AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1995
REGISTRATION NO. 33-......
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------
ENRON OIL & GAS COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 47-0684736
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1400 SMITH STREET, HOUSTON, TEXAS 77002
TELEPHONE NO. (713) 853-6161
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DENNIS M. ULAK, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
ENRON OIL & GAS COMPANY
1400 SMITH STREET
HOUSTON, TEXAS 77002
(713) 853-6161
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
GARY W. ORLOFF, ESQ. REX R. ROGERS, ESQ.
BRACEWELL & PATTERSON, L.L.P. ASSISTANT GENERAL COUNSEL
SOUTH TOWER PENNZOIL PLACE ENRON CORP.
711 LOUISIANA STREET, SUITE 2900 1400 SMITH STREET, ROOM 4842
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
-------------------
CALCULATION OF REGISTRATION FEE
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- ------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH MAXIMUM AMOUNT OF
CLASS OF SECURITIES OFFERING REGISTRATION
TO BE REGISTERED PRICE(1)(2) FEE(1)(2)
- ------------------------------------------------------------------------------
Common Stock, par value $.01 per
share.............................. $493,695,000 $170,240
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(1) Estimated in accordance with Rule 457 solely for the purpose of
calculating the registration fee. Includes up to 11,000,000 shares which
are deliverable only upon exchange at maturity of the Exchangeable Notes
of Enron Corp. (which notes are separately registered pursuant to a
Registration Statement on Form S-3 filed by Enron Corp. concurrently
herewith) and no separate consideration will be received for such shares.
Accordingly, pursuant to Rule 457(l), no registration fee is required.
(2) Includes shares subject to the Underwriters' over-allotment option. Also
includes up to 6,210,000 shares that are to be offered outside the United
States but that may be resold from time to time in the United States under
circumstances requiring delivery of a prospectus; such shares are not
being registered for the purpose of sales outside the United States.
-------------------
THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN
ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering (the "Prospectus") by Enron Corp. of Enron
Oil & Gas Company Common Stock; and one used in connection with the shares
deliverable upon mandatory exchange pursuant to the terms of the Exchangeable
Notes of Enron Corp. (which Exchangeable Notes are separately registered
pursuant to a Registration Statement on Form S-3 filed by Enron Corp.
concurrently herewith), and which will be included in such registration
statement as Appendix A to the prospectus (the "Appendix Prospectus"). The
Appendix Prospectus and the Prospectus are identical except that they contain
different front and back cover pages, different descriptions under "Prospectus
Summary -- Relationship between the Company and Enron Corp." and different
descriptions of the plan of distribution (contained under the captions
"Underwriting"and "Plan of Distribution"). In addition, the Appendix
Prospectus will omit from the "Prospectus Summary" the material captioned "The
Stock Offerings." The form of the Prospectus is included herein and is
followed by those pages to be used in the Appendix Prospectus which differ
from, or are in addition to, those in the Prospectus. Each of the pages for
the Appendix Prospectus included herein is labeled "Alternative Page For
Appendix Prospectus."
<PAGE>
**************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. *
* A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN *
* FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES *
* MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME *
* THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL *
* NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO *
* BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN *
* WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
**************************************************************************
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1995
27,000,000 SHARES
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
Of the 27,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of Enron Oil & Gas Company (the "Company") offered,
21,600,000 shares are being offered hereby in the United States and 5,400,000
shares are being offered in a concurrent international offering outside the
United States (collectively, the "Stock Offerings"). The initial public
offering price and the aggregate underwriting discount per share are identical
for both of the Stock Offerings. See "Underwriting".
All of the shares of Common Stock offered in the Stock Offerings are being
sold by Enron Corp. The Company will not receive any of the proceeds from the
sale of shares of Common Stock in the Stock Offerings.
Concurrently with the Stock Offerings, Enron Corp. is offering 10,000,000
(11,000,000 if the over-allotment
option of the Underwriters in such offering is exercised in full) %
Exchangeable Notes due , 1998 ("the Exchangeable Notes"), which are
mandatorily exchangeable into shares of the Company's Common Stock currently
owned by Enron Corp., subject to Enron Corp.'s right to deliver cash in lieu
of such shares (the "Exchangeable Notes Offering"). The consummation of the
Exchangeable Notes Offering is not contingent upon the consummation of the
Stock Offerings or vice versa. At maturity, the Exchangeable Notes will be
mandatorily exchanged for no more than 10,000,000 shares of Common Stock (no
more than 11,000,000 shares if the over-allotment option of the Underwriters
in the Exchangeable Notes Offering is exercised in full), depending on the
market price of the Common Stock at such time, subject to adjustment.
Following the consummation of the Stock Offerings, Enron Corp. will own an
aggregate of 101,000,000 shares of Common Stock or approximately 63% of the
outstanding shares (or, assuming that the Underwriters' over-allotment options
in the Stock Offerings are exercised in full, 96,950,000 shares of Common
Stock or approximately 61% of the outstanding shares). Assuming the
Underwriters' over-allotment options in the Stock Offerings and the
Exchangeable Notes Offering are exercised in full and the maximum number of
shares of Common Stock is delivered upon mandatory exchange of the
Exchangeable Notes at Maturity, Enron Corp. would own approximately 54% of the
outstanding Common Stock.
On November 7, 1995, the last reported sale price of Common Stock on the
New York Stock Exchange Composite Tape was $20 1/8 per share. See "Price Range
of Common Stock and Cash Dividends".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING ENRON
OFFERING PRICE DISCOUNT(1) CORP.(2)
-------------- ------------ -------------
<S> <C> <C> <C>
Per Share............................ $ $ $
Total (3)............................ $ $ $
</TABLE>
- ------------
(1) The Company and Enron Corp. have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933.
(2) The Company will pay estimated expenses of $ in connection with the
Stock Offerings.
(3) Enron Corp. has granted the Underwriters an option for 30 days to purchase
up to an additional 3,240,000 shares at the initial public offering price
per share, less the underwriting discount, solely to cover
over-allotments. Additionally, Enron Corp. has granted an over-allotment
option with respect to an additional 810,000 shares as part of the
international offering. If such over-allotment options are exercised in
full, the total initial public offering price, underwriting discount and
proceeds to Enron Corp. will be $ , $ and $ ,
respectively. See "Underwriting".
------------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that the
certificates for the shares will be ready for delivery in New York, New York,
on or about , 1995.
GOLDMAN, SACHS & CO. SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
S.G.WARBURG & CO. INC.
HOWARD, WEIL, LABOUISSE, FRIEDRICHS RAUSCHER PIERCE REFSNES, INC.
INCORPORATED
------------------------
The date of this Prospectus is , 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549; and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Northeast Regional Office, Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
prescribed rates. The Company's Common Stock is listed on the New York Stock
Exchange, Inc. ("NYSE"), and reports, proxy statements and other information
concerning the Company can be inspected and copied at the offices of the New
York Exchange at 20 Broad Street, New York, New York 10005.
This Prospectus constitutes a part of a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in such Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
Reference is made to such Registration Statement and to the exhibits relating
thereto for further information with respect to the Company and the shares of
Common Stock offered hereby. Any statements contained herein concerning the
provisions of any document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission or incorporated by reference herein are
not necessarily complete, and in each instance reference is made to the copy
of such document so filed for a more complete description of the matter
involved. Each such statement is qualified in its entirety by such reference.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 31,
1994, Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995,
June 30, 1995 and September 30, 1995 and the description of the Common Stock
contained in the Registration Statement on Form 8-A declared effective on
October 3, 1989, are incorporated herein by reference.
Each document filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the shares of Common Stock
pursuant hereto shall be deemed to be incorporated herein by reference and to
be a part hereof from the date of filing of such document. Any statement
contained herein or in a document all or a portion of which is incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the request of any such person, a copy of any
or all of the foregoing documents incorporated herein by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into the documents that this Prospectus incorporates). Requests
should be directed to Secretary Division, Enron Oil & Gas Company, at its
principal executive offices, 1400 Smith Street, Houston, Texas 77002
(telephone: 713-853-6161).
------------------------
IN CONNECTION WITH THE OFFERING OF THE EXCHANGEABLE NOTES AND COMMON
STOCK OF THE COMPANY BY ENRON CORP., THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE EXCHANGEABLE
NOTES OR THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS. IT IS NOT INTENDED TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY
BY THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. CERTAIN
TERMS ARE DEFINED IN THIS SUMMARY UNDER 'CERTAIN DEFINITIONS.' CAPITALIZED TERMS
WHICH ARE NOT DEFINED IN THIS SUMMARY ARE USED AS DEFINED ELSEWHERE IN THIS
PROSPECTUS.
THE COMPANY
Enron Oil & Gas Company (together with its subsidiaries, "the Company") is
one of the largest independent (non-integrated) oil and gas companies in the
United States in terms of domestic proved reserves. It is engaged, directly and
through its subsidiaries, in the exploration for, and the development,
production and marketing of, natural gas and crude oil primarily in major
producing basins in the United States, as well as in Canada, Trinidad and India
and to a lesser extent, selected other international areas. At December 31,
1994, the Company's estimated net proved natural gas reserves were 1,910 Bcf and
estimated net proved crude oil, condensate and natural gas liquids reserves were
37 MMBbl, a net increase of 8% and 78%, respectively, over year end 1993. The
Company has increased its reserves for six consecutive years. At December 31,
1994, approximately 70% of the Company's reserves (on a natural gas equivalent
basis) was located in the United States, 16% in Canada, 11% in Trinidad and 3%
in India. At such date, approximately 90% of the Company's total proved reserves
was classified as developed.
While year end reserve evaluations will not be available for some time,
based on the results of the Company's drilling program for the first nine months
of 1995, it is expected that extensions, discoveries and other additions to
reserves for the year will exceed production for both North America and
Trinidad, as well as in total. Additionally, reserves acquired are expected to
substantially exceed those sold, with the resulting replacement of production
from all sources expected to exceed 150%.
BUSINESS STRATEGY. The Company's strategy is to maximize the rate of
return on investment of capital by controlling both operating and capital costs
and enhancing the certainty of future revenues through the use of various
marketing mechanisms. This strategy enhances the generation of both income and
cash flow from each unit of production and allows for the growth of production
on a cost-effective basis by optimizing the reinvestment of cash flow. Through
this strategy, the Company has increased its net income in each of the last five
years, despite the volatile natural gas price environment, and achieved a return
on equity ranging from 8% in 1990 to 15% in 1994. For the first nine months of
1995, net income increased 5% compared to the same period for 1994.
The Company refocused its 1995 drilling activity away from natural gas
deliverability and toward natural gas reserve enhancement and crude oil
exploitation in the United States in response to the decline in United States
natural gas prices in recent periods. The Company also is focusing on the
cost-effective utilization of advances in technology associated with gathering,
processing and interpretation of 3-D seismic data, developing reservoir
simulation models and drilling operations through the use of new and/or improved
drill bits, mud motors, mud additives, formation logging techniques and
reservoir fracturing methods. These advanced technologies are used, as
appropriate, throughout the Company to reduce the risks associated with all
aspects of oil and gas reserve exploration, exploitation and development.
The Company implements its strategy by emphasizing the drilling of
internally generated prospects in order to find and develop low cost reserves.
By following this strategy the Company has increased production in each of the
last four years with a compound annual growth rate of 13.1% while increasing
proved reserves approximately 32%, both on a natural gas equivalent basis. For
1994, net equivalent production reached a new high of 307 Bcfe, an increase of
9% over 1993. Natural gas production in 1994 averaged approximately 749 MMcf per
day, which represents an
3
increase of 6% over 1993. Crude oil and condensate production averaged 12.6 MBbl
per day in 1994 which represents an increase of 42% over 1993. Natural gas
production for the first nine months of 1995 averaged 719 MMcf per day, down 24
MMcf per day from the first nine months of 1994. Lower volumes in 1995 reflect
the voluntary curtailment by the Company of United States production at a higher
rate than in 1994 because United States natural gas prices were down by 26%
period to period, the impact of the sale of reserves and related assets and the
effect of the reduction and redirection of natural gas drilling activities early
in 1995. Crude oil and condensate volumes for the first nine months of 1995
averaged 18.6 MBbl per day, an increase of 55% over the first nine months of
1994.
Achieving and maintaining the lowest possible cost structure are also
important goals in the implementation of the Company's strategy. Over the last
five years, the Company has reduced total cash operating expenses, including
lease and well, general and administrative, taxes other than income, and
interest expenses from $.95/Mcfe in 1989 to $.49/Mcfe in 1994, a reduction of
48%. At the same time non-cash expenses (depreciation, depletion and
amortization) have been reduced from $.93/Mcfe in 1989 to $.80/Mcfe in 1994, a
reduction of 14%. For the first nine months of 1995, cash operating expenses
averaged $.56/Mcfe compared to $.50/Mcfe for the first nine months of 1994 and
non-cash expenses averaged $.69/Mcfe and $.81/Mcfe for the two periods,
respectively.
Consistent with the Company's desire to optimize the use of its assets, the
Company also maintains a strategy of selling select oil and gas properties that
for various reasons no longer fit into future operating plans, or which are not
assessed to have sufficient future growth potential and when the economic value
to be obtained by selling the properties and reserves in the ground is evaluated
to be greater than what would be obtained by holding the properties and
producing the reserves over time. As a result, the Company typically receives
each year a varying but substantial level of proceeds related to such sales
which proceeds are available for general corporate use. Proceeds from property
sales in 1994 were $91 million ($71 million after tax) and in the first nine
months of 1995 were $101 million ($77 million after tax).
NORTH AMERICAN OPERATIONS. The Company's seven principal United States
producing areas are the Big Piney area of Wyoming, South Texas area, East Texas
area, Offshore Gulf of Mexico area, Canyon Trend area of West Texas, Pitchfork
Ranch area of New Mexico and Vernal area of Utah. Properties in these areas
comprised approximately 76% of the Company's United States reserves (on a
natural gas equivalent basis) and 85% of the Company's United States net natural
gas deliverability as of December 31, 1994 and are substantially all operated by
the Company. The Company's other United States natural gas and crude oil
producing properties are located primarily in other areas of Texas, Utah, New
Mexico and in Oklahoma.
At December 31, 1994, 93% of the Company's proved United States reserves
(on a natural gas equivalent basis) was natural gas and 7% was crude oil,
condensate and natural gas liquids. A substantial portion of the Company's
United States natural gas reserves is in long-lived fields with well-established
production histories. The Company believes that opportunities exist to increase
production in many of these fields through continued infill and other
development drilling.
The Company also has natural gas and crude oil producing properties located
in Western Canada, primarily in the provinces of Alberta, Saskatchewan and
Manitoba. The Company produces natural gas from seven major areas and crude oil
from three major areas. The Sandhills area in Southern Saskatchewan is the
largest single producing area, contributing 51% of Canadian deliverability at
September 30, 1995. Canadian natural gas deliverability net to the Company at
September 30, 1995 was approximately 70 MMcf per day and the Company held
approximately 350,000 net undeveloped acres in Canada.
OUTSIDE NORTH AMERICA OPERATIONS. The Company has operations offshore
Trinidad and India and is conducting exploration in selected other international
areas. Properties offshore Trinidad and India comprise 100% of the Company's
current reserves and production outside of North America.
4
The Company's reserves at December 31, 1994 included 236 Bcf of natural gas and
12 MMBbl of liquids in these two areas. The Company's net production from
offshore Trinidad was approximately 100 MMcf per day of natural gas and 6.2 MBbl
per day of crude oil and condensate at September 30, 1995. The Company's net
production from offshore India was approximately 3.5 MBbl per day of crude oil
net to the Company at September 30, 1995. In addition, the Company is pursuing
other exploitation opportunities in countries, including Mozambique and Qatar,
where indigenous natural gas reserves have been identified, particularly where
synergies in natural gas transportation, processing and power cogeneration can
be optimized with other Enron Corp. affiliated companies.
RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP.
Enron Corp. currently owns 80% of the outstanding shares of Common Stock.
After consummation of the sale of Common Stock pursuant to the Stock Offerings,
Enron will own an aggregate of 101,000,000 shares of Common Stock or
approximately 63% of the outstanding shares (or, assuming that the Underwriters'
over-allotment options in the Stock Offerings are exercised in full, 96,950,000
shares of Common Stock or approximately 61% of the outstanding shares.
Concurrently with the offering of Common Stock hereby, Enron Corp. is offering
10,000,000 (11,000,000 if the over-allotment option of the underwriters in such
offering is exercised in full) % Exchangeable Notes due 1998
(the "Exchangeable Notes"), which are mandatorily exchangeable into shares of
Common Stock of the Company at maturity, subject to Enron Corp.'s option to pay
cash in lieu of such mandatory exchange (the "Exchangeable Notes Offering"). The
consummation of the Exchangeable Notes Offering is not contingent upon the
consummation of the Stock Offerings or vice versa. At maturity, the Exchangeable
Notes must be mandatorily exchanged for no more than 10,000,000 shares of Common
Stock owned by Enron Corp. (no more than 11,000,000 shares if the over-allotment
option of the underwriters in the Exchangeable Notes Offering is exercised in
full), depending on the market price of the Common Stock at such time, subject
to adjustment and to Enron Corp.'s option to pay cash in lieu of such mandatory
exchange. Any market that develops in the Exchangeable Notes is likely to
influence and be influenced by the market for the Common Stock. For example, the
price of the Common Stock could become more volatile and could be depressed by
possible sales of Common Stock by investors who view the Exchangeable Notes as a
more attractive means of equity participation in the Company and by hedging and
arbitrage activity that may develop involving the Exchangeable Notes and the
Common Stock.
Neither the Stock Offerings nor the delivery of shares of Common Stock
pursuant to the terms of the Exchangeable Notes will affect the existing
agreements between the Company and Enron Corp. and their respective affiliates,
except for the Tax Allocation Agreement which will cease to be effective from
the time at which deconsolidation occurs (when Enron Corp. ceases to own 80% of
the outstanding shares of Common Stock) for future periods, but will remain in
effect with regard to periods prior to deconsolidation. For issues not addressed
in the original agreement, the Company has entered into a supplemental agreement
with Enron Corp. clarifying future potential adjustments associated with the
final settlement on audit of taxes for periods prior to the deconsolidation. The
Company does not believe that the cessation of consolidated tax reporting with
Enron Corp. and effectiveness of the Tax Allocation Agreement concurrent with
deconsolidation will have a material adverse effect on its financial condition
or results of operations. See "Relationship Between the Company and Enron Corp."
The nature of the respective businesses of the Company and Enron Corp. and
its affiliates is such as to potentially give rise to conflicts of interest
between the two companies. The Company's operations account for substantially
all of Enron Corp.'s natural gas and crude oil exploration and production
operations. An affiliate of Enron Corp. has entered into an agreement to acquire
a controlling interest in Coda Energy, Inc. ("Coda"), a company engaged in
domestic oil and gas exploration, development and production, with crude oil
accounting for approximately 86% of
5
Coda's proved reserves. At December 31, 1994, Coda reported estimated proved
natural gas reserves of 39,808 MMcf and estimated proved crude oil, condensate
and natural gas liquids reserves of 39,207 MBbls. If the transaction is
consummated, conflicts of interest could arise between the Company and Coda, and
Enron Corp. will be required to resolve them in a manner consistent with its
fiduciary obligations. See "Relationship Between the Company and Enron Corp. --
Conflicts of Interest."
THE STOCK OFFERINGS
Common Stock offered by Enron
Corp.(1):
U.S. Offering............. 21,600,000 shares
International Offering.... 5,400,000 shares
Total................... 27,000,000 shares
Dividends..................... $0.03 per share, quarterly. See "Price Range of
Common Stock and Cash Dividends."
New York Stock Exchange
symbol...................... EOG
Use of proceeds............... All of the shares of Common Stock being offered
are being offered by Enron Corp. The Company
will not receive any proceeds from the sale of
the shares.
- ------------
(1) Excludes 4,050,000 shares subject to the Underwriters' over-allotment
options.
The offering of 21,600,000 shares of Common Stock in the United States (the
"U.S. Offering") and the offering of 5,400,000 shares of Common Stock outside
the United States (the "International Offering") are collectively referred to as
the "Stock Offerings." The closing of the International Offering is a condition
to the closing of the U.S. Offering, and vice versa. See "Underwriting."
6
<PAGE>
SUMMARY FINANCIAL AND OPERATING INFORMATION
The following table sets forth a summary of selected consolidated financial
and operating data for the Company for each of the five years in the period
ended December 31, 1994 and for the nine-month periods ended September 30, 1994
and 1995. This information should be read in conjunction with the consolidated
financial statements of the Company and related notes thereto incorporated by
reference herein (see "Incorporation of Certain Documents by Reference") and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus. Financial information for
each of the five years in the period ended December 31, 1994 has been derived
from audited financial statements. Financial information for the nine-month
periods ended September 30, 1994 and 1995 has been derived from unaudited
financial statements. The interim data reflects all adjustments which, in the
opinion of the management of the Company, are necessary to present fairly such
information for the interim periods. Results of the nine-month periods are not
necessarily indicative of the results expected for a full year or any other
interim period.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net operating revenues(1)............ $ 403,137 $ 402,588 $ 459,026 $ 581,020 $ 625,823 $ 474,340 $ 492,342
Income before income taxes........... 34,614 45,669 79,844 112,273 153,935 126,166 144,175
Net income........................... 45,468 47,916 97,580 138,025 147,998 105,438 110,731
Earnings per share of common
stock(2)........................... $.30 $.32 $.63 $.86 $.93 $.66 $.69
Average number of common shares(2)... 151,800 151,800 154,533 159,966 159,845 159,826 159,951
BALANCE SHEET DATA (AT PERIOD END):
Net oil and gas properties........... $1,305,136 $1,339,666 $1,468,011 $1,546,045 $1,684,811 $1,637,762 $1,843,150
Total assets......................... 1,417,939 1,455,608 1,731,012 1,811,162 1,861,867 1,855,819 2,109,971
Long-term debt
Affiliate........................ 277,918 132,836 --(3) -- 25,000 25,000 16,320
Other............................ 140,442 289,556 150,000(3) 153,000 165,337 158,862 247,552
Deferred revenue..................... -- -- 301,395 227,528 184,183 195,109 224,085
Shareholders' equity................. 610,042 643,185 826,986(3) 933,073 1,043,419 1,019,712 1,140,295
OPERATING DATA:
Wellhead Volumes and Prices
Natural Gas Volumes (MMcf per
day)(4)............................ 455 491 564 709 749 743 719
Average Natural Gas Prices
($/Mcf)(5)......................... $1.51 $1.37 $1.58 $1.92 $1.62 $1.69 $1.23
Crude/Condensate Volumes (MBbl per
day)............................... 8.2 8.2 8.5 8.9 12.6 12.0 18.6
Average Crude/Condensate Prices
($/Bbl)............................ $21.67 $18.78 $17.90 $16.37 $15.62 $15.24 $16.77
</TABLE>
- ------------
(1) Net operating revenues for the years 1990 and 1991 and for the first nine
months of 1994 have been revised to include gains from sales of reserves and
related assets for consistency with current year reporting.
(2) In May 1994, the Board of Directors declared a two-for-one split of the
Company's Common Stock to be effected as a non-taxable dividend of one share
for each share outstanding on May 31, 1994. All share and per share amounts
presented herein are reflected on a post-split basis.
(3) In August 1992, the Company completed the sale of 8.2 million shares of
Common Stock resulting in aggregate net proceeds to the Company of
approximately $112 million used primarily to repay long-term debt. In
September 1992, the Company completed the sale of a volumetric production
payment, resulting in net proceeds of approximately $327 million used to
repay long-term debt and for other general corporate purposes.
(4) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf per
day in 1994 and in the nine-month periods ended September 30, 1994 and 1995
delivered under the terms of a volumetric production payment agreement
effective October 1, 1992, as amended.
(5) Includes an average equivalent wellhead value of $1.70 per Mcf in 1992,
$1.57 per Mcf in 1993, $1.27 per Mcf in 1994 and $1.32 per Mcf and $.76 per
Mcf in the nine-month periods ended September 30, 1994 and 1995,
respectively, for the volumes described in note (4), net of transportation
costs.
7
<PAGE>
SUMMARY OIL AND GAS RESERVE INFORMATION
The following table sets forth summary information with respect to the
Company's estimates of its net proved natural gas, crude oil, condensate and
natural gas liquids reserves at December 31, 1994. For additional information
relating to reserves, see "Business -- Oil and Gas Exploration and Production
Properties and Reserves."
<TABLE>
<CAPTION>
NATURAL GAS
NATURAL EQUIVALENTS (BCFE)
GAS LIQUIDS ------------------------
(BCF) (MBBL)(1) DEVELOPED UNDEVELOPED
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Net proved reserves at December 31, 1994:
United States.......................................... 1,307 17,787 1,229 185
Canada................................................. 297 7,237 330 10
Trinidad............................................... 206 4,429 233 --
India.................................................. 29 7,585 46 29
------- ---------- --------- ----------
Total............................................. 1,839 37,038 1,838 224
======= ========== ========= ==========
</TABLE>
Reserve amounts set out above have been revised to exclude volumes
attributable to a volumetric production payment from owned reserves.
The Company's estimates of its net proved natural gas, crude oil,
condensate and natural gas liquids reserves at December 31, 1994, including
amounts attributable to a volumetric production payment, are shown below. This
disclosure is presented as additional information and is not intended to
represent required disclosure pursuant to Statement of Financial Accounting
Standards ("SFAS") No. 69 -- "Disclosures about Oil and Gas Producing
Activities."
<TABLE>
<CAPTION>
NATURAL GAS
NATURAL EQUIVALENTS (BCFE)
GAS LIQUIDS ------------------------
(BCF) (MBBL)(1) DEVELOPED UNDEVELOPED
-------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Net proved reserves at December 31, 1994, including
amounts attributable to volumetric production
payment:
United States.......................................... 1,378 17,787 1,300 185
Canada................................................. 297 7,237 330 10
Trinidad............................................... 206 4,429 233 --
India.................................................. 29 7,585 46 29
------- ---------- --------- ----------
Total............................................. 1,910 37,038 1,909 224
======= ========== ========= ==========
</TABLE>
- ------------
(1) Includes crude oil, condensate and natural gas liquids.
8
<PAGE>
CERTAIN DEFINITIONS
Unless otherwise indicated in this Prospectus, natural gas volumes are
stated at the legal pressure base of the state, area or country in which the
reserves are located and at 60 Fahrenheit. Natural gas equivalents are
determined using the ratio of 6.0 Mcf of natural gas to 1.0 barrel of crude oil,
condensate or natural gas liquids.
As used herein, the following terms have the specific meanings set out:
"Mcf" means thousand cubic feet, "MMcf" means million cubic feet, "Bcf" means
billion cubic feet, "Bbl" means barrel, "MBbl" means thousand barrels, "MMBbl"
means million barrels, "Mcfe" means thousand cubic feet equivalent, "MMcfe"
means million cubic feet equivalent, "Bcfe" means billion cubic feet equivalent,
"MMBtu" means million British thermal units, "BBtu" means billion British
thermal units and "TBtu" means trillion British thermal units.
With respect to information on the Company's working interest in wells or
acreage, "net" oil and gas wells or acreage are determined by multiplying
"gross" oil and gas wells or acreage by the Company's working interest in the
wells or acreage.
"Exploration and development expenditures" include costs associated with
exploratory and development drilling (including exploratory dry holes),
leasehold acquisitions, seismic data acquisitions, geological and land related
overhead expenditures, delay rentals, producing property acquisitions,
capitalized interest and other miscellaneous capital expenditures. "Total
finding costs" is the ratio of total exploration and development expenditures to
reserves added as a result of the drilling and acquisition program. Reserves
added include the total net natural gas equivalent volume of all natural gas,
crude oil, condensate and natural gas liquids added from extensions, discoveries
and other additions, purchases in place and revisions of previous estimates.
"Infill drilling" means drilling for the development and production of net
proved undeveloped reserves.
9
USE OF PROCEEDS
The shares of Common Stock of the Company being offered hereby and the
Exchangeable Notes are being sold by Enron Corp. Accordingly, the Company will
not receive any of the proceeds from the Stock Offerings or the sale of the
Exchangeable Notes or delivery of shares of Common Stock pursuant thereto.
PRICE RANGE OF COMMON STOCK AND CASH DIVIDENDS
The following table sets forth, for the periods indicated, the high and
low sale prices per share for the Common Stock, as reported on the New York
Stock Exchange Composite Tape, and the amount of cash dividends paid per
share. The 1993 and First and Second Quarter 1994 sales prices and cash
dividends per share have been restated to reflect the two-for-one stock split
on May 31, 1994.
PRICE RANGE
-------------------- CASH
HIGH LOW DIVIDENDS
--------- --------- ---------
1993
First Quarter................... $ 20.31 $ 13.38 $ .03
Second Quarter.................. 22.50 17.88 .03
Third Quarter................... 26.81 19.88 .03
Fourth Quarter.................. 27.00 17.06 .03
1994
First Quarter................... $ 23.75 $ 19.31 $ .03
Second Quarter.................. 24.63 22.38 .03
Third Quarter................... 23.00 18.50 .03
Fourth Quarter.................. 22.75 17.38 .03
1995
First Quarter................... $ 24.88 $ 17.12 $ .03
Second Quarter.................. 24.75 20.25 .03
Third Quarter................... 25.38 20.00 .03
Fourth Quarter (through November
7, 1995)........................ 22.75 18.75
See the cover page of this Prospectus for the last reported sale price of
the Common Stock on the NYSE as of a recent date.
As of November 1, 1995, there were approximately 270 record holders of
the Company's Common Stock, including individual participants in security
position listings. There are an estimated 5,100 beneficial owners of the
Company's Common Stock, including shares held in street name.
Following the initial public offering and sale of its Common Stock in
October 1989, the Company paid quarterly dividends of $0.025 per share
beginning with an initial dividend paid in January 1990 with respect to the
fourth quarter of 1989. Beginning in January 1993 with respect to the fourth
quarter of 1992, the Company has paid quarterly dividends of $0.03 per share.
The Company currently intends to continue to pay quarterly cash dividends on
its outstanding shares of Common Stock. However, the determination of the
amount of future cash dividends, if any, to be declared and paid will depend
upon, among other things, the financial condition, funds from operations,
level of exploration and development expenditure opportunities and future
business prospects of the Company.
10
BUSINESS
GENERAL
The Company, a Delaware corporation organized in 1985, is engaged, either
directly or through a marketing subsidiary with regard to domestic operations
or through various subsidiaries with regard to international operations, in
the exploration for, and the development, production and marketing of, natural
gas and crude oil primarily in major producing basins in the United States, as
well as in Canada, Trinidad and India and to a lesser extent, selected other
international areas. At December 31, 1994, the Company's estimated net proved
natural gas reserves were 1,910 Bcf and estimated net proved crude oil,
condensate and natural gas liquids reserves were 37 MMBbl. At such date,
approximately 70% of the Company's reserves (on a natural gas equivalent
basis) was located in the United States, 16% in Canada, 11% in Trinidad and 3%
in India.
The Company pursues its oil and gas exploration and development
operations primarily by the acquisition, through various means including but
not limited to leasing, purchasing and farming-in of acreage that is either
undeveloped or lightly developed, and drilling of internally generated
prospects. The Company also maintains a strategy of selling selected oil and
gas properties that, for various reasons, no longer fit into future operating
plans or which are not assessed to have sufficient future growth potential and
when the economic value to be obtained by selling the properties and reserves
in the ground is evaluated to be greater than what would be obtained by
holding the properties and producing the reserves over time. As a result, the
Company typically receives each year a varying but substantial level of
proceeds related to such sales which proceeds are available for general
corporate use.
EXPLORATION AND PRODUCTION
NORTH AMERICAN OPERATIONS
The Company's seven principal United States producing areas are the Big
Piney area, South Texas area, East Texas area, Offshore Gulf of Mexico area,
Canyon Trend area, Pitchfork Ranch area and Vernal area. Properties in these
areas comprised approximately 76% of the Company's United States reserves (on
a natural gas equivalent basis) and 85% of the Company's United States net
natural gas deliverability as of December 31, 1994 and are substantially all
operated by the Company. At September 30, 1995, properties in these areas
comprised approximately 87% of the Company's United States net natural gas
deliverability. The Company's other United States natural gas and crude oil
producing properties are located primarily in other areas of Texas, Utah, New
Mexico and in Oklahoma.
At December 31, 1994, 93% of the Company's proved United States reserves
(on a natural gas equivalent basis) was natural gas and 7% was crude oil,
condensate and natural gas liquids. A substantial portion of the Company's
United States natural gas reserves is in long-lived fields with
well-established production histories. The Company believes that opportunities
exist to increase production in many of these fields through continued infill
and other development drilling.
The Company also has natural gas and crude oil producing properties
located in Western Canada, primarily in the provinces of Alberta, Saskatchewan
and Manitoba.
BIG PINEY AREA. The Company's largest reserve accumulation is located in
the Big Piney area in Sublette and Lincoln counties in southwestern Wyoming.
The Company is the holder of the largest productive acreage base in this area,
with approximately 219,000 net acres under lease directly within field limits.
