<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ENRON OIL & GAS COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[ENRON OIL AND GAS COMPANY LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 7, 1996
TO THE SHAREHOLDERS:
Notice is hereby given that the annual meeting of shareholders of Enron Oil
& Gas Company (the "Company") will be held in the LaSalle Ballroom of the
Doubletree Hotel at Allen Center, 400 Dallas Street, Houston, Texas, at 3:00
p.m. Houston time on Tuesday, May 7, 1996, for the following purposes:
1. To elect five directors of the Company to hold office until the next
annual meeting of shareholders and until their respective successors are
duly elected and qualified;
2. To approve an amendment to the Company's Restated Certificate of
Incorporation to increase the total number of authorized shares of
Common Stock from 160,000,000 to 320,000,000 shares;
3. To ratify the Board of Directors' appointment of Arthur Andersen LLP,
independent public accountants, as auditors for the Company for the year
ending December 31, 1996; and
4. To transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Holders of record of Common Stock of the Company at the close of business
on March 11, 1996, will be entitled to notice of and to vote at the meeting or
any adjournments thereof.
Shareholders who do not expect to attend the meeting are encouraged to sign
and return the enclosed proxy, for which purpose a postage-paid, return envelope
is enclosed. The proxy must be signed and returned in order to be counted.
By Order of the Board of Directors,
ANGUS H. DAVIS
Vice President, Communications and
Corporate Secretary
Houston, Texas
March 25, 1996
<PAGE> 3
[ENRON OIL AND GAS COMPANY LOGO]
PROXY STATEMENT
The enclosed form of proxy is solicited by the Board of Directors of Enron
Oil & Gas Company (the "Company" or "EOG") to be used at the annual meeting of
shareholders to be held in the LaSalle Ballroom of the Doubletree Hotel at Allen
Center, 400 Dallas Street, Houston, Texas, at 3:00 p.m. Houston time on Tuesday,
May 7, 1996 (the "Annual Meeting"). The mailing address of the principal
executive offices of the Company is 1400 Smith St., Houston, Texas 77002. This
proxy statement and the related proxy are to be first sent or given to the
shareholders of the Company on approximately March 25, 1996. Any shareholder
giving a proxy may revoke it at any time provided written notice of such
revocation is received by the Vice President, Communications and Corporate
Secretary of the Company before such proxy is voted; otherwise, if received in
time, properly completed proxies will be voted at the Annual Meeting in
accordance with the instructions specified thereon. Shareholders attending the
Annual Meeting may revoke their proxies and vote in person.
Holders of record at the close of business on March 11, 1996, of Common
Stock of the Company, par value $.01 per share (the "Common Stock"), will be
entitled to one vote per share on all matters submitted to the meeting. On March
11, 1996, the record date, there were outstanding 159,976,840 shares of Common
Stock. There are no other voting securities outstanding.
The Company's summary annual report for the year ended December 31, 1995,
is being mailed herewith to all shareholders entitled to vote at the Annual
Meeting. The summary annual report and the Annual Report on Form 10-K contained
therein do not constitute a part of the proxy soliciting material.
All references in this proxy statement to Common Stock (or phantom shares
relating to Common Stock) reflect the two-for-one stock split effective June 15,
1994. All references in this proxy statement to Enron Corp. common stock reflect
the two-for-one stock split effective August 16, 1993.
ITEM 1.
ELECTION OF DIRECTORS
At the Annual Meeting, five directors are to be elected to hold office
until the next succeeding annual meeting of the shareholders and until their
respective successors have been elected and qualified. All of the nominees are
currently directors of the Company. Proxies cannot be voted for a greater number
of persons than the number of nominees named on the enclosed form of proxy. A
plurality of the votes cast in person or by proxy by the holders of Common Stock
is required to elect a director. Accordingly, under Delaware law, abstentions
and broker non-votes (which occur if a broker or other nominee does not have
discretionary authority and has not received instructions with respect to a
particular item) would not have the same effect as a vote against a particular
director. Shareholders may not cumulate their votes in the election of
directors.
It is the intention of the persons named in the enclosed proxy to vote such
proxy for the election of the nominees named herein. Should any nominee become
unavailable for election, discretionary authority is conferred to vote for a
substitute. The following information regarding the nominees, their principal
occupations, employment history and directorships in certain companies is as
reported by the respective nominees.
<PAGE> 4
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
[PHOTO] FRED C. ACKMAN, 65
Director since 1989
For over five years Mr. Ackman has been a consultant to the oil and gas industry and has
interests in ranching and investments.
- ------------------------------------------------------------------------------------------------------------------
[PHOTO] FORREST E. HOGLUND, 62
Director since 1987
Mr. Hoglund joined the Company as Chairman of the Board and Chief Executive Officer in
September, 1987. Since May, 1990, he has also served as President of the Company. Mr.
Hoglund is also an advisory director of Texas Commerce Bank National Association.
- ------------------------------------------------------------------------------------------------------------------
[PHOTO] RICHARD D. KINDER, 51
Director since 1985
For over five years, Mr. Kinder has been President and Chief Operating Officer of Enron
Corp. 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.), Sonat Offshore
Drilling Inc. and Baker Hughes Incorporated.
- ------------------------------------------------------------------------------------------------------------------
[PHOTO] KENNETH L. LAY, 53
Director since 1985
For over five years, Mr. Lay has been Chairman of the Board and Chief Executive Officer 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.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
[PHOTO] EDWARD RANDALL, III, 69
Director since 1990
Mr. Randall's principal occupation is investments. Mr. Randall is also a director of KN
Energy, Inc. and PaineWebber Group Inc.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ON JANUARY 31, 1996
The Company knows of no one who beneficially owns in excess of five percent
of the Common Stock of the Company except as set forth in the table below:
<TABLE>
<CAPTION>
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF
TITLE OF CLASS OF BENEFICIAL OWNER SOLE VOTING AND INVESTMENT POWER CLASS
- -------------- --------------------- ----------------------------------------- -------
<S> <C> <C> <C>
Common Enron Corp. 96,950,000 60.65
1400 Smith Street
Houston, Texas 77002
</TABLE>
SECURITY OWNERSHIP OF THE BOARD OF DIRECTORS AND MANAGEMENT ON JANUARY 31, 1996
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------
SOLE VOTING
SOLE VOTING SHARED VOTING AND LIMITED
AND AND OR NO
INVESTMENT INVESTMENT INVESTMENT PERCENT
TITLE OF CLASS NAME POWER(1)(2) POWER POWER(3) OF CLASS
- --------------- ------------------------------ ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Enron Oil & Fred C. Ackman................ 11,000 *
Gas Company Forrest E. Hoglund............ 3,110,389 320,000 2.12
Common Stock Richard D. Kinder............. 13,738(4) 20,500(9) *
Kenneth L. Lay................ 50,000(4) 1,200(5) *
Joe Mike McKinney............. 108,998 17,500 *
Mark G. Papa.................. 246,094 15,000 25,000 *
Edward Randall, III........... 13,000 *
Dennis M. Ulak................ 52,863 20,000 *
Walter C. Wilson.............. 179,925 15,000 *
All directors and executive
officers as a group (11 in
number)..................... 3,892,799(4) 356,700 92,500 2.67
Enron Corp. Forrest E. Hoglund............ 109,426 100,000(10) 396,617(6) *
Common Stock Richard D. Kinder............. 2,199,197 51,098 *
Kenneth L. Lay................ 2,996,638(11) 7,552(5) 75,070 1.22
Joe Mike McKinney............. 25,150 8,375 *
Mark G. Papa.................. 23,320 8,018 31,105 *
Edward Randall, III........... 49,091(7) 32,969(8) *
Dennis M. Ulak................ 4,822 *
Walter C. Wilson.............. 11,950 *
All directors and executive
officers as a group (11 in
number)..................... 5,402,822 148,539 606,899 2.42
</TABLE>
(See notes on following page)
3
<PAGE> 6
- ---------------
* Less than 1 percent.
