<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
<TABLE>
<S> <C>
DELAWARE 47-0684736
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
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)
------------------------
BARRY HUNSAKER, JR., ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
ENRON OIL & GAS COMPANY
1400 SMITH STREET
HOUSTON, TEXAS 77002
TELEPHONE: (713) 853-5788
FACSIMILE: (713) 646-2750
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
ARTHUR H. ROGERS, ESQ. GARY W. ORLOFF, ESQ.
FULBRIGHT & JAWORSKI L.L.P. BRACEWELL & PATTERSON, L.L.P.
1301 MCKINNEY STREET, SUITE 5100 SOUTH TOWER PENNZOIL PLACE, SUITE 2900
HOUSTON, TEXAS 77010 711 LOUISIANA STREET
TELEPHONE: (713) 651-5421 HOUSTON, TEXAS 77002
FACSIMILE: (713) 651-5246 TELEPHONE: (713) 221-1306
FACSIMILE: (713) 221-2166
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, 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
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED* PER UNIT OFFERING PRICE* FEE
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value 42,550,000 $19.625 $609,356,250 $169,402
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes 27,000,000 shares that may be offered by the Company in an
underwritten offering, and up to 4,050,000 shares that the underwriters in
that offering may purchase from Enron Corp. to cover over-allotments, if any.
The price is estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(c) (based on the average of the high and low prices
of the common stock as reported in the New York Stock Exchange composite
transaction reporting system on July 19, 1999). Also includes up to 11,500,000
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), including shares exchangeable for Notes that the
underwriters for Enron Corp.'s offering may purchase to cover over-allotments,
if any. No separate consideration will be received by the Company for such
shares. Accordingly, pursuant to Rule 457(i), no registration fee is required
with respect to such shares.
------------------------
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> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one used in
connection with an offering (the "Prospectus") by Enron Oil & Gas Company of
common stock, $.01 par value per share ("Common Stock"), and one used in
connection with shares of Common Stock 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 and different
descriptions of "Legal Matters" and 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 Offering". The form of 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> 3
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED JULY 23, 1999.
27,000,000 Shares
[Enron Logo]
ENRON OIL & GAS COMPANY
Common Stock
----------------------
Enron Oil & Gas Company is offering 27,000,000 shares of its common stock.
The common stock is listed on the New York Stock Exchange under the symbol
"EOG". The last reported sale price of the common stock on July 21, 1999 was
$20.00 per share.
Enron Corp. is offering concurrently, in a separate public offering with a
separate prospectus 10,000,000 (11,500,000 if the underwriters in that offering
fully exercise their over-allotment option) Exchangeable Notes, which are
mandatorily exchangeable into shares of EOG common stock currently owned by
Enron Corp. This offering of EOG common stock and the concurrent offering of
Exchangeable Notes by Enron Corp. are not conditioned on each other.
Consider carefully the risk factors beginning on page 10 of this
prospectus.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- --------
<S> <C> <C>
Initial price to public..................................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to EOG........................... $ $
</TABLE>
To the extent that the underwriters sell more than 27,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
4,050,000 shares from Enron Corp. at the initial price to public less the
underwriting discount.
----------------------
The underwriters expect to deliver the shares against payment in New York,
New York on August , 1999.
GOLDMAN, SACHS & CO. BANC OF AMERICA SECURITIES LLC
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
LEHMAN BROTHERS
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
WARBURG DILLON READ LLC
----------------------
Prospectus dated , 1999.
<PAGE> 4
ENRON OIL & GAS COMPANY
- ------------------------- LOGO
*NATURAL GAS EQUIVALENT DAILY PRODUCTION AT DECEMBER 31, 1998.
OIL AND GAS TERMS
<TABLE>
<S> <C> <C>
When describing commodities
produced and sold: gas = natural gas
oil = crude oil
liquids = crude oil, condensate and natural gas liquids
When describing natural gas: Mcf = thousand cubic feet
MMcf = million cubic feet
Bcf = billion cubic feet
MMBtu = million British Thermal Units
When describing oil: Bbl = barrel
MBbl = thousand barrels
MMBbl = million barrels
When comparing oil to natural gas: 1 Bbl of oil = 6 Mcf of natural gas equivalent
Mcfe = thousand cubic feet equivalent
MMcfe = million cubic feet equivalent
Bcfe = billion cubic feet equivalent
</TABLE>
2
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights selected information we have included or
incorporated by reference in this prospectus. However, it does not contain all
information that may be important to you. More detailed information about this
offering, our business and our financial and operating data is contained
elsewhere in this prospectus. We encourage you to read this prospectus in its
entirety before making an investment decision.
In this prospectus, we refer to Enron Oil & Gas Company and its
subsidiaries as "we", "us", "our" or "EOG" unless the context clearly indicates
otherwise.
ABOUT EOG
EOG is one of the largest independent exploration and production companies
in the United States. We explore for and produce natural gas and oil in almost
every major producing basin in the United States and Canada and internationally
in India and Trinidad and, to a lesser extent, selected other areas.
SHARE EXCHANGE WITH ENRON CORP.
On July 20, 1999, EOG and Enron Corp. announced an agreement to exchange
62,270,000 shares of our common stock out of 82,270,000 shares currently owned
by Enron Corp. for all the stock of our subsidiary, EOGI-India, Inc. Prior to
the Share Exchange, we will make an indirect $600,000,000 cash capital
contribution, plus certain intercompany receivables, to EOGI-India, Inc. At the
time of completion of this transaction, this subsidiary will own, through
subsidiaries, all of our assets and operations in India and China. We expect
this transaction to be tax-free to Enron Corp. and us. We refer to this
transaction elsewhere in this prospectus as the Share Exchange. Some time after
the Share Exchange, we expect to change our corporate name to "EOG Resources,
Inc." and we will make appropriate changes to our subsidiaries' names. See
"Relationship with Enron Corp."
The completion of the Share Exchange is subject to specific conditions and
will occur on the later of August 31, 1999 and three days after all conditions
have been satisfied or waived. If prior to August 31, 1999 all conditions to the
Share Exchange have been satisfied or waived, we can require that the Share
Exchange take place prior to August 31, 1999. We currently expect the Share
Exchange to close on or before August 31, 1999. If we complete the Share
Exchange prior to this offering, we will use borrowed funds for the cash capital
contribution in connection with the Share Exchange, and we will repay a portion
of those borrowed funds with the net proceeds of this offering. If we complete
this offering on the same day as the Share Exchange, we will use the proceeds of
this offering to pay a portion of the capital contribution in connection with
the Share Exchange.
Upon completion of the Share Exchange, all of the directors of EOG who are
affiliated with Enron Corp. will resign from our Board of Directors.
For the complete terms of our agreement with Enron Corp., please refer to
the Share Exchange Agreement between Enron Corp. and us filed as an exhibit to
the registration statement that includes this prospectus.
EOG RESOURCES, INC.
As EOG Resources, Inc., our reserves and production will be predominantly
comprised of natural gas, and will be primarily located in North America. On a
pro forma basis, 77% of our total reserves will be located in, and 85% of our
production will be derived from, the United States or Canada, with natural gas
comprising 87% of total production, on a natural gas equivalent basis
3
<PAGE> 6
as of or for the year ended December 31, 1998.
After giving effect to the Share Exchange, at December 31, 1998, our
estimated total net proved reserves included:
- 4,294 Bcf of gas, including:
- 1,180 Bcf of proved undeveloped methane reserves in the Big Piney deep
Paleozoic formations in Wyoming and
- 61 MMBbl of liquids.
After giving effect to the Share Exchange, at December 31, 1998,
- 66% of our reserves (on a natural gas equivalent basis) was located in
the United States
- 11% in Canada and
- 23% in Trinidad.
After giving effect to the Share Exchange, for the year ended December 31,
1998 our delivered volumes (on a natural gas equivalent basis) were
- 282 Bcfe in the United States,
- 46 Bcfe in Canada and
- 57 Bcfe in Trinidad.
BUSINESS STRATEGY
Our strategy is to maximize the return on invested capital by achieving
operating and finding costs that are among the lowest in the industry. We are
focused on growing our domestic natural gas reserves and production by
concentrating our efforts in known North American reserve basins. We focus on
selected international opportunities where we can successfully apply our core
competencies in the exploitation of reserves. Our strategy is intended to
enhance the generation of cash flow and earnings from each unit of production on
a cost effective basis.
Our North American operations are organized into seven largely autonomous
business units, each focusing on a basin or basins, utilizing personnel who have
developed experience and expertise unique to the geology of the region, thereby
leveraging our knowledge and cost structure into enhanced returns on invested
capital.
We focus our drilling activity toward natural gas deliverability in
addition to natural gas reserve enhancement and to a lesser extent crude oil
exploitation. We also focus 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.
We implement our strategy by emphasizing the drilling of internally
generated prospects in order to find and develop low cost reserves. We also make
selected tactical acquisitions that give us additional economies of scale or
land positions with significant additional prospects. Achieving and maintaining
the lowest possible operating cost structure are also important goals in the
implementation of our strategy.
Consistent with our desire to optimize the use of our assets, we also sell
selected oil and gas properties that for various reasons may no longer fit into
future operating plans or which we believe do not have sufficient future growth
potential. We do this when we believe the economic value to be obtained by
selling the properties and reserves in the ground is greater than what we would
obtain by holding the properties and producing the reserves over time. As a
result, we typically receive each year a varying but substantial level of
proceeds related to such sales. We use these proceeds for general corporate
purposes.
4
<PAGE> 7
RECENT DEVELOPMENTS
For the second quarter 1999, we reported net income of $20.6 million, or
$.13 per share, compared to net income of $13.3 million, or $.09 per share, for
the comparable period a year ago. Net of non-recurring items, our second quarter
1999 net income was $12.9 million, or $.08 per share. Net operating revenues for
second quarter 1999 were $187.2 million compared to $183.3 million for the
comparable period a year ago.
Our natural gas deliveries in second quarter 1999 increased six percent to
959 MMcf per day versus 1998 second quarter deliveries of 907 MMcf per day.
Crude oil and condensate deliveries totaled 24.5 MBbls per day in the second
quarter 1999, an increase of nine percent from deliveries of 22.4 MBbls per day
for the comparable period a year ago.
As a result of the change to our portfolio of assets subsequent to the
Share Exchange, we are currently re-evaluating our overall business. We expect
to complete this re-evaluation by the end of third quarter 1999. As a result of
this re-evaluation, some of our current projects may no longer be deemed central
to our business. In that case, we may incur non-cash charges in connection with
the disposition of such projects of up to approximately $75 million, after-tax.
We have received a commitment for a new credit facility of up to $1.3
billion, which may be used to fund the $600 million cash capital contribution
for the Share Exchange if it closes before this offering.
We have declared a regular quarterly dividend of $0.03 per share on the
common stock of EOG, payable July 30, 1999, to shareholders of record as of July
15, 1999.
On July 21, 1999, two stockholders of EOG filed separate lawsuits
purportedly on behalf of EOG against Enron Corp. and EOG's directors, alleging
that Enron Corp. and EOG's directors breached their fiduciary duties of good
faith and loyalty in approving the Share Exchange. The lawsuits seek to
temporarily and permanently enjoin the Share Exchange and seek compensatory
damages and costs and expenses, including reasonable attorneys' and experts'
fees. EOG, Enron Corp. and the EOG directors believe the lawsuits are without
merit and intend to vigorously contest them.
THE OFFERING
- Shares offered by EOG..........................................27,000,000
- Approximate number of shares outstanding after this offering and the
Share Exchange...........................................................
- New York Stock Exchange
symbol................................................................EOG
- Use of proceeds..........................................We expect to use
the net proceeds from this offering of approximately $ to either make
a cash capital contribution to our subsidiaries that conduct our India
and China operations in connection with the pending Share Exchange or if
the Share Exchange already has taken place when this offering is
completed, to repay a portion of the indebtedness incurred to fund such
capital contribution. The pending Share Exchange with Enron Corp. is
discussed in "Prospectus Summary -- Share Exchange With Enron Corp." We
will not receive any proceeds from the underwriters' exercise of the
over-allotment option.
5
<PAGE> 8
CONCURRENT OFFERING
Enron Corp. is offering concurrently, in a separate public offering with a
separate prospectus 10,000,000 (11,500,000 if the underwriters in that offering
fully exercise their over-allotment option) Exchangeable Notes, which are
mandatorily exchangeable into shares of our common stock currently owned by
Enron Corp. This offering of our common stock and the concurrent offering of
Exchangeable Notes by Enron Corp. are not conditioned on each other. Enron may
not sell any shares of our common stock other than those covered by the
underwriters' over-allotment and the Exchangeable Notes for a period of six
months following the closing of the Share Exchange. We will not receive any
proceeds from the Exchangeable Notes offering.
6
<PAGE> 9
SUMMARY OF HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The following table sets forth our summary selected historical financial
and operating data as of and for each of the three years in the period ended
December 31, 1998 and the three-month periods ended March 31, 1998 and 1999 and
our pro forma financial and operating data as of and for the year ended December
31, 1998 and the three-month period ended March 31, 1999. This information
should be read in conjunction with our consolidated financial statements and the
related notes incorporated by reference in this prospectus (see "Where You Can
Find More Information") and our condensed consolidated pro forma financial
statements and the related notes included elsewhere in this prospectus.
Financial information for each of the three years in the period ended December
31, 1998 has been derived from audited financial statements. Financial
information for the three-month periods ended March 31, 1998 and 1999 has been
derived from unaudited financial statements. The interim data reflects all
adjustments which, in the opinion of our management, are necessary to present
fairly such information for the interim periods. Results of the three-month
periods are not necessarily indicative of the results expected for a full year
or any other interim period. The unaudited condensed consolidated pro forma
information is for informational purposes only, and does not necessarily
represent what our actual results of operations would have been had the Share
Exchange occurred on the dates indicated under "Unaudited Condensed Consolidated
Pro Forma Financial Information".
<TABLE>
<CAPTION>
PRO FORMA
THREE
PRO FORMA THREE MONTHS MONTHS
YEAR ENDED DECEMBER 31, YEAR ENDED ENDED MARCH 31, ENDED
---------------------------------- DECEMBER 31, --------------------- MARCH 31,
1996 1997 1998 1998 1998 1999 1999
-------- -------- -------- ------------ -------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net operating revenues......... $730,648.. $783,501 $769,188 $696,351 $199,831 $158,954 $140,120
Operating expenses
Lease and well................ 76,618.. 96,064 98,868 87,750 24,909 24,069 19,788
Exploration costs............. 55,009.. 57,696 65,940 63,407 17,398 16,789 15,991
Dry hole costs................ 13,193 17,303 22,751 22,751 7,881 345 345
Impairment of unproved oil and
gas properties.............. 21,226 27,213 32,076 32,076 8,348 8,003 8,003
Depreciation, depletion and
amortization................ 251,278 278,179 315,106 305,786 71,961 82,022 79,120
General and administrative.... 56,405 54,415 69,010 57,968 16,554 23,635 13,142
Taxes other than income....... 48,089 59,856 51,776 45,161 14,494 13,695 11,473
-------- -------- -------- -------- -------- -------- --------
Total................... 521,818 590,726 655,527 614,899 161,545 168,558 147,862
-------- -------- -------- -------- -------- -------- --------
Operating income (loss)........ 208,830 192,775 113,661 81,452 38,286 (9,604) (7,742)
Other income (expense), net.... (5,007) (1,588) (4,800) 5 (970) 26,938(1) 24,639(1)
Interest expense (net of
interest capitalized)......... 12,861 27,717 48,579 60,590 9,110 14,267 17,134
-------- -------- -------- -------- -------- -------- --------
Income before income taxes..... 190,962 163,470 60,282 20,867 28,206 3,067 (237)
Income tax provision
(benefit)(2).................. 50,954(3) 41,500(4) 4,111(5) (10,432)(5) 1,201(6) (1,999)(7) (2,047)(7)
-------- -------- -------- -------- -------- -------- --------
Net income..................... $140,008 $121,970 $ 56,171 $ 31,299 $ 27,005 $ 5,066 $ 1,810
======== ======== ======== ======== ======== ======== ========
Net income per share of common
stock
Basic......................... $ .88 $ .78 $ .36 $ .26 $ .17 $ .03 $ .02
======== ======== ======== ======== ======== ======== ========
Diluted....................... $ .87 $ .77 $ .36 $ .26 $ .17 $ .03 $ .02
======== ======== ======== ======== ======== ======== ========
Average number of common shares
Basic......................... 159,853 157,376 154,345 119,075 154,736 153,733 118,463
======== ======== ======== ======== ======== ======== ========
Diluted....................... 161,525 158,160 155,054 119,784 155,522 154,615 119,345
======== ======== ======== ======== ======== ======== ========
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRO FORMA
AT DECEMBER 31, AT AT
------------------------------------ MARCH 31, MARCH 31,
1996 1997 1998 1999 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Oil and gas properties - net........................... $2,099,589 $2,387,207 $2,676,363 $2,681,316 $2,450,296
Total assets........................................... 2,458,353 2,723,355 3,018,095 2,990,235 2,677,789
Long-term debt
Trade................................................ 466,089 548,775 942,779 1,170,518 1,280,518
Affiliate............................................ - 192,500 200,000 - -
Deferred revenue....................................... 56,383 39,918 4,198 3,148 3,148
Shareholders' equity................................... 1,265,090 1,281,049 1,280,304 1,284,713 936,967
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
THREE MONTHS THREE
YEAR ENDED PRO FORMA ENDED MONTHS
DECEMBER 31, YEAR ENDED MARCH 31, ENDED
------------------------ DECEMBER 31, --------------- MARCH 31,
1996 1997 1998 1998 1998 1999 1999
------ ------ ------ ------------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Wellhead Volumes and Prices
Natural Gas Volumes (MMcf per day).............. 830 889 971 915 901 1,004 933
Average Natural Gas Prices ($/Mcf).............. $ 1.78 $ 2.07 $ 1.78 $ 1.74 $ 1.86 $ 1.53 $ 1.50
Crude/Condensate Volumes (MBbl per day)......... 19.6 19.9 24.7 19.6 22.3 25.7 18.6
Average Crude/Condensate Prices ($/Bbl)......... $20.60 $19.30 $12.66 $12.61 $14.64 $10.76 $11.12
</TABLE>
- ---------------
(1) Includes a gain of $28 million related to the sale of options held by EOG to
purchase 1.6 million shares of Enron Corp. common stock.
(2) Includes benefits of approximately $16 million, $12 million, $12 million,
$12 million, $1 million, $3 million and $3 million in the year ended
December 31, 1996, 1997, 1998 and 1998 (pro forma), and the three-month
period ended March 31, 1998, 1999 and 1999 (pro forma), respectively,
relating to tight gas sand federal income tax credits.
(3) Includes a benefit of $9 million primarily associated with a reassessment of
deferred tax requirements and the successful resolution on audit of Canadian
income taxes for certain prior years.
(4) Includes a benefit of $15 million primarily associated with the refiling of
certain Canadian tax returns and the sale of certain international assets
and subsidiaries.
(5) Includes a benefit of $2 million related to the final audit assessments of
India taxes for certain prior years, a benefit of $4 million related to
reduced deferred franchise taxes, and $4 million related to Venezuela
deferred tax benefits.
(6) Includes a benefit of $9 million related to certain international costs and
the resolution of certain domestic and international issues.
(7) Computed using the actual effective tax rate for the quarter rather than the
annual effective tax rate.
8
<PAGE> 11
SUMMARY OF HISTORICAL AND PRO FORMA OIL AND GAS RESERVE INFORMATION
The following table sets forth summary information with respect to EOG's
estimates of its net proved natural gas, crude oil, condensate and natural gas
liquids reserves at December 31, 1998. For additional information relating to
reserves, see "Business -- Oil and Gas Exploration and Production Properties and
Reserves".
<TABLE>
<CAPTION>
NATURAL GAS
EQUIVALENTS (BCFE)
GAS LIQUIDS -------------------------------
(BCF) (MBBL) DEVELOPED UNDEVELOPED TOTAL
----- --------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
HISTORICAL:
Net proved reserves at
December 31, 1998:
United States........................ 2,854(1) 36,827 1,628 1,446(1) 3,074(1)
Canada............................... 464 7,592 432 78 510
Trinidad............................. 976 16,204 312 762 1,074
India................................ 825 42,785 608 473 1,081
Other................................ 110 1,162 - 117 117
----- ------- ----- ----- -----
Total........................... 5,229 104,570 2,980 2,876 5,856
===== ======= ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
NATURAL GAS
EQUIVALENTS (BCFE)
GAS LIQUIDS -------------------------------
(BCF) (MBBL) DEVELOPED UNDEVELOPED TOTAL
------- --------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
PRO FORMA:
Net proved reserves at
December 31, 1998, as adjusted(2):
United States......................... 2,854(1) 36,827 1,628 1,446(1) 3,074(1)
Canada................................ 464 7,592 432 78 510
Trinidad.............................. 976 16,204 312 762 1,074
----- ------- ----- ----- -----
Total............................ 4,294 60,623 2,372 2,286 4,658
===== ======= ===== ===== =====
</TABLE>
- ---------------
(1) Includes 1,180 Bcf of methane reserves in the Big Piney deep Paleozoic
formations in Wyoming.
(2) Adjusted to reflect the effect of the Share Exchange.
9
<PAGE> 12
RISK FACTORS
In considering whether to purchase shares of our common stock, you should
carefully consider the risk factors described below and all the information we
have included or incorporated by reference in this prospectus. In addition,
please read "Cautionary Statement Regarding Forward-Looking Statements" on page
15 of this prospectus, where we describe uncertainties associated with our
business and the forward-looking statements included or incorporated by
reference in this prospectus.
A SUBSTANTIAL OR EXTENDED DECLINE IN OIL OR GAS PRICES WOULD HAVE A MATERIAL
ADVERSE EFFECT ON US.
Prices for natural gas and oil fluctuate widely. For example, natural gas
and oil prices declined significantly in 1998 and, for an extended period of
time, remained substantially below prices obtained in previous years. Since we
are primarily a natural gas company, we are more significantly affected by
changes in natural gas prices than changes in the prices for crude oil,
condensate or natural gas liquids. Among the factors that can cause these price
fluctuations are:
- the level of consumer demand,
- weather conditions,
- price and availability of alternative fuels,
- domestic drilling activity and
- overall economic conditions.
During 1995, 1996, 1997 and 1998, the high and low prices for natural gas and
oil on the twelve-month forward NYMEX strip were:
<TABLE>
<CAPTION>
GAS OIL
------------- ---------------
HIGH LOW HIGH LOW
----- ----- ------ ------
<S> <C> <C> <C> <C>
1995................. $2.09 $1.57 $19.16 $16.58
1996................. 2.73 1.85 23.27 16.90
1997................. 2.79 2.02 23.38 18.29
1998................. 2.72 1.92 18.41 12.17
</TABLE>
The average North America wellhead natural gas prices we received increased
43% from 1995 to 1996 and 15% from 1996 to 1997, while the average North America
wellhead natural gas prices we realized from 1997 to 1998 decreased by 15%.
Wellhead natural gas volumes from the Trinidad SECC Block are sold at prices
that are based on a fixed schedule with periodic escalations. No formal contract
has been entered into regarding future production of proved reserves from the
Trinidad U(a) Block. Due to the many uncertainties associated with the world
political environment, the availabilities of other world wide energy supplies
and the relative competitive relationships of the various energy sources in the
view of the consumers, we are unable to predict what changes may occur in
natural gas prices in the future.
We sell substantially all of our wellhead crude oil and condensate under
various terms and arrangements at market responsive prices. Crude oil and
condensate prices also have fluctuated during the last three years. Due to the
many uncertainties associated with the world political environment, the
availabilities of other worldwide energy supplies and the relative competitive
relationships of the various energy sources in the view of the consumers, the
level of consumer demand and the availability of alternative fuels, we are
unable to predict what changes may occur in crude oil and condensate prices in
the future.
Our cash flow and earnings depend to a great extent on the prevailing
prices for natural gas and oil. Prolonged or substantial declines in these
commodity prices may adversely affect our liquidity, the amount of cash flow
available for capital expenditures and our ability to maintain our credit
quality and access to the credit and capital markets.
OUR ABILITY TO SELL OUR OIL AND GAS PRODUCTION COULD BE MATERIALLY HARMED IF WE
FAIL TO OBTAIN ADEQUATE SERVICES SUCH AS TRANSPORTATION AND PROCESSING.
The sale of our oil and gas production depends on a number of factors
beyond our control, including the availability and capacity of transportation
and processing facilities. Our failure to obtain such services on acceptable
terms could materially harm our business.
10
<PAGE> 13
THE OIL AND GAS RESERVES DATA AND FUTURE NET REVENUES ESTIMATES WE REPORT ARE
UNCERTAIN.
Estimates of reserves by necessity are projections based on engineering
data, the projection of future rates of production and the timing of future
expenditures. Estimates of our proved oil and gas reserves and projected future
net revenues are based on reserve reports which we prepare and a portion of
which are reviewed by independent petroleum engineers. The process of estimating
oil and gas reserves requires substantial judgment on the part of the petroleum
engineers, resulting in imprecise determinations, particularly with respect to
new discoveries. Different reserve engineers may make different estimates of
reserve quantities and revenues attributable thereto based on the same data.
Future performance that deviates significantly from the reserve reports could
have a material adverse effect on us. The accuracy of any reserve estimate
depends on the quality of the available data as well as engineering and
geological interpretation and judgment. Results of drilling, testing and
production and changes in the assumptions regarding decline and production
rates, the ability to market oil and gas that is produced, oil and gas prices,
revenues, taxes, capital expenditures, operating expenses, geologic success and
quantities of recoverable oil and gas may vary substantially from those assumed
in the estimates, may result in revisions to such estimates and could materially
affect the estimated quantities and related value of reserves. The estimates of
future net revenues reflect oil and gas prices as of the date of estimation,
without escalation or reduction. Fluctuations in the price of natural gas and
oil have the effect of significantly altering reserve estimates as the economic
projections inherent in the estimates may reduce or increase the quantities of
recoverable reserves. There can be no assurance, however, that such prices will
be realized or that the estimated production volumes will be produced during the
periods indicated. Actual future production, natural gas and oil prices,
revenues, taxes, development expenditures, operating expenses and quantities of
recoverable natural gas and oil reserves most likely will vary from our
estimates.
IF WE FAIL TO ACQUIRE OR FIND ADDITIONAL RESERVES, OUR RESERVES AND PRODUCTION
WILL DECLINE MATERIALLY FROM THEIR CURRENT LEVELS.
The rate of production from oil and gas properties generally declines as
reserves are depleted. Except to the extent that we acquire additional
properties containing proved reserves, conduct successful exploration and
development activities or, through engineering studies, identify additional
behind-pipe zones or secondary recovery reserves, our proved reserves will
decline materially as reserves are produced. Future oil and gas production is,
therefore, highly dependent upon our level of success in acquiring or finding
additional reserves.
WE INCUR CERTAIN COSTS TO COMPLY WITH GOVERNMENT REGULATIONS, ESPECIALLY
REGULATIONS RELATING TO ENVIRONMENTAL PROTECTION, AND COULD INCUR EVEN GREATER
COSTS IN THE FUTURE.
Our exploration, production and marketing operations are regulated
extensively at the federal, state and local levels, as well as by other
countries in which we do business. We have made and will continue to make
expenditures in our efforts to comply with the requirements of environmental and
other regulations. Further, the oil and gas regulatory environment could change
in ways that might substantially increase these costs.