The Company operates approximately 650 natural gas wells in this area in which
it owns a 91% average working interest. Deliveries from the area net to the
Company averaged 124 MMcf per day of natural gas and 1.5 MBbl per day of crude
oil, condensate, and natural gas liquids in 1994. At September 30, 1995,
natural gas deliverability net to the Company was approximately 138 MMcf per
day.
The current principal producing intervals are the Frontier and Mesaverde
formations. The Frontier formation, which occurs at 6,500-10,000 feet,
contains approximately 66% of the Company's current Big Piney reserves. The
Company drilled 67 wells in the Big Piney area in 1994. Although natural gas
drilling has been curtailed in this area during 1995 in response to market
conditions, numerous drilling opportunities will be available for several
years.
11
During the fourth quarter of 1995, the Company anticipates recording as
proved undeveloped reserves approximately 1,100 Bcf of methane contained,
along with high concentrations of carbon dioxide and nitrogen as well as small
amounts of other gaseous substances in the deep Wyoming Paleozoic formation
located under acreage leased by the Company and held by production in the Big
Piney area. The Company is actively pursuing the consummation of a market or
markets from several different potential sources to facilitate realizing the
value of these reserves.
SOUTH TEXAS AREA. The Company's activities in South Texas are focused in
the Wilcox, Expanded Wilcox, Frio and Lobo producing horizons. The principal
area of activity is in the Lobo Trend which occurs primarily in Webb and
Zapata counties.
The Company operates approximately 470 wells in the South Texas area.
Production is primarily from the Lobo sand of the Wilcox formation at depths
ranging from 7,000 to 11,000 feet. The Company has approximately 250,000 net
acres under lease in this area. Natural gas deliveries net to the Company
averaged 181 MMcf per day in 1994. At September 30, 1995, natural gas
deliverability from this area net to the Company was approximately 150 MMcf
per day which was impacted during 1995 by the sale of selected properties. The
Company drilled 56 wells in the South Texas area in 1994 and anticipates an
active drilling program will continue for several years.
EAST TEXAS AREA. The Company's activities in the East Texas area are
primarily in the Carthage field, located in Panola County, and the North
Milton field, located in northern Harris County.
The Carthage field is the Company's newest area of concentration. This
field is one of the most prolific fields in east Texas with production
primarily from the Cotton Valley, Travis Peak and Pettit formations. In 1995,
properties were acquired that doubled the Company's acreage position to 17,000
acres. An active drilling program is planned for the remainder of 1995 and for
several years. The Company has an average 71% working interest in its
holdings. The Company has continued its activity in the North Milton field
where it now operates 19 wells and holds a 100% working interest in the
acreage. Further drilling is planned for 1996. At September 30, 1995,
deliverability from the East Texas area was approximately 35 MMcf per day of
natural gas with almost 1.0 MBbl per day of condensate, both net to the
Company.
OFFSHORE GULF OF MEXICO AREA. At September 30, 1995, the Company held an
interest in 191 blocks in the Offshore Gulf of Mexico area totaling 561,000
net acres. Of the 191 blocks, 133 are operated by the Company. These interests
are located predominantly in federal waters offshore Texas and Louisiana.
During 1995, the Company acquired a 50% interest in operations previously
owned by Santa Fe Minerals complementing previously owned interests and adding
significantly to the Company's offshore operations. Natural gas deliveries
from this area averaged 83 MMcf per day during 1994 and 118 MMcf per day
during the first nine months of 1995, both net to the Company. A substantial
portion of such deliveries was from interests in the Matagorda trend with
significant volumes also coming from the Mustang Island area. Deliverability
from this area at September 30, 1995 was 160 MMcf per day net to the Company
sourced principally as noted above. The Company has maintained an active
drilling program in this area during 1994 and 1995 and anticipates a similar
program to continue for several years.
CANYON TREND AREA. The Company's activities in this area have been
concentrated in Crockett, Sutton, Terrell and Val Verde Counties, Texas where
the Company drilled 331 natural gas wells during the period 1992 through 1994.
The Company holds approximately 91,800 net acres and now operates
approximately 500 natural gas wells in this area in which it owns a 97%
average working interest. Production is from the Canyon sands and Strawn
limestone at depths from 5,500 to 11,500 feet. In 1994, natural gas deliveries
from this area net to the Company averaged 65 MMcf per day. At September 30,
1995, natural gas deliverability from this area net to the Company was
approximately 54 MMcf per day. The Company has maintained an active drilling
program in the Canyon Trend area during 1995 and expects a similar program to
continue for several years.
PITCHFORK RANCH FIELD. The Pitchfork Ranch field located in Lea County,
New Mexico, produces primarily from the Bone Spring, Atoka and Morrow
formations. In 1994, deliveries net to the Company from this area averaged 36
MMcf per day of natural gas and approximately 2 MBbl per
12
day of crude oil, condensate and natural gas liquids. At September 30, 1995,
deliverability from this area net to the Company was approximately 32 MMcf per
day of natural gas and 3.6 MBbl per day of crude oil, condensate and natural
gas liquids. The Company holds approximately 27,900 net acres and expects to
maintain an active drilling program in this field for several years.
VERNAL AREA. In the Vernal area, located primarily in Uintah County,
Utah, the Company operates approximately 195 producing wells and presently
controls approximately 79,000 net acres. For the first nine months of 1995,
natural gas deliveries, net to the Company from the Vernal area averaged 24
MMcf per day which represents deliverability. Production is from the Green
River and Wasatch formations located at depths between 4,500-8,000 feet. The
Company has an average working interest of approximately 60%. The Company
drilled 20 wells in the Vernal area in 1994 and has maintained a comparable
drilling program during 1995.
CANADA. The Company is engaged in the exploration for and the
development, production and marketing of natural gas and crude oil and the
operation of natural gas processing plants in western Canada, principally in
the provinces of Alberta, Saskatchewan, and Manitoba. The Company conducts
operations from offices in Calgary. The Company produces natural gas from
seven major areas and crude oil from three major areas. The Sandhills area in
Southern Saskatchewan is the largest single producing area where 160 wells
were drilled in 1994 resulting in deliverability net to the Company from the
field of approximately 38 MMcf per day at December 31, 1994. Canadian natural
gas deliverability net to the Company at September 30, 1995 was approximately
70 MMcf per day and the Company held approximately 350,000 net undeveloped
acres in Canada. The Company expects to maintain an active drilling program in
Canada for several years.
OUTSIDE NORTH AMERICA OPERATIONS
The Company has operations offshore Trinidad and India and is conducting
exploration in selected other international areas. Properties offshore
Trinidad and India comprised 100% of the Company's proved reserves and
production outside of North America at year end 1994.
TRINIDAD. In November 1992, the Company was awarded a 95% working
interest concession in the South East Coast Consortium ("SECC") block offshore
Trinidad, encompassing three undeveloped fields, previously held by three
government-owned energy companies. The Kiskadee field has been developed, the
Ibis field is under development and the Oil Bird field is anticipated to be
developed over the next three to five years. Existing surplus processing and
transportation capacity at the Pelican field facilities owned and operated by
Trinidad and Tobago government-owned companies is being used to process and
transport the production. Natural gas is being sold into the local market
under a take-or-pay agreement with the National Gas Company of Trinidad and
Tobago. In 1994, deliveries net to the Company averaged 63 MMcf per day of
natural gas and 2.6 MBbl per day of crude oil and condensate. At September 30,
1995, deliverability net to the Company was approximately 166 MMcf per day of
natural gas and 8.0 MBbls per day of crude oil and condensate. The Company's
net production from offshore Trinidad was approximately 100 MMcf per day of
natural gas and 6.2 MBbl per day of crude oil and condensate at September 30,
1995. The Company held approximately 71,000 net undeveloped acres in Trinidad.
The Company recently has been awarded the right to develop the U(a) block
adjacent to the SECC block and is presently negotiating the terms of a
production sharing contract with the Government of Trinidad and Tobago.
INDIA. In December 1994, the Company signed agreements covering profit
sharing, joint operations and product sales, and was granted a 30% working
interest in, the Tapti, Panna and Mukta blocks located offshore Bombay, India.
The Company is designated operator of all three areas. The blocks were
previously operated by the Indian national oil company, Oil & Natural Gas
Corporation Limited, which retained a 40% working interest. The 363,000 acre
Tapti Block contains two major proved gas accumulations delineated by 22
expendable exploration wells that have been plugged. The Company has initiated
a development plan for the Tapti Block accumulations. The 106,000 acre Panna
Block and the 192,000 acre Mukta Block are partially developed with 30 wells
producing from five producing platforms located in the Panna and Mukta fields.
The fields were producing approximately 3.5 MBbl per day of crude oil net to
the Company as of September 30,
13
1995; all associated natural gas was being flared. The Company intends to
continue development of the accumulations and to expand processing capacity to
allow crude oil production at full deliverability as well as to permit natural
gas sales.
OTHER INTERNATIONAL. The Company continues to evaluate other selected
conventional natural gas and crude oil opportunities outside North America.
The Company is pursuing other exploitation opportunities in countries,
including Mozambique and Qatar, where indigenous natural gas reserves have
been identified, particularly where synergies in natural gas transportation,
processing and power cogeneration can be optimized with other Enron Corp.
affiliated companies. In early 1995, the Company and the Qatar General
Petroleum Corporation signed a nonbinding letter of intent concerning the
possible development of a liquefied natural gas project for natural gas to be
produced from the North Dome Field. The Company and Enron Corp. may jointly
hold up to a 40% working interest in the joint venture and drill and develop
to-be-agreed-upon reserves. In addition, the Company signed letters of intent
in early 1995 with the National Oil Corporation of Uzbekistan, and Gazprom,
the Russian natural gas company, to pursue the feasibility of joint venture
development and marketing of previously discovered conventional hydrocarbon
reserves in Uzbekistan. The Company is in discussions with the Chinese
government concerning the potential for conventional oil and gas development
opportunities in China. The Company holds nonoperating working interests in
two conventional oil and gas exploration prospects in the U.K. North Sea.
The Company continues evaluation and assessment of its international
opportunity portfolio in the coalbed methane recovery arena, including
projects in South Wales in the U.K., the Lorraine Basin in France, Galilee
Basin in Queensland, Australia and Hedong basin in China.
MARKETING
WELLHEAD MARKETING
The Company's North America wellhead natural gas production is currently
being sold on the spot market and under long-term natural gas contracts at
market responsive prices. In many instances, the long-term contract prices
closely approximate the prices received for natural gas being sold on the spot
market. Wellhead natural gas volumes from Trinidad are sold at prices that are
based on a fixed price schedule with annual escalations. Natural gas volumes
in India will be sold to the Gas Authority of India, Ltd. under a take-or-pay
contract at a price linked to a basket of world market fuel oil quotations
with floor and ceiling limits. Approximately 45% of the Company's wellhead
natural gas production is currently being sold to pipeline and marketing
subsidiaries of Enron Corp. The Company believes that the terms of its
transactions and agreements with Enron Corp. and/or its affiliates are and
intends that future such transactions and agreements will be at least as
favorable to the Company as could be obtained from third parties.
Substantially all of the Company's wellhead crude oil and condensate is
sold under short-term contracts at market responsive prices.
OTHER MARKETING
Enron Oil & Gas Marketing, Inc. ("EOGM") is a wholly-owned subsidiary of
the Company engaged in various marketing activities. Both the Company and EOGM
contract to provide, under short and long-term agreements, natural gas to
various purchasers and then aggregate the necessary supplies for the sales
with purchases from various sources including third-party producers, marketing
companies, pipelines or from the Company's own production. In addition, EOGM
has purchased and constructed several small gathering systems in order to
facilitate its entry into the gathering business on a strategic basis. Both
the Company and EOGM utilize other short and long-term hedging and trading
mechanisms including sales and purchases utilizing NYMEX-related commodity
market transactions. All of these activities are currently conducted with
companies affiliated with Enron Corp. These marketing activities have provided
an effective balance in managing the Company's exposure to commodity price
risks for both natural gas and crude oil and condensate wellhead prices. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations _ Capital Resources and Liquidity _ Hedging Transactions".
14
WELLHEAD VOLUMES AND PRICES, AND LEASE AND WELL EXPENSES
The following table sets forth certain information regarding the
Company's wellhead volumes of and average prices for natural gas per Mcf,
crude oil and condensate, and natural gas liquids per Bbl, and average lease
and well expenses per Mcfe delivered during each of the three years in the
period ended December 31, 1994 and the nine-month periods ended September 30,
1994 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
VOLUMES (PER DAY)
Natural Gas (MMcf)
United States(1)........... 534 649 614 609 534
Canada..................... 30 58 72 71 75
Trinidad................... _ 2 63 63 110
--------- --------- --------- --------- ---------
Total(1)................. 564 709 749 743 719
========= ========= ========= ========= =========
Crude Oil and Condensate (MBbl)
United States.............. 6.3 6.6 8.0 7.5 9.1
Canada..................... 2.2 2.2 2.0 1.9 2.4
Trinidad................... _ .1 2.5 2.6 4.8
India...................... _ _ .1 _ 2.3
--------- --------- --------- --------- ---------
Total.................... 8.5 8.9 12.6 12.0 18.6
========= ========= ========= ========= =========
Natural Gas Liquids (MBbl)
United States.............. .3 .2 .3 .2 1.2
Canada..................... .4 .4 .4 .5 .3
--------- --------- --------- --------- ---------
Total.................... .7 .6 .7 .7 1.5
========= ========= ========= ========= =========
AVERAGE PRICES
Natural Gas ($/Mcf)
United States(2)........... $ 1.61 $ 1.97 $ 1.71 $ 1.79 $ 1.33
Canada..................... 1.18 1.34 1.42 1.51 .95
Trinidad................... _ .89 .93 .93 .97
Composite(2)............. 1.58 1.92 1.62 1.69 1.23
Crude Oil and Condensate ($/Bbl)
United States.............. $ 18.29 $ 16.96 $ 16.06 $ 15.64 $ 17.20
Canada..................... 16.80 14.63 14.05 13.72 16.31
Trinidad................... _ 14.36 15.50 15.20 16.16
India...................... _ _ 15.70 _ 16.82
Composite................ 17.90 16.37 15.62 15.24 16.77
Natural Gas Liquids ($/Bbl)
United States.............. $ 11.56 $ 13.85 $ 12.45 $ 12.50 $ 11.76
Canada..................... 10.05 9.46 8.45 7.86 9.69
Composite................ 10.69 11.12 9.90 9.43 11.27
LEASE AND WELL EXPENSES ($/MCFE)
United States.............. $ .20 $ .18 $ .19 $ .19 $ .20
Canada..................... .50 .48 .34 .35 .35
Trinidad................... _ 1.46 .17 .15 .14
India...................... _ _ .13 _ 1.59
Composite................ .22 .21 .20 .20 .23
</TABLE>
- ------------
(1) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf
per day in 1994 and in the nine-month periods ended September 30, 1994
and 1995 delivered under the terms of a volumetric production payment
agreement effective October 1, 1992, as amended.
(2) Includes an average equivalent wellhead value of $1.70 per Mcf in 1992,
$1.57 per Mcf in 1993, $1.27 per Mcf in 1994 and $1.32 per Mcf and $.76
per Mcf in the nine-month periods ended September 30, 1994 and 1995,
respectively, for the volumes described in note (1), net of
transportation costs.
15
OTHER NATURAL GAS MARKETING VOLUMES AND PRICES
The following table sets forth certain information regarding the
Company's volumes of natural gas delivered under other marketing and
volumetric production payment arrangements, and resulting average per unit
gross revenue and per unit amortization of deferred revenues along with
associated costs during each of the three years in the period ended December
31, 1994 and the nine-month periods ended September 30, 1994 and 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1992 1993 1994 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Volumes (MMcf per day)(1)............ 255 293 324 327 266
Average Gross Revenue ($/Mcf)(2)..... $ 2.62 $ 2.57 $ 2.38 $ 2.41 $ 1.87
Associated Costs ($/Mcf)(3)(4)....... 1.99 2.32 2.06 2.13 1.49
--------- --------- --------- --------- ---------
Margin ($/Mcf)....................... $ 0.63 $ 0.25 $ 0.32 $ 0.28 $ 0.38
========= ========= ========= ========= ---------
</TABLE>
- ------------
(1) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf
per day in 1994 and in the nine-month periods ended September 30, 1994
and 1995 delivered under the terms of volumetric production payment and
exchange agreements effective October 1, 1992, as amended.
(2) Includes per unit deferred revenue amortization for the volumes detailed
in note (1) at an equivalent of $2.51 per Mcf in 1992, $2.50 per Mcf in
1993, $2.46 per Mcf in 1994 and $2.46 per Mcf and $2.47 per Mcf in the
nine-month periods ended September 30, 1994 and 1995, respectively.
(3) Includes an average value of $2.37 per Mcf in 1992, $2.20 per Mcf in
1993, $1.92 per Mcf in 1994 and $1.99 per Mcf and $1.50 per Mcf in the
nine-month periods ended September 30, 1994 and 1995, respectively,
including average equivalent wellhead value, any applicable
transportation costs and exchange differentials, for the volumes
detailed in note (1).
(4) Including transportation and exchange differentials.
OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES
The following tables set forth the Company's net proved and proved
developed reserves at December 31, 1993 and 1994, and the changes in the net
proved reserves for the year 1994 as estimated by the Company's engineering
staff. The additional disclosures that include volumes attributable to a
volumetric production payment set forth in the following tables are presented
as additional information and are not intended to represent required
disclosure pursuant to SFAS No. 69 -- "Disclosures about Oil and Gas Producing
Activities."
<TABLE>
<CAPTION>
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Natural Gas (Bcf)
Net proved reserves at December
31, 1993...................... 1,313.2 271.0 100.5 _ 1,684.7
Additional disclosures:
Volumes attributable to
volumetric production
payment.................. 87.5 _ _ _ 87.5
------------- ------ -------- --------- ---------
Net proved reserves at December
31, 1993, including volumes
attributable to volumetric
production payment............ 1,400.7 271.0 100.5 _ 1,772.2
============= ====== ======== ========= =========
Net proved reserves at December
31, 1993...................... 1,313.2 271.0 100.5 _ 1,684.7
Revisions of previous
estimates................ (17.1) (6.5 ) 15.0 _ (8.6)
Purchases in place......... 18.8 9.2 _ 29.3 57.3
Extensions, discoveries and
other additions.......... 233.8 50.2 113.9 _ 397.9
Sales in place............. (29.3) (1.0 ) _ _ (30.3)
Production................. (212.0) (26.3 ) (23.2) _ (261.5)
------------- ------ -------- --------- ---------
Net proved reserves at December
31, 1994...................... 1,307.4 296.6 206.2 29.3 1,839.5
16
Additional disclosures:
Volumes attributable to
volumetric production
payment.................. 70.9 _ _ _ 70.9
------------- ------ -------- --------- ---------
Net proved reserves at December
31, 1994, including volumes
attributable to volumetric
production payment............ 1,378.3 296.6 206.2 29.3 1,910.4
============= ====== ======== ========= =========
Liquids (MBbl)(1)
Net proved reserves at December
31, 1993...................... 13,172 5,471 2,218 _ 20,861
Revisions of previous
estimates................ 2,179 (177 ) 455 _ 2,457
Purchases in place......... 358 _ _ 7,617 7,975
Extensions, discoveries and
other additions.......... 5,332 2,848 2,687 _ 10,867
Sales in place............. (257) _ _ _ (257)
Production................. (2,997) (905 ) (931) (32) (4,865)
------------- ------ -------- --------- ---------
Net proved reserves at December
31, 1994...................... 17,787 7,237 4,429 7,585 37,038
============= ====== ======== ========= =========
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- --------- ---------
Net proved developed reserves at
Natural Gas (Bcf)
December 31, 1993.......... 1,079.8 250.6 71.4 _ 1,401.8
December 31, 1994.......... 1,128.2 288.3 206.2 _ 1,622.7
Liquids (MBbl)(1)
December 31, 1993.......... 11,165 5,409 1,591 _ 18,165
December 31, 1994.......... 16,770 7,073 4,429 7,585 35,857
UNITED STATES CANADA TRINIDAD INDIA TOTAL
------------- ------ -------- --------- ---------
Net proved developed reserves,
including amounts attributable to
volumetric production payment at
Natural Gas (Bcf)
December 31, 1993.......... 1,167.3 250.6 71.4 _ 1,489.3
December 31, 1994.......... 1,199.1 288.3 206.2 _ 1,693.6
Liquids (MBbl)(1)
December 31, 1993.......... 11,165 5,409 1,591 _ 18,165
December 31, 1994.......... 16,770 7,073 4,429 7,585 35,857
</TABLE>
- ------------
(1) Includes crude oil, condensate and natural gas liquids.
Estimates of proved and proved developed reserves at December 31, 1993
and 1994 were based on studies performed by the Company's engineering staff
for reserves in the United States, Canada, Trinidad and India. Opinions by
DeGolyer and MacNaughton, independent petroleum consultants, for the years
ended December 31, 1993 and 1994 covering producing areas containing 65% and
59%, respectively, of proved reserves of the Company on a
net-equivalent-cubic-feet-of-gas basis, indicate that the estimates of proved
reserves prepared by the Company's engineering staff for the properties
reviewed by DeGolyer and MacNaughton, when compared in total on a net-
equivalent-cubic-feet-of-gas basis, do not differ materially from the
estimates prepared by DeGolyer and MacNaughton. Such estimates by DeGolyer and
MacNaughton in the aggregate varied by not more than 5% from those prepared by
the Company's engineering staff. All reports by DeGolyer and MacNaughton were
developed utilizing geological and engineering data provided by the Company.
There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting future rates of production and timing of
development expenditures, including many factors beyond the control of the
producer. The reserve data set forth herein represent only estimates. Reserve
engineering is a subjective process of estimating underground accumulations of
17
natural gas and liquids, including crude oil, condensate and natural gas
liquids, that cannot be measured in an exact manner. The accuracy of any
reserve estimate is a function of the amount and quality of available data and
of engineering and geological interpretation and judgment. As a result,
estimates of different engineers normally vary. In addition, results of
drilling, testing and production subsequent to the date of an estimate may
justify revision of such estimate. Accordingly, reserve estimates are often
different from the quantities ultimately recovered. The meaningfulness of such
estimates is highly dependent upon the accuracy of the assumptions upon which
they were based.
In general, the volume of production from oil and gas properties owned by
the Company declines as reserves are depleted. Except to the extent the
Company acquires additional properties containing proved reserves or conducts
successful exploration and development activities, or both, the proved
reserves of the Company will decline as reserves are produced. Volumes
generated from future activities of the Company are therefore highly dependent
upon the level of success in acquiring or finding additional reserves and the
costs incurred in doing so.
ACREAGE
The following tables summarize the Company's developed and undeveloped
acreage at December 31, 1994 and September 30, 1995. Excluded is acreage in
which the Company's interest is limited to owned royalty, overriding royalty
and other similar interests.
<TABLE>
<CAPTION>
DEVELOPED UNDEVELOPED TOTAL
-------------------------- ---------------------------- ----------------------------
GROSS NET GROSS NET GROSS NET
------------ ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
At December 31, 1994:
United States................... 978,427 637,870 1,952,656 1,705,716 2,931,083 2,343,586
Canada.......................... 501,989 307,996 437,523 353,550 939,512 661,546
India........................... 60,000 18,000 602,207 180,662 662,207 198,662
Trinidad........................ 4,200 3,990 74,851 71,108 79,051 75,098
Other International............. _ _ 13,913,600 11,756,800 13,913,600 11,756,800
------------ ------------ ------------- ------------- ------------- -------------
Total...................... 1,544,616 967,856 16,980,837 14,067,836 18,525,453 15,035,692
============ ============ ============= ============= ============= =============
At September 30, 1995:
United States................... 1,554,024 661,647 2,321,727 1,775,151 3,875,751 2,436,798
Canada.......................... 559,534 335,559 424,302 349,503 983,836 685,062
India........................... 60,000 18,000 602,207 180,662 662,207 198,662
Trinidad........................ 4,200 3,990 74,851 71,108 79,051 75,098
Other International............. _ _ 13,422,400 11,773,100 13,422,400 11,773,100
------------ ------------ ------------- ------------- ------------- -------------
Total...................... 2,177,758 1,019,196 16,845,487 14,149,524 19,023,245 15,168,720
============ ============ ============= ============= ============= =============
</TABLE>
18
DRILLING AND ACQUISITION ACTIVITIES
During the years ended December 31, 1992, 1993 and 1994 and the nine
months ended September 30, 1995 the Company spent approximately $396, $430,
$494 and $401 million, respectively, for exploratory and development drilling
and acquisition of leases and producing properties. The Company drilled,
participated in the drilling of or acquired wells as set out in the table
below for the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
-------------------------------------------------------- ----------------
1992 1993 1994 1995
---------------- ---------------- ---------------- ----------------
GROSS NET GROSS NET GROSS NET GROSS NET
----- ------- ----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Development Wells Completed
Domestic
Gas........................ 484 399.06 352 279.00 308 244.23 99 77.78
Oil........................ 19 10.80 45 19.01 34 29.57 36 32.06
Dry........................ 64 56.12 59 46.83 41 32.15 38 30.80
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 567 465.98 456 344.84 383 305.95 173 140.64
International
Gas........................ 2 2.00 227 190.10 250 190.30 116 107.66
Oil........................ 13 11.70 4 3.50 11 5.10 13 8.21
Dry........................ 5 4.05 11 7.60 13 11.50 11 8.38
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 20 17.75 242 201.20 274 206.90 140 124.25
----- ------- ----- ------- ----- ------- ----- -------
Total Development............... 587 483.73 698 546.04 657 512.85 313 264.89
----- ------- ----- ------- ----- ------- ----- -------
Exploratory Wells Completed
Domestic
Gas........................ 11 8.72 14 10.03 13 9.80 4 2.52
Oil........................ 1 .40 3 2.50 3 2.57 3 2.63
Dry........................ 16 13.42 32 22.08 23 18.17 6 4.47
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 28 22.54 49 34.61 39 30.54 13 9.62
International
Gas........................ 7 5.75 14 11.40 9 7.90 2 1.24
Oil........................ 4 3.69 2 .90 1 .50 2 2.00
Dry........................ 4 2.85 10 7.35 14 12.50 5 3.70
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 15 12.29 26 19.65 24 20.90 9 6.94
----- ------- ----- ------- ----- ------- ----- -------
Total Exploratory............... 43 34.83 75 54.26 63 51.44 22 16.56
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 630 518.56 773 600.30 720 564.29 335 281.45
Wells in Progress at end of period... 82 60.75 82 61.09 45 28.79 53 38.72
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 712 579.31 855 661.39 765 593.08 388 320.17
===== ======= ===== ======= ===== ======= ===== =======
Wells Acquired
Gas............................. 641 597.29* 44 26.44* 41 40.90* 271 97.37*
Oil............................. 28 25.80* _ 12.80* 60 38.99* 5 .93*
----- ------- ----- ------- ----- ------- ----- -------
Total.................... 669 623.09 44 39.24 101 79.89 276 98.30
===== ======= ===== ======= ===== ======= ===== =======
</TABLE>
- ------------
* Includes the acquisition of additional interests in certain wells in which
the Company previously held an interest.
All of the Company's drilling activities are conducted on a contract
basis with independent drilling contractors. The Company owns no drilling
equipment.
19
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The following table sets forth a summary of selected consolidated
financial and operating information for the Company for each of the five years
in the period ended December 31, 1994 and the nine-month periods ended
September 30, 1994 and 1995. This information should be read in conjunction
with the consolidated financial statements of the Company and related notes
thereto incorporated by reference herein (see "Incorporation of Certain
Documents by Reference") and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus. Financial information for each of the five years in the period
ended December 31, 1994 has been derived from audited financial statements.
Financial information for the nine-month periods ended September 30, 1994 and
1995 has been derived from unaudited financial statements. The interim data
reflects all adjustments which, in the opinion of the management of the
Company, are necessary to present fairly such information for the interim
periods. Results of the nine-month periods are not necessarily indicative of
the results expected for a full year or any other interim period.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------- ------------------------
1990 1991 1992 1993 1994 1994 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net operating revenues
Natural gas...................... $ 301,645 $ 321,603 $ 388,988 $ 505,162 $ 489,893 $ 365,654 $ 332,015
Crude oil, condensate and natural
gas liquids.................... 66,165 62,836 58,927 55,834 76,338 52,632 90,342
Gains on sales of reserves and
related assets................. 31,802 14,983 6,037 13,318 54,014 52,212 62,546
Other............................ 3,525 3,166 5,074 6,706 5,578 3,842 7,439
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total........................ 403,137 402,588 459,026 581,020 625,823 474,340 492,342
Operating expenses
Lease and well................... 43,806 49,922 49,406 59,344 60,384 44,782 52,918
Exploration...................... 35,031 31,470 33,278 36,921 41,811 29,647 31,590
Dry hole......................... 12,986 14,698 10,764 18,355 17,197 10,803 8,586
Impairment of unproved oil and
gas properties................. 20,571 12,791 15,136 20,467 24,936 17,364 20,453
Depreciation, depletion and
amortization................... 155,877 160,885 179,839 249,704 242,182 181,645 157,875
General and administrative....... 38,254 36,216 36,648 45,274 51,418 38,050 41,186
Taxes other than income.......... 22,966 18,222 28,346 35,396 28,254 22,010 25,606
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total........................ 329,491 324,204 353,417 465,461 466,182 344,301 338,214
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income..................... 73,646 78,384 105,609 115,559 159,641 130,039 154,128
Other income (expense)............... (2,153) (3,215) (3,476) 6,635 2,783 2,238 (1,143)
Interest expense (net of interest
capitalized)....................... 36,879 29,500 22,289 9,921 8,489 6,111 8,810
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income before income taxes........... 34,614 45,669 79,844 112,273 153,935 126,166 144,175
Income tax provision (benefit)(1).... (10,854) (2,247) (17,736) (25,752)(2) 5,937(3) 20,728 33,444(4)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income........................... $ 45,468 $ 47,916 $ 97,580 $ 138,025 $ 147,998 $ 105,438 $ 110,731
=========== =========== =========== =========== =========== =========== ===========
Earnings per share of common
stock(5)........................... $ .30 $ .32 $ .63 $ .86 $ .93 $ .66 $ .69
=========== =========== =========== =========== =========== =========== ===========
Average number of common shares(5)... 151,800 151,800 154,533 159,996 159,845 159,826 159,951
=========== =========== =========== =========== =========== =========== ===========
BALANCE SHEET DATA (AT PERIOD END):
Net oil and gas properties........... $ 1,305,136 $ 1,339,666 $ 1,468,011 $ 1,546,045 $ 1,684,811 $ 1,637,762 $ 1,843,150
Total assets......................... 1,417,939 1,455,608 1,731,012 1,811,162 1,861,867 1,855,819 2,109,971
Long-term debt
Affiliate........................ 277,918 132,836 _(6) _ 25,000 25,000 16,320
Other............................ 140,442 289,556 150,000(6) 153,000 165,337 158,862 247,552
Deferred revenue..................... _ _ 301,395 227,528 184,183 195,109 224,085
Shareholders' equity................. 610,042 643,185 826,986(6) 933,073 1,043,419 1,019,712 1,140,295
20
OPERATING DATA:
Wellhead Volumes and Prices
Natural Gas Volumes (MMcf per day)
United States(7)................. 437 466 534 649 613 609 534
Canada........................... 18 25 30 58 73 71 75
Trinidad......................... _ _ _ 2 63 63 110
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total(7)..................... 455 491 564 709 749 743 719
=========== =========== =========== =========== =========== =========== ===========
Average Natural Gas Prices ($/Mcf)
United States.................... $ 1.51 $ 1.38 $ 1.61 $ 1.97 $ 1.71 $ 1.79 $ 1.33
Canada........................... 1.47 1.32 1.18 1.34 1.42 1.51 .95
Trinidad......................... _ _ _ .89 .93 .93 .97
Composite.................... 1.51 1.37 1.58 1.92 1.62 1.69 1.23
Crude/Condensate Volumes (MBbl per
day)
United States.................... 5.8 5.9 6.3 6.6 8.0 7.5 9.1
Canada........................... 2.4 2.3 2.2 2.2 2.0 1.9 2.4
Trinidad......................... _ _ _ .1 2.5 2.6 4.8
India............................ _ _ _ _ .1 _ 2.3
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total........................ 8.2 8.2 8.5 8.9 12.6 12.0 18.6
=========== =========== =========== =========== =========== =========== ===========
Average Crude/Condensate Prices
($/Bbl)
United States.................... $21.95 $19.24 $18.29 $16.96 $16.06 $15.64 $17.20
Canada........................... 21.01 17.58 16.80 14.63 14.05 13.72 16.31
Trinidad......................... _ _ _ 14.36 15.50 15.20 16.16
India............................ _ _ _ _ 15.70 _ 16.82
Composite.................... 21.67 18.78 17.90 16.37 15.62 15.24 16.77
Natural Gas Liquids Volumes (MBbl per
day)
United States.................... .4 .3 .3 .2 .3 .2 1.2
Canada........................... _ .3 .4 .4 .4 .5 .3
Total........................ .4 .6 .7 .6 .7 .7 1.5
Average Natural Gas Liquids Prices
($/Bbl)
United States.................... $10.59 $10.79 $11.56 $13.85 $12.45 $12.50 $11.76
Canada........................... _ 12.48 10.05 9.46 8.45 7.86 9.69
Composite.................... 10.59 11.64 10.69 11.12 9.90 9.43 11.27
</TABLE>
- ------------
(1) Includes benefits of approximately $17 million, $43 million, $65 million
and $36 million in 1991, 1992, 1993 and 1994, respectively, and $29
million and $16 million in the nine-month periods ended September 30, 1994
and 1995, respectively, relating to tight gas sand federal income tax
credits and $25 million and $7 million in 1990 and 1991, respectively,
associated with the utilization of a net operating loss carryforward.
