<PAGE>
As Filed with the Securities and Exchange Commission on July 15, 1999
Registration No. 333-82943
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------
DEVON ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1474008
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
J. LARRY NICHOLS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DEVON ENERGY CORPORATION
20 NORTH BROADWAY, SUITE 1500
OKLAHOMA CITY, OKLAHOMA 73102-8260
(405) 235-3611
(Address, including zip code, and (Name, address, including zip code,
telephone number, including area and telephone number, including
code, area code, of agent for service)
of registrant's principal executive
offices)
COPIES TO:
Jerry Warren Gregory F. Pilcher David Lopez
McAfee & Taft Vice President and Cleary, Gottleib, Steen &
A Professional Corporation General Counsel Hamilton
Two Leadership Square, Kerr-McGee Corporation One Liberty Plaza
10th Floor 123 Robert S. Kerr New York, New York 10006-
211 North Robinson Avenue 1470
Oklahoma City, Oklahoma Oklahoma City,
73102-7103 Oklahoma 73102
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on the 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 of 1933, 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 of 1933, 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
under the Securities Act of 1933, check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS 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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. Kerr- +
+McGee may not sell these securities until the registration statement filed +
+with the SEC is effective. This prospectus is not an offer to sell these +
+securities and we are not soliciting an offer to buy these securities in any +
+state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 19, 1999
PROSPECTUS
8,655,652 Shares
[LOGO OF DEVON ENERGY CORPORATION]
Common Stock
$0.10 par value
--------
This prospectus relates to up to 9,954,000 shares of Devon Energy Corporation
common stock which may be delivered by Kerr-McGee Corporation, at its option,
on , 2004 to holders of debt exchangeable for common stock, or DECS, to be
issued by Kerr-McGee. This prospectus accompanies a prospectus and a prospectus
supplement of Kerr-McGee relating to the sale of the Kerr-McGee DECS. We
sometimes call these DECS exchangeable notes. The Kerr-McGee prospectus and
prospectus supplement are not a part of this prospectus.
Devon will not receive any of the proceeds from the sale of the exchangeable
notes or the delivery of common stock to which this prospectus relates and will
have no obligation with respect to the exchangeable notes.
Our common stock is listed on the American Stock Exchange under the symbol
"DVN." On July 16, 1999, the last reported sale price of the common stock on
the American Stock Exchange was $38.250 per share.
Investing in our common stock involves risks. See "Risk Factors" beginning on
page 12.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
--------
Kerr-McGee has granted to the underwriters of the exchangeable notes a 30-day
option to purchase additional exchangeable notes, which may, at Kerr-McGee's
option, be exchanged at their maturity for up to an additional 1,298,348 shares
of Devon common stock. Kerr-McGee has granted this option solely to cover over-
allotments, if any.
July , 1999
<PAGE>
(This page intentionally left blank)
2
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information provided by this prospectus is accurate as of any date other than
the date on the front of this prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus...................................................... 3
Prospectus Summary......................................................... 4
Risk Factors............................................................... 12
Risks Relating to the Oil and Gas Industry............................... 12
Risks Relating to an Investment in Devon................................. 13
Risks Relating to the Proposed Merger of Devon and PennzEnergy........... 14
Use of Proceeds............................................................ 17
New Devon After the Merger of Devon and PennzEnergy........................ 17
Capitalization............................................................. 18
Market Price Data.......................................................... 19
Unaudited Pro Forma Financial Information.................................. 20
Notes to Unaudited Pro Forma Financial Information......................... 24
Properties of New Devon After the Merger................................... 29
Directors and Executive Officers of New Devon After the Merger............. 32
Selling Stockholder........................................................ 34
Plan of Distribution....................................................... 34
Legal Matters.............................................................. 36
Experts.................................................................... 36
Where You Can Find More Information........................................ 37
Cautionary Statement Concerning Forward-Looking Statements................. 38
Commonly Used Oil and Gas Terms............................................ 39
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus provides you with a general description of our common stock.
You should read this prospectus together with the additional information
described under the heading "Where You Can Find More Information" on page 37.
In this prospectus, the terms "Devon," "we," "us" and "our" mean Devon
Energy Corporation, an Oklahoma corporation, and its consolidated subsidiaries.
Unless otherwise indicated, all dollar amounts in this prospectus are
expressed in U.S. dollars.
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus. It may
not contain all of the information that is important to you. You should read
the summary together with the more detailed information in the rest of this
prospectus and the documents to which we have referred you. See "Where You Can
Find More Information" on page 37.
Devon
We are an independent energy company engaged primarily in oil and gas
exploration, development and production, and in the acquisition of producing
properties. Our oil and gas properties are concentrated in six operating areas
in the United States and Canada. We are one of the top 15 public independent
oil and gas companies in both the United States and Canada, as measured by oil
and gas reserves. Our United States operations are primarily conducted in the
Permian Basin, the San Juan Basin, the Rocky Mountains and the Mid-continent.
Our Canadian operations are primarily conducted in the province of Alberta. At
December 31, 1998, our estimated proved reserves were 299.4 million barrels of
oil equivalent, of which 67% were natural gas reserves and 33% were oil
reserves.
Strategy
Our primary objectives are to build reserves, production, cash flow and
earnings per share by acquiring oil and gas properties, exploring for new oil
and gas reserves and seeking optimal production from existing oil and gas
properties. Our management seeks to achieve these objectives by:
.keeping debt levels reasonable,
.concentrating our properties in core areas to achieve economies of scale,
.acquiring and developing high profit margin properties,
.continually disposing of marginal and non-strategic properties, and
.balancing reserves and production between oil and gas.
Through our predecessors, we began operations in 1971 as a privately held
company. During 1988, we expanded our capital base by issuing common stock to
the public for the first time. This transaction began a substantial expansion
program that has continued through the years. We have used a two-pronged
strategy of acquiring producing properties and engaging in drilling activities
to achieve this expansion. Approximately two-thirds of our total capital spent
during this period was for property acquisitions and one-third was for
drilling. Total proved reserves increased from 8.1 million barrels of oil
equivalent at the end of 1987 to 299.4 million barrels of oil equivalent at the
end of 1998.
Our objective is to increase value per share, in addition to increasing
total assets. Reserves have grown from 1.31 barrels of oil equivalent per
diluted share at the end of 1987 to 5.61 barrels of oil equivalent per diluted
share at the end of 1998. At the same time, our net debt, or long-term debt
less working capital, has remained relatively low. At the end of 1998, our net
debt was $1.25 per barrel of oil equivalent.
Our completed merger with Northstar
On December 10, 1998, we completed a merger with Canadian-based Northstar
Energy Corporation. The merger was accounted for under the "pooling of
interests" method of accounting and Northstar became our wholly-owned
subsidiary. Northstar's properties are located primarily in the Western Canada
Sedimentary Basin in Alberta. Through the merger, we expanded our reserves by
approximately 115 million barrels of oil equivalent, or 62%, and nearly tripled
our undeveloped leasehold inventory. In addition, we retained the experienced
Northstar management team to continue to direct our Canadian operations.
4
<PAGE>
Our merger with Northstar has placed us in a unique position to take
advantage of growth opportunities both in the United States and in Canada. Our
properties are relatively balanced, with 52% of our proved reserves in the
United States and 48% in Canada. This balance gives us considerable exposure to
growing North American natural gas markets, while allowing us to retain
substantial oil reserves, particularly in the Permian Basin of the United
States. In addition, we own a large inventory of acreage and have the financial
flexibility to pursue the opportunities for drilling on this acreage.
As part of the merger consideration, we issued, through Northstar, 16.1
million exchangeable shares. The exchangeable shares are exchangeable at any
time, on a one-for-one basis, for shares of our common stock. Although the
exchangeable shares are essentially equivalent to our common stock, because
they were issued by Northstar, they qualify as a domestic Canadian investment
for Canadian institutional stockholders. The exchangeable shares trade on The
Toronto Stock Exchange under the symbol "NSX." Our common stock trades on the
American Stock Exchange under the symbol "DVN."
Our proposed merger with PennzEnergy
On May 19, 1999, we entered into an agreement to merge with PennzEnergy
Company. PennzEnergy is an independent oil and gas company engaged in the
acquisition, exploration, exploitation and development of prospective and
proved oil and gas properties and the production and sale of crude oil,
condensate, natural gas and natural gas liquids. We believe that the merged
company, which we refer to in this prospectus as New Devon, will rank solidly
in the top ten of all U.S.-based independent oil and gas producers in terms of
market capitalization, total proved reserves and annual production. We believe
that New Devon will create substantially more stockholder value than could be
achieved by either Devon or PennzEnergy individually.