Hydrocarbon-producing states regulate conservation practices and the
protection of correlative rights. These regulations affect our operations and
limit the quantity of hydrocarbons we may produce and sell. In addition, at the
U.S. federal level, the Federal Energy Regulatory Commission regulates
interstate transportation of natural gas under the Natural Gas Act. Other
regulated matters include marketing, pricing, transportation and valuation of
royalty payments.
As an owner or lessee and operator of oil and gas properties, we are
subject to various federal, state, local and foreign regulations relating to
discharge of materials into, and
11
<PAGE> 14
protection of, the environment. These regulations may, among other things,
impose liability on us for the cost of pollution clean-up resulting from
operations, subject us to liability for pollution damages, and require
suspension or cessation of operations in affected areas. Changes in or additions
to regulations regarding the protection of the environment could hurt our
business.
OUR INDUSTRY IS VERY COMPETITIVE.
The oil and gas industry is extremely competitive. This is especially true
with regard to exploration for, and exploitation and development of, new sources
of crude oil and natural gas. As an independent oil and gas company, we
frequently compete against other companies that are larger and financially
stronger in acquiring properties suitable for exploration, in contracting for
drilling equipment and other services and in securing trained personnel.
WE DO NOT INSURE AGAINST ALL POTENTIAL LOSSES AND COULD BE SERIOUSLY HARMED BY
UNEXPECTED LIABILITIES.
Exploration for and production of oil and gas can be hazardous, involving
natural disasters and other unforeseen occurrences such as blowouts, cratering,
fires and loss of well control, which can damage or destroy wells or production
facilities, injure or kill people, and damage property and the environment.
Offshore operations are subject to usual marine perils, including hurricanes and
other adverse weather conditions, and governmental regulations as well as
interruption or termination by governmental authorities based on environmental
and other considerations. We maintain insurance against many, but not all,
potential losses or liabilities arising from our operations in accordance with
customary industry practices and in amounts that we believe to be prudent.
Losses and liabilities arising from such events could reduce our revenues and
increase our costs to the extent not covered by insurance.
The occurrence of any of the aforementioned events and any payments made as
a result of such events and the liabilities related thereto, would reduce the
funds available for exploration, drilling and production and could have a
material adverse effect on our financial position or results of operations.
OUR HEDGING ACTIVITIES MAY PREVENT US FROM BENEFITING FROM PRICE INCREASES AND
MAY EXPOSE US TO OTHER RISKS.
We engage in price risk management activities from time to time primarily
for non-trading and to a lesser extent for trading purposes. We use derivative
financial instruments (primarily price swaps and costless collars) for
non-trading purposes to hedge the impact of market fluctuations on natural gas
and crude oil market prices and net income and cash flow.
To the extent that we engage in hedging activities, we may be prevented
from realizing the benefits of price increases above the levels of the hedges.
In addition, we are subject to risks associated with differences in prices at
different locations, particularly where transportation constraints restrict our
ability to deliver oil and gas volumes to the delivery point to which the
hedging transaction is indexed.
Further, hedging contracts are subject to the risk that the other party may
prove unable or unwilling to perform its obligations under such contracts. Any
significant nonperformance could adversely affect us financially.
WHEN WE ACQUIRE OIL AND GAS PROPERTIES, OUR FAILURE TO FULLY IDENTIFY POTENTIAL
PROBLEMS, TO PROPERLY ESTIMATE RESERVES OR PRODUCTION RATES OR COSTS, OR TO
EFFECTIVELY INTEGRATE THE ACQUIRED OPERATIONS COULD SERIOUSLY HARM US.
We from time to time acquire oil and gas properties. When we do so, our
failure to fully identify potential problems, to properly estimate reserves or
production rates or costs, or to effectively integrate the acquired operations
could seriously harm us. Although we perform reviews of acquired properties that
we believe are consistent with industry practices, we do not review in depth
every individual property involved in each acquisition. Ordinarily we focus on
higher-value properties and sample the remainder.
12
<PAGE> 15
However, even a detailed review of records and properties may not necessarily
reveal existing or potential problems, nor will it permit a buyer to become
sufficiently familiar with the properties to assess fully their deficiencies and
potential. Inspections may not always be performed on every well, and
environmental problems, such as ground water contamination, are not necessarily
observable even when an inspection is undertaken.
Even when problems are identified, we often assume environmental and other
risks and liabilities in connection with acquired properties. There are numerous
uncertainties inherent in estimating quantities of proved oil and gas reserves
and actual future production rates and associated costs with respect to acquired
properties. Actual results may vary substantially from those assumed in the
estimates. In addition, acquisitions may have adverse effects on our operating
results, particularly during the periods in which the operations of acquired
businesses are being integrated into our ongoing operations.
OUR NON-U.S. OPERATIONS ARE SUBJECT TO RISKS OF DOING BUSINESS ABROAD.
Our non-U.S. oil and natural gas exploration, exploitation, development and
production activities are subject to certain political and economic risks
including, among others:
- cancellation or renegotiation of contracts;
- disadvantages of competing against companies from countries that are not
subject to U.S. laws and regulations, including the Foreign Corrupt
Practices Act;
- changes in foreign laws or regulations;
- changes in tax laws;
- royalty and tax increases;
- retroactive tax claims;
- expropriation or nationalization of property;
- currency fluctuations;
- foreign exchange controls;
- import and export regulations;
- environmental controls;
- risks of loss due to civil strife, acts of war, guerilla activities and
insurrection; and
- other risks arising out of foreign governmental sovereignty over the
areas in which our operations are conducted.
Consequently, our non-U.S. exploration, exploitation, development and
production activities may be substantially affected by factors beyond our
control, any of which could materially adversely affect our financial position
or results of operations. Furthermore, in the event of a dispute arising from
non-U.S. operations, we may be subject to the exclusive jurisdiction of courts
outside the United States or may not be successful in subjecting non-U.S.
persons to the jurisdiction of the courts in the United States, which could
adversely affect the outcome of the dispute.
A DECLINE IN THE CONDITION OF THE CAPITAL MARKETS OR A SUBSTANTIAL RISE IN
INTEREST RATES COULD HARM US.
If the condition of the capital markets utilized by us to finance our
operations materially declines, we might not be able to finance our operations
on terms we consider acceptable. In addition, a substantial rise in interest
rates would decrease our net cash flows available for reinvestment.
OUR COMPUTER SYSTEMS OR OTHER ASSETS USED IN OUR OPERATIONS AND THOSE OF THIRD
PARTIES MAY NOT BE YEAR 2000 COMPLIANT, WHICH MAY CAUSE SYSTEM FAILURES AND
DISRUPTIONS IN OPERATIONS.
The inability of some computer programs and embedded computer chips to
distinguish between the year 1900 and the year 2000 poses a serious threat of
business disruption to any organization that uses computer technology and
computer chip technology in their business systems or equipment. Each major
business unit has been required to
13
<PAGE> 16
inventory and assess the risk associated with
hardware, software, telecommunications systems, office equipment, embedded chip
controls and systems, process control systems, facility control systems and
dependencies on external mission critical entities.
We presently believe that, with updates to software that are substantially
complete or well under way, conversions to new software and completion of
efforts planned by each major business unit to update imbedded microprocessors,
the risk associated with year 2000 will be significantly reduced. However, we
are unable to assure that the consequences of year 2000 failures of systems
maintained by us or by third parties will not materially adversely impact our
results of operations or financial condition. More detailed information about
the year 2000 risks and our efforts to address this issue is contained in our
Annual Report on Form 10-K for the year ended December 31, 1998, as amended by
Amendment No. 1 on Form 10-K/A, and our Quarterly Report on Form 10-Q for the
three months ended March 31, 1999, both of which are incorporated by reference
into this prospectus.
14
<PAGE> 17
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All
statements other than statements of historical facts, including, among others,
statements regarding our future financial position, business strategy, budgets,
reserve information, projected levels of production, projected costs and plans
and objectives of management for future operations, are forward-looking
statements.
We typically use words such as "expect", "anticipate", "estimate",
"strategy", "intend", "plan" and "believe" or the negative of those terms or
other variations of them or by comparable terminology to identify our
forward-looking statements. In particular, statements, express or implied,
concerning future operating results or the ability to generate income or cash
flows are forward-looking statements.
Although we believe our expectations reflected in forward-looking
statements are based on reasonable assumptions, no assurance can be given that
these expectations will be achieved. Important factors that could cause actual
results to differ materially from the expectations reflected in the
forward-looking statements include, among others:
- timing and extent of changes in commodity prices for crude oil, natural
gas and related products and interest rates;
- extent of our success in discovering, developing, marketing and producing
reserves and in acquiring oil and gas properties;
- successful implementation of our Year 2000 Plan, the effectiveness of our
Year 2000 Plan, and the Year 2000 readiness of outside entities;
- political developments around the world; and
- financial market conditions.
Some of these factors are discussed under "Risk Factors" beginning on page
9 of this prospectus.
In light of these risks, uncertainties and assumptions, the events
anticipated by our forward-looking statements might not occur. We undertake no
obligation to update or revise our forward-looking statements, whether as a
result of new information, future events or otherwise.
USE OF PROCEEDS
We expect the net proceeds from the offering of common stock to be
approximately $ million after deducting discounts to the underwriters and
estimated expenses of the offering that we will pay. We expect to use the net
proceeds from the offering of common stock either to make a cash capital
contribution to our subsidiaries that conduct our India and China operations in
connection with the pending Share Exchange or, if the Share Exchange already has
taken place when the offering is completed, to repay a portion of the
indebtedness incurred to fund such capital contribution. The pending Share
Exchange with Enron Corp. is discussed in "Prospectus Summary -- Share Exchange
With Enron Corp." We will not receive any proceeds from the underwriters'
exercise of the over-allotment option.
15
<PAGE> 18
CAPITALIZATION
The following table sets forth as of March 31, 1999:
- Our actual capitalization;
- Our as-adjusted capitalization showing the effects of our receipt of the
estimated net proceeds from the sale of the shares we are selling in this
offering assuming that the net proceeds are used to repay outstanding
commercial paper and bank debt; and
- Our pro forma as-adjusted capitalization showing the effects of
- our receipt of the estimated net proceeds from the sale of the shares
we are selling in this offering; and
- our receipt of 62,270,000 shares of our common stock currently owned
by Enron Corp. in exchange for all the stock of our subsidiary,
EOGI-India, Inc. after we have made, indirectly, a $600,000,000 cash
capital contribution and a contribution of receivables due from
subsidiaries of EOGI-India, Inc. as of March 31, 1999, funded in part
from borrowings under a new credit facility.
The as-adjusted capitalization and the pro forma as-adjusted capitalization
assume that the net proceeds from the offering of the common stock are used to
make capital contributions to our subsidiaries that conduct our India and China
operations in connection with the pending Share Exchange. If the Share Exchange
has already taken place when the offering is completed, the net proceeds would
be used to repay a portion of the indebtedness incurred to fund such capital
contribution.
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt
Company:
Commercial paper and bank debt............ $ 390,278 $ - $ 500,278
Notes due 2004 (6.50%).................... 100,000 100,000 100,000
Notes due 2006 (6.70%).................... 150,000 150,000 150,000
Notes due 2007 (6.50%).................... 100,000 100,000 100,000
Notes due 2008 (6.00%).................... 175,000 175,000 175,000
Notes due 2028 (6.65%).................... 150,000 150,000 150,000
Subsidiary companies:
Notes due 2001 (floating)................. 105,000 105,000 105,000
Other..................................... 240 240 240
---------- ---------- ----------
Total long-term debt................. 1,170,518 780,240 1,280,518
Shareholders' equity
Common stock................................. 201,600 201,870 201,870
Additional paid in capital................... 401,462 918,992 918,992
Unearned compensation........................ (4,578) (4,578) (4,578)
Cumulative foreign currency translation
adjustment................................ (32,399) (32,399) (32,399)
Retained earnings............................ 838,825 838,825 1,218,679
Common stock held in treasury................ (120,197) (120,197) (1,365,597)
---------- ---------- ----------
Total shareholders' equity........... 1,284,713 1,802,513 936,967
---------- ---------- ----------
Total capitalization................. $2,455,231 $2,582,753 $2,217,485
========== ========== ==========
</TABLE>
16
<PAGE> 19
PRICE RANGE OF COMMON STOCK AND CASH DIVIDENDS
The following table sets forth, for the periods indicated, the high and low
sales prices per share for our common stock, as reported on the New York Stock
Exchange Composite Tape, and the amount of cash dividends paid per share.
<TABLE>
<CAPTION>
PRICE RANGE
---------------- CASH
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
1997
First Quarter....................................... $27.00 $19.88 $0.03
Second Quarter...................................... 21.75 17.50 0.03
Third Quarter....................................... 25.06 17.69 0.03
Fourth Quarter...................................... 23.81 18.50 0.03
1998
First Quarter....................................... $24.13 $18.56 $0.03
Second Quarter...................................... 24.50 18.13 0.03
Third Quarter....................................... 20.69 11.75 0.03
Fourth Quarter...................................... 18.50 12.69 0.03
1999
First Quarter....................................... $18.38 $15.69 $0.03
Second Quarter...................................... 21.50 16.00 0.03
Third Quarter(through July 21, 1999)................ 21.44 19.25 -
</TABLE>
As of July 1, 1999, there were approximately 430 record holders of our
common stock, including individual participants in security position listings.
There are an estimated 20,000 beneficial owners of our common stock, including
shares held in street name.
We have declared a regular quarterly dividend of $0.03 per share on our
common stock, payable July 30, 1999, to shareholders of record as of July 15,
1999. We currently intend to continue to pay quarterly cash dividends on the
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, our financial condition, funds from operations, level of
exploration, exploitation and development expenditure opportunities and future
business prospects of EOG.
17
<PAGE> 20
ENRON OIL & GAS COMPANY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following unaudited condensed consolidated pro forma statements of
income for the year ended December 31, 1998 and the three months ended March 31,
1999, give effect to the offering and the Share Exchange as described below, as
though they occurred on January 1, 1998. The unaudited condensed consolidated
pro forma balance sheet at March 31, 1999 gives effect to the offering and the
Share Exchange as though they occurred on March 31, 1999.
The unaudited condensed consolidated pro forma statements of income and
balance sheet have been prepared based upon our historical consolidated
statements of income and balance sheet of EOG included in our Annual Report on
Form 10-K for the year ended December 31, 1998, as amended by Amendment No. 1 on
Form 10-K/A, and our Quarterly Report on Form 10-Q for the three months ended
March 31, 1999, both of which are incorporated by reference in this prospectus
and have been prepared based upon available information and assumptions that our
management believes are reasonable. The unaudited condensed consolidated pro
forma statements of income are for informational purposes only, and do not
necessarily represent what our actual results of operations would have been had
the offering and the Share Exchange occurred on January 1, 1998. The unaudited
condensed consolidated pro forma balance sheet is for informational purposes
only, and does not purport to represent our actual financial position had the
offering and the Share Exchange occurred on March 31, 1999. In addition, the
unaudited condensed consolidated pro forma financial statements are not
necessarily indicative of our future results of operations or financial position
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements of EOG and the related notes included in our Annual Report on Form
10-K for the year ended December 31, 1998, as amended by Amendment No. 1 on Form
10-K/A, and our Quarterly Report on Form 10-Q for the three months ended March
31, 1999, both of which are incorporated by reference in this prospectus.
18
<PAGE> 21
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
NET OPERATING REVENUES
Natural Gas
Trade......................................... $117,267 $(12,580)(a) $104,687
Associated Companies(h)....................... 12,843 12,843
Crude Oil, Condensate and Natural Gas Liquids
Trade......................................... 26,517 (6,254)(a) 20,263
Associated Companies(h)....................... 1,036 1,036
Gains on Sales of Reserves and Related Assets and
Other, Net.................................... 1,291 1,291
-------- -------- --------
Total.................................... 158,954 (18,834) 140,120
OPERATING EXPENSES
Lease and Well................................... 24,069 (4,281)(a) 19,788
Exploration Costs................................ 16,789 (798)(a) 15,991
Dry Hole Costs................................... 345 345
Impairment of Unproved Oil and Gas Properties.... 8,003 8,003
Depreciation, Depletion and Amortization......... 82,022 (2,902)(a) 79,120
General and Administrative....................... 23,635 (10,493)(a) 13,142
Taxes Other Than Income.......................... 13,695 (2,222)(a) 11,473
-------- -------- --------
Total.................................... 168,558 (20,696) 147,862
-------- -------- --------
OPERATING INCOME (LOSS)............................ (9,604) 1,862 (7,742)
OTHER INCOME (EXPENSE), NET........................ 26,938 (2,299)(a) 24,639
-------- -------- --------
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES.... 17,334 (437) 16,897
INTEREST EXPENSE
Incurred
Trade......................................... 17,310 1,817(b) 19,127
Affiliate(h).................................. 117 117
Capitalized...................................... (3,160) 1,050(a) (2,110)
-------- -------- --------
Net Interest Expense.......................... 14,267 2,867 17,134
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES.................. 3,067 (3,304) (237)
INCOME TAX PROVISION (BENEFIT)..................... (1,999) 588(a) (2,047)
(636)(b)
-------- -------- --------
NET INCOME......................................... $ 5,066 $ (3,256) $ 1,810
======== ======== ========
NET INCOME PER SHARE OF COMMON STOCK
Basic............................................ $ 0.03 $ 0.02
======== ========
Diluted.......................................... $ 0.03 $ 0.02
======== ========
AVERAGE NUMBER OF COMMON SHARES
Basic............................................ 153,733 118,463
======== ========
Diluted.......................................... 154,615 119,345
======== ========
</TABLE>
The following notes are an integral part of these condensed consolidated pro
forma financial statements.
19
<PAGE> 22
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS AS ADJUSTED
---------- ----------- -----------
<S> <C> <C> <C>
NET OPERATING REVENUES
Natural Gas
Trade............................................ $558,376 $(48,722)(a) $509,654
Associated Companies(h).......................... 62,929 62,929
Crude Oil, Condensate and Natural Gas Liquids
Trade............................................ 120,366 (24,115)(a) 96,251
Associated Companies(h).......................... 9,266 9,266
Gains on Sales of Reserves and Related Assets and
Other, Net....................................... 18,251 18,251
-------- -------- --------
Total....................................... 769,188 (72,837) 696,351
OPERATING EXPENSES
Lease and Well...................................... 98,868 (11,118)(a) 87,750
Exploration Costs................................... 65,940 (2,533)(a) 63,407
Dry Hole Costs...................................... 22,751 22,751
Impairment of Unproved Oil and Gas Properties....... 32,076 32,076
Depreciation, Depletion and Amortization............ 315,106 (9,320)(a) 305,786
General and Administrative.......................... 69,010 (11,042)(a) 57,968
Taxes Other Than Income............................. 51,776 (6,615)(a) 45,161
-------- -------- --------
Total....................................... 655,527 (40,628) 614,899
-------- -------- --------
OPERATING INCOME...................................... 113,661 (32,209) 81,452
OTHER INCOME (EXPENSE), NET........................... (4,800) 4,805(a) 5
-------- -------- --------
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES....... 108,861 (27,404) 81,457
INTEREST EXPENSE
Incurred
Trade............................................ 60,701 (99)(a) 68,734
8,132(b)
Affiliate(h)..................................... 589 589
Capitalized......................................... (12,711) 3,978(a) (8,733)
-------- -------- --------
Net Interest Expense............................. 48,579 12,011 60,590
-------- -------- --------
INCOME BEFORE INCOME TAXES............................ 60,282 (39,415) 20,867
INCOME TAX PROVISION (BENEFIT)........................ 4,111 (11,697)(a) (10,432)
(2,846)(b)
-------- -------- --------
NET INCOME............................................ $ 56,171 $(24,872) $ 31,299
======== ======== ========
NET INCOME PER SHARE OF COMMON STOCK
Basic............................................... $ 0.36 $ 0.26
======== ========
Diluted............................................. $ 0.36 $ 0.26
======== ========
AVERAGE NUMBER OF COMMON SHARES
Basic............................................... 154,345 119,075
======== ========
Diluted............................................. 155,054 119,784
======== ========
</TABLE>
The following notes are an integral part of these condensed consolidated pro
forma financial statements.
20
<PAGE> 23
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AT MARCH 31, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADDITIONAL EXCHANGE OF
BORROWINGS TRANSFERRED
AND EQUITY SUBSIDIARIES OTHER
HISTORICAL ISSUANCE SHARES ADJUSTMENTS AS ADJUSTED
----------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents.................. $ 13,133 $105,400(b) $ (607,150)(d) $(13,355)(f) $ 8,678
517,800(c) (10,000)(e) 2,850(g)
Accounts Receivable
Trade.................................... 153,940 (66,899)(d) 87,041
Associated Companies(h).................. 14,867 14,867
Inventories................................ 38,384 (12,100)(d) 26,284
Other...................................... 7,337 (1,505)(d) 5,832
----------- -------- ----------- -------- -----------
Total................................ 227,661 623,200 (697,654) (10,505) 142,702
OIL AND GAS PROPERTIES (SUCCESSFUL EFFORTS
METHOD).................................... 4,903,390 (247,902)(d) 4,655,488
Less: Accumulated Depreciation, Depletion
and Amortization......................... (2,222,074) 16,882(d) (2,205,192)
----------- -------- ----------- -------- -----------
Net Oil and Gas Properties........... 2,681,316 (231,020) 2,450,296
OTHER ASSETS................................. 81,258 4,600(b) (1,067)(d) 84,791
----------- -------- ----------- -------- -----------
TOTAL ASSETS................................. $ 2,990,235 $627,800 $ (929,741) $(10,505) $ 2,677,789
=========== ======== =========== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable
Trade.................................... $ 131,287 $ (42,103)(d) $ 89,184
Associated Companies(h).................. 44,934 (8,352)(f) 36,582
Accrued Taxes Payable...................... 15,469 (1,630)(d) 29(f) 13,868
Dividends Payable.......................... 4,721 4,721
Other...................................... 25,153 (9,090)(d) 1,000(g) 17,063
----------- -------- ----------- -------- -----------
Total................................ 221,564 (52,823) (7,323) 161,418
LONG-TERM DEBT - Trade....................... 1,170,518 110,000(b) 1,280,518
OTHER LIABILITIES
Trade...................................... 22,395 1,850(g) 24,245
Associated Companies(h).................... 31,378 (8,352)(f) 23,026
DEFERRED INCOME TAXES........................ 256,519 (11,568)(d) 3,516(f) 248,467
DEFERRED REVENUES............................ 3,148 3,148
SHAREHOLDERS' EQUITY
Common Stock, $.01 Par, 320,000,000 Shares
Authorized and 160,000,000 Shares Issued
Historical and 187,000,000 Shares Pro
Forma.................................... 201,600 270(c) 201,870
Additional Paid In Capital................. 401,462 517,530(c) 918,992
Unearned Compensation...................... (4,578) (4,578)
Cumulative Foreign Currency Translation
Adjustment............................... (32,399) (32,399)
Retained Earnings.......................... 838,825 390,050(d) (196)(f) 1,218,679
(10,000)(e)
Common Stock Held in Treasury, 6,263,376
Shares Historical and 68,533,376 Shares
Pro Forma................................ (120,197) (1,245,400)(d) (1,365,597)
----------- -------- ----------- -------- -----------
Total Shareholders' Equity........... 1,284,713 517,800 (865,350) (196) 936,967
----------- -------- ----------- -------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY... $ 2,990,235 $627,800 $ (929,741) $(10,505) $ 2,677,789
=========== ======== =========== ======== ===========
</TABLE>
The following notes are an integral part of these condensed consolidated pro
forma financial statements.
21
<PAGE> 24
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
The following pro forma adjustments give effect to the sale of 27,000,000
shares of our common stock in this offering, additional borrowings of $110.0
million under new revolving credit facilities and the Share Exchange (see note
(a)), as though these transactions occurred on January 1, 1998 for income
statement purposes, and give effect to these transactions as though they
occurred on March 31, 1999 for balance sheet purposes. Our historical results
were derived from our historical financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 1998, as amended by
Amendment No. 1 on Form 10-K/A, and our Quarterly Report on Form 10-Q for the
three months ended March 31, 1999, both of which are incorporated by reference
in this prospectus.
(a) To reflect the elimination of the historical results of operations of
EOGI-India, Inc., Enron Oil & Gas India Ltd., EOGI China Company, Enron
Oil & Gas China Ltd., EOGI-China, Inc. and Enron Oil & Gas China
International Ltd. (collectively referred to as the "Transferred
Subsidiaries"), all wholly owned subsidiaries of EOG. All of EOG's
interest in the common shares of each of the Transferred Subsidiaries
are to be transferred to Enron Corp. in exchange for 62,270,000 shares
of our common stock owned by Enron Corp. pursuant to a share exchange
agreement (the "Share Exchange").
(b) To reflect the borrowing of $110.0 million under a new revolving credit
facility. Borrowings are assumed to be at 6.0% per annum, plus the
amortization of total commitment fees of $4.6 million ($1.5 million for
1998 and $0.2 million for the three months ended March 31, 1999).
Commitment fees are deferred as "Other Assets" and are amortized over
the related commitment or loan period, as applicable.
(c) To reflect the net proceeds received from the offering of 27,000,000
shares of our common stock. The net proceeds amount is an estimate
based on an assumed offering price of $20.00 per share net of an
underwriting discount and offering costs of $0.82 per share. The actual
offering price may differ significantly from our estimate.
(d) To reflect the elimination of the balances of the Transferred
Subsidiaries and the receipt of 62,270,000 shares of our common stock
pursuant to the Share Exchange. The shares of our common stock received
are reflected at their estimated fair market value on the date of the
transfer and a gain is reflected for the difference between the fair
market value of our shares of common stock received and our historical
cost basis in the Transferred Subsidiaries. The estimated fair market
value is based on an assumed market price per share of $20.00. The
actual market price per share on the date of the Share Exchange may
differ significantly from our estimate. Prior to the Share Exchange EOG
contributed $600.0 million in the form of cash capital contributions
plus contributions of net intercompany accounts receivable of $170.3
million at March 31, 1999. The actual balance of net intercompany
accounts receivable on the date of the Share Exchange may differ
significantly from the balance at March 31, 1999. The Share Exchange is
in the form of a non-taxable exchange of shares; accordingly, no income
taxes have been provided with respect to the recognized gain.
(e) To reflect $10.0 million of transaction costs directly related to the
Share Exchange. As noted in footnote(d), the Share Exchange is in the
form of a non-taxable exchange of shares; accordingly, such transaction
costs are not deductible for income tax purposes.
(f) To reflect a net payment of $13.4 million from EOG to Enron Corp. to
settle amounts payable to Enron Corp. and other income tax related
issues, which were resolved as part of the Share Exchange and the
termination of the Tax Sharing Agreement, as amended, between EOG and
Enron Corp.
22
<PAGE> 25
(g) To reflect the payment by Enron Corp. of $1.9 million and the
assumption by EOG of a liability of the same amount related to certain
unvested benefit obligations under an Enron Corp. Cash Balance Plan and
the payment by Enron Corp. of $1.0 million and the assumption by EOG of
a liability of the same amount related to employee medical
reimbursement accounts concurrent with the loss of control of EOG by
Enron Corp.
(h) Associated companies and affiliate balances result from transactions
with Enron Corp., its subsidiaries or affiliates. If as a result of the
offering and the Share Exchange, Enron Corp.'s ownership of our common
stock declines to a level that Enron Corp. accounts for its investment
in EOG on the cost method, any balances with associated companies or
affiliates would be reclassified as trade.