(1) The number of shares of Common Stock of the Company subject to stock
options exercisable within 60 days after January 31, 1996, is as follows:
Mr. Ackman 9,000 shares; Mr. Hoglund 1,875,262 shares; Mr. Randall 9,000
shares; Mr. McKinney 107,205 shares; Mr. Papa 242,948 shares; Mr. Ulak
52,863 shares; Mr. Wilson 177,725 shares; and all directors and executive
officers as a group, 2,570,078 shares.
(2) The number of shares of Enron Corp. Common Stock subject to stock options
exercisable within 60 days after January 31, 1996, is as follows: Mr.
Hoglund 61,320 shares; Mr. Kinder 1,974,385 shares; Mr. Lay 2,058,264
shares; Mr. McKinney 24,990 shares; Mr. Papa 23,320 shares; and all
directors and executive officers as a group, 4,142,279 shares.
(3) Includes shares held under the Enron Corp. Savings Plan and/or Employee
Stock Ownership Plan ("ESOP"). Participants in the Savings Plan have sole
voting power and limited investment power with respect to Enron Corp.
shares in the Savings Plan. Participants in the ESOP have sole voting power
and no investment power prior to distribution of shares from the ESOP. Also
includes restricted shares of Common Stock of the Company and Enron Corp.
held under the Company's 1992 Stock Plan and Enron Corp.'s 1991 Stock Plan
for which participants have sole voting power and no investment power until
such shares vest in accordance with Plan provisions. After vesting, the
participant has sole investment and voting powers.
(4) Does not include 96,950,000 shares owned by Enron Corp. in which each of
Messrs. Lay and Kinder, in their capacities as Chairman of the Board and
President, respectively, of Enron Corp., has sole voting and investment
power pursuant to the provisions of Enron Corp.'s bylaws.
(5) Includes 1,200 shares with respect to Company Common Stock and 7,552 shares
with respect to Enron Corp. Common Stock held by Mr. Lay's children and
step-children.
(6) Includes 370,656 restricted shares of Enron Corp. Common Stock, in which
shares Mr. Hoglund has sole voting power and limited investment power.
(7) Includes 42,291 shares of Enron Corp. Common Stock held by trusts of which
Mr. Randall is trustee and in which Mr. Randall disclaims beneficial
ownership.
(8) Shares of Enron Corp. Common Stock held by trusts of which Mr. Randall is
trustee and in which Mr. Randall disclaims beneficial ownership.
(9) Shares held in a charitable foundation in which Mr. Kinder has no pecuniary
interest.
(10) Includes 100,000 shares held in a charitable foundation in which Mr.
Hoglund has no pecuniary interest.
(11) Includes 100,000 shares held in a charitable foundation in which Mr. Lay
has no pecuniary interest.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held four regularly scheduled meetings and four
special meetings during the year ended December 31, 1995.
The Board of Directors uses working committees with functional
responsibility in the more complex recurring areas where disinterested oversight
is required. The Audit Committee was created in October 1989, after the initial
public offering and sale of Common Stock, and is the communication link between
the Board and independent auditors of the Company. During the year ended
December 31, 1995, the Audit Committee met three times. The Audit Committee
recommends to the Board of Directors the appointment of
4
<PAGE> 7
independent public accountants as auditors for the Company and reviews as deemed
appropriate the scope of the audit, the accounting policies and reporting
practices, the system of internal controls, compliance with policies regarding
business conduct and other matters. The Audit Committee is currently composed of
Messrs. Ackman (Chairman) and Randall.
In January, 1990, the Board of Directors created the Compensation
Committee, which is responsible for administration of the Company stock plans
and approval of compensation arrangements of senior management. The Compensation
Committee, which met two times during the year, is composed of Messrs. Randall
(Chairman) and Ackman.
The Company does not have a standing nominating committee.
During the year ended December 31, 1995, each director attended at least
75% of the total number of meetings of the Board and the committees on which the
director served.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR COMPENSATION
During 1995, each director who was not an employee of the Company, Enron
Corp. or its affiliates, received annual fees of $33,500 for serving as a
director and $5,000 for each committee of which such director was Chairman.
Total directors fees earned in 1995 were $77,000.
Prior to the tax deconsolidation described under "Certain Transactions,"
Company directors fees could be deferred to a later specified date under the
Enron Corp. 1985 Deferral Plan and 1994 Deferral Plan. Under the 1985 Deferral
Plan, interest is credited on amounts deferred based on 150% of Moody's seasoned
corporate bond yield index, which for 1995 was 12.39%. Interest was credited at
9% under the 1994 Deferral Plan. In connection with the deconsolidation of the
Company from the consolidated U.S. income tax reporting group of Enron Corp. in
December 1995, the Company created the Enron Oil & Gas Company 1996 Deferral
Plan (the "1996 Deferral Plan") and agreed to assume all deferral liabilities of
Enron Corp. relating to Company directors and employees under the Enron Corp.
1994 Deferral Plan described above. In addition, all deferrals after the tax
deconsolidation were made under the 1996 Deferral Plan. The terms of the 1996
Deferral Plan are substantially identical to those of the Enron Corp. 1994
Deferral Plan. Payments are made exclusively from the general assets of the
Company and the Company has elected to purchase life insurance on the lives of
some covered participants with the Company as the owner and beneficiary.
Currently one nonemployee director participates in the 1996 Deferral Plan.
Nonemployee directors also participate in the Enron Oil & Gas Company 1993
Nonemployee Director Stock Option Plan, which was approved by Company
shareholders at the 1993 annual meeting. Under the terms of the Plan, each
nonemployee director receives on the date of each annual meeting during the term
of the Plan an option to purchase 6,000 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
In addition, each nonemployee director who is elected or appointed to the Board
of Directors for the first time after an annual meeting is granted on the date
of such election or appointment an option to purchase 6,000 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock on
the date of grant. Options granted under the Plan vest 50% after one year and
100% after two full years of service as a director following the date of grant.
All options expire ten years from the date of grant. During 1995, each
nonemployee director was granted a total of 6,000 options at an exercise price
of $23.00.
5
<PAGE> 8
REPORT FROM THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
Compensation for Company executives is administered by the Compensation
Committee of the Board of Directors (the "Committee"), which is composed
exclusively of outside directors. It is the responsibility of the Committee to
develop compensation philosophy and authorize salary increases for officers,
incentive programs and awards consistent with this philosophy.
