the average of the Executive's actual
annual Earnings for the 36 calendar months immediately preceding the
Executive's Normal Retirement or Early Retirement, Disability or death.
"Involuntary Termination" means a Termination of employment for any
reason other than for Normal Retirement or Early Retirement, voluntary
resignation, death or Disability.
"Normal Retirement" means a termination of employment by the Executive
other than by reason of death on or after the date on which the Executive
attains age 65.
"Retirement Percentage" is the sum of (i) 2% multiplied by the
Executive's Years of Service through the Year of Service in which the Executive
attains the age of 54 and (ii) 4.2% multiplied by the Executive's Years of
Service commencing with the Year of Service in which the Executive attains the
age of 55 and ending with the Year of Service in which the Executive attains
the age of 64; provided, however, that the Retirement Percentage shall not
exceed 60%.
A "subsidiary" of the Company is any corporation, partnership, venture
or other entity in which the Company has at least a 50% ownership interest.
-7-
<PAGE> 8
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
"T-Bond Rate" means the annual interest rate obtained at the most
recent auction of 10-year United States Treasury Bonds preceding the date for
which such rate is to be determined under this Agreement.
"Termination of employment" means the ceasing of the Executive's
employment for any reason whatsoever, whether voluntarily or involuntarily.
"Vested" refers to the date when the Executive first qualifies for
Normal Retirement Benefits under this Agreement.
A "Year" is a period of twelve (12) consecutive calendar months.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement on the date first written above.
PRESIDIO OIL COMPANY
By: /s/ C. S. HARDESTY
Christopher S. Hardesty
Vice President
EXECUTIVE
By: /s/ ROBERT L. SMITH
Robert L. Smith
-8-
<PAGE> 1
EXHIBIT 10.15
================================================================================
THE SALE OF THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS
NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS WARRANT NOR SUCH
SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED
OR DISPOSED OF EXCEPT IN COMPLIANCE WITH, AND IN EACH INSTANCE SUBJECT TO, THE
TERMS, CONDITIONS AND RESTRICTIONS SET FORTH IN THIS STOCK PURCHASE WARRANT TO
SUBSCRIBE FOR AND PURCHASE CLASS A COMMON STOCK OF PRESIDIO OIL COMPANY, DATED
AS OF JANUARY 15, 1993.
********************
STOCK PURCHASE WARRANT
TO
SUBSCRIBE FOR AND PURCHASE
CLASS A COMMON STOCK OF
PRESIDIO OIL COMPANY
********************
This certifies that, for good and valuable consideration PRESIDIO OIL
COMPANY, a Delaware corporation (the "Company") grants to CHRISTOPHER S.
HARDESTY, (the "Warrantholder"), the right to subscribe for and purchase from
the Company, 15,000 validly issued, fully paid and non-assessable shares (the
"Warrant Shares") of the Company's Class A Common Stock, $.10 par value per
share (the "Common Stock"), at a price (the "Exercise Price") equal to $1.0625
per share from January 15, 1993 (the "Beginning Date"), to and including
January 14, 2003 (the "Expiration Date"), upon the terms and subject to the
conditions herein set forth. The Exercise Price and the number of Warrant
Shares purchasable upon exercise of this Warrant are subject to adjustment from
time to time as provided in Article 5 hereof.
================================================================================
<PAGE> 2
1. DURATION AND EXERCISE OF WARRANT; LIMITATION ON EXERCISE;
PAYMENT OF TAXES; TRANSFER RESTRICTION AND LEGEND.