23
<PAGE> 26
BUSINESS
GENERAL
Enron Oil & Gas Company, a Delaware corporation organized in 1985, together
with its subsidiaries, explores, develops, produces and markets, natural gas and
crude oil primarily in major producing basins in the United States, as well as
in Canada and Trinidad and, to a lesser extent, selected other international
areas. Our principal producing areas are further described under "Exploration
and Production" below. At December 31, 1998, our estimated net proved natural
gas reserves were 5,229 Bcf, including 1,180 Bcf of proved undeveloped methane
reserves in the Big Piney deep Paleozoic formations, and estimated net proved
crude oil, condensate and natural gas liquids reserves were 105 MMBbl. (See
"-- Oil and Gas Exploration and Production Properties and Resources".) After
giving effect to the Share Exchange, at December 31, 1998 our estimated net
proved reserves would have been 4,294 Bcf of gas and 61 MMBbl of oil. After
giving effect to the Share Exchange at December 31, 1998, 66% of our reserves,
on a natural gas equivalent basis, was located in the United States, 11% in
Canada and 23% in Trinidad.
BUSINESS STRATEGY
Our strategy is to maximize the return on invested capital by achieving
operating and finding costs that are among the lowest in the industry. We are
focused on growing our domestic natural gas reserves and production by
concentrating our efforts in known North American reserve basins. We focus on
selected international opportunities where we can successfully apply our core
competencies in the exploitation of reserves. Our strategy is intended to
enhance the generation of cash flow and earnings from each unit of production on
a cost effective basis.
Our North American operations are organized into seven largely autonomous
business units, each focusing on a basin or basins, utilizing personnel who have
developed experience and expertise unique to the geology of the region, thereby
leveraging our knowledge and cost structure into enhanced returns on invested
capital.
We focus our drilling activity toward natural gas deliverability in
addition to natural gas reserve enhancement and to a lesser extent crude oil
exploitation. We also focus 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.
We implement our strategy by emphasizing the drilling of internally
generated prospects in order to find and develop low cost reserves. We also make
selected tactical acquisitions that give us additional economies of scale or
land positions with significant additional prospects. Achieving and maintaining
the lowest possible operating cost structure are also important goals in the
implementation of our strategy.
Consistent with our desire to optimize the use of our assets, we also sell
selected oil and gas properties that for various reasons may no longer fit into
future operating plans or which we believe do not have sufficient future growth
potential. We do this when we believe the economic value to be obtained by
selling the properties and reserves in the ground is greater than what we would
obtain by holding the properties and producing the reserves over time. As a
result, we typically receive each year a varying but substantial level of
proceeds related to such sales. We use these proceeds for general corporate
purposes.
24
<PAGE> 27
With respect to information on our 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 our working interest in the wells or acreage. Unless
otherwise defined, all references to wells are gross.
BUSINESS SEGMENTS
Our operations are all oil and gas exploration and production related. We
have not included a discussion of our India and China operations since they will
be transferred to Enron Corp. in connection with the Share Exchange.
EXPLORATION AND PRODUCTION
NORTH AMERICA OPERATIONS
United States. Our eight principal United States producing areas are the
Big Piney area of Wyoming, South Texas area, East Texas area, Offshore Gulf of
Mexico area, Canyon/ Strawn Trend area of West Texas, Sand Tank and Pitchfork
Ranch areas of New Mexico and Vernal area of Utah. Properties in these areas
represented approximately 81% of our United States reserves (on a natural gas
equivalent basis) and 82% of our United States net natural gas deliverability as
of December 31, 1998. We operate substantially all of these properties.
Our other United States oil and gas producing properties are located
primarily in other areas of Texas, Utah, New Mexico, Oklahoma, California,
Mississippi and Kansas.
At December 31, 1998, 93% of our proved United States reserves, including
the reserves in the Big Piney deep Paleozoic formations in Wyoming (on a natural
gas equivalent basis), was natural gas and 7% was crude oil, condensate and
natural gas liquids. A substantial portion of our United States natural gas
reserves is in long-lived fields with well-established production histories. We
believe that opportunities exist to increase production in many of these fields
through continued infill and other development drilling.
Big Piney Area. Our largest reserve accumulation is located in the Big
Piney area in Sublette and Lincoln counties in southwestern Wyoming. We are the
holder of the largest productive acreage base in this area, with approximately
280,000 net acres under lease directly within field limits. We operate
approximately 800 natural gas and crude oil wells in this area in which we own
an 85% average working interest. Deliveries from the area net to us averaged 118
MMcf per day of natural gas and 4.0 MBbl per day of crude oil, condensate, and
natural gas liquids in 1998. At December 31, 1998, natural gas deliverability
net to us was approximately 110 MMcf per day.
The current principal producing intervals are the Almy, Mesaverde and
Frontier formations. The Frontier formation, which occurs at 6,500 to 10,000
feet, contains approximately 64% of our Big Piney proved developed reserves. We
drilled 44 wells in the Big Piney area in 1998 and we plan to drill 50 wells
during 1999.
We have recorded as proved undeveloped reserves 1,180 Bcf of methane
contained, along with high concentrations of carbon dioxide as well as small
amounts of other gaseous substances, in the deep Wyoming Paleozoic (Madison)
formation located under acreage we hold by production in the Big Piney area. In
January 1999, we acquired certain adjacent Madison formation producing interests
that include the rights to an agreement covering the processing of natural gas
from such adjacent interests from the Madison formation through an existing
plant operated by another company in the industry.
South Texas Area. Our activities in South Texas are focused in the Lobo,
Wilcox and Frio producing horizons. The principal areas of activity are in the
Lobo and Wilcox Trends which occur primarily in Webb, Zapata and Duval counties,
as well as the Frio Trend in Matagorda County.
In Matagorda County, we completed two wells in 1998, each with a rate of 40
MMcf per day of natural gas and 2.0 MBbl per day of condensate. At December 31,
1998, we operated approximately 420 wells in the South Texas area, and
production is primarily from the Frio, Wilcox and Lobo sands at
25
<PAGE> 28
depths ranging from 5,000 to 16,000 feet. We have approximately 273,000 net
leasehold acres and more than 40,000 net mineral fee acres in this area. Natural
gas deliveries net to us averaged approximately 162 MMcf per day in 1998. At
December 31, 1998, natural gas deliverability from this area net to us was
approximately 182 MMcf per day. We drilled 47 wells in the South Texas area in
1998, acquired 758 square miles of new 3-D seismic and leased 64,500 net acres.
We plan to drill 54 wells in 1999 and plan to maintain an active drilling
program in South Texas for several years.
East Texas Area. Our activities in the East Texas area are primarily in the
Carthage field, located in Panola County, the North Milton field, located in
northern Harris County, and the Stowell/Big Hill area, located in Jefferson and
Chambers Counties.
The Carthage field production is primarily from the Cotton Valley, Travis
Peak and Pettit formations. At December 31, 1998, we held approximately 17,900
net acres under lease with an average 74% working interest in this area. We
drilled 29 wells in the Carthage area in 1998 and we anticipate drilling 15
wells in this area during 1999. We have continued our activity in the North
Milton area where we now operate 30 wells and hold a 100% working interest in
the acreage. We expect to drill three additional wells during 1999. We drilled
10 wells in the Stowell/Big Hill area in 1998, and we are continuing expansion
of the program in 1999. Net deliveries from the East Texas area averaged 56.4
MMcf per day of natural gas and 2.3 MBbl per day of crude oil, condensate and
natural gas liquids in 1998. At December 31, 1998, deliverability from the area
was approximately 80 MMcf per day of natural gas with 2.0 MBbl per day of crude
oil, condensate and natural gas liquids both net to us.
Offshore Gulf of Mexico Area. During 1998, we made a significant
acquisition on the Outer-Continental Shelf of the Gulf of Mexico, purchasing a
19% working interest in the Matagorda Island 623 field which increased our
natural gas deliveries, adding 55 MMcf per day net to us. Development of the
Eugene Island 135 discovery continued with a third development well increasing
our net field production to 17 MMcf per day and 760 barrels of condensate per
day. At December 31, 1998, we held an interest in 184 blocks in the Offshore
Gulf of Mexico area totaling approximately 544,000 net acres. Of these 184
blocks, located predominantly in federal waters offshore Texas and Louisiana, we
operate 127. Natural gas deliveries from this area averaged 116 MMcf per day
during 1998 net to us. A substantial portion of such deliveries was from
interests in the Matagorda Island and Mustang Island areas of offshore Texas
with significant volumes also coming from Eugene Island 135. During 1998, we
participated in the drilling of 10 wells (3.9 net wells) in the Gulf of Mexico.
In 1999, we anticipate participating in the drilling of four to six wells.
Canyon/Strawn Trend Area. Our activities in this area have been
concentrated in Crockett, Terrell and Val Verde Counties in Texas where we
drilled 21 natural gas wells during 1998. We hold approximately 66,000 net acres
and now operate approximately 350 natural gas wells in this area in which we own
a 90% average working interest. Production is from the Canyon sands and Strawn
limestone at depths from 5,500 to 12,500 feet. At December 31, 1998, natural gas
deliverability net to us was approximately 35 MMcf per day.
Sand Tank Area. The Sand Tank area located in Eddy County, New Mexico
produces from the Chester, Morrow, and Atoka formations. Natural gas deliveries
for 1998 averaged 16 MMcf per day and deliveries of crude oil, condensate and
natural gas liquids averaged .3 MBbl per day in 1998 both net to us. At year end
1998, deliverability, net to us, was approximately 15 MMcf per day of natural
gas and .2 MBbl per day of crude oil, condensate and natural gas liquids. We
hold 14,000 net acres and have an average working interest of approximately 60%.
In 1999, we plan to drill four wells in this stacked-pay area.
Pitchfork Ranch Area. The Pitchfork Ranch area located in Lea County, New
Mexico, produces primarily from the
26
<PAGE> 29
Bone Spring, Wolfcamp, Atoka and Morrow formations. In 1998, deliveries net to
us averaged 18 MMcf per day of natural gas and approximately 2.0 MBbl per day of
crude oil, condensate and natural gas liquids. At December 31, 1998,
deliverability net to us was approximately 21 MMcf per day of natural gas and
1.8 MBbl per day of crude oil, condensate and natural gas liquids. We hold
approximately 34,000 net acres and are continuing to interpret a 3-D seismic
survey shot over this entire area. We expect to maintain a drilling program in
this area in 1999.
Vernal Area. In the Vernal area, located primarily in Uintah County, Utah,
we operate approximately 305 producing wells and presently control approximately
77,000 net acres. In 1998, natural gas deliveries net to us from the Vernal area
averaged 21 MMcf per day. Deliverability at December 31, 1998, was approximately
26 MMcf per day. Production is from the Green River and Wasatch formations
located at depths between 4,500 and 8,000 feet. We have an average working
interest of approximately 60%. We anticipate numerous drilling opportunities
will be available in this area in 1999.
Canada. We are engaged in the exploration for and the exploitation,
development, production and marketing of natural gas, natural gas liquids and
crude oil in Western Canada, principally in the provinces of Alberta,
Saskatchewan, and Manitoba. We conduct operations from offices in Calgary,
Alberta, and produce natural gas and crude oil from five major areas. The
Sandhills area in southwestern Saskatchewan is the largest single natural gas
producing area in Canada for EOG. In 1998, we drilled 150 wells in the area and
we acquired additional acreage and wells in the area resulting in peak
deliverability of approximately 44 MMcf per day net to us at December 31, 1998.
We plan to drill approximately 223 wells during 1999. At the end of 1999, we
expect to realize 48 MMcf per day net deliverability. The Blackfoot area in
southeastern Alberta is our second largest natural gas producing area in Canada.
In 1998, we drilled 16 new wells and we performed numerous recompletions,
workovers and facility optimizations resulting in deliverability of
approximately 30 MMcf per day and 1.2 MBbl per day of crude oil and condensate
net to us at December 31, 1998. We plan to drill approximately 50 Blackfoot
wells during 1999. As a result, we expect the net deliverability from the
Blackfoot area to increase to 40 MMcf per day at the end of 1999. Total Canadian
natural gas deliverability net to us at December 31, 1998 was approximately 120
MMcf per day, and we held approximately 555,000 net undeveloped acres in Canada.
Total Canadian natural gas deliveries net to us for 1998 averaged approximately
105 MMcf per day.
OUTSIDE NORTH AMERICA OPERATIONS
We have producing operations offshore Trinidad, and are evaluating and
conducting exploration, exploitation and development in selected other
international areas.
Trinidad. In November 1992, we were awarded a 95% working interest
concession in the South East Coast Consortium Block offshore Trinidad,
encompassing three undeveloped fields, previously held by three government-owned
energy companies. We have developed the Kiskadee field. We are developing the
Ibis field and we anticipate that the Oilbird field will be developed over the
next several years. We are using existing surplus processing and transportation
capacity at the Pelican field facilities owned and operated by Trinidad and
Tobago government-owned companies to process and transport the production. We
are selling natural gas into the local market under a take-or-pay agreement with
the National Gas Company of Trinidad and Tobago. In 1998, deliveries net to us
averaged 139 MMcf per day of natural gas, which includes 24 MMcf per day of gas
balancing volumes relating to a field allocation agreement, and 3.0 MBbl per day
of crude oil and condensate.
In 1995, we were awarded the right to develop the modified U(a) block near
the South East Coast Consortium Block. We signed a production sharing contract
with the Government of Trinidad and Tobago in 1996. Under the contract we
committed to the acquisition of 3-D seismic data and the drilling
27
<PAGE> 30
of three wells. The first well was drilled in 1998 and was successful,
encountering over 400 feet of net pay, resulting in the largest exploration
discovery in our history. We estimate the gross proved reserves of the discovery
to be over 600 billion cubic feet equivalent. We expect to drill two significant
exploratory wells in 1999.
At December 31, 1998, we held approximately 144,000 net undeveloped acres
in Trinidad.
Venezuela. We were awarded exploration, exploitation and development rights
for a block offshore the eastern state of Sucre, Venezuela in early 1996. We
signed agreements with the government of Venezuela and other participants
associated with a concession awarded in the Gulf of Paria East. We hold an
initial 90% working interest in the joint venture and act as operator. We
drilled one exploratory well during 1998 and encountered hydrocarbons. We are
continuing to do additional evaluation work.
Other International. We continue to evaluate other selected conventional
natural gas and crude oil opportunities outside North America by pursuing other
exploitation opportunities in countries where indigenous natural gas and crude
oil reserves have been identified. We are also participating in discussions
concerning the potential for natural gas development opportunities in Mozambique
as well as other opportunities in Trinidad and other countries. (See
"Relationship with Enron Corp." for a further discussion of the relationship
between our company and Enron Corp. in the Mozambique project.)
MARKETING
Wellhead Marketing. We currently sell our North America wellhead natural
gas production 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. We sell wellhead natural gas volumes from Trinidad at prices that are
based on a fixed price schedule with annual escalations. We currently sell
approximately 7% of our wellhead natural gas production to pipeline and
marketing subsidiaries of Enron Corp. We believe that the terms of our
transactions and agreements with Enron Corp. are at least as favorable to us as
could be obtained from third parties.
We sell substantially all of our wellhead crude oil and condensate under
various terms and arrangements at market responsive prices. We currently sell
approximately 1% of our wellhead crude oil and condensate production to
subsidiaries of Enron Corp.
Other Marketing. Enron Oil & Gas Marketing, Inc., one of our wholly-owned
subsidiaries, is a marketing company engaging in various marketing activities.
Both we and this subsidiary 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 our own production and arrange
for any necessary transportation to the points of delivery. In addition, this
subsidiary has purchased and constructed several small gathering systems in
order to facilitate its entry into the gathering business on a limited basis.
Both our company and this subsidiary use other short and long-term hedging and
trading mechanisms including sales and purchases utilizing NYMEX-related
commodity market transactions. These marketing activities have provided an
effective balance in managing a portion of our exposure to commodity price risks
for both natural gas and crude oil and condensate wellhead prices. (See
"-- Other Matters -- Risk Management".)
In September 1992, we sold a volumetric production payment for $326.8
million to a limited partnership. Delivery obligations were terminated in
December 1998. (See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Capital Resources and Liquidity -- Sale of
Volumetric Production Payment" included in our Annual Report on Form 10-K for
the year ended December 31, 1998, as amended by Amendment No. 1 on Form 10-K/A,
which is incorporated by reference into this prospectus.)
28
<PAGE> 31
In March 1995, in a series of transactions with Enron Corp., we exchanged
all of our 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, we were relieved of all performance
obligations associated with the Cogen Contracts. We 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
effect of this series of transactions has resulted in increases in our net
operating revenues and cash receipts 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.
29
<PAGE> 32
WELLHEAD VOLUMES AND PRICES, AND LEASE AND WELL EXPENSES
The following table sets forth certain information regarding our 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, 1998
and the three months ended March 31, 1998 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ ---------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
VOLUMES (PER DAY)
Natural Gas (MMcf)
United States(1)...................................... 608 657 671 644 677
Canada................................................ 98 101 105 101 104
Trinidad.............................................. 124 113 139 109 152
India................................................. - 18 56 47 71
------ ------ ------ ------ ------
Total............................................ 830 889 971 901 1,004
====== ====== ====== ====== ======
Crude Oil and Condensate (MBbl)
United States......................................... 9.2 11.7 14.0 12.6 13.1
Canada................................................ 2.4 2.5 2.6 2.7 2.7
Trinidad.............................................. 5.2 3.4 3.0 2.8 2.8
India................................................. 2.8 2.3 5.1 4.2 7.1
------ ------ ------ ------ ------
Total............................................ 19.6 19.9 24.7 22.3 25.7
====== ====== ====== ====== ======
Natural Gas Liquids (MBbl)
United States......................................... 1.3 2.6 2.9 2.7 2.6
Canada................................................ 1.2 1.3 1.0 1.1 0.4
------ ------ ------ ------ ------
Total............................................ 2.5 3.9 3.9 3.8 3.0
====== ====== ====== ====== ======
AVERAGE PRICES
Natural Gas ($/Mcf)
United States(2)...................................... $ 2.04 $ 2.32 $ 1.93 $ 2.01 $ 1.62
Canada................................................ 1.15 1.43 1.40 1.39 1.39
Trinidad.............................................. 1.00 1.05 1.06 1.09 1.06
India................................................. - 2.79 2.41 2.70 1.96
Composite........................................ 1.78 2.07 1.78 1.86 1.53
Crude Oil and Condensate ($/Bbl)
United States......................................... $21.88 $19.81 $12.84 $14.68 $11.31
Canada................................................ 18.01 17.16 11.82 13.97 11.75
Trinidad.............................................. 19.76 18.68 12.26 14.03 9.63
India................................................. 20.17 20.05 12.86 15.33 9.79
Composite........................................ 20.60 19.30 12.66 14.64 10.76
Natural Gas Liquids ($/Bbl)
United States......................................... $14.67 $12.76 $ 8.38 $ 9.49 $ 7.69
Canada................................................ 9.14 8.94 5.32 5.96 5.00
Composite........................................ 11.99 11.54 7.56 8.48 7.34
LEASE AND WELL EXPENSES ($/MCFE)
United States........................................... $ .19 $ .23 $ .22 $ .24 $ .20
Canada.................................................. .34 .39 .37 .40 .41
Trinidad................................................ .16 .16 .12 .15 .11
India................................................... .99 .64 .24 .31 .35
Composite........................................ .22 .26 .24 .26 .23
</TABLE>
- ---------------
(1) Includes 48 MMcf per day for the year ended December 31, 1996, 1997 and 1998
and for the three-month period ended March 31, 1998 delivered under the
terms of a volumetric production payment agreement effective October 1,
1992, as amended. Delivery obligations were terminated in December 1998.
(2) Includes an average equivalent wellhead value of $1.17, $1.73 and $1.53 per
Mcf for the year ended December 31, 1996, 1997 and 1998 and of $1.62 per Mcf
for the three-month period ended March 31, 1998, respectively, for the
volumes described in note (1), net of transportation costs.
30
<PAGE> 33
COMPETITION
We actively compete for reserve acquisitions and exploration/exploitation
leases, licenses and concessions, frequently against companies with
substantially larger financial and other resources. To the extent our
exploration budget is lower than that of certain of our competitors, we may be
disadvantaged in effectively competing for certain reserves, leases, licenses
and concessions. Competitive factors include price, contract terms, and quality
of service, including pipeline connection times and distribution efficiencies.
In addition, we face competition from other producers and suppliers, including
competition from other world wide energy supplies, such as natural gas from
Canada.
OTHER MATTERS
Risk Management. We engage in price risk management activities from time to
time primarily for non-trading and to a lesser extent for trading purposes. We
use derivative financial instruments (primarily price swaps and costless
collars) for non-trading purposes to hedge the impact of market fluctuations of
natural gas and crude oil market prices on net income and cash flow.
At December 31, 1998, we had outstanding crude oil commodity price swap
transactions, designated as hedges, covering approximately 700 MBbl of crude oil
and condensate for 1999. The fair value of the positions was a net revenue
increase of $4 million at December 31, 1998.
At December 31, 1998, based on the portion of our anticipated natural gas
volumes for 1999 for which prices have not, in effect, been hedged using
NYMEX-related commodity market transactions and long-term marketing contracts,
our net income and after-tax cash flow sensitivity to changing natural gas
prices is approximately $18 million for each $.10 per Mcf change in average
wellhead natural gas prices. While we are not affected as significantly by
changing crude oil prices for those volumes not otherwise hedged, our net income
and cash flow sensitivity is approximately $6 million for $1.00 per barrel
change in average wellhead crude oil prices.
Tight Gas Sand Tax Credits (Section 29) and Severance Tax Exemption. United
States federal tax law provides a tax credit for production of certain fuels
produced from nonconventional sources (including natural gas produced from tight
formations), subject to a number of limitations. Fuels qualifying for the credit
must be produced from a well drilled or a facility placed in service after
November 5, 1990 and before January 1, 1993, and must be sold before January 1,
2003.
The credit, which is currently approximately $.52 per MMBtu of natural gas,
is computed by reference to the price of crude oil, and is phased out as the
price of crude oil exceeds $23.50 in 1980 dollars (adjusted for inflation) with
complete phaseout if such price exceeds $29.50 in 1980 dollars (similarly
adjusted). Under this formula, the commencement of phaseout would be triggered
if the average price for crude oil rose above approximately $49 per barrel in
current dollars. Significant benefits from the tax credit have accrued and
continue to accrue to us since a portion (and in some cases a substantial
portion) of our natural gas production from wells drilled after November 5,
1990, and before January 1, 1993, on our leases in several of our significant
producing areas qualify for this tax credit.
Natural gas production from wells spudded or completed after May 24, 1989
and before September 1, 1996 in tight formations in Texas qualifies for a
ten-year exemption, ending August 31, 2001, from severance taxes, subject to
certain limitations. In 1995, the drilling qualification period was extended
from September 1996 through August 2002, and the tax exemption was modified in a
somewhat reduced form. In 1998, the drilling qualification period was extended
eight years through August 2010.
31
<PAGE> 34
OIL AND GAS EXPLORATION AND PRODUCTION PROPERTIES AND RESERVES
The following table sets forth our net proved and proved developed reserves
at December 31 for each of the four years in the period ended December 31, 1998,
and the changes in the net proved reserves for each of the three years in the
period then ended as estimated by our engineering staff. See "Risk Factors--The
oil and gas reserves data and future net revenues estimates we report are
uncertain".
NET PROVED AND PROVED DEVELOPED RESERVE SUMMARY
<TABLE>
<CAPTION>
UNITED STATES CANADA TRINIDAD INDIA OTHER TOTAL
------------- ------ -------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Natural Gas(Bcf)
Net proved reserves at December 31, 1995........ 2,654.1(1) 313.9 245.5 75.0 - 3,288.5
Revisions of previous estimates............... 3.6 (2.9) 79.6 - - 80.3
Purchases in place............................ 100.6 0.9 - - - 101.5
Extensions, discoveries and other additions... 256.8 49.2 90.7 124.6 - 521.3
Sales in place................................ (58.4) (4.3) - - - (62.7)
Production.................................... (210.2) (35.9) (45.6) - - (291.7)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1996........ 2,746.5(1) 320.9 370.2 199.6 - 3,637.2
Revisions of previous estimates............... (50.8) (1.5) (0.4) 25.1 - (27.6)
Purchases in place............................ 60.0 67.6 - - - 127.6
Extensions, discoveries and other additions... 275.9 37.8 - 253.5 7.7 574.9
Sales in place................................ (17.7) (0.4) - - - (18.1)
Production.................................... (229.1) (37.0) (41.0) (6.6) - (313.7)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1997........ 2,784.8(1) 387.4 328.8 471.6 7.7 3,980.3
Revisions of previous estimates............... (55.9) (2.5) 4.7 32.3 (0.4) (21.8)
Purchases in place............................ 123.0 54.9 - - - 177.9
Extensions, discoveries and other additions... 272.8 62.9 693.8 340.9 103.0 1,473.4
Sales in place................................ (37.5) - - - - (37.5)
Production.................................... (233.8) (38.5) (50.9) (20.2) - (343.4)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1998........ 2,853.4(1) 464.2 976.4 824.6 110.3 5,228.9
======= ====== ======= ======= ===== =======
Liquids (MBbl)(2)
Net proved reserves at December 31, 1995........ 25,399 6,585 6,870 11,542 - 50,396
Revisions of previous estimates............... 339 191 1,835 - - 2,365
Purchases in place............................ 312 2 - - - 314
Extensions, discoveries and other additions... 7,103 2,116 1,388 275 - 10,882
Sales in place................................ (447) (121) - - - (568)
Production.................................... (3,830) (1,321) (1,925) (1,026) - (8,102)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1996........ 28,876 7,452 8,168 10,791 - 55,287
Revisions of previous estimates............... 3,515 225 (31) 19 - 3,728
Purchases in place............................ 127 1,123 - - - 1,250
Extensions, discoveries and other additions... 6,037 1,590 - 20,123 - 27,750
Sales in place................................ (1,683) - - - - (1,683)
Production.................................... (5,223) (1,384) (1,236) (838) - (8,681)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1997........ 31,649 9,006 6,901 30,095 - 77,651
Revisions of previous estimates............... (152) (504) (1,049) 3,063 73 1,431
Purchases in place............................ 3,104 - - - - 3,104
Extensions, discoveries and other additions... 9,396 448 11,429 11,501 1,089 33,863
Sales in place................................ (1,039) - - - - (1,039)
Production.................................... (6,131) (1,358) (1,077) (1,874) - (10,440)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1998........ 36,827 7,592 16,204 42,785 1,162 104,570
======= ====== ======= ======= ===== =======
</TABLE>
(Table continued on following page)
32
<PAGE> 35
<TABLE>
<CAPTION>
UNITED STATES CANADA TRINIDAD INDIA OTHER TOTAL
------------- ------ -------- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Bcf Equivalent (Bcfe)
Net proved reserves at December 31, 1995........ 2,806.6(1) 353.3 286.7 144.3 - 3,590.9
Revisions of previous estimates............... 5.7 (1.8) 90.6 - - 94.5
Purchases in place............................ 102.5 0.9 - - - 103.4
Extensions, discoveries and other additions... 299.4 61.9 99.0 126.2 - 586.5
Sales in place................................ (61.0) (5.1) - - - (66.1)
Production.................................... (233.1) (43.9) (57.1) (6.2) - (340.3)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1996........ 2,920.1(1) 365.3 419.2 264.3 - 3,968.9
Revisions of previous estimates............... (29.8) (0.1) (0.5) 25.2 - (5.2)
Purchases in place............................ 60.7 74.4 - - - 135.1
Extensions, discoveries and other additions... 312.1 47.4 - 374.2 7.7 741.4
Sales in place................................ (27.7) (0.4) - - - (28.1)
Production.................................... (260.4) (45.3) (48.5) (11.7) - (365.9)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1997........ 2,975.0(1) 441.3 370.2 652.0 7.7 4,446.2
Revisions of previous estimates............... (57.0) (5.5) (1.7) 50.8 - (13.4)
Purchases in place............................ 141.6 54.9 - - - 196.5
Extensions, discoveries and other additions... 329.2 65.6 762.4 409.9 109.5 1,676.6
Sales in place................................ (43.7) - - - - (43.7)
Production.................................... (270.6) (46.6) (57.3) (31.4) - (405.9)
------- ------ ------- ------- ----- -------
Net proved reserves at December 31, 1998........ 3,074.5(1) 509.7 1,073.6 1,081.3 117.2 5,856.3
======= ====== ======= ======= ===== =======
Net proved developed reserves at
Natural Gas (Bcf)
December 31, 1995............................. 1,218.1 310.1 233.9 - - 1,762.1
December 31, 1996............................. 1,325.7 319.5 370.2 124.6 - 2,140.0
December 31, 1997............................. 1,349.0 370.9 328.8 286.6 - 2,335.3
December 31, 1998............................. 1,429.7 387.4 283.0 407.4 - 2,507.5
Liquids(MBbl)(2)
December 31, 1995............................. 19,977 6,505 5,607 11,542 - 43,631
December 31, 1996............................. 24,868 7,452 8,168 10,791 - 51,279
December 31, 1997............................. 27,707 8,885 6,901 23,322 - 66,815
December 31, 1998............................. 33,045 7,465 4,782 33,472 - 78,764
Bcf Equivalents
December 31, 1995............................. 1,338.0 349.1 267.5 69.3 - 2,023.9
December 31, 1996............................. 1,474.9 364.2 419.2 189.3 - 2,447.6
December 31, 1997............................. 1,515.3 424.2 370.2 426.5 - 2,736.2
December 31, 1998............................. 1,628.0 432.1 311.7 608.2 - 2,980.0
</TABLE>
- ---------------
(1) Includes 1,180 Bcf of proved undeveloped methane reserves contained, along
with high concentrations of carbon dioxide and other gases, in deep
Paleozoic (Madison) formations in the Big Piney area of Wyoming.