The PennzEnergy merger is subject to customary conditions contained in the
merger agreement, many of which are not within our control. Closing conditions
include (a) obtaining the approval of stockholders of both Devon and
PennzEnergy, (b) the absence of any law or court order prohibiting the merger,
(c) the expiration of applicable regulatory waiting periods, (d) the approval
for listing of the New Devon shares on either the New York Stock Exchange or
the American Stock Exchange, (e) the continued accuracy of each company's
representations and warranties, and (f) the receipt of legal opinions as to the
tax-free qualification of the merger. In addition, either Devon or PennzEnergy
may terminate the merger if it does not close prior to December 31, 1999, and
under other circumstances. Although we believe that the conditions to closing
will be satisfied on or before the scheduled closing date of August 18, 1999,
we cannot assure you that the merger will be completed. If the merger is
completed, Devon stockholders will receive one share of New Devon common stock
for each share of Devon common stock that they own. PennzEnergy stockholders
will receive 0.4475 shares of New Devon common stock for each share of
PennzEnergy common stock that they own. Holders of the Kerr-McGee exchangeable
notes that are exchanged for common stock after the merger will receive shares
of New Devon common stock rather than shares of Devon common stock that they
would have received prior to the merger.
Devon has filed a proxy statement with the SEC that describes the merger and
risks related to it. The "Risk Factors" section of this prospectus, beginning
on page 12, discusses potential risks associated with the proposed merger. You
should consider these potential risks before you decide to invest in the common
stock offered by this prospectus. The prospectus incorporates by reference the
information contained in the merger proxy statement. To request a copy of the
merger proxy statement, see "Where You Can Find More Information" on page 37 of
this prospectus. This document does not constitute a solicitation of proxies
for Devon's stockholder meeting relating to the merger. We are soliciting
proxies for the meeting only through the merger proxy statement.
If the closing of the PennzEnergy merger does not occur, the financial
condition and business of Devon will be different than if the merger is
completed. This prospectus contains information relating to New Devon
5
<PAGE>
that assumes that merger will be completed. If the merger is not completed, the
receipt of shares of common stock of Devon upon exchange of the exchangeable
notes will be an investment solely in Devon, without regard to PennzEnergy,
and, therefore, you should review carefully the information relating to Devon
as a stand-alone company that is contained in the documents we incorporate by
reference under the caption "Where You Can Find More Information" on page 37 of
this prospectus.
Our proposed public offering of common stock
New Devon plans to raise between $300 and $500 million through a public
offering of newly issued shares of New Devon common stock shortly after the
merger with PennzEnergy is completed. However, depending upon market conditions
and other factors, Devon may make the offering prior to the merger. If the
offering is made prior to the merger, Devon plans to raise between $300 and
$350 million. It is also possible that Devon or New Devon may offer equity
securities other than common stock. Neither Devon nor New Devon can provide
assurances that they will successfully complete a public offering. The public
offering is not a condition to the merger. If Devon completes the public
offering before the merger, then each newly issued Devon share would be
converted into one share of New Devon in the merger. All further references in
this document to this proposed offering of securities will be made assuming it
will occur after the merger is completed.
This document does not constitute an offer to sell or a solicitation of an
offer to buy these newly issued shares. The new shares will be offered only
through a separate prospectus.
Our principal executive offices are located at 20 North Broadway, Suite
1500, Oklahoma City, Oklahoma 73102-8260. Our telephone number at that location
is (405) 235-3611.
The Kerr-McGee Exchangeable Notes Offering
The Kerr-McGee exchangeable notes are being offered by Kerr-McGee through
its exchangeable notes prospectus and prospectus supplement. The exchangeable
notes are mandatorily exchangeable for Devon common stock or, at Kerr-McGee's
option, the cash equivalent, at maturity on , 2004. Assuming Kerr-McGee
does not exercise its option to exchange any portion of the exchangeable notes
for cash, and assuming the underwriters exercise their option to purchase
1,298,348 exchangeable notes to cover over-allotments, up to 9,954,000 shares
of Devon common stock will be delivered pursuant to the terms of the
exchangeable notes. Kerr-McGee will not have the option to exchange the
exchangeable notes for Devon common stock prior to maturity. This prospectus
relates to shares of Devon common stock that Kerr-McGee may deliver under the
exchangeable notes. The Kerr-McGee prospectus and prospectus supplement
relating to the exchangeable notes are not a part of this prospectus and we
take no responsibility for any information included in or omitted from those
documents.
6
<PAGE>
Summary Unaudited Pro Forma Financial and Other Information
The following unaudited pro forma financial information has been prepared to
assist in your analysis of the financial effects of the PennzEnergy merger.
This pro forma information is based on the historical financial statements of
Devon and PennzEnergy.
The information was prepared based on the following:
. New Devon will utilize the full cost method of accounting for its oil
and gas activities.
. The merger will be accounted for as a purchase of PennzEnergy by New
Devon.
. New Devon plans to raise between $300 and $500 million in a public
offering of additional shares of New Devon common stock. The proceeds
from the planned offering would be used to fund capital expenditures and
repay long-term debt. The pro forma financial statements do not reflect
any effects of the planned offering.
. Expected annual cost savings of $50 to $60 million have not been
reflected as an adjustment to the historical data. These cost savings
are expected to result from the consolidation of the corporate
headquarters of Devon and PennzEnergy and the elimination of duplicate
staff and expenses.
. The unaudited pro forma statements of operations do not include the
effects of a reduction of the carrying value of oil and gas properties
because the reduction is directly related to the merger. As of March 31,
1999, the pro forma reduction would have been $657.0 million ($407.4
million after tax). The unaudited pro forma balance sheet does include
the effect of this reduction.
The March 31, 1999, pro forma reduction was based on a posted West Texas
Intermediate oil price of $15.25 per barrel and a Texas Gulf Coast index
gas price of $1.80 per Mcf. As of June 30, 1999, both West Texas
Intermediate oil and Texas Gulf Coast index gas prices had increased to
$16.50 per barrel and $2.14 per Mcf, respectively. Using these prices,
the pro forma reduction of the carrying value of oil and gas properties
would be reduced to less than $200 million (less than $150 million after
tax). The actual reduction, if any, that will be recorded by New Devon
will depend on the oil and gas prices in effect at the end of the
quarter in which the merger is actually closed.
No pro forma adjustments have been made with respect to the following
unusual items. These items are reflected in the historical results of Devon or
PennzEnergy, as applicable, and should be considered when making period-to-
period comparisons:
. In 1998, PennzEnergy realized pretax gains on the sale and exchange of
Chevron Corporation common stock of $230.1 million. The summary
unaudited pro forma operations data does not include the related $207.0
million after-tax extraordinary loss resulting from the early
extinguishment of debt.
. In 1998, PennzEnergy incurred $24.3 million of nonrecurring general and
administrative expenses in connection with the spin-off of Pennzoil-
Quaker State Company on December 30, 1998.
. In 1998, Devon incurred $13.1 million of nonrecurring expenses related
to the merger with Northstar.
. In 1998, Devon reduced the carrying value of its oil and gas properties
by $126.9 million ($88.0 million after-tax) due to the full cost ceiling
limitation.
The unaudited pro forma information is presented for illustrative purposes
only. If the merger had occurred in the past, New Devon's financial position or
operating results might have been different from those presented in the
unaudited pro forma information. You should not rely on the unaudited pro forma
information as an indication of the financial position or operating results
that New Devon would have achieved if the merger had occurred on March 31, 1999
or January 1, 1998. You also should not rely on the unaudited pro forma
information as an indication of the future results that New Devon will achieve
after the merger.