The Committee believes that appropriately balanced compensation elements
contribute to the success of the Company. Hay Management Consultants provides an
annual analysis of executive base salaries, annual bonuses and long-term
incentives paid by the Company as compared to those paid by a number of industry
peer companies included in the "Comparative Stock Performance" section. The
Committee believes that the best compensation philosophy is to put a substantial
portion of the total compensation package at risk and tied to both the financial
results achieved and the performance of the Common Stock of the Company, which
means that the Company does not intend to lead the competition in base salary
levels. Further, the Committee believes that total compensation for the
executives should exceed average compensation levels of a peer group of
companies only if the Company performs at a level such that financial results
achieved by the Company and shareholder return on investments in the Company
exceed the average achieved by that peer group of companies over a reasonable
period of time. To achieve this goal, the Committee has authorized the following
incentive plans, which provide for incentive compensation in the form of cash
and stock options, to link executive compensation with the performance and
financial results of the Company.
Key Contributor Incentive Plan. All Company employees are eligible for
cash bonuses of up to 100% of base salary under this plan. The plan authorizes
the funding of a bonus pool to be approved by the Committee. The bonus pool is
not generally anticipated to exceed the lesser of (i) 5% of net income or (ii)
5% of the net present value, discounted at 10%, of the net cash flows
anticipated to result from the investment program of the Company. Each year the
Committee approves performance goals for the Company against which actual
results are measured to determine the level of funding for this plan. The goals
established for the Company cover factors such as net income, production and
reserve volume growth, finding costs per equivalent unit of reserves added and
developed and rate of return on exploration and development expenditures. These
goals are designed to address both current financial performance and the
long-term development of the Company. The Committee does not use a specific
formula for weighting these individual performance factors.
Enron Oil & Gas Company 1992 Stock Plan. This plan is the long-term
incentive plan of the Company for executive officers and other selected
employees. The purposes of this plan are to encourage employees who receive
grants to develop a proprietary interest in the performance of the Company, to
generate an increased incentive to contribute to the future success of the
Company, thus enhancing the value of the Company for the benefit of
shareholders, and to enhance the ability of the Company and its subsidiaries to
attract and retain individuals with qualifications essential to the progress,
growth and profitability of the Company.
This plan authorizes the Committee to award stock options to executive
officers and other selected employees. Stock options are normally granted on an
annual basis at an option price equal to the fair market value of Company Common
Stock on the date of grant, have ten-year terms and vest over four years except
in cases where they are issued in lieu of a portion of a cash bonus. In such
cases, option grants may have a shorter term and typically vest in a shorter
time period, which for grants during 1995 included a term of five years with
100% vesting upon grant, except for those optionees who are subject to the
short-swing profit provisions of Section 16(b) of the Securities Exchange Act of
1934 ("the Exchange Act"), in which case, the options vest 100% six months after
the date of grant. Committee approval is obtained for the number of options to
be granted. The awards are made at a level that is not anticipated to generate
significant benefits relative to the
6
<PAGE> 9
industry peer group unless the Company Common Stock performs correspondingly
well during the life of the grant. With the success of the Company (and the
resulting benefits to its shareholders), this feature becomes a larger part of
the total compensation package.
Based upon a thorough review and discussion of the 1995 results of the
Company, several of which are highlighted in the following paragraph, the
Committee approved funding the bonus pool at 5% of 1995 net income. The
Committee also reviewed and approved individual officer bonuses, salary
increases, and stock option grants recommended by the Chief Executive Officer of
the Company based upon his evaluation of each individual officer's performance
and contribution to the overall success of the Company during 1995. Bonuses for
executive officers of the Company ranged from 38% to 76% of base salary and
option grants were awarded at levels expected to bring total compensation
opportunities in line with similar positions at peer companies.
During 1995, the Company continued to demonstrate its ability to
out-perform its industry competition, realizing $142.1 million in net income.
These results were down only 4.0% from 1994 even though prices for wellhead
natural gas sales, the predominant product sold by the Company, were down by
20.4% to $1.29 per thousand cubic feet (Mcf) in 1995 as compared to $1.62 per
Mcf in 1994, and U.S. tight gas sand federal income tax credits were down $14.1
million, reflecting the normal decline in volumes qualifying for the credit. For
the first nine months of 1995, net income of the Company was up 5.0% while net
income for a peer group consisting of five other independent exploration and
production companies, with comparable large capitalization and generally
considered to be among those that are successful financially and similar to the
Company operationally, was down an average of 65%. As a result of lower wellhead
natural gas prices, particularly those realized in the U.S., the Company elected
to curtail natural gas sales in certain areas of the U.S. and also refocused its
drilling activity away from natural gas deliverability and toward natural gas
reserve enhancement and crude oil exploitation. Key accomplishments offsetting
the effects of the significant reduction in wellhead natural gas prices
included: a very successful program of other marketing activities, including
commodity price hedging that added $108.7 million to pre-tax earnings in 1995
compared to $53.5 million for 1994; a continuing focus on asset redeployments
during the year, resulting in the sale of selected oil and gas reserves and
related assets generating pre-tax gains of $62.8 million compared to similar
1994 gains of $54.0 million; a continued focus on cost control that resulted in
a further reduction in total operating expenses of $.07 per thousand cubic feet
of natural gas equivalent (Mcfe) to $1.22 per Mcfe compared to $1.29 per Mcfe in
1994; and the continued improvement in crude oil and condensate production that
increased by 51.6% to 19.1 thousand barrels per day (MBD) compared to 12.6 MBD
for 1994 combined with improving wellhead crude oil and condensate prices that
averaged $16.78 per barrel in 1995 compared to $15.62 per barrel in 1994. As a
result of these accomplishments, income before income taxes increased by 19.6
percent to $184.1 million. Operationally, the Company was very successful in
continuing to build its asset base by replacing 204% of its natural gas
equivalent production at an all in finding cost of $.76 per Mcfe including
drilling additions and purchases net of divestments but excluding reserve
revisions and the addition of 1.2 trillion cubic feet of methane reserves
contained in deep Paleozoic formations in the Big Piney area of Wyoming.
Drilling additions alone replaced 151% of 1995 production, marking the eighth
straight year in which drilling additions exceeded production. In setting up
future operations, the Company continued very successfully the initiation of
operations in the Panna, Mukta and Tapti fields in concessions awarded by the
government of India in late 1994, completed some of its most successful property
acquisitions ever in the Carthage area of East Texas and offshore in the Gulf of
Mexico and continued a very successful program of acquiring and interpreting
significant new volumes of 3-D seismic information both onshore and offshore and
domestically and internationally. These achievements were all realized while
keeping the debt to total capital ratio for the Company at 20%, retaining one of
the most conservative financial structures of any member of its peer group of
industry companies.
7
<PAGE> 10
Chief Executive Officer Compensation. Effective September 1, 1987, Mr.
Hoglund entered into an employment agreement with the Company under which he
serves as Chairman of the Board, President and Chief Executive Officer of the
Company. Under the provisions of subsequent amendments to Mr. Hoglund's
employment agreement, the term has been extended to September 1, 1998, and Mr.
Hoglund agreed to receive an annual salary of $570,000 and no annual bonus.
Substantially all of Mr. Hoglund's future compensation in excess of his
base salary is at risk and tied to the performance of Company Common Stock. The
Committee believes this is the most effective way to link executive rewards to
shareholder value.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the Chief Executive Officer and four other most highly compensated
executive officers of a company, as reported in that company's proxy statement.
Qualifying performance-based compensation is not subject to the deduction limit
if certain requirements are met. The Company has structured its long-term
incentives in the form of stock option grants in a manner that complies with the
statute.