(2) Includes a benefit of $12 million from the reduction of the Company's
deferred federal income tax liability resulting from a reevaluation of
deferred tax requirements partially offset by an approximate $7 million
predominantly non-cash charge primarily to adjust the Company's
accumulated deferred income tax liability for the increase in the
corporate federal income tax rate from 34% to 35%.
(3) Includes a benefit of approximately $8 million related to reduced
estimated state income taxes and certain franchise taxes, a portion of
which is treated as income tax under SFAS No. 109 _ "Accounting for Income
Taxes", and a $5 million benefit from the reduction of the Company's
deferred federal income tax liability resulting from a reevaluation of
deferred tax requirements.
(4) Includes a $12 million benefit associated with the successful resolution
on audit of federal income taxes for certain prior years.
(5) In May 1994, the Board of Directors declared a two-for-one split of the
Company's Common Stock to be effected as a non-taxable dividend of one
share for each share outstanding. Shares were issued on June 15, 1994 to
shareholders of record as of May 31, 1994. All share and per share amounts
presented herein are reflected on a post-split basis.
(6) In August 1992, the Company completed the sale of an additional 8.2
million shares of Common Stock resulting in aggregate net proceeds to the
Company of approximately $112 million used primarily to repay long-term
debt. In September 1992, the Company completed the sale of a volumetric
production payment, resulting in net proceeds of approximately $327
million used to repay long-term debt and for other general corporate
purposes.
(7) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf per
day in 1994 and in the nine-month periods ended September 30, 1994 and
1995 delivered under the terms of a volumetric production payment
effective October 1, 1992, as amended.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following review of operations for each of the three years in the
period ended December 31, 1994 and for the nine-month periods ended September
30, 1994 and 1995 should be read in conjunction with the consolidated
financial statements of the Company and notes thereto and other financial data
incorporated by reference herein. See "Incorporation of Certain Documents by
Reference."
RESULTS OF OPERATIONS
NET OPERATING REVENUES
Wellhead volume and price statistics for the specified periods were as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- --------------------
1992 1993 1994 1994 1995
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Natural Gas Volumes (MMcf per
day)
North America(1)........... 564 707 686 680 609
Trinidad................... _ 2 63 63 110
---------- ---------- ---------- --------- ---------
Total................. 564 709 749 743 719
========== ========== ========== ========= =========
Average Natural Gas Prices
($/Mcf)
North America(2)........... $ 1.58 $ 1.92 $ 1.68 $ 1.76 $ 1.28
Trinidad................... _ .89 .93 .93 .97
Composite............. 1.58 1.92 1.62 1.69 1.23
Crude/Condensate Volumes (MBbl
per day)
North America.............. 8.5 8.8 10.0 9.4 11.5
Trinidad................... _ .1 2.5 2.6 4.8
India...................... _ _ .1 _ 2.3
---------- ---------- ---------- --------- ---------
Total................. 8.5 8.9 12.6 12.0 18.6
========== ========== ========== ========= =========
Average Crude/Condensate Prices
($/Bbl)
North America.............. $ 17.90 $ 16.39 $ 15.65 $ 15.25 $ 17.01
Trinidad................... _ 14.36 15.50 15.20 16.16
India...................... _ _ 15.70 _ 16.82
Composite............. 17.90 16.37 15.62 15.24 16.77
</TABLE>
- ------------
(1) Includes 28 MMcf per day in 1992, 81 MMcf per day in 1993 and 48 MMcf
per day in 1994 and in the nine-month periods ended September 30, 1994
and 1995 delivered under the terms of volumetric production payment and
exchange agreements effective October 1, 1992, as amended.
(2) Includes an average equivalent wellhead value of $1.70 per Mcf in 1992,
$1.57 per Mcf in 1993, $1.27 per Mcf in 1994 and $1.32 per Mcf and $.76
per Mcf in the nine-month periods ended September 30, 1994 and 1995,
respectively, for the volumes detailed in note (1), net of
transportation costs.
NINE MONTHS 1995 COMPARED TO NINE MONTHS 1994. During the first nine
months of 1995, net operating revenues increased $18 million to $492 million
as compared to the same period in 1994.
Average wellhead natural gas prices for the first nine months of 1995
were down approximately 27% from the same period in 1994 reducing net
operating revenues by approximately $90 million. In addition, a decrease of 3%
in wellhead natural gas volumes from the first nine months of 1994 reduced net
operating revenues by approximately $11 million. The Company voluntarily
curtailed its United States wellhead natural gas delivered volumes by an
average of approximately 140 MMcf per day during the first nine months of 1995
compared to approximately 110 MMcf per day during the
22
same period in 1994 due to significantly lower United States wellhead natural
gas prices. In addition, the impact of the sales of oil and gas reserves and
related assets (net of purchases of similar assets) resulted in a reduction of
approximately 40 MMcf per day in delivered volumes for the first nine months
of 1995 as compared to the first nine months of 1994. The Company refocused
its 1995 drilling activity away from natural gas deliverability and toward
natural gas reserve enhancement and crude oil exploitation in the United
States in response to the significant decline in United States natural gas
prices in recent periods. Wellhead crude oil and condensate average prices
increased 10% adding approximately $8 million to net operating revenues
compared to the first nine months of 1994. Crude oil and condensate wellhead
volumes increased 55% adding approximately $27 million to net operating
revenues compared to the same period a year ago primarily reflecting new
production on stream offshore India, and higher volumes offshore Trinidad and
in North America.
Other marketing activities associated with sales and purchases of natural
gas, natural gas price swap transactions, other commodity price hedging of
natural gas and crude oil and condensate prices utilizing NYMEX-related
commodity market transactions, and volumetric production payment related
margins added approximately $91 million to net operating revenues during the
first nine months of 1995, an increase of approximately $67 million from the
same period in 1994. This increase primarily resulted from a gain of $51
million on natural gas commodity price hedging activities utilizing
NYMEX-related commodity market transactions in the first nine months of 1995
compared to a $2 million loss during the same period in 1994 and increased
margins associated with other natural gas marketing activities. The average
associated costs of natural gas marketing, price swap and volumetric
production payment transactions, including, where appropriate, average
wellhead value, transportation costs and exchange differentials, decreased
$.64 per Mcf. The average price received for these transactions decreased $.54
per Mcf. Related other natural gas marketing volumes decreased 19%. The
reduction in other natural gas marketing volumes and prices relates primarily
to the exchange of the fuel contracts noted below, lower wellhead market
prices and decreased other marketing activities. The $.10 per Mcf margin
increase partially offset by the reduction in other natural gas marketing
volumes increased net operating revenues by approximately $3 million compared
to the first nine months of 1994. The Company realized an $11 million gain in
the first nine months of 1995 related to certain NYMEX-related commodity
market transactions with an Enron Corp. affiliated company that were
designated for trading purposes in late 1994. The Company had no open trading
positions at September 30, 1995. See "Trading Transactions."
In March 1995, the Company exchanged existing fuel supply and purchase
contracts and related price swap agreements associated with a Texas City
cogeneration plant for certain natural gas price swap agreements of equivalent
value issued by an Enron Corp. affiliated company. As a result of these
transactions, the Company realized a $8.4 million increase in net operating
revenues in the first nine months of 1995 over the amount realized from the
exchanged fuel supply and purchase contracts in the same period of 1994. See
"Relationship Between the Company and Enron Corp. _ Contractual Agreements."
Gains on sales of reserves and related assets during the first nine
months of 1995 increased $10 million to $63 million when compared to the same
period in 1994 which increase was attributable to the Company's continuing
efforts in optimizing the use of its assets.
1994 COMPARED TO 1993. During 1994, net operating revenues increased to
$626 million, up $45 million as compared to 1993.
Average wellhead natural gas volumes increased approximately 6% compared
to 1993 primarily reflecting the effects of development activities offshore
Trinidad and in Canada partially offset by voluntary curtailments of
production in the United States in 1994. The volume reductions in the United
States as a result of voluntary curtailments were more than offset by the new
natural gas deliveries from the Kiskadee field offshore Trinidad and increased
deliveries in Canada. The increase in wellhead natural gas volumes added $28
million to net operating revenues. Average wellhead natural gas prices were
down significantly from 1993 reducing net operating revenues by
23
approximately $83 million. This 16% reduction in average wellhead natural gas
prices reflects the overall decline in the United States natural gas markets
during the last half of 1994 and increased volumes offshore Trinidad sold
under a long-term contract at a price considerably below North America spot
market prices. A 42% increase in wellhead crude oil and condensate volumes
over 1993 added $22 million to net operating revenues primarily reflecting
development activities offshore Trinidad and increased production in the
United States. A 5% decrease in wellhead crude oil and condensate average
prices decreased net operating revenues by approximately $3 million.
Other marketing activities associated with sales and purchases of natural
gas, natural gas and crude oil price swap transactions, other commodity price
hedging of natural gas and crude oil prices utilizing NYMEX-related commodity
market transactions, and margins relating to the volumetric production payment
added $50 million to net operating revenues during 1994. This increase of $41
million from the same period in 1993 primarily results from a gain of $11
million on natural gas commodity price hedging activities utilizing
NYMEX-related commodity market transactions in 1994 versus an $18 million loss
during 1993 and increased margins associated with other natural gas marketing
activities. The average associated costs of natural gas marketing, price swap
and volumetric production payment transactions, including, where appropriate,
average wellhead value, transportation costs and exchange differentials,
decreased $.26 per Mcf. The average price received for these transactions
decreased $.19 per Mcf. Related other natural gas marketing volumes increased
10%.
Gains on sales of selected oil and gas reserves and related assets were
$54 million in 1994 as compared to $13 million in 1993. While the quantity of
equivalent reserves sold in 1994 was slightly less than 1993, higher average
proceeds received per equivalent unit in 1994 as compared to 1993 primarily
contributed to the increased gain recognition. In continuing its strategy of
fully utilizing its assets in optimizing profitability, cash flow and return
on investments, the Company expects to continue the sale of similar properties
from time to time.
1993 COMPARED TO 1992. During 1993, net operating revenues increased to
$581 million, up $122 million as compared to 1992.
Average wellhead natural gas volumes increased approximately 26% compared
to 1992 primarily reflecting the effects of exploration and development
activities relating to tight gas sand formations. Wellhead natural gas
delivered volumes were curtailed less during portions of 1993 than for the
comparable periods in 1992 due to the significant increases realized in
wellhead natural gas prices in 1993. Average wellhead natural gas prices were
up approximately 22% in 1993 over those received in 1992, adding approximately
$87 million to net operating revenues. Increases in wellhead natural gas
volumes in 1993 added $83 million to net operating revenues compared to 1992.
Average wellhead crude oil and condensate prices in 1993 were down 9% compared
to 1992, reducing net operating revenues by $5 million. Increases in wellhead
crude oil and condensate volumes in 1993 added approximately $2 million to net
operating revenues compared to 1992.
Other marketing activities associated with sales and purchases of natural
gas, natural gas price swap transactions, other commodity price hedging of
natural gas and crude oil and condensate prices utilizing NYMEX-related
commodity market transactions, and margins relating to the volumetric
production payment added $8 million to net operating revenues during 1993.
This decrease of $54 million from 1992 primarily results from shrinking
margins associated with sales under long-term fixed price contracts and
amortization of volumetric production payment deferred revenue due to
increases in market responsive natural gas prices associated with volumes
supplying these dispositions and losses on natural gas commodity price hedging
activities utilizing NYMEX-related commodity market transactions. The average
associated costs of natural gas marketing, price swap and volumetric
production payment transactions, including, where appropriate, average
wellhead value, transportation costs and exchange differentials, increased
$.33 per Mcf. Related other natural gas marketing volumes increased 15%.
24
The impact of the other marketing activities, a substantial portion of
which serve as hedges of commodity price risks for a portion of wellhead
deliveries for the respective periods, were more than offset by reductions in
revenues associated with market responsive prices for wellhead deliveries
during those periods.
OPERATING EXPENSES
NINE MONTHS 1995 COMPARED TO NINE MONTHS 1994. During the first nine
months of 1995, operating expenses of $338 million were $6 million lower than
the $344 million incurred in the same period in 1994. Lease and well expenses
increased approximately $8 million to $53 million primarily due to expanded
international operations including the initiation of operations in India in
late December 1994 partially offset by reductions in United States lease and
well expenses. Exploration expenses increased $2 million to $32 million due to
increased exploration activities. Impairment of unproved oil and gas
properties for the first nine months of 1995 increased $3 million from the
comparable period a year ago primarily due to impairments associated with
certain offshore Gulf of Mexico leases. Depreciation, depletion and
amortization ("DD&A") expense decreased $24 million to $158 million reflecting
a decrease in the average DD&A rate from $.81 per Mcfe in the first nine
months of 1994 to $.69 per Mcfe in the first nine months of 1995. The DD&A
rate decrease is primarily attributable to increased production from
international operations with lower average DD&A rates than incurred for North
America operations. General and administrative expenses increased
approximately $3 million to $41 million due to expanded international
activities and overall higher costs associated with certain employee related
expenses. Taxes other than income were $4 million higher in the first nine
months of 1995 compared to the same period in 1994 primarily due to a
reduction included in 1994 associated with state franchise taxes and higher
production related taxes associated with new production in India in the first
nine months of 1995 partially offset by decreases in state severance taxes due
to lower taxable North America wellhead volumes and average prices in 1995.
The Company reduced its total per unit operating costs for lease and well
expense, DD&A, general and administrative expense, interest expense, and taxes
other than income by $.06 per Mcfe, averaging $1.25 per Mcfe during the first
nine months of 1995 compared to $1.31 per Mcfe during the same period in 1994.
This decrease is primarily attributable to the reduction in the average DD&A
rate as noted above partially offset by increases in per unit lease and well,
general and administrative expenses, and taxes other than income.
1994 COMPARED TO 1993. During 1994, total operating expenses of $466
million were approximately $1 million higher than the $465 million incurred in
1993. Lease and well expenses of $60 million were approximately $1 million
higher than 1993 primarily due to increased expenses related to new operations
offshore Trinidad partially offset by cost reductions in North America.
Exploration expenses of $42 million increased $5 million from the previous
year primarily due to an increased level of exploration activities. Impairment
of unproved oil and gas properties increased $4 million from 1993 primarily
due to impairments associated with certain offshore Gulf of Mexico leases.
DD&A expense decreased from $250 million in 1993 to $242 million in 1994
reflecting a $.09 per Mcfe decrease in the average DD&A rate to $.80 per Mcfe.
The rate decrease is primarily due to increased production from offshore
Trinidad at an average DD&A rate significantly less than the North America
operations DD&A rate and a $.03 per Mcfe reduction in the North America
operations DD&A rate. General and administrative expenses increased $6 million
to $51 million primarily due to overall higher costs associated with expanded
international and domestic operations. Taxes other than income decreased
approximately $7 million from 1993 primarily due to lower taxable United
States wellhead volumes and prices and reductions included in 1994 related to
revisions of certain prior year production taxes. Included in 1994 and 1993
are benefits associated with reductions in state franchise taxes of $4 million
and $3 million, respectively. The Company continues to benefit from certain
state severance tax exemptions allowed on high cost natural gas volumes.
25
Total per unit operating costs for lease and well expense, DD&A, general
and administrative expense, interest expense, and taxes other than income
decreased $.14 per Mcfe, averaging $1.29 per Mcfe during 1994 compared to
$1.43 per Mcfe for 1993. The decrease was primarily due to per unit reductions
in DD&A and taxes other than income as discussed above.
1993 COMPARED TO 1992. During 1993, total operating expenses of $465
million were $112 million higher than the $353 million incurred in 1992. Lease
and well expenses increased approximately $10 million primarily due to
expanded domestic and international operations. Exploration expenses increased
approximately $4 million primarily due to increased exploration activities in
North America. An unsuccessful Gulf of Mexico well added nearly $4 million to
dry hole expenses and a related $3 million to lease impairments in 1993. Dry
hole expenses also reflect the impact of increased drilling activity outside
North America. DD&A expense increased $70 million to $250 million reflecting
an increase in production volumes and an average DD&A rate increase from $.79
per Mcfe in 1992 to $.89 per Mcfe for 1993. The DD&A rate increase is
primarily due, as expected, to factors associated with the tight gas sands
drilling program which costs are being more than offset by benefits realized
in the form of tight gas sand federal income tax credits and certain state
severance tax exemptions. General and administrative expenses increased almost
$9 million to $45 million primarily reflecting cost reductions included in
1992 related to changes associated with certain employee compensation plans
and overall higher costs in 1993 due to an expansion of domestic and
international operations. Taxes other than income increased $7 million
primarily due to increased production volumes and revenues in 1993, partially
offset by continuing benefits associated with certain state severance tax
exemptions allowed on high cost natural gas volumes and a $3 million reduction
of state franchise taxes resulting from refunds of prior year payments
received in 1993.
Total per unit operating costs for lease and well expense, DD&A, general
and administrative expense, interest expense, and taxes other than income
increased $.03 per Mcfe, averaging $1.43 per Mcfe during 1993 compared to
$1.40 per Mcfe for 1992. The total increase was associated with DD&A expense
which was up $.10 per Mcfe as noted above being partially offset by a
reduction of $.07 Mcfe in all other costs.
OTHER INCOME
Other income for 1993 includes $4 million in interest income associated
with the investment of funds temporarily surplus to the Company and $4 million
associated with settlements related to the termination of certain long-term
natural gas contracts.
INTEREST EXPENSE
Net interest expense for the first nine months of 1995 was up $3 million
as compared to the same period in 1994 reflecting primarily a higher level of
debt outstanding during the 1995 period.
Net interest expense in 1994 decreased approximately $1 million to $8
million as compared to 1993 primarily due to favorable interest rates on new
financing acquired by a subsidiary of the Company for operations offshore
Trinidad and the retirement of higher interest rate debt. The estimated fair
value of outstanding interest rate swap agreements at December 31, 1994 was a
negative $0.5 million based on termination values obtained from third parties.
Net interest expense decreased $12 million, or 55%, to $10 million in
1993 as compared to 1992 reflecting the repayment of a substantial portion of
the Company's long-term debt in 1992 with proceeds from the sale of common
stock in August 1992 and the sale of a volumetric production payment in
September 1992. The estimated fair value of outstanding interest rate swap
agreements at December 31, 1993 was a negative $3.3 million based upon
termination values obtained from third parties.
26
INCOME TAXES
Income tax provision increased $13 million for first nine months of 1995
as compared to the same period in 1994 primarily resulting from higher income
before income taxes and lower benefits associated with tight gas sand federal
income tax credits utilized in the first nine months of 1995 as compared to
the same period in 1994 partially offset by a $12 million benefit associated
with the successful resolution on audit of federal income taxes for certain
prior years.
Income tax provision in 1994 includes a benefit of approximately $36
million associated with tight gas sand federal income tax credit utilization,
a benefit of approximately $8 million related to reduced estimated state
income taxes and a portion of certain franchise taxes which is treated as
income tax under SFAS No. 109, and a $5 million benefit from the reduction of
the Company's deferred federal income tax liability resulting from a
reevaluation of deferred tax requirements.
Income tax benefit in 1993 includes a benefit of approximately $65
million associated with tight gas sand federal income tax credit utilization,
an approximate $7 million predominantly one-time non-cash charge recorded in
the third quarter of 1993 primarily to adjust the Company's accumulated
deferred federal income tax liability for the increase in the corporate
federal income tax rate from 34% to 35% and a $12 million benefit from the
reduction of the Company's deferred federal income tax liability resulting
from a reevaluation of deferred tax requirements.
CAPITAL RESOURCES AND LIQUIDITY
CASH FLOW
The primary sources of cash for the Company during the nine-month period
ended September 30, 1995 and for each of the years in the three-year period
ended December 31, 1994 included funds generated from operations, the sale of
Common Stock, the sale of a volumetric production payment, proceeds from the
sale of selected oil and gas reserves and related assets and the issuance of
debt. Primary cash outflows during these periods included funds used in
operations, exploration and development expenditures, dividends and the
repayment of debt.
Discretionary cash flow, a frequently used measure of performance for
exploration and production companies, is generally derived by adjusting net
income to eliminate the effects of depreciation, depletion and amortization,
impairment of unproved oil and gas properties, deferred taxes, gains on sales
of oil and gas reserves and related assets, certain other miscellaneous
non-cash amounts, except for amortization of deferred revenue, and exploration
and dry hole expenses. However, based on the continuing practice of the
Company of selling selected oil and gas reserves and related assets in
furtherance of its strategy of fully utilizing its assets in optimizing
profitability, cash flow and return on investments, it believes that net
proceeds from these transactions should also be considered as available
discretionary cash flow and accordingly is presenting those values for all
periods shown. The Company generated discretionary cash flow of $387 million
during the first nine months of 1995, a 3% decrease from the $401 million
generated for the same period in 1994, primarily reflecting lower net
operating revenues, higher cash expenses and a decrease in benefits associated
with tight gas sand federal income tax credits. The Company generated
discretionary cash flow of approximately $514 million in 1994, $521 million in
1993 and $346 million in 1992. The 1993 amount includes $50 million associated
with a federal income tax refund resulting from the settlement on audit of
federal income taxes paid in certain prior years.
Net operating cash flows for the first nine months of 1995 and for each
of the years in the three-year period ended December 31, 1994 have been
revised to reflect proceeds from the sale of a volumetric production payment
during 1992 and the elimination of the related amortization of deferred
revenues as net operating cash flows rather than as investing cash flows as
previously reported. Net operating cash flows of $229 million for the first
nine months of 1995 decreased approximately $72 million as compared to the
same period in 1994 primarily reflecting the same factors addressed above with
regard to discretionary cash flow and higher working capital requirements. Net
operating cash flows were approximately $383 million in 1994, $406 million in
1993, and
27
$608 million in 1992. Decreased 1994 net operating cash flows were primarily
due to the receipt in 1993 of a refund on settlement on audit of federal
income taxes paid in certain prior years. Decreased 1993 net operating cash
flows were primarily due to the receipt in 1992 of $327 million of proceeds
from the sale of a volumetric production payment, increased net operating
revenues and a decrease in provision for current taxes resulting from both
increased tight gas sand federal income tax credit utilization and the receipt
of a refund on settlement on audit of federal income taxes paid in certain
prior years. In accordance with the requirements of SFAS No. 95 _ "Statement
of Cash Flows", net proceeds from the sale of selected oil and gas reserves
and related assets are not included in the determination of net operating cash
flows.
SALE OF SELECTED OIL AND GAS RESERVES AND RELATED ASSETS
During the first nine months of 1995, the Company received proceeds of
$101 million from the sale of selected oil and gas reserves and related assets
compared to $82 million received in the first nine months of 1994. Taxable
gains from the first nine months of 1995 sales generated income taxes of $24
million leaving, net proceeds of $77 million. During 1994, the Company
received proceeds of $91 million from the sale of selected oil and gas
reserves and related assets compared to $42 million received in 1993. While
the quantity of equivalent reserves sold in 1994 was slightly less than 1993,
higher average proceeds received per equivalent unit of reserves sold in 1994
as compared to 1993 resulted in significantly higher 1994 proceeds. Taxable
gains resulting from the 1994 sales generated income taxes of $20 million,
leaving net proceeds of $71 million. Taxable gains resulting from such sales
in 1993 generated federal income taxes of $8 million, leaving net proceeds of
$34 million.
SALE OF VOLUMETRIC PRODUCTION PAYMENT
In September 1992, the Company sold a volumetric production payment for
$326.8 million to a limited partnership. Under the terms of the production
payment agreements, the Company conveyed a real property interest in
approximately 124 Bcfe (136 TBtu) of certain natural gas and other
hydrocarbons to the purchaser. Effective October 1, 1993, the agreements were
amended providing for the extension of the original term of the volumetric
production payment through March 31, 1999 and including a revised schedule of
daily quantities of hydrocarbons to be delivered which is approximately
one-half of the original schedule. The revised schedule will total
approximately 89.1 Bcfe (97.8 TBtu) versus approximately 87.9 Bcfe (96.4 TBtu)
remaining to be delivered under the original agreement. Daily quantities of
hydrocarbons no longer required to be delivered under the revised schedule
during the period from October 1, 1993 through June 30, 1996 are available for
sale by the Company. The Company retains responsibility for its working
interest share of the cost of operations. In accordance with generally
accepted accounting principles, the Company accounted for the proceeds
received in the transaction as deferred revenue which is being amortized into
revenue and income as natural gas and other hydrocarbons are produced and
delivered to the purchaser during the term, as revised, of the volumetric
production payment thereby matching those revenues with the depreciation of
asset values which remained on the balance sheet following the sale and the
operating expenses incurred for which the Company retained responsibility. The
Company expects the above transaction, as amended, to have minimal direct
impact on future earnings. However, cash made available by the sale of the
volumetric production payment has provided considerable financial flexibility
for the pursuit of investment alternatives.
28
EXPLORATION AND DEVELOPMENT EXPENDITURES
The table below sets out components of actual exploration and development
expenditures for the years ended December 31, 1992, 1993 and 1994, along with
those estimated for the year 1995 and actual components of exploration and
development expenditures for the nine-month periods ended September 30, 1994
and 1995.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
--------------------
EXPENDITURE CATEGORY 1992 1993 1994 1994 1995
- ------------------------------------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Capital
Drilling and Facilities......... $ 260 $ 331 $ 342 $ 257 $ 225
Leasehold Acquisitions.......... 23 29 52 32 17
Producing Property
Acquisitions.................. 65 9 34 14 114
Capitalized Interest and
Other......................... 14 14 14 10 9
--------- --------- --------- --------- ---------
Total...................... 362 383 442 313 365
Exploration Expenses................. 44 55 59 41 40
--------- --------- --------- --------- ---------
Total................................ $ 406 $ 438 $ 501 $ 354 $ 405
========= ========= ========= ========= =========
</TABLE>
Exploration and development expenditures for the first nine months of
1995 increased $51 million compared to the same period in 1994, and primarily
reflect the acquisitions of selected properties to complement existing United
States producing areas.
Exploration and development expenditures increased $63 million, or 14%,
in 1994 compared to 1993. The increase primarily reflects the acquisitions of
selected properties to compliment existing North America producing areas and
the addition of new international activities in India. See
"Business _ Exploration and Production" for additional information detailing
the specific geographic locations of the Company's drilling programs and
"_ Outlook" below for a discussion related to future exploration and
development expenditure plans.
Exploration and development expenditures in 1993 increased to $438
million, an 8% increase, as compared to the $406 million expended in 1992. The
increase was attributable to increased domestic drilling activity with reduced
emphasis on development drilling expenditures associated with tight gas sand
formations. The Company also implemented its first development program outside
of North America during 1993, installing a jacket, platform and production
facilities and initiating natural gas production from the Kiskadee field
offshore the southeast coast of Trinidad.
HEDGING TRANSACTIONS
With the objective of enhancing the certainty of future revenues, the
Company has, as of October 23, 1995, entered into hedging transactions for
approximately 400 BBtu per day (approximately 381 MMcf per day) and 529 BBtu
per day (approximately 504 MMcf per day) of its North America natural gas
volumes for the last three months of 1995 and the year 1996, respectively. A
significant portion of the 1995 and substantially all of the 1996 hedge
transactions involve NYMEX-based commodity price swap agreements totaling 260
BBtu per day at an average price of $1.98 per MMBtu and 447 BBtu per day at an
average price of $2.00 per MMBtu for the last three months of 1995 and the
year 1996, respectively. The remaining hedge transactions of 140 BBtu per day
and 82 BBtu per day for the last three months of 1995 and the year 1996,
respectively, include notional and physical transactions that involve fixed
price sales contracts and volumetric production payment and exchange
agreements. Included in the 1996 hedge transactions are commodity price swap
agreements totaling 200 BBtu per day of notional volumes at a weighted average
NYMEX-based price of $1.97 per MMbtu which include one-time options
exercisable by the counterparty on or before December 17, 1996 totaling 200
BBtu per day of notional volumes in 1997 and 1998 at the same weighted average
NYMEX-based price of $1.97 per MMBtu. The Company has also, as of October 16,
1995, hedged approximately 10,100 Bbl per day and 9,600 Bbl per day of its
North
29
America crude oil and condensate volumes using commodity price swap agreements
at NYMEX-based West Texas Intermediate Crude Oil ("WTI") prices averaging
$18.77 per Bbl and $18.90 per Bbl for the last three months of 1995 and the
year 1996, respectively. Included in the 1995 and 1996 hedge transactions are
commodity price swap agreements totaling up to 3,000 Bbl per day at WTI prices
ranging between $18.70 and $18.80 per Bbl each of which includes a one-time
option exercisable by the counterparty at various times up to and including
December 31, 1996 and for various periods some of which extend through
December 31, 2000 at the same respective NYMEX-based prices as are applicable
in the individual agreements for the 1995 and 1996 periods. The Company
continues to evaluate the potential for entering into and may enter into,
additional hedging transactions related to certain of the remaining months in
1995, and in future years. In addition, the Company also may close out any
portion of the existing or yet to be entered into hedges as determined
appropriate by management of the Company.
TRADING TRANSACTIONS
Subsequent to September 30, 1995, the Company sold call options with a
notional volume of 50 BBtu per day at an average price of $2.10 per MMBtu for
the period January through December, 1996.
FINANCING
The Company's long-term debt-to-total-capital ratio was 19%, 15% and 14%
as of September 30, 1995 and December 31, 1994 and 1993, respectively. The
Company has entered into an agreement with Enron Corp. pursuant to which the
Company may borrow funds from Enron Corp. at a representative market rate of
interest on a revolving basis. During 1994, there were no funds borrowed by
the Company under this agreement. During the first nine months of 1995, the
average of the daily balances of funds borrowed by the Company under the
agreement was $2.3 million, and the balance at September 30, 1995 was $16.3
million. Under a promissory note effective January 1, 1993 at a fixed interest
rate of 7%, the Company may advance funds temporarily surplus to the Company
to Enron Corp. for investment purposes. Daily outstanding balances of funds
advanced to Enron Corp. under the note averaged $200,000 during the first nine
months of 1995 and $69 million during 1994 with no balance outstanding at
December 31, 1994 or September 30, 1995. There was a balance of $7 million
outstanding at December 31, 1994 under a commercial paper program initiated in
1990. Proceeds from the commercial paper program were used to fund current
transactions. During 1994, total long-term debt increased $37 million to $190
million as a result of $23 million of new borrowings related to certain
international drilling activities, a $7 million increase in commercial paper,
and the recording of an $8 million capital lease obligation. The estimated
fair value of the Company's long-term debt, including current maturities of $2
million and $30 million, at December 31, 1994 and 1993 was $186 million and
$192 million, respectively, based upon quoted market prices and, where such
prices were not available, upon interest rates currently available to the
Company at year end.
OUTLOOK
Uncertainty continues to exist as to the direction of future North
America natural gas price trends and there is a wide divergence in the
opinions held by some in the industry. However, recent history would tend to
support, and it seems there is emerging among a larger number of industry
representatives somewhat of a consensus, that natural gas prices will remain
below parity with crude oil, condensate and natural gas liquids for some time.
This situation is being impacted by improvements in the technology used in
drilling and completing oil and gas wells that are tending to mitigate the
impacts of fewer oil and gas wells being drilled, the deregulation of the
natural gas market under Federal Energy Regulatory Commission Order 636 and
subsequent related orders, and improvements being realized in the availability
and utilization of natural gas storage capacity. However, the continually
increasing recognition of natural gas as a more environmentally friendly
source of energy along with the availability of significant domestically
sourced supplies should result
30
in further increases in demand and a supporting/strengthening of the overall
natural gas market over time. Being primarily a natural gas producer, the
Company is more significantly impacted by changes in natural gas prices than
by changes in crude oil and condensate prices. Based on the portion of the
Company's anticipated natural gas volumes for which prices have not, in
effect, been hedged using NYMEX-related commodity market transactions,
long-term marketing contracts and the sale of a volumetric production payment,
the Company's net income and cash flow sensitivity to changing natural gas
prices is approximately $4.0 million for each $.10 per Mcf change in average
wellhead natural gas prices. Using various commodity price hedging mechanisms,
the Company has, in effect, locked in prices for an average of about 50% of
its anticipated wellhead natural gas volumes and about 30% of its anticipated
wellhead crude oil and condensate volumes for the year 1995 and about 65% of
its anticipated wellhead natural gas volumes and about 40% of its anticipated
wellhead crude oil and condensate volumes for the year 1996. The percentage of
volumes hedged may change during the remainder of 1995 and will change in
future years.