7
<PAGE>
<TABLE>
<CAPTION>
New Devon Pro
Forma as of
March 31, 1999
--------------
(In Thousands,
Except Per
Share Data)
<S> <C>
Balance Sheet Data:
Investment in common stock of Chevron Corporation (see note 3
on page 26).................................................. $ 629,453
Total assets.................................................. 4,092,118
Debentures exchangeable into shares of Chevron Corporation
common stock (see note 3 on page 26)......................... 757,721
Other long-term debt.......................................... 1,422,793
Convertible preferred securities of subsidiary trust.......... 149,500
Stockholders' equity.......................................... 997,750
Book value per share.......................................... 14.27
</TABLE>
<TABLE>
<CAPTION>
New Devon Pro Forma
-------------------------
Three Months
Year Ended Ended
December 31, March 31,
1998 1999
------------ ------------
(In Thousands,
Except Per Share Data)
<S> <C> <C>
Operations Data:
Operating Results
Oil sales......................................... $ 302,918 $ 64,914
Gas sales......................................... 553,938 122,979
NGL sales......................................... 63,703 12,813
Other revenue..................................... 295,803 9,390
---------- ---------
Total revenue................................... 1,216,362 210,096
---------- ---------
Lease operating expenses.......................... 294,739 66,336
Production taxes.................................. 28,148 5,937
Depreciation, depletion and amortization.......... 444,650 97,752
General and administrative expenses............... 139,378 28,291
Northstar combination expenses.................... 13,149 --
Interest expense.................................. 176,659 36,545
Deferred effect of changes in foreign currency
exchange rate on subsidiary's long-term debt..... 16,104 (3,161)
Distributions on preferred securities of
subsidiary trust................................. 9,717 2,429
Reduction of carrying value of oil and gas
properties....................................... 126,900 --
---------- ---------
Total costs and expenses........................ 1,249,444 234,129
---------- ---------
Loss before income taxes.......................... (33,082) (24,033)
Income tax expense (benefit):
Current......................................... 10,324 1,914
Deferred........................................ (3,340) (11,032)
---------- ---------
Total income tax expense....................... 6,984 (9,118)
---------- ---------
Net loss.......................................... (40,066) (14,915)
Preferred stock dividends......................... 5,625 2,434
---------- ---------
Net loss applicable to common shareholders........ $ (45,691) $ (17,349)
========== =========
Net loss per share--basic and diluted............. (0.66) (0.25)
Cash dividends per share.......................... 0.17 0.05
Weighted average common shares outstanding........ 69,729 69,900
Cash Flow Data
Net cash provided by operating activities......... $ 388,992 67,088
Net cash used in investing activities............. (222,959) (136,895)
Net cash provided (used) by financing activities.. (143,300) 60,472
Modified EBITDA................................... 740,948 109,532
Cash margin....................................... 544,248 68,644
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
New Devon Pro Forma
--------------------------------
Three Months
Year Ended Ended
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Production, Price and Other Data
Production:
Oil (MBbls)................................ 26,128 6,168
Gas (MMcf)................................. 303,693 76,502
NGL (MBbls)................................ 7,128 1,690
MBoe ...................................... 83,872 20,609
Average prices:
Oil (per Bbl).............................. $ 11.59 $ 10.52
Gas (per Mcf).............................. 1.82 1.61
NGL (per Bbl).............................. 8.94 7.58
Per Boe.................................... 10.98 9.74
Costs per Boe:
Operating costs............................ 3.85 3.51
Depreciation, depletion and amortization of
oil and gas properties.................... 5.24 4.68
General and administrative expenses........ 1.66 1.37
</TABLE>
<TABLE>
<CAPTION>
New Devon
Pro Forma
as of
December 31, 1998
-----------------
<S> <C>
Property Data
Proved reserves:
Oil (MBbls)............................................... 272,688
Gas (MMcf)................................................ 2,050,528
NGL (MBbls)............................................... 45,654
Total (MBoe).............................................. 660,096
SEC 10% present value (thousands)......................... $2,087,666
Standardized measure of discounted future net cash flows
(thousands).............................................. 1,816,542
</TABLE>
9
<PAGE>
SUMMARY HISTORICAL SELECTED FINANCIAL AND PRODUCTION DATA
The following selected financial information (not covered by the independent
auditors' reports) for the fiscal years has been derived from Devon's audited
consolidated financial statements. The following information of the interim
periods has been derived from Devon's unaudited financial statements.
<TABLE>
<CAPTION>
As of December 31, As of March 31,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.......... $1,183,290 $1,248,986 $1,226,356 $1,329,626 $1,267,505
Long-term debt........ 83,000 305,337 405,271 312,420 422,293
Convertible preferred
securities of
subsidiary trust..... 149,500 149,500 149,500 149,500 149,500
Stockholders' equity.. 678,772 596,546 522,963 610,423 529,798
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------------- ---------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Operations Data:
Operating Results
Oil sales........... 136,023 207,725 143,624 41,589 27,913
Gas sales........... 101,443 219,459 209,344 51,905 53,551
NGL sales........... 19,299 24,920 16,692 4,814 3,929
Other revenue....... 34,570 47,555 17,848 2,129 1,873
---------- ---------- ---------- ---------- ----------
Total revenues.... 291,335 499,659 387,508 100,437 87,266
---------- ---------- ---------- ---------- ----------
Lease operating
expenses........... 58,734 100,897 113,484 29,376 27,420
Production taxes.... 10,880 19,227 13,916 3,415 2,969
Depreciation,
depletion and
amortization....... 70,307 169,108 123,844 29,993 33,558
General and
administrative
expenses........... 15,111 24,381 23,554 5,643 6,223
Northstar
Combination
expenses........... -- -- 13,149 -- --
Interest expense.... 12,662 18,788 22,632 5,410 6,664
Deferred effect of
changes in foreign
currency exchange
rate on
subsidiary's long-
term debt.......... 199 5,860 16,104 -- (3,161)
Distributions on
preferred
securities of
subsidiary trust... 4,753 9,717 9,717 2,429 2,429
Reduction of
carrying value of
oil and gas
properties......... -- 625,514 126,900 -- --
---------- ---------- ---------- ---------- ----------
Total costs and
expenses......... 172,646 973,492 463,300 76,266 76,102
---------- ---------- ---------- ---------- ----------
Earnings (loss)
before income
taxes.............. 118,689 (473,833) (75,792) 24,171 11,164
Income tax expense
(benefit):
Current........... 7,834 26,857 7,687 3,160 1,903
Deferred.......... 43,252 (200,699) (23,194) 6,786 3,281
---------- ---------- ---------- ---------- ----------
Total........... 51,086 (173,842) (15,507) 9,946 5,184
---------- ---------- ---------- ---------- ----------
Net earnings
(loss)............. $ 67,603 $ (299,991) $ (60,285) $ 14,225 $ 5,980
========== ========== ========== ========== ==========
Net earnings (loss)
per share:
Basic............. $ 2.06 $ (6.38) $ (1.25) $ 0.29 $ 0.12
Diluted........... 1.99 (6.38) (1.25) 0.29 0.12
Cash dividends per
common share....... 0.15 0.14 0.15 0.03 0.05
Weighted average
common shares
outstanding--
basic.............. 32,812 47,040 48,376 48,310 48,470
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
---------------------------------- ------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- -------- --------
(In Thousands, Except Per Share and Per Unit Data)
<S> <C> <C> <C> <C> <C>
Cash Flow Data
Net cash provided by
operating
activities........... $ 144,248 $ 253,056 $ 191,571 $ 71,788 $ 57,067
Net cash used by
investing
activities........... (243,451) (147,583) (271,960) (29,605) (77,648)
Net cash provided
(used) by financing
activities........... 96,420 (77,141) 57,618 (38,832) 14,884
Modified EBITDA....... 206,610 355,154 223,405 62,003 50,954
Cash margin........... 181,361 299,792 183,369 51,004 39,658
Production, Price and
Other Data
Production:
Oil (MBbls)......... 6,780 11,783 11,903 3,197 2,565
Gas (MMcf).......... 62,186 121,810 133,065 32,523 35,122
NGL (MBbls)......... 1,255 1,891 1,939 509 476
MBoe................ 18,399 33,976 36,020 9,127 8,895
Average prices:
Oil (Per Bbl)....... $ 20.06 $ 17.63 $ 12.07 $ 13.01 $ 10.88
Gas (Per Mcf)....... 1.63 1.80 1.57 1.60 1.52
NGL (Per Bbl)....... 15.38 13.18 8.61 9.46 8.25
Per Boe............. 13.96 13.31 10.26 10.77 9.60
Costs per Boe:
Operating costs..... 3.78 3.54 3.54 3.59 3.42
Depreciation,
depletion and
amortization of oil
and gas
properties......... 3.69 4.86 3.32 3.17 3.66
General and
administrative
expenses........... 0.82 0.72 0.65 0.62 0.70
<CAPTION>
As of December 31,
----------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Property Data
Proved reserves:
Oil (MBbls)......... 80,155 97,041 83,457
Gas (MMcf).......... 898,319 1,150,604 1,198,894
NGL (MBbls)......... 14,190 17,178 16,079
Total (MBoe)........ 244,065 305,986 299,351
SEC 10% present
value (thousands).. $1,999,748 $1,340,644 $1,009,039
Standardized measure
of discounted
future net cash
flows (thousands).. 1,454,974 1,100,676 931,588
</TABLE>
11
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, and all of the
other information contained in this document and the documents to which we have
referred you, before deciding to invest in our common stock.
Risks Relating to the Oil and Gas Industry
Our results are highly dependent on oil and gas prices, which are volatile and
beyond our control
Our revenues, results of operations and financial condition depend largely
on the prices we receive for our oil and gas production. Extended periods of
low prices could adversely affect the ultimate return on past investments and
our ability or willingness to continue or complete our current and planned
drilling programs and acquisitions.
Our calculations of proved reserves are only estimates
There are many uncertainties in estimating quantities of oil and gas
reserves. In addition, the estimates of future net cash flows from our proved
reserves and their present value are based upon assumptions about future
production levels, prices and costs that may prove to be inaccurate. Our
estimated reserves may be subject to upward or downward revision based upon our
production, results of future exploration and development, prevailing oil and
gas prices, operating and development costs and other factors.
Our exploration, development and acquisition activities might not result in
significant additional reserves
The rate of production from oil and gas properties generally declines as
reserves are depleted. Our proved reserves will decline materially as oil and
gas are produced unless we acquire additional properties with proved reserves,
conduct successful exploration and development activities or our reserve
estimates increase. Our future oil and gas production is consequently dependent
upon our success in acquiring or finding additional reserves.