Compensation Committee
Edward Randall, III -- Chairman
Fred C. Ackman
8
<PAGE> 11
COMPARATIVE STOCK PERFORMANCE
The performance graph shown below was prepared by Value Line, Inc., for use
in this proxy statement. As required by applicable rules of the Securities and
Exchange Commission (the "SEC"), the graph was prepared based upon the following
assumptions:
1. $100 was invested on December 31, 1990 in Common Stock of EOG, the
Standard & Poors 500 (the "S&P 500"), a peer group of independent
exploration and production companies (the "96 Peers") and the same peer
group of independent exploration and production companies used in the
Comparative Total Returns table in the Proxy Statement of the Company
for the May 2, 1995 annual meeting of shareholders (the "95 Peers").
2. The investments in the 95 Peers and 96 Peers are weighted based on the
market capitalization of each individual company within the 95 Peers and
96 Peers at the beginning of each year.
3. Dividends are reinvested on the ex-dividend dates.
The companies that comprise the 96 Peers are as follows: Anadarko Petroleum
Corp., Apache Corp., Burlington Resources Inc., Louisiana Land and Exploration
Company, Maxus Energy Company, Noble Affiliates, Inc., Oryx Energy Company,
Santa Fe Energy Resources Inc., Seagull Energy Corporation, Union Pacific
Resources Company, Union Texas Petroleum Holdings, Inc. and Vastar Resources
Inc. The companies that comprise the 95 Peers are as follows: Anadarko Petroleum
Corp., Apache Corp., Burlington Resources Inc., Louisiana Land and Exploration
Company, Maxus Energy Company, Mesa Inc., Noble Affiliates, Inc., Oryx Energy
Corporation and Union Texas Petroleum Holdings, Inc.
COMPARATIVE TOTAL RETURNS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
EOG, S&P 500, 96 PEERS AND 95 PEERS
(Performance Results Through December 31)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) EOG S&P 500 96 Peers 95 Peers
<S> <C> <C> <C> <C>
1990 100 100 100 100
1991 92.70 130.55 88.94 91.16
1992 140.87 140.72 100.21 102.79
1993 188.20 154.91 115.06 119.06
1994 181.95 157.39 99.52 108.12
1995 234.27 216.42 118.71 119.98
</TABLE>
9
<PAGE> 12
EXECUTIVE COMPENSATION
The following table summarizes certain information regarding compensation
paid or accrued during each of the last three fiscal years to the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ---------------------------------------------
OTHER RESTRICTED SECURITIES ALL OTHER
ANNUAL STOCK UNDERLYING LTIP COMPENSATION
NAME & PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/ PAYOUTS ------------
POSITION YEAR ($) ($) ($)(2) ($)(3) SARS (#) ($) ($)(4)
- ----------------------- ---- -------- -------- ------------ ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Forrest E. Hoglund..... 1995 $570,000 $ 69,721 $ 793
Chairman of the Board,
President 1994 $570,000 $140,004 $ 23,450 1,846,310 $ 31,130
and Chief Executive
Officer 1993 $570,000 $154,925 $ 212,063 66,650 (5) $ 41,907
Mark G. Papa........... 1995 $257,520 $135,000 $ 8,515 53,750 $ 793
President, 1994 $247,850 $123,500 $ 15,648 $ 5,695 74,380 $ 31,130
North American
Operations 1993 $235,000 $106,400 $ 12,132 $ 133,219 105,650 (5) $ 38,559
Joe Mike McKinney(1)... 1995 $235,000 $112,500 $ 12,085 47,416 $ 793
President,
International
Operations 1994 $225,000 $117,000 $ 9,096 $ 5,360 59,615 $ 31,130
Walter C. Wilson....... 1995 $183,540 $105,000 $ 13,834 38,265 $ 793
Sr. Vice President and 1994 $176,040 $ 97,500 $ 10,572 51,165 $ 31,130
Chief Financial
Officer 1993 $174,040 $ 84,000 $ 17,475 42,000 $ 29,859
Dennis M. Ulak......... 1995 $176,670 $ 97,500 $ 6,202 31,055 $ 793
President,
International 1994 $157,020 $ 81,250 $ 4,500 39,410 $ 30,318
Operations 1993 $139,850 $ 56,000 $ 4,000 28,000 $ 24,850
</TABLE>
- ---------------
(1) Mr. McKinney became an executive officer during 1994.
(2) No Named Officer had "perquisites and other personal benefits" with a value
greater than the lesser of $50,000 or 10% of reported salary and bonus.
Enron Corp. has maintained three deferral plans (a 1985 plan, a 1992 plan
and a 1994 plan) for key employees of Enron Corp. and its subsidiaries,
including the Company, under which payment of base salary, annual bonus and
long term incentive awards may be deferred to a later specified date. Under
the 1985 Deferral Plan, interest is credited on amounts deferred based on
150% of Moody's seasoned corporate bond yield index with a minimum rate of
12%, which for 1993 was 12.825%, for 1994 was the minimum of 12%, and for
1995 was 12.39%. Interest in excess of 120% of the December, 1994 long-term
Applicable Federal Rate ("AFR") (9.91%) has been reported as Other Annual
Compensation for 1995, interest in excess of 120% of the December 1993
long-term AFR (7.29%) has been reported as Other Annual Compensation for
1994, and interest in excess of 120% of the December, 1992 long-term AFR
(8.5%) has been reported as Other Annual Compensation for 1993. No interest
has been reported as Other Annual Compensation under the 1992 Deferral Plan,
which credits interest at the Enron Corp. mid-term borrowing rate, since
crediting rates for 1993, 1994 and 1995 of 7.06%, 6.0% and 8.5%,
respectively, did not exceed 120% of the AFR. No interest has been reported
as Other Annual Compensation under the 1994 Deferral Plan, because none of
the Named Officers participates in this plan. Other Annual Compensation also
includes miscellaneous cash payments for items such as cash perquisite
allowances and lost benefits due to statutory earnings limits. In connection
with the deconsolidation of the Company from the consolidated U.S. income
tax reporting group of
(Notes continued on following page)
10
<PAGE> 13
Enron Corp. in December 1995, the Company created the 1996 Deferral Plan and
agreed to assume all deferral liabilities of Enron Corp. relating to Company
employees under the Enron Corp. 1992 and 1994 Deferral Plans described
above. (For a description of the tax deconsolidation, see "Certain
Transactions.")
(3) Restricted stock awards to the Named Officers on February 7, 1994, were
provided to compensate for lost benefits due to statutory earnings limits
and became 50% vested on August 7, 1994, and 100% vested on February 7,
1995. The following is the aggregate number of shares in unreleased
restricted stock holdings of Enron Corp. Common Stock and their value as of
December 31, 1995, for each of the Named Officers: Mr. Hoglund, 4,680 shares
valued at $178,425; Mr. Papa, 2,940 shares valued at $112,088; Mr. McKinney,
2,940 shares valued at $112,088. Dividend equivalents accrue from the date
of grant and are payable on the vesting date of the shares.
(4) Includes the value as of year end 1993, 1994 and 1995 of Enron Corp. Common
Stock allocated during those years to employees' savings and special
subaccounts under the Enron Corp. Employee Stock Ownership Plan ("ESOP").