Other factors representing positive impacts that are more certain
continue to hold good potential for the Company in future periods. While the
drilling qualification period for the tight gas sand federal income tax credit
expired on December 31, 1992, the Company has continued in 1995, and should
continue in the future, to realize significant benefits associated with
production from wells drilled during the qualifying period as it will be
eligible for the federal income tax credit through the year 2002. However, all
other factors remaining equal, the annual benefit, which was $36 million in
1994 and is estimated to be approximately $21 million for 1995, is expected to
continue to decline in future periods as production from the qualified wells
declines. The drilling qualification period for a certain state severance tax
exemption available on qualifying high-cost natural gas revenues continues
through August 1996 in its current form and in a modified and somewhat reduced
form from that point through August 2002. Consequently, new qualifying
production will be added prospectively to that presently qualified. Other
natural gas marketing activities are also expected to continue to contribute
meaningfully to financial results. The Company completed a fairly significant
restructure of its other natural gas marketing portfolio during 1992 with the
sale of a volumetric production payment of approximately 124 Bcfe (136 TBtu)
for $326.8 million that was subsequently revised in 1993 and elimination of
most delivery obligations under four long-term fixed price marketing
contracts. The proceeds from the sale of the volumetric production payment
added substantially to the financial flexibility of the Company supporting
future development while the combined effect of all elements of the
restructuring on net income has not been, and will not in the future be,
significant. These factors are expected to contribute significantly to
earnings, cash flow, and the ability of the Company to pursue the continuation
of an active exploration, development and selective acquisition program.
The Company plans to continue to focus a substantial portion of its
development and certain exploration expenditures in its major producing areas
in North America. However, based on the continuing uncertainty associated with
North America natural gas prices and the continuing weakness in that market,
and as a result of the recent success realized offshore Trinidad and
opportunities available to the Company in conjunction with the recent signing
of agreements in India, the Company anticipates expending an increasing
portion of its available funds in the further development of these
opportunities. In addition, the Company expects to include limited but
meaningful exploratory exposure in other areas outside of North America in its
expenditure plans and will continue to evaluate the potential for involvement
in other exploitation type opportunities. The continuation of expenditures in
other areas outside of North America in the near term is expected to be
primarily for the evaluation of conventional oil and gas exploration and
exploitation opportunities in the U.K. North Sea and China, respectively, and
coalbed methane recovery prospects in Australia and China. Other prospects in
various locations will also attract the expenditure of some funds. (See
"Business _ Exploration and Production" for additional information detailing
the specific geographic locations of the related drilling programs). The
Company continues to pursue a strategy of funding
31
exploration, development and acquisition activities primarily from available
internally generated cash flow.
The level of exploration and development expenditures will vary in future
periods depending on energy market conditions and other related economic
factors. Based upon existing economic and market conditions, the Company
believes net operating cash flow and available financing alternatives will be
sufficient to fund its net investing cash requirements for the near term.
However, the Company has significant flexibility with respect to its financing
alternatives and adjustment of its exploration and development expenditure
plans as circumstances warrant. While the Company has certain continuing
commitments associated with expenditure plans related to operations in India,
they are not anticipated to be material when considered in relation to the
total financial capacity of the Company.
OTHER
The cost of environmental compliance has not been material to the
Company.
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121 _ "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (the "Standard"). The Standard requires, among other
things, that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company is required to adopt the Standard no later than the
first quarter of 1996. While the Company has not finalized its evaluation of
the effect of adoption of the Standard, its evaluation to date indicates that
application of the Standard to its current portfolio of assets could result in
impairment charges ranging from $5 million to $60 million before federal
income taxes ($3 million to $39 million after federal income taxes). However,
such impairment charges would be non-cash charges.
32
<PAGE>
MANAGEMENT
The current directors and executive officers of the Company and their
names and ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Forrest E. Hoglund........................ 62 Chairman of the Board, President and
Chief Executive Officer; Director
Fred C. Ackman............................ 64 Director
Richard D. Kinder......................... 51 Director
Kenneth L. Lay............................ 53 Director
Edward Randall, III....................... 68 Director
Joe Michael McKinney...................... 55 President-International Operations
Mark G. Papa.............................. 49 President-North American Operations
Walter C. Wilson.......................... 53 Senior Vice President and Chief
Financial Officer
Ben B. Boyd............................... 54 Vice President and Controller
Dennis M. Ulak............................ 41 Vice President and General Counsel
</TABLE>
Forrest E. Hoglund joined the Company as Chairman of the Board, Chief
Executive Officer and Director in September 1987. Since May 1990, he has also
served as President of the Company. Mr. Hoglund was a director of USX
Corporation from February 1986 until September 1987. He joined Texas Oil & Gas
Corp. ("TXO") in 1977 as president, was named Chief Operating Officer in 1979,
Chief Executive Officer in 1982, and served TXO in those capacities until
September 1987. Mr. Hoglund is also an advisory director of Texas Commerce
Bank National Association.
Fred C. Ackman is the former Chairman, President and Chief Executive
Officer of The Superior Oil Company. For over five years Mr. Ackman has been a
consultant to the oil and gas industry and has interests in ranching and
investments.
Richard D. Kinder has been President and Chief Operating Officer of Enron
Corp. since October 1990. From December 1988 until October 1990, he served
Enron Corp. as Vice Chairman of the Board. For over five years prior to his
election as Vice Chairman, Mr. Kinder served in various management and legal
positions with Enron Corp. and its affiliates. Mr. Kinder is also a director
of Enron Corp., Enron Global Power & Pipelines L.L.C., EOTT Energy Corp. (the
general partner of EOTT Energy Partners, L.P.), Enron Liquids Pipeline Company
(the general partner of Enron Liquids Pipeline, L.P.), Sonat Offshore Drilling
Inc. and Baker Hughes Incorporated.
Kenneth L. Lay has been Chairman of the Board and Chief Executive Officer
of Enron Corp. for over five years. From February 1989 until October 1990, he
also served as President of Enron Corp. Mr. Lay is also a director of Eli
Lilly and Company, Compaq Computer Corporation, Trust Company of the West,
EOTT Energy Corp. (the general partner of EOTT Energy Partners, L.P.), and
Enron Corp.
Edward Randall, III is principally involved in investments. Mr. Randall
is also a director of KN Energy, Inc. and PaineWebber Group Inc.
Joe Michael McKinney has been President-International Operations since
February 1994 with responsibilities for all exploration, drilling, production
and engineering activities for the Company's international ventures outside
North America. Mr. McKinney joined Enron Oil & Gas International, Inc., a
wholly-owned subsidiary of the Company, in December 1991 as Senior Vice
President of Operations and was elected President and Chief Operating Officer
of Enron Oil & Gas International, Inc. in April 1993, a capacity in which he
continues to serve. Prior to joining the Company, Mr. McKinney held operations
management positions with Union Texas Petroleum Company, The Superior Oil
Company and Exxon Company, USA.
33
Mark G. Papa has been President-North American Operations since February
1994. From May 1986 through January 1994, Mr. Papa served as Senior Vice
President-Operations. Mr. Papa joined Belco Petroleum Corporation, a
predecessor of the Company, in 1981 as Division Production Coordinator and
served as Senior Vice President-Drilling and Production, BelNorth Petroleum
Corporation from May 1984 until May 1986.
Walter C. Wilson has been Senior Vice President and Chief Financial
Officer since May 1991. Mr. Wilson joined the Company in November 1987 as Vice
President and Controller and was named Senior Vice President-Finance in
October 1988. Prior to joining the Company Mr. Wilson held financial
management positions with Exxon Company, USA for 16 years and The Superior Oil
Company for four years.
Ben B. Boyd has been Vice President and Controller since March 1991. Mr.
Boyd joined the Company in March 1989 as Director of Accounting and was named
Controller in May 1990. Prior to joining the Company, Mr. Boyd held financial
management positions with DeNovo Oil & Gas, Inc., Scurlock Oil Company and
Coopers & Lybrand.
Dennis M. Ulak has been Vice President and General Counsel since March
1992. Mr. Ulak joined the Company in March 1987 as Senior Counsel and was
named Assistant General Counsel in August 1990. Prior to joining the Company,
Mr. Ulak held various legal positions with Enron Corp. and Northern Natural
Gas Company.
THE SELLING STOCKHOLDER
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE STOCK OFFERINGS AFTER STOCK OFFERINGS(1)(2)
----------------------------- SHARES TO -----------------------------
SELLING STOCKHOLDER SHARES PERCENTAGE BE SOLD(1) SHARES PERCENTAGE
- ------------------------------------- -------------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Enron Corp. 128,000,000 80% 27,000,000 101,000,000 63%
</TABLE>
- ------------
(1) Assumes that the Underwriters' over-allotment options in the Stock
Offerings are not exercised. If such options are exercised in full, Enron
Corp. will sell 31,050,000 shares of Common Stock in the Stock Offerings
and will beneficially own 96,950,000 shares of Common Stock (approximately
61% of the outstanding shares) after the Stock Offerings.
(2) Concurrently with the Stock Offerings, Enron Corp. is offering
Exchangeable Notes, which at maturity must be exchanged for no more than
10,000,000 shares of Common Stock owned by Enron Corp., depending on the
market price of the Common Stock at such time, subject to adjustment and
to Enron Corp.'s option to pay an amount in cash in lieu of such mandatory
exchange. Following consummation of the Exchangeable Notes Offering, the
shares that may be delivered upon exchange therefor will continue to be
beneficially owned by Enron Corp. until such time, if any, as they are
delivered at maturity of the Exchangeable Notes. If the Underwriters'
over-allotment options in the Stock Offerings and the Exchangeable Notes
Offering are exercised in full and the maximum number of shares of Common
Stock are delivered at maturity of the Exchangeable Notes, Enron Corp.
will beneficially own 85,950,000 shares of Common Stock or approximately
54% of the outstanding shares.
The registration related to the Stock Offerings and the Common Stock
deliverable upon exchange of the Exchangeable Notes is being provided pursuant
to the terms of a Stock Restriction and Registration Agreement with Enron
Corp., under which the Company has agreed that upon the request of Enron Corp.
(or certain assignees), the Company will register under the Securities Act and
applicable state securities laws the sale of Common Stock owned by Enron Corp.
The Company's obligation is subject to certain limitations relating to a
minimum amount of Common Stock required for registration, the timing of
registration and other similar matters. The Company is obligated to pay all
expenses incidental to such registration, excluding underwriters' discounts
and commissions and certain legal fees and expenses.
34
RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP.
OWNERSHIP OF COMMON STOCK
Through its ability to elect all of the directors of the Company, Enron
Corp. has the ability to control all matters relating to the management of the
Company, including any determination with respect to acquisition or
disposition of Company assets, future issuance of Common Stock or other
securities of the Company and any dividends payable on the Common Stock. Enron
Corp. also has the ability to control the Company's exploration, development,
acquisition and operating expenditure plans. There is no agreement between
Enron Corp. and the Company that would prevent Enron Corp. from acquiring
additional shares of Common Stock of the Company.
The sale by Enron Corp. of the shares of Common Stock of the Company will
cause Enron Corp.'s ownership interest in the Company to fall below 80% with
the result that (i) the Company will cease to be included in the consolidated
federal income tax return filed by Enron Corp. and (ii) the Tax Allocation
Agreement between the Company and Enron Corp. described below will cease to be
effective from the time at which deconsolidation occurs for future periods,
but will remain in effect with regard to periods prior to deconsolidation. The
Company has entered into a supplemental agreement with Enron Corp. clarifying
future potential adjustments associated with the final settlement on audit of
taxes for periods prior to the deconsolidation for issues not addressed in the
original agreement. The Company does not believe that the cessation of
consolidated tax reporting with Enron Corp. and effectiveness of the Tax
Allocation Agreement concurrent with deconsolidation will have a material
adverse effect on its financial condition or results of operations.
CONTRACTUAL ARRANGEMENTS
The Company entered into a Services Agreement (the "Services Agreement")
with Enron Corp. effective January 1994, pursuant to which Enron Corp.
provides various services, such as maintenance of certain employee benefit
plans, provision of telecommunications and computer services, lease of office
space and the provision of purchasing and operating services and certain other
corporate staff and support services. Such services historically have been
supplied to the Company by Enron Corp., and the Services Agreement provides
for the further delivery of such services substantially identical in nature
and quality to those services previously provided. The Company has agreed to a
fixed rate for the rental of office space and to reimburse Enron Corp. for all
other direct costs incurred in rendering services to the Company under the
contract and to pay Enron Corp. for allocated indirect costs incurred in
rendering such services up to a maximum of $6.7 million for 1994, such cap to
be increased in subsequent years for inflation and certain changes in the
Company's allocation bases with any increase not to exceed 7.5% per year.
Approximately $6.6 million was paid under the Services Agreement by the
Company to Enron Corp. in 1994. The Services Agreement is for an initial term
of five years through December 1998 and will continue thereafter until
terminated by either party.
In March 1995, in a series of transactions with Enron Corp. and an
affiliate of Enron Corp., the Company exchanged all of its fuel supply and
purchase contracts and related price swap agreements associated with a Texas
City cogeneration plant (the "Cogen Contracts") for certain natural gas price
swap agreements (the "Swap Agreements") of equivalent value. As a result of
the transactions, the Company has been relieved of all performance obligations
associated with the Cogen Contracts. The Company will realize net operating
revenues and receive corresponding cash payments of approximately $91 million
during the period extending through December 31, 1999 under the terms of the
Swap Agreements. The estimated fair value of the Swap Agreements was
approximately $81 million at the date the Swap Agreements were received. The
net of this series of transactions will result in increases in net operating
revenues and cash receipts for the Company during 1995 and 1996 of
approximately $13 million and $7 million, respectively, with offsetting
decreases in 1998 and 1999 versus that anticipated under the Cogen Contracts.
35
The Company has been included in the consolidated federal income tax
return filed by Enron Corp. as the common parent for itself and its
subsidiaries and affiliated companies, excluding any foreign subsidiaries.
Consistent therewith and pursuant to a Tax Allocation Agreement between the
Company, the Company's subsidiaries and Enron Corp., either Enron Corp. has
paid to the Company and each subsidiary an amount equal to the tax benefit
realized in the Enron Corp. consolidated federal income tax return resulting
from the utilization of the Company's or the subsidiary's net operating losses
and/or tax credits, or the Company and each subsidiary has paid to Enron Corp.
an amount equal to the federal income tax computed on its separate taxable
income less the tax benefits associated with any net operating losses and/or
tax credits generated by the Company or the subsidiary which were utilized in
the Enron Corp. consolidated return. Enron Corp. has paid the Company and each
subsidiary for the tax benefits associated with their net operating losses and
tax credits utilized in the Enron Corp. consolidated return, provided that a
tax benefit was realized except as discussed below, even if such benefits
could not have been used by the Company or the subsidiary on a separately
filed tax return. The Company entered into an agreement with Enron Corp.
providing for the Company to be paid for all realizable benefits associated
with tight gas sand federal income tax credits concurrent with tax reporting
and settlement for the periods in which they were generated. The Tax
Allocation Agreement applies to the Company and each of its subsidiaries for
all years in which the Company or any of its subsidiaries are or were included
in the Enron Corp. consolidated return. To the extent a state or other taxing
jurisdiction requires or permits a consolidated, combined, or unitary tax
return to be filed and such return includes the Company or any of its
subsidiaries, the principles expressed with respect to consolidated federal
income tax allocation shall apply. The Tax Allocation Agreement will cease to
be effective from the time at which deconsolidation occurs for future periods,
but will remain in effect with regard to periods prior to deconsolidation. For
issues not addressed in the original agreement, the Company has entered into a
supplemental agreement with Enron Corp. clarifying future potential
adjustments associated with the final settlement on audit of taxes for periods
prior to the deconsolidation. The Company does not believe that the cessation
of consolidated tax reporting with Enron Corp. and effectiveness of the Tax
Allocation Agreement concurrently with deconsolidation will have a material
adverse effect on its financial condition or results of operations.
For a discussion of transactions between the Company and Enron Corp. and
its affiliates, see the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 incorporated herein by reference. See "Incorporation
of Certain Documents by Reference."
CONFLICTS OF INTEREST
The nature of the respective businesses of the Company and Enron Corp.
and its affiliates is such as to potentially give rise to conflicts of
interest between the two companies. Conflicts could arise, for example, with
respect to transactions involving purchases, sales and transportation of
natural gas and other business dealings between the Company and Enron Corp.
and its affiliates, potential acquisitions of businesses or oil and gas
properties, the issuance of additional shares of voting securities, the
election of directors or the payment of dividends by the Company.
Circumstances may also arise that would cause Enron Corp. to engage in
the exploration for and/or development and production of natural gas and crude
oil in competition with the Company. For example, opportunities might arise
which would require financial resources greater than those available to the
Company, which are located in areas or countries in which the Company does not
intend to operate or which involve properties that the Company would be
unwilling to acquire. Also, Enron Corp. might acquire a competing oil and gas
business as part of a larger acquisition. In addition, as part of Enron
Corp.'s strategy of securing supplies of natural gas or capital, Enron Corp.
may from time to time acquire producing properties or interests in entities
owning producing properties, and thereafter engage in exploration, development
and production activities with respect to such properties or indirectly engage
in such activities through such companies. Enron Corp. may also acquire
interests in oil and gas properties or companies in connection with its
financing
36
activities. For example, in its financing activities Enron Corp. or any entity
in which it has an interest may make loans secured by oil and gas properties
or securities of oil and gas companies, may acquire production payments or may
receive interests in oil and gas properties as equity components of lending
transactions. As a result of its lending activities, Enron Corp. may also
acquire oil and gas properties or companies upon foreclosure of secured loans
or as part of a borrower's rearrangement of its obligations. Such acquisition,
exploration, development and production activities may directly or indirectly
compete with the Company's business. There can be no assurances that Enron
Corp. will not engage directly or indirectly through entities other than the
Company, in the natural gas and crude oil exploration, development and
production business in competition with the Company.
Joint Energy Development Investments Limited Partnership ("JEDI"), a
limited partnership in which Enron Capital & Trade Resources Corp. ("ECT"), a
wholly owned subsidiary of Enron Corp., owns a 50% general partner interest,
has entered into an agreement to acquire a controlling interest in Coda. Coda
is engaged in the exploration for, and the development, production and
marketing of, natural gas and crude oil primarily in North Texas and Oklahoma.
Crude oil accounted for approximately 86% of Coda's proved reserves. At
December 31, 1994, Coda reported estimated proved natural gas reserves of
39,808 MMcf and estimated proved crude oil, condensate and natural gas liquids
reserves of 39,207 MBbls. Enron anticipates that the transaction will be
consummated in early 1996, subject to Coda stockholder approval and other
conditions. Conflicts may arise between Coda and JEDI, and if the acquisition
of Coda occurs Enron will be required to resolve such conflicts in a manner
that is consistent with its fiduciary and contractual duties to other
investors in Coda and JEDI and its fiduciary duties to the Company. ECT has
entered into an agreement with JEDI and other investors in Coda designed to
minimize certain conflicts of interest that may arise and providing, among
other things, that the Company has no obligation to offer any business
opportunities to Coda.
The Company and Enron Corp. and its affiliates have in the past entered
into material intercompany transactions and agreements incident to their
respective businesses, and the Company and Enron Corp. and its affiliates may
be expected to enter into material transactions and agreements from time to
time in the future. Such transactions and agreements have related to, among
other things, the purchase and sale of natural gas and crude oil, the
financing of exploration and development efforts by the Company, and the
provision of certain corporate services. The Company believes that its
existing transactions and agreements with Enron Corp. and its affiliates have
been at least as favorable to the Company as could be obtained from third
parties, and the Company intends that the terms of any future transactions and
agreements between the Company and Enron Corp. and its affiliates will be at
least as favorable to the Company as could be obtained from third parties.
37
DESCRIPTION OF COMMON STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 160,000,000
shares of Common Stock, $.01 par value, of which 159,799,955 shares were
outstanding on October 31, 1995. The following summary description of the
capital stock of the Company is qualified in its entirety by reference to the
Restated Certificate of Incorporation of the Company, as amended, a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
The Common Stock possesses ordinary voting rights for the election of
directors and in respect to other corporate matters, each share being entitled
to one vote. There are no cumulative voting rights, meaning that the holders
of a majority of the shares voting for the election of directors can elect all
the directors if they choose to do so. The Common Stock carries no preemptive
rights and is not convertible, redeemable or assessable, or entitled to the
benefits of any sinking fund. The holders of Common Stock are entitled to
dividends in such amounts and at such times as may be declared by the Board of
Directors out of funds legally available therefor.
Upon liquidation or dissolution, holders of Common Stock are entitled to
share ratably in all net assets available for distribution to stockholders
after payment of any corporate debts. All outstanding shares of Common Stock
are duly authorized, validly issued, fully paid and nonassessable.
The transfer agent and registrar of the Common Stock is First Chicago
Trust Company of New York, Jersey City, New Jersey.
LIMITATION ON DIRECTORS' LIABILITY
Delaware corporation law authorizes corporations to limit or eliminate
the personal liability of directors to corporations and their stockholders for
monetary damages for breach of directors' fiduciary duty of care. The duty of
care requires that, when acting on behalf of the corporation, directors must
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by such laws,
directors are accountable to corporations and their stockholders for monetary
damages for conduct constituting gross negligence in the exercise of their
duty of care. The Delaware laws enable corporations to limit available relief
to equitable remedies such as injunction or rescission. The Restated
Certificate of Incorporation, as amended, of the Company limits the liability
of directors of the Company to the Company or its stockholders (in their
capacity as directors but not in their capacity as officers) to the fullest
extent permitted by the Delaware law. Specifically, directors of the Company
will not be personally liable for monetary damages for breach of a director's
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.
This provision in the Restated Certificate of Incorporation may have the
effect of reducing the likelihood of derivative litigation against directors,
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefited the Company and its
stockholders.
38
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
FOR NON-UNITED STATES HOLDERS OF COMMON STOCK
The following is a summary of certain United States federal income tax
consequences of the acquisition, ownership and disposition of Common Stock by
a holder that, for United States federal income and estate tax purposes, is a
Non-United States Holder. For purposes of this discussion, a "Non-United
States Holder" means a corporation, individual or partnership that is, as to
the United States, a foreign corporation, a non-resident alien individual or a
foreign partnership, or a trust or estate other than one the income of which
is subject to United States federal income tax regardless of its source. This
summary does not address all aspects of United States federal income and
estate taxation and does not deal with foreign, state and local tax
consequences that may be relevant to Non-United States Holders in light of
their specific circumstances. Furthermore, this summary is based on the
provisions of the United States Internal Revenue Code of 1986, as amended, and
the regulations, rulings and judicial decisions thereunder, all of which are
subject to change. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE UNITED STATES TAX CONSEQUENCES TO THEM OF
ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR
OTHER TAXING JURISDICTION.
DIVIDENDS
Dividends paid to a Non-United States Holder generally will be subject to
withholding of United States federal income tax at a rate of 30% (or a lower
rate prescribed by an applicable tax treaty). If the dividends are effectively
connected with the conduct of a trade or business within the United States by
the Non-United States Holder, the dividends will be subject to the ordinary
United States federal income tax on net income that applies to United States
persons and will not be subject to withholding if the Non-United States Holder
files a United States Internal Revenue Service Form 4224 with the Company or
its dividend paying agent. In the case of corporate holders, such dividends
might also be subject to the United States branch profits tax at a rate of 30%
(or a lower rate prescribed by an applicable tax treaty). A Non-United States
Holder may be required to satisfy certain certification requirements in order
to obtain any reduction of or exemption from withholding under the foregoing
rules and may obtain a refund of any excess amounts currently withheld by
filing an appropriate refund claim with the United States Internal Revenue
Service.
Distributions in excess of the Company's current and accumulated earnings
and profits, as determined for United States federal income tax purposes, will
be treated first as a return of capital to the extent of the Non-United States
Holder's tax basis in the Common Stock (and will be applied against and reduce
such holder's tax basis in the Common Stock) and thereafter as gain from the
sale of Common Stock. The portion treated as a return of capital will not be
subject to United States federal income tax and the portion, if any, treated
as gain will be subject to the rules described under " _ Gain on Disposition"
below. Because the Company will not be able to determine whether a
distribution should properly be treated as a dividend or as a return of
capital at the time of payment, it is required to treat all distributions as
dividends for United States withholding tax purposes. Non-United States
Holders will be eligible to claim a refund to the extent that a distribution
represents a return of capital and may in certain circumstances be eligible to
claim a refund to the extent that a distribution is treated as gain.
Non-United States Holders should consult their own tax advisors with respect
to distributions in excess of current and accumulated earnings and profits.
GAIN ON DISPOSITION
GENERAL RULE
Subject to special rules for individuals described below, a Non-United
States Holder generally will not be subject to United States federal income
tax on gain recognized on a sale or other disposition of Common Stock unless
(a) the gain is effectively connected with the conduct of a trade or business
within the United States by the Non-United States Holder (in which case the
United
39
States branch profits tax described above may also apply to corporate holders)
or (b) the gain is treated as effectively connected with the conduct of a
trade or business within the United States because the Company is or has been
a "United States real property holding corporation" for United States federal
income tax purposes (in which case, withholding of such tax may also apply).
The Company believes that it is currently, and is likely to remain, a United
States real property holding corporation. The preceding sentence
notwithstanding, under currently effective United States federal income tax
laws, gain recognized by a Non-United States Holder will not be treated as
effectively connected with the conduct of a trade or business within the
United States (or subject to withholding) unless such Non-United States Holder
held, directly or indirectly, at any time during the five-year period ending
on the date of disposition, more than five percent of the Common Stock.
Non-United States Holders should consult applicable tax treaties, which may
provide for different rules (including possibly the exemption of certain
capital gains from tax).
INDIVIDUALS
In addition to the rules described above, an individual Non-United States
Holder who holds Common Stock as a capital asset generally will be subject to
tax on any gain recognized on the disposition of such stock if such individual
is present in the United States for 183 days or more in the taxable year of
disposition and either (a) has a "tax home" in the United States (as
specifically defined under the United States federal income tax laws) or (b)
maintains an office or other fixed place of business in the United States to
which the gain from the sale of the stock is attributable. Certain individual
Non-United States Holders may also be subject to tax pursuant to provisions of
United States federal income tax law applicable to United States expatriates.
FEDERAL ESTATE TAX
Common Stock owned or treated as owned by an individual Non-United States
Holder at the date of death will be subject to United States federal estate
tax, unless an applicable estate tax treaty provides otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company or its designated paying agent (the "payor") must report
annually to the United States Internal Revenue Service and to each Non-United
States Holder the amount of dividends paid to and the tax, if any, withheld
with respect to such holder. That information may also be made available to
the tax authorities of the country in which the Non-United States Holder
resides.
United States information reporting requirements (other than the
reporting of dividend payments described in the preceding paragraph) and
United States backup withholding (imposed at a 31% rate) generally will not
apply to dividends paid to a Non-United States Holder at an address outside
the United States, unless the payor has knowledge that the payee is a United
States person. Otherwise, information reporting and backup withholding may
apply to dividends paid on the Common Stock to a Non-United States Holder who
fails to furnish certain information, including a tax identification number,
in the manner required by United States law and applicable regulations.
Payment of the proceeds of a disposition of Common Stock by a United
States office of a broker is subject to backup withholding and information
reporting, unless the holder certifies to the broker under penalties of
perjury as to its name, address and status as a Non-United States Holder or
the holder otherwise establishes an exemption. Neither backup withholding nor
information reporting generally will apply to a payment of the proceeds of a
disposition of Common Stock by a foreign office of a foreign broker that is
not a United States Related Person (as defined below). Information reporting
requirements (but not backup withholding) will apply to a payment of the
proceeds of a disposition of Common Stock by a foreign office of a broker that
is a United States person or a United States Related Person, unless the broker
has documentary evidence in its records that the holder is a Non-United States
Related Person and certain other conditions are met, or the holder otherwise
establishes an exemption. For this purpose, a "United States Related
40
Person" is (a) a foreign broker, 50% or more of whose gross income for certain
periods is effectively connected with the conduct of a trade or business in
the United States or (b) a foreign broker that is a "controlled foreign
corporation" for United States federal income tax purposes.
Backup withholding is not an additional tax. Any amounts withheld under
the backup withholding rules will be refunded or credited against the
Non-United States Holder's United States federal income tax liability,
provided that required information is furnished to the United States Internal
Revenue Service.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Enron
Corp. has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Smith Barney
Inc., Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber
Incorporated, S.G.Warburg & Co. Inc., Howard, Weil, Labouisse, Friedrichs
Incorporated and Rauscher Pierce Refsnes, Inc., are acting as representatives,
has severally agreed to purchase from Enron Corp. the respective number of
shares of Common Stock set forth opposite its name below:
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ------------------------------------- -----------
Goldman, Sachs & Co..................
Smith Barney Inc.....................
Donaldson, Lufkin & Jenrette
Securities Corporation.............
PaineWebber Incorporated.............
S.G.Warburg & Co. Inc................
Howard, Weil, Labouisse, Friedrichs
Incorporated.......................
Rauscher Pierce Refsnes, Inc.........
-----------
Total........................... 21,600,000
===========
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares of Common
Stock offered hereby, if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and each of such dealers may reallow, a concession not exceeding $
per share to certain dealers and brokers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the representatives.
Enron Corp. and the Company have entered into an underwriting agreement
(the "International Underwriting Agreement") with the underwriters of the
international offering (the "International Underwriters") providing for the
concurrent offer and sale by Enron Corp. of 5,400,000 shares of Common Stock
in an international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two
offerings are identical. The closing of the offering made hereby is a
condition to the closing of the international offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International and SBC Warburg.
41
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions,
it will offer, sell or deliver the shares of Common Stock, directly or
indirectly, only in the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph; (a) any individual who is a
resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase
is located in the United States. Each of the International Underwriters has
agreed pursuant to the Agreement Between that, as a part of the distribution
of the shares offered as a part of the international offering, and subject to
certain exceptions, it will (i) not, directly or indirectly, offer, sell or
deliver shares of Common Stock (a) in the United States or to any U.S. persons
or (b) to any person who it believes intends to reoffer, resell or deliver the
shares in the United States or to any U.S. persons, and (ii) cause any dealer
to whom it may sell such shares at any concession to agree to observe a
similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall
be the initial public offering price, less an amount not greater than the
selling concession.
This Prospectus may be used by underwriters and dealers in connection
with offers and sales of the Common Stock, including shares initially sold in
the international offering, to persons located in the United States.
Enron Corp. has granted the U.S. Underwriters an option exercisable for
30 calendar days after the date of this Prospectus to purchase up to an
aggregate of an additional 3,240,000 shares of Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their over-
allotment option, the U.S. Underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof that
the number of the shares of Common Stock to be purchased by each of them, as
shown in the foregoing table, bears to the 21,600,000 shares of Common Stock
being offered. Enron Corp. has granted the International Underwriters a
similar option exercisable up to an aggregate of 810,000 additional shares of
Common Stock.
Enron Corp., the Company and the Company's Chief Executive Officer have
agreed that during the period beginning from the date of this Prospectus and
continuing to and including the date 270 days after the date of this
Prospectus, subject to certain exceptions set forth in the Underwriting
Agreement, they will not offer, sell, contract to sell or otherwise dispose of
any Common Stock, any securities of the Company which are substantially
similar to shares of Common Stock, or any securities convertible into or
exchangeable for Common Stock or such substantially similar securities without
the prior written consent of Goldman, Sachs & Co., except for the shares of
Common Stock offered in connection with the concurrent international offering
and the Exchangeable Notes Offering.
The Common Stock (including the shares of Common Stock offered hereby) is
listed on the NYSE.
The representatives and certain of the Underwriters and/or their
affiliates have provided investment banking and financial advisory services to
Enron Corp., its subsidiaries or affiliates in the past, for which they have
received customary compensation and expense reimbursement, and may do so again
in the future.
Enron Corp. and the Company have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required
to make in respect thereof.
42
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock deliverable upon exchange of
the Exchangeable Notes will be passed upon for the Company by Dennis M. Ulak,
Esq., Vice President and General Counsel of the Company, and for the
Underwriters by Bracewell & Patterson, L.L.P. Certain matters will be passed
upon for Enron Corp. by Vinson & Elkins L.L.P. Mr. Ulak owns substantially
less than 1% of the outstanding shares of Common Stock of the Company or
common stock of Enron Corp. Bracewell & Patterson, L.L.P. provides services to
Enron Corp. and certain of its subsidiaries (including the Company) and
affiliates on matters unrelated to the offering of the Exchangeable Notes, the
delivery of the Common Stock upon exchange thereof or the Stock Offering.
EXPERTS
The consolidated financial statements and schedule included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing in
giving said report.
The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1994, and the estimates from the reports
of that firm appearing in such Annual Report, are incorporated by reference on
the authority of said firm as experts in petroleum engineering and in giving
such reports.