(2) Includes crude oil, condensate and natural gas liquids.
33
<PAGE> 36
Acreage. The following table summarizes our developed and undeveloped
acreage at December 31, 1998. Excluded is acreage in which our 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>
United States
California............. 21,324 16,747 821,738 748,238 843,062 764,985
Texas.................. 413,305 220,075 637,850 513,807 1,051,155 733,882
Offshore Gulf of
Mexico.............. 283,571 126,306 564,775 417,827 848,346 544,133
Wyoming................ 153,597 116,092 324,531 251,792 478,128 367,884
Oklahoma............... 188,963 104,633 122,848 87,264 311,811 191,897
Montana................ 119,686 1,651 146,013 103,779 265,699 105,430
New Mexico............. 71,945 35,091 106,133 64,232 178,078 99,323
Utah................... 74,454 50,311 40,873 27,205 115,327 77,516
Mississippi............ 5,144 5,052 43,174 42,950 48,318 48,002
Kansas................. 17,339 15,489 6,747 4,009 24,086 19,498
Colorado............... 20,619 1,233 30,908 13,618 51,527 14,851
Louisiana.............. 6,285 5,429 6,520 3,767 12,805 9,196
Arkansas............... 8,522 1,319 2,457 2,010 10,979 3,329
Other.................. 5,247 984 1,015 795 6,262 1,779
--------- --------- --------- --------- --------- ---------
Total.......... 1,390,001 700,412 2,855,582 2,281,293 4,245,583 2,981,705
Canada
Saskatchewan........... 251,805 235,121 288,834 283,732 540,639 518,853
Alberta................ 372,612 243,225 336,713 243,971 709,325 487,196
Manitoba............... 11,743 9,954 23,730 21,966 35,473 31,920
British Columbia....... 656 164 8,755 5,553 9,411 5,717
--------- --------- --------- --------- --------- ---------
Total Canada...... 636,816 488,464 658,032 555,222 1,294,848 1,043,686
Other International
China.................. 5,000 5,000 1,844,531 1,844,531 1,849,531 1,849,531
Venezuela.............. - - 268,413 241,572 268,413 241,572
India.................. 98,300 29,490 564,307 169,292 662,607 198,782
France................. - - 168,032 168,032 168,032 168,032
Trinidad............... 4,200 3,990 147,233 143,490 151,433 147,480
--------- --------- --------- --------- --------- ---------
Total Other
International... 107,500 38,480 2,992,516 2,566,917 3,100,016 2,605,397
--------- --------- --------- --------- --------- ---------
Total.......... 2,134,317 1,227,356 6,506,130 5,403,432 8,640,447 6,630,788
========= ========= ========= ========= ========= =========
</TABLE>
Producing Well Summary. The following table reflects the Company's
ownership in gas and oil wells located in Texas, the Gulf of Mexico, Oklahoma,
New Mexico, Utah, Wyoming, and various other states, Canada, Trinidad, India and
China at December 31, 1998.
<TABLE>
<CAPTION>
PRODUCTIVE WELLS
EXCLUDING INDIA
PRODUCTIVE WELLS AND CHINA
---------------- ----------------
GROSS* NET GROSS* NET
------- ------ ------- ------
<S> <C> <C> <C> <C>
Gas.................................................. 5,253 3,788 5,241 3,784
Oil.................................................. 897 506 831 486
----- ----- ----- -----
Total...................................... 6,150 4,294 6,072 4,270
===== ===== ===== =====
</TABLE>
- ---------------
* Gross gas and oil wells include 255 with multiple completions.
34
<PAGE> 37
DRILLING AND ACQUISITION ACTIVITIES
During the years ended December 31, 1996, 1997 and 1998, we spent
approximately $599 million, $693 million and $769 million, respectively, for
exploratory and development drilling and acquisition of leases and producing
properties. We drilled, participated in the drilling of or acquired wells as set
out in the table below for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ --------------
1996 1997 1998 1999
-------------- -------------- -------------- --------------
GROSS NET GROSS NET GROSS NET GROSS NET
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Development Wells Completed
North America
Gas.......................... 396 325.04 467 352.90 478 402.80 64 46.94
Oil.......................... 80 57.46 94 74.85 38 34.98 6 3.96
Dry.......................... 80 68.77 101 80.01 79 62.16 26 23.60
--- ------ --- ------ --- ------ --- ------
Total................... 556 451.27 662 507.76 595 499.94 96 74.50
Outside North America
Gas.......................... - - 12 3.60 - - 5 2.20
Oil.......................... 1 .30 6 1.80 21 6.30 3 .90
Dry.......................... - - - - - - - -
--- ------ --- ------ --- ------ --- ------
Total................... 1 .30 18 5.40 21 6.30 8 3.10
--- ------ --- ------ --- ------ --- ------
Total Development....... 557 451.57 680 513.16 616 506.24 104 77.60
--- ------ --- ------ --- ------ --- ------
Exploratory Wells Completed
North America
Gas.......................... 14 10.36 8 5.12 5 4.40 4 3.05
Oil.......................... 1 .78 - - 6 5.50 - -
Dry.......................... 26 19.00 12 7.53 22 15.70 2 1.32
--- ------ --- ------ --- ------ --- ------
Total................... 41 30.14 20 12.65 33 25.60 6 4.37
Outside North America
Gas.......................... - - - - 1 1.00 - -
Oil.......................... - - - - 1 .90 - -
Dry.......................... 1 .50 - - - - - -
--- ------ --- ------ --- ------ --- ------
Total................... 1 .50 - - 2 1.90 - -
--- ------ --- ------ --- ------ --- ------
Total Exploratory....... 42 30.64 20 12.65 35 27.50 - -
--- ------ --- ------ --- ------ --- ------
Total................... 599 482.21 700 525.81 651 533.74 110 81.97
Wells in Progress at end of
period.......................... 87 61.08 44 36.39 28 15.73 29 19.47
--- ------ --- ------ --- ------ --- ------
Total................... 686 543.29 744 562.20 679 549.47 139 101.44
=== ====== === ====== === ====== === ======
Wells Acquired
Gas.......................... 350 148.20* 227 82.45* 333 317.23* 22 2.13*
Oil.......................... 5 .65 48 20.50* - 1.70* 2 .67
--- ------ --- ------ --- ------ --- ------
Total................... 355 148.85 275 102.95 333 318.93 24 2.80
=== ====== === ====== === ====== === ======
</TABLE>
- ---------------
* Includes the acquisition of additional interests in certain wells in which we
previously acquired an interest.
All of our drilling activities are conducted on a contract basis with
independent drilling contractors. We own no drilling equipment.
35
<PAGE> 38
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of EOG (upon the closing of the Share
Exchange with Enron Corp.) and their names and ages are as follows (all
positions are with EOG unless otherwise noted):
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Fred C. Ackman........................ 68 Director
Edward Randall, III................... 72 Director
Frank G. Wisner....................... 61 Director
Forrest E. Hoglund.................... 66 Chairman of the Board; Director
Mark G. Papa.......................... 52 President and Chief Executive Officer;
Director
Edmund P. Segner, III................. 45 Vice Chairman and Chief of Staff
Loren M. Leiker....................... 45 Executive Vice President, Exploration
Gary L. Thomas........................ 49 Executive Vice President, North
American Operations
Barry Hunsaker, Jr. .................. 49 Senior Vice President and General
Counsel
Walter C. Wilson...................... 56 Senior Vice President and Chief
Financial Officer
</TABLE>
Mr. Ackman has been a director since 1989. He also has been a consultant to
the oil and gas industry for over six years and has interests in ranching and
investments.
Mr. Randall has been a director since 1990, and his principal occupation is
investments. Mr. Randall also is a director of KN Energy, Inc. and PaineWebber
Group Inc.
Mr. Wisner has been a director since 1997. He also has served as Vice
Chairman of American International Group Inc. since 1997 following his
retirement as U.S. Ambassador to India. American International Group Inc. is an
insurance company, which provides insurance to companies investing in foreign
operations. Mr. Wisner's more than 35-year career with the U.S. State
Department, primarily in Africa, Asia and Washington, D.C., included serving as
U.S. Ambassador to the Philippines, Egypt and Zambia.
Forrest E. Hoglund joined EOG as Chairman of the Board and Director in
September 1987. He also served as Chief Executive Officer of EOG until September
1998 and served as President from May 1990 until December 1996. Mr. Hoglund is
an advisory director of Chase Bank of Texas, National Association. Mr. Hoglund
expects to retire by August 31, 1999 and, therefore, may or may not be a
director or executive officer of EOG at the time of the closing of this
offering.
Mark G. Papa was elected President and Chief Executive Officer and Director
of EOG in September 1998, President and Chief Operating Officer in September
1997, President in December 1996 and was President North America Operations from
February 1994 to September 1998. From May 1986 through January 1994, Mr. Papa
served as Senior Vice President - Operations. Mr. Papa joined Belco Petroleum
Corporation, a predecessor of EOG, in 1981.
Edmund P. Segner, III became Vice Chairman and Chief of Staff of EOG in
September 1997. Mr. Segner was a director of EOG from January 1997 to October
1997. Mr. Segner joined Enron Corp. in 1988 and was Executive Vice President and
Chief of Staff.
36
<PAGE> 39
Loren M. Leiker joined EOG in April 1989 and has been Executive Vice
President, Exploration since May 1998. Mr. Leiker was previously Senior Vice
President, Exploration of EOG.
Gary L. Thomas was elected Executive Vice President, North American
Operations in May 1998. He was previously Senior Vice President and General
Manager of EOG's Midland Division. Mr. Thomas joined a predecessor of EOG in
July 1978.
Barry Hunsaker, Jr. has been Senior Vice President and General Counsel
since he joined EOG in May 1996. Prior to joining EOG, Mr. Hunsaker was a
partner in the law firm of Vinson & Elkins L.L.P.
Walter C. Wilson joined EOG in November 1987 and has been Senior Vice
President and Chief Financial Officer since May 1991.
THE SELLING STOCKHOLDER
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
BENEFICIAL OWNERSHIP AFTER STOCK OFFERING
BEFORE STOCK OFFERING AND SHARE EXCHANGE(1)(2)
------------------------ SHARES TO ------------------------
SELLING STOCKHOLDER SHARES PERCENTAGE BE SOLD(1) SHARES PERCENTAGE
- ------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Enron Corp. 82,270,000 53.5% 4,050,000 15,950,000 13.4%
</TABLE>
- ---------------
(1) Assumes the exercise of the over-allotment option in full, and the transfer
by Enron Corp. of 62,270,000 shares of our common stock to us in connection
with the Share Exchange.
(2) Concurrently with this offering, Enron Corp. is offering Exchangeable Notes,
which are mandatorily exchangeable into no more than 10,000,000 shares of
our common stock (no more than 11,500,000 shares if the over-allotment
option to the underwriters in the Exchangeable Notes offering is exercised
in full) owned by Enron Corp. 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 as they are
delivered at maturity of the Exchangeable Notes. If the underwriters'
over-allotment options in this offering 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 4,450,000 shares of our common stock or approximately 3.8%
of the outstanding shares.
The registration related to our common stock covered by the over-allotment
option and our 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 we have agreed that, upon the request of
Enron Corp. (or certain assignees), we will register under the Securities Act
and applicable state securities laws the sale of our common stock owned by Enron
Corp. Our obligation is subject to certain limitations relating to a minimum
amount of our common stock required for registration, the timing of registration
and other similar matters. We are obligated to pay all expenses incidental to
such registration, excluding underwriters' discounts and commissions and certain
legal fees and expenses.
RELATIONSHIP WITH ENRON CORP.
After the Share Exchange, Enron Corp.'s ownership of EOG will be reduced to
20,000,000 shares of common stock. Enron Corp. may not sell these remaining
shares of EOG common stock for a period of six months after the Share Exchange.
However, Enron Corp. may sell up to 4,050,000 shares of our common stock to
satisfy the underwriters' over-allotment option in this offering and may sell
convertible securities that would be mandatorily exchangeable into a maximum of
10,000,000 of its remaining
37
<PAGE> 40
EOG shares (11,500,000 if the underwriters' over-allotment option in that
offering is exercised in full). (See "The Selling Stockholder".) Enron Corp.'s
sale of these convertible securities is discussed further in "Concurrent
Offering".
On closing of the Share Exchange, the EOG board of directors will be
reduced to five, and all of Enron Corp.'s officers and directors currently
serving as EOG directors will resign from the EOG board. We have the right to
use the name "Enron Oil & Gas Company" for the period of six months after the
Share Exchange. However, some time soon after the Share Exchange, we expect to
change our corporate name to "EOG Resources, Inc." We will also change the names
of our subsidiaries to reflect our new corporate name.
Enron Corp. currently provides us with various services, such as
maintenance of employee benefit plans, provision of some telecommunications and
computer support services, lease of office space and the provision of some
purchasing and operating services and other corporate staff and support
services. After the Share Exchange, we have the right to continue to use these
services for a period of up to one year. However, we expect to transition away
from using these services as soon as reasonably convenient for both Enron Corp.
and us. EOG believes that it has obtained these services at substantially market
terms, and, therefore, we expect that our costs to obtain these services from
third parties will not materially change.
EOG and Enron Corp. have in the past entered into material transactions and
agreements incident to their respective businesses. Such transactions and
agreements have related to, among other things, the purchase and sale of natural
gas and crude oil and hedging and trading activities. Those transactions and
agreements currently in place will continue after the Share Exchange, and we do
not expect any material changes to such transactions and agreements that would
not otherwise occur in a third party transaction. EOG and Enron Corp. may enter
into similar types of transactions and agreements in the future. We intend that
the terms of any future transactions and agreements between us and Enron Corp.
will be at least as favorable to us as could be obtained from other third
parties.
After the completion of the Share Exchange, we and Enron Corp. can compete
anywhere in the world, including India and China. In certain areas of the world,
affiliate rules may have prevented us from having exploration opportunities
while Enron Corp. owned a majority of our common stock. After the Share
Exchange, those rules will no longer restrict us.
EOG and Enron Corp. have entered into an agreement regarding the manner in
which they will share the burdens and benefits of the integrated project under
joint development in Mozambique. The agreement provides generally that our
interest in this project will be 20% of the combined ownership interest of EOG
and Enron Corp. This agreement will continue in place after the Share Exchange.
For further detail of our relationship with Enron Corp. after the Share
Exchange and the status of specific intercompany agreements, please refer to the
Share Exchange Agreement filed as an exhibit to the registration statement that
includes this prospectus.
38
<PAGE> 41
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Our authorized capital stock consists of 10,000,000 shares of preferred
stock, par value $.01 per share, none of which are outstanding, and 320,000,000
shares of common stock, $.01 par value, of which 153,896,229 shares were
outstanding as of July 1, 1999. Following the Share Exchange and the offering,
there will be 35,270,000 fewer shares of common stock outstanding. The following
description of our capital stock summarizes the material terms and provisions of
these securities. For the complete terms of our common stock and preferred
stock, please refer to our restated certificate of incorporation and bylaws that
are incorporated by reference into the registration statement that includes this
prospectus.
PREFERRED STOCK
Our board of directors is authorized, subject to any limitations prescribed
by law, to provide for the issuance of the shares of preferred stock in series,
by filing a certificate pursuant to the applicable laws of the State of Delaware
to establish from time to time the number of shares to be included in each such
series, and to fix the powers, designations, preferences, and relative,
participating, optional or other rights, if any, of the shares of each such
series and any qualifications, limitations, or restrictions thereof, all without
stockholder approval. Any future issuance of preferred stock, while providing
desired flexibility in connection with acquisitions and other corporate
purposes, could adversely affect the voting power or other rights of holders of
common stock and the likelihood that such holders will receive dividend payments
and payments upon liquidation, and could have the effect of delaying, deferring
or preventing a change of control of EOG.
COMMON STOCK
Our 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. Our 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 our common stock are entitled to dividends in
such amounts and at such times as may be declared by the board of directors out
of legally available funds.
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 and any liquidation preference established for
any preferred stock. All outstanding shares of common stock are duly authorized,
validly issued, fully paid and nonassessable.
LISTING
Our common stock is listed on the New York Stock Exchange.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar of our 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
39
<PAGE> 42
or rescission. Our restated certificate of incorporation limits the liability of
our directors to EOG 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, our directors will not be personally liable for monetary
damages for breach of a director's fiduciary duty as a director, except for
liability
- for any breach of the director's duty of loyalty to the company or its
stockholders,
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law, or
- for any transaction from which the director derived an improper personal
benefit.
This provision in our 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 us and our stockholders.
40
<PAGE> 43
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for EOG
by Barry Hunsaker, Jr., Esq., Senior Vice President and General Counsel, and for
the underwriters by Bracewell & Patterson, L.L.P. Certain other matters will be
passed on for EOG by Fulbright & Jaworski L.L.P. Mr. Hunsaker owns substantially
less than 1% of the outstanding shares of our common stock. Bracewell &
Patterson, L.L.P. provides services to us and our affiliates on matters
unrelated to the offering of the common stock.
EXPERTS
The consolidated financial statements and schedule included in our Annual
Report on Form 10-K for the year ended December 31, 1998 incorporated by
reference in this prospectus and elsewhere in the registration statement 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 our Annual Report on Form 10-K for the
year ended December 31, 1998, and the estimates from the reports of that firm
appearing in such Annual Report, are incorporated by reference herein on the
authority of said firm as experts in petroleum engineering in giving such
reports.
41
<PAGE> 44
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file at the SEC's public reference rooms located at:
- 450 Fifth Street, N.W.
Washington, D.C. 20549;
- Seven World Trade Center
New York, New York 10048; and
- Northwest Atrium Center
500 West Madison Street
Chicago, Illinois 60661.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms and their copy charges.
Our common stock has been listed and traded on the New York Stock Exchange
since 1989. Accordingly, you may inspect the information we file with the SEC at
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934
until we sell all of the common stock:
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
1998, as amended by Amendment No. 1 on Form 10-K/A; and
- Our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
You may request a copy of these filings, excluding exhibits, at no cost by
writing or telephoning Angus H. Davis, Corporate Secretary, at our principal
executive office, which is:
Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
(713) 853-6161
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION.
WE ARE NOT MAKING AN OFFER OF THE SECURITIES COVERED BY THIS PROSPECTUS
WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN
THIS PROSPECTUS OR IN ANY OTHER DOCUMENT INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE
DOCUMENTS.
42
<PAGE> 45
UNDERWRITING
EOG, Enron Corp. and the underwriters for the offering named below have
entered into an underwriting agreement with respect to the shares being offered.
Subject to certain conditions, each underwriter has severally agreed to purchase
the number of shares indicated in the following table. Goldman, Sachs & Co.,
Banc of America Securities LLC, Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, PaineWebber Incorporated, Salomon Smith Barney Inc. and
Warburg Dillon Read LLC are the representatives of the underwriters.
Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial price to public. Any such securities
dealers may resell any shares purchased from the underwriters to certain other
brokers or dealers at a discount of up to $ per share from the initial price
to public. If all the shares are not sold at the initial price to public, the
representatives may change the offering price and the other selling terms.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co. .......................................
Banc of America Securities LLC..............................
Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated..............................................
Lehman Brothers Inc. .......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ..................................
PaineWebber Incorporated....................................
Salomon Smith Barney Inc. ..................................
Warburg Dillon Read LLC.....................................
-------
Total..................................................
=======
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
4,050,000 shares from Enron Corp. to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to this option, the
underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
EOG, its directors and executive officers and Enron Corp. have agreed with
the underwriters not to offer, sell, contract to sell or otherwise dispose of or
hedge any shares of EOG common stock or securities convertible into or
exchangeable for shares of EOG common stock during the period from the date of
this prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of Goldman, Sachs & Co. This
agreement does not apply to any existing employee benefit
U-1
<PAGE> 46
plans or the exercise of stock options pursuant to EOG's stock option plan.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by EOG and Enron Corp. The
amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares.
<TABLE>
<CAPTION>
Paid By EOG
-------------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Share................... $ $0
Total....................... $ $0
</TABLE>
<TABLE>
<CAPTION>
Paid By Enron
Corp.
-------------------
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Share................... $0 $
Total....................... $0 $
</TABLE>
In connection with the offering, the underwriters may purchase and sell
shares of EOG common stock in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.
EOG estimates that its total expenses of the offering of common stock,
excluding underwriting discounts and commissions, will be approximately
$ .
EOG and Enron Corp. 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.
The representatives or their respective affiliates in the past have
provided investment banking and/or commercial banking services and other
financial services for us and our affiliates and have received compensation and
expense reimbursement for these services. In the case of Goldman, Sachs & Co.
and Banc of America Securities LLC, these services have included advice to us in
connection with the Share Exchange. The representatives or their respective
affiliates may in the future provide investment banking and/or commercial
banking services and other financial services to us or our affiliates for which
they will receive compensation and expense reimbursement.
U-2
<PAGE> 47
================================================================================
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 10
Cautionary Statement Regarding
Forward-Looking Statements.......... 15
Use of Proceeds....................... 15
Capitalization........................ 16
Price Range of Common Stock and Cash
Dividends........................... 17
Unaudited Condensed Consolidated Pro
Forma Financial Information......... 18
Business.............................. 24
Management............................ 36
The Selling Stockholder............... 37
Relationship with Enron Corp. ........ 37
Description of Capital Stock.......... 39
Legal Matters......................... 41
Experts............................... 41
Where You Can Find More
Information......................... 42
Underwriting.......................... U-1
</TABLE>
================================================================================
================================================================================
27,000,000 Shares
ENRON OIL & GAS COMPANY
Common Stock
[ENRON LOGO]
GOLDMAN, SACHS & CO.
BANC OF AMERICA SECURITIES LLC
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
LEHMAN BROTHERS
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
SALOMON SMITH BARNEY
WARBURG DILLON READ LLC
Representatives of the Underwriters
================================================================================
<PAGE> 48
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED JULY 23, 1999.
ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS APPENDIX A
'ENRON LOGO'
ENRON OIL & GAS COMPANY
Common Stock
----------------------
This prospectus relates to up to 11,500,000 shares of our common stock
which may be delivered by Enron Corp. upon mandatory exchange of the %
Exchangeable Notes due , 2002 of Enron Corp. This prospectus is
Appendix A to a prospectus of Enron Corp. covering the sale of the Exchangeable
Notes. We will not receive any of the proceeds from the sale of the Exchangeable
Notes or the delivery by Enron Corp. of its shares of our common stock upon
exchange of the Exchangeable Notes at maturity.
Enron Oil & Gas Company is offering 27,000,000 shares of its common stock.
The common stock is listed on the New York Stock Exchange under the symbol
"EOG". The last reported sale price of the common stock on July 21, 1999 was
$20.00 per share.
Enron Corp. is offering concurrently, in a separate public offering with a
separate prospectus 10,000,000 (11,500,000 if the underwriters in that offering
fully exercise their over-allotment option) Exchangeable Notes, which are
mandatorily exchangeable into shares of EOG common stock currently owned by
Enron Corp. This offering of EOG common stock and the concurrent offering of
Exchangeable Notes by Enron Corp. are not conditioned on each other.
Consider carefully the risk factors beginning on page of this
prospectus.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
Prospectus dated , 1999.
<PAGE> 49
ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS
RECENT DEVELOPMENTS
For the second quarter 1999, we reported net income of $20.6 million, or
$.13 per share, compared to net income of $13.3 million, or $.09 per share, for
the comparable period a year ago. Net of non-recurring items, our second quarter
1999 net income was $12.9 million, or $.08 per share. Net operating revenues for
second quarter 1999 were $187.2 million compared to $183.3 million for the
comparable period a year ago.
Our natural gas deliveries in second quarter 1999 increased six percent to
959 MMcf per day versus 1998 second quarter deliveries of 907 MMcf per day.
Crude oil and condensate deliveries totaled 24.5 MBbls per day in the second
quarter 1999, an increase of nine percent from deliveries of 22.4 MBbls per day
for the comparable period a year ago.
As a result of the change to our portfolio of assets subsequent to the
Share Exchange, we are currently re-evaluating our overall business. We expect
to complete this re-evaluation by the end of third quarter 1999. As a result of
this re-evaluation, some of our current projects may no longer be deemed central
to our business. In that case, we may incur non-cash charges in connection with
the disposition of such projects of up to approximately $75 million, after-tax.
We have received a commitment for a new credit facility of up to $1.3
billion, which may be used to fund the $600 million cash capital contribution
for the Share Exchange if it closes before this offering.
We have declared a regular quarterly dividend of $0.03 per share on the
common stock of EOG, payable July 30, 1999, to shareholders of record as of July
15, 1999.
On July 21, 1999, two stockholders of EOG filed separate lawsuits
purportedly on behalf of EOG against Enron Corp. and EOG's directors, alleging
that Enron Corp. and EOG's directors breached their fiduciary duties of good
faith and loyalty in approving the Share Exchange. The lawsuits seek to
temporarily and permanently enjoin the Share Exchange, compensatory damages and
costs and expenses, including reasonable attorneys' and experts' fees. EOG,
Enron Corp. and the EOG directors believe the lawsuits are without merit and
intend to vigorously contest them.