Included in 1994 and 1995 are special allocations made in February, 1994 to
employees' savings subaccounts under the ESOP and a special allocation made
in December, 1994 and December, 1995 to a special allocation subaccount.
(5) Includes options for Mr. Hoglund to purchase 66,650 shares and for Mr. Papa
to purchase 41,650 shares of Enron Corp. Common Stock with respect to 1993.
11
<PAGE> 14
STOCK OPTION GRANTS DURING 1995
The following table sets forth information with respect to grants of stock
options to the Named Officers reflected in the Summary Compensation Table on
page 10 and all employee optionees as a group. No SAR units were granted during
1995, and none are outstanding.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES POTENTIAL REALIZABLE VALUE AT
UNDERLYING % OF TOTAL ASSUMED ANNUAL RATES OF
OPTIONS/ OPTIONS/SARS EXERCISE STOCK PRICE APPRECIATION
SARS GRANTED TO OR BASE FOR OPTION TERM(1)
GRANTED EMPLOYEES IN PRICE EXPIRATION -------------------------------------------
NAME/GROUP (#)(2) FISCAL YEAR ($/SH) DATE 0%(3) 5% 10%
- ---------------------- ----------- ------------ -------- ---------- ------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Hoglund........... (6)
Mr. Papa.............. 16,800(4) 1.0 $ 17.875 01/30/00 $0 $ 82,967 $ 183,336
35,000(5) 2.1 $ 17.875 01/30/05 $0 $ 393,452 $ 997,085
1,950(6) 0.1 $ 24.375 04/21/05 $0 $ 29,892 $ 75,753
Mr. McKinney.......... 15,920(4) 1.0 $ 17.875 01/30/00 $0 $ 78,621 $ 173,733
30,000(5) 1.8 $ 17.875 01/30/05 $0 $ 337,245 $ 854,644
1,496(6) 0.1 $ 24.375 04/21/05 $0 $ 22,933 $ 58,116
Mr. Wilson............ 13,265(4) 0.8 $ 17.875 01/30/00 $0 $ 65,510 $ 144,759
25,000(5) 1.5 $ 17.875 01/30/05 $0 $ 281,037 $ 712,204
Mr. Ulak.............. 11,055(4) 0.7 $ 17.875 1/30/00 $0 $ 54,595 $ 120,642
20,000(5) 1.2 $ 17.875 1/30/05 $0 $ 224,830 $ 569,763
All Shareholders...... N/A N/A N/A N/A $0 $1,866,337,332 $4,729,665,233
All Optionees......... 1,650,030 100.0% $18.5652(7) 2000-2005 $0 $ 19,265,015(8) $ 48,821,331(8)
Optionees' Gain As %
Of All Shareholders'
Gain................ N/A N/A N/A N/A N/A 1.03% 1.03%
</TABLE>
- ---------------
(1) The dollar amounts under these columns represent the potential realizable
value of each grant of options assuming that the market price of the
underlying security appreciates in value from the date of grant at the 5%
and 10% annual rates prescribed by the SEC. These calculations are not
intended to forecast possible future appreciation, if any, of the price of
Company Common Stock.
(2) If a "change of control" (as defined in the Company 1992 Stock Plan) were
to occur before the options become exercisable and are exercised, the
vesting described below will be accelerated and all such outstanding
options will be surrendered and the optionee will receive a cash payment
from the company that issued the option in an amount equal to the value of
the surrendered options (as defined in the Company 1992 Stock Plan).
(3) An appreciation in stock price, which will benefit all shareholders, is
required for optionees to receive any gain. A stock price appreciation of
zero percent would render the option without value to the optionees.
(4) Represents stock options granted in lieu of cash bonus with 100% vesting
upon grant except for those optionees who are subject to the short-swing
profit provisions of Section 16(b) of the Exchange Act, in which case the
options vest 100% six months after the date of grant.
(5) Represent stock options that vest at the cumulative rate of 25% per year,
commencing on the first anniversary of the date of grant.
(Notes continued on following page)
12
<PAGE> 15
(6) Represents stock options granted as ESOP Offset Payment. Mr. Hoglund
declined acceptance of additional stock options he was eligible to receive.
(7) Weighted average grant price for all stock options for the purchase of
Company Common Stock granted to employees in 1995.
(8) Appreciation for all shareholders is calculated using the average exercise
price for all Employee Options ($18.5652) and using the number of shares of
the Company's Common Stock issued and outstanding on December 31, 1995.
AGGREGATED STOCK OPTION/SAR EXERCISES DURING 1995 AND STOCK OPTION/SAR VALUES AS
OF DECEMBER 31, 1995
The following table sets forth information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options and SAR units held as of the end of the fiscal year:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED OPTIONS/SARS
SHARES AT DECEMBER 31, 1995(1)
ACQUIRED ON VALUE --------------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE
- ------------------------ ---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Mr. Hoglund............. EOG 50,000 $ 712,500 1,825,262 71,048
Enron Corp. 35,200 $ 719,975 39,990 34,660
----------------
Subtotal $ 1,432,475
Mr. Papa................ EOG 12,800 $ 196,800 191,923 105,207
Enron Corp. 10,000 $ 73,125 14,990 16,660
----------------
Subtotal $ 269,925
Mr. McKinney............ EOG 74,475 76,556
Enron Corp. 24,990 16,660
Subtotal
Mr. Wilson.............. EOG 10,000 $ 146,500 141,930 71,500
Mr. Ulak................ EOG 34,555 $ 258,871 26,498 53,412
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS/
SARS AT DECEMBER 31, 1995
--------------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ------------------------ ---------------- ----------------
<S> <C><C> <C>
Mr. Hoglund............. $ 7,762,626 $ 848,002
$ 437,391 $ 472,594
---------------- ----------------
$ 8,200,017 $ 1,320,596
Mr. Papa................ $ 1,713,097 $ 547,218
$ 163,953 $ 182,219
---------------- ----------------
$ 1,877,050 $ 729,437
Mr. McKinney............ $ 381,565 $ 330,023
$ 240,529 $ 160,353
---------------- ----------------
$ 622,094 $ 490,376
Mr. Wilson.............. $ 1,328,713 $ 378,109
Mr. Ulak................ $ 67,843 $ 258,851
</TABLE>
- ---------------
(1) There are no SAR units applicable to the Named Officers.
RETIREMENT AND SUPPLEMENTAL BENEFIT PLANS
For many years, Enron Corp. has maintained the Enron Corp. Retirement Plan
(the "Retirement Plan") to provide retirement income for employees of Enron
Corp. and its subsidiaries, including the Company. Accrual of benefits under the
Retirement Plan was temporarily suspended effective December 31, 1994 in
connection with Enron Corp.'s intent to convert the plan benefit formula from a
final average pay formula (the "Pre-1995 Formula") to a career average pay, cash
balance formula (the "Post-1994 Formula").