43
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
-----
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Prospectus Summary................... 3
Use of Proceeds...................... 10
Price Range of Common
Stock and Cash Dividends........... 10
Business............................. 11
Selected Consolidated Financial and
Operating Information.............. 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Management........................... 33
The Selling Stockholder.............. 34
Relationship Between the
Company and Enron Corp............. 35
Description of Common Stock.......... 38
Certain United States Federal Tax
Consequences For Non-United States
Holders of Common Stock............ 39
Underwriting......................... 41
Validity of Common Stock............. 43
Experts.............................. 43
27,000,000 SHARES
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
PROSPECTUS
------------------------
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
S.G.WARBURG & CO. INC.
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
RAUSCHER, PIERCE REFSNES, INC.
REPRESENTATIVES OF THE UNDERWRITERS
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
**************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. *
* A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN *
* FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES *
* MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME *
* THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL *
* NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO *
* BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN *
* WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
**************************************************************************
[ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS]
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1995
APPENDIX A
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
This Prospectus relates to up to 10,000,000 shares of common stock, par
value $.01 per share (the "Common Stock"), of Enron Oil & Gas Company (the
"Company"), which may be delivered by Enron Corp. upon mandatory exchange of
the % Exchangeable Notes due 1998 (the "Exchangeable Notes") of
Enron Corp., subject to Enron Corp.'s right to deliver cash in lieu of such
shares. This Prospectus is Appendix A to a prospectus of Enron Corp. covering
the sale of 10,000,000 Exchangeable Notes (the "Exchangeable Notes
Prospectus"). The Company will not receive any of the proceeds from the sale
of the Exchangeable Notes or the delivery of shares of Common Stock upon
mandatory exchange of the Exchangeable Notes at maturity.
Enron Corp. has granted the underwriters of the Exchangeable Notes a
30-day option to purchase up to an additional 1,000,000 Exchangeable Notes at
the initial offering price per Exchangeable Note, less the underwriting
discount, which may be exchangeable at their maturity for additional shares of
Common Stock. Such option has been granted solely to cover over-allotments, if
any.
Concurrently with the offering of the Exchangeable Notes made by the
Exchangeable Notes Prospectus (the "Exchangeable Notes Offering"), Enron Corp.
is offering for sale 27,000,000 shares of Common Stock (31,050,000 shares if
the underwriters' over-allotment options in such offerings are exercised in
full) in concurrent U.S. and international offerings (collectively, the "Stock
Offerings"). The consummation of the Exchangeable Notes Offering is not
contingent upon the consummation of the Stock Offerings, or vice versa.
On November 7, 1995, the last reported sale price of Common Stock on the
New York Stock Exchange, Inc. Composite Tape was $20 1/8 per share. See "Price
Range of Common Stock and Cash Dividends".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------------
The date of this Prospectus is , 1995.
<PAGE>
[ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS]
PLAN OF DISTRIBUTION
This Prospectus relates to the 11,000,000 shares of Common Stock that may
be delivered by Enron Corp. pursuant to the Exchangeable Notes and is Appendix
A to the Enron Corp. Exchangeable Notes Prospectus. At maturity of the
Exchangeable Notes the principal amount of each such note will be mandatorily
exchanged by Enron Corp. into shares of Common Stock or, at the option of
Enron Corp., cash in lieu of such mandatory exchange. For a description of the
Exchangeable Notes, see "Description of the Exchangeable Notes" in the Enron
Corp. Exchangeable Notes Prospectus.
Enron Corp., the Company and the Company's Chief Executive Officer have
agreed that during the period beginning from the date of this Prospectus and
continuing to and including the date 270 days after the date of this
Prospectus, subject to certain exceptions set forth in the Underwriting
Agreement, they will not offer, sell, contract to sell or otherwise dispose of
Common Stock, any securities of the Company which are substantially similar to
shares of Common Stock or any securities which are convertible into or
exchangeable for Common Stock or such substantially similar securities without
the prior written consent of Goldman, Sachs & Co., except for the shares of
Common Stock offered in connection with the concurrent Stock Offerings.
In connection with the distribution of the Exchangeable Notes, Enron
Corp. and the Company have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act,
or to contribute to payments the Underwriters may be required to make in
respect thereof.
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock deliverable upon exchange of
the Exchangeable Notes will be passed upon for the Company by Dennis M. Ulak,
Esq., Vice President and General Counsel of the Company, and for the
Underwriters by Bracewell & Patterson, L.L.P. Certain matters will be passed
upon for Enron Corp. by Vinson & Elkins L.L.P. Mr. Ulak owns substantially
less than 1% of the outstanding shares of Common Stock of the Company or
common stock of Enron Corp. Bracewell & Patterson, L.L.P. provides services to
Enron Corp. and certain of its subsidiaries (including the Company) and
affiliates on matters unrelated to the offering of the Exchangeable Notes, the
delivery of the Common Stock upon exchange thereof and the Stock Offerings.
EXPERTS
The consolidated financial statements and schedule included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report
with respect thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and auditing in
giving said report.
The letter report of DeGolyer and MacNaughton, independent petroleum
consultants, included as an exhibit to the Company's Annual Report on Form
10-K for the year ended December 31, 1994, and the estimates from the reports
of that firm appearing in such Annual Report, are incorporated by reference on
the authority of said firm as experts in petroleum engineering and in giving
such reports.
<PAGE>
[ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS]
RELATIONSHIP BETWEEN THE COMPANY AND ENRON CORP.
All of the shares of Common Stock offered hereby and in the Stock
Offerings are being sold by Enron Corp., and the Company will receive no
proceeds from such sales. Concurrently with the offering of the Exchangeable
Notes, Enron Corp. is offering for sale 27,000,000 shares of Common Stock
(31,050,000 shares if the Underwriters' over-allotment options in such Stock
Offerings are exercised in full). Following the consummation of the Stock
Offerings, Enron Corp. will own an aggregate of 101,000,000 shares of Common
Stock or approximately 63% of the outstanding shares (or, assuming that the
Underwriters' over-allotment options in the Stock Offerings are exercised in
full, 96,950,000 shares of Common Stock or approximately 61% of the
outstanding shares). At maturity, the Exchangeable Notes must be exchanged for
no more than 10,000,000 shares of Common Stock (no more than 11,000,000 shares
if the over-allotment option of the underwriters in the Exchangeable Notes
Offering is exercised in full), depending on the market price of the Common
Stock at such time, subject to adjustment and to Enron Corp.'s option to pay
an amount of cash in lieu of such mandatory exchange. Assuming the
underwriters' over-allotment options in the Stock Offerings and the
Exchangeable Notes Offering are exercised in full and the maximum number of
shares is mandatorily exchanged at maturity of the Exchangeable Notes, Enron
Corp.'s remaining ownership of Common Stock would be approximately 54%. Any
market that develops in the Exchangeable Notes is likely to influence, and be
influenced by, the market for the Common Stock. For example, the price of the
Common Stock could become more volatile and could be depressed by possible
sales of Common Stock by investors who view the Exchangeable Notes as a more
attractive means of equity participation in the Company and by hedging and
arbitrage activity that may develop involving the Exchangeable Notes and the
Common Stock.
Neither the Stock Offerings nor the delivery of shares of Common Stock
pursuant to the terms of the Exchangeable Notes will affect the existing
agreements between the Company and Enron Corp. and their respective
affiliates, except for the Tax Allocation Agreement which will cease to be
effective from the time at which deconsolidation occurs (when Enron Corp.
ceases to own 80% of the outstanding shares of Common Stock) for future
periods, but will remain in effect with regard to periods prior to
deconsolidation. For issues not addressed in the original agreement, the
Company has entered into a supplemental agreement with Enron Corp. clarifying
future potential adjustments associated with the final settlement on audit of
taxes for periods prior to the deconsolidation. The Company does not believe
that the cessation of consolidated tax reporting with Enron Corp. and
effectiveness of the Tax Allocation Agreement concurrent with deconsolidation
will have a material adverse effect on its financial condition or results of
operations. See "Relationship Between the Company and Enron Corp."
The nature of the respective businesses of the Company and Enron Corp.
and its affiliates is such as to potentially give rise to conflicts of
interest between the two companies. The Company's operations account for
substantially all of Enron Corp.'s natural gas and crude oil exploration and
production operations. An affiliate of Enron Corp. has entered into an
agreement to acquire a controlling interest in Coda Energy, Inc. ("Coda"), a
company engaged in domestic oil and gas exploration, development and
production, with crude oil accounting for approximately 86% of Coda's proved
reserves. At December 31, 1994, Coda reported estimated proved natural gas
reserves of 39,808 MMcf and estimated proved crude oil, condensate and natural
gas liquids reserves of 39,207 MBbls. If the transaction is consummated,
conflicts of interest could arise between the Company and Coda, and Enron
Corp. will be required to resolve them in a manner consistent with its
fiduciary obligations. See "Relationship Between the Company and Enron Corp. _
Conflicts of Interest."
5
<PAGE>
[ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS]
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
-------------------
TABLE OF CONTENTS
PAGE
-----
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Prospectus Summary................... 3
Use of Proceeds...................... 10
Price Range of Common
Stock and Cash Dividends........... 10
Business............................. 11
Selected Consolidated Financial and
Operating Information.............. 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Management........................... 33
The Selling Stockholder.............. 34
Relationship Between the
Company and Enron Corp............. 35
Description of Common Stock.......... 38
Certain United States Federal Tax
Consequences For Non-United States
Holders of Common Stock............ 39
Plan of Distribution................. 43
Validity of Common Stock............. 43
Experts.............................. 43
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
PROSPECTUS
-------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
*****************************************************************************
* *
* THE INFORMATION CONTAINED HEREIN IS SUBJECT TO AMENDMENT AND COMLETION. *
* *
*****************************************************************************
[ALTERNATIVE PAGE FOR INTERNATIONAL EQUITY OFFERING]
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1995
27,000,000 SHARES
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
Of the 27,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of Enron Oil & Gas Company (the "Company") offered, 5,400,000
shares are being offered hereby in an international offering outside the
United States and 21,600,000 shares are being offered in a concurrent offering
in the United States
(collectively, the "Stock Offerings"). The initial public offering price and
the aggregate underwriting discount per share are identical for both of the
Stock Offerings. See "Underwriting".
All of the shares of Common Stock offered in the Stock Offerings are being
sold by Enron Corp. The Company will not receive any of the proceeds from the
sale of shares of Common Stock in the Stock Offerings.
Concurrently with the Stock Offerings, Enron Corp. is offering 10,000,000
(11,000,000 if the over-allotment option of the Underwriters in such offering
is exercised in full) % Exchangeable Notes due , 1998 ("the
Exchangeable Notes"), which are mandatorily exchangeable into shares of the
Company's Common Stock currently owned by Enron Corp., subject to Enron
Corp.'s right to deliver cash in lieu of such shares (the "Exchangeable Notes
Offering"). The consummation of the Exchangeable Notes Offering is not
contingent upon the consummation of the Stock Offerings or vice versa. At
maturity, the Exchangeable Notes will be mandatorily exchanged for no more
than 10,000,000 shares of Common Stock (no more than 11,000,000 shares if the
over-allotment option of the Underwriters in the Exchangeable Notes Offering
is exercised in full), depending on the market price of the Common Stock at
such time, subject to adjustment. Following the consummation of the Stock
Offerings, Enron Corp. will own an aggregate of 101,000,000 shares of Common
Stock or approximately 63% of the outstanding shares (or, assuming that the
Underwriters' over-allotment options in the Stock Offerings are exercised in
full, 96,950,000 shares of Common Stock or approximately 61% of the
outstanding shares). Assuming the Underwriters' over-allotment options in the
Stock Offerings and the Exchangeable Notes Offering are exercised in full and
the maximum number of shares of Common Stock is delivered upon mandatory
exchange of the Exchangeable Notes at Maturity, Enron Corp. would own
approximately 54% of the outstanding Common Stock.
On November 7, 1995, the last reported sale price of Common Stock on the
New York Stock Exchange Composite Tape was $20 1/8 per share. See "Price Range
of Common Stock and Cash Dividends".
------------------------
THIS INTERNATIONAL PROSPECTUS IS INTENDED FOR USE ONLY IN CONNECTION WITH
OFFERS AND SALES OF THE COMMON STOCK OUTSIDE THE UNITED STATES AND IS NOT TO
BE SENT
OR GIVEN TO ANY PERSON WITHIN THE UNITED STATES. THE COMMON STOCK
OFFERED HEREBY IS NOT BEING REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933 FOR THE PURPOSE OF SALES OUTSIDE THE UNITED
STATES.
----------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING ENRON
OFFERING PRICE DISCOUNT(1) CORP.(2)
-------------- ------------ -------------
<S> <C> <C> <C>
Per Share............................ $ $ $
Total(3)............................. $ $ $
</TABLE>
- ------------
(1) The Company and Enron Corp. have agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933.
(2) The Company will pay estimated expenses of $ in connection with the
Stock Offerings.
(3) Enron Corp. has granted the Underwriters an option for 30 days to purchase
up to an additional 810,000 shares at the initial public offering price
per share, less the underwriting discount, solely to cover over-
allotments. Additionally, Enron Corp. has granted an over-allotment option
with respect to an additional 3,240,000 shares as part of the United
States offering. If such over-allotment options are exercised in full, the
total initial public offering price, underwriting discount and proceeds to
Enron Corp. will be $ , $ and $ ,
respectively. See "Underwriting".
------------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them, to their right to
reject any order in whole or in part. It is expected that the certificates for
the shares will be ready for delivery in New York, New York, on or about
, 1995.
GOLDMAN SACHS INTERNATIONAL SBC WARBURG
A DIVISION OF SWISS BANK CORPORATION
------------------------
The date of this Prospectus is , 1995.
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL EQUITY OFFERING]
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, Enron
Corp. has agreed to sell to each of the International Underwriters named
below, and each of such International Underwriters, for whom Goldman Sachs
International and SBC Warburg are acting as representatives, has severally
agreed to purchase from Enron Corp., the respective number of shares of Common
Stock set forth opposite its name below.
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ------------------------------------- ----------
Goldman Sachs International..........
SBC Warburg..........................
----------
Total...................... 5,400,000
----------
----------
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common
Stock in part directly to the public at the initial public offering price set
forth on the cover page of this Prospectus, and in part to certain securities
dealers at such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain brokers and dealers. After the shares of
Common Stock are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives.
Enron Corp. and the Company has entered into an underwriting agreement
(the "U.S. Underwriting Agreement") with the underwriters of the U.S. offering
(the "U.S. Underwriters") providing for the concurrent offer and sale of
21,600,000 shares of Common Stock in a U.S. offering in the United States. The
offering price and aggregate underwriting discounts and commissions per share
for the two offerings are identical. The closing of the offering made hereby
is a condition to the closing of the U.S. offering, and vice versa. The
representatives of the U.S. Underwriters are Goldman, Sachs & Co., Merrill
Lynch & Co. and Salomon Brothers, Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States
or (b) any corporation, partnership or other entity organized in or under the
laws of the United States or any political subdivision thereof and whose
office most directly involved with the purchase is located in the United
States. Each of the International Underwriters named herein has agreed
pursuant to the Agreement Between that, as a part of the distribution of the
shares offered as a part of the international offering, and subject to certain
exceptions, it will (i) not, directly or indirectly, offer, sell or deliver
shares of Common Stock (a) in the United States or to any U.S. persons or (b)
to any person who it believes intends to reoffer, resell or deliver the shares
in the United States or to any U.S. persons, and (ii) cause any dealer to whom
it may sell such shares at any concession to agree to observe a similar
restriction.
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL EQUITY OFFERING]
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall
be the initial public offering price, less an amount not greater than the
selling concession.
Enron Corp. has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 810,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the International Underwriters exercise their
over-allotment option, the International Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to purchased by each of them, as shown in
the foregoing table, bears to the 5,400,000 shares of Common Stock offered.
Enron Corp. has granted the U.S. Underwriters a similar option is to purchase
up to an aggregate of 3,240,000 additional shares of Common Stock.
Enron Corp., the Company and the Company's Chief Executive Officer have
agreed that during the period beginning from the date of this Prospectus and
continuing to and including the date 270 days after the date of this
Prospectus, subject to certain exceptions set forth in the Underwriting
Agreement, they will not offer, sell, contract to sell or otherwise dispose of
any Common Stock, any securities of the Company which are substantially
similar to shares of Common Stock or which are convertible into or
exchangeable for Common Stock or such substantially similar securities without
the prior written consent of Goldman, Sachs & Co., except for the shares of
Common Stock offered in connection with the concurrent U.S. offering and the
Exchangeable Notes Offering.
Each International Underwriter has also agreed that (a) it has not
offered or sold and prior to the date six months after the date of issue of
the shares of Common Stock will not offer or sell any shares of Common Stock
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purpose of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (b) it has complied, and will comply with, all
applicable provisions of the Financial Services Act of 1986 of Great Britain
with respect to anything done by it in relation to the shares of Common Stock
in, from or otherwise involving the United Kingdom, and (c) it has only issued
or passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issuance of the shares of Common Stock
to a person who is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) 1995 of Great
Britain or is a person to whom the document may otherwise lawfully be issued
or passed on.
Purchasers of shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practice of
the country of purchase in addition to the initial public offering price.
The Common Stock (including the shares of Common Stock offered hereby) is
listed on the NYSE.
The representatives and certain of the Underwriters and/or their
affiliates have provided investment banking and financial advisory services to
Enron Corp., its subsidiaries or affiliates in the past, for which they have
received customary compensation and expense reimbursement, and may do so again
in the future.
Enron Corp. and the Company have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required
to make in respect thereof.
<PAGE>
[ALTERNATIVE PAGE FOR INTERNATIONAL EQUITY OFFERING]
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
-------------------
TABLE OF CONTENTS
PAGE
-----
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
Prospectus Summary................... 3
Use of Proceeds...................... 10
Price Range of Common
Stock and Cash Dividends........... 10
Business............................. 11
Selected Consolidated Financial and
Operating Information.............. 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Management........................... 33
The Selling Stockholder.............. 34
Relationship Between the
Company and Enron Corp............. 35
Description of Common Stock.......... 38
Certain United States Federal Tax
Consequences For Non-United States
Holders of Common Stock............ 39
Underwriting......................... 41
Validity of Common Stock............. 43
Experts.............................. 43
27,000,000 SHARES
ENRON OIL & GAS COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
PROSPECTUS
-----------------
GOLDMAN SACHS INTERNATIONAL
SBC WARBURG
A DIVISION OF SWISS BANK CORPORATION
REPRESENTATIVES OF THE UNDERWRITERS
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth those expenses to be incurred by the
Company in connection with the issuance and distribution of the securities
being registered. Except for the Securities and Exchange Commission
registration fee, all amounts shown are estimates.
Filing Fee for Registration
Statement............................ $ 170,240
NASD, Inc. Filing Fee................ 30,500
Legal Fees and Expenses.............. *
Accounting Fees and Expenses......... *
Transfer Agent's Fees and Expenses... *
Blue Sky Fees and Expenses........... *
Miscellaneous........................ *
-----------
Total................................ $ *
===========
- ------------
* To be provided by amendment.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Restated Certificate of Incorporation, as amended, of the Company
(the "Corporation" therein) contains the following provisions relating to
indemnification of directors and officers, namely:
"A.1. A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
2. The foregoing provisions of this Article shall not eliminate or
limit the liability of a director for any act or omission occurring prior
to the effective date of this Restated Certificate of Incorporation. Any
repeal or amendment of this Article by the stockholders of the
Corporation shall be prospective only and shall not adversely affect any
limitation on the personal liability of a director of the Corporation
existing at the time of such repeal or amendment. In addition to the
circumstances in which a director of the Corporation is not personally
liable as set forth in the foregoing provisions of this Article, a
director shall not be liable to the fullest extent permitted by any
amendment to the Delaware General Corporation Law enacted that further
limits the liability of a director.
B.1. Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom
he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the
II-1
same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation
to provided broader indemnification rights than said law permitted the
Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith,
and such indemnification shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit
of his or her heirs, executors and administrators; provided, however,
that, except as provided in paragraph 2. hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Section
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of the proceeding, shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this Article or otherwise. The Corporation may, by
action of its Board of Directors, provide indemnification to employees
and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
2. If a claim under paragraph B.1. of this Article is not paid in
full by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall
be a defense to any such action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required,
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of
conduct.
3. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Article shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, by-law, agreement, vote of stockholders
or disinterested directors or otherwise.
4. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation
Law.
II-2
5. If this Article or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Corporation
shall nevertheless indemnify and hold harmless each director, officer,
employee and agent of the Corporation, and may nevertheless indemnify and
hold harmless each employee and agent of the Corporation, as to costs,
charges and expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement with respect to any action, suit or
proceeding, whether civil, criminal, administrative or investigative to
the full extent permitted by any applicable portion of this Article that
shall not have been invalidated and to the full extent permitted by
applicable law.
6. For purposes of this Article, reference to the "Corporation"
shall include, in addition to the Corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger prior to (or, in the case of an entity
specifically designated in a resolution of the Board of Directors, after)
the adoption hereof and which, if its separate existence had continued,
would have had the power and authority to indemnify its directors,
officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or
is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued."
The Restated Certificate of Incorporation of Enron Corp. (the
"Corporation" therein) contains the following provisions relating to
indemnification of directors and officers, namely:
"2.(A) Each person who was or is made a party or is threatened to
be made a party to or is involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom
he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that
such amendment permits the Corporation to provide prior to such
amendment), against all expenses, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered
by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided
in paragraph (B) hereof, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and
shall include the right to be paid by the Corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation
Law requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of the
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section
or otherwise. The Corporation may, by action of its
II-3
Board of Directors, provide indemnification to employees and agents of
the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
(B) If a claim under paragraph 2(A) of this Article XVI is not paid
in full by the Corporation within thirty days after a written claim has
been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expenses of prosecuting such claim. It shall
be a defense to any such action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required,
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden or proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of
conduct.
(C) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition
conferred in this Section shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, by-law, agreement, vote of stockholders
or disinterested directors or otherwise.
(D) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against
such expense, liability or loss under the Delaware General Corporation
Law".
The Underwriting Agreements filed as Exhibits 1(a) and 1(b) hereto, under
certain specified circumstances, provide for indemnification by the
Underwriters of the directors, officers and controlling persons of the
Company.
The Stock Restriction and Registration Agreement, filed as Exhibit 99
hereto, under certain specified circumstances, provides for the
indemnification of the Company by Enron Corp.
Enron Corp. has purchased liability insurance policies covering the
directors and officers of the Company to provide protection where the Company
cannot legally indemnify a director or officer and where a claim arises under
the Employee Retirement Income Security Act of 1974 against a director or
officer based on an alleged breach of fiduciary duty or other wrongful act.
The directors and officers of the Company will continue to be covered by such
insurance policies so long as the Company remains a subsidiary of Enron Corp.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTIONS
- ------------------------ ----------------------------------------------------------------------------
<S> <C> <C>
1(a) -- Form of Underwriting Agreement for U.S. Offering.
1(b) -- Form of Underwriting Agreement for International Offering.
1(c) -- Form of Underwriting Agreement for Exchangeable Notes.
*4 -- Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to
Form S-1 Registration Statement No. 33-30678, filed August 24, 1989 ("Form S-1").
II-4
**5 -- Opinion of Dennis M. Ulak, Esq., Vice President and General Counsel of Enron Oil & Gas
Company.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of DeGolyer and MacNaughton.
23(c) -- The consent of Dennis M. Ulak, Esq., is contained in his opinion filed as Exhibit 5
hereto.
24 -- Powers of Attorney.
*99 -- Stock Restriction and Registration Agreement dated as of August 23, 1989 (Exhibit 10.2 to
Form S-1).
</TABLE>
- ------------
* Incorporated by reference as indicated.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, ENRON OIL &
GAS COMPANY CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT OR AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF HOUSTON, STATE OF TEXAS,
ON THE 7TH DAY OF NOVEMBER, 1995.
ENRON OIL & GAS COMPANY
(Registrant)
By: /s/ WALTER C. WILSON
(WALTER C. WILSON)
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES WITH ENRON OIL & GAS COMPANY INDICATED AND ON THE 7TH DAY OF
NOVEMBER, 1995.
SIGNATURE TITLE
- -------------------------- ---------------------------------------------------
/s/FORREST E. HOGLUND Chairman of the Board, President and Chief Executive
(FORREST E. HOGLUND) Officer and Director
(Principal Executive Officer)
/s/WALTER C. WILSON Senior Vice President and Chief Financial Officer
(WALTER C. WILSON) (Principal Financial Officer)
/s/BEN B. BOYD Vice President and Controller
(BEN B. BOYD) (Principal Accounting Officer)
FRED C. ACKMAN* Director
(FRED C. ACKMAN)
RICHARD D. KINDER* Director
(RICHARD D. KINDER)
KENNETH L. LAY* Director
(KENNETH L. LAY)
EDWARD RANDALL, III* Director
(EDWARD RANDALL, III)
*By /s/ANGUS H. DAVIS
(ANGUS H. DAVIS)
(ATTORNEY-IN-FACT FOR PERSONS INDICATED)
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NUMBER DESCRIPTION PAGE
- ------------------------ ------------------------------------------------------------------------------------------ ------------
<S> <C> <C> <C>
1(a) -- Form of Underwriting Agreement for U.S. Offering.
1(b) -- Form of Underwriting Agreement for International Offering.
1(c) -- Form of Underwriting Agreement for Exchangeable Notes.
*4 -- Specimen of Certificate evidencing the Common Stock (Exhibit 3.3 to
Form S-1 Registration Statement No. 33-30678, filed August 24, 1989 ("Form S-1").
**5 -- Opinion of Dennis M. Ulak, Esq., Vice President and General Counsel of Enron Oil & Gas
Company.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of DeGolyer and MacNaughton.
23(c) -- The consent of Dennis M. Ulak, Esq., is contained in his opinion filed as Exhibit 5
hereto.
24 -- Powers of Attorney.
*99 -- Stock Restriction and Registration Agreement dated as of August 23, 1989 (Exhibit 10.2 to
Form S-1).
</TABLE>
- ------------
* Incorporated by reference as indicated.
** To be filed by amendment.
EXHIBIT 1(a)
ENRON OIL & GAS COMPANY
COMMON STOCK
($.01 PAR VALUE)
UNDERWRITING AGREEMENT
(U.S. VERSION)
. . . . . , 1995
Goldman, Sachs & Co.,
Smith Barney Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation,
PaineWebber Incorporated,
S.G.Warburg & Co. Inc.,
Howard, Weil, Labouisse, Friedrichs Incorporated,
Rauscher Pierce Refsnes, Inc.,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
The Stockholder named in Schedule II hereto (the "Selling Stockholder") of
Enron Oil & Gas Company, a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of 21,600,000
shares (the "Firm Shares") and, at the election of the Underwriters, up to
3,240,000 additional shares (the "Optional Shares"), of Common Stock, $.01 par
value ("Stock"), of the Company (the Firm Shares and the Optional Shares that
the Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares").
It is understood and agreed to by all parties that the Company and the
Selling Stockholder are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Selling
Stockholder of up to a total of 6,210,000 shares of Stock (the "International
Shares"), including the overallotment option thereunder, through arrangements
with certain underwriters outside the United States (the "International
Underwriters"), for whom Goldman Sachs International and S.G. Warburg Securities
Ltd. are acting as lead managers.
1
Anything herein or therein to the contrary notwithstanding, the respective
closings under this Agreement and the International Underwriting Agreement are
hereby expressly made conditional on one another. The Underwriters hereunder and
the International Underwriters are simultaneously entering into an Agreement
between U.S. and International Underwriting Syndicates (the "Agreement between
Syndicates") which provides, among other things, for the transfer of shares of
Stock between the two syndicates. Two forms of prospectus are to be used in
connection with the offering and sale of shares of Stock contemplated by the
foregoing, one relating to the Shares hereunder and the other relating to the
International Shares. The latter form of prospectus will be identical to the
former except for certain substitute pages as included in the registration
statement and amendments thereto as mentioned below. Except as used in Sections
2, 3, 4, 9 and 11 herein, and except as the context may otherwise require,
references hereinafter to the Shares shall include all the shares of Stock which
may be sold pursuant to either this Agreement or the International Underwriting
Agreement, and references herein to any prospectus whether in preliminary or
final form, and whether as amended or supplemented, shall include both the U.S.
and the international versions thereof.
1. (a) The Company represents and warrants to, and agrees with,
each of the Underwriters that:
(i) A registration statement on Form S-3 (File No. 33-....)
(the "Initial Registration Statement"), in respect of the Shares has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you
for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no
other document with respect to the Initial Registration Statement or
document incorporated by reference therein has heretofore been filed
with the Commission; and no stop order suspending the effectiveness of
the Initial Registration Statement, any post-effective amendment
thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or, to the
Company's knowledge, threatened by the Commission (any preliminary
prospectus included in the Initial Registration Statement or filed with
the Commission pursuant to Rule 424(a) of the rules and regulations of
the Commission under the Act, is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including (i) the information contained in the
form of final prospectus filed with the Commission pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof and deemed
by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective or such
part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective and (ii) the documents incorporated by
reference in the prospectus contained in the registration statement at
the time such part of the registration statement became effective, each
as amended at the time such part of the Initial Registration Statement
became effective, are hereinafter collectively called the "Registration
Statement"; such final prospectus, in the form first filed pursuant to
Rule 424(b) under the Act, is hereinafter called the "Prospectus"; any
reference herein to any Preliminary Prospectus or the Prospectus shall
be deemed to refer to and include the documents
2
incorporated by reference therein pursuant to Item 12 of Form S-3 under
the Act, as of the date of such Preliminary Prospectus or Prospectus,
as the case may be; any reference to any amendment or supplement to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to
and include any documents filed after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated
by reference in such Preliminary Prospectus or Prospectus, as the case
may be; and any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any annual report of
the Company filed pursuant to Section 13(a) or 15(d) of the Exchange
Act after the effective date of the Registration Statement that is
incorporated by reference in the Registration Statement;
(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by the Selling Stockholder expressly for use in the preparation of the
answers therein to Item 7 of Form S-3;
(iii) The documents incorporated by reference in the Prospectus,
when they became effective or were filed with the Commission, as the
case may be, conformed in all material respects to the requirements of
the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder, and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and any further documents so filed
and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(iv) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto and as of
the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to
3
any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein or by the
Selling Stockholder expressly for use in the preparation of the answers
therein to Item 7 of Form S-3;
(v) Neither the Company nor any of its Material Subsidiaries
has sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock or any increase in long-term debt of the Company or any
of its Material Subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus;
(vi) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each Material Subsidiary of the
Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts
any business, so as to require qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction;
(vii) The Company and its subsidiaries have good and marketable
title to their producing oil and gas properties, free and clear of all
liens, encumbrances and defects, except (a) those described in the
Prospectus, (b) liens securing taxes and other governmental charges, or
claims of materialmen, mechanics and similar persons, not yet due and
payable, (c) liens and encumbrances under operating agreements,
unitization and pooling agreements, and gas sales contracts, securing
payment of amounts not yet due and payable and of a scope and nature
customary in the oil and gas industry and (d) liens, encumbrances and
defects that do not, singly or in the aggregate, materially affect the
value of such oil and gas properties or materially interfere with the
use made or proposed to be made of such properties by the Company and
its subsidiaries;
(viii) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly
4
authorized and issued, are fully paid and non-assessable and conform to
the description of the Stock contained in the Prospectus; and all of
the issued shares of capital stock of each Material Subsidiary of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and (except for directors' qualifying shares)
are owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(ix) The compliance by the Company with all of the provisions of
this Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or the charter or by-laws of any of its subsidiaries or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the sale of the
Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International Underwriting
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters
and the International Underwriters;
(x) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or charter, as the case
may be, or By-laws or in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in
any indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
(xi) The statements set forth in the Prospectus under the caption
"Description of Common Stock", insofar as they purport to constitute a
summary of the terms of the Stock, and under the caption
"Underwriting", insofar as they purport to describe the provisions of
the laws and documents referred to therein, are accurate, complete and
fair;
(xii) Other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any property
of the Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders' equity
or results of operations of the Company and its subsidiaries; and, to
the best of the Company's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by others;
5
(xiii) The Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(xiv) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes; and
(xv) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(b) The Selling Stockholder represents and warrants to, and agrees with,
each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders
necessary for the execution and delivery by the Selling Stockholder of
this Agreement and the International Underwriting Agreement, and for
the sale and delivery of the Shares to be sold by the Selling
Stockholder hereunder and under the International Underwriting
Agreement, have been obtained; and the Selling Stockholder has full
right, power and authority to enter into this Agreement and the
International Underwriting Agreement and to sell, assign, transfer and
deliver the Shares to be sold by the Selling Stockholder hereunder and
under the International Underwriting Agreement;
(ii) The sale of the Shares to be sold by the Selling Stockholder
hereunder and under the International Underwriting Agreement and the
compliance by the Selling Stockholder with all of the provisions of
this Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute,
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Selling Stockholder or any of its
subsidiaries is a party or by which the Selling Stockholder or any of
its subsidiaries is bound, or to which any of the property or assets of
the Selling Stockholder or any of its subsidiaries is subject, nor will
such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Selling Stockholder or
any of its subsidiaries or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Selling Stockholder or any of its subsidiaries or the property of
the Selling Stockholder or any of its subsidiaries;
(iii) The Selling Stockholder has, and immediately prior to each
Time of Delivery (as defined in Section 4 hereof) the Selling
Stockholder will have, good and valid title to the Shares to be sold by
the Selling Stockholder hereunder and under the International
Underwriting Agreement, free and clear of all liens, encumbrances,
equities or claims; and, upon delivery of such Shares and payment
therefor pursuant hereto and thereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims,
will pass to the several Underwriters or the International
Underwriters, as the case may be;
6
(iv) During the period beginning from the date hereof and
continuing to and including the date 270 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder or under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities without the prior written consent of Goldman, Sachs & Co.;
(v) The Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by the
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement and
the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
2. Subject to the terms and conditions herein set forth, (a) the Selling
Stockholder agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Selling
Stockholder, at a purchase price per share of $......................., the
number of Firm Shares to be purchased by such Underwriter as set forth opposite
the name of such Underwriter in Schedule I hereto and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Selling Stockholder agrees to sell to
each of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Selling Stockholder, at the purchase price per
share set forth in clause (a) of this Section 2, that portion of the number of
Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined by multiplying
such number of Optional Shares by a fraction the numerator of which is the
maximum number of Optional Shares which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all of the
Underwriters are entitled to purchase hereunder.