<PAGE> 50
ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 51
ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS
LEGAL MATTERS
The validity of our common stock deliverable upon exchange of the
Exchangeable Notes will be passed upon for EOG by Barry Hunsaker, Jr., Esq.,
Senior Vice President and General Counsel, and for the underwriters by Bracewell
& Patterson, L.L.P. Certain other matters will be passed on for EOG by Fulbright
& Jaworski L.L.P. Certain matters will be passed upon for Enron Corp. by Vinson
& Elkins L.L.P. Mr. Hunsaker owns substantially less than 1% of the outstanding
shares of our common stock. Bracewell & Patterson, L.L.P. provides services to
us and our affiliates on matters unrelated to the offering of the common stock.
EXPERTS
The consolidated financial statements and schedule included in our Annual
Report on Form 10-K for the year ended December 31, 1998 incorporated by
reference in this prospectus and elsewhere in the registration statement 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 our Annual Report on Form 10-K for the
year ended December 31, 1998, and the estimates from the reports of that firm
appearing in such Annual Report, are incorporated by reference herein on the
authority of said firm as experts in petroleum engineering in giving such
reports.
PLAN OF DISTRIBUTION
This prospectus relates to up to 11,500,000 shares of EOG common stock that
may be delivered by Enron Corp. pursuant to its offering of Exchangeable Notes
and is Appendix A to the Enron Corp. Exchangeable Notes prospectus. At maturity
of the Exchangeable Notes, the principal amount of each note will be mandatorily
exchanged by Enron Corp. for shares of EOG common stock. For a description of
the Exchangeable Notes, see "Description of the Exchangeable Notes" in the Enron
Corp. Exchangeable Notes prospectus.
We, our directors and executive officers and Enron Corp. have agreed with
the underwriters not to offer, sell, contract to sell or otherwise dispose of or
hedge any shares of our common stock or securities convertible into or
exchangeable for shares of our common stock during the period from the date of
this prospectus continuing through the date 180 days after the date of this
prospectus, except with the prior written consent of Goldman, Sachs & Co. This
agreement does not apply to any existing employee benefit plans or the exercise
of stock options pursuant to our stock option plan.
In connection with the distribution of the Exchangeable Notes, we and Enron
Corp. have agreed to indemnify the 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> 52
================================================================================
ALTERNATIVE PAGE FOR APPENDIX PROSPECTUS
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 5
Risk Factors.......................... 10
Cautionary Statement Regarding
Forward-Looking Statements.......... 15
Use of Proceeds....................... 15
Capitalization........................ 16
Price Range of Common Stock and Cash
Dividends........................... 17
Unaudited Condensed Consolidated Pro
Forma Financial Information......... 18
Business.............................. 24
Management............................ 36
The Selling Stockholder............... 37
Relationship with Enron Corp. ........ 37
Description of Capital Stock.......... 39
Plan of Distribution.................. 41
Legal Matters......................... 41
Experts............................... 41
Where You Can Find More
Information......................... 42
</TABLE>
[Enron Logo]
ENRON OIL & GAS COMPANY
Common Stock
-----------------------
PROSPECTUS
-----------------------
================================================================================
<PAGE> 53
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 Enron Oil &
Gas Company ("the Company") in connection with the issuance and distribution of
the securities being registered. Except for the SEC registration fee, all
amounts shown are estimates.
<TABLE>
<S> <C>
SEC Registration Fees....................................... $169,402
Legal Fees and Expenses..................................... 100,000
Accounting Fees and Expenses................................ 120,000
Transfer Agent's Fees and Expenses.......................... 10,000
Blue Sky Fees and Expenses.................................. 10,000
Printing and Engraving Expenses............................. 150,000
Miscellaneous............................................... 40,598
--------
Total............................................. $600,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
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:
"Eighth: 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 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 broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including
II-1
<PAGE> 54
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
<PAGE> 55
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 Form of Underwriting Agreement filed herewith as Exhibit 1, under
certain specified circumstances, provides for indemnification by the
Underwriters of the directors and officers who sign the registration statement
and controlling persons of the Company.
The Company 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.
ITEM 16. EXHIBITS.
Exhibits not incorporated herein by reference to a prior filing are
designated by an asterisk (*) and are filed herewith; all exhibits not so
designated are incorporated herein by reference to the Company's Form S-1
Registration Statement, Registration No. 33-30678, filed on August 24, 1989
("Form S-1"), or as otherwise indicated.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
+1 -- Form of Underwriting Agreement.
*2 -- Share Exchange Agreement, dated as of July 19, 1999
between Enron Corp. and the Company.
4.1(a) -- Restated Certificate of Incorporation of Enron Oil & Gas
Company (Exhibit 3.1 to Form S-1).
4.1(b) -- Certificate of Amendment of Restated Certificate of
Incorporation of Enron Oil & Gas Company (Exhibit 4.1(b)
to Form S-8 Registration Statement No. 33-52201, filed
February 8, 1994).
4.1(c) -- Certificate of Amendment of Restated Certificate of
Incorporation of Enron Oil & Gas Company (Exhibit 4.1(c)
to Form S-8 Registration Statement No. 33-58103, filed
March 15, 1995).
4.1(d) -- Certificate of Amendment of Restated Certificate of
Incorporation of Enron Oil & Gas Company, dated June 11,
1996 (Exhibit 3(d) to Form S-3 Registration Statement No.
333-09919, filed August 9, 1996).
</TABLE>
II-3
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4.1(e) -- Certificate of Amendment of Restated Certificate of
Incorporation of Enron Oil & Gas Company, dated May 7,
1997 (Exhibit 3(e) to Form S-3 Registration Statement No.
333-44785, filed January 23, 1998).
4.2 -- By-laws of Enron Oil & Gas Company dated August 23, 1989,
as amended December 12, 1990, February 8, 1994, January
19, 1996, February 13, 1997 and May 5, 1998 (Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998).
4.3 -- Specimen of Certificate evidencing the Common Stock
(Exhibit 3.3 to Form S-1).
*5 -- Opinion of Barry Hunsaker, Jr.
*23(a) -- Consent of Arthur Andersen LLP.
*23(b) -- Consent of DeGolyer and MacNaughton.
23(c) -- The consent of Barry Hunsaker, Jr., Esq. is contained in
his opinion filed as Exhibit 5 hereto.
*24 -- Powers of Attorney.
</TABLE>
- ------------------
+ To be filed by amendment.
* Filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) 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.
(2) 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.
(3) 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 this registration statement shall be deemed to
be a new registration statement relating to the securities offered herein,
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 Act 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 whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE> 57
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 22nd day of July,
1999.
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 22nd day of
July, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
FORREST E. HOGLUND* Chairman of the Board and Director
- -----------------------------------------------------
(Forrest E. Hoglund)
/s/ MARK G. PAPA President and Chief Executive Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
(Mark G. Papa)
/s/ WALTER C. WILSON Senior Vice President and Chief Financial
- ----------------------------------------------------- Officer (Principal Financial and Accounting
(Walter C. Wilson) Officer)
FRED C. ACKMAN* Director
- -----------------------------------------------------
(Fred C. Ackman)
RICHARD A. CAUSEY* Director
- -----------------------------------------------------
(Richard A. Causey)
JAMES V. DERRICK, JR.* Director
- -----------------------------------------------------
(James V. Derrick, Jr.)
JOHN H. DUNCAN* Director
- -----------------------------------------------------
(John H. Duncan)
KEN L. HARRISON* Director
- -----------------------------------------------------
(Ken L. Harrison)
KENNETH L. LAY* Director
- -----------------------------------------------------
(Kenneth L. Lay)
EDWARD RANDALL, III* Director
- -----------------------------------------------------
(Edward Randall, III)
JEFFREY K. SKILLING* Director
- -----------------------------------------------------
(Jeffrey K. Skilling)
FRANK G. WISNER* Director
- -----------------------------------------------------
(Frank G. Wisner)
*By /s/ ANGUS H. DAVIS
------------------------------------------------
(Angus H. Davis)
(Attorney-in-fact for persons indicated)
</TABLE>
II-5
<PAGE> 58
INDEX TO EXHIBITS
Exhibits not incorporated herein by reference to a prior filing are
designated by an asterisk (*) and are filed herewith; all exhibits not so
designated are incorporated herein by reference to the Company's Form S-1
Registration Statement, Registration No. 33-30678, filed on August 24, 1989
("Form S-1"), or as otherwise indicated.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
+1 -- Form of Underwriting Agreement.
*2 -- Share Exchange Agreement, dated as of July 19, 1999
between Enron Corp. and the Company.
4.1(a) -- Restated Certificate of Incorporation of Enron Oil & Gas
Company (Exhibit 3.1 to Form S-1).
4.1(b) -- Certificate of Amendment of Restated Certificate of
Incorporation of Enron Oil & Gas Company (Exhibit 4.1(b)
to Form S-8 Registration Statement No. 33-52201, filed
February 8, 1994).
4.1(c) -- Certificate of Amendment of Restated Certificate of
Incorporation of Enron Oil & Gas Company (Exhibit 4.1(c)
to Form S-8 Registration Statement No. 33-58103, filed
March 15, 1995).
4.1(d) -- Certificate of Amendment of Restated Certificate of
Incorporation of Enron Oil & Gas Company, dated June 11,
1996 (Exhibit 3(d) to Form S-3 Registration Statement No.
333-09919, filed August 9, 1996).
4.1(e) -- Certificate of Amendment of Restated Certificate of
Incorporation of Enron Oil & Gas Company, dated May 7,
1997 (Exhibit 3(e) to Form S-3 Registration Statement No.
333-44785, filed January 23, 1998).
4.2 -- By-laws of Enron Oil & Gas Company dated August 23, 1989,
as amended December 12, 1990, February 8, 1994, January
19, 1996, February 13, 1997 and May 5, 1998 (Exhibit 3.2
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998).
4.3 -- Specimen of Certificate evidencing the Common Stock
(Exhibit 3.3 to Form S-1).
*5 -- Opinion of Barry Hunsaker, Jr.
*23(a) -- Consent of Arthur Andersen LLP.
*23(b) -- Consent of DeGolyer and MacNaughton.
23(c) -- The consent of Barry Hunsaker, Jr., Esq. is contained in
his opinion filed as Exhibit 5 hereto.
*24 -- Powers of Attorney.
</TABLE>
- ------------------
+ To be filed by amendment.
* Filed herewith.
<PAGE> 1
EXHIBIT 2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is entered into as of
this 19th day of July, 1999 by and between Enron Corp., an Oregon corporation
("Enron"), and Enron Oil & Gas Company, a Delaware corporation ("EOG"). Enron
and EOG are referred to collectively herein as the "Parties" and individually as
a "Party."
RECITALS
WHEREAS, Enron owns 82,270,000 shares of common stock, par value $.01
per share of EOG ("EOG Common Stock"), or approximately 53.5% of the outstanding
EOG Common Stock;
WHEREAS, Enron Oil & Gas International, Inc., a Delaware corporation
and a wholly owned subsidiary of EOG ("EOG International"), owns (a) all of the
issued and outstanding capital stock (the "EOG India Shares") of EOGI-India,
Inc., a Delaware corporation ("EOG India HoldCo"); (b) all of the issued and
outstanding capital stock (the "EOG China Sichuan Shares") of EOGI-China
(Sichuan), Inc., a Delaware corporation ("EOG China Sichuan"), and (c) all of
the issued and outstanding capital stock (the "EOG China Delaware Shares") of
EOGI-China, Inc., a Delaware corporation ("EOG China Delaware");
WHEREAS, EOG India HoldCo owns all of the issued and outstanding
capital stock of Enron Oil & Gas India Ltd., a Cayman Islands corporation ("EOG
India Cayco");
WHEREAS, EOG China Sichuan owns all of the issued and outstanding
capital stock of EOGI China Company, a Cayman Islands corporation ("EOG China
Cayco"), and EOG China Cayco owns all of the issued and outstanding capital
stock of Enron Oil & Gas China Ltd., a Cayman Islands corporation ("EOG China
Limited");
WHEREAS, EOG China Delaware owns all of the issued and outstanding
capital stock of Enron Oil & Gas China International Ltd., a Cayman Islands
corporation ("EOG China International");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, Enron desires to transfer to EOG 62,270,000 of the shares of EOG
Common Stock owned by Enron in exchange for all of the EOG India Shares; and
WHEREAS, this Agreement and the transactions contemplated hereby have
been unanimously approved by the Board of Directors of EOG and unanimously
recommended to the Board of Directors by a committee of the Board of Directors
consisting solely of two directors not employed by, or otherwise having any
relationship with, Enron or EOG other than as directors of EOG (the "Special
Committee");
1
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties and covenants herein contained, and other good and
valuable consideration, the receipt of which are hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE 1.
DEFINITIONS
Capitalized terms not otherwise defined herein used in this Agreement
shall have the meanings ascribed to them in this Article 1.
"Acquired Companies" means collectively EOG India HoldCo, EOG China
Sichuan (until the merger contemplated by Section 2.1(a) has been consummated),
EOG China Delaware, EOG India Cayco, EOG China Cayco, EOG China International
and EOG China Limited.
"Affiliate" shall mean with respect to any Person, any Person which,
directly or indirectly, controls, is controlled by, or is under a common control
with, such Person. The term "control" (including the terms "controlled by" and
"under common control with") as used in the preceding sentence means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of a Person, whether through the ownership
of voting securities, by contract, or otherwise. Notwithstanding the foregoing,
unless otherwise expressly stated and except for purposes of the definition of
Unitary Tax, for purposes of this Agreement (a) EOG and its Subsidiaries shall
not be deemed to be Affiliates of Enron, (b) any Person who would be an
Affiliate of EOG solely because such Person is an Affiliate of Enron shall not
be deemed to be an Affiliate of EOG and (c) Enron shall not be deemed to be an
Affiliate of EOG.
"Aircraft Agreements" means collectively (a) the Aircraft Sublease
Agreement, dated as of June 12, 1997, among Wilmington Trust Company, Enron and
EOG, (b) the N5731 Aircraft Subleasing Agreement, dated as of December 23, 1997,
among Wilmington Trust Company, ECT Investing Partners L.P., Enron and EOG and
(c) the N5732 Aircraft Subleasing Agreement, dated as of December 23, 1997,
among Wilmington Trust Company, ECT Investing Partners L.P., Enron and EOG.
"EOG Group" means the affiliated group of corporations of which EOG is
the common parent corporation within the meaning of section 1504(a) of the Code,
and any analogous definition under applicable state Income Tax law of a group of
corporations filing a Tax Return relating to consolidated or combined Tax
liability or a Unitary Tax Return of which EOG is the common parent corporation.
"Business Day" shall mean any day other than a day on which banks in
the State of Texas are authorized or obligated to be closed.
2
<PAGE> 3
"Business Opportunity Agreement" shall mean the Equity Participation
and Business Opportunity Agreement between EOG and Enron dated December 9, 1997,
as amended, as the same may be further amended from time to time.
"Claim" shall mean all demands, claims, actions, investigations,
proceedings and arbitrations, whether or not ultimately determined to be valid.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Enron Benefit Plans" shall mean collectively, each Plan and each other
program, contract, fringe benefit or arrangement providing for bonuses,
remuneration, pensions, deferred compensation, retirement plan payments, profit
sharing, incentive or other pay, hospitalization or medical expenses or
insurance sponsored by Enron for its employees and its participating employer
companies (including EOG and its Subsidiaries) and their employees.
"Enron Group" means the affiliated group of corporations of which Enron
is the common parent corporation within the meaning of section 1504(a) of the
Code, and any analogous definition under applicable state Income Tax law of a
group of corporations filing a Tax Return relating to consolidated or combined
Tax liability or a Unitary Tax Return of which Enron is the common parent
corporation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated and rulings issued thereunder.
"Fully Diluted EOG Shares" means, on any given date, the shares of EOG
Common Stock issued and outstanding on such date, together with the shares of
EOG Common Stock issuable by EOG upon the exercise, conversion or exchange of
any outstanding stock options, warrants, agreements, securities, rights or other
instruments, but only to the extent that any of the foregoing are exercisable or
will be exercisable on or prior to December 31, 1999, and only to the extent
that any of the foregoing have an exercise price, conversion price or exchange
ratio of less than $22.00 per share.
"Governmental Authority" or "Governmental Authorities" shall mean the
United States and any foreign, state, county, city or other political
subdivision, agency, court or instrumentality.
"Income Tax" means any Tax based on or measured by net income.
"knowledge" means, with respect to any Party, the actual knowledge of
any executive officer of such Person.
"Laws" shall mean any constitution, statute, code, regulation, rule,
injunction, judgment, order, decree or ruling of any applicable Governmental
Authority.
3
<PAGE> 4
"Lock-up Expiration Date" shall mean the date that is six months after
the Closing Date.
"Loss" or "Losses" shall mean all debts, liabilities, losses,
penalties, fines, assessments, settlements, judgments, costs (including, but not
limited to, remediation costs) and expenses (including, without limitation,
involving theories of negligence or strict liability and including court costs
and attorneys' fees), other than Taxes.
"Material Adverse Effect" shall mean, with respect to any given Person,
any event, circumstance, condition, development or occurrence causing, resulting
in or having an adverse effect on the financial condition, business, assets or
properties that is material to such Person and its Subsidiaries, taken as a
whole; provided, that such term shall not include effects that result from
market conditions generally in the oil and gas industry.
"Oil and Gas Interests" shall mean (a) direct and indirect interests in
and rights with respect to oil, gas, mineral, and related properties and assets
of any kind and nature, direct or indirect, including working, leasehold and
mineral interests and operating rights and royalties, overriding royalties,
production payments, net profit interests and other nonworking interests and
nonoperating interests; (b) all interests in rights with respect to hydrocarbons
and other minerals or revenues therefrom, all contracts in connection therewith
and claims and rights thereto (including all oil and gas leases, operating
agreements, unitization and pooling agreements and orders, division orders,
transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and
processing contracts and agreements, and in each case, interests thereunder);
(c) surface interests, fee interests, reversionary interests, reservations, and
concessions related to the foregoing; (d) all easements, rights of way,
licenses, permits, leases, and other interests associated with, appurtenant to,
or necessary for the operation of any of the foregoing; and (e) all interests in
equipment and machinery (including wells, well equipment and machinery), oil and
gas production, gathering, transmission, treating, processing, and storage
facilities (including tanks, tank batteries, pipelines, and gathering systems),
pumps, water plants, electric plants, gasoline and gas processing plants,
refineries, and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing.
"Pension Plan" shall mean any "employee pension benefit plan" as such
term is defined in Section 3(2) of ERISA that is maintained or sponsored by
Enron.
"Plan" shall mean any "employee benefit plan" as such term is defined
in Section 3(3) of ERISA, including without limitation any Pension Plan.
"Person" shall mean any natural person, firm, partnership, association,
corporation, limited liability company, trust, entity, public body or
government.
"Pre-Closing Period" means any taxable period ending on or before the
Closing Date.
4
<PAGE> 5
"Reasonable Efforts" shall mean a party's efforts in accordance with
reasonable commercial practices and without the payment of any money to any
third party except the incurrence of reasonable expenses that are insignificant
in amount.
"Registration Rights Agreement" means the Stock Restriction and
Registration Rights Agreement dated as of August 23, 1989 between Enron and EOG,
as amended.
"Retained Shares" shall mean any of the shares of EOG Common Stock
beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended) by Enron other than the Exchanged Shares (or shares that
will become the Exchanged Shares).
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Standstill Expiration Date" shall mean the later of (a) the second
anniversary of the Closing Date and (b) the earliest date that Enron ceases to
beneficially own more than 5% of the issued and outstanding shares of EOG Common
Stock.
"Straddle Period" means any taxable period beginning on or before and
ending after the Closing Date.
"Subsidiary" or "Subsidiaries" of a specified Person shall mean any
corporation, partnership, limited liability company, joint venture or other
legal entity of which the specified Person (either alone and/or through and/or
together with any other Subsidiary) owns, directly or indirectly, 50% or more of
the stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity or of which the
specified Person controls the management. Notwithstanding the foregoing, unless
otherwise expressly stated for purposes of this Agreement, EOG and its
Subsidiaries shall not be deemed to be Subsidiaries of Enron.
"Tax" or "Taxes" means any and all federal, state, local, foreign or
(American) Indian nation taxes, duties, levies, imposts, or withholdings of any
nature whatsoever (including, without limitation, income, franchise, gross
receipts, sales, rental, use, turnover, value added, property (tangible and
intangible), windfall profit, goods and services, excise and stamp taxes),
together with any and all assessments, penalties, fines, additions and interest
relating thereto.
"Termination Date" shall mean November 1, 1999.
"Third Party Claim" shall mean a Claim asserted against an Indemnified
Party by a Person other than a party to this Agreement or any Affiliate thereof
that could give rise to a right of indemnification under this Agreement, other
than a Claim for or related to Taxes.
"Unitary Tax" means a state Income Tax that reflects the combined
and/or consolidated tax reporting (either on a domestic or worldwide basis) of a
corporation and its Affiliates and that is
5
<PAGE> 6
imposed by that state either (i) on its apportioned and/or allocable share of
the net income of a taxpayer and its United States Affiliates that are engaged
in a unitary business, part of which is conducted in the state or (ii) on its
apportioned and/or allocable share of the net income of a taxpayer and its
Affiliates, both domestic and foreign, that are engaged in a unitary business. A
"unitary business" is a group of affiliated corporations that (i) exhibits
common ownership, centralized management, functional integration, and/or
economies of scale, or (ii) is doing business in the state and included in a
consolidated federal Income Tax return.
"Unitary Tax Return" shall have the meaning given such term in Article
10.
ARTICLE 2.
THE TRANSACTIONS
2.1 Contributions. Subject to the terms and conditions set forth in
this Agreement, prior to the consummation of the Share Exchange the following
transactions shall be consummated:
(a) EOG shall cause EOG China Sichuan to be merged into EOG
International;
(b) EOG may, in its discretion, cause EOG International to be
merged into EOG (any such merger into EOG, the "EOG International
Merger") or into a limited liability company (provided that such
limited liability company is disregarded as an entity separate from EOG
for Income Tax purposes) wholly owned by EOG, provided that if EOG
International is merged into such a limited liability company, then
references in this Agreement to EOG International shall refer to such
limited liability company after such merger occurs and to EOG
International prior to such merger;
(c) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) the shares of EOG China Cayco to EOG India HoldCo;
(d) EOG shall cause EOG India HoldCo to contribute the shares
of EOG China Cayco to EOG India Cayco. Effective the day after such
contribution (but prior to the day of the Share Exchange) EOG shall
cause EOG China Cayco to elect to be disregarded as an entity separate
from its owner pursuant to Treas. Reg. Section 301.7701-3;
(e) EOG shall contribute to EOG International, shall cause EOG
International to contribute to EOG India HoldCo simultaneously with the
receipt of such amount from EOG, and shall cause EOG India HoldCo to
contribute to EOG India Cayco simultaneously with the receipt of such
amount from EOG International, $600 million in cash (the "Contributed
Amount"); provided, however, that if the EOG International Merger
occurs pursuant to Section 2.1(b), EOG shall contribute the Contributed
Amount directly to EOG India HoldCo;
6
<PAGE> 7
(f) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo the EOG China Delaware Shares;
(g) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo, and shall cause EOG India HoldCo
to contribute to EOG India Cayco simultaneously with the receipt of
same from EOG International (or EOG), the balance as of the Closing
Date of all receivables from EOG India Cayco;
(h) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo, and shall cause EOG India HoldCo
to contribute to EOG India Cayco simultaneously with the receipt of
such amount from EOG International (or EOG), an amount of cash
sufficient to allow EOG India Cayco to discharge all of its payables
(including accrued interest) to Wilsyx International Finance B.V. as of
the Closing Date, which payables shall be so discharged prior to the
consummation of the Share Exchange;
(i) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo, shall cause EOG India HoldCo to
contribute to EOG India Cayco simultaneously with the receipt of same
from EOG International (or EOG), and shall cause EOG India Cayco to
contribute to EOG China Cayco simultaneously with the receipt of same
from EOG India HoldCo, the balance as of the Closing Date of all
receivables from EOG China Cayco; and
(j) EOG shall cause EOG International to contribute (or, if
the EOG International Merger occurs pursuant to Section 2.1(b), EOG
shall contribute) to EOG India HoldCo, shall cause EOG India HoldCo to
contribute to EOG China Delaware simultaneously with the receipt of
same from EOG International (or EOG), and shall cause EOG China
Delaware to contribute to EOG China International simultaneously with
the receipt of same from EOG India HoldCo, the balance as of the
Closing Date of all receivables from EOG China International.
The transactions contemplated by this Section 2.1 of this Agreement (except for
the EOG International Merger pursuant to Section 2.1(b)) shall be collectively
referred to herein as the "Contributions."
2.2 Share Exchange. Subject to the terms and conditions set forth in
this Agreement, (a) prior to the transactions referred to in clauses (b) and (c)
of this Section 2.2, EOG International shall distribute to EOG all of the EOG
India Shares (unless EOG International is merged into EOG pursuant to Section
2.1(b)); (b) Enron shall transfer and assign to EOG an aggregate of 62,270,000
shares of EOG Common Stock owned by Enron (the "Exchanged Shares") and (c) in
exchange therefor EOG shall transfer and assign to Enron all of the EOG India
Shares. The transactions
7
<PAGE> 8
contemplated by this Section 2.2 of this Agreement shall be collectively
referred to herein as the "Share Exchange."
2.3 Closing. The closing of the transactions contemplated by Section
2.2 of this Agreement (the "Closing") shall take place at the offices of Vinson
& Elkins L.L.P., 2300 First City Tower, 1001 Fannin, Houston, Texas 77002 at
9:30 a.m., Houston time, on the later of August 31, 1999 and the third Business
Day following the satisfaction or waiver of the conditions set forth in Article
8 (other than the deliveries contemplated to occur at Closing), or at such other
time as Enron and EOG shall agree in writing; provided, however, that if all of
the conditions set forth in Article 8 (other than the deliveries contemplated to
occur at Closing) have been satisfied or waived prior to August 31, 1999, EOG
shall have the right, but not the obligation, to cause the Closing to occur on a
Business Day after such waiver or satisfaction and prior to August 31, 1999 by
giving at least three Business Days notice to Enron of the rescheduled date of
Closing. The date upon which the Closing occurs shall be referred to herein as
the "Closing Date."
2.4 Deliveries at or Prior to the Closing.
(a) At or prior to the Closing, EOG will, or will (if applicable) cause
EOG International to, deliver to Enron:
(i) written evidence reasonably satisfactory to Enron of the
consummation of the Contributions as contemplated by Section 2.1 of
this Agreement;
(ii) the certificate required to be delivered by EOG pursuant
to Section 8.2(d) of this Agreement; and
(iii) stock certificates representing all of the EOG India
Shares endorsed in blank or accompanied by duly executed assignment
documents.
(b) At or prior to the Closing, Enron will deliver to EOG:
(i) the certificate required to be delivered by Enron pursuant
to Section 8.3(c) of this Agreement;
(ii) stock certificates representing all of the Exchanged
Shares endorsed in blank or accompanied by duly executed assignment
documents; and
(iii) written evidence reasonably satisfactory to EOG of the
resignation, effective upon the Closing, as a director of EOG of each
of the following individuals: Kenneth L. Lay, Jeffrey K. Skilling;
James V. Derrick, Jr.; Ken L. Harrison; Richard A. Causey; and John H.
Duncan (or any successors thereto or additional directors appointed
without the concurrence of the Special Committee) (collectively, the
"Resigning Directors").