The Pre-1995 Formula was designed to provide monthly retirement income for
each covered employee in an amount equal to 1.45% of an employee's final average
pay multiplied by such employee's years of accrual service not in excess of 25
years, plus .45% of final average pay multiplied by accrual service in excess of
25 years up to a maximum of 10 years, plus .45% of final average pay in excess
of the integration level multiplied by accrual service not in excess of 35
years, plus 1% of final average pay multiplied by accrual service in excess of
35 years. Final average pay is the average of an employee's monthly compensation
either for any period of 60 consecutive months that occurs during the last 120
months of vesting service and for which such employee's average monthly
compensation is the highest, or for the period of such employee's
13
<PAGE> 16
vesting service if less than 60 months. The integration level is the lesser of
125% of compensation covered by Social Security for an employee attaining the
Social Security retirement age or the FICA taxable wage base in effect, in the
Plan year in which the employee terminates employment. Benefits accrued under
the Retirement Plan after 1986 and before 1995 are offset by the value of Common
Stock allocated to employee retirement subaccounts in the Enron Corp. Employee
Stock Ownership Plan.
In 1995, the Enron Corp. Board of Directors adopted an amendment to and
restatement of the Retirement Plan changing the Plan name to the Enron Corp.
Cash Balance Plan (the "Cash Balance Plan") and changing the benefit accrual
formula to the Post-1994 Formula, under which covered employees will accrue an
annual benefit equal to an account balance of 5% of base pay. Each employee's
accrued benefit will be credited with interest based on 10-year Treasury Bond
yields. Benefit accrual under the Post-1994 Formula commenced in Plan year 1996.
Directors who are not employees of the Company or Enron Corp. are not
eligible to participate in the Cash Balance Plan.
In addition, Enron Corp. has a Supplemental Retirement Plan that is
designed to assure payments to certain employees of that retirement income that
would be provided under the Cash Balance Plan except for the dollar limitation
on accrued benefits imposed by the Internal Revenue Code of 1986, as amended,
and a Pension Program for Deferral Plan Participants that provides supplemental
retirement benefits equal to any reduction in benefits due to deferral of salary
into the Enron Corp. Deferral Plans.
The following table sets forth the estimated annual benefits payable under
normal retirement at age 65, assuming current remuneration levels without any
projected salary increase and participation until normal retirement at age 65,
with respect to the Named Officers under the provisions of the foregoing
retirement plan:
<TABLE>
<CAPTION>
ESTIMATED
CURRENT CREDITED CURRENT ESTIMATED
CREDITED YEARS OF COMPENSATION ANNUAL BENEFIT
YEARS OF SERVICE COVERED PAYABLE UPON
SERVICE AT AGE 65 BY PLANS RETIREMENT
-------- --------- ----------- --------------
<S> <C> <C> <C> <C>
Mr. Hoglund........................... 8.3 10.8 $ 570,000 $115,087
Mr. Papa.............................. 14.6 30.3 $ 259,020 $108,062
Mr. McKinney.......................... 4.1 13.0 $ 237,000 $ 30,843
Mr. Wilson............................ 8.1 19.8 $ 185,040 $ 43,821
Mr. Ulak.............................. 17.6 40.6 $ 180,000 $108,487
</TABLE>
NOTE: The estimated annual benefits payable are based on the straight life
annuity form without adjustment for any offset applicable to a
participant's retirement subaccount in the Enron Corp. Employee Stock
Ownership Plan.
Messrs. Hoglund, Papa and Wilson participate in the Enron Corp. Executive
Supplemental Survivor Benefits Plan. In the event of death after retirement, the
Plan provides an annual benefit to the participant's beneficiary equal to 50% of
the participant's annual base salary at retirement, paid for 10 years. The Plan
also provides that in the event of death before retirement, the participant's
beneficiary receives an annual benefit equal to 30% of the participant's annual
base salary at death, paid for the life of the participant's spouse (but for no
more than 20 years in some cases).
14
<PAGE> 17
SEVERANCE PLANS
The Enron Corp. Severance Pay Plan, as amended, provides for the payment of
benefits to employees of Enron Corp. and its subsidiaries, including the
Company, who are terminated for failing to meet performance objectives or
standards, or who are terminated due to reorganization or economic factors. The
amount of benefits payable for performance related terminations is based on
length of service and may not exceed six weeks pay. For those terminated as the
result of reorganization or economic circumstances, the benefit is based on
length of service and amount of pay, up to a maximum payment of 26 weeks of base
pay. If the employee signs a Waiver and Release of Claims Agreement, the
severance pay benefits are doubled. Under no circumstances will the total
severance pay benefit paid under the Enron Corp. Severance Pay Plan exceed 52
weeks of pay. Under the Enron Corp. Change of Control Severance Plan, in the
event of an unapproved change of control of Enron Corp., any employee who is
involuntarily terminated within two years following the change of control will
be eligible for severance benefits equal to two weeks of base pay multiplied by
the number of full or partial years of service, plus one month of base pay for
each $10,000 (or portion of $10,000) included in the employee's annual base pay,
plus one month of base pay for each five percent of annual incentive award
opportunity under any approved plan. The maximum an employee can receive is 2.99
times the employee's average annual base pay over the past five years. The
Company reimburses Enron Corp. for severance plan costs attributable to Company
employees.
EMPLOYMENT CONTRACTS
Effective September 1, 1987, Mr. Hoglund entered into an employment
agreement with the Company under which he serves as Chairman of the Board,
President and Chief Executive Officer of the Company. On December 14, 1994, the
employment agreement was amended to extend the term to September 1, 1998.
Thereafter, the term may be extended as may be agreed by Mr. Hoglund and the
Company. Pursuant to the terms of the employment agreement, as amended, Mr.
Hoglund's annual base salary during the remaining term shall be not less than
$570,000.
Mr. Hoglund's employment agreement provides that if any corporation or
other entity acquires or succeeds to all or substantially all of the business or
assets of the Company, by purchase, consolidation or otherwise, Mr. Hoglund's
stock options and restricted shares of Enron Corp. Common Stock shall vest and
shall automatically be advanced to maturity as if the initial term under his
employment agreement had expired.
CERTAIN TRANSACTIONS
Messrs. Lay and Kinder are executive officers of Enron Corp. The Company
has significant business relationships with Enron Corp.
The Company entered into a Services Agreement (the "Services Agreement")
with Enron Corp. effective January 1, 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 certain 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 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
15
<PAGE> 18
maximum of approximately $7 million in 1995. The limit on cost for the allocated
indirect services provided by Enron Corp. to the Company will increase in
subsequent years for inflation and certain changes in the Company's allocation
bases, but such increase will not exceed 7.5% per year. The Services Agreement
is for an initial term of five years through December, 1998 and will continue
thereafter until terminated by either party.
The sale by Enron Corp. on December 13, 1995 of approximately 31 million
shares of the Common Stock reduced Enron Corp.'s ownership interest in the
Company from 80% to 61%, with the result that (i) the Company ceased, effective
December 14, 1995, to be included in the consolidated U.S. income tax return
filed by Enron Corp. and (ii) the Tax Allocation Agreement previously in effect
between the Company and Enron Corp. was terminated. In addition, effective
December 14, 1995, the Company and its subsidiaries and Enron Corp. entered into
a new Tax Allocation Agreement pursuant to which, among other things, Enron
Corp. has agreed (in exchange for the payment of $13.0 million by the Company)
to be liable for, and indemnify the Company against, all U.S. and state income
taxes and certain foreign taxes imposed on the Company for periods prior to the
date Enron Corp. reduced its ownership in the Company to less than 80%. The
Company does not believe that the cessation of consolidated tax reporting with
Enron Corp., the termination of the prior Tax Allocation Agreement and the
signing of the new Tax Allocation Agreement with Enron Corp. will have a
material adverse effect on its financial condition or results of operations.