1.1 DURATION AND EXERCISE OF WARRANT. This Warrant may
be exercised with respect to any whole number or all of the Warrant Shares on
any occasion from and after the Beginning Date to and including the Expiration
Date. The rights represented by this Warrant may be exercised by the
Warrantholder by (a) the surrender of this Warrant, accompanied by the duly
signed Exercise Form attached hereto as Schedule 1 and incorporated herein by
this reference, to the Company at the offices of the company located at 5613
DTC Parkway, Suite 750, Englewood, Colorado 80111-3065 (or at such other
office or agency of the Company as it may designate by notice to the
Warrantholder at the address of such Warrantholder as provided in Section 6.6
of this Warrant) during normal business hours on any day other than a Saturday,
Sunday or a day on which national banks are authorized to close in the City and
County of Denver, Sate of Colorado (a "Business Day") on or after the Beginning
Date but no later than the close of business on the Expiration Date, and (b)
delivery of payment to the Company, for the account of the Company, by cash or
by certified or bank cashier's check, in an amount equal to the Exercise Price
multiplied by the number of Warrant Shares with respect to which the Warrant is
being exercised, in lawful money of the United States of America. The Company
agrees that the Warrant Shares shall be deemed to be issued to the
Warrantholder as the record owner of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment shall have been made for the Warrant Shares as provided above. Common
Stock certificates for the Warrant Shares shall be delivered to the
Warrantholder within a reasonably practicable time thereafter. If this Warrant
is exercised on any occasion with respect to less than all of the Warrant
Shares, a new warrant covering the balance of the Warrant Shares shall be
issued and delivered to, or in accordance with transfer instructions properly
given by, the Warrantholder, on the same terms and subject to the same
conditions as this Warrant. This Warrant and any other warrants issued in
accordance with the terms hereof are referred to herein collectively as the
"Warrant".
1.2 PAYMENT OF TAXES. The issuance of certificates for
Warrant Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect hereto; provided, however, that the
Warrantholder shall be required to pay any and all taxes which may be payable
in respect to any transfer involved in the issuance and delivery of any
certificate in a name other than that of the then Warrantholder.
2
<PAGE> 3
1.3 TRANSFER RESTRICTION AND LEGEND. Neither this
Warrant, nor any of the Warrant Shares, nor any interest in either, may be
sold, assigned, pledged, hypothecated, encumbered or in any other manner
transferred or disposed of, in whole or in part, except in compliance with
applicable United States federal and state and other applicable securities laws
and the terms and conditions of this Warrant. Until transfer of this Warrant
and/or the Warrant Shares, as appropriate, has been registered under the
Securities Act of 1933, as amended (the "Securities Act"), this Warrant and
each Common Stock certificate issued upon the exercise or conversion of this
Warrant shall be subject to the following provision, which provision shall also
appear as a legend on each such Common Stock certificate:
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
NEITHER THIS WARRANT NOR SUCH SECURITIES NOR ANY INTEREST OR
PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR
DISPOSED OF EXCEPT IN COMPLIANCE WITH, AND IN EACH INSTANCE SUBJECT
TO, THE TERMS, CONDITIONS AND RESTRICTIONS SET FORTH IN A STOCK
PURCHASE WARRANT TO SUBSCRIBE FOR AND PURCHASE CLASS A COMMON STOCK OF
PRESIDIO OIL COMPANY, DATED AS OF JANUARY 15, 1993, A COPY OF WHICH
MAY BE EXAMINED AT THE PRINCIPAL OFFICES OF THE COMPANY.
2. RESERVATION OF SHARES, ETC.
The Company covenants and agrees that all Warrant Shares which are
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid, non-assessable and free from all
taxes, liens, security interests, charges and other encumbrances with respect
to the issue thereof other than taxes in respect of any transfer occurring
contemporaneously with such issue. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, and
keep available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant, and will at its expense, upon each reservation of shares, procure such
listing thereof (subject to the registration under the Securities Act or
applicable exemption therefrom permitting public trading) as then may be
required on all stock exchanges on which the Common Stock is then listed.
3. LOSS OR DESTRUCTION OF WARRANT.
Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver a new
Warrant of like tenor.
3
<PAGE> 4
4. PURCHASE FOR INVESTMENT.
The Warrantholder by acceptance hereof confirms that this Warrant is,
and any and all Warrant Shares issued hereafter shall be, acquired by the
Warrantholder for his own account for investment and not with a view to, or for
sale in connection with, any distribution thereof, nor with any intention of
reselling or granting any participation in all or part of this Warrant or the
Warrant Shares to any person or entity.