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF ENRON
Enron hereby represents and warrants to EOG as follows, subject to the
matters set forth in the disclosure schedule delivered by Enron to EOG on the
date hereof (the "Enron Disclosure Schedule") and, provided that the disclosures
made on any section of the Enron Disclosure Schedule with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of the applicable section of the Enron
Disclosure Schedule:
3.1 Organization. Enron is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Oregon, with full
corporate power, right and authority to own and lease the properties and assets
it currently owns and leases and to carry on its business as such business is
currently being conducted.
3.2 Qualification. Enron is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
the business as now conducted or the character of the property owned or leased
by it makes such qualification necessary, except where the failure to be so
qualified or in good standing would not or would not reasonably be expected to,
have a Material Adverse Effect on Enron.
3.3 Authorization of this Agreement; No Violation. This Agreement has
been duly executed and delivered by Enron. Enron has the full corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Enron of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all requisite corporate action on the part of
Enron. Except as disclosed in Section 3.3 of the Enron Disclosure Schedule,
neither the execution and delivery by Enron of this Agreement nor the
consummation by Enron of the transactions contemplated hereby will conflict
with, result in a breach, default or violation of, or require the consent of any
third party under,
(a) the terms, provisions or conditions of the certificate of
incorporation or bylaws of Enron;
(b) any judgment, decree or order or any Law to which Enron is
a party or is subject that would, or would reasonably be expected to,
have a Material Adverse Effect on Enron; or
(c) any material contract, agreement, lease, license or other
arrangement to which Enron or one of its Subsidiaries is a party or by
which it or one of its Subsidiaries, or any of
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their respective properties, is bound that would, or would reasonably
be expected to, have a Material Adverse Effect on Enron.
3.4 Governmental Consents. Except as disclosed in Section 3.4 of the
Enron Disclosure Schedule, no consent, action, approval or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
to authorize, or is otherwise required in connection with, the execution and
delivery by Enron of this Agreement or Enron's performance of the terms of this
Agreement or the validity or enforceability hereof against Enron.
3.5 Enforceability. This Agreement constitutes the legal, valid and
binding obligation of Enron enforceable against Enron in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and other Laws affecting creditors' rights generally and general principles of
equity.
3.6 Ownership of Exchanged Shares. Enron is the record and beneficial
owner of all of the Exchanged Shares, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities Laws), claims, liens for taxes, security interests, options,
warrants, rights, contracts, calls, commitments, equities and demands. Enron has
the sole right to vote the Exchanged Shares. None of the Exchanged Shares is
subject to any voting trust or other agreement, arrangement or restriction with
respect to the voting of the Exchanged Shares, and no proxy, power of attorney
or other authorization has been granted with respect to any of the Exchanged
Shares. Other than as set forth in this Agreement, neither Enron nor any of its
Subsidiaries is a party to any contracts, agreements, commitments or other
arrangements, including any options, warrants or other rights, obligating Enron
or any of its Subsidiaries to sell, dispose of or encumber any of the Exchanged
Shares.
3.7 Brokers' Fees. Except for Credit Suisse First Boston Corporation,
Enron has no liability or obligation to pay any fees or commissions to any
broker or finder with respect to the transactions contemplated by this
Agreement. Enron shall be solely responsible for all fees payable to any broker
or finder engaged on behalf of Enron with respect to the transactions
contemplated by this Agreement.
3.8 Investment. Enron is not acquiring the EOG India Shares with a view
to or for sale in connection with any distribution thereof within the meaning of
the Securities Act. Enron, together with its directors and executive officers
and advisors, is familiar with investments of the nature of the EOG India
Shares, understands that this investment involves substantial risks, has
adequately investigated the Acquired Companies and has substantial knowledge and
experience in financial and business matters such that it is capable of
evaluating, and has evaluated, the merits and risks inherent in acquiring the
EOG India Shares, and is able to bear the economic risks of such investment.
3.9 Litigation. Except as disclosed in Enron's Annual Report on Form
10-K for the year ended December 31, 1998 or Enron's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999, as of the date hereof, there are no
actions, suits, proceedings or governmental
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investigations or inquiries pending, or to the knowledge of Enron, threatened,
against Enron, its Subsidiaries or any of their respective properties, assets,
operations or businesses that would, or would reasonably be expected to, have a
Material Adverse Effect on Enron.
3.10 Tax Representations and Warranties.
(a) Immediately after the Share Exchange, EOG India HoldCo
will be engaged in the active conduct of a trade or business within the
meaning of section 355(b)(1)(A) (without regard to section
355(b)(2)(B)) of the Code.
(b) Following the Share Exchange, EOG India Cayco will
continue, independently of EOG and EOG International and with its
separate employees, the active conduct of the business conducted by EOG
India Cayco prior to the Share Exchange.
(c) Enron has no plan or intention to sell, exchange, transfer
by gift, or otherwise dispose of any stock in, or securities of, any of
the Acquired Companies following the Share Exchange.
(d) There is no plan or intention by any of the Acquired
Companies to redeem or otherwise acquire any of its outstanding stock
following the Share Exchange.
(e) There is no plan or intention to sell or otherwise dispose
of the assets of any of the Acquired Companies following the Share
Exchange, except in the ordinary course of business.
(f) Following the Share Exchange, EOG India Cayco will use the
Contributed Amount for expansion of its existing business and to make
debt and equity investments in related and unrelated parties for use in
operations outside the United States.
(g) It is Enron's intention to sell the Retained Shares in the
manner permitted by Section 6.2(c) as soon as is reasonably practical
and consistent with market conditions.
(h) Enron has no plan or intention to violate, or take any
action inconsistent with, any of its covenants in Section 6.1 or 6.3 of
this Agreement.
(i) Enron has owned, either directly or through a wholly owned
subsidiary of Enron, the Exchanged Shares and the Retained Shares
during the entire period beginning on October 9, 1990 and ending on the
Closing Date. During such period, Enron has not acquired any of the
Exchanged Shares or the Retained Shares by purchase (within the meaning
of section 355(d) of the Code).
(j) To the knowledge of Enron, no disposition by Enron or any
Affiliate of Enron of EOG Common Stock during the five-year period
preceding the Closing Date was made
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to one or more Persons acting pursuant to a plan or arrangement of such
Person or Persons to acquire at least 50% of the outstanding shares of
EOG Common Stock.
(k) The dispositions by Enron of EOG Common Stock in March
1996, May 1996, June 1996, August 1996, September 1996 and November
1996 were made on the open market in broker transactions. The
dispositions by Enron of EOG Common Stock in December 1995 were made in
a public offering through underwriters.
(l) Enron has no knowledge of any plan or intention of any
Person (or Persons acting in concert) to acquire at least 5% of the
outstanding shares of EOG Common Stock after the date hereof; provided,
however, that the Parties acknowledge and agree that any proposals or
indications of interest received by or on behalf of, or discussions or
negotiations with, Enron or EOG prior to the date hereof shall not be
deemed to constitute any such plan or intention if such proposals,
indications of interest, discussions or negotiations would violate the
provisions of, or be inconsistent with the transactions contemplated
by, this Agreement.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF EOG
EOG hereby represents and warrants to Enron as follows, subject to the
matters set forth in the disclosure schedule delivered by EOG to Enron on the
date hereof (the "EOG Disclosure Schedule"), and, provided that the disclosures
made on any section of the EOG Disclosure Schedule with respect to any
representation or warranty shall be deemed to be made with respect to any other
representation or warranty requiring the same or similar disclosure to the
extent that the relevance of such disclosure to other representations and
warranties is evident from the face of the applicable section of the EOG
Disclosure Schedule:
4.1 Organization. Each of EOG and (until the EOG International Merger
occurs, if it occurs) EOG International is a corporation (or, in the case of EOG
International, if it is merged into a limited liability company pursuant to
Section 2.1(b), a limited liability company) duly organized, validly existing
and in good standing under the Laws of the State of Delaware, with full
corporate power, right and authority to own and lease the properties and assets
it currently owns and leases and to carry on its business as such business is
currently being conducted. Each of the Acquired Companies is duly organized,
validly existing and (to the extent the concept is recognized in the applicable
jurisdiction) in good standing under the Laws of its respective jurisdiction of
incorporation, with full company power, right and authority to own and lease the
properties and assets it currently owns and leases and to carry on its business
as such business is currently being conducted.
4.2 Qualification. Each of EOG, (until the EOG International Merger
occurs, if it occurs) EOG International, and each of the Acquired Companies is
duly qualified to do business as a foreign
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corporation and is in good standing in each jurisdiction in which the nature of
the business as now conducted or the character of the property owned or leased
by it makes such qualification necessary (in each case to the extent such
concept is recognized in the applicable jurisdiction), except where the failure
to be so qualified or in good standing would not, or would not reasonably be
expected to, have a Material Adverse Effect on the Acquired Companies, taken as
a whole, or EOG.
4.3 Authorization of Agreement; No Violation. This Agreement has been
duly executed and delivered by EOG. EOG has the full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by EOG of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and validly authorized by all requisite corporate action on the part of
EOG. Without limiting the generality of the foregoing, this Agreement and the
transactions contemplated hereby have been unanimously approved by the Board of
Directors of EOG and have been unanimously recommended to the Board of Directors
by the Special Committee. Except as disclosed in Section 4.3 of the EOG
Disclosure Schedule, neither the execution and delivery by EOG of this Agreement
nor the consummation by EOG of the transactions contemplated hereby will
conflict with, result in a breach, default or violation of, or require the
consent of any third party under,
(a) the terms, provisions or conditions of the certificate of
incorporation or bylaws or other organizational documents of EOG or any
of its Subsidiaries;
(b) any judgment, decree or order or any Law to which EOG or
any of its Subsidiaries is a party or is subject that would, or would
reasonably be expected to, have a Material Adverse Effect on the
Acquired Companies, taken as a whole, or EOG; or
(c) any material contract, agreement, lease, license or other
arrangement to which EOG or one of its Subsidiaries is a party or by
which it or one of its Subsidiaries, or any of their respective
properties, is bound that would, or would reasonably be expected to,
have a Material Adverse Effect on EOG or the Acquired Companies, taken
as a whole.
4.4 Governmental Consents. Except as disclosed in Section 4.4 of the
EOG Disclosure Schedule, no consent, action, approval or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
to authorize, or is otherwise required in connection with, the execution and
delivery by EOG of this Agreement or EOG's performance of the terms of this
Agreement or the validity or enforceability hereof against EOG.
4.5 Enforceability. This Agreement constitutes the legal, valid and
binding obligation of EOG enforceable against EOG in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other Laws affecting creditors' rights generally and general principles of
equity.
4.6 Ownership of EOG India Shares. EOG International (or, if the EOG
International Merger occurs, then EOG) is the record and beneficial owner of all
of the EOG India Shares free and
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clear of any restrictions on transfer (other than any restrictions under the
Securities Act and state securities Laws), claims, liens for taxes, security
interests, options, warrants, rights, contracts, calls, commitments, equities
and demands. There are no outstanding shares of any class of capital stock of
EOG India HoldCo (other than the EOG India Shares) or any securities convertible
into or exercisable or exchangeable for any class of capital stock of EOG India
HoldCo. EOG International (or, if the EOG International Merger occurs, then EOG)
has the sole right to vote all of the EOG India Shares. None of the EOG India
Shares is subject to any voting trust or other agreement, arrangement or
restriction with respect to the voting of such shares, and no proxy, power of
attorney or other authorization has been granted with respect to any of such
shares. Other than as set forth in this Agreement, there are no contracts,
agreements, commitments or other arrangements, including any options, warrants
or other rights, obligating EOG, EOG India HoldCo or any other Person to issue,
sell, dispose of or encumber any shares of any class of EOG India HoldCo capital
stock.
4.7 Brokers' Fees. Except for Goldman, Sachs & Co., Banc of America
Securities LLC, and J. P. Morgan Securities Inc., neither EOG nor any of its
Subsidiaries has any liability or obligation to pay any fees or commissions to
any broker or finder with respect to the transactions contemplated by this
Agreement. EOG shall be solely responsible for all fees payable to any broker or
finder engaged on behalf of EOG or any board committee thereof with respect to
the transactions contemplated by this Agreement.
4.8 Litigation. Except as set forth in Section 4.8 of the EOG
Disclosure Schedule or in EOG's Annual Report on Form 10-K for the year ended
December 31, 1998 or EOG's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999, as of the date hereof, there are no actions, suits, proceedings
or governmental investigations or inquiries pending, or to the knowledge of EOG,
threatened, against EOG, its Subsidiaries or any of their respective properties,
assets, operations or businesses that would, or would reasonably be expected to,
have a Material Adverse Effect on the Acquired Companies, taken as a whole, or
EOG.
4.9 Tax Representations and Warranties.
(a) EOG has owned all of the outstanding stock of EOG
International, and EOG International has (or, if the EOG International
Merger occurs, then EOG International and EOG, collectively, have)
owned all of the EOG India Shares, during the entire five-year period
ending on the date of the Share Exchange.
(b) Immediately after the Share Exchange, EOG will be engaged
in the active conduct of a trade or business within the meaning of
section 355(b)(2) of the Code, and such trade or business has been
actively conducted throughout the five-year period ending on the date
of the Share Exchange.
(c) Following the Share Exchange, EOG will continue,
independently of the Acquired Companies and with its separate
employees, the active conduct of the business conducted by EOG prior to
the Share Exchange.
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(d) EOG intends to complete on the Closing Date or within one
year after the Closing Date a stock offering of at least 10,000,000
shares of EOG Common Stock the proceeds of which will be used to fund
operations, capital expenditures, acquisitions, the retirement of
indebtedness, or other business needs, unless market conditions change
materially and adversely with respect to completion of such stock
offering on or after the Closing Date.
(e) To their knowledge, the management of EOG is not aware of
any plan or intention on the part of any particular shareholder or
security holder of EOG (other than Enron) to sell, exchange, transfer
by gift, or otherwise dispose of any stock in, or securities of, EOG
following the Share Exchange, other than through public market trading.
(f) There is no plan or intention by EOG, directly or through
any Subsidiary, to purchase any of its outstanding stock following the
Share Exchange.
(g) EOG has no plan or intention to sell or otherwise dispose
of the assets of EOG after the Share Exchange, except in the ordinary
course of business and except for sales or dispositions of assets that
EOG believes do not have significant value.
(h) None of EOG, EOG International and EOG India HoldCo is an
investment company as defined in section 368(a)(2)(F)(iii) and (iv) of
the Code.
(i) Neither EOG nor EOG International will own any equity
interest in EOG India HoldCo following the Share Exchange.
(j) As of the time immediately prior to the Share Exchange,
EOG India HoldCo has never had any Texas gross receipts for Texas
franchise tax purposes.
4.10. Financing Commitment. EOG has obtained a commitment (the
"Financing Commitment") from Bank of America, N.A. to finance the Contributed
Amount as well as any fees or expenses required to be paid by EOG in connection
with the transactions contemplated by this Agreement. A true and correct copy of
the Financing Commitment has been provided to Enron.
ARTICLE 5.
COVENANTS OF ENRON AND EOG
5.1 Reasonable Efforts; Consents. Each of the Parties shall use its
Reasonable Efforts to obtain the satisfaction of all conditions to the Closing
attributable to such Party in an expeditious manner. Each of the Parties will
use its Reasonable Efforts to obtain the authorizations, consents, orders and
approvals of Governmental Authorities and any other third parties that may be or
become necessary or advisable for the performance of its obligations pursuant to
this Agreement and the consummation of the transactions contemplated hereby and
will cooperate in all reasonable respects
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with each other in promptly seeking to obtain such authorizations, consents,
orders and approvals as may be necessary or advisable for the performance of
their respective obligations pursuant to this Agreement. In addition, each Party
shall make all filings required to be made by such party in connection with this
Agreement or necessary or desirable to achieve the purposes contemplated hereby,
and shall cooperate as needed with respect to any such filing by the other
Party. Except as required by Law, none of the Parties will take any action that
is reasonably likely to have the effect of delaying, impairing or impeding in
any material respect the receipt of any required approvals and each of the
Parties will use its Reasonable Efforts to secure such approvals as promptly as
possible.
5.2 Delivery and Retention of Records.
(a) On the Closing Date, EOG shall deliver or cause to be
delivered to Enron all material agreements, documents, books, records
and files (collectively, "Acquired Companies Records"), if any, in the
possession of EOG or any of its Subsidiaries relating to the business
and operations of the Acquired Companies to the extent not then in the
possession of the Acquired Companies, subject to the following
exceptions: (i) Enron recognizes that certain Acquired Companies
Records may contain incidental information relating to the Acquired
Companies or may relate primarily to Subsidiaries or divisions of EOG
other than the Acquired Companies, and that EOG may retain such
Acquired Companies Records and shall provide copies of the relevant
portions thereof to Enron at EOG's cost and (ii) EOG may retain any tax
returns and reports, forms or workpapers relating thereto, and Enron
shall be provided with copies of such returns, reports, forms or
workpapers, only to the extent that they relate to the Acquired
Companies' separate returns or separate tax liability.
(b) Enron agrees (i) to hold the Acquired Companies Records
and not to destroy or dispose of any thereof for a period of six years
from the Closing Date or such longer time as may be required by Law,
provided that, if it desires to destroy or dispose of such Acquired
Companies Records during such period, it will first offer in writing at
least 90 days prior to such destruction or disposition to surrender
them to EOG and if EOG does not accept such offer within 60 days after
receipt of such offer, Enron may take such action and (ii) following
the Closing Date to afford EOG and its accountants and counsel, during
normal business hours, upon reasonable request, at any time, full
access to the Acquired Companies Records and to Enron's and the
Acquired Companies' employees to the extent that such access may be
requested for any legitimate purpose at no cost to EOG (other than for
reasonable out-of-pocket expenses), provided, however, that such access
will not operate to cause the waiver of any attorney-client, work
product or like privilege; provided further, that in the event of any
litigation nothing herein shall limit either party's rights of
discovery under applicable Law. Notwithstanding the foregoing, Enron
shall be entitled to convey all or any portion of the Acquired
Companies Records in connection with the sale, if any, of all or any
portion of the capital stock, business or assets of the Acquired
Companies to the purchaser of such capital stock, business or assets of
any of the Acquired Companies; provided, that the purchaser of such
capital stock, business or assets agrees to be bound by the terms of
this
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Section 5.2(b). Enron shall have the same rights, and EOG the same
obligations, as are set forth above in this Section 5.2(b) with respect
to any copies of Acquired Companies Records pertaining to any of the
Acquired Companies that are retained by EOG, with the exception of tax
returns retained by EOG, provided that such access will not operate to
cause the waiver of any attorney-client, work product, or like
privilege.
5.3 Notice of Certain Events. Each Party will notify the other Party
of:
(a) any notice from any Person alleging that the consent of
such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice from any Governmental Authority in connection
with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or threatened, which, if pending on the date of this
Agreement, would have been required to have been disclosed by it
pursuant to Sections 3.9 or 4.8.
5.4 Corporate Name, Trademarks, Etc. Pursuant to Section 5 of the
Non-Exclusive License Agreement between Enron and EOG dated as of December 9,
1997 (the "License Agreement"), the License Agreement and the non-exclusive
license granted thereunder shall be terminated six months after the Closing Date
in accordance with the terms of the License Agreement. The Parties hereby amend
Section 7 of the License Agreement such that the references therein to "eighteen
months" shall be "twelve (12) months."
5.5 EOG International Guarantee. Enron will use its Reasonable Efforts
to replace as soon as practicable the current guarantees (the "India
Guarantees") by EOG International to the Indian government of EOG India Cayco's
obligations under any applicable production sharing contracts, it being
acknowledged that such replacement will not be a condition to Closing. During
any period that such replacement does not occur, or if such replacement never
occurs, then Enron will indemnify, defend and hold harmless EOG, its Affiliates
and their respective directors, officers, shareholders and employees (each a
"EOG Party" and collectively, the "EOG Parties"), from and against all Claims
(including, without limitation, any Claims for Taxes) and Losses asserted
against, imposed upon, or incurred by any EOG Party, directly or indirectly, by
reason of, arising out of, or resulting from any requirement (or any assertion,
Claim or allegation by or on behalf of any beneficiary of the India Guarantee as
to any requirement) for EOG International (or, if the EOG International Merger
occurs pursuant to Section 2.1(b), EOG) to honor the India Guarantees. EOG
agrees to use its Reasonable Efforts to assist Enron in implementing the
replacement of the guarantee contemplated by this Section. EOG further agrees
not to modify the terms of any India Guarantee, or to consent to any
modification, without the prior written consent of Enron, which consent shall
not be unreasonably withheld or delayed.
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5.6 North Milton Field. The Parties acknowledge that under the terms of
that certain letter agreement by and between Enron Natural Gas Marketing &
Storage Company, a wholly owned subsidiary of Enron ("NGMS"), and EOG dated as
of January 9, 1989 (the "Bammel Agreement"), NGMS has the right to acquire, on
the terms and conditions set forth therein, EOG's interests (the "North Milton
Interests") in the North Milton Field located in Harris County, Texas if EOG
desires to sell the North Milton Interests or any part thereof or if EOG should
cease to be a majority owned subsidiary of Enron (a "Change of Control"). Enron
agrees that even if the execution of this Agreement or the consummation of the
transactions contemplated hereby constitute a Change of Control, Enron shall not
have the right to exercise its right to acquire the North Milton Interests;
provided, however, if EOG or any of its Subsidiaries directly or indirectly
transfers or otherwise disposes of any interest in the North Milton Interests to
any third party not affiliated with EOG, or if following the Closing any Person
acquires more than 50% of the voting stock of EOG, then Enron shall have the
right to exercise its right to acquire the North Milton Interests (or in the
case EOG or any of its Subsidiaries directly or indirectly transfers or
otherwise disposes only a portion of their interest in the North Milton
Interests, such portion of the North Milton Interests so transferred or
otherwise disposed of) in accordance with the provisions of the Bammel
Agreement. Furthermore, neither EOG nor any of its Subsidiaries may directly or
indirectly transfer or otherwise dispose of all or a portion of the North Milton
Interests unless the transferee thereof agrees to be bound by the provisions of
this Section and the Bammel Agreement; provided that no such transfer shall
relieve EOG of its obligations hereunder or under the Bammel Agreement.
5.7 Employee Benefit and Compensation Matters.
(a) As of the Closing Date, EOG and its Subsidiaries shall cease to be
participating employers in Enron Benefit Plans and employees of EOG and its
Subsidiaries shall cease to be participants in all Enron Benefit Plans, and all
liability associated with such Enron Benefit Plans, including but not limited to
funding, claims for events which occur prior to the Closing, earned or accrued
benefits, fines, penalties and Taxes, shall remain the sole liability of Enron.
Notwithstanding the foregoing, employees of EOG and its Subsidiaries who are
participants in or who have accrued benefits under the Enron Executive
Supplemental Survivor Benefits Plan, the Enron Performance Unit Plan and the
Enron 1988 Deferral Plan shall remain entitled to benefits provided thereunder
according to the terms and provisions of such plans, which if necessary shall be
amended by Enron to recognize continuing service with EOG (or service with a
member of a controlled group of corporations that includes EOG, within the
meaning of Code Section 414(b)) as continued employment under such plans.
(b) EOG shall promptly establish employee benefit plans for its employees
for the period subsequent to the Closing. EOG shall promptly seek a favorable
determination letter from the Internal Revenue Service for each such Plan that
is intended to be tax qualified. Each EOG employee shall be given credit for all
purposes under EOG's employee benefit plans, programs, practices and policies
(in each case other than tax-qualified Pension Plans) for all service prior to
the Closing Date with EOG and its Affiliates, or any predecessor employer, to
the extent such credit was given under the Enron Benefit Plans ("Past Service").
With respect to any of the EOG employee benefit plans that is a tax qualified
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Pension Plan, each EOG employee shall be given credit, to the extent he or she
participates in any such Pension Plan, for all Past Service for purposes of
eligibility to participate and vesting, but not for purposes of benefit accrual,
except that EOG shall give credit for Past Service for purposes of benefit
accrual for those employees of EOG who were not vested in Enron's Cash Balance
Plan. Upon the Closing Date, Enron shall pay EOG an amount in cash equal to
$1,850,000 which is attributable to the unvested accrued benefits of EOG's
employees upon the cessation of EOG's participation in Enron's Cash Balance
Plan. Upon establishment by EOG of a tax qualified defined contribution Pension
Plan meeting the requirements of section 401(k) of the Code, and the issuance of
a favorable determination letter by the Internal Revenue Service for such plan,
Enron and EOG will cooperate for a trust-to-trust transfer of assets and
assumption of liabilities (cash and Enron common stock) from the 401(k) Pension
Plan sponsored by Enron to such 401(k) Pension Plan established by EOG.
Subsequent to the Closing and until such transfer shall occur, Enron will accept
non-payroll deducted loan payments from employees of EOG who have loans from
their accounts in the Enron 401(k) Pension Plan.
(c) As of the Closing, Enron shall cause the Enron Flexible Compensation
Plan to be split into two identical plans, with one such plan designated the EOG
Flexible Compensation Plan which shall cover EOG's employees and include their
flexible spending account balances. As of the Closing, EOG shall assume and
become financially responsible for the EOG Flexible Compensation Plan.
(d) Prior to the Closing Date, representatives of Enron and EOG shall
negotiate in good faith to develop a list (the "Enron Employee Offer List") of
the names of employees of EOG and its Subsidiaries to whom Enron may make offers
of employment effective as of the Closing Date on such terms and conditions as
Enron in its sole discretion may determine, provided, however, it shall be a
condition of employment of any such employee by Enron that such employee agree
to execute an election in a form satisfactory to Enron and EOG to exchange all
stock-based awards made to such employee under any stock plan maintained by EOG
at an equal conversion value determined by Enron for equivalent stock awards
made under a stock plan maintained by Enron. Subject thereto, neither Enron nor
EOG (nor their respective Subsidiaries) may, prior to the Closing and for a one
year period thereafter, without the prior written consent of the other Party,
solicit to hire any employee of the other Party. Each employee of EOG listed on
the Enron Employee Offer List who (i) accepts an offer of employment from Enron,
(ii) commences employment with Enron as of the Closing and (iii) is a
participant in the EOG 1996 Deferral Plan shall cease deferrals to such Plan but
remain entitled to benefits provided thereunder according to the terms and
provisions of such Plan, which if necessary shall be amended by EOG to recognize
continuing service with Enron (or service with a member of a controlled group of
corporations that includes Enron, within the meaning of Code Section 414(b)) as
continued employment under such Plan.
(e) Enron shall assume EOG's liability for payment of awards becoming
due after the Closing to employees of EOG who accept offers of employment from
Enron made pursuant to preceding paragraph (d), pertaining to payments under
EOG's 20 Bcfe Award Program attributable to Panna/Mukta, Tapti and China
discoveries. A true and correct copy of the current form of such
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program has been furnished to Enron, and such program will not be amended
without the prior written consent of Enron.
5.8 Aircraft Leases. At the Closing, all of EOG's rights and
obligations under each of the Aircraft Agreements shall be terminated.
5.9 Office Space. Enron shall use its Reasonable Efforts to make
available to EOG office space in Three Allen Center, Houston, Texas to which
Enron currently has access that reasonably accommodates EOG. In the event that
Enron makes available to EOG office space in Three Allen Center that reasonably
accommodates EOG, (i) EOG shall promptly move its office to such location and
vacate its current office space at 1400 Smith Street, Houston, Texas and (ii)
Enron shall subsidize the rent that is payable by EOG for the offices located at
Three Allen Center from the date that EOG vacates its offices at 1400 Smith
Street through the date that is one year following the Closing Date by an amount
equal to the aggregate rent subsidy that EOG would have otherwise been entitled
to receive for its offices at 1400 Smith Street under the Services Agreement
dated as of January 1, 1997 between Enron and EOG for the same period ("Services
Agreement"). The obligations in this Section shall be in addition to Enron's
obligations to pay for EOG's relocation expenses on the terms, and subject to
the conditions, set forth in Section 11(d) of the Business Opportunity
Agreement.