Potential hazards could damage or destroy our oil and gas wells, production
facilities or damage or injure property, persons and the environment
The exploration for and production of oil and gas can be hazardous,
involving natural disasters, blowouts, cratering, fires and losses of well
control. These hazards can damage or destroy oil and gas wells and production
facilities, injure or kill people and cause damage to property and the
environment. We maintain insurance against many potential losses and
liabilities in accordance with customary industry practices, however our
insurance does not protect us against all operational risks.
Government regulations, including environmental regulations, may adversely
affect our results
Our exploration and production operations are regulated at the federal,
state and local levels in the United States as well as by governments in other
countries. We make large expenditures to comply with the requirements of these
regulations. Future changes in the regulation of the oil and gas industry could
significantly increase these costs.
We are subject to various federal, state, local and foreign regulations
relating to the protection of the environment. We may be liable for the cost to
clean-up pollution resulting from our operations and for the cost of pollution
damages. We also may be required to suspend or cease operations in affected
areas. Additional future regulations for the protection of the environment
could adversely affect our operations and results.
12
<PAGE>
Risks Relating to an Investment in Devon
Our stock price might decline if we do not complete the PennzEnergy merger
Our current stock price could reflect value that investors anticipate will
result from the PennzEnergy merger. If so, our failure to complete the
PennzEnergy merger could cause our stock price to decline. The merger is
subject to conditions, including stockholder approval. We cannot assure you
that those conditions will be satisfied or that the merger will be completed.
The interest of Devon's largest stockholder may conflict with the interests of
Devon's or New Devon's other stockholders
Kerr-McGee Corporation currently owns 9,954,000 shares, or 20.4%, of the
outstanding Devon common stock. After completion of the merger, Kerr-McGee
would own up to 14.2% of the outstanding shares of New Devon's common stock.
This percentage will be reduced further if New Devon completes a planned public
offering of new shares of common stock. Sales by Kerr-McGee of substantial
amounts of Devon or New Devon common stock in the public or private market, or
the perception that such sales may occur, could cause the prices of those
shares to decline. Kerr-McGee has requested that Devon register with the SEC
with this document the Devon common stock held by Kerr-McGee in connection with
the offering of Kerr-McGee DECS as described on page 6. These DECS would be
mandatorily exchangeable for Devon common stock or, at Kerr-McGee's option, the
cash equivalent.
As a substantial stockholder, Kerr-McGee may have the power to influence the
outcome of matters submitted to a vote of the Devon or New Devon stockholders,
and Kerr-McGee's interests may not reflect the interests of other stockholders.
Devon and Kerr-McGee have not implemented any specific procedures to deal with
conflicts that may arise in the future between Kerr-McGee's interests and those
of other Devon or New Devon stockholders. In the event a conflict arises, we
will implement procedures we deem appropriate to deal with the specific
situation.
Under an agreement between Devon and Kerr-McGee dated December 31, 1996,
Devon is obligated to nominate a specified number of persons designated by
Kerr-McGee for election to Devon's board. The exact number would generally be
set so that Kerr-McGee's representation on the Devon board approximates the
percentage of Devon's common stock that Kerr-McGee owns. The December 31, 1996,
agreement also restricts Kerr-McGee's ability to acquire or dispose of Devon
common stock and grants Kerr-McGee preemptive rights in connection with
offerings of Devon convertible securities.
The Kerr-McGee designees to Devon's board resigned their positions on May
19, 1999, and Devon and Kerr-McGee have agreed that the December 31, 1996,
agreement will terminate when the merger occurs.
Devon has charter and other provisions that may make it difficult to cause a
change of control
Some provisions of Devon's certificate of incorporation and by-laws and of
the Oklahoma General Corporation Act, as well as Devon's stockholder rights
plan, may make it difficult for stockholders to cause a change in control of
Devon and replace incumbent management. These provisions include:
. a classified board, the members of which serve staggered three-year
terms and may be removed by stockholders only for cause;
. a prohibition on stockholders calling special meetings and acting by
written consent; and
. rights issued under its rights plan, which would "flip in" if a hostile
bidder acquired 15% of Devon's common stock.
New Devon's certificate of incorporation and bylaws, the Delaware General
Corporation Law and New Devon's stockholder rights plan will also have similar
provisions.
13
<PAGE>
Risks Relating to the Proposed Merger of Devon and PennzEnergy
We may not successfully integrate the operations of Devon and PennzEnergy or
achieve the benefits we are seeking
The success of the merger will partially depend upon the integration of the
current management and operations of Devon and PennzEnergy. The management team
of New Devon will not have experience with the combined businesses of Devon and
PennzEnergy. New Devon may not be able to integrate the operations of Devon and
PennzEnergy without the loss of key employees, customers or suppliers; loss of
revenues; increases in operating or other costs; or other difficulties. In
addition, New Devon may not be able to realize the operating efficiencies and
other benefits sought from the merger.
Significant charges and expenses will be incurred as a result of the merger
Devon and PennzEnergy expect to incur approximately $71.5 million of costs
related to the merger. These expenses will include investment banking expenses,
severance, legal and accounting fees, financial printing expenses and other
related charges. In addition, New Devon expects to incur an estimated $20 to
$30 million in costs to combine the two companies. New Devon may incur
additional unanticipated expenses in connection with the merger.
New Devon also may incur a noncash after-tax charge to earnings related to a
full cost ceiling limitation. Under the full cost method of accounting followed
by Devon and to be followed by New Devon, the net book value of oil and gas
properties, less related deferred income taxes, may not exceed a calculated
"ceiling." The ceiling is the estimated after-tax future net revenues from
proved oil and gas properties, discounted at 10% per year. The ceiling
limitation is applied separately by country. In calculating future net
revenues, prices and costs in effect at the time of the calculation are held
constant indefinitely, except for changes that are fixed and determinable by
existing contracts. The net book value, less deferred tax liabilities, is
compared to the ceiling on a quarterly basis. Any excess of the net book value,
less deferred taxes, is written off as an expense. An expense recorded in one
period may not be reversed in a subsequent period even though higher oil and
gas prices may have increased the ceiling applicable to the subsequent period.
As of March 31, 1999, New Devon's pro forma after-tax charge would have been
$407.4 million. This pro forma amount was based on a posted West Texas
Intermediate oil price of $15.25 per barrel and a Texas Gulf Coast index gas
price of $1.80 per Mcf. As of June 30, 1999, both West Texas Intermediate oil
and Texas Gulf Coast index gas prices had increased to $16.50 per barrel and
$2.14 per Mcf, respectively. Using these prices, the pro forma after-tax charge
to earnings would be reduced to less than $150 million. The actual charge, if
any, that will be recorded by New Devon will depend on the oil and gas prices
in effect at the end of the quarter in which the merger is actually closed.
New Devon may incur a tax liability for a prior PennzEnergy transaction as a
result of the merger
If PennzEnergy's distribution to its stockholders of the stock of Pennzoil-
Quaker State Company in December 1998 were to be considered part of a plan or
series of related transactions that includes the merger, New Devon would
recognize gain under Section 355(e) of the Internal Revenue Code. PennzEnergy
and Devon believe the distribution and the merger should not be considered part
of such a plan or series of related transactions because, among other things,
neither party contemplated a business combination with the other and until
April 1999 the parties had no discussions regarding a business combination.
However, any transaction within a four-year period beginning two years before
the distribution is presumed to be part of such a plan. We cannot assure you
that PennzEnergy will be able to overcome this presumption. PennzEnergy
currently estimates New Devon's potential tax liability upon such a transaction
at $16 million in additional tax for 1998 and the elimination of approximately
$183 million in net operating loss carryovers through 1998.
14
<PAGE>
New Devon's business will expose Devon stockholders to different risks
Some of PennzEnergy's assets are outside of North America and a significant
portion of its production and reserves are located offshore in the Gulf of
Mexico. Additionally its reserves and production are more weighted towards oil
than Devon's. Therefore, the assets of New Devon will expose the former Devon
stockholders to more risks associated with oil prices and offshore Gulf of
Mexico and international operations than they were exposed to prior to the
merger. Production in the Gulf of Mexico generally declines at faster rates
than onshore production in North America.
In addition, offshore operations in this area are subject to tropical
weather disturbances. Some of these disturbances can be severe enough to cause
substantial damage to facilities and possibly interrupt production. In
accordance with customary industry practices, New Devon will maintain insurance
against some, but not all, of these risks. Losses could occur for uninsurable
or uninsured risks or in amounts in excess of existing insurance coverage. We
cannot assure you that New Devon will be able to maintain adequate insurance in
the future at rates it considers reasonable or that any particular types of
coverage will be available. An event that is not fully covered by insurance
could have a material adverse effect on New Devon's financial position and
results of operations.