7
The Selling Stockholder hereby grants to the Underwriters the right to
purchase at their election up to 3,240,000 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering overallotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares may be exercised by written notice from you to the
Selling Stockholder, given within a period of 30 calendar days after the date of
this Agreement and setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Selling Stockholder
otherwise agree in writing, earlier than two or later than ten business days
after the date of such notice.
3. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in
such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Selling Stockholder shall be
delivered by or on behalf of the Selling Stockholder to Goldman, Sachs
& Co., through the facilities of The Depository Trust Company ("DTC"),
for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by certified or
official bank check or checks, payable to the order of the Selling
Stockholder in New York Clearing House (next day) funds. The Company
will cause the certificates representing the Shares to be made
available for checking and packaging at least twenty-four hours prior
to the Time of Delivery (as defined below) with respect thereto at the
office of DTC or its designated custodian (the "Designated Office").
The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on .............,
1995 or on such other time and date as Goldman, Sachs & Co. and the
Selling Stockholder may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York City time, on the date specified
by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs &
Co. of the Underwriters' election to purchase such Optional Shares, or
such other time and date as Goldman, Sachs & Co. and the Selling
Stockholder may agree upon in writing. Such time and date for delivery
of the Firm Shares is herein called the "First Time of Delivery", such
time and date for delivery of the Optional Shares, if not the First
Time of Delivery, is herein called the "Second Time of Delivery", and
each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery
by or on behalf of the parties hereto pursuant to Section 7 hereof,
including the cross-receipt for the Shares and any additional documents
requested by the Underwriters pursuant to Section 7(l) hereof, will be
delivered at the offices of Bracewell & Patterson, L.L.P., 711
Louisiana Street, Houston, Texas 77002 (the "Closing Location"), and
the Shares will be delivered at the Designated Office, all at each Time
of Delivery. A meeting will be held at the Closing Location at
..............p.m., New York City time, on the New York Business Day
next preceding each Time of Delivery, at which meeting the final drafts
of the documents to be delivered pursuant to the preceding sentence
will be available for review by the parties hereto. For the purposes of
this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday
8
which is not a day on which banking institutions in New York are
generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and
to file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
Registration Statement or Prospectus prior to the last Time of Delivery
which shall be disapproved by you promptly after reasonable notice
thereof; to advise you, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with copies
thereof; to file promptly all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long
as the delivery of a prospectus is required in connection with the
offering or sale of the Shares; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you
may reasonably request to qualify the Shares for offering and sale
under the securities laws of such jurisdictions as you may request and
to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading,
or, if for any other reason it shall be necessary during such period to
amend or supplement the Prospectus or to file under the Exchange Act
any document incorporated by reference in the Prospectus in order to
comply with the Act or the Exchange Act, to notify you and upon your
request
9
to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as
soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Company and
its subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 270 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option plans existing
on the date of this Agreement), without the prior written consent of
Goldman, Sachs & Co., and to cause the Company's Chairman of the Board,
President and Chief Executive Officer to agree not to offer, sell,
contract to sell or otherwise dispose of any Stock, any securities of
the Company substantially similar to the Stock, or any securities
convertible into or exchangeable for Stock or such substantially
similar securities, during such period (other than pursuant to employee
stock option plans existing on the date of this Agreement), without the
prior written consent of Goldman, Sachs & Co.;
(f) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a balance
sheet and statements of income, stockholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company
and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to stockholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished
to its stockholders generally or to the Commission), provided that
prior to the Company's furnishing any
10
such additional information that is material and non-public you shall
enter into such agreement respecting the confidentiality thereof as the
Company may reasonably request; and
(h) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 P.M., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company and the Selling Stockholder covenant and agree
with one another and with the several Underwriters that (a) the Company will pay
or cause to be paid the following: (i) the fees, disbursements and expenses of
the Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the
International Underwriting Agreement, the Agreement between Syndicates, the
Selling Agreements, the Blue Sky Memorandum and any other documents in
connection with the offering, purchase, sale and delivery of the Shares; (iii)
all expenses in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 5(b) hereof, including
the fees and disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky survey; (iv) the filing
fees incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (v) the cost of
preparing stock certificates; (vi) the cost and charges of any transfer agent or
registrar; and (vii) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section; and (b) the Selling Stockholder will pay or cause to be paid all
costs and expenses incident to the performance of the Selling Stockholder
obligations hereunder which are not otherwise specifically provided for in this
Section, including (i) any fees and expenses of counsel for the Selling
Stockholder, and (ii) all expenses and taxes incident to the sale and delivery
of the Shares to be sold by the Selling Stockholder to the Underwriters
hereunder. It is understood, however, that the Company shall bear, and the
Selling Stockholder shall not be required to pay or to reimburse the Company
for, the cost of any other matters not directly relating to the sale and
purchase of the Shares pursuant to this Agreement, and that, except as provided
in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees and expenses of their counsel,
stock transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the
Shares to be delivered at each Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and of the Selling Stockholder herein are, at and as
of such Time of Delivery, true and correct, the condition that the Company and
the Selling Stockholder each shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
11
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Bracewell & Patterson, L.L.P., counsel for the
Underwriters, shall have furnished to you such opinion or opinions (a
draft of such opinion or opinions is attached as Annex II(a) hereto),
dated such Time of Delivery, with respect to certain of the matters
covered in paragraphs (i), (ii), (vi), (x) and (xii) of subsection (c)
below as well as such other related matters as you may reasonably
request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon
such matters;
(c) Dennis M. Ulak, Vice President and General Counsel of
the Company, shall have furnished to you his written opinion (a draft
of such opinion is attached as Annex II(b) hereto), dated such Time of
Delivery, in form and substance satisfactory to you, to the effect
that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with all necessary corporate
power and authority to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company (including the Shares being delivered at
such Time of Delivery) have been duly and validly authorized and
issued and are fully paid and non-assessable; and the Shares
conform to the description of the Stock contained in the
Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material
liability or disability by reason of failure to be so qualified
in any such jurisdiction (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of
officers of the Company, provided that such counsel shall state
that he believes that both you and he are justified in relying
upon such opinions and certificates);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and
has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as
12
to require such qualification, or is subject to no material
liability or disability by reason of failure to be so qualified
in any such jurisdiction; and all of the issued shares of
capital stock of each such subsidiary have been duly and validly
authorized and issued, are fully paid and non-assessable, and
(except for directors' qualifying shares) are owned directly or
indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (such counsel being entitled to
rely in respect of the opinion in this clause upon opinions of
local counsel and in respect of matters of fact upon
certificates of officers of the Company or its subsidiaries,
provided that such counsel shall state that he believes that
both you and he are justified in relying upon such opinions and
certificates);
(v) To the best of such counsel's knowledge and other
than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of
its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a material adverse
effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and
its subsidiaries; and, to the best of such counsel's knowledge,
no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(vi) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by
the Company;
(vii) The compliance by the Company with all of the
provisions of this Agreement and the International Underwriting
Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to
such counsel to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or the charter or
by-laws of any of its subsidiaries or any statute or any order,
rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the sale of the
Shares or the consummation by the Company of the transactions
contemplated by this Agreement and the International
Underwriting Agreement, except the registration under the Act of
the Shares, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the
International Underwriters;
13
(ix) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or charter, as the
case may be, or By-laws or in default in the performance or
observance of any material obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be
bound;
(x) The statements set forth in the Prospectus under
the caption "Description of Common Stock", insofar as they
purport to constitute a summary of the terms of the Stock, and
under the caption "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to
therein, are accurate, complete and fair;
(xi) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(xii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules
and regulations thereunder; although he does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the
Prospectus, except for those referred to in the opinion in
subsection (x) of this Section 7(c), he has no reason to believe
that, as of its effective date, the Registration Statement or
any further amendment thereto made by the Company prior to such
Time of Delivery (other than the financial statements and
related schedules and reports of experts pertaining to natural
resource reserves therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such
14
counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact necessary
to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
that, as of such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; and he does not know of any amendment to
the Registration Statement required to be filed or of any
contracts or other documents of a character required to be filed
as an exhibit to the Registration Statement or required to be
incorporated by reference into the Prospectus or required to be
described in the Registration Statement or the Prospectus which
are not filed or incorporated by reference or described as
required.
In rendering such opinion, such counsel may state that he expresses no
opinion as to the laws of any jurisdiction outside the United States and may
rely, as to matters of New York law, upon an opinion of Vinson & Elkins L.L.P.
delivered therewith.
(d) Vinson & Elkins L.L.P., counsel to the Company, shall have
furnished to you their written opinion (a draft of such opinion is attached as
Annex II(c) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by
the Company;
(ii) The statements set forth in the Prospectus under the
caption "Description of Common Stock", insofar as they purport
to constitute a summary of the terms of the Stock, and under the
caption "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are
accurate, complete and fair;
(iii) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms
are defined in the Investment Company Act;
(iv) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary
15
to make the statements therein not misleading, or, in the case
of other documents which were filed under the Exchange Act with
the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made when such documents were so filed, not
misleading; and
(v) The Registration Statement and the Prospectus and
any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules
and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the
Prospectus, except for those referred to in the opinion in
subsection (ii) of this Section 7(d), they have no reason to
believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or
that, as of such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; and they do not know of any amendment to
the Registration Statement required to be filed or of any
contracts or other documents of a character required to be filed
as an exhibit to the Registration Statement or required to be
incorporated by reference into the Prospectus or required to be
described in the Registration Statement or the Prospectus which
are not filed or incorporated by reference or described as
required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States.
(e) James V. Derrick, Jr., Senior Vice President and General
Counsel of the Selling Stockholder, shall have furnished to you his written
opinion (a draft of such opinion is attached as Annex II(d) hereto), dated such
Time of Delivery, in form and substance satisfactory to you, to the effect that:
16
(i) This Agreement and the International Underwriting
Agreement have been duly executed and delivered by the Selling
Stockholder; and the sale of the Shares to be sold by the
Selling Stockholder hereunder and thereunder and the compliance
by the Selling Stockholder with all of the provisions of this
Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein contemplated
will not conflict with or result in a breach or violation of any
terms or provisions of, or constitute a default under, any
statute, indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which the
Selling Stockholder or any of its subsidiaries is a party or by
which the Selling Stockholder or any of its subsidiaries is
bound, or to which any of the property or assets of the Selling
Stockholder or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of such Selling
Stockholder or the charter or by-laws of any of its subsidiaries
or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over
the Selling Stockholder or the property of such Selling
Stockholder;
(ii) No consent, approval, authorization or order of any
court or governmental agency or body is required for the
consummation of the transactions contemplated by this Agreement
and the International Underwriting Agreement in connection with
the Shares to be sold by such Selling Stockholder hereunder or
thereunder, except which have been duly obtained and are in full
force and effect, such as have been obtained under the Act and
such as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of such Shares
by the Underwriters or the International Underwriters;
(iii) Immediately prior to such Time of Delivery the Selling
Stockholder had good and valid title to the Shares to be sold at
such Time of Delivery by the Selling Stockholder under this
Agreement and the International Underwriting Agreement, free and
clear of all liens, encumbrances, equities or claims, and full
right, power and authority to sell, assign, transfer and deliver
the Shares to be sold by the Selling Stockholder hereunder and
thereunder;
(iv) Good and valid title to such Shares, free and clear of
all liens, encumbrances, equities or claims, has been
transferred to each of the several Underwriters or International
Underwriters, as the case may be, who have purchased such Shares
in good faith and without notice of any such lien, encumbrance,
equity or claim or any other adverse claim within the meaning of
the Uniform Commercial Code.
In rendering such opinion, such counsel may state that he expresses no
opinion as to the laws of any jurisdiction outside the United States and may
rely, as to matters of New York law, on an opinion of Vinson & Elkins L.L.P.
delivered therewith.
(f) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent to
the date of this Agreement and also at each Time of Delivery, Arthur Andersen
LLP shall have furnished to you a letter or letters, dated the respective dates
of delivery thereof, in form and substance satisfactory to you, to the effect
set
17
forth in Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached as Annex I(a) hereto and a draft of the
form of letter to be delivered on the effective date of any post-effective
amendment to the Registration Statement and as of each Time of Delivery is
attached as Annex I(b) hereto);
(g)(i) Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus, and
(ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described in Clause (i) or
(ii), is in the judgment of the Representatives so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the terms and
in the manner contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of any of the Company's
debt securities;
(i) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange (the "Exchange"); (ii) a
suspension or material limitation in trading in the Company's securities on the
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(j) The Shares to be sold by the Selling Stockholder at such Time
of Delivery shall have been duly listed on the Exchange;
(k) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from the Company's Chairman of the Board,
President and Chief Executive Officer to the effect set forth in Subsection 5(e)
hereof in form and substance satisfactory to you;
(l) The Company and the Selling Stockholder shall have furnished
or caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and of the Selling Stockholder, respectively,
satisfactory to you as to the accuracy of the representations
18
and warranties of the Company and the Selling Stockholder, respectively, herein
at and as of such Time of Delivery, as to the performance by the Company and the
Selling Stockholder of all of their respective obligations hereunder to be
performed at or prior to such Time of Delivery, and as to such other matters as
you may reasonably request, and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a) and (g) of
this Section, and as to such other matters as you may reasonably request; and
(m) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement.
8. (a) The Company and the Selling Stockholder, jointly and
severally, will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such action or claim as such expenses are incurred; PROVIDED, HOWEVER, that the
Company and the Selling Stockholder shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein; and provided, further,
that the Company and the Selling Stockholder shall not be liable to any
Underwriter under this indemnity agreement in this subsection (a) with respect
to any Preliminary Prospectus to the extent that any such loss, claim, damage or
liability of such Underwriter results from the fact such Underwriter sold Shares
to a person as to whom it shall be established that there was not sent or given,
at or prior to the written confirmation of such sale, a copy of the Prospectus
or of the Prospectus as then amended or supplemented in any case where such
delivery is required by the Act if the Company has previously furnished copies
thereof to such Underwriter and the loss, claim, damage or liability of such
Underwriter results from an untrue statement or omission of a material fact
contained in the Preliminary Prospectus which was corrected in the Prospectus or
in the Prospectus as then amended or supplemented.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or the Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or
19
supplement in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through Goldman, Sachs & Co. expressly for
use therein; and will reimburse the Company and the Selling Stockholder for any
legal or other expenses reasonably incurred by the Company or the Selling
Stockholder in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholder on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholder on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholder bear to the total underwriting discounts and commissions received by
the Underwriters with respect to the Shares purchased under this Agreement, in
20
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholder on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Selling Stockholder and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
PRO RATA allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company and the Selling Stockholder under this
Section 8 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under this Section 8
shall be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company or Selling Stockholder within the meaning of the Act.
9. ___(a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Selling Stockholder shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Selling
Stockholder that you have so arranged for the purchase of such Shares, or the
Selling Stockholder notifies you that they have so arranged for the purchase of
such Shares, you or the Selling Stockholder shall have the right to postpone
such Time of Delivery for a period of not more than seven days, in order to
effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
21
(b) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholder as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all of the Shares to be purchased at such Time of Delivery, then the
Selling Stockholder shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholder as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all of the Shares to be purchased at such Time of Delivery, or if the Selling
Stockholder shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Selling Stockholder to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
or the Selling Stockholder, except for the expenses to be borne by the Company
and the Selling Stockholder and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Selling Stockholder and the
several Underwriters, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company, or the Selling Stockholder, or any officer or
director or controlling person of the Company or of the Selling Stockholder, and
shall survive delivery of and payment for the Shares.
Anything herein to the contrary notwithstanding, the indemnity agreement of
the Company in subsection (a) of Section 8 hereof, the representations and
warranties in subsections (a)(ii), (a)(iii) and (a)(iv) of Section 1 hereof and
any representation or warranty as to the accuracy of the Registration Statement
or the Prospectus contained in any certificate furnished by the Company pursuant
to Section 7 hereof, insofar as they may constitute a basis for indemnification
for liabilities (other than payment by the Company of expenses incurred or paid
in the successful defense of any action, suit or proceeding) arising under the
Act, shall not extend to the extent of any interest therein of a controlling
person or partner of an Underwriter who is a director, officer or controlling
person of the Company when the Registration Statement has become effective,
except in each case to the extent that an interest of such character shall have
been determined by a court of appropriate jurisdiction as not against public
policy as expressed in the Act. Unless in the opinion of counsel for the Company
the matter has been settled by controlling precedent, the Company will, if a
claim for such indemnification is asserted, submit to a court of appropriate
jurisdiction the question of whether such interest is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
22
11. If this Agreement shall be terminated pursuant to Section 9
hereof, neither the Company nor the Selling Stockholder shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Selling Stockholder as provided herein, the Selling Stockholder will reimburse
the Underwriters through you for all out-of-pocket expenses approved in writing
by you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and the Selling Stockholder shall then
be under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Underwriters, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Underwriter made or
given by you or by Goldman, Sachs & Co.
on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to the Selling Stockholder shall be delivered or sent by mail,
telex or facsimile transmission to the Selling Stockholder, Attention:
Secretary, at its address set forth in Schedule II hereto; and if to the Company
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8 (c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholder by you upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholder and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, the Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. As used herein, the terms "Material Subsidiary" or "Material
Subsidiaries" shall include any subsidiary of the Company, the assets,
operations, financial position or results of operations of which are material to
the Company, and in any event shall include IN Holdings, Inc., Enron Oil Canada,
Ltd., Enron Exploration Company, Enron Gas & Oil Trinidad Limited, Enron Oil &
Gas India Ltd. and Enron Oil & Gas Marketing, Inc.
23
17. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us . . . counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and the Selling Stockholder. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters (U.S. Version), the form of
which shall be submitted to the Company and the Selling Stockholder for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
Enron Oil & Gas Company
By:
Name:
Title:
24
Enron Corp.
By:
Name:
Title:
Accepted as of the date hereof at ........,
...............:
Goldman, Sachs & Co.
Smith Barney Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
PaineWebber Incorporated
S.G.Warburg & Co. Inc.
Howard, Weil, Labouisse, Friedrichs Incorporated
Rauscher Pierce Refsnes, Inc.
By:
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
25
SCHEDULE I
<TABLE>
<CAPTION>
Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
UNDERWRITER to be Purchased Exercised
<S> <C> <C>
Goldman, Sachs & Co....................................................
Smith Barney Inc.......................................................
Donaldson, Lufkin & Jenrette Securities
Corporation..........................................................
PaineWebber Incorporated...............................................
S.G.Warburg & Co. Inc..................................................
Howard, Weil, Labouisse, Friedrichs
Incorporated.........................................................
Rauscher Pierce Refsnes, Inc...........................................
Total............................................. __________ ________
</TABLE>
26
SCHEDULE II
Number of Optional
Shares to be
Total Number of Sold if
Firm Shares Maximum Option
to be Sold Exercised
The Selling Stockholder:
Enron Corp. __________ _________
1400 Smith Street
Houston, Texas 77002
Telex:
Facsimile Transmission:
27
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's Quarterly
Report on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives; and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing
came to their attention that caused them to believe that the unaudited
condensed consolidated financial statements do not comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
28
(v) They have compared the information in the Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing procedures
that caused them to believe that this information does not conform in
all material respects with the disclosure requirements of Items 301,
302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus
and/or included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Exchange Act
and the related published rules and regulations, or (ii) any
material modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the
Prospectus or included in the Company's Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus, for them
to be in conformity with generally accepted accounting
principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree with
the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on Form
10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in
the Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes in
the consolidated capital stock or any increase in the
consolidated long-term debt of the Company and its subsidiaries,
or any decreases in consolidated net current assets or net
assets or other items
29
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included or
incorporated by reference in the Prospectus, except in each case
for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by reference in
the Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable
period of the preceding year and with any other period of
corresponding length specified by the Representatives, except in
each case for increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in
such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of minute books, inquiries and other procedures
referred to in paragraphs (iii) and (vi) above, they have carried out
certain specified procedures, not constituting an examination in
accordance with generally accepted auditing standards, with respect to
certain amounts, percentages and financial information specified by the
Representatives which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Prospectus
(excluding documents incorporated by reference) or in Part II of, or in
exhibits and schedules to, the Registration Statement specified by the
Representatives or in documents incorporated by reference in the
Prospectus specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
30
EXHIBIT 1(b)
ENRON OIL & GAS COMPANY
COMMON STOCK
($.01 PAR VALUE)
UNDERWRITING AGREEMENT
(INTERNATIONAL VERSION)
....................., 1995
Goldman Sachs International,
SBC Warburg,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International,
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.
Ladies and Gentlemen:
The stockholder named in Schedule II hereto (the "Selling Stockholder") of
Enron Oil & Gas Company, a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of 5,400,000 shares
(the "Firm Shares") and, at the election of the Underwriters, up to 810,000
additional shares (the "Optional Shares") of Common Stock, $.01 par value
("Stock") of the Company (the Firm Shares and the Optional Shares which the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares").
It is understood and agreed to by all parties that the Selling Stockholder
is concurrently entering into an agreement, a copy of which is attached hereto
(the "U.S. Underwriting Agreement"), providing for the sale by the Selling
Stockholder of up to a total of 24,840,000 shares of Stock (the "U.S. Shares"),
including the overallotment option thereunder, through arrangements with certain
underwriters in the United States (the "U.S. Underwriters"), for whom Goldman,
Sachs & Co. and Smith Barney Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, PaineWebber Incorporated, S. G. Warburg & Co. Inc., Howard, Weil,
Labouisse, Friedrichs
1
Incorporated and Rauscher Pierce Refsnes, Inc., are acting as representatives.
Anything herein or therein to the contrary notwithstanding, the respective
closings under this Agreement and the U.S. Underwriting Agreement are hereby
expressly made conditional on one another. The Underwriters hereunder and the
U.S. Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates") which
provides, among other things, for the transfer of shares of Stock between the
two syndicates and for consultation by the Lead Managers hereunder with Goldman,
Sachs & Co. prior to exercising the rights of the Underwriters under Section 7
hereof. Two forms of prospectus are to be used in connection with the offering
and sale of shares of Stock contemplated by the foregoing, one relating to the
Shares hereunder and the other relating to the U.S. Shares. The latter form of
prospectus will be identical to the former except for certain substitute pages
as included in the registration statement and amendments thereto as mentioned
below. Except as used in Sections 2, 3, 4, 9 and 11 herein, and except as
context may otherwise require, references hereinafter to the Shares shall
include all of the shares of Stock which may be sold pursuant to either this
Agreement or the U.S. Underwriting Agreement, and references herein to any
prospectus whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international versions
thereof.
In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied MUTATIS MUTANDIS as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.
1. The Company and the Selling Stockholder hereby make to the Underwriters
the same respective representations, warranties and agreements as are set forth
in Section 1 of the U.S. Underwriting Agreement, which Section is incorporated
herein by this reference.
2. Subject to the terms and conditions herein set forth, (a) the Selling
Stockholder agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Selling
Stockholder, at a purchase price per share of $................, the number of
Firm Shares set forth opposite their respective names in Schedule I hereto and
(b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Selling Stockholder
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Selling Stockholder, at the
purchase price per share set forth in clause (a) of this Section 2, that portion
of the number of Optional Shares as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the
2
name of such Underwriter in Schedule I hereto and the denominator of which is
the maximum number of Optional Shares that all of the Underwriters are entitled
to purchase hereunder.
The Selling Stockholder, as and to the extent indicated in Schedule II
hereto, hereby grants to the Underwriters the right to purchase at their
election up to 810,000 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering overallotments in
the sale of the Firm Shares. Any such election to purchase Optional Shares may
be exercised only by written notice from you to the Selling Stockholder, given
within a period of 30 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Shares to be purchased and the date on
which such Optional Shares are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Selling Stockholder otherwise agree in writing, earlier
than two or later than ten business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to and
with the Company and the Selling Stockholder the representations and agreements
of such Underwriter as a member of the selling group contained in Sections 3(d)
and 3(e) of the form of Selling Agreements.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Selling Stockholder shall be delivered by or on behalf of the
Selling Stockholder to Goldman, Sachs & Co., through the facilities of The
Depository Trust Company ("DTC"), for the account of such Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
certified or official bank check or checks, payable to the order of the Selling
Stockholder, in New York Clearing House (next day) funds. The Company will cause
the certificates representing the Shares to be made available for checking and
packaging at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City time, on
............., 1995 or such other time and date as Goldman, Sachs & Co. and the
Selling Stockholder may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs & Co.
in the written notice given by Goldman, Sachs & Co. of the Underwriters'
election to purchase such Optional Shares, or such other time and date as
Goldman, Sachs & Co. and the Selling Stockholder may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery", such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery", and each
such time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 of the U.S. Underwriting Agreement,
including the cross-receipt for the Shares and any additional documents
requested by the Underwriters pursuant to Section 7 of the U.S. Underwriting
Agreement, will be delivered at the offices of Bracewell &
3
Patterson, L.L.P., South Tower Pennzoil Place, 711 Louisiana Street, Suite 2900,
Houston, Texas 77002-2781 (the "Closing Location"), and the Shares will be
delivered at the Designated Office, all at the Time of Delivery. A meeting will
be held at the Closing Location at ..............p.m., New York City time, on
the New York Business Day next preceding the Time of Delivery, at which meeting
the final drafts of the documents to be delivered pursuant to the preceding
sentence will be available for review by the parties hereto. For the purposes of
this Section 4, "New York Business Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in New York are generally authorized or obligated by law or executive order to
close.
5. The Company hereby makes with the Underwriters the same agreements as
are set forth in Section 5 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
6. The Company, the Selling Stockholder, and the Underwriters hereby agree
with respect to certain expenses on the same terms as are set forth in Section 6
of the U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.
7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery to the condition that all representations and
warranties and other statements of the Company and the Selling Stockholder
herein are, at and as of such Time of Delivery, true and correct, the condition
that the Company and the Selling Stockholder shall have performed all of their
respective obligations hereunder theretofore to be performed, and additional
conditions identical to those set forth in Section 7 of the U.S. Underwriting
Agreement, which Section is incorporated herein by this reference.
8. (a) The Company and the Selling Stockholder, jointly and severally, will
indemnify and hold harmless each Underwriter against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; PROVIDED, HOWEVER, that the
Company and the Selling Stockholder shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through GSI expressly for use therein; and provided, further, that the Company
and the Selling Stockholder shall not be liable to any Underwriter under this
indemnity agreement in this subsection (a) with respect to any Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact such Underwriter sold Shares to a person as to
whom it shall be established that there was not sent or given, at or
4
prior to the written confirmation of such sale, a copy of the Prospectus or of
the Prospectus as then amended or supplemented in any case where such delivery
is required by the Act if the Company has previously furnished copies thereof to
such Underwriter and the loss, claim, damage or liability of such Underwriter
results from an untrue statement or omission of a material fact contained in the
Preliminary Prospectus which was corrected in the Prospectus or in the
Prospectus as then amended or supplemented.
(b) Each Underwriter will indemnify and hold harmless the Company and the
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or the Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through GSI expressly for use therein; and will reimburse the
Company and the Selling Stockholder for any legal or other expenses reasonably
incurred by the Company or the Selling Stockholder in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
5
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholder on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholder on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholder on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Shares purchased under this
Agreement (before deducting expenses) received by the Company and the Selling
Stockholder bear to the total underwriting discounts and commissions received by
the Underwriters with respect to the Shares purchased under this Agreement, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or the Selling Stockholder on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Selling Stockholder and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
PRO RATA allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.
(e) The obligations of the Company and the Selling Stockholder under this
Section 8 shall be in addition to any liability which the Company and the
Selling Stockholder may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters
6
under this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company or the Selling Stockholder within the meaning of
the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Shares,
then the Selling Stockholder shall be entitled to a further period of thirty-six
hours within which to procure another party or other parties satisfactory to you
to purchase such Shares on such terms. In the event that, within the respective
prescribed periods, you notify the Selling Stockholder that you have so arranged
for the purchase of such Shares, or the Selling Stockholder notifies you that it
has so arranged for the purchase of such Shares, you or the Selling Stockholder
shall have the right to postpone such Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholder as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Selling Stockholder shall have the right to require each non-defaulting
Underwriter to purchase the number of shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Selling
Stockholder as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Selling
Stockholder shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a defaulting
Underwriter or Underwriters, then this Agreement (or, with respect to the Second
Time of Delivery, the obligations of the Underwriters to purchase and of the
Selling Stockholder to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
or the Selling Stockholder, except for the expenses to be borne by the Company
and the Selling Stockholder and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
7
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Selling Stockholder and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or the Selling Stockholder, or any officer or
director or controlling person of the Company or any controlling person of the
Selling Stockholder, and shall survive delivery of and payment for the Shares.
Anything herein to the contrary notwithstanding, the indemnity agreement of
the Company in subsection (a) of Section 8 hereof, the representations and
warranties in subsections (a)(ii), (a)(iii) and (a)(iv) of Section 1 of the U.S.
Underwriting Agreement incorporated by reference herein and any representation
or warranty as to the accuracy of the Registration Statement or the Prospectus
contained in any certificate furnished by the Company pursuant to Section 7
hereof, insofar as they may constitute a basis for indemnification for
liabilities (other than payment by the Company of expenses incurred or paid in
the successful defense of any action, suit or proceeding) arising under the Act,
shall not extend to the extent of any interest therein of a controlling person
or partner of an Underwriter who is a director, officer or controlling person of
the Company when the Registration Statement has become effective, except in each
case to the extent that an interest of such character shall have been determined
by a court of appropriate jurisdiction as not against public policy as expressed
in the Act. Unless in the opinion of counsel for the Company the matter has been
settled by controlling precedent, the Company will, if a claim for such
indemnification is asserted, submit to a court of appropriate jurisdiction the
question whether such interest is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholder shall then be under any
liability to any Underwriter except as provided in Section 6 and Section 8
hereof; but, if for any other reason, any Shares are not delivered by or on
behalf of the Selling Stockholder as provided herein, the Selling Stockholder
will reimburse the Underwriters through GSI for all out-of-pocket expenses
approved in writing by GSI, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company and the
Selling Stockholder shall then be under no further liability to any Underwriter
in respect of the Shares not so delivered except as provided in Sections 6 and 8
hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives of the
Underwriters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; if to the Selling
Stockholder shall be delivered or sent by mail, telex or facsimile transmission
to Selling Stockholder, Attention: Secretary, at its address set forth in
8
Schedule II hereto; and if to the Company shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its address set
forth in its Underwriters' Questionnaire, or telex constituting such
Questionnaire, which address will be supplied to the Company or the Selling
Stockholder by GSI upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and the Selling Stockholder and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No purchaser of any of the Shares from any Underwriter
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign and
return to us seven counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and the Selling Stockholder. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in a form of Agreement among Underwriters (International Version), the
form of which shall be furnished to the Company and the Selling Stockholder for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
9
Very truly yours,
Enron Oil & Gas Company
By: ...........................................
Name:
Title:
Enron Corp.
By: ...........................................
Name:
Title:
Accepted as of the date hereof at......,
..........................:
Goldman Sachs International
SBC Warburg
By: Goldman Sachs International
By: .....................................................
(Attorney-in-fact)
On behalf of each of the Underwriters
10
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co....................................................
SBC Warburg............................................................
Total.............................................
</TABLE>
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
---------------- ------------------
<S> <C> <C>
The Selling Stockholder:
Enron Corp.
1400 Smith Street
Houston, Texas 77002
Telex:
Facsimile Transmission:
</TABLE>
EXHIBIT 1(c)
ENRON CORP.
% EXCHANGEABLE NOTES DUE, 1998
UNDERWRITING AGREEMENT
(U.S. VERSION)
. . . . . , 1995
Goldman, Sachs & Co.,
Merrill Lynch & Co.