5.10 Intercompany Agreements. In the event that there shall be any
agreement between EOG or its Subsidiaries, on the one hand, and Enron or its
Subsidiaries, on the other hand, in existence and effect as of the Closing Date
that is not set forth on Appendix I (which has been mutually prepared and does
not constitute a representation of either Party), then the Parties agree that,
within 30 days after the date that one Party identifies any such agreement to
the other Party, the Parties will negotiate in good faith whether to modify or
terminate such agreement (or whether to take no action with respect thereto), it
being understood that in the absence of any agreement to the contrary, such
agreement will not be affected by the transactions contemplated by this
Agreement, unless otherwise expressly provided for herein or in such agreement.
5.11 Business Opportunity Agreement.
(a) The Parties hereby agree that Section 12 of the Business
Opportunity Agreement is hereby amended, effective as of the date
hereof, to the effect that Enron shall no longer have the rights set
forth in such Section 12 to participate in any subsequent offerings of
capital stock by EOG that are consummated simultaneously with, or
after, the Closing; provided, however, that Enron shall continue to
have the rights set forth in Section 6.2 hereof. If this Agreement is
terminated without the occurrence of a Closing, then the amendment
effected pursuant to this Section 5.11 shall be null and void ab
initio.
(b) The Parties hereby agree that, notwithstanding anything to
the contrary contained in the Business Opportunity Agreement, in the
event that Enron is required pursuant to Section 4 of the Business
Opportunity Agreement to offer to EOG a business
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opportunity that involves E& P Business Assets (as defined in the
Business Opportunity Agreement) located in India or China, (i) if Enron
so elects, EOG shall offer such business opportunity, at Enron's cost,
to one of the Acquired Companies selected by Enron to pursue such
opportunity and (ii) following the Closing, Enron shall be entitled,
directly or indirectly to pursue such opportunity. In addition, the
Parties hereby agree that Section 4 of the Business Opportunity
Agreement is hereby amended, effective as of the Closing Date, by
adding a sentence to the end of such Section that reads as follows:
"Notwithstanding the foregoing, for purposes of this Section
4, a business opportunity involving E&P Business Assets
located in India or China that was first presented after July
19, 1999 shall be deemed not to have been first presented
until after Enron no longer controls EOG and no longer owns
directly or indirectly at least 40% of the capital stock of
EOG having ordinary voting power for the election of
directors."
5.12 Payroll Services. Subsequent to the Closing and through December
31, 1999, Enron shall continue to provide to EOG the payroll services being
provided under the Services Agreement. EOG shall compensate Enron for
performance of such services using the methodology described in the Services
Agreement. After December 31, 1999, EOG shall no longer have any rights to such
services, except that Enron will provide to EOG under the terms of the Services
Agreement year-end payroll and payroll tax reporting with respect to the year
ended December 31, 1999.
5.13 Certain Board Matters. If, prior to the Closing, the Board of
Directors of EOG votes upon any matter that specifically relates to EOG's
operations or proposed operations in India or China, then the parties agree
that, in addition to the vote of the Board of Directors required under the
Delaware General Corporation Law and EOG's Certificate of Incorporation or
Bylaws, such matter will also require the concurrence of the Special Committee.
ARTICLE 6.
ADDITIONAL COVENANTS OF ENRON
6.1 Ownership of Exchanged Shares. Except as otherwise contemplated by
Section 2.2 of this Agreement, Enron will not, directly or indirectly, sell,
transfer, pledge or otherwise dispose any of the Exchanged Shares (or shares
that will become Exchanged Shares) to any Person or grant an option with respect
to any of the Exchanged Shares (or shares that will become Exchanged Shares), or
enter into any other agreement or arrangement with respect to any of the
Exchanged Shares (or shares that will become Exchanged Shares).
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6.2 Post-Closing Transfers of Retained Shares of EOG Common Stock.
(a) Except as provided in Section 6.2(b) below, from and after
the date hereof and prior to the Lock-up Expiration Date, Enron will
not, directly or indirectly, sell, transfer, pledge or otherwise
dispose of (including without limitation by issuing any debt or equity
securities exercisable or exchangeable for, or convertible into) any
Retained Shares to any Person other than a wholly owned Subsidiary of
Enron.
(b) Notwithstanding the provisions of Section 6.2(a), in the
event that EOG engages in a public offering of its equity securities
("Public Offering") prior to the Lock-Up Expiration Date, Enron shall
be entitled, subject to the terms and conditions of the Registration
Rights Agreement (including those terms relating to underwriter
cutbacks), to sell in the Public Offering (i) one or more series of
debt or equity securities of Enron ("Convertible Securities") that are
mandatorily exchangeable for or mandatorily convertible into up to
10,000,000 Retained Shares less any shares sold pursuant to clause (ii)
below and (ii) with the prior written consent of EOG, up to 10,000,000
Retained Shares less the number of Retained Shares underlying
Convertible Securities sold pursuant to clause (i) above. In connection
with any such Public Offering, Enron and EOG shall use their Reasonable
Efforts to cause the underwriters in such Public Offering to distribute
any such securities in a widely dispersed manner.
(c) Enron shall not, without the prior written consent of EOG,
sell, transfer, pledge or otherwise dispose of, directly or indirectly,
any Retained Shares or Convertible Securities other than (to the extent
any transaction is permitted by Sections 6.2(a) and 6.2(b)) (i)
pursuant to a public offering registered under the Securities Act
(provided that Enron shall use its Reasonable Efforts to cause the
underwriters in such public offering to distribute such shares in a
widely dispersed manner), (ii) pursuant to Rule 144 promulgated under
the Securities Act, (iii) to a wholly owned subsidiary of Enron, which
shall thereafter become subject to the provisions of this Agreement to
the same extent as Enron, (iv) pursuant to any merger approved by the
Board of Directors of EOG with respect to which Enron did not violate
the provisions of Section 6.3 hereof or (v) any tender offer or
exchange offer recommended by the Board of Directors of EOG with
respect to which Enron did not violate the provisions of Section 6.3
hereof.
(d) Enron shall notify EOG in writing within five Business
Days after Enron consummates the sale of any Retained Shares.
6.3 Standstill. Enron agrees that, commencing on the date hereof and
ending on the Standstill Expiration Date, unless specifically requested in
advance by EOG's board of directors, neither Enron nor any of its Subsidiaries
will directly or indirectly (a) acquire, offer to acquire, or agree to acquire,
or cause or recommend that any other Person acquire, directly or indirectly, by
purchase, gift, through the acquisition or control of another Person or
otherwise, any voting securities of EOG (other than Retained Shares in
connection with dispositions of shares of EOG Common
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Stock permitted by Section 6.2 hereof), (b) make or in any way participate in,
directly or indirectly, any "solicitation" of "proxies" to vote or become a
"participant" in any "election contest" (as such terms are used in the proxy
rules of the Securities and Exchange Commission) or seek to advise or influence
any Person with respect to the voting of any voting securities of EOG, (c)
propose or nominate any nominee for director of EOG (other than to fill any
vacancy prior to the Closing Date caused by a Resigning Director ceasing to be a
director of EOG prior to the Closing Date), (d) submit any stockholder proposal
to be voted upon by the stockholders of EOG, (e) deposit any voting securities
in a voting trust or subject any such voting securities to any arrangement or
agreement with respect to the voting of such voting securities, (f) except as
expressly contemplated by this Agreement, propose any business combination
(including without limitation pursuant to any merger or share exchange)
involving EOG or make or propose a tender or exchange offer or any other offer
for any of EOG's voting securities, or arrange, or participate in the
arrangement of, financing thereof, (g) disclose an intent, purpose, plan or
proposal with respect to EOG or its voting securities inconsistent with the
provisions of this Agreement, (h) from and after the Closing Date, otherwise
act, alone or in concert with or on behalf of others, to seek directly or
indirectly to control the officers or board of directors of EOG (provided that
prior to the Closing Date Enron will not take any action with respect thereto
that is inconsistent with this Agreement, its implementation or the effectuation
of the purposes hereof), or (i) encourage or assist any other Person in
connection with any of the foregoing. In addition, during the period from the
Closing Date until the Standstill Expiration Date, at any meeting of EOG
stockholders with respect to which Enron owns Retained Shares entitled to vote,
Enron will attend such meeting in person or by proxy and will vote all of its
Retained Shares in the manner, if any, recommended by the board of directors of
EOG.
6.4 Cooperation in Litigation. Following the Closing Date, and to the
extent reasonably necessary to permit EOG or any of its Affiliates to defend
(including, without limitation, any related investigation, appeal or settlement)
any lawsuit, mediation, enforcement action, arbitration, administrative hearing
or other adjudicative proceeding which exists at the Closing Date or which is
brought thereafter, Enron agrees to afford EOG and its Affiliates and their
respective accountants and counsel, during normal business hours at no cost to
EOG other than reasonable out-of-pocket expenses, (i) reasonable access to all
employees of Enron or any of its Affiliates and all witnesses subject to the
control or direction of Enron or any of its Affiliates and (ii) reasonable
access to all documents and records within the custody or subject to the control
of Enron or any of its Affiliates; provided, however, that such access will not
operate to cause the waiver of any attorney-client, work product or like
privilege; provided further, that in the event of any litigation nothing herein
shall limit either party's rights of discovery under applicable Law. Following
the Closing Date, Enron also agrees to give EOG 15 days prior written notice of
the intention of Enron or any of its Affiliates to settle or otherwise
compromise any claims against Enron or any of its Affiliates arising from or
related to any Enron Producer/Affiliate Disputes, as that term is defined below,
whether or not those claims have been formally filed with any court or other
adjudicative body. As used in this paragraph, the term "Enron Producer/Affiliate
Disputes" means any claim, lawsuit, mediation, enforcement action, arbitration,
administrative hearing or other adjudicative proceeding where the allegations
include claims that EOG or any of its Affiliates have failed to pay or has
improperly paid any amount alleged to be due and owing and which further alleges
that such failure to pay or improper payment
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results in whole or in part from, or is in any way related to, the affiliate
relationship of EOG or any of its Affiliates with Enron or any of its
Affiliates. The foregoing definition is intended to include, but is not limited
to, claims asserting failure to pay or improper payment of royalties, overriding
royalties, production payments, severance taxes, and/or any other liability
arising from the production and/or sale of hydrocarbons.
6.5 Resignation of Directors. Enron shall cause each of the Resigning
Directors who is also an employee of Enron to resign as a director of EOG
effective upon the Closing. Enron shall use its Reasonable Efforts to cause any
other Resigning Directors to resign as a director of EOG effective upon the
Closing.
ARTICLE 7.
ADDITIONAL COVENANTS OF EOG
7.1 Ownership of the EOG India Shares. Except as otherwise contemplated
by this Agreement, EOG and EOG International will not, directly or indirectly,
sell, transfer, pledge or otherwise dispose of any of the EOG India Shares (or
the shares of capital stock of any of the Acquired Companies) to any Person or
grant an option with respect to any of the foregoing, or enter into any other
agreement or arrangement with respect to any of the foregoing.
7.2 Conduct of Business by the Acquired Companies Pending the Share
Exchange. From the date hereof until the Closing Date, unless Enron shall
otherwise agree in writing, EOG shall cause the Acquired Companies to conduct
their business in the ordinary course consistent with recent past practice and
shall use all Reasonable Efforts to preserve intact the Acquired Companies'
business organizations and relationships with third parties and to keep
available the services of the Acquired Companies' present officers and key
employees. Except as set forth in Section 7.2 of the EOG Disclosure Schedule or
as otherwise expressly contemplated by or expressly provided in this Agreement,
and without limiting the generality of the foregoing, from the date hereof until
the Closing Date, except with the prior written consent of Enron, which consent
shall not be unreasonably withheld, EOG will cause the following:
(a) None of the Acquired Companies will adopt or propose any
change to its certificate of incorporation or bylaws or other organizational
documents;
(b) None of the Acquired Companies will (i) declare, set aside
or pay any dividend or other distribution with respect to any of their shares of
capital stock or (ii) repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other securities of, or other ownership interests in
the Acquired Companies.
(c) Except for the pending Tata farmout and the pending Hardy
Oil & Gas acquisition, both of which have been described to Enron, and except as
set forth in the capital budget
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or work program furnished in writing to Enron, none of the Acquired Companies
will merge or consolidate with any other Person or acquire assets having an
individual purchase price of more than $1 million or an aggregate purchase price
of more than $5 million;
(d) Except as set forth in the capital budget or work program
furnished in writing to Enron, none of the Acquired Companies will sell, lease,
license or otherwise surrender, relinquish or dispose of any assets or
properties with an individual fair market value exceeding $1 million or an
aggregate fair market value exceeding $5 million;
(e) None of the Acquired Companies will settle any material
tax audit, make or change any material tax election or file any material amended
tax return, which audit, election or return relates solely to one or more
Acquired Companies;
(f) Except as described on Section 7.2(f) of the EOG
Disclosure Schedule, none of the Acquired Companies will issue any securities,
incur any indebtedness except trade debt in the ordinary course of business or
pursuant to existing credit facilities or arrangements, increase compensation,
bonus or other benefits payable to any executive officer or former employee
except in the ordinary course of business or enter into any settlement or
consent with respect to any pending material litigation;
(g) None of the Acquired Companies will change any method of
financial accounting or accounting practice, except for any such change required
by GAAP and except, to the extent relating to any reporting required by foreign
Law, for any such change required by foreign Law;
(h) Except as described on Section 7.2(h) of the EOG
Disclosure Schedule, neither EOG India HoldCo nor any of its Subsidiaries will
become bound or obligated to participate in any operation, or consent to
participate in any operation, with respect to any Oil and Gas Interests that
will individually cost in excess of $1 million unless the operation is a
currently existing obligation of EOG India HoldCo or any of its Subsidiaries or
necessary to extend, preserve or maintain an Oil and Gas Interest;
(i) None of the Acquired Companies will enter into any
futures, hedge, swap, collar, put, call, floor, cap, option or other contracts
that are intended to benefit from or reduce or eliminate the risk of
fluctuations in the price of commodities, other than in the ordinary course of
business in accordance with the Acquired Companies' recent past practice;
(j) Neither EOG nor any of the Acquired Companies will pledge
any of the shares or assets of EOG India Cayco, EOG China Cayco, EOG China
Limited, or EOG China International as security for any loan to any member of
the EOG Group; and
(k) None of the Acquired Companies will agree or commit to do
any of the foregoing.
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7.3 Cooperation in Litigation. Following the Closing Date, and to the
extent reasonably necessary to permit Enron or any of its Affiliates to defend
(including, without limitation, any related investigation, appeal or settlement)
any lawsuit, mediation, enforcement action, arbitration, administrative hearing
or other adjudicative proceeding which exists at the Closing Date or which is
brought thereafter, EOG agrees to afford Enron and its Affiliates and their
respective accountants and counsel, during normal business hours, at no cost to
Enron other than reasonable out-of-pocket expenses, (i) reasonable access to all
employees of EOG or any of its Affiliates and all witnesses subject to the
control or direction of EOG or any of its Affiliates and (ii) reasonable access
to all documents and records within the custody or subject to the control of EOG
or any of its Affiliates; provided, however, that such access will not operate
to cause the waiver of any attorney-client, work product or like privilege;
provided further, that in the event of any litigation nothing herein shall limit
either party's rights of discovery under applicable Law. Following the Closing
Date, EOG also agrees to give Enron 15 days prior written notice of the
intention of EOG or any of its Affiliates to settle or otherwise compromise any
claims against EOG or any of its Affiliates arising from or related to any EOG
Producer/Affiliate Disputes, as that term is defined below, whether or not those
claims have been formally filed with any court or other adjudicative body. As
used in this paragraph, the term "EOG Producer/Affiliate Disputes" means any
claim, lawsuit, mediation, enforcement action, arbitration, administrative
hearing or other adjudicative proceeding where the allegations include claims
that Enron or any of its Affiliates have failed to pay or has improperly paid
any amount alleged to be due and owing and which further alleges that such
failure to pay or improper payment results in whole or in part from, or is in
any way related to, the affiliate relationship of Enron or any of its Affiliates
with EOG or any of its Affiliates. The foregoing definition is intended to
include, but is not limited to, claims asserting failure to pay or improper
payment of royalties, overriding royalties, production payments, severance
taxes, and/or any other liability arising from the production and/or sale of
hydrocarbons.
7.4 Share Issuances. EOG will not issue or dispose of any shares of its
capital stock (other than pursuant to currently outstanding options under
employee or director stock option plans) prior to the Closing unless, after such
issuance or disposition, Enron continues to own at least a majority of the Fully
Diluted EOG Shares; provided, however, that the foregoing provision shall not
prohibit the issuance of shares of capital stock by EOG in connection with the
Public Offering, so long as such issuance is consummated no earlier than
simultaneously with the Closing.
ARTICLE 8.
CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligation of Each Party. The respective
obligations of each Party to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of
the following conditions:
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(a) no order shall have been entered and shall have remained
in effect in any action or proceeding before any Governmental Authority
that would prohibit or make illegal the consummation of the
transactions contemplated by this Agreement; and
(b) any and all material consents of Governmental Authorities,
if any, necessary to consummate the transactions contemplated by this
Agreement shall have been obtained.
8.2 Additional Conditions Precedent to Obligations of Enron. The
obligations of Enron to consummate the transactions contemplated by this
Agreement are also subject to the fulfillment (or waiver in writing by Enron) at
or prior to the Closing Date of the following conditions:
(a) each of the representations and warranties of EOG
contained in Article 4 of this Agreement (other than those
representations and warranties contained in Sections 4.2 and 4.7)
shall, to the extent qualified as to Material Adverse Effect, be true
and correct in all respects as of the Closing Date (except for such
representations and warranties as are made as of a specified date,
which shall be true and correct in all respects as of such specified
date), and to the extent not so qualified shall be true and correct
except for such failures which, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse
Effect on the Acquired Companies, taken as a whole, or Enron;
(b) all the covenants in this Agreement to be complied with
and performed by EOG on or before the Closing Date (other than the
covenants set forth in paragraphs (b), (c), (d) or (h) of Section 7.2,
which are the subject of paragraph (c) below) shall have been duly
complied with and performed in all material respects;
(c) each of the covenants set forth in paragraphs (b), (c),
(d) or (h) of Section 7.2 of this Agreement to be complied with and
performed by EOG on or before the Closing Date shall have been duly
complied with and performed in all respects, except for such failures
which, individually or in the aggregate, have not had and would not
reasonably be expected to have, a Material Adverse Effect on the
Acquired Companies, taken as a whole, or Enron;
(d) a certificate to the foregoing effect dated the Closing
Date and signed by an authorized executive officer of EOG shall have
been delivered to Enron; and
(e) Vinson & Elkins L.L.P. shall have delivered to Enron its
written opinion (which may be based upon certain representations of EOG
and Enron) dated as of the Closing Date to the effect that no gain or
loss should be recognized to Enron upon the Share Exchange pursuant to
section 355(a) of the Code.
8.3 Additional Conditions Precedent to Obligations of EOG. The
obligations of EOG to consummate the transactions contemplated by this Agreement
are also subject to the fulfillment (or waiver in writing by EOG) at or prior to
the Closing Date of the following conditions:
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(a) each of the representations and warranties of Enron
contained in Article 3 of this Agreement (other than those
representations and warranties contained in Sections 3.2 and 3.7)
shall, to the extent qualified as to Material Adverse Effect, be true
and correct in all respects as of the Closing Date (except for such
representations and warranties as are made as of a specified date,
which shall be true and correct in all respects as of such specified
date), and to the extent not so qualified shall be true and correct
except for such failures which, individually or in the aggregate have
not had and would not reasonably be expected to have a Material Adverse
Effect on EOG;
(b) all the covenants in this Agreement to be complied with
and performed by Enron on or before the Closing Date shall have been
duly complied with and performed in all material respects;
(c) a certificate to the foregoing effect dated the Closing
Date and signed by an authorized executive officer of Enron shall have
been delivered to EOG;
(d) Steptoe & Johnson LLP shall have delivered to EOG its
written opinion (which may be based upon certain representations of EOG
and Enron) dated as of the Closing Date to the effect that the Share
Exchange should constitute a distribution of the stock of a controlled
corporation described in section 355 of the Code upon which no gain or
loss is recognized to EOG and, if the EOG International Merger does not
occur, no gain or loss is recognized to EOG International; and
(e) at or prior to the Closing, each Resigning Director shall
resign as a director of EOG, effective upon the Closing.
ARTICLE 9.
INDEMNIFICATION
9.1 By Enron. Subject to the terms and conditions of this Article 9,
Enron hereby agrees to indemnify, defend and hold harmless EOG, its Affiliates
and their respective directors, officers and employees (each a "EOG Party" and
collectively, the "EOG Parties"), from and against the following (collectively,
the "EOG Indemnified Liabilities"): all Claims and Losses asserted against,
imposed upon, or incurred by any EOG Party, directly or indirectly, by reason
of, arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of Enron contained in this Agreement or (b) the
breach of any covenant or agreement of Enron contained in this Agreement.
9.2 By EOG. Subject to the terms and conditions of this Article 9, EOG
hereby agrees to indemnify, defend and hold harmless Enron, its Affiliates and
their respective directors, officers and employees (each an "Enron Party" and
collectively, the "Enron Parties"), from and against the following
(collectively, the "Enron Indemnified Liabilities"): all Claims and Losses
asserted against,
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imposed upon or incurred by any Enron Party, directly or indirectly, by reason
of, arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of EOG contained in this Agreement, or (b) the breach
of any covenant or agreement of EOG contained in this Agreement.
9.3 Express Negligence Rule. WITHOUT LIMITING OR ENLARGING THE SCOPE OF
THE INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS ARTICLE 9, AN INDEMNIFIED
PARTY SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE
TERMS HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO SUCH
INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR VIOLATION OF ANY LAW OF OR BY SUCH INDEMNIFIED
PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A CONSPICUOUS LEGEND.
9.4 Exceptions to Indemnities. Notwithstanding anything to the contrary
set forth in Section 9.1, EOG Indemnified Liabilities shall not include any and
all Claims to the extent such Claims are attributable to a breach of any
representation, warranty, covenant or agreement of EOG under this Agreement.
Notwithstanding anything to the contrary set forth in Section 9.2, Enron
Indemnified Liabilities shall not include any and all Claims to the extent such
Claims are attributable to a breach of any representation, warranty, covenant or
agreement of Enron under this Agreement. Notwithstanding any other provision of
this Article 9, the provisions of this Article 9 (other than this sentence)
shall not apply to any matters relating to indemnification for Taxes (including
indemnification relating to Sections 3.10 and 4.9), which matters shall be
governed exclusively by Article 10 and this sentence; provided that this Section
9.4 shall not limit Enron's obligations pursuant to Section 5.5.
9.5 Notice of Claim.
(a) For purposes of this Article 9, the term "Indemnifying
Party" when used in connection with a particular Claim or Loss shall
mean the party having an obligation to indemnify another party with
respect to such Claim or Loss pursuant to this Article 9, and the term
"Indemnified Party" when used in connection with a particular Claim or
Loss shall mean the party having the right to be indemnified with
respect to such Claim or Loss by another party pursuant to this Article
9.
(b) Promptly after any Indemnified Party becomes aware of
facts giving rise to a Claim by it for indemnification pursuant to this
Article 9, such Indemnified Party will provide notice thereof in
writing to the Indemnifying Party (a "Claim Notice") specifying the
nature and specific basis for such Claim and a copy of all papers
served with respect to such Claim (if any). For purposes of this
Section 9.5(b), receipt by a party of written notice of any demand,
assertion, claim, action or proceeding (judicial, administrative or
otherwise) by or from any Person other than a party to this Agreement
which gives rise to a Claim on behalf of such party shall constitute
the discovery of facts giving rise to a Claim by it and shall
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require prompt notice of the receipt of such matter as provided in the
first sentence of this Section 9.5(b). The failure by an Indemnified
Party to notify an Indemnifying Party shall not be a defense to any
indemnification obligation unless the Indemnifying Party is able to
demonstrate that actual prejudice was suffered by the Indemnifying
Party as a result of such failure to notify. Each Claim Notice shall
set forth a reasonable description of the Claim as the Indemnified
Party shall then have and shall contain a statement to the effect that
the Indemnified Party giving the notice is making a claim pursuant to
and formal demand for indemnification under this Article 9. The Claim
Notice must set forth the particular provision in this Article 9 and
any related provision in this Agreement pursuant to which such
indemnification claim is made.
9.6 Third Party Claims.
(a) If an Indemnified Party shall have any Third Party Claim
asserted against such Indemnified Party, the Indemnified Party promptly
shall transmit to the Indemnifying Party a Claim Notice relating to
such Third Party Claim. Prior to the expiration of the 45-day period
following the Indemnifying Party's receipt of such notice (the
"Election Period"), the Indemnifying Party shall notify the Indemnified
Party whether the Indemnifying Party disputes its potential liability
to the Indemnified Party under this Article 9 with respect to such
Third Party Claim.
(b) If an Indemnifying Party notifies an Indemnified Party
within the Election Period that the Indemnifying Party does not dispute
its potential liability to the Indemnified Party under this Article 9,
the Indemnifying Party shall assume the defense of the Third Party
Claim, at its sole cost and expense, and shall prosecute such defense
diligently to a final conclusion or settle such Third Party Claim at
the discretion of the Indemnifying Party in accordance with this
Section 9.6(b). The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement
thereof. If requested by the Indemnifying Party, the Indemnified Party
agrees to cooperate fully with the Indemnifying Party and its counsel
at the Indemnifying Party's expense in contesting any Third Party Claim
that the Indemnifying Party elects to contest, including, without
limitation, the making of any related counterclaim against the Person
asserting the Third Party Claim or any cross-complaint against any
Person. The Indemnified Party shall have the right to participate in,
but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this Section 9.6(b)
and shall bear its own costs and expenses with respect to any such
participation.
9.7 Subrogation. In the event that any Indemnified Party has a right
against a Third Party with respect to any damages, losses, costs or expenses
paid to or on behalf of such Indemnified Party by an Indemnifying Party, then
such Indemnifying Party shall, to the extent of such payment, be subrogated to
the right of such Indemnified Party.
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9.8 Exclusive Remedies; Survival of Representations and Warranties. EOG
and Enron (a) agree that only actual damages shall be recoverable under this
Agreement and (b) hereby waive any right to recover special, punitive,
consequential, incidental or exemplary damages except to the extent any such
party suffers such damages to an unaffiliated Third Party in connection with a
Third Party Claim, in which event such damages shall be recoverable.
Notwithstanding anything to the contrary in this Agreement, the indemnification
provisions of this Article 9 shall be (x) the exclusive remedies for a Party for
any Claim based upon the breach of any representation or warranty of the other
Party contained in this Agreement following Closing and (y) the exclusive
monetary remedies for any Claim based upon the breach of any covenant of the
other Party contained in this Agreement; provided, however, that indemnification
related to Taxes, including indemnification relating to Sections 3.10 and 4.9,
shall be governed exclusively by Article 10. No Claim of any nature can be
brought by any EOG Party against Enron pursuant to Section 9.1(a) or any Enron
Party against EOG pursuant to Section 9.2(a) unless written notice of such Claim
has been given on or before the second anniversary of the Closing Date and
otherwise in accordance with this Article 9 with respect to any other Claim.