New Devon will be subject to other uncertainties of foreign operations
New Devon will have international operations in Australia, Azerbaijan,
Brazil, Canada, Egypt, Qatar and Venezuela. Local political, economic and other
uncertainties may adversely affect these operations. These uncertainties
include:
. the risk of war, general strikes, civil unrest, expropriation, forced
renegotiation or modification of existing contracts, and import, export
and transportation regulations and tariffs;
. taxation policies, including royalty and tax increases and retroactive
tax claims;
. exchange controls, currency fluctuations, devaluation or other activities
that limit or disrupt markets and restrict payments or the movement of
funds, and other uncertainties arising out of foreign government
sovereignty over international operations;
. laws and policies of the United States affecting foreign trade, taxation
and investment;
. the possibility of being subject to the exclusive jurisdiction of foreign
courts in connection with legal disputes and the possible inability to
subject foreign persons to the jurisdiction of courts in the United
States; and
. difficulties in enforcing New Devon's rights against a governmental
agency because of the doctrine of sovereign immunity.
New Devon will have a higher debt level than Devon, which may result in a lower
debt rating and require a substantial portion of operating cash flow to pay
interest and principal
New Devon will have higher levels of debt and interest expense than Devon on
a stand-alone basis. The increase in total indebtedness and leverage of New
Devon after the merger may have a negative impact on New Devon's ability to
realize the expected benefits of the merger, including a possible downgrade in
the credit rating of New Devon from that currently maintained by Devon.
Standard & Poor's has announced that, because of the higher leverage of New
Devon, it may assign a debt rating to New Devon that is lower than Devon's
current senior debt rating of "BBB+". The increased debt level will also
require New Devon to use a substantial portion of its operating cash flow to
pay interest and principal on its debt instead of for other corporate purposes.
15
<PAGE>
New Devon plans to raise between $300 and $500 million in a public offering
of additional shares of New Devon common stock and intends to use the net
proceeds from the offering to fund capital expenditures and repay indebtedness.
There can be no assurances that the proposed public offering will be completed
and, consequently, there can be no assurance that the total indebtedness of New
Devon will be reduced from the proceeds of an offering.
16
<PAGE>
USE OF PROCEEDS
Devon will not receive any of the proceeds from the sale of Kerr-McGee's
exchangeable notes or from delivery of the Devon common stock by Kerr-McGee
under the exchangeable notes.
NEW DEVON AFTER THE MERGER OF DEVON AND PENNZENERGY
If Devon's merger with PennzEnergy is completed, we believe that New Devon
will rank solidly in the top ten of all United States-based independent oil and
gas producers in terms of market capitalization, total proved reserves and
annual production. We expect the merger to provide New Devon with the following
advantages:
Larger and More Diversified Asset Base. At the end of 1998, Devon and
PennzEnergy combined had aggregate proved reserves of approximately 660 million
barrels of oil equivalent. On an energy equivalent basis, about 52% of these
reserves were natural gas and 48% were oil and natural gas liquids.
Approximately 64% of the proved reserves, or 423 million equivalent barrels,
were located in the United States. These reserves were concentrated in four
primary operating areas: the Permian Basin, the Rocky Mountain Region, the Gulf
Coast/East Texas Region and the Offshore Gulf of Mexico. Approximately 22% of
the combined reserves, or 144 million equivalent barrels, were located in the
Western Canadian Sedimentary Basin. The balance of proved reserves,
approximately 94 million equivalent barrels, was located outside North America,
primarily in Azerbaijan. In addition to the proved oil and gas properties, the
combined companies had a substantial inventory of exploration acreage totaling
approximately 15 million net acres.
New Devon should also realize substantial oil and gas production. Assuming
the merger was effective as of January 1, 1999, New Devon's estimated 1999
production would be between 28 and 31 million barrels of oil and natural gas
liquids and between 275 and 300 billion cubic feet of natural gas.
Increased Financial Strength and Flexibility. New Devon's equity market
capitalization is expected to be approximately $2.9 billion as a result of the
merger (not including New Devon's planned common stock offering). As a result
of this size and market capitalization, New Devon should have greater access to
capital than either Devon or PennzEnergy currently has alone. In addition, we
believe that New Devon should have an enhanced ability to pursue acquisitions
and to participate in further consolidation among independent exploration and
production companies.
Cost Savings. New Devon is expecting $50 to $60 million in annual cost
savings from reduced operating and general and administrative expenses. New
Devon plans to consolidate the corporate headquarters and selected field
offices of Devon and PennzEnergy, eliminate duplicative staff and expenses,
achieve purchasing synergies and implement other cost saving measures.
Improved Capital Efficiencies. New Devon plans to pursue the best
exploration opportunities available to the combined company and to focus on
exploitation projects with the highest rates of return. In addition, due to its
greater financial strength, New Devon will be better able to pursue and
accelerate the development, exploitation and exploration of PennzEnergy's oil
and gas assets. As a result, New Devon believes it has the potential for
greater returns on capital than Devon or PennzEnergy could achieve alone.
Greater Human and Technological Resources. New Devon will have significant
expertise with regard to various oilfield technologies, including coal bed
methane, enhanced oil recovery, deep onshore natural gas drilling, shallow and
deep water offshore drilling and other exploration, production and processing
technologies. New Devon will also have significant international operations and
experience in Canada and outside North America. As a result, New Devon will
have an enhanced ability to acquire, explore for, develop and exploit oil and
natural gas reserves domestically both onshore and offshore, as well as
internationally.
17
<PAGE>
CAPITALIZATION
The following table compares our actual capitalization as of March 31, 1999,
to our pro forma capitalization including the PennzEnergy merger. In preparing
the pro forma information, we have assumed that the merger closed on March 31,
1999. New Devon plans to raise between $300 and $500 million in a public
offering of additional shares of New Devon common stock proposed to be made
soon after completion of the merger. The proceeds from the planned offering
would be used to fund capital expenditures and repay long-term debt. The
following table does not reflect any effects of the planned offering.
You should read the following table in conjunction with the historical
consolidated financial statements of Devon which are filed with the SEC and
incorporated by reference in this document and the unaudited pro forma
financial information included in this document.
<TABLE>
<CAPTION>
As of March 31, 1999
----------------------
New Devon
Actual Pro Forma
---------- ----------
(In Thousands)
<S> <C> <C>
Long-term debt:
Borrowings under credit facilities with banks........ $ 197,293 $ 323,148
Notes:
6.76% due July 19, 2005............................. 75,000 75,000
6.79% due March 2, 2009............................. 150,000 150,000
Debentures:
9.625% due November 15, 1999, principal amount of
$200 million....................................... -- 200,000
10.625% due June 1, 2001, principal amount of $150
million............................................ -- 150,000
10.25% due November 1, 2005, principal amount of
$250 million....................................... -- 287,725
10.125% due November 15, 2009, principal amount of
$200 million....................................... -- 236,920
Debentures exchangeable into shares of Chevron
Corporation common stock (see note 3 on page 25)
4.90% due August 15, 2008, principal amount of
$443.8 million..................................... -- 441,721
4.95% due August 15, 2008, principal amount of
$316.5 million..................................... -- 316,000
---------- ----------
Total long-term debt............................... 422,293 2,180,514
---------- ----------
Devon-obligated mandatorily redeemable trust
convertible preferred securities...................... 149,500 149,500
Stockholders' equity:
Preferred stock, $1.00 par value..................... -- 1,500
Common stock, $0.10 par value........................ 4,849 6,994
Additional paid-in capital........................... 798,640 1,670,306
Accumulated deficit.................................. (239,353) (646,712)
Accumulated other comprehensive loss................. (34,338) (34,338)
---------- ----------
Total stockholders' equity......................... 529,798 997,750
---------- ----------
Total capitalization.............................. $1,101,591 $3,327,764
========== ==========
Shares authorized:
Preferred stock...................................... 3,000 4,500
Common stock......................................... 400,000 400,000
Shares outstanding:
Preferred stock...................................... -- 1,500
Common stock......................................... 48,492 69,938
Common shares reserved for issuance of options under
Devon's stock option plans............................ 1,826 4,826
Employee stock options outstanding..................... 3,430 5,511
</TABLE>
The above New Devon pro forma capitalization includes six separate debentures
issued by PennzEnergy. The aggregate pro forma amount of the debentures is
$72.1 million higher than the aggregate principal amount. The excess amount is
the amount by which the debentures' estimated fair value at March 31, 1999
exceeded the principal amounts. Because the PennzEnergy merger will be
accounted for using the purchase method of accounting for business
combinations, New Devon will record these debentures at their fair values at
the date the merger is closed. The difference will be amortized over the
debentures' lives as adjustments to interest expense.
The pro forma increase in the number of common shares reserved for issuance
of stock options assumes the related proposal is approved by Devon's
stockholders at the special meeting to be held on August 17, 1999.