5. CERTAIN ADJUSTMENTS.
5.1 The Exercise Price at which Warrant Shares may be
purchased hereunder, and the number of Warrant Shares to be purchased upon
exercise hereof, are subject to change or adjustment as follows:
(a) Recapitalization, Stock Dividends, Etc. If
the Company shall, while this Warrant remains unexercised and
in force, effect a reorganization or recapitalization of such
character that the Warrant Shares purchasable hereunder shall
be changed into or become exchangeable for a larger or smaller
number of shares, upon the effectuation of such reorganization
or recapitalization, the number of Warrant Shares which the
Warrantholder shall be entitled to purchase hereunder shall be
increased or decreased, as the case may be, in direct
proportion to the increase or decrease in the number of shares
of Common Stock resulting from such reorganization or
recapitalization, and the Exercise Price hereunder, per share,
of such reorganized or recapitalized Warrant Shares shall in
the case of any increase in the number of such Warrant Shares
be proportionately reduced, and in the case of a decrease in
the number of such Warrant Shares be proportionately
increased. For purposes of this Section 5.1, a
"reorganization or recapitalization" shall mean a stock
dividend or distribution on the Common Stock in shares of
capital stock of the Company or in securities of the Company
convertible into shares of Common Stock (to the extent that
shares of Common Stock are issuable upon the conversion
thereof), or a stock split or reverse stock split, or the
issuance by reclassification of shares of Common Stock of
shares of capital stock of the Company. No adjustments shall
be made to the number of Warrant Shares issuable on the
exercise of this Warrant for any cash dividends paid or
payable to holders of record of Common Stock prior to the date
as of which the Warrantholder shall be deemed to be the record
holder of the
4
<PAGE> 5
Warrant Shares; provided, however, that if the Company shall,
at any time during the life of this Warrant, declare a
dividend payable in cash on its Common Stock and shall at
substantially the same time offer its stockholders a right to
purchase new Common Stock from the proceeds of such dividend
or for an amount substantially equal to the dividend, all
Common Stock so issued shall, for the purpose of this Warrant,
be deemed to have been issued as a stock dividend.
(b) Mergers, Consolidations, Etc. In case of any
consolidation of the Company with, or merger of the Company
with or into, any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the
Company in connection with a plan of complete liquidation of
the Company, the Company shall arrange for provision to be
made whereby the Warrantholder shall thereafter have
substantially the same rights to purchase and receive, upon
the basis and upon the terms and conditions specified in this
Warrant in lieu of the Warrant Shares immediately theretofore
purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock or securities or
other property as may be issued in connection with such
consolidation, merger or sale or conveyance with respect to or
in exchange for the number of outstanding shares of Common
Stock equal to the number of Warrant Shares immediately
theretofore purchasable and receivable upon the exercise of
the rights represented hereby had such consolidation, merger,
sale or conveyance not taken place.
5.2 TERMINATION OF RIGHTS. Upon the Company having made
the arrangements as required by Section 5.1(b), then all rights under this
Warrant shall terminate on a date fixed by the Company int he event of any
consolidation of the Company with, or merger of the Company with or into, any
other corporation, or sale or conveyance of all or substantially all of the
assets of the Company in connection with a plan of complete liquidation of the
Company. The date to be fixed by the Company shall be, in the case of a
dissolution, liquidation or winding-up, not earlier than the date of the
commencement of the proceedings therefor and not later than 30 days after such
commencement date, and in the case of a merger or sale of assets, not later
than the date of the consummation of such merger or sale.
5
<PAGE> 6
5.3 NOTIFICATION BY THE COMPANY. In case at any time:
(a) the Company shall pay or declare any dividend payable
in stock upon the Common Stock or make any distribution (other than
ordinary cash dividends payable out of earnings or surplus legally
available for dividends) to the holders of the Common Stock;
(b) the Company shall make an offer for subscription pro
rata to the holders of its Common Stock of any additional shares of
stock of any class of other rights;
(c) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation
or merger of the Company with or into, or sale of all or substantially
all of its assets to, another corporation; or
(d) there shall be a voluntary or involuntary
dissolution, partial liquidation, or winding-up of the Company;
(e) the Company shall give notice to the Warrantholder of
the date on which the books of the Company shall close or a record
date shall be taken for such dividend, distribution or subscription
rights, or the date on which such reorganization, reclassification,
consolidation, merger, sale dissolution, liquidation or winding-up
shall take place, as the case may be. Such notice shall also specify
the date on which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up,
as the case may be. Such notice shall be given not less than 20 days
prior to the action in question and not less than 10 days prior to the
record date or the date on which the Company's transfer books are
closed in respect thereto. The Warrantholder agrees to keep
confidential the information set forth in such notice until such
information is released by the Company or is otherwise made known to
the public, unless such information is required to be disclosed by law
(in which event the Warrantholder shall notify the Company of such
disclosure required by law at or prior to the time of making such
disclosure required by law).