Indemnity obligations of any Indemnifying Party shall be reduced by any
insurance proceeds realized by any Indemnified Party.
ARTICLE 10.
TAX MATTERS
10.1 Preparation and Filing of Tax Returns.
(a) Unitary Tax Returns Filed by Enron. Enron shall file
timely all returns and reports ("Tax Returns") with respect to a
Unitary Tax ("Unitary Tax Returns") covering a Pre-Closing Period or a
Straddle Period required to be filed by Enron and shall be responsible
for the timely payment of all Taxes due with respect to the period
covered by such Unitary Tax Returns. EOG shall provide to Enron all
information in its or its Subsidiaries' possession needed by Enron to
prepare and file such Unitary Tax Returns.
(b) Tax Returns of Acquired Companies (other than Consolidated
Income Tax Returns) for Pre-Closing Periods. With respect to each Tax
Return covering a Pre-Closing Period that is required to be filed after
the Closing Date (other than the Tax Returns described in Section
10.1(a) or 10.1(d)) for, by or with respect to any of the Acquired
Companies, Enron shall cause such Tax Return to be prepared, shall
cause to be included in such Tax Return all items of income, gain,
loss, deduction and credit and other tax items ("Tax Items") required
to be included therein, shall furnish a copy of such Tax Return to EOG
as soon as practicable, shall file timely such Tax Return with the
appropriate taxing authority, and shall be responsible for the timely
payment of all Taxes due with respect to the period covered by such Tax
Return.
(c) Tax Returns of Acquired Companies (other than Consolidated
Income Tax Returns) for Straddle Periods. With respect to any Tax
Return of an Acquired Company
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covering a taxable period beginning on or before the Closing Date and
ending after the Closing Date that is required to be filed after the
Closing Date, Enron shall cause such Tax Return to be prepared, shall
cause to be included in such Tax Return all Tax Items required to be
included therein, shall furnish a copy of such Tax Return to EOG as
soon as practicable, shall file timely such Tax Return with the
appropriate taxing authority, and shall be responsible for the timely
payment of all Taxes due with respect to the period covered by such Tax
Return.
(d) Consolidated Income Tax Returns. With respect to each U.S.
federal Income Tax Return, each Tax Return relating to consolidated or
combined state Income Taxes, and each Unitary Tax Return covering a
Pre-Closing Period or a Straddle Period that is required to be filed
after the Closing Date for, by or with respect to the EOG Group, EOG
shall cause such Tax Return to be prepared, shall cause to be included
in such Tax Return all Tax Items required to be included therein, shall
deliver a copy of such Tax Return to Enron as soon as practicable, and
shall pay timely all Taxes required to be paid by or with respect to
the EOG Group for the periods covered by such Tax Returns.
(e) Income Tax Return Preparation. Except as specifically set
forth in this Section 10.1, any Tax Return to be prepared pursuant to
the provisions of this Section 10.1 shall be prepared in a manner
consistent with practices followed in prior years with respect to
similar Tax Returns, except for changes required by changes in Law. To
the extent necessary, EOG shall grant to Enron or its designee and
Enron shall grant to EOG or its designee appropriate powers of attorney
to enable each to prepare and file Tax Returns as provided in this
Section 10.1.
(f) Treatment of Contributions and Share Exchange. Effective
the day after the contribution of the shares of EOG China Cayco to EOG
India Cayco pursuant to Section 2.1(d) hereof (but prior to the day of
the Share Exchange) EOG shall cause EOG China Cayco to elect to be
disregarded as an entity separate from its owner pursuant to Treas.
Reg. ss. 301.7701-3. EOG and Enron shall treat the contribution
described in Section 2.1(d) hereof as a transfer of the assets of EOG
China Cayco to EOG India Cayco pursuant to a reorganization within the
meaning of section 368(a)(1)(D) of the Code, shall cooperate with each
other to preserve the tax-free nature of such transaction, and shall
take no action or position inconsistent with the nature of the
contribution described in Section 2.1(d) hereof as tax-free (taking
into account section 367 of the Code) without the need for filing a
gain recognition agreement. Enron and EOG shall treat, and shall take
no action or position inconsistent with the treatment of, the Share
Exchange as tax-free to Enron, EOG and (if the EOG International Merger
does not occur) EOG International under section 355 of the Code, unless
the Share Exchange is required to be treated differently pursuant to a
determination (within the meaning of section 1313(a) of the Code).
Enron and EOG shall treat, and shall take no position or action
inconsistent with the treatment of, the transactions described in
Section 2.1 of this Agreement as not creating Texas gross receipts for
Texas franchise Tax purposes, unless such transactions are required to
be treated differently pursuant to a
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determination (within the meaning of section 1313(a) of the Code or
comparable provision of Texas Tax Law).
(g) Subpart F Income. In the event that Enron intends to file
any Tax Return reflecting Taxes for which EOG would be responsible
pursuant to Section 10.3(b)(ii), Enron will present Enron's good faith
calculations of the relevant amount of Subpart F income and of the
amount of Tax, computed as provided in Section 10.4(e), for which Enron
believes EOG is responsible in connection with such Tax Return at least
45 days prior to the date such Tax Return is due, including extensions.
EOG will provide EOG's good faith comments on such calculations no
later than 15 days after receipt of such calculations from Enron. To
the extent that Enron agrees with EOG's good faith comments, Enron will
accept them and reflect them on such Tax Return as it is filed. To the
extent that Enron disagrees with EOG's good faith comments, the Parties
will attempt in good faith to resolve the dispute. In the event that
they do not resolve the dispute, a neutral accountant mutually selected
by Enron and EOG will resolve the dispute expeditiously prior to the
date the Tax Return is due, including extensions.
10.2 Liquidation of Tax Sharing Agreements.
(a) Except as provided in Section 10.2(b), all Tax sharing
agreements or similar agreements or arrangements between Enron, on the
one hand, and EOG or any members of the EOG Group on the other hand,
whether written or unwritten and including specifically (i) the Tax
Allocation Agreement, dated February 17, 1998, between Enron and EOG
and certain EOG Subsidiaries (the "1998 Tax Sharing Agreement") and
(ii) the First Amended and Restated Tax Allocation Agreement, dated
August 9, 1991, between Enron and EOG and certain EOG Subsidiaries,
shall be terminated as of the Closing Date upon payment by EOG to Enron
of $13,355,313 (appropriately adjusted if the Closing Date is other
than September 30, 1999), and thereafter no party to any such agreement
shall have any liability to make any payment under any such agreement.
(b) Notwithstanding Section 10.2(a), the provisions of Section
3.2 of the 1998 Tax Sharing Agreement, dealing with payments for
utilization of consolidated minimum tax credits, and the provisions of
Section 3.5 of the 1998 Tax Sharing Agreement, dealing with payments
with respect to capital loss carrybacks, and the related provisions of
the 1998 Tax Sharing Agreement to the extent necessary to implement
Sections 3.2 and 3.5 thereof, shall survive the Closing and continue in
force and effect.
10.3 Indemnification for Taxes.
(a) Subject to the terms and conditions of Section 10.4, from
and after the Closing Date Enron shall be liable for and shall
indemnify and hold harmless EOG and its Subsidiaries (collectively, the
"EOG Tax Indemnitees")from and against the following:
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(i) Any Taxes of an Acquired Company or of any member
of the Enron Group (other than EOG or any member of the EOG Group
(other than an Acquired Company) which was also a member of the Enron
Group) for any taxable period, except to the extent provided in Section
10.3(b);
(ii) Any Taxes imposed on EOG or EOG International
with respect to the Share Exchange to the extent resulting from a
breach by Enron of any representation or warranty made pursuant to
Section 3.10 of this Agreement or covenant made pursuant to Section 6.2
of this Agreement;
(iii) Any Taxes imposed on EOG or EOG International
with respect to the Share Exchange to the extent resulting from any of
the following events: (1) within two years following the Closing Date
the percentage ownership by Enron or any Acquired Company of the stock
of an Acquired Company is decreased to less than 80% of its ownership
percentage of such stock immediately after the Share Exchange, (2)
within two years following the Closing Date any Acquired Company
redeems or otherwise acquires more than 20 percent of its stock
outstanding immediately after the Share Exchange, (3) within two years
following the Closing Date any Acquired Company disposes of any of its
assets other than in the ordinary course of business, or (4) within two
years following the Closing Date Enron sells the Retained Shares to one
Person (or a group of Persons composed of one Person and other Persons
related to such Person within the meaning of section 267(b) or
707(b)(1) of the Code); and
(iv) Any withholding Tax imposed by India with
respect to interest paid or accrued by EOG India Cayco.
(b) Subject to the terms and conditions of Section 10.4, from
and after the Closing Date EOG shall be liable for and shall indemnify
and hold harmless Enron, EOG India HoldCo and their respective
Subsidiaries (collectively, the "Enron Tax Indemnitees") from and
against the following:
(i) Any Taxes of any member of the EOG Group (whether
pursuant to Treas. Reg. Sections. 1.1502-6 or otherwise) other than any
Acquired Company for any taxable period except to the extent provided
in Section 10.3(a);
(ii) Any Taxes imposed with respect to any Subpart F
income (within the meaning of section 952 of the Code) of any of the
Acquired Companies attributable (using an interim closing of the books
approach) to the period January 1, 1999 through the Closing Date;
(iii) Any Taxes imposed on Enron with respect to the
Share Exchange to the extent resulting from a breach by EOG of any
representation or warranty made pursuant to Section 4.9 of this
Agreement;
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(iv) Any Taxes imposed on Enron with respect to the
Share Exchange if continuity of interest in EOG within the meaning of
Treas. Reg. Sections. 1.355-2(c) is not maintained with respect to the
Share Exchange unless the absence of such continuity of interest was
not a contributing cause with respect to the imposition on Enron of any
such Taxes; provided, however, that if EOG asserts that continuity of
interest was maintained with respect to the Share Exchange and/or that
any absence of continuity of interest was not a contributing cause with
respect to the imposition of any such Taxes, EOG shall bear the burden
of proof and be required to prove such matters by clear and convincing
evidence; and
(v) Any Texas franchise Taxes (measured by any of the
contributions described in Section 2.1 of this Agreement) imposed on
EOG India HoldCo to the extent resulting from a breach of the
representation contained in Section 4.9(j) of this Agreement.
10.4 Indemnification Procedures.
(a) If a claim is made by any taxing authority that, if
successful, would result in the indemnification of a party (the "Tax
Indemnified Party") under Section 10.3, the Tax Indemnified Party shall
promptly give written notice of such fact to the party (the "Tax
Indemnifying Party") obligated under Section 10.3 to indemnify the Tax
Indemnified Party.
(b) The Tax Indemnified Party shall take such action in
connection with contesting such claim as the Tax Indemnifying Party
shall reasonably request in writing from time to time, including the
selection of counsel and experts and the execution of appropriate
powers of attorney; provided that (i) within 30 days after the notice
required by this section has been delivered (or such earlier date that
any payment of Taxes is due by the Tax Indemnified Party but in no
event sooner than 10 days after the Tax Indemnifying Party's receipt of
such notice), the Tax Indemnifying Party requests that such claim be
contested, (ii) the Tax Indemnifying Party shall have agreed to pay to
the Tax Indemnified Party on a monthly basis all costs and expenses
that the Tax Indemnified Party reasonably incurs in connection with
contesting such claim, including reasonable attorneys' and accountants'
fees and disbursements, and (iii) if the Tax Indemnified Party is
requested by the Tax Indemnifying Party to pay the Tax claimed and sue
for a refund, the Tax Indemnifying Party shall have advanced to the Tax
Indemnified Party, on an interest-free basis, the amount of such claim.
The Tax Indemnified Party shall not make any payment of any such claim
for at least 30 days (or such shorter period as may be required by
applicable Law) after the giving of the notice required by this
subsection, shall give to the Tax Indemnifying Party any information
reasonably requested relating to such claim, and otherwise shall
cooperate with the Tax Indemnifying Party in order to contest
effectively any such claim. The Tax Indemnifying Party shall determine
the method of any contest of such claim and shall control the conduct
thereof.
(c) Subject to the provisions of Section 10.4(b), the Tax
Indemnified Party shall enter into a settlement of such contest with
the applicable taxing authority or prosecute such
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contest to a determination in a court of initial or appellate
jurisdiction, all as the Tax Indemnifying Party may request.
(d) Promptly after the extent of the liability of the Tax
Indemnified Party with respect to a claim shall be established by the
final judgment or decree of a court or a final and binding settlement
with a governmental authority having jurisdiction thereof, the Tax
Indemnifying Party shall pay to the Tax Indemnified Party the amount of
any Taxes (computed as provided in Section 10.4(e) with respect to U.S.
state and federal Income Taxes) and costs and expenses to which the Tax
Indemnified Party may become entitled by reason of the provisions of
Section 10.3 and this Section 10.4, less any amount advanced to the Tax
Indemnified Party pursuant to Section 10.4(b). Any such payment shall
be treated as described in Section 10.5(c).
(e) The amount of U.S. state and federal income Taxes to which
the Tax Indemnified Party shall be entitled pursuant to Section 10.3
(other than Section 10.3(b)(v)) and this Section 10.4 shall be computed
as follows:
(i) Determine the amount of income or gain included
in the Tax Indemnified Party's gross income for U.S. federal income tax
purposes with respect to the Taxes for which the Tax Indemnified Party
is indemnified;
(ii) Multiply the amount determined in clause (i)
above by the percentage which is two percentage points higher than the
highest rate of tax applicable to corporations under section 11 of the
Code for the taxable year to which the indemnified Taxes relate;
(iii) If and to the extent that any amount of the
payment by the Tax Indemnifying Party to the Tax Indemnified Party of
indemnified Taxes is subject (without regard to the Tax Indemnified
Party's other Tax Items) to Income Tax in the hands of the Tax
Indemnified Party, multiply the amount determined in clause (ii) above
by a fraction, the numerator of which is one and the denominator of
which is one minus the percentage (expressed as a decimal) which is two
percentage points higher than the highest rate of tax applicable to
corporations under section 11 of the Code for the taxable year in which
such payment is made or otherwise required to be reported; and
(iv) Add to the amount determined in clause (iii)
above interest at the rate and in the manner specified in section
6621(a)(2) of the Code from the due date of the Tax Return for the
taxable year to which the indemnified Taxes relate to the date of
payment of the indemnified Taxes by the Tax Indemnifying Party to the
Tax Indemnified Party.
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10.5 Tax Refunds.
(a) Except as provided in Section 10.5(b), to the extent any
determination of Taxes, whether as the result of an audit or
examination, a claim for refund, the filing of an amended Tax Return,
or otherwise, results in a refund of Taxes paid (all referred to as a
"Refund"), EOG shall be entitled to any part of such Refund
attributable to a Tax for which EOG has indemnified the Enron Tax
Indemnitees pursuant to Section 10.3(b) of this Agreement, and Enron
shall be entitled to any part of such Refund attributable to a Tax for
which Enron has indemnified the EOG Tax Indemnitees pursuant to Section
10.3(a) of this Agreement. Whichever Party receives a Refund shall,
within 10 days after receipt thereof, pay such Refund, or any part
thereof, together with any interest received thereon, to the Party
entitled thereto under this Section 10.5(a).
(b) If, subsequent to any payment made between Parties
pursuant to Section 10.5(a), the amount of any Refund is adjusted, a
subsequent payment shall be made between the Parties to reflect the
amount of such adjustment.
(c) Any payment from Enron to EOG pursuant to this Agreement
shall be treated for Tax purposes as a decrease in the amount
contributed by EOG to EOG India HoldCo pursuant to Section 2.1 of this
Agreement, and any payment from EOG to Enron pursuant to this Agreement
shall be treated for Tax purposes as an increase in the amount
contributed by EOG to EOG India HoldCo pursuant to Section 2.1 of this
Agreement unless required to be treated differently pursuant to a
determination (within the meaning of section 1313(a) of the Code).
ARTICLE 11.
TERMINATION
11.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned as follows:
(a) by the mutual written consent of Enron and EOG at any time
prior to the Closing;
(b) by Enron or EOG if a final, non-appealable order to
restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated hereby shall have been entered;
(c) by Enron or EOG if the Closing shall not have occurred on
or before the Termination Date; provided that, a Party shall not be
entitled to terminate this Agreement pursuant to this Section 11.1(c)
if the failure results primarily from the breach by such Party of any
of its representations, warranties or covenants contained in this
Agreement.
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11.2 Effect of Termination. In the event that Closing does not occur as
a result of any party exercising its right to terminate pursuant to Section
11.1, then this Agreement shall be null and void and no party shall have any
rights or obligations under this Agreement, except that nothing herein and no
termination pursuant hereto shall relieve any party from any liability for any
breach hereof prior to such termination, or, with respect to those provisions
that survive such termination, prior to or following such termination.
ARTICLE 12.
MISCELLANEOUS
12.1 Expenses. Except as otherwise expressly provided in the Business
Opportunity Agreement and in the Registration Rights Agreement, each Party shall
be solely responsible for all expenses, including due diligence expenses,
incurred by it or its Subsidiaries in connection with the transactions
contemplated by this Agreement, and no Party shall be entitled to any
reimbursement for such expenses from any other Party. Notwithstanding the
foregoing and in addition to any amounts that may be due under the preceding
sentence, Enron shall reimburse EOG for $1.25 million of its expenses incurred
in connection with the transactions contemplated by this Agreement, which
reimbursement shall be, and shall be effected through, an adjustment to the
Contributed Amount.
12.2 Waiver. Except as expressly provided in this Agreement, neither
the failure nor any delay on the part of any Party in exercising any right,
power or remedy hereunder shall operate as a waiver thereof, or of any other
right, power or remedy; nor shall any single or partial exercise of any right,
power or remedy preclude any further or other exercise thereof, or the exercise
of any other right, power or remedy. Except as expressly provided herein, no
waiver of any of the provisions of this Agreement shall be valid unless it is in
writing and signed by the Party against whom it is sought to be enforced and, in
the case of any waiver of EOG prior to the Closing, has been approved by the
Special Committee.
12.3 Publicity. The Parties shall consult with each other with regard
to all publicity and other releases concerning the transactions contemplated by
this Agreement and, except as required by applicable Law or the applicable rules
or regulations of any Governmental Authority or stock exchange, no Party
(including each Party's Subsidiaries) shall issue any such publicity or other
release without the prior written consent of the other Party.
12.4 Assignment. Neither this Agreement nor any rights or obligations
hereunder shall be assigned or transferred in any way whatsoever by the Parties
hereto except with the prior written consent of the other Party hereto, which
consent such other Party shall be under no obligation to grant, and any
assignment or attempted assignment without such consent shall have no force or
effect with respect to the non-assigning Party. Subject to the preceding
sentence, this Agreement shall be binding on and inure to the benefit of the
Parties hereto and their successors and permitted assigns.
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12.5 Notices. Any and all notices or other communications required or
permitted under this Agreement shall be given in writing and delivered in Person
or sent by United States certified or registered mail, postage prepaid, return
receipt requested, or by overnight express mail, or by telex, facsimile or
telecopy to the address of such party set forth below. Any such notice shall be
effective upon receipt or three days after placed in the mail, whichever is
earlier.
if to Enron: Enron Corp.
1400 Smith Street
Houston, Texas 77002
Attention: Kenneth L. Lay and James V. Derrick, Jr.
Facsimile No.: (713) 853-9479
with a copy to: Vinson & Elkins L.L.P.
2300 First City Tower
Houston, Texas 77002
Attention: J. Mark Metts
Facsimile No.: (713) 615-5605
if to EOG: Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
Attention: Mark G. Papa and Barry Hunsaker
Facsimile No.: (713) 646-2750
with copies to: Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Attention: Arthur H. Rogers
Facsimile No.: (713) 651-5246
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff and David A. Katz
Facsimile No.: (212) 403-2000
Any party may, by notice so delivered, change its address for notice purposes
hereunder.
12.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware, excluding any choice of
Law rules that may direct the application of the Laws of another jurisdiction.
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12.7 Further Assurances. After the Closing each Party hereto at the
reasonable request of the other Party hereto and without additional
consideration, shall execute and deliver, or shall cause to be executed and
delivered, from time to time, such further certificates, agreements or
instruments of conveyance and transfer, assumption, release and acquittance and
shall take such other action as the other Party hereto may reasonably request,
to consummate or implement the transactions contemplated by this Agreement.
12.8 Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in full
force and effect and this Agreement shall be construed in all respects as if
such invalid, illegal or unenforceable provision were omitted. If any provision
is inapplicable to any Person or circumstance, it shall, nevertheless, remain
applicable to all other Persons and circumstances.
12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and which together
shall constitute but one and the same instrument.
12.10 Construction. Any section headings in this Agreement are for
convenience of reference only, and shall be given no effect in the construction
or interpretation of this Agreement or any provisions thereof. No provision of
this Agreement will be interpreted in favor of, or against, any Party by reason
of the extent to which any such Party or its counsel participated in the
drafting thereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.
12.11 Entire Agreement; Amendment. This Agreement, the Schedules
hereto, each of which is deemed to be a part hereof, and any agreements,
instruments or documents executed and delivered by the Parties (or their
Subsidiaries) pursuant to this Agreement, constitute the entire agreement and
understanding between the Parties, and it is understood and agreed that all
previous undertakings, negotiations and agreements between the Parties regarding
the subject matter hereof are merged herein. This Agreement may not be modified
orally, but only by an agreement in writing signed by each of the Parties;
provided that any modification to this Agreement shall not be effective unless
recommended to the Board of Directors of EOG by the Special Committee.
12.12 No Third Party Beneficiaries. Nothing in this Agreement shall
provide any benefit to any third party or entitle any third party to any claim,
cause of action, remedy or right of any kind, it being the intent of the Parties
that this Agreement shall not be construed as a third party beneficiary
contract; provided, however, that the indemnification provisions in Article 9
shall inure to the benefit of the Enron Parties and the EOG Parties as provided
therein.
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IN WITNESS WHEREOF, the Parties have duly executed and delivered this
Agreement on the date first written above.
ENRON CORP.
By /s/ Jeffrey K. Skilling
---------------------------------
Jeffrey K. Skilling
President and Chief Operating
Officer
ENRON OIL & GAS COMPANY
By /s/ Mark G. Papa
---------------------------------
Mark G. Papa
President and Chief Executive
Officer
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EXHIBIT 5
July 22, 1998
Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
Gentlemen:
As Senior Vice President and General Counsel of Enron Oil & Gas
Company, a Delaware corporation (the "Company"), I am familiar with the
Registration Statement on Form S-3 (the "Registration Statement") currently
being filed with the Securities and Exchange Commission relating to the proposed
offering by the Company of up to 27,000,000 shares of common stock, par value
$.01 per share, of the Company (the "Common Stock"), and the proposed offering
by Enron Corp. of up to 15,550,000 shares of Common Stock (11,500,000 shares of
which are deliverable only upon exchange at maturity of exchangeable notes of
Enron Corp., which exchangeable notes are being separately registered pursuant
to a registration statement on Form S-3 filed by Enron Corp.). In connection
therewith, I have examined, among other things, a copy of the Restated
Certificate of Incorporation and Bylaws of the Company as amended to the date
hereof, the corporate proceedings taken to date with respect to the
authorization, issuance and sale of the Common Stock, and I have performed such
other investigations as I have considered appropriate as the basis for the
opinions expressed herein. Capitalized terms used but not defined herein are
used as defined in the Registration Statement.
Based on the foregoing, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
2. The issuance of the shares of Common Stock to be issued by the
Company pursuant to the Registration Statement has been duly
authorized, and (subject to the Registration Statement
becoming effective and applicable Blue Sky laws being complied
with), when the terms of their issue and sale have been duly
established, upon the issuance and delivery thereof as set
forth in the Registration
<PAGE> 2
Statement, and upon the receipt by the Company of the purchase
price thereof, such shares of Common Stock will be validly
issued, fully paid and nonassessable.
3. The shares of Common Stock of the Company to be sold by the
Selling Stockholder pursuant to the Registration Statement
are, and upon sale will be, validly issued, fully paid and
nonassessable.
I am a member of the bar of the State of Texas. The opinions set forth
above are limited in all respects to the laws of the State of Texas, the General
Corporation Law of the State of Delaware and federal law.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to me under the caption "Legal
Experts" in the Prospectus constituting part of the Registration Statement and
to the filing of this opinion as an exhibit thereto. By giving such consent, I
do not admit that I am an expert with respect to any part of the Registration
Statement, including this exhibit, within the meaning of the term "expert" as
used in the Securities Act of 1933, as amended, or the rules and regulations of
the Commission issued thereunder.
Very truly yours,
Barry Hunsaker, Jr.
<PAGE> 1
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 March 5,
1999, included in Enron Oil & Gas Company's Form 10-K, as amended by Amendment
No. 1 on Form 10-K/A, for the year ended December 31, 1998, and to all
references to our Firm included in this registration statement.
ARTHUR ANDERSEN LLP
Houston, Texas
July 21, 1999
<PAGE> 1
EXHIBIT 23(b)
July 21, 1999
Enron Oil & Gas Company
1400 Smith Street
Houston, Texas 77002
Gentlemen:
In connection with the Registration Statement on Form S-3 (the
Registration Statement), to be filed with the Securities and Exchange Commission
on or about July 22, 1999, by Enron Oil & Gas Company (the Company), DeGolyer
and MacNaughton (the firm) hereby consents to the incorporation in said
Registration Statement of the references to the firm and to the opinions
delivered to the Company regarding the comparison of estimates prepared by the
firm with those furnished to it by the Company of the proved oil, condensate,
natural gas liquids, and natural gas reserves of certain selected properties
owned by the Company. The opinions are contained in our letter reports dated
January 17, 1997, January 13, 1998, and January 11, 1999, for estimates as of
December 31, 1996, December 31, 1997, and December 31, 1998, respectively. The
opinions are referred to 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, 1998.
DeGolyer and MacNaughton also consents to the references to it in section
"Experts" in the Prospectus that is a part of the Registration Statement.
Very truly yours,
DeGOLYER and MacNAUGHTON
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ Forrest E. Hoglund
-----------------------------
Forrest E. Hoglund
<PAGE> 2
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ Fred C. Ackman
-----------------------------
Fred C. Ackman
<PAGE> 3
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ James V. Derrick
-----------------------------
James V. Derrick
<PAGE> 4
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ Ken L. Harrison
-----------------------------
Ken L. Harrison
<PAGE> 5
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ Kenneth L. Lay
-----------------------------
Kenneth L. Lay
<PAGE> 6
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ Edward Randall, III
-----------------------------
Edward Randall, III
<PAGE> 7
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ Jeffrey K. Skilling
-----------------------------
Jeffrey K. Skilling
<PAGE> 8
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ Frank G. Wisner
-----------------------------
Frank G. Wisner
<PAGE> 9
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ Richard A. Causey
-----------------------------
Richard A. Causey
<PAGE> 10
POWER OF ATTORNEY
Enron Oil & Gas Company
KNOW ALL MEN BY THESE PRESENTS, that in connection with the proposed
registration by Enron Oil & Gas Company, a Delaware corporation (the
"Company"), of up to 42,550,000 shares of its Common Stock, $.01 par value (the
"Common Stock"), inclusive of the underwriters' over-allotment option, plus
such additional number of shares of Common Stock as may be permitted pursuant
to Rule 462 of the Securities Act of 1933, as amended, in connection with the
proposed sale of such Common Stock by the Company, the undersigned officer or
director of the Company hereby constitutes and appoints Barry Hunsaker, Jr.
Walter C. Wilson, 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
19th day of July, 1999.
/s/ John H. Duncan
-----------------------------
John H. Duncan