18
<PAGE>
MARKET PRICE DATA
Devon common stock is listed on the AMEX under the symbol "DVN." We
commenced the payment of regular quarterly cash dividends on our common stock
on June 30, 1993, in the amount of $0.03 per share. Effective December 31,
1996, we increased our quarterly dividend payment to $0.05 per share. We
anticipate that we will continue to pay regular quarterly dividends in the
foreseeable future. Dividends are also paid on the exchangeable shares at the
same rate and on the same dates as dividends paid on the common stock.
The following table sets forth the quarterly high and low sales prices for
the Devon common stock as reported by the AMEX for the fiscal periods
indicated.
<TABLE>
<CAPTION>
High Low Volume
---- ---- --------------
(In Thousands)
<S> <C> <C> <C>
1996:
Quarter Ended March 31, 1996....... $25 3/4 $19 7/8 2,825
Quarter Ended June 30, 1996........ $26 1/8 $ 22 2,474
Quarter Ended September 30, 1996... $27 1/2 $22 3/4 4,715
Quarter Ended December 31, 1996.... $35 1/2 $25 1/4 6,011
1997:
Quarter Ended March 31, 1997....... $38 7/8 $29 1/2 4,458
Quarter Ended June 30, 1997........ $38 1/2 $27 3/8 5,619
Quarter Ended September 30, 1997... $45 1/4 $36 1/8 3,851
Quarter Ended December 31, 1997.... $49 1/8 $35 4,460
1998:
Quarter Ended March 31, 1998....... $41 1/8 $32 7/8 5,542
Quarter Ended June 30, 1998........ $40 1/2 $32 5/8 6,144
Quarter Ended September 30, 1998... $36 5/8 $26 1/8 10,170
Quarter Ended December 31, 1998.... $ 36 $27 3/4 9,017
1999:
Quarter Ended March 31, 1999....... $31 3/4 $20 1/8 14,271
Quarter Ended June 30, 1999........ $37 7/16 $25 15/16 14,221
Quarter Ended September 30, 1999
(through July 16, 1999)........... $38 11/16 $36 1,628
</TABLE>
On July 16, 1999, the last full trading day prior to the date of this
prospectus, the last reported sales price on the American Stock Exchange of
shares of Devon common stock was $38 1/4.
19
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information has been prepared to
assist in the analysis of the financial effects of the proposed merger. This
pro forma information is based on the historical financial statements of Devon
and PennzEnergy.
The information was prepared based on the following:
. New Devon will utilize the full cost method of accounting for its oil and
gas activities.
. The merger will be accounted for as a purchase of PennzEnergy by New
Devon.
. New Devon plans to raise between $300 and $500 million in a public
offering of additional shares of New Devon common stock. The proceeds
from the planned offering would be used to fund capital expenditures and
repay long-term debt. The pro forma financial statements do not reflect
any effects of the planned offering.
. The unaudited pro forma balance sheet has been prepared as if the merger
occurred on March 31, 1999. The unaudited pro forma statements of
operations have been prepared as if the merger occurred on January 1,
1998.
. Expected annual cost savings of $50 to $60 million have not been
reflected as an adjustment to the historical data. These cost savings are
expected to result from the consolidation of the corporate headquarters
of Devon and PennzEnergy and the elimination of duplicate staff and
expenses.
. The unaudited pro forma statements of operations do not include the
effects of a reduction of the carrying value of oil and gas properties
because the reduction is directly related to the merger. As of March 31,
1999, the pro forma reduction would have been $657.0 million ($407.4
million after tax). The unaudited pro forma balance sheet does include
the effect of this reduction.
The March 31, 1999, pro forma reduction was based on a posted West Texas
Intermediate oil price of $15.25 per barrel and a Texas Gulf Coast index
gas price of $1.80 per Mcf. As of June 30, 1999, both West Texas
Intermediate oil and Texas Gulf Coast index gas prices had increased to
$16.50 per barrel and $2.14 per Mcf, respectively. Using these prices,
the pro forma reduction of the carrying value of oil and gas properties
would be reduced to less than $200 million (less than $150 million after
tax). The actual reduction, if any, that will be recorded by New Devon
will depend on the oil and gas prices in effect at the end of the
quarter in which the merger is actually closed.
No pro forma adjustments have been made with respect to the following
unusual items. These items are reflected in the historical results of Devon or
PennzEnergy, as applicable, and should be considered when making period-to-
period comparisons:
. In 1998, PennzEnergy realized pretax gains on the sale and exchange of
Chevron Corporation common stock of $230.1 million. The unaudited pro
forma statement of operations does not include the related $207.0 million
after-tax extraordinary loss resulting from the early extinguishment of
debt.
. In 1998, PennzEnergy incurred $24.3 million of nonrecurring general and
administrative expenses in connection with the spin-off of Pennzoil-
Quaker State Company on December 30, 1998.
. In 1998, Devon incurred $13.1 million of nonrecurring expenses related to
the merger with Northstar.
. In 1998, Devon reduced the carrying value of its oil and gas properties
by $126.9 million ($88.0 million after-tax) due to the full cost ceiling
limitation.
The unaudited pro forma financial statements and related notes are presented
for illustrative purposes only. If the proposed merger had occurred in the
past, New Devon's financial position or operating results might have been
different from those presented in the unaudited pro forma information. The
unaudited pro forma information should not be relied upon as an indication of
the financial position or operating results that New Devon would have achieved
if the merger had occurred as of March 31, 1999 or January 1, 1998. You also
should not rely on the unaudited pro forma information as an indication of the
future results that New Devon will achieve after the merger.
20
<PAGE>
Unaudited Pro Forma Balance Sheet
March 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
PennzEnergy
Historical Pro Forma
Reclassified Adjustments New Devon
Devon (Note 5) (Note 2) Pro Forma
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Assets:
Current assets........... $ 101,067 $ 124,264 $ (10,300)(a) $ 225,331
10,300 (c)
Oil and gas properties,
net..................... 1,128,388 1,640,894 413,455 (a) 3,078,591
552,884 (c)
(657,030)(d)
Other properties, net.... 23,674 -- 5,000 (a) 28,674
Investment in common
stock of Chevron
Corporation (Note 3).... -- 629,453 -- 629,453
Other assets............. 14,376 36,537 79,156 (a) 130,069
---------- ---------- --------- ----------
Total assets........... $1,267,505 $2,431,148 $ 393,465 $4,092,118
========== ========== ========= ==========
Liabilities:
Current liabilities...... $ 95,152 $ 161,564 $ (5,374)(a) $ 251,342
Debentures exchangeable
into shares of Chevron
Corporation common stock
(Note 3)................ -- 739,810 17,911 (a) 757,721
Other long-term debt..... 422,293 852,353 76,602 (a) 1,422,793
71,545 (a)
Other long-term
liabilities............. 34,590 131,327 (2,590)(a) 163,327
Deferred income taxes.... 36,172 161,282 (161,282)(a) 349,685
563,184 (c)
(249,671)(d)
Company-obligated
mandatorily redeemable
convertible preferred
securities of subsidiary
trust holding solely
6.5% convertible junior
subordinated debentures
of Devon Energy
Corporation............. 149,500 -- 149,500
Stockholders' equity:
Preferred stock.......... -- 1,500 1,500
Common stock............. 4,849 43,507 2,145 (a) 6,994
(43,507)(b)
Additional paid-in
capital................. 798,640 356,351 709,166 (a) 1,670,306
14,000 (a)
148,500 (a)
(356,351)(b)
Accumulated deficit...... (239,353) (34,172) 34,172 (b) (646,712)
(407,359)(d)
Accumulated other
comprehensive earnings
(loss).................. (34,338) 247,223 (247,223)(b) (34,338)
Treasury stock........... -- (229,597) 229,597 (b) --
---------- ---------- --------- ----------
Total stockholders'
equity................ 529,798 384,812 83,140 997,750
---------- ---------- --------- ----------
Total liabilities and
stockholders' equity.. $1,267,505 $2,431,148 $ 393,465 $4,092,118
========== ========== ========= ==========
</TABLE>
21
<PAGE>
Unaudited Pro Forma Statement of Operations
Year Ended December 31, 1998
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
PennzEnergy
Historical Pro Forma
Reclassified Adjustments New Devon
Devon (Note 5) (Note 2) Pro Forma
-------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil sales.................. $143,624 $159,294 $ 302,918
Gas sales.................. 209,344 344,594 553,938
NGL sales.................. 16,692 47,011 63,703
Other...................... 17,848 286,468 (8,513)(h) 295,803
-------- -------- --------- ---------
Total revenues........... 387,508 837,367 (8,513) 1,216,362
-------- -------- --------- ---------
Costs and expenses:
Lease operating expenses... 113,484 181,255 294,739
Production taxes........... 13,916 14,232 28,148
Depreciation, depletion and
amortization.............. 123,844 208,009 112,797 (e) 444,650
General and administrative
expenses.................. 23,554 126,124 (10,300)(h) 139,378
Northstar combination
expenses.................. 13,149 -- 13,149
Interest expense........... 22,632 156,272 4,114 (f) 176,659
(6,359)(g)
Exploration expenses....... -- 139,970 (139,970)(h) --
Deferred effect of changes
in foreign currency
exchange rate on
subsidiary's long-term
debt...................... 16,104 -- 16,104