6
<PAGE> 7
5.4 ISSUANCE OF COMMON STOCK. In case the Company at any
time or from time to time shall issue or sell shares of Common Stock (other
than shares of Common Stock issued or issuable to employees of the Company
pursuant to employee benefit plans in amounts not exceeding 10% of the number
of then outstanding shares of Common Stock, but otherwise including shares of
Common Stock deemed to be issued pursuant to Section 5.5 below) without
consideration or for a consideration per share less than the lesser of the
current market price per share of Common Stock (as defined in Section 5.6
below) and the Exercise Price then in effect, then, in each such case, the
Exercise Price then in effect shall be reduced, concurrently with such issue or
sale, to a rate (calculated to the nearest cent) determined by multiplying the
Exercise Price then in effect by a fraction:
(a) the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such issue or sale
plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of such
shares of Common Stock so issued or sold would purchase at the
Exercise Price then in effect, and
(b) the denominator of which shall be the number of
shares of Common Stock outstanding immediately after such issue or
sale, provided that, for the purpose of this Section 5.4;
(i) immediately after any shares of Common Stock
are deemed to have been issued pursuant to Section 5.5 below, such
shares shall be deemed to be outstanding, and
(ii) treasury shares shall not be deemed to be
outstanding.
5.5 OPTIONS, RIGHTS, WARRANTS, ETC. In case the Company
at any time or from time to time shall issue, sell, grant or assume, or shall
fix a record date for the determination of holders of any class of securities
entitled to receive, any options, rights or warrants (referred to herein
collectively as "Options") or securities convertible into shares of Common
Stock ("Convertible Securities") then, and in each such case, the maximum
number of shares (as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be shares of Common Stock
issued as of the time of such issue, sale, grant or assumption or, in case such
record date shall have been fixed, as of the close of business on such record
date, provided that shares of Common Stock shall not be deemed to have been
issued unless the consideration per share of such shares would be less than the
lesser of the current market price per share of the Common Stock (as defined in
7
<PAGE> 8
Section 5.6 below) immediately prior to such issue, sale, grant or assumption
or immediately prior to the close of business on such record date, as the case
may be, and provided, further, that in any such case in which shares of Common
Stock are deemed to be issued,
(a) no further adjustment of the Exercise Price shall be
made upon the subsequent issue or sale of Convertible Securities or
shares of Common Stock upon the exercise of such Options or the
conversion or exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase
in the consideration payable to the Company, or decrease in the number
of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof (by change of rate or otherwise), the Exercise Price
and any subsequent adjustments based thereon shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such
increase or decrease insofar as it affects such Options, or the rights
of conversion or exchange under such Convertible Securities, which are
outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation) of any such Options or any rights of conversion or
exchange under such Convertible Securities which shall not have been
exercised, the Exercise Price and any subsequent adjustments based
thereon shall, upon such expiration (or such cancellation, as the case
may be) be recomputed as if:
(i) in the case of Convertible Securities or
Options for Common Stock, the only shares of Common Stock
issued or sold were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration
actually received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus
the consideration actually received by the Company upon such
exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus
the additional consideration, if any, actually received by the
Company upon such conversion or exchange; and
8
<PAGE> 9
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise thereof were issued at the
time of the issue, sale, grant or assumption of such Options,
and the consideration received by the Company for the shares
of Common Stock deemed to have been issued was the
consideration actually received by the Company for the issue,
sale, grant or assumption of such Options or Convertible
Securities; and
(d) no readjustment pursuant to clauses (b) or (c) above
shall have the effect of increasing the Exercise Price by an amount in
excess of the amount of adjustment thereof originally made in respect
to the issue, sale, grant or assumption of such Options or Convertible
Securities; and
(e) in the case of any Options which expire by their
terms not more that 30 days after the date of issue, sale, grant, or
assumption thereof, no adjustment of the Exercise Price shall be made
until the expiration or exercise of all such Options, whereupon in the
case of such exercise such adjustment shall be made in the manner
provided in Section 5.5 above.