Prior to December 14, 1995, the Company was included in the consolidated
U.S. income tax return filed by Enron Corp. as the common parent for itself and
its subsidiaries and affiliated companies, excluding any foreign subsidiaries,
and the resulting taxes, including taxes for any state or other taxing
jurisdiction that required or permitted a consolidated, combined, or unitary tax
return to be filed and in which the Company and/or any of its subsidiaries was
included, were apportioned as between the Company and/or any of its subsidiaries
and Enron Corp. based on the terms of the Tax Allocation Agreement in effect
prior to December 14, 1995.
Pursuant to the terms of a Stock Restriction and Registration Agreement
with Enron Corp., the Company has agreed that upon the request of Enron Corp.,
the Company will register under the Securities Act of 1933, as amended, and
applicable state securities laws the sale of the Common Stock owned by Enron
Corp. which Enron Corp. has requested to be registered. The obligation of the
Company 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 incident to such
registration, excluding underwriters discounts and commissions and certain legal
fees and expenses.
In addition, the Company and Enron Corp. have in the past entered into
significant intercompany transactions and agreements incidental to their
respective businesses, and the Company and Enron Corp. 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. During 1995, Enron Corp. and its affiliates paid the Company
approximately $260 million as a net result of the foregoing described
transactions and agreements. The Company intends that the terms of any future
transactions and agreements between the Company and Enron Corp. will be at least
as favorable to the Company as could be obtained from third parties.
16
<PAGE> 19
ITEM 2.
APPROVAL OF AMENDMENT TO
RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
On February 23, 1996, the Board of Directors adopted, subject to
shareholder approval, the following amendment to the Restated Certificate of
Incorporation of the Company in order to increase the number of shares of Common
Stock authorized for issuance from 160,000,000 to 320,000,000 shares:
RESOLVED, that the Restated Certificate of Incorporation of the
Company is hereby amended by deleting Paragraph A of Article Fourth thereof
in its entirety and substituting the following therefor:
"FOURTH: A. The total number of shares of all classes of stock that
the Corporation shall have authority to issue is Three Hundred Twenty
Million (320,000,000) shares of Common Stock, par value $.01 per share
(hereinafter referred to as "Common Stock")."
REASONS FOR THE INCREASE IN NUMBER OF AUTHORIZED SHARES
The Company is currently authorized to issue 160,000,000 shares of Common
Stock, of which 159,976,840 were issued and outstanding and 23,160 were held as
treasury shares at the close of business on March 11, 1996.
Prior to the tax deconsolidation described above under "Certain
Transactions" (the "Deconsolidation"), the Company was a member of the Enron
Corp. consolidated group for U.S. income tax reporting purposes. In order to
qualify for this tax treatment, Enron Corp. was required to own at least 80% of
the outstanding Common Stock. Because Enron Corp. owned 128,000,000 shares of
Common Stock prior to the Deconsolidation, the Company was effectively
restricted to having no more than 32,000,000 additional shares of Common Stock
outstanding. Thus, the authorized number of shares of Common Stock for issuance
had been limited to 160,000,000 shares to preclude any transaction that might
result in an unintended breaking of the required ownership level for
consolidated U.S. income tax reporting purposes.
Because Deconsolidation has now occurred, the Company is no longer subject
to this restriction on the issuance of additional shares. As a result, the Board
of Directors of the Company has determined that it is in the best interests of
the Company to increase the authorized number of shares of Common Stock in the
manner described above. These additional shares will make available to the
Company additional shares of Common Stock for future issuance from time to time
for proper corporate purposes, including but not limited to possible future
acquisitions, stock sales, stock option exercises, or other employee incentive
plan requirements. The Company has no present plans with respect to the issuance
of additional shares, other than the possible issuance of shares for stock
option exercises or other employee incentive plan purposes.
The additional shares could potentially be issued at times and under
circumstances that could have a dilutive effect on earnings per share and on the
equity ownership and voting power of the present holders of Common Stock.
Although the flexibility of the Board of Directors to issue additional Common
Stock could enhance the ability of the Board to negotiate on behalf of the
stockholders in a takeover situation and also could be used by the incumbent
Board of Directors to make a change of control more difficult, the Board of
Directors has no present intention of issuing any shares of Common Stock for any
anti-takeover purposes.
17
<PAGE> 20
REQUIRED VOTE AND RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding Common
Stock is required to approve this amendment to the Restated Certificate of
Incorporation. The approval and adoption of this proposal requires the
affirmative vote of the holders of record at the close of business on March 11,
1996 of at least a majority of the shares of the outstanding Common Stock.
Accordingly, under Delaware law and the Restated Certificate of Incorporation
and by-laws of the Company, abstentions and broker non-votes would have the same
legal effect as a vote against this proposal, even though this may not be the
intent of the person voting or giving the proxy.
The shares represented by the proxies solicited by the Board of Directors
will be voted as directed on the form of proxy or, if no direction is indicated,
will be voted "FOR" the approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THIS PROPOSAL.
ITEM 3.
APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors appointed Arthur Andersen LLP, independent public accountants, to
audit the consolidated financial statements of the Company for the year ending
December 31, 1996.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting. Accordingly,
under Delaware law and the Restated Certificate of Incorporation and bylaws of
the Company, abstentions would have the same legal effect as a vote against this
proposal, but a broker non-vote would not be counted for purposes of determining
whether a majority had been achieved.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. A representative of
Arthur Andersen LLP is expected to be present at the Annual Meeting and will be
available to make a statement if such representative desires to do so and to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION BY THE SHAREHOLDERS OF THIS
APPOINTMENT.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
Shareholders may propose matters to be presented at shareholder meetings
and may also nominate persons to be Directors. Formal procedures have been
established for those proposals and nominations.
PROPOSALS FOR 1997 ANNUAL MEETING
Pursuant to various rules promulgated by the SEC, any proposals of holders
of Common Stock of the Company intended to be presented at the Annual Meeting of
Shareholders of the Company to be held in 1997 must be received by the Company,
addressed to Angus H. Davis, Vice President, Communications and Corporate
Secretary, 1400 Smith Street, Houston, Texas 77002, no later than November 25,
1996, to be included in the Company proxy statement and form of proxy relating
to that meeting.
18
<PAGE> 21
In addition to the SEC rules described in the preceding paragraph, the
Company bylaws provide that for business to be properly brought before the
Annual Meeting of Shareholders, it must be either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting by
a shareholder of the Company who is a shareholder of record at the time of
giving of notice hereinafter provided for, who shall be entitled to vote at such
meeting and who complies with the following notice procedures. In addition to
any other applicable requirements for business to be brought before an annual
meeting by a shareholder of the Company, the shareholder must have given timely
notice in writing of the business to be brought before an Annual Meeting of
Shareholders of the Company to the Secretary of the Company. To be timely,
notice given by a shareholder must be delivered to or mailed and received at the
principal executive offices of the Company, 1400 Smith Street, Houston, Texas
77002, no later than February 6, 1997. The notice shall set forth as to each
matter the shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the Company books, of the shareholder proposing
such business, (iii) the acquisition date, the class and the number of shares of
voting stock of the Company which are owned beneficially by the shareholder,
(iv) any material interest of the shareholder in such business, and (v) a
representation that the shareholder intends to appear in person or by proxy at
the meeting to bring the proposed business before the meeting. Notwithstanding
the foregoing bylaw provisions, a shareholder must also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in the foregoing bylaw
provisions. Notwithstanding anything in the Company bylaws to the contrary, no
business shall be conducted at the annual meeting except in accordance with the
procedures outlined above.