Distributions on preferred
securities of subsidiary
trust..................... 9,717 -- 9,717
Reduction of carrying value
of oil and gas
properties................ 126,900 74,739 (74,739)(h) 126,900
-------- -------- --------- ---------
Total costs and
expenses................ 463,300 900,601 (114,457) 1,249,444
-------- -------- --------- ---------
Earnings (loss) before income
tax expense (benefit)....... (75,792) (63,234) 105,944 (33,082)
Income tax expense (benefit):
Current.................... 7,687 2,637 -- 10,324
Deferred................... (23,194) (20,405) 40,259 (i) (3,340)
-------- -------- --------- ---------
Total income tax expense
(benefit)............... (15,507) (17,768) 40,259 6,984
-------- -------- --------- ---------
Net earnings (loss).......... (60,285) (45,466) 65,685 (40,066)
Preferred stock dividends.... -- 5,625 -- 5,625
-------- -------- --------- ---------
Net earnings (loss)
applicable to common
shareholders................ $(60,285) $(51,091) $ 65,685 $ (45,691)
======== ======== ========= =========
Net loss per average common
share outstanding--basic and
diluted..................... $ (1.25) $ (1.07) $ (0.66)
======== ======== =========
Weighted average common
shares outstanding--basic
(Note 4).................... 48,376 47,716 69,729
======== ======== =========
</TABLE>
22
<PAGE>
Unaudited Pro Forma Statement of Operations
Three Months Ended March 31, 1999
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
PennzEnergy
Historical Pro Forma
Reclassified Adjustments New Devon
Devon (Note 5) (Note 2) Pro Forma
------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oil sales...................... $27,913 $ 37,001 $ 64,914
Gas sales...................... 53,551 69,428 122,979
NGL sales...................... 3,929 8,884 12,813
Other.......................... 1,873 11,163 (3,646)(h) 9,390
------- -------- ------- --------
Total revenues............... 87,266 126,476 (3,646) 210,096
------- -------- ------- --------
Costs and expenses:
Lease operating expenses....... 27,420 38,916 66,336
Production taxes............... 2,969 2,968 5,937
Depreciation, depletion and
amortization.................. 33,558 68,141 (3,947)(e) 97,752
General and administrative
expenses...................... 6,223 24,643 (2,575)(h) 28,291
Interest expense............... 6,664 30,560 1,028 (f) 36,545
(1,707)(g)
Exploration expenses........... -- 9,107 (9,107)(h) --
Deferred effect of changes in
foreign currency exchange rate
on subsidiary's long-term
debt.......................... (3,161) -- (3,161)
Distributions on preferred
securities of subsidiary
trust......................... 2,429 -- 2,429
------- -------- ------- --------
Total costs and expenses..... 76,102 174,335 (16,308) 234,129
------- -------- ------- --------
Earnings (loss) before income tax
expense (benefit)............... 11,164 (47,859) 12,662 (24,033)
Income tax expense (benefit):
Current........................ 1,903 11 -- 1,914
Deferred....................... 3,281 (19,125) 4,812 (i) (11,032)
------- -------- ------- --------
Total income tax expense
(benefit)................... 5,184 (19,114) 4,812 (9,118)
------- -------- ------- --------
Net earnings (loss).............. 5,980 (28,745) 7,850 (14,915)
Preferred stock dividends........ -- 2,434 -- 2,434
------- -------- ------- --------
Net earnings (loss) applicable to
common shareholders............. $ 5,980 $(31,179) $ 7,850 $(17,349)
======= ======== ======= ========
Net earnings (loss) per average
common share outstanding--basic
and diluted..................... $ 0.12 $ (0.65) $ (0.25)
======= ======== ========
Weighted average common shares
outstanding--basic (Note 4)..... 48,470 47,888 69,900
======= ======== ========
</TABLE>
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
December 31, 1998 and March 31, 1999
1. Method of Accounting for the Merger
New Devon will account for the merger using the purchase method of
accounting for business combinations. Accordingly, PennzEnergy's assets
acquired and liabilities assumed by New Devon will be revalued and recorded at
their estimated "fair values." In the merger, New Devon will issue 0.4475
shares of New Devon common stock for each outstanding share of PennzEnergy
common stock. This will result in New Devon issuing approximately 21.4 million
shares of its common stock to PennzEnergy stockholders.
The purchase price of PennzEnergy's net assets acquired will be based on the
value of the New Devon common stock issued to the PennzEnergy stockholders. The
value of the New Devon common stock issued is based on the average trading
price of Devon's common stock for a period of three days before and after the
public announcement of the merger. This average trading price equaled $33.40
per share.
2. Pro Forma Adjustments Related to the Merger
The unaudited pro forma balance sheet includes the following adjustments:
(a) This entry adjusts the historical book values of PennzEnergy's assets
and liabilities to their estimated fair values as of March 31, 1999. The
calculation of the total purchase price and the preliminary allocation to
assets and liabilities are shown below.
<TABLE>
<CAPTION>
(In Thousands,
Except Share
Price)
--------------
<S> <C>
Calculation and preliminary allocation of purchase price:
Shares of New Devon common stock to be issued to
PennzEnergy stockholders................................. 21,446
Average Devon stock price................................. $ 33.40
----------
Fair value of common stock to be issued................... 716,296
Plus preferred stock to be assumed by New Devon........... 150,000
Plus estimated merger costs to be incurred................ 71,545
Plus fair value of PennzEnergy employee stock options to
be assumed by New Devon.................................. 14,000
Less estimated stock registration and issuance costs to be
incurred................................................. (4,985)
----------
Total purchase price........................................ 946,856
Plus fair value of liabilities to be assumed by New Devon:
Current liabilities....................................... 156,190
Debentures exchangeable into Chevron Corporation common
stock.................................................... 757,721
Other long-term debt...................................... 928,955
Other long-term liabilities............................... 128,737
----------
2,918,459
----------
Less fair value of non oil and gas assets to be acquired by
New Devon:
Current assets............................................ 113,964
Non oil and gas properties................................ 5,000
Investment in common stock of Chevron Corporation......... 629,453
Other assets.............................................. 115,693
----------
864,110
----------
Fair value allocated to oil and gas properties, including
$111 million of undeveloped leasehold...................... $2,054,349
==========
</TABLE>
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION--(Continued)
December 31, 1998 and March 31, 1999
The total purchase price includes the value of the New Devon common stock to
be issued, net of $5.0 million of estimated registration and issuance costs.
The purchase price also includes:
. $150 million of New Devon preferred stock to be issued in exchange for
the same amount of PennzEnergy preferred stock. The unaudited pro forma
balance sheet includes $1.5 million of PennzEnergy's historical aggregate
par value of the preferred stock, plus $148.5 million of additional paid-
in capital.
. $71.5 million of estimated merger costs. These costs include advisory
fees, severance and other merger-related costs. These costs are added to
long-term debt in the unaudited pro forma balance sheet.
. $14 million of New Devon employee stock options to be issued in exchange
for existing vested PennzEnergy employee stock options. The value of
these options is added to additional paid-in capital in the unaudited pro
forma balance sheet.
(b) This adjustment includes a $43.5 million reduction to par value, a
$356.4 million reduction of additional paid-in capital, a $34.2 million
reduction of accumulated deficit, a $247.2 million reduction of accumulated
other comprehensive earnings and a $229.6 million reduction of treasury
stock. These adjustments eliminate PennzEnergy's historical book values of
those accounts.
(c) This adjustment increases the value of PennzEnergy's oil and gas
properties acquired by $552.9 million, and increases current assets by
$10.3 million, both for related deferred income taxes. This adjustment
equals the deferred income tax effect of the difference between the fair
values assigned to PennzEnergy's assets and liabilities and their bases for
income tax purposes. Due to the tax-free nature of the merger, New Devon's
tax basis in those assets and liabilities will be the same as PennzEnergy's
tax basis.
(d) This adjustment reduces the value of proved oil and gas properties by
$657.0 million pursuant to the "ceiling test" required under the full cost
method of accounting. As of March 31, 1999, the pro forma carrying value of
New Devon's oil and gas properties, less deferred income taxes, would have
exceeded the pro forma full cost ceiling by approximately $407.4 million.
Accordingly, the unaudited pro forma balance sheet reflects a reduction of
$657.0 million to oil and gas properties, partially offset by a $249.6
million deferred income tax benefit, resulting in an after-tax charge of
$407.4 million taken against retained earnings.