5.6 MARKET PRICE. For the purposes of any computation
under Section 5.5 above, the current market price per share of Common Stock on
any record date shall be deemed to be the average of the daily representative
closing prices per share for the 30 consecutive trading days commencing 45
trading days before such date. The closing price for each day shall be the
last sale price regular way or, in case no sale takes place on such day, the
average of the closing bid and asked prices regular way, in either case, on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading on any national securities exchange on which the
shares of Common Stock are listed or admitted to trading, or if the shares are
not listed or admitted to trading on any national securities exchange, the
closing sale price, if available, or the average of the highest reported bid
and lowest reported asked prices as furnished by the National Association of
Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is
no longer reporting such information. If on any date the shares of Common
Stock are not quoted by any such organization, the fair value of such shares of
Common Stock on such date, as determined by the board of directors of the
Corporation, shall be used and described in a statement filed with the transfer
agent.
5.7 BASIS FOR ADJUSTMENTS; NOTIFICATIONS. Any adjustment
effected pursuant to this Article 5 shall be made on the basis of the number of
Warrant Shares which the Warrantholder would have been entitled to acquire by
exercise of this Warrant immediately prior to the event giving rise to such
adjustment and to the Exercise Price hereunder, per share, on the basis of each
such respective Exercise Price immediately prior to the event giving rise to
such adjustment. Immediately upon the occurrence of each
9
<PAGE> 10
adjustment hereunder, then, and in each case, the chief financial officer of
the Company shall give written notice thereof in the form of an officer's
certificate to the Warrantholder, which notice shall state the Exercise Price
resulting from such adjustment and the increase or decrease, if any, in the
number of Warrant Shares purchasable upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
6. MISCELLANEOUS.
6.1 ENTIRE AGREEMENT; GOVERNING LAW. This Warrant
constitutes the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings related to such subject matter. This Warrant shall be
construed in accordance with the laws of the State of Delaware.
6.2 BINDING EFFECTS; BENEFITS. This Warrant
shall inure to the benefit of and shall be binding upon the parties hereto and
their respective successors and assigns. Nothing in this Warrant, expressed or
implied, is intended to or shall confer on any person other that the parties
hereto, and their respective successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Warrant.
6.3 AMENDMENTS AND WAIVERS. This Warrant may not be
modified or amended except by an instrument in writing signed by the party
against whom such modification or amendment is sought. Either party hereto
may, by an instrument in writing, waive compliance by the other party with any
term or provision of this Warrant on the part of such other party hereto to be
performed or complied with. The waiver by any party hereto of a breach of any
term or provision of this Warrant shall not be construed as a waiver of any
subsequent breach or of a breach of any other term or provision of this
Warrant.
6.4 SECTION AND OTHER HEADINGS. The Article, Section and
other headings contained in this Warrant are for reference purposes only and
shall not be deemed to be part of this Warrant or to affect the meaning or
interpretation of this Warrant.
6.5 NOTICES. All notices and other communications
required or permitted to be given under this Warrant shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
telex, telegraph, registered or certified mail to the parties hereto at the
following addresses or to such other address as any party hereto shall
hereafter specify by notice to the other party hereto:
(a) if to the Company, addressed to:
10
<PAGE> 11
Presidio Oil Company
5613 DTC Parkway, Suite 750
Englewood, Colorado 80111-3035
Attention: General Counsel
(b) if to the Warrantholder, addressed to:
Mr. Christopher S. Hardesty
c/o Presidio Oil Company
5613 DTC Parkway, Suite 750
Englewood, Colorado 80111-3065
(or to such other address the
Warrantholder has provided to the
Company)
Any such notices and communications shall be deemed to have been given only
when received.
6.6 SEVERABILITY. Any term or provision of this Warrant
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the terms and
provisions of this Warrant or affecting the validity or enforceability of any
of the terms or provisions of this Warrant in any other jurisdiction.
6.7 FRACTIONAL SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon exercise
hereof, the Company shall pay to the Warrantholder an amount in cash equal to
such fraction multiplied by the fair market value of a share of Common Stock as
of the date of such exercise.
6.8 RIGHTS OF THE HOLDER.
(a) The Warrantholder shall not, by virtue of this
Warrant, be entitled to any rights of a stockholder of the Company,
either at law or equity.