PROPOSALS FOR 1996 ANNUAL MEETING
The date of delivery to, or receipt by, the Company of any notice from
shareholders of the Company regarding business to be brought before the 1996
Annual Meeting of Shareholders of the Company was February 2, 1996. The Company
has not received any notices from its shareholders regarding business to be
brought before the 1996 Annual Meeting of Shareholders.
NOMINATIONS FOR 1997 ANNUAL MEETING AND FOR ANY SPECIAL MEETINGS
Only persons who are nominated in accordance with the following procedures
shall be eligible for election as directors. Nominations of persons for election
to the Company's Board of Directors may be made at a meeting of shareholders (a)
by or at the direction of the Board of Directors or (b) by any shareholder of
the Company who is a shareholder of record at the time of giving of notice
hereinafter provided for, who shall be entitled to vote for the election of
directors at the meeting and who complies with the following notice procedures.
Such nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Company. To be timely, notice given by a shareholder shall be delivered
to or mailed and received at the principal executive offices of the Company,
1400 Smith Street, Houston, Texas 77002, (i) with respect to an election to be
held at the Annual Meeting of Shareholders of the Company, on or before February
6, 1997, and (ii) with respect to an election to be held at a special meeting of
shareholders of the Company for the election of directors, not later than the
close of business on the 10th day following the day on which such notice of the
date of the meeting was mailed or public disclosure of the date of meeting was
made, whichever first occurs. Such notice shall set forth (a) as to each person
whom the shareholder proposes to nominate for election or re-election as a
director, all
19
<PAGE> 22
information relating to the person that is required to be disclosed in
solicitations for proxies for election of directors, or is otherwise required,
pursuant to Regulation 14A under the Exchange Act (including the written consent
of such person to be named in the proxy statement as a nominee and to serve as a
director if elected); and (b) as to the shareholder giving the notice (i) the
name and address, as they appear of record on the Company's books, of such
shareholders, and (ii) the class and number of shares of capital stock of the
Company which are beneficially owned by the shareholder. In the event a person
is validly designated as nominee to the Board of Directors and shall thereafter
become unable or unwilling to stand for election to the Board of Directors, the
Board of Directors or the shareholder who proposed such nominee, as the case may
be, may designate a substitute nominee. Notwithstanding the foregoing bylaw
provisions, a shareholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in the foregoing bylaw
provisions.
NOMINATIONS FOR 1996 ANNUAL MEETING
The date for delivery to, or receipt by, the Company of any notice from a
shareholder of the Company regarding nominations for directors to be elected at
the 1996 Annual Meeting of Shareholders of the Company was February 2, 1996. The
Company has not received any notices from its shareholders regarding nominations
for directors to be elected at the 1996 Annual Meeting of Shareholders.
GENERAL
As of the date of this proxy statement, the management of the Company has
no knowledge of any business to be presented for consideration at the meeting
other than that described above. If any other business should properly come
before the meeting, it is intended that the shares represented by proxies will
be voted with respect thereto in accordance with the judgment of the persons
named in such proxies.
The cost of any solicitation of proxies will be borne by the Company. In
addition to solicitation by use of the mails, certain officers and regular
employees of the Company may solicit the return of proxies by telephone,
telegraph or personal interview. Arrangements may also be made with brokerage
firms and other custodians, nominees and fiduciaries for the forwarding of
material to and solicitation of proxies from the beneficial owners of Common
Stock held of record by such persons, and the Company will reimburse such
brokerage firms, custodians, nominees and fiduciaries for reasonable out of
pocket expenses incurred by them in connection therewith.
By Order of the Board of Directors,
ANGUS H. DAVIS
Vice President, Communications and
Corporate Secretary
Houston, Texas
March 25, 1996
20
<PAGE> 23
|
/X/ PLEASE MARK YOUR |7437
VOTES AS IN THIS ----
EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
1. Election of FOR WITHHELD 2. Approval of FOR AGAINST ABSTAIN
Directors. / / / / amendment to / / / / / /
(see reverse) Restated
Certificate of
Incorporation
For, except vote withheld from the 3. Ratification of FOR AGAINST ABSTAIN
following nominee(s): appointment of / / / / / /
______________________________ independent
accountants.
4. In the discretion of the proxies named Change of Address/ / /
herein, the proxies are authorized Comments on
to vote upon other matters as are Reverse Side
properly brought before the meeting.
All as more particularly described in the
Proxy Statement relating to such meeting,
receipt of which is hereby acknowledged.
Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such.
------------------------------------------
------------------------------------------
Signature(s) Date
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[ENRON OIL & GAS COMPANY LOGO] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
NEED ASSISTANCE IN ANY OF THE FOLLOWING AREAS:
o DIVIDEND CHECKS - ADDRESS CHANGES - LEGAL TRANSFERS
o DIRECT DEPOSIT - HAVE YOUR ENRON OIL & GAS COMPANY QUARTERLY DIVIDENDS
ELECTRONICALLY DEPOSITED INTO YOUR CHECKING OR SAVINGS ACCOUNT ON DIVIDEND
PAYMENT DATE. (No more worries about late or lost dividend checks.)
o CONSOLIDATION OF ACCOUNTS - ELIMINATE MULTIPLE ACCOUNTS FOR ONE HOLDER
AND CERTAIN DUPLICATE SHAREHOLDER MAILINGS GOING TO ONE ADDRESS. (Dividend
checks, annual reports and proxy materials would continue to be mailed to
each shareholder.)
JUST CALL OUR TRANSFER AGENT'S TELEPHONE RESPONSE CENTER:
(800) 519-3111 OR (201) 324-1225
OR WRITE TO:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
P.O. BOX 2500
JERSEY CITY, NJ 07303-2500
FOR EARNINGS INFORMATION, CALL (800) 808-0363.
<PAGE> 24
[ENRON OIL & GAS COMPANY LOGO]
P PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ENRON OIL & GAS COMPANY FOR ANNUAL MEETING ON MAY 7, 1996
R
The Undersigned hereby appoints Forrest E. Hoglund, Lewis P. Chandler, Jr.
O and Angus H. Davis, or any of them, and any substitute or substitutes, to be
the attorneys and proxies of the undersigned at the Annual Meeting of
X Stockholders of Enron Oil & Gas Company (the "Company") to be held at
3:00 p.m. Houston time on Tuesday, May 7, 1996, in the LaSalle Ballroom of
Y the Doubletree Hotel at Allen Center, 400 Dallas St., Houston, Texas, or
at any adjournment thereof, and to vote at such meeting the shares of stock
of the Company the undersigned held of record on the books of the Company
on the record date for the meeting.
ELECTION OF DIRECTORS, NOMINEES: (change of address/comments)
Fred C. Ackman, Forrest E. Hoglund,
Richard D. Kinder, Kenneth L. Lay, ----------------------------------
Edward Randall, III
----------------------------------
----------------------------------
----------------------------------
(If you have written in the above
space, please mark the
corresponding box on the reverse
side of this card)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE
APPROPRIATE BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK
ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD --------------
OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE SEE REVERSE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. SIDE
--------------