Salomon Brothers Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Enron Corp., a Delaware corporation (the "Company"), proposes, subject to
the terms and conditions stated herein, to sell to the Underwriters named in
Schedule I hereto (the "Underwriters") an aggregate of 10,000,000 Exchangeable
Notes (the "Firm Notes") and, at the election of the Underwriters, up to
1,000,000 additional Exchangeable Notes (the "Optional Notes"), of __%
Exchangeable Notes due _____, 1998 of the Company ("Exchangeable Notes") (the
Firm Notes and the Optional Notes which the Underwriters elect to purchase
pursuant to Section 2 hereof being collectively called the "Notes"). At maturity
(including as a result of acceleration or otherwise), the principal amount of
each Note will be mandatorily exchangeable by the Company into shares of common
stock of Enron Oil & Gas Company, a Delaware corporation ("EOG"), $.01 par value
("EOG Common Stock"), (or at the Company's option, cash with an equal value) at
the rate specified in the Company Prospectus (as defined below).
The Company and EOG are concurrently entering into an agreement (the "U.S.
Common Stock Underwriting Agreement") providing for the sale by the Company of
21,600,000 shares of EOG Common Stock (24,840,000 shares if the underwriters'
over-allotment option in such offering is exercised in full) through Goldman,
Sachs & Co. and Smith Barney Inc. as representatives of the several underwriters
named therein and an agreement (together with the U.S. Common Stock
1
Underwriting Agreement, the "Common Stock Underwriting Agreements") providing
for the sale by the Company of 5,400,000 shares of EOG Common Stock, (6,210,000
shares if the underwriters' over-allotment option in such offerings is exercised
in full) through Goldman Sachs International and SBC Warburg as representatives
of the several underwriters named therein. The closings under this Agreement are
not conditioned on the closings under the Common Stock Underwriting Agreements.
1. (a) The Company represents and warrants to, and agrees with, each of the
Underwriters and EOG that:
(i) A registration statement on Form S-3 (File No. 33-....) (the
"Initial Company Registration Statement") in respect of the Firm Notes
and Optional Notes has been filed or transmitted for filing with the
Securities and Exchange Commission (the "Commission"); the Initial
Company Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto but including all documents incorporated by reference
in the prospectus contained therein, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering ("Rule 462(b) Registration Statement"), filed pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the
"Act"), which became effective upon filing, no other document with
respect to the Initial Company Registration Statement or document
incorporated by reference therein has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the
Initial Company Registration Statement, any post-effective amendment
thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or, to the
Company's knowledge, threatened by the Commission (any preliminary
prospectus included in the Initial Company Registration Statement or
filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act, is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial Company
Registration Statement, any post-effective amendment thereto or the
Rule 462(b) Registration Statement, if any, including all exhibits
thereto but excluding the Form T-1 and including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section
5(a)(i) hereof and deemed by virtue of Rule 430A under the Act to be
part of the registration statement at the time it was declared
effective and (ii) the documents incorporated by reference in the
prospectus contained in the Initial Company Registration Statement at
the time such part of the registration statement became effective or
such part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of
the registration statement became effective, are hereinafter
collectively called the "Company Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Company Prospectus"; any reference
herein to any Company Preliminary Prospectus or the Company Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act, as of
the date of such Company Preliminary Prospectus or Company Prospectus,
as the case may be; any reference to any amendment or supplement to any
Company Preliminary Prospectus or the Company Prospectus shall be
deemed to refer to and include any documents filed after the date of
such Company Preliminary Prospectus or Company Prospectus, as the case
may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"),
2
and incorporated by reference in such Company Preliminary Prospectus or
Company Prospectus, as the case may be; and any reference to any
amendment to the Initial Company Registration Statement shall be deemed
to refer to and include any annual report of the Company filed pursuant
to Section 13(a) or 15(d) of the Exchange Act after the effective date
of the Company Registration Statement that is incorporated by reference
in the Registration Statement);
(ii) No order preventing or suspending the use of any Company
Preliminary Prospectus has been issued by the Commission, and each
Company Preliminary Prospectus, at the time of filing thereof,
conformed in all material respects to the requirements of the Act and
the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and the rules and regulations of the Commission thereunder, and
did not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; PROVIDED, HOWEVER, that this representation
and warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Goldman, Sachs & Co. expressly
for use therein;
(iii) The documents incorporated by reference in the Company
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents
so filed and incorporated by reference in the Company Prospectus or any
further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will
conform in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iv) The Company Registration Statement conforms, and the Company
Prospectus and any further amendments or supplements to the Company
Registration Statement or the Company Prospectus will conform, in all
material respects to the requirements of the Act and the Trust
Indenture Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as of the Company Registration Statement and any amendment thereto and
as of the applicable filing date as to the Company Prospectus and any
amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
3
(v) Neither the Company nor any of its subsidiaries listed on
Schedule II hereto ("Material Subsidiaries") has sustained since the
date of the latest audited financial statements included or
incorporated by reference in the Company Prospectus any material loss
or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Company Prospectus; and, since
the respective dates as of which information is given in the Company
Registration Statement and the Company Prospectus, there has not been
any change in the capital stock (other than changes in common stock
resulting from employee benefit plan or dividend reinvestment plan
transactions, purchases pursuant to the Company's stock repurchase
program, conversions of outstanding convertible securities and other
changes occurring in the ordinary course of business, as disclosed to
the Underwriters in writing) or combined short-term and long-term debt
(except as incurred in the ordinary course of business, as disclosed to
the Underwriters in writing) of the Company or any change in the
capital stock of any of its Material Subsidiaries or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Company Prospectus;
(vi) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Company
Prospectus, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws of
each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the failure
to be so qualified in any such jurisdiction; and each Material
Subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in
the Company Prospectus, and has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction;
(vii) The Company has an authorized capitalization as set forth in
the Company Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description of the
capital stock contained in the Company Prospectus; all of the issued
shares of capital stock of each Material Subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (other than contractual covenants
restricting disposition thereof, none of which relate to the capital
stock of EOG), except for (A) EOG, 80% of which capital stock is, prior
to the sales to be effected pursuant to the Common Stock Underwriting
Agreements, owned by the Company, (B) Citrus Corp., 50% of which
capital stock is indirectly owned by the Company, and (C) Florida Gas
Transmission Company, 100% of which capital stock is
4
owned by Citrus Corp.; and the Company has good and valid title to all
of the shares of EOG Common Stock to be delivered upon exchange of the
Notes, and owns such shares free and clear of all liens, encumbrances,
equities or claims;
(viii) The Notes have been duly authorized and, when issued and
delivered pursuant to this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the Indenture dated as of November 1, 1985 between the
Company and Harris Trust Savings Bank, as Trustee (the "Trustee"), as
supplemented by the First Supplemental Indenture dated as of ________,
1995 by and between the Company and the Trustee (the "First
Supplemental Indenture", such Indenture, as so supplemented by the
First Supplemental Indenture, being herein referred to as the
"Indenture"), under which the Notes are to be issued, which is
substantially in the form filed as an exhibit to the Company
Registration Statement; the Indenture has been duly authorized and duly
qualified under the Trust Indenture Act; the Indenture dated as of
November 1, 1985 has been duly executed and delivered by the Company
and the Trustee, and when the First Supplemental Indenture has been
executed and delivered by the Company and the Trustee, the Indenture
will constitute a valid and legally binding instrument, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Notes and the Indenture will conform to the
descriptions thereof in the Company Prospectus;
(ix) The issue and sale of the Notes by the Company hereunder and
the compliance with all of the provisions of the Notes, the Indenture
and this Agreement and the consummation of the transactions herein and
therein contemplated (including the delivery of the EOG Common Stock
upon exchange of the Notes), will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or the charter or by-laws of
any of its subsidiaries or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties; and
no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the sale of the Notes or the consummation by the
Company of the transactions contemplated by this Agreement (including
the delivery of the EOG Common Stock upon exchange of the Notes),
except the registration under the Act of the Notes, the EOG Common
Stock deliverable upon exchange of the Notes, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Trust Indenture Act or state or foreign securities
or Blue Sky laws in connection with the purchase and distribution of
the Notes by the Underwriters;
(x) Neither the Company nor any of its subsidiaries is in violation
of its Certificate of Incorporation or charter, as the case may be, or
By-laws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
5
agreement or instrument to which it is a party or by which it or any
of its properties may be bound;
(xi) The statements set forth in the Company Prospectus under the
caption "Description of the Exchangeable Notes", insofar as they
purport to constitute a summary of the terms of the Exchangeable Notes,
and under the caption "Underwriting", insofar as they purport to
describe the provisions of the laws and documents referred to therein,
are accurate, complete and fair;
(xii) Other than as set forth or contemplated in the Company
Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries; and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(xiii) Neither the Company nor any of its subsidiaries has taken or
will take, directly or indirectly, any action designed to, or that
might reasonably be expected to, cause or result in the stabilization
or manipulation of the price of the Notes or the EOG Common Stock;
(xiv) The Company is not and, after giving effect to the offering
and sale of the Notes (and, if consummated, the sale of the shares of
EOG Common Stock pursuant to the Common Stock Underwriting Agreements),
will not be an "investment company" or an entity "controlled" by an
"investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act");
(xv) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes; and
(xvi) Arthur Andersen LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
(b) EOG represents and warrants to, and agrees with, each of the
Underwriters and the Company that:
(i) A registration statement on Form S-3 (File No. 33-....) (the
"Initial EOG Registration Statement") in respect of the EOG Common
Stock deliverable upon exchange of the Notes has been filed with the
Commission; the Initial EOG Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you
for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering ("Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Act, which became
6
effective upon filing, no other document with respect to the Initial
EOG Registration Statement or document incorporated by reference
therein has heretofore been filed with the Commission; and no stop
order suspending the effectiveness of the Initial EOG Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or, EOG's knowledge, threatened by the
Commission (any preliminary prospectus included in the Initial EOG
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act),
is hereinafter called an "EOG Preliminary Prospectus"; the various
parts of the Initial EOG Registration Statement, any post-effective
amendment thereto or the Rule 462(b) Registration Statement, if any,
including all exhibits thereto and including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section
5(b)(i) hereof and deemed by virtue of Rule 430A under the Act to be
part of the registration statement at the time it was declared
effective and (ii) the documents incorporated by reference in the
prospectus contained in the Initial EOG Registration Statement at the
time such part of the registration statement became effective or such
part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of
the registration statement became effective, are hereinafter
collectively called the "EOG Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "EOG Prospectus"; any reference herein
to any EOG Preliminary Prospectus or the EOG Prospectus shall be deemed
to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of such
EOG Preliminary Prospectus or EOG Prospectus, as the case may be; any
reference to any amendment or supplement to any EOG Preliminary
Prospectus or the EOG Prospectus shall be deemed to refer to and
include any documents filed after the date of such EOG Preliminary
Prospectus or EOG Prospectus, as the case may be, under the Exchange
Act, and incorporated by reference in such EOG Preliminary Prospectus
or EOG Prospectus, as the case may be; and any reference to any
amendment to the Initial EOG Registration Statement shall be deemed to
refer to and include any annual report of EOG filed pursuant to Section
13(a) or 15(d) of the Exchange Act after the effective date of the EOG
Registration Statement that is incorporated by reference in the EOG
Registration Statement);
(ii) No order preventing or suspending the use of any EOG
Preliminary Prospectus has been issued by the Commission, and each EOG
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act, and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to EOG by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iii) The documents incorporated by reference in the EOG
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of
7
such documents contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and any
further documents so filed and incorporated by reference in the EOG
Prospectus or any further amendment or supplement thereto, when such
documents become effective or are filed with the Commission, as the
case may be, will conform in all material respects to the requirements
of the Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to EOG by an
Underwriter through Goldman, Sachs & Co. expressly for use therein;
(iv) The EOG Registration Statement conforms, and the EOG
Prospectus and any further amendments or supplements to the EOG
Registration Statement or the EOG Prospectus will conform, in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and do not and will not, as of
the applicable effective date as of the EOG Registration Statement and
any amendment thereto and as of the applicable filing date as to the
EOG Prospectus and any amendment or supplement thereto, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, HOWEVER, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to EOG by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(v) Neither EOG nor any of its subsidiaries listed on Schedule III
hereto (the "EOG Material Subsidiaries") has sustained since the date
of the latest audited financial statements included or incorporated by
reference in the EOG Prospectus any material loss or interference with
its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the EOG Prospectus; and, since the respective dates as
of which information is given in the EOG Registration Statement and the
EOG Prospectus, there has not been any change in the capital stock or
any increase in long-term debt of the EOG or any of the EOG Material
Subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity
or results of operations of EOG and its subsidiaries, otherwise than as
set forth or contemplated in the EOG Prospectus;
(vi) EOG has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the EOG Prospectus, and has
been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each Material Subsidiary of the
Company has been duly incorporated and is validly existing as a
corporation in good standing
8
under the laws of its jurisdiction of incorporation, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified as
a foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require
qualification, or is subject to no material liability or disability by
reason of the failure to be so qualified in any such jurisdiction;
(vii) EOG and its subsidiaries have good and marketable title to
their producing oil and gas properties, free and clear of all liens,
encumbrances and defects, except (a) those described in the EOG
Prospectus, (b) liens securing taxes and other governmental charges, or
claims of materialmen, mechanics and similar persons, not yet due and
payable, (c) liens and encumbrances under operating agreements,
unitization and pooling agreements, and gas sales contracts, securing
payment of amounts not yet due and payable and of a scope and nature
customary in the oil and gas industry and (d) liens, encumbrances and
defects that do not, singly or in the aggregate, materially affect the
value of such oil and gas properties or materially interfere with the
use made or proposed to be made of such properties by EOG and its
subsidiaries;
(viii) EOG has an authorized capitalization as set forth in the EOG
Prospectus, and all of the issued shares of capital stock of EOG
(including the shares of EOG Common Stock deliverable upon exchange of
the Notes) have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description of the EOG
capital stock contained in the EOG Prospectus; and all of the issued
shares of capital stock of each EOG Material Subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable
and (except for directors' qualifying shares) are owned directly or
indirectly by EOG, free and clear of all liens, encumbrances, equities
or claims;
(ix) The issuance and sale of the Notes by the Company, the
compliance by EOG with all of the provisions of this Agreement and the
consummation of the transactions herein and therein contemplated
(including the delivery of the EOG Common Stock upon exchange of the
Notes), will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which EOG or any of its subsidiaries is a party or by
which EOG or any of its subsidiaries is bound or to which any of the
property or assets of EOG or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of EOG or the charter or
by-laws of any of its subsidiaries or any statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over EOG or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required to be obtained by EOG for the sale of the
Notes or the consummation by EOG of the transactions contemplated by
this Agreement (including the delivery of the EOG Common Stock upon
exchange of the Notes), except the registration under the Act of the
Notes, the EOG Common Stock deliverable upon exchange of the Notes, and
such consents, approvals, authorizations, registrations or
qualifications as may be required under state
9
securities or Blue Sky laws in connection with the purchase and
distribution of the Notes by the Underwriters;
(x) Neither EOG nor any of its subsidiaries is in violation of its
Certificate of Incorporation or charter, as the case may be, or By-laws
or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument to which it is a party or by which it or any of
its properties may be bound;
(xi) The shares of EOG Common Stock deliverable upon exchange of
the Notes have been duly and validly authorized and issued and are
fully paid and non-assessable and conform to the description of the EOG
Common Stock contained in the EOG Prospectus;
(xii) The statements set forth in the EOG Prospectus under the
caption "Description of Common Stock", insofar as they purport to
constitute a summary of the terms of the EOG Common Stock, and under
the caption "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate,
complete and fair;
(xiii) Other than as set forth or contemplated in the EOG
Prospectus, there are no legal or governmental proceedings pending to
which EOG or any of its subsidiaries is a party or of which any
property of EOG or any of its subsidiaries is the subject which, if
determined adversely to EOG or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders' equity
or results of operations of EOG and its subsidiaries; and, to the best
of EOG's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(xiv) Neither EOG nor any of its subsidiaries has taken or will
take, directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in the stabilization or
manipulation of the price of the Notes or the EOG Common Stock;
(xv) EOG is not and, after giving effect to the offering and sale
of the Notes (and, if consummated, the sale of the shares of EOG Common
Stock pursuant to the Common Stock Underwriting Agreements), will not
be an "investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act");
(xvi) Neither EOG nor any of its affiliates does business with the
government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes; and
(xvii) Arthur Andersen LLP, who have certified certain financial
statements of EOG and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and
10
not jointly, to purchase from the Company, at a purchase price per Note of
$...................., the number of Firm Notes to be purchased by such
Underwriter as set forth opposite the name of such Underwriter in Schedule I
hereto and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Notes as provided below, the Company
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the purchase price
per note set forth in clause (a) of this Section 2, that portion of the number
of Optional Notes as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional Notes) determined by multiplying
such number of Optional Notes by a fraction the numerator of which is the
maximum number of Optional Notes which such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Notes that all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 1,000,000 Optional Notes, at the purchase price per Note
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Notes. Any such election to purchase
Optional Notes may be exercised by written notice from you to the Company, given
within a period of 30 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Notes to be purchased and the date on
which such Optional Notes are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Company otherwise agree in writing, earlier than two or
later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Notes, the
several Underwriters propose to offer the Firm Notes for sale upon the terms and
conditions set forth in the Company Prospectus.
4. (a) The Notes to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered
in such names as Goldman, Sachs & Co. may request upon at least
forty-eight hours' prior notice to the Company shall be delivered by
or on behalf of the Company to Goldman, Sachs & Co., through the
facilities of The Depository Trust Company ("DTC"), for the account of
such Underwriter, against payment by or on behalf of such Underwriter
of the purchase price therefor by certified or official bank check or
checks, payable to the order of the Company in New York Clearing House
(next day) funds. The Company will cause the certificates representing
the Notes to be made available for checking and packaging at least
twenty- four hours prior to the Time of Delivery (as defined below)
with respect thereto at the office of DTC or its designated custodian
(the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Notes, 9:30 a.m., New York
City time, on ............., 1995 or on such other time and date as
Goldman, Sachs & Co. and the Company may agree upon in writing, and,
with respect to the Optional Notes, 9:30 a.m., New York City time, on
the date specified by Goldman, Sachs & Co. in the written notice given
by Goldman, Sachs & Co. of the Underwriters' election to purchase such
Optional Notes, or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing. Such time and date for
delivery of the Firm Notes is herein called the "First Time of
Delivery", such time and date for delivery of the Optional Notes, if
not the First Time of Delivery, is herein called the "Second Time
11
of Delivery", and each such time and date for delivery is herein called
a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including
the cross-receipt for the Notes and any additional documents requested
by the Underwriters pursuant to Section 7(l) hereof, will be delivered
at the offices of Bracewell & Patterson, L.L.P., 711 Louisiana Street,
Houston, Texas 77002 (the "Closing Location"), and the Notes will be
delivered at the Designated Office, all at each Time of Delivery. A
meeting will be held at the Closing Location at ..............p.m., New
York City time, on the New York Business Day next preceding each Time
of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to
close.
5. (a) The Company agrees with each of the Underwriters:
(i) To prepare the Company Prospectus in a form approved by you and
to file such Company Prospectus pursuant to Rule 424(b) under the Act
not later than the Commission's close of business on the second
business day following the execution and delivery of this Agreement,
or, if applicable, such earlier time as may be required by Rule
430A(a)(3) under the Act; to make no further amendment or any
supplement to the Company Registration Statement or Company Prospectus
prior to the last Time of Delivery which shall be disapproved by you
promptly after reasonable notice thereof; to advise you, promptly after
it receives notice thereof, of the time when any amendment to the
Company Registration Statement has been filed or becomes effective or
any supplement to the Company Prospectus or any amended Company
Prospectus has been filed and to furnish you with copies thereof; to
file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Company Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering or
sale of the Notes; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Company Preliminary
Prospectus or prospectus, of the suspension of the qualification of the
Notes for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request
by the Commission for the amending or supplementing of the Company
Registration Statement or Company Prospectus or for additional
information; and, in the event of the issuance of any stop order or of
any order preventing or suspending the use of any Company Preliminary
Prospectus or prospectus or suspending any such qualification, promptly
to use its best efforts to obtain the withdrawal of such order;
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the Notes for offering and sale under the
securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Notes, provided that in connection
12
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(iii) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Company
Prospectus in New York City in such quantities as you may reasonably
request, and, if the delivery of a prospectus is required at any time
prior to the expiration of nine months after the time of issue of the
Company Prospectus in connection with the offering or sale of the Notes
and if at such time any events shall have occurred as a result of which
the Company Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such Company Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Company
Prospectus or to file under the Exchange Act any document incorporated
by reference in the Company Prospectus in order to comply with the Act
or the Exchange Act, to notify you and upon your request to file such
document and to prepare and furnish without charge to each Underwriter
and to any dealer in securities as many copies as you may from time to
time reasonably request of an amended Company Prospectus or a
supplement to the Company Prospectus which will correct such statement
or omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Notes at any time nine months or more after the time of issue of the
Company Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies
as you may request of an amended or supplemented Company Prospectus
complying with Section 10(a)(3) of the Act;
(iv) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on
the date of this Agreement, and the Company shall at the time of filing
either pay to the Commission the filing fee for the Rule 462(b)
Registration Statement or give irrevocable instructions for the payment
of such fee pursuant to Rule 111(b) under the Act;
(v) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Company Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Company and
its subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations of the Commission
thereunder (including, at the option of the Company, Rule 158);
(vi) During the period beginning from the date hereof and
continuing to and including the date 270 days after the date of the EOG
Prospectus, not to, except pursuant to the Common Stock Underwriting
Agreements, (x) offer, sell, contract to sell or otherwise dispose of
any shares of EOG Common Stock, or securities convertible into or
exchangeable for EOG Common Stock, or rights or warrants to acquire EOG
Common Stock, or any other securities substantially similar to EOG
Common Stock or Notes except as may be required pursuant to the
Indenture, or (y) file any registration statement under the Act with
respect to securities convertible into or exchangeable for
13
EOG Common Stock, rights or warrants to acquire EOG Common Stock, or
any other securities substantially similar to EOG Common Stock or
Notes, in each case without the prior written consent of Goldman, Sachs
& Co.;
(vii) To deliver to EOG copies of the opinion and certificates
delivered pursuant to Sections 7(c) and (m), in each case also
addressed to EOG or otherwise entitling EOG to rely on such opinions
and certificates as if they were so addressed;
(viii) During a period of five years from the effective date of the
Company Registration Statement, to supply to the Representatives of the
Underwriters, and to each other Underwriter who may so request in
writing, copies of any financial statements and other periodic and
special reports as the Company may from time to time distribute
generally to its lenders or to the holders of any class of its
securities registered under Section 12 of the Exchange Act and to
furnish to the Underwriters or the Representatives of the Underwriters
a copy of each annual or other report it shall be required to file with
the Commission; and
(ix) To use its best efforts to list, subject to notice of issuance,
the Notes on the New York Stock Exchange.
(b) EOG agrees with each of the Underwriters:
(i) To prepare the EOG Prospectus in a form approved by you and to
file such EOG Prospectus pursuant to Rule 424(b) under the Act not
later than the Commission's close of business on the second business
day following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act; to make no further amendment or any supplement to the
EOG Registration Statement or EOG Prospectus prior to the last Time of
Delivery which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice
thereof, of the time when any amendment to the EOG Registration
Statement has been filed or becomes effective or any supplement to the
EOG Prospectus or any amended EOG Prospectus has been filed and to
furnish you with copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by EOG
with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act subsequent to the date of the EOG Prospectus and for
so long as the delivery of a prospectus is required in connection with
the offering or sale of the Notes; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any EOG
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the EOG Common Stock for delivery in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the EOG Registration Statement or EOG Prospectus or
for additional information; and, in the event of the issuance of any
stop order or of any order preventing or suspending the use of any EOG
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(ii) Promptly from time to time to take such action as you may
reasonably request to qualify the EOG Common Stock deliverable upon
exchange of the Notes under the securities laws of such jurisdictions
as you may request and to comply with
14
such laws so as to permit the continuance of sales and dealings therein
in such jurisdictions for as long as may be necessary to complete the
distribution of the Notes, provided that in connection therewith EOG
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction;
(iii) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the EOG Prospectus
in New York City in such quantities as you may reasonably request, and,
if the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the EOG Prospectus
in connection with the offering or sale of the Notes and if at such
time any events shall have occurred as a result of which the EOG
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made when such EOG Prospectus is
delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the EOG Prospectus
or to file under the Exchange Act any document incorporated by
reference in the EOG Prospectus in order to comply with the Act or the
Exchange Act, to notify you and upon your request to file such document
and to prepare and furnish without charge to each Underwriter and to
any dealer in securities as many copies as you may from time to time
reasonably request of an amended EOG Prospectus or a supplement to the
EOG Prospectus which will correct such statement or omission or effect
such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Notes at any time
nine months or more after the time of issue of the EOG Prospectus, upon
your request but at the expense of such Underwriter, to prepare and
deliver to such Underwriter as many copies as you may request of an
amended or supplemented EOG Prospectus complying with Section 10(a)(3)
of the Act;
(iv) If EOG elects to rely upon Rule 462(b), EOG shall file a Rule
462(b) Registration Statement with the Commission in compliance with
Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and EOG shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to
Rule 111(b) under the Act;
(v) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the EOG Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of EOG and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(vi) During the period beginning from the date hereof and
continuing to and including the date 270 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, other than pursuant to the Common
Stock Underwriting Agreements, any EOG Common Stock or any securities
of EOG that are substantially similar to the EOG Common Stock,
including but not limited to any securities that are convertible into
or exchangeable for, or that represent the right to receive, EOG Common
Stock or any such substantially similar
15
securities (other than pursuant to employee stock option plans existing
on the date of this Agreement), without the prior written consent of
Goldman, Sachs & Co., and to cause EOG's Chairman of the Board,
President and Chief Executive Officer to agree not to offer, sell,
contract to sell or otherwise dispose of any EOG Common Stock, any
securities of EOG substantially similar to the EOG Common Stock, or any
securities convertible into or exchangeable for EOG Common Stock or
such substantially similar securities (other than pursuant to employee
stock option plans existing on the date of this Agreement), during such
period, without the prior written consent of Goldman, Sachs & Co.;
(vii) To furnish to its stockholders as soon as practicable after
the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of EOG
and its subsidiaries certified by independent public accountants) and,
as soon as practicable after the end of each of the first three
quarters of each fiscal year (beginning with the fiscal quarter ending
after the effective date of the EOG Registration Statement),
consolidated summary financial information of EOG and its subsidiaries
for such quarter in reasonable detail;
(viii) To deliver to the Company, copies of the opinion and
certificates delivered pursuant to Sections 7(d) and (m), in each case
also addressed to the Company or otherwise entitling the Company to
rely on such opinions and certificates as if they were so addressed;
and
(ix) During a period of five years from the effective date of the
Company Registration Statement to furnish to you copies of all reports
or other communications (financial or other) furnished to
securityholders, and to deliver to you (i) as soon as they are
available, copies of any reports and financial statements furnished to
or filed with the Commission or any national securities exchange on
which any class of securities of EOG is listed; and (ii) such
additional information concerning the business and financial condition
of EOG as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent that the
accounts of EOG and its subsidiaries are consolidated in reports
furnished to its securityholders generally or to the Commission),
provided that prior to EOG's furnishing any such additional information
that is material and non-public you shall enter into such agreement
respecting the confidentiality thereof as EOG may reasonably request.
6. The Company and EOG covenant and agree with one another and the several
Underwriters that (a) the Company will pay or cause to be paid the following:
(i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Notes under the Act and
all other expenses in connection with the preparation, printing and filing of
the Company Registration Statement, any Company Preliminary Prospectus, the
Company Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the
Selling Agreements, the Indenture, the Blue Sky and Legal Investment Memorandum
and any other documents in connection with the offering, purchase, sale and
delivery of the Notes; (iii) all expenses in connection with the qualification
of the Notes for offering and sale under state securities laws as provided in
Section 5(a)(ii) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky and legal investment surveys; (iv) the filing fees incident to securing
any required
16
review by the National Association of Securities Dealers, Inc. of the terms of
the sale of the Notes; (v) the cost of preparing the Notes; (vi) the fees and
expenses of the Trustee and any agent of the Trustee and the fes and
disbursements of counsel to the Trustee in connection with the Indenture and the
Notes; (vii) any fees charged by securities rating agencies for rating the
Notes; and (viii) all other costs and expenses incident to the performance of
its obligations hereunder which are not otherwise specifically provided for in
this Section; and (b) EOG will pay or cause to be paid the following: (i) the
fees, disbursements and expenses of EOG's counsel and accountants in connection
with the registration of the EOG Common Stock under the Act and all other
expenses in connection with the preparation, printing and filing of the EOG
Registration Statement, any EOG Preliminary Prospectus, the EOG Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Blue Sky Memorandum and any Legal Investment Memorandum and any other
documents in connection with the EOG Common Stock deliverable upon exchange of
the Notes; (iii) all expenses in connection with the qualification of the EOG
Common Stock deliverable upon exchange of the Notes under state securities laws
as provided in Section 5(b)(ii) hereof, including the fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with such Blue Sky or legal investment surveys; (iv) the cost of
preparing stock certificates; (v) the cost and charges of any transfer agent or
registrar; and (vi) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section. It is understood, however, that the Underwriters will pay all
of their own costs and expenses, including the fees and expenses of their
counsel and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Notes to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of EOG herein, are, at and as of such Time of Delivery, true and
correct, the condition that the Company and EOG each shall have performed all of
its obligations hereunder theretofore to be performed, and the following
additional conditions:
(a) Each of the Company Prospectus and the EOG Prospectus shall
have been filed with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing by the rules and
regulations under the Act and in accordance with Sections 5(a) and 5(b)
hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00
P.M., Washington, D.C. time, on the date of this Agreement; no stop
order suspending the effectiveness of the Company Registration
Statement or the EOG Registration Statement or any part thereof shall
have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;
(b) Bracewell & Patterson, L.L.P., counsel for the Underwriters,
shall have furnished to you such opinion or opinions (a draft of each
such opinion is attached as Annex III(a) hereto), dated such Time of
Delivery, with respect to certain of the matters covered in paragraphs
(i), (iii), (iv), (v), (xi) and (xii) of subsection (c) below and in
paragraphs (i), (ii), (vi), (x), (xi) and (xii) of subsection (d) below
as well as such other
17
related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(c) James V. Derrick, Jr., Senior Vice President and General
Counsel of the Company, shall have furnished to you his written opinion
(a draft of each such opinion is attached as Annex III(b) hereto),
dated as of such Time of Delivery, in form and substance satisfactory
to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
State of Delaware, with all necessary corporate power and
authority to own its properties and conduct its business as
described in the Company Prospectus;
(ii) Each Material Subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with all necessary
corporate power and authority to own its properties and conduct
its business as described in the Company Prospectus;
(iii) This Agreement has been duly authorized, executed and
delivered by the Company;
(iv) The Notes are in the form contemplated by the Indenture
and have been duly authorized by all necessary corporate action
on the part of the Company; the Notes, when executed and
authenticated as specified in the Indenture (which facts, such
counsel may state, such counsel has not determined by an
inspection of the individual Notes) and issued and delivered
against payment pursuant to this Agreement, will constitute
valid and legally binding obligations of the Company entitled to
the benefits provided by the Indenture; and the Notes and the
Indenture conform in all material respects to the descriptions
thereof in the Company Prospectus;
(v) The Indenture has been duly authorized, executed and
delivered by the Company, and assuming due authorization,
execution and delivery by the Trustee, constitutes a valid and
legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or similar laws
relating to or affecting creditor's rights generally and to
general equity principles; and the Indenture has been duly
qualified under the Trust Indenture Act;
(vi) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to
require such qualification, or is subject to no material
liability or disability by reason of failure to be so qualified
in any such jurisdiction (such counsel being entitled to rely in
respect of the opinion in this clause upon certificates of
public officials);
(vii) Each Material Subsidiary has been duly qualified as a
foreign corporation for the transaction of business and is in
good standing under the laws
18
of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, or is subject to no material liability or
disability by reason of failure to be so qualified in any such
jurisdiction; and all of the issued shares of capital stock of
each such subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for
directors' qualifying shares) are owned directly or indirectly
by the Company, free and clear of all liens, encumbrances,
equities or claims (other than contractual covenants restricting
the disposition thereof, none of which relate to the capital
stock of EOG) except for (A) EOG, 80% of which capital stock,
prior to the sale to be effected pursuant to the Common Stock
Underwriting Agreements, is owned by the Company, (B) Citrus
Corp., 50% of which capital stock is owned indirectly by the
Company and (C) Florida Gas Transmission Company, 100% of which
capital stock is owned by Citrus Corp. (such counsel being
entitled to rely in respect of the opinion in this clause upon,
in respect of matters of fact, certificates of officers of the
Company or its subsidiaries, provided that such counsel shall
state that he believes that he is justified in so relying upon
such certificates, or certificates of public officials);
(viii) To such counsel's knowledge and other than as set
forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of the Material
Subsidiaries is a party or of which any property of the Company
or any of the Material Subsidiaries is the subject which would
be required to be described in the Company Prospectus and is not
described as required;
(ix) The compliance by the Company with all of the
provisions of this Agreement and the consummation of the
transactions herein contemplated (including the delivery of the
shares of EOG Common Stock upon exchange of the Notes) will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its subsidiaries
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or the charter or by-laws of any of its subsidiaries or
any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any
of their properties;
(x) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental
agency or body is required for the sale of the Notes, the
delivery of the EOG Common Stock upon exchange of the Notes or
the consummation by the Company of the transactions contemplated
by this Agreement, except such as have been obtained under the
Act or the Trust Indenture Act, and such consents, approvals,
authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Notes by the
Underwriters;
19
(xi) The documents incorporated by reference in the Company
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and he
has no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(xii) The Company Registration Statement and the Company
Prospectus and any further amendments and supplements thereto
made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the
rules and regulations thereunder; although he does not assume
any responsibility for the accuracy, completeness or fairness of
the statements contained in the Company Registration Statement
or the Company Prospectus, he has no reason to believe that, as
of its effective date, the Company Registration Statement or any
further amendment thereto made by the Company prior to such Time
of Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the Company Prospectus or any further
amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and
related schedules and reports of experts pertaining to natural
resource reserves therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time of
Delivery, either the Company Registration Statement or the
Company Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules and
reports of experts pertaining to natural resource reserves
therein, as to which such counsel need express no opinion)
contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading; and he does not know of any amendment to the
Company Registration Statement required to be filed or of any
contracts or other
20
documents of a character required to be filed as an exhibit to
the Company Registration Statement or required to be
incorporated by reference into the Prospectus or required to be
described in the Company Registration Statement or the Company
Prospectus which are not filed or incorporated by reference or
described as required.