(b) When this Warrant shall have been surrendered for
exercise accompanied by payment of the Exercise Price as provided
herein, certificates for the Warrant Shares purchased upon such
exercise shall be issuable and any person designated to be the record
holder of such Warrant Shares shall be deemed to have become a holder
of record of such Warrant Shares as of the date of such surrender and
payment, whichever last occurs; provided that if at such date the
transfer books for the Common Stock shall be closed,
11
<PAGE> 12
the certificates for the Warrant Shares shall be issuable on the date
on which such books shall next be open (whether before, on or after
the Expiration Date) and until then the Company shall be under no duty
to deliver any certificate for such Warrant Shares; and further
provided that such books, unless otherwise required by law, shall not
be closed at any one time for a period longer than 20 days.
IN WITNESS WHEREOF, each of the parties hereto has caused this Warrant
to be signed and to be dated as of January 15, 1993.
PRESIDIO OIL COMPANY
A DELAWARE CORPORATION
By: /s/ Robert L. Smith
Robert L. Smith
President
By: /s/ Christopher S. Hardesty
Christopher S. Hardesty
12
<PAGE> 13
SCHEDULE 1
WARRANT EXERCISE FORM
(To be executed upon exercise of the Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by the Warrant dated as of January 15, 1993, from Presidio Oil
Company, a Delaware corporation, to Christopher S. Hardesty (the "Warrant"), to
purchase __________ of the Warrant Shares (as defined in the Warrant) and
herewith tenders payment for such Warrant Shares to the order of Presidio Oil
Company in the amount of $_____________ in accordance with the terms of the
Warrant. The undersigned requests that a certificate for such Warrant Shares
be registered in the name of the undersigned and that such certificates be
delivered to ___________________________________________________________________
________________________________________________________________________________
___________________________.
Signature_________________________
Name______________________________
Date___________________
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF PRESIDIO OIL COMPANY
<TABLE>
<CAPTION>
COMPANY STATE OF INCORPORATION
- ------- ----------------------
<S> <C>
Presidio Exploration, Inc. Colorado
Presidio West Virginia, Inc. Delaware
Palisade Oil, Inc. Colorado
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in (i) Registration Statement No.
33-5390 on Form S-3, (ii) Registration Statement No. 33-6661 on Form S-8, (iii)
Registration Statement No. 33-32821 on Form S-3, (iv) Registration Statement
No. 33-20496 on Form S-8, (v) Registration Statement No. 33-37747 on Form S-3,
(vi) Registration Statement No. 33-34350 on Form S-3, (vii) Registration
Statement No. 33-38620 on Form S-8 and (viii) Registration Statement No.
33-44909 on Form S-8 of our report dated February 15, 1994 appearing in this
Annual Report on Form 10-K of Presidio Oil Company for the year ended December
31, 1993.
/s/ Deloitte & Touche
DELOITTE & TOUCHE
Denver, Colorado
February 15, 1994
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PETROLEUM ENGINEER
We hereby consent to reference of our firm in the Annual Report on Form 10-K of
Presidio Oil Company and its subsidiaries (the "Company") for the year ended
December 31, 1993, and the incorporation by reference thereof into the
Company's Registration Statement on Form S-3 (33-5390), Form S-3 (No.
33-32821), Form S-8 (No. 33-6661), Form S-8 (No. 33-20496), Form S-3 (No.
33-37747), Form S-8 (No. 33-38620), Form S-3 (No. 33- 34350) and Form S-8 (No.
33-44909).
Very truly yours,
HUDDLESTON & CO., INC.
By: /s/ Peter D. Huddleston
Peter D. Huddleston
February 10, 1994
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PETROLEUM ENGINEER
We hereby consent to reference of our firm in the Annual Report on Form 10-K of
Presidio Oil Company and its subsidiaries (the "Company") for the year ended
December 31, 1993, and the incorporation by reference thereof into the
Company's Registration Statement on Form S-3 (33-5390), Form S-3 (No.
33-32821), Form S-8 (No. 33-6661), Form S-8 (No. 33-20496), Form S-3 (No.
33-37747), Form S-8 (No. 33-38620), Form S-3 (No. 33- 34350) and Form S-8 (No.
33-44909).
Very truly yours,
NETHERLAND, SEWELL & ASSOCIATES, INC.
By: /s/ Frederic D. Sewell
Frederic D. Sewell
President
February 10, 1994