In rendering such opinion, such counsel may state that he
expresses no opinion as to the laws of any jurisdiction outside
the United States and, with respect to the opinion in paragraph
(iii) above, may rely, as to matters of New York law, upon the
opinion of Vinson & Elkins L.L.P. delivered pursuant to
subsection 7(e) hereof.
(d) Dennis M. Ulak, Vice President and General Counsel of
EOG, shall have furnished to you his written opinion (a draft of
each such opinion is attached as Annex III(c) hereto), dated as
of such Time of Delivery, in form and substance satisfactory to
you, to the effect that:
(i) EOG has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with all necessary corporate power and authority to
own its properties and conduct its business as described in the
Prospectus;
(ii) EOG has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of
EOG (including the shares of EOG Common Stock deliverable upon
exchange of the Notes) have been duly and validly authorized and
issued and are fully paid and non-assessable; and the EOG Common
Stock conforms to the description of such stock contained in the
EOG Prospectus;
(iii) EOG has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, or is subject to no material liability or
disability by reason of failure to be so qualified in any such
jurisdiction (such counsel being entitled to rely in respect of
the opinion in this clause upon opinions of local counsel and in
respect of matters of fact upon certificates of officers of EOG,
provided that such counsel shall state that he believes that
both you and he are justified in relying upon such opinions and
certificates);
(iv) Each EOG Material Subsidiary has been duly incorporated
and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation and has been duly
qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification, or is subject
to no material liability or disability by reason of failure to
be so qualified in any such jurisdiction; and all of the issued
shares of capital stock of each such subsidiary have been duly
and validly authorized and issued, are fully paid and
non-assessable, and (except for directors' qualifying shares)
are owned directly or indirectly by EOG, free and clear of all
liens, encumbrances, equities or claims (such counsel being
entitled to rely
21
in respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of
officers of EOG or its subsidiaries, provided that such counsel
shall state that he believes that both you and he are justified
in relying upon such opinions and certificates);
(v) To the best of such counsel's knowledge and other than
as set forth in the EOG Prospectus, there are no legal or
governmental proceedings pending to which EOG or any of its
subsidiaries is a party or of which any property of EOG or any
of its subsidiaries is the subject which, if determined
adversely to EOG or any of its subsidiaries, would individually
or in the aggregate have a material adverse effect on the
current or future consolidated financial position, stockholders'
equity or results of operations of EOG and its subsidiaries;
and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by EOG;
(vii) The compliance by EOG with all of the provisions of
this Agreement and the consummation of the transactions herein
contemplated (including the delivery of the EOG Common Stock
upon exchange of the Notes), will not conflict with or result in
a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to
such counsel to which EOG or any of its subsidiaries is a party
or by which EOG or any of its subsidiaries is bound or to which
any of the property or assets of EOG or any of its subsidiaries
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of EOG
or the charter or by-laws of any of its subsidiaries or any
statute or any order, rule or regulation known to such counsel
of any court or governmental agency or body having jurisdiction
over EOG or any of its subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required in connection with the
consummation by EOG of the transactions contemplated by this
Agreement, except the registration under the Act of the EOG
Common Stock, and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the registration
of the EOG Common Stock;
(ix) Neither EOG nor any of its subsidiaries is in violation
of its Certificate of Incorporation or charter, as the case may
be, or By-laws or in default in the performance or observance of
any material obligation, agreement, covenant or condition
contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is
a party or by which it or any of its properties may be bound;
(x) The statements set forth in the EOG Prospectus under the
caption "Description of Common Stock", insofar as they purport
to constitute a summary of the terms of the EOG Common Stock,
and under the caption "Underwriting",
22
insofar as they purport to describe the provisions of the laws
and documents referred to therein, are accurate, complete and
fair;
(xi) The documents incorporated by reference in the EOG
Prospectus or any further amendment or supplement thereto made
by EOG prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(xii) The EOG Registration Statement and the EOG Prospectus
and any further amendments and supplements thereto made by EOG
prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules
and regulations thereunder; although he does not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the EOG Registration Statement or the
EOG Prospectus, except for those referred to in the opinion in
subsection (x) of this Section 7(d), he has no reason to believe
that, as of its effective date, the EOG Registration Statement
or any further amendment thereto made by EOG prior to such Time
of Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the EOG Prospectus or any further
amendment or supplement thereto made by EOG prior to such Time
of Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time of
Delivery, either the EOG Registration Statement or the EOG
Prospectus or any further amendment or supplement thereto made
by EOG prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances
23
under which they were made, not misleading; and he does not know
of any amendment to the EOG Registration Statement required to
be filed or of any contracts or other documents of a character
required to be filed as an exhibit to the EOG Registration
Statement or required to be incorporated by reference into the
EOG Prospectus or required to be described in the EOG
Registration Statement or the EOG Prospectus which are not filed
or incorporated by reference or described as required.
In rendering such opinion, such counsel may state that he expresses no
opinion as to the laws of any jurisdiction outside the United States and, with
respect to the opinion in paragraph (iv) above, may rely, as to matters of New
York law, upon an opinion of Vinson & Elkins L.L.P. delivered therewith.
(e) Vinson & Elkins L.L.P., counsel to the Company and EOG, shall have
furnished to you their written opinion (a draft of each such opinion is attached
as Annex III(d) hereto) dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that:
(i) The Agreement has been duly authorized, executed and
delivered by the Company and EOG;
(ii) The statements set forth in the Company Prospectus
under the caption "Description of Exchangeable Notes", insofar
as they purport to constitute a summary of the terms of the
Exchangeable Notes, and under the caption "Underwriting",
insofar as they purport to describe the provisions of the laws
and docuemnts referred to therein, and the statements set forth
in the EOG Prospectus under the caption "Description of Capital
Stock", insofar as they purport to constitute a summary of the
terms of the EOG Common Stock, and under the caption
"Underwriting", insofar as they purport to describe the
provisions of the laws and docuemnts referred to therein, are
accurate, complete and fair;
(iii) Each of the Company and EOG is not, and after the
consummation of the transactions contemplated by this Agreement
and the Common Stock Underwriting Agreements will not be, an
"investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company
Act;
(iv) The documents incorporated by reference in the EOG
Prospectus or any further amendment or supplement thereto made
by EOG prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue
24
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made when such
documents were so filed, not misleading; and
(v) The documents incorporated by reference in the Company
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may be,
complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder; and they
have no reason to believe that any of such documents, when such
documents became effective or were so filed, as the case may be,
contained, in the case of a registration statement which became
effective under the Act, an untrue statement of a material fact
or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Exchange Act with the Commission, an untrue statement
of a material fact or omitted to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such documents
were so filed, not misleading; and
(vi) The EOG Registration Statement and the EOG Prospectus
and any further amendments and supplements thereto made by EOG
prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the rules
and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the EOG Registration Statement or the
EOG Prospectus, except for those referred to in the opinion in
subsection (ii) of this Section 7(e), they have no reason to
believe that, as of its effective date, the EOG Registration
Statements or any further amendment thereto made by EOG prior to
such Time of Delivery (other than the financial statements and
related schedules and reports of experts pertaining to natural
resource reserves therein, as to which such counsel need express
no opinion) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or
that, as of its date, the EOG Prospectus or any further
amendment or supplement thereto made by EOG prior to such Time
of Delivery (other than the financial statements and related
schedules and reports of experts pertaining to natural resource
reserves therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of such Time of
Delivery, either the EOG Registration Statement or the EOG
Prospectus or any further amendment or supplement thereto made
by EOG prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material
25
fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
and they do not know of any amendment to the EOG Registration
Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to
the EOG Registration Statement or required to be incorporated by
reference into the EOG Prospectus or required to be described in
the EOG Registration Statement or the EOG Prospectus which are
not filed or incorporated by reference or described as required.
(vii) The Company Registration Statement and the Company
Prospectus and any further amendments and supplements thereto
made by the Company prior to such Time of Delivery (other than
the financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the
rules and regulations thereunder; although they do not assume
any responsibility for the accuracy, completeness or fairness of
the statements contained in the Company Registration Statement
or the Company Prospectus, except for those referred to in the
opinion in subsection (ii) of this Section 7(e), they have no
reason to believe that, as of its effective date, the Company
Registration Statements or any further amendment thereto made by
the Company prior to such Time of Delivery (other than the
financial statements and related schedules and reports of
experts pertaining to natural resource reserves therein, as to
which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Company Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery
(other than the financial statements and related schedules and
reports of experts pertaining to natural resource reserves
therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made,
not misleading or that, as of such Time of Delivery, either the
Company Registration Statement or the Company Prospectus or any
further amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the financial
statements and related schedules and reports of experts
pertaining to natural resource reserves therein, as to which
such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and
they do not know of any amendment to the Company Registration
Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to
the Company Registration Statement or required to be
incorporated by reference into the Company Prospectus or
required to be described in the Company Registration Statement
or the Company Prospectus which are not filed or incorporated by
reference or described as required.
In rendering such opinion, such counsel may state that they express no
opinion as to the laws of any jurisdiction outside the United States.
26
(f) On the respective dates of the Company Prospectus and the EOG
Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New
York City time, on the respective effective dates of the Company Registration
Statement and the EOG Registration Statement and the effective date of any
post-effective amendment to the Company Registration Statement and the EOG
Registration Statement and also at each Time of Delivery, Arthur Andersen LLP
shall have furnished to you a letter or letters, dated the respective dates of
delivery thereof, in form and substance satisfactory to you, to the effect set
forth in Annex I hereto in the case of the Company and Annex II hereto in the
case of EOG (the executed copy of the letter in respect of the Company
Registration Statement delivered prior to the execution of this Agreement is
attached as Annex I(a) hereto and the executed copy of the letter in respect of
the EOG Registration Statement delivered prior to the execution of this
Agreement is attached as Annex II(a) hereto, and a draft of the form of letter
to be delivered on the effective date of any post-effective amendment to the
Company Registration Statement and as of each Time of Delivery is attached as
Annex I(b) hereto and a draft of the form of letter to be delivered on the
effective date of any post-effective amendment to the EOG Registration Statement
and as of each Time of Delivery is attached as Annex II(b) hereto);
(g) The Company and EOG shall have complied with the provisions of Section
5(a)(iii) and 5(b)(iii), as the case may be, with respect to the furnishing of
prospectuses on the New York Business Day next succeeding the date of this
Agreement;
(h) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included or
incorporated by reference in the Company Prospectus any loss or interference
with its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the Company
Prospectus; (ii) since the respective dates as of which information is given in
the Company Prospectus there shall not have been any change in the capital stock
or long-term debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth or
contemplated in the Company Prospectus; (iii) neither EOG nor any of its
subsidiaries shall have sustained since the date of the latest audited financial
statements included or incorporated by reference in the EOG Prospectus any loss
or interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the EOG Prospectus; and (iv) since the respective dates as of
which information is given in the EOG Prospectus there shall not have been any
change in the capital stock or long-term debt of EOG or any of its subsidiaries
or any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position, stockholders'
equity or results of operations of EOG and its subsidiaries, otherwise than as
set forth or contemplated in the EOG Prospectus, the effect of which, in any
such case described in clause (i), (ii), (iii) or (iv), is in the judgment of
the Representatives of the Underwriters so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Notes being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Company Prospectus;
(i) On or after the date hereof (i) no downgrading shall have occurred in
the rating accorded the Company's or EOG's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by the
Commission for purposes of Rule 436(g)(2)
27
under the Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative implications, its
rating of any of the Company's or EOG's debt securities;
(j) On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange (the "Exchange"); (ii) a suspension or
material limitation in trading in the Company's or EOG's securities on the
Exchange; (iii) a general moratorium on commercial banking activities declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Notes being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(k) The Notes, subject to notice of issuance, and the EOG Common Stock to
be delivered by the Company upon exchange of the Notes, shall have been duly
listed on the Exchange;
(l) The Company has obtained and delivered to the Underwriters executed
copies of an agreement from the Company's Chairman of the Board, President and
Chief Executive Officer to the effect set forth in Subsection 5(b)(v) hereof in
form and substance satisfactory to you;
(m) The Company and EOG shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company and of EOG
respectively, satisfactory to you as to the accuracy of the representations and
warranties of the Company and EOG respectively, herein at and as of such Time of
Delivery, as to the performance by the Company and EOG of all of their
respective obligations hereunder to be performed at or prior to such Time of
Delivery, and as to such other matters as you may reasonably request, and the
Company and EOG shall have furnished or caused to be furnished certificates as
to the matters set forth in subsections (a) and (h) of this Section, and as to
such other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Company Preliminary Prospectus, the Company
Registration Statement or the Company Prospectus (in each case including any EOG
Preliminary Prospectus or EOG Prospectus included therein), or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; PROVIDED, HOWEVER, that the Company shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Company Preliminary
Prospectus, the Company Registration Statement or the Company Prospectus or any
such amendment or supplement in reliance upon and in
28
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein; and provided, further,
that the Company shall not be liable to any Underwriter under this indemnity
agreement in this subsection (a) with respect to any Company Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact such Underwriter sold Notes to a person as to
whom it shall be established that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the applicable Company
Prospectus or of the applicable prospectus as then amended or supplemented in
any case where such delivery is required by the Act if the Company has
previously furnished copies thereof to such Underwriter and the loss, claim,
damage or liability of such Underwriter results from an untrue statement or
omission of a material fact contained in the Company Preliminary Prospectus
which was corrected in the Company Prospectus or in the Company Prospectus as
then amended or supplemented and delivered to the Underwriter.
(b) EOG will indemnify and hold harmless each Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any EOG Preliminary Prospectus, the EOG Registration
Statement or the EOG Prospectus, or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; PROVIDED, HOWEVER, that EOG shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any EOG Preliminary Prospectus, the EOG Registration
Statement or the EOG Prospectus or any such amendment or supplement in reliance
upon and in conformity with written information furnished to EOG by any
Underwriter through Goldman, Sachs & Co. expressly for use therein; and
provided, further, that EOG shall not be liable to any Underwriter under this
indemnity agreement in this subsection (b) with respect to any EOG Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact such Underwriter sold Notes to a person as to
whom it shall be established that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the applicable Company
Prospectus or of the applicable prospectus as then amended or supplemented in
any case where such delivery is required by the Act if the Company has
previously furnished copies thereof to such Underwriter and the loss, claim,
damage or liability of such Underwriter results from an untrue statement or
omission of a material fact contained in the EOG Preliminary Prospectus which
was corrected in the EOG Prospectus or the EOG Prospectus as then amended or
supplemented and delivered to the Underwriter.
(c) Each Underwriter will indemnify and hold harmless the Company and EOG
against any losses, claims, damages or liabilities to which the Company or EOG
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Company or EOG Preliminary Prospectus, the Company or EOG
Registration Statement or the Company or EOG Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements
29
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Company or EOG Preliminary Prospectus, the Company or
EOG Registration Statement or the Company or EOG Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or EOG by such Underwriter through Goldman,
Sachs & Co. expressly for use therein; and will reimburse the Company and EOG
for any legal or other expenses reasonably incurred by the Company or EOG in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against an indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (which shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(e) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and EOG on the one hand and the Underwriters on the
other from the offering of the Notes. If, however, the allocation provided by
the immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (d) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and EOG on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and EOG on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net
30
proceeds from the offering of the Notes purchased under this Agreement (before
deducting expenses) received by the Company and EOG bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Notes purchased under this Agreement, in each case as set forth in the
table on the cover page of the Company Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or EOG on the one
hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, EOG and the Underwriters agree that it would
not be just and equitable if contributions pursuant to this subsection (e) were
determined by PRO RATA allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (e). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (e) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (e), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Notes underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and EOG under this Section 8 shall be in
addition to any liability which the Company and EOG may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company or EOG and to
each person, if any, who controls the Company or EOG within the meaning of the
Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Notes which it has agreed to purchase hereunder at a Time of Delivery, you may
in your discretion arrange for you or another party or other parties to purchase
such Notes on the terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of such Notes,
then the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to you to
purchase such Notes on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for the
purchase of such Notes, or the Company notifies you that they have so arranged
for the purchase of such Notes, you or the Company shall have the right to
postpone such Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the Company or
EOG Registration Statement or the Company or EOG Prospectus, or in any other
documents or arrangements, and the Company and EOG agree to file promptly any
amendments to the Company or EOG Registration Statement or the Company or EOG
Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement
31
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Notes.
(b) If, after giving effect to any arrangements for the purchase of the
Notes of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Notes which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
of the Notes to be purchased at such Time of Delivery, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the number
of Notes which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Notes which such Underwriter
agreed to purchase hereunder) of the Notes of such defaulting Underwriter or
Underwriters for which such arrangements have not been made; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Notes of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Notes which
remains unpurchased exceeds one-eleventh of the aggregate number of all of the
Notes to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Notes of a defaulting Underwriter or Underwriters, then
this Agreement (or, with respect to the Second Time of Delivery, the obligations
of the Underwriters to purchase and of the Company to sell the Optional Notes)
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company or EOG except for the expenses to be borne by the
Company and EOG and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, EOG and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or EOG, or any officer or director or controlling person of the Company or of
EOG, and shall survive delivery of and payment for the Notes.
Anything herein to the contrary notwithstanding, the indemnity agreement of
the Company in subsection (a) of Section 8 hereof, the representations and
warranties in subsections (a)(ii), (a)(iii) and (a)(iv) of Section 1 hereof and
any representation or warranty as to the accuracy of the Company Registration
Statement or the Company Prospectus contained in any certificate furnished by
the Company pursuant to Section 7 hereof, the indemnity agreement of EOG in
subsection (b) of Section 8 hereof, the representations and warranties in
subsections (b)(ii), (b)(iii) and (b)(iv) of Section 1 hereof and any
representation or warranty as to the accuracy of the EOG Registration Statement
or the EOG Prospectus contained in any certificate furnished by the Company or
EOG pursuant to Section 7 hereof insofar as they may constitute a basis for
indemnification for liabilities (other than payment by the Company or EOG of
expenses incurred or paid in the successful defense of any action, suit or
proceeding) arising under the Act, shall not extend to the extent of any
interest therein of a controlling person or partner of an Underwriter who is a
director, officer or controlling person of the Company or EOG when the
applicable registration statement has become effective, except in each case to
the extent that an interest of such character shall have been determined by a
court of appropriate jurisdiction as not against public policy as expressed in
the Act. Unless in the opinion of
32
counsel for the Company and/or EOG, as the case may be, the matter has been
settled by controlling precedent, the Company and/or EOG, as the case may be,
will, if a claim for such indemnification is asserted, submit to a court of
appropriate jurisdiction the question of whether such interest is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor EOG shall then be under any liability to any Underwriter
except as provided in Sections 6 and 8 hereof; but, if for any other reason any
Notes are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all out-of-pocket
expenses approved in writing by you, including fees and disbursements of
counsel, reasonably incurred by the Underwriters in making preparations for the
purchase, sale and delivery of the Notes not so delivered, but the Company and
EOG shall then be under no further liability to any Underwriter in respect of
the Notes not so delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you or by Goldman, Sachs & Co.
on behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the Company Attention: Secretary, at its address set
forth in the Company Registration Statement; and if to EOG shall be delivered or
sent by mail, telex or facsimile transmission to the address of EOG set forth in
the EOG Registration Statement, Attention: Secretary; provided, however, that
any notice to an Underwriter pursuant to Section 8(d) hereof shall be delivered
or sent by mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire or telex constituting such
Questionnaire, which address will be supplied to the Company or EOG by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and EOG and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and EOG and
each person who controls the Company, EOG or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Notes from any Underwriter shall be deemed
a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties hereto
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall together constitute one and the same instrument.
33
If the foregoing is in accordance with your understanding, please sign and
return to us . . . counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and EOG. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company and EOG for examination upon request, but without warranty on your part
as to the authority of the signers thereof.
34
Very truly yours,
Enron Corp.
By: __________________________________________
Name:
Title:
Enron Oil & Gas Company
By: __________________________________________
Name:
Title:
Accepted as of the date hereof at ........,
...............:
Goldman, Sachs & Co.
Merrill Lynch & Co.
Salomon Brothers Inc.
By:.........................................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
35
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
NOTES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM NOTES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co....................................................
Merrill Lynch & Co.....................................................
Salomon Brothers Inc...................................................
Total.............................................
</TABLE>
36
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to the Company and its subsidiaries within the meaning of the Act and
the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Company
Registration Statement or the Company Prospectus comply as to form in
all material respects with the applicable accounting requirements of
the Act or the Exchange Act, as applicable, and the related published
rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American
Institute of Certified Public Accountants of the consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Company Prospectus and/or included in the Company's
Quarterly Report on Form 10-Q incorporated by reference into the
Company Prospectus as indicated in their reports thereon copies of
which have been separately furnished to the Representatives; and on the
basis of specified procedures including inquiries of officials of the
Company who have responsibility for financial and accounting matters
regarding whether the unaudited condensed consolidated financial
statements referred to in paragraph (vi)(A)(i) below comply as to form
in all material respects with the applicable accounting requirements of
the Act and the Exchange Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the Exchange Act and the related
published rules and regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the Company
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
37
(v) They have compared the information in the Company Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited procedures specified in such letter
nothing came to their attention as a result of the foregoing procedures
that caused them to believe that this information does not conform in
all material respects with the disclosure requirements of Items 301,
302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Company Prospectus, inquiries of
officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements
of cash flows included in the Company Prospectus and/or included
or incorporated by reference in the Company's Quarterly Reports
on Form 10-Q incorporated by reference in the Company Prospectus
do not comply as to form in all material respects with the
applicable accounting requirements of the Exchange Act and the
related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the
Company Prospectus or included in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the Company
Prospectus, for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the Company Prospectus do not agree with
the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not
included in the Company Prospectus but from which were derived
the unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and balance
sheet items included in the Company Prospectus and referred to
in Clause (B) were not determined on a basis substantially
consistent with the basis for the audited financial statements
included or incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Company
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
38
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any
decreases in consolidated net current assets or net assets or
other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as
compared with amounts shown in the latest balance sheet included
or incorporated by reference in the Company Prospectus, except
in each case for changes, increases or decreases which the
Company Prospectus discloses have occurred or may occur or which
are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Company
Prospectus to the specified date referred to in Clause (E) there
were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding
year and with any other period of corresponding length specified
by the Representatives, except in each case for increases or
decreases which the Company Prospectus discloses have occurred
or may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Company Prospectus and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Company Prospectus (excluding documents incorporated by reference)
or in Part II of, or in exhibits and schedules to, the Company
Registration Statement specified by the Representatives or in documents
incorporated by reference in the Company Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company
and its subsidiaries and have found them to be in agreement.
39
ANNEX II
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect
to EOG and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the EOG Registration
Statement or the EOG Prospectus comply as to form in all material
respects with the applicable accounting requirements of the Act or the
Exchange Act, as applicable, and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the consolidated interim financial
statements, selected financial data, pro forma financial information,
financial forecasts and/or condensed financial statements derived from
audited financial statements of EOG for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the EOG Prospectus and/or included in EOG's Quarterly
Report on Form 10-Q incorporated by reference into the EOG Prospectus
as indicated in their reports thereon copies of which have been
separately furnished to the Representatives; and on the basis of
specified procedures including inquiries of officials of EGO who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing
came to their attention that caused them to believe that the unaudited
condensed consolidated financial statements do not comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect to
the consolidated results of operations and financial position of EOG
for the five most recent fiscal years included in the EOG Prospectus
and included or incorporated by reference in Item 6 of EOG's Annual
Report on Form 10-K for the most recent fiscal year agrees with the
corresponding amounts (after restatement where applicable) in the
audited consolidated financial statements for such five fiscal years
which were included or incorporated by reference in EOG's Annual
Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the EOG Prospectus
under selected captions with the disclosure requirements of Regulation
S-K and on the basis of limited
40
procedures specified in such letter nothing came to their attention as
a result of the foregoing procedures that caused them to believe that
this information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of EOG and its subsidiaries, inspection of
the minute books of EOG and its subsidiaries since the date of the
latest audited financial statements included or incorporated by
reference in the EOG Prospectus, inquiries of officials of EOG and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements
of cash flows included in the EOG Prospectus and/or included or
incorporated by reference in EOG's Quarterly Reports on Form
10-Q incorporated by reference in the EOG Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Exchange Act and the related
published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed
consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the EOG
Prospectus or included in EOG's Quarterly Reports on Form 10-Q
incorporated by reference in the EOG Prospectus, for them to be
in conformity with generally accepted accounting principles;
(B) any other unaudited income statement data and balance
sheet items included in the EOG Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any
such unaudited data and items were not determined on a basis
substantially consistent with the basis for the corresponding
amounts in the audited consolidated financial statements
included or incorporated by reference in EOG's Annual Report on
Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which were not
included in the EOG Prospectus but from which were derived the
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the EOG Prospectus and referred to in Clause
(B) were not determined on a basis substantially consistent with
the basis for the audited financial statements included or
incorporated by reference in EOG's Annual Report on Form 10-K
for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the EOG
Prospectus do not comply as to form in all material respects
with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock or any
41
increase in the consolidated long-term debt of EOG and its
subsidiaries, or any decreases in consolidated net current
assets or net assets or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in
the latest balance sheet included or incorporated by reference
in the EOG Prospectus, except in each case for changes,
increases or decreases which the EOG Prospectus discloses have
occurred or may occur or which are described in such letter; and
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the EOG
Prospectus to the specified date referred to in Clause (E) there
were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding
year and with any other period of corresponding length specified
by the Representatives, except in each case for increases or
decreases which the EOG Prospectus discloses have occurred or
may occur or which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the EOG Prospectus and the
limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of EOG and its subsidiaries, which appear in the EOG
Prospectus (excluding documents incorporated by reference) or in Part
II of, or in exhibits and schedules to, the Registration Statement
specified by the Representatives or in documents incorporated by
reference in the EOG Prospectus specified by the Representatives, and
have compared certain of such amounts, percentages and financial
information with the accounting records of EOG and its subsidiaries and
have found them to be in agreement.
42
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report on the consolidated
financial statements of Enron Oil & Gas Company and subsidiaries dated February
17, 1995, included in Enron Oil & Gas Company's Form 10-K for the year ended
December 31, 1994, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Houston, Texas
November 8, 1995
EXHIBIT 23(b)
DEGOLYER AND MACNAUGHTON
One Energy Square
Dallas, Texas 75206
October 25, 1995
Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
Gentlemen:
In connection with Enron Oil & Gas Company's (the "Company") Registration
Statement on Form S-3 registering an offering of Common Stock of the Company to
be filed with the Securities and Exchange Commission on or about October 26,
1995, we hereby consent to the references to our firm and to our letter report
dated January 13, 1995 in the section of the Registration Statement entitled
"Business - Oil and Gas Exploration and Production Properties and Reserves" and
further consent to the incorporation by reference in said Registration Statement
of the references to our firm and to our opinions delivered to the Company
relating to our comparison of estimates prepared by us to those furnished to us
by the Company of proved oil, condensate, natural gas liquids, and natural gas
reserves of certain selected properties owned by the Company expressed in our
letter reports dated January 20, 1993, January 27, 1994, and January 13, 1995,
for estimates as of January 1, 1993, January 1, 1994, and January 1, 1995, for
estimates as of January 1, 1993, January 1, 1994, and January 1, 1995,
respectively, which are included in the section "Supplemental Information to
Consolidated Financial Statements - Oil and Gas Producing Activities" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994. We
also consent to the references to us in the section "Experts" in the Prospectus
that is a part of the Registration Statement.
Very truly yours,
DeGOLYER and MacNAUGHTON
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the "Company"),
of shares of its Common Stock, $.01 par value, in connection with the proposed
sale of such Common Stock by Enron Corp. as a "Selling Stockholder" of the
Company, and in connection with the delivery of shares of such Common Stock by
Enron Corp. upon exchange of Enron Corp. Exchangeable Notes, the undersigned
officer or director of the Company hereby constitutes and appoints Walter C.
Wilson, Dennis M. Ulak, and Angus H. Davis, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and file a registration statement on Form S-3
relating to such securities to be filed with the Securities and Exchange
Commission, together with all amendments thereto, with all exhibits and any and
all documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and confirming all the said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this 7th day of
November, 1995.
FRED C. ACKMAN
-----------------------------
Fred C. Ackman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the "Company"),
of shares of its Common Stock, $.01 par value, in connection with the proposed
sale of such Common Stock by Enron Corp. as a "Selling Stockholder" of the
Company, and in connection with the delivery of shares of such Common Stock by
Enron Corp. upon exchange of Enron Corp. Exchangeable Notes, the undersigned
officer or director of the Company hereby constitutes and appoints Walter C.
Wilson, Dennis M. Ulak, and Angus H. Davis, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and file a registration statement on Form S-3
relating to such securities to be filed with the Securities and Exchange
Commission, together with all amendments thereto, with all exhibits and any and
all documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and confirming all the said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this 7th day of
November, 1995.
FORREST E. HOGLUND
-----------------------------
Forrest E. Hoglund
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the "Company"),
of shares of its Common Stock, $.01 par value, in connection with the proposed
sale of such Common Stock by Enron Corp. as a "Selling Stockholder" of the
Company, and in connection with the delivery of shares of such Common Stock by
Enron Corp. upon exchange of Enron Corp. Exchangeable Notes, the undersigned
officer or director of the Company hereby constitutes and appoints Walter C.
Wilson, Dennis M. Ulak, and Angus H. Davis, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and file a registration statement on Form S-3
relating to such securities to be filed with the Securities and Exchange
Commission, together with all amendments thereto, with all exhibits and any and
all documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and confirming all the said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this 7th day of
November, 1995.
RICHARD D. KINDER
-----------------------------
Richard D. Kinder
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the "Company"),
of shares of its Common Stock, $.01 par value, in connection with the proposed
sale of such Common Stock by Enron Corp. as a "Selling Stockholder" of the
Company, and in connection with the delivery of shares of such Common Stock by
Enron Corp. upon exchange of Enron Corp. Exchangeable Notes, the undersigned
officer or director of the Company hereby constitutes and appoints Walter C.
Wilson, Dennis M. Ulak, and Angus H. Davis, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and file a registration statement on Form S-3
relating to such securities to be filed with the Securities and Exchange
Commission, together with all amendments thereto, with all exhibits and any and
all documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and confirming all the said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this 7th day of
November, 1995.
KENNETH L. LAY
-----------------------------
Kenneth L. Lay
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the "Company"),
of shares of its Common Stock, $.01 par value, in connection with the proposed
sale of such Common Stock by Enron Corp. as a "Selling Stockholder" of the
Company, and in connection with the delivery of shares of such Common Stock by
Enron Corp. upon exchange of Enron Corp. Exchangeable Notes, the undersigned
officer or director of the Company hereby constitutes and appoints Walter C.
Wilson, Dennis M. Ulak, and Angus H. Davis, and each of them (with full power to
each of them to act alone), his true and lawful attorney-in-fact and agent, for
him and on his behalf and in his name, place and stead, in any and all
capacities, to sign, execute and file a registration statement on Form S-3
relating to such securities to be filed with the Securities and Exchange
Commission, together with all amendments thereto, with all exhibits and any and
all documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as the undersigned might or could do if personally
present, hereby ratifying and confirming all the said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereto set his hand this 7th day of
November, 1995.
EDWARD RANDALL, III
-----------------------------
Edward Randall, III