This adjustment reflects the estimated full cost ceiling reduction that
would have been required had the merger occurred on March 31, 1999, based on a
posted West Texas Intermediate oil price of $15.25 per barrel and a Texas Gulf
Coast index gas price of $1.80 per Mcf. As of June 30, 1999, both West Texas
Intermediate oil and Texas Gulf Coast index gas prices had increased to $16.50
per barrel and $2.14 per Mcf, respectively. Using these prices, the pro forma
reduction of the carrying value of oil and gas properties would be reduced to
less than $200 million (less than $150 million after tax). The actual
reduction, if any, that will be recorded by New Devon will depend on the oil
and gas prices in effect at the end of the quarter in which the merger is
actually closed.
The unaudited pro forma statements of operations include the following
adjustments:
(e) This adjustment reflects the pro forma depreciation, depletion and
amortization expense using the full cost method of accounting based on the
allocation of the purchase price. This adjustment assumes an estimated
$657.0 million ($407.4 million after tax) reduction of the carrying value
of oil and gas properties under the full cost ceiling test, as of January
1, 1998. See pro forma adjustment (d) above for further information on this
estimated noncash charge. This pro forma reduction is directly related to
the merger and therefore is not reflected in the accompanying unaudited pro
forma statements of operations.
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION--(Continued)
December 31, 1998 and March 31, 1999
(f) This adjustment increases interest expense due to the $71.5 million of
merger costs assumed to be funded with borrowings from credit facilities.
(g) This adjustment reduces interest expense for the year 1998 and the
first quarter of 1999 by $6.4 million and $1.7 million, respectively. These
amounts represent the amortization of the pro forma premium recorded in
long-term debt as of January 1, 1998, as part of pro forma adjustment (a)
to record PennzEnergy's assets and liabilities at their estimated fair
values.
(h) This adjustment eliminates historical amounts recorded by PennzEnergy
under the successful efforts accounting method for gains on property sales,
general and administrative expenses, exploration expenses and asset
impairments to conform to the full cost method of accounting followed by
Devon. Under the full cost method, proceeds from the sale of oil and gas
properties are generally recorded as an adjustment of the carrying value of
the properties, with no gain or loss recognized. Also, general and
administrative expenses incurred for property acquisition, exploration and
development activities are capitalized under the full cost method. In
addition, exploration expenses, which include items such as dry hole costs
and lease expirations or impairment expenses, are capitalized under the
full cost method. The $74.7 million reduction of oil and gas properties
recorded by PennzEnergy in the year 1998 was calculated under the
successful efforts method and therefore has been eliminated in the pro
forma statement of operations for 1998.
(i) This adjustment records the net tax effect of all pro forma adjustments
at an effective income tax rate of 38%.
3. Investment in Chevron Common Stock and Related Exchangeable Debentures
As of March 31, 1999, and December 31, 1998, PennzEnergy beneficially owned
approximately 7.1 million shares of Chevron Corporation common stock. These
shares have been deposited with an exchange agent for possible exchange for
$761.2 million principal amount of exchangeable debentures of PennzEnergy. Each
$1,000 principal amount of the exchangeable debentures is exchangeable into
9.3283 shares of Chevron common stock, an exchange rate equivalent to $107 7/32
per share of Chevron common stock.
The exchangeable debentures consist of $443.8 million of 4.90% debentures
and $317.4 million of 4.95% debentures. The exchangeable debentures were issued
on August 3, 1998, and mature August 15, 2008. The exchangeable debentures are
callable beginning on August 15, 2000. The exchangeable debentures are
exchangeable at the option of the holders at any time prior to maturity for
shares of Chevron common stock. In lieu of delivering Chevron common stock,
PennzEnergy may, at its option, pay to any holder an amount in cash equal to
the market value of the Chevron common stock to satisfy the exchange request.
4. Common Shares Outstanding
Net earnings (loss) per average share outstanding have been calculated based
upon the pro forma weighted average number of shares outstanding as follows:
<TABLE>
<CAPTION>
Three Months
Year Ended Ended
December 31, March 31,
1998 1999
------------ ------------
(In Thousands)
<S> <C> <C>
Devon's weighted average common shares
outstanding.................................. 48,376 48,470
New Devon shares to be issued in exchange for
all outstanding shares of PennzEnergy ....... 21,353 21,430
------ ------
Pro forma weighted average New Devon shares
outstanding.................................. 69,729 69,900
====== ======
</TABLE>
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION--(Continued)
December 31, 1998 and March 31, 1999
Pro forma common shares outstanding at March 31, 1999, assuming the merger
occurred on that date, are as follows:
<TABLE>
<CAPTION>
(In Thousands)
--------------
<S> <C>
Devon's common shares outstanding........................ 48,492
New Devon shares to be issued in exchange for all
outstanding shares of PennzEnergy ...................... 21,446
------
Pro forma New Devon common shares outstanding............ 69,938
======
</TABLE>
5. PennzEnergy Historical and Reclassified Balances
Devon and PennzEnergy record certain revenues and expenses differently in
their respective consolidated financial statements. To make the unaudited pro
forma financial information consistent, we have reclassified certain of
PennzEnergy's balances to conform to Devon's financial presentation. The
following tables present PennzEnergy's balances as presented in its historical
financial statements and the reclassified balances which are included in the
accompanying unaudited pro forma statements of operations.
Securities and Exchange Commission rules regarding pro forma presentation
require that the pro forma statements of operations disclose income or loss
from continuing operations. As shown in the tables below, PennzEnergy's
historical results for the year 1998 included a loss from discontinued
operations and extraordinary items that are not included in the reclassified
balances presented in the accompanying unaudited pro forma statement of
operations for 1998.
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION--(Continued)
December 31, 1998 and March 31, 1999
In addition to the reclassifications shown below for the unaudited pro forma
statements of operations, a reclassification has been made to PennzEnergy's
historical balance sheet for the accompanying unaudited pro forma balance sheet
as of March 31, 1999. PennzEnergy had $40.9 million classified as minority
interest in its March 31, 1999, historical consolidated balance sheet. To
conform to Devon's presentation, this amount is included as other long-term
liabilities in the accompanying unaudited pro forma balance sheet.
<TABLE>
<CAPTION>
Year Ended December 31, 1998 Three Months Ended March 31, 1999
------------------------------------------ ------------------------------------------
PennzEnergy PennzEnergy
PennzEnergy Historical PennzEnergy Historical
Historical Reclassifications Reclassified Historical Reclassifications Reclassified
----------- ----------------- ------------ ----------- ----------------- ------------
(Unaudited)
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales.............. $ 550,899 $(550,899) $ -- $115,313 $(115,313) $ --
Oil sales.............. -- 159,294 159,294 -- 37,001 37,001
Gas sales.............. -- 344,594 344,594 -- 69,428 69,428
NGL sales.............. -- 47,011 47,011 -- 8,884 8,884
Investment and other
income................ 286,468 -- 286,468 11,163 -- 11,163
--------- --------- -------- -------- --------- --------
Total revenues....... 837,367 -- 837,367 126,476 -- 126,476
--------- --------- -------- -------- --------- --------
Costs and expenses:
Lease operating
expenses.............. 217,194 (35,939) 181,255 46,643 (7,727) 38,916
Production taxes....... -- 14,232 14,232 -- 2,968 2,968
General and
administrative
expenses.............. 52,228 73,896 126,124 8,972 15,671 24,643
Depreciation,
depletion and
amortization.......... 208,009 -- 208,009 68,141 -- 68,141
Impairment of long-
lived assets.......... 74,739 -- 74,739 -- -- --
Exploration expenses... 161,615 (21,645) 139,970 13,118 (4,011) 9,107
Taxes, other than
income................ 30,544 (30,544) -- 6,901 (6,901) --
Interest charges,
net................... 156,272 -- 156,272 30,560 -- 30,560
--------- --------- -------- -------- --------- --------
Total costs and
expenses............ 900,601 -- 900,601 174,335 -- 174,335
--------- --------- -------- -------- --------- --------
Loss from continuing
operations before
income tax............. (63,234) -- (63,234) (47,859) -- (47,859)
Income tax benefit...... (17,768) -- (17,768) (19,114) -- (19,114)
--------- --------- -------- -------- --------- --------
Loss from continuing
operations............. $ (45,466) $ -- $(45,466) $(28,745) $ -- $(28,745)
========= ======== ========= ========
Loss from discontinued
operations............. (3,246) --
--------- --------
Loss before
extraordinary items.... (48,712) (28,745)
Extraordinary items..... (206,963) --
--------- --------
Net loss................ (255,675) (28,745)
Preferred stock
dividends.............. 5,625 2,434
--------- --------
Net loss available to
common shareholders.... $(261,300) $(31,179)
========= ========
</TABLE>
28
<PAGE>
PROPERTIES OF NEW DEVON AFTER THE MERGER
The following table shows the total proved reserves of New Devon on a pro
forma basis as of December 31, 1998:
<TABLE>
<CAPTION>
Proved Reserves as of December 31, 1998
------------------------------------------------------------
10%
10% Present Present
Primary Operating Areas Devon PennzEnergy New Devon MBoe% Value Value %
- ----------------------- --------- ----------- --------- ----- -------------- -------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
North America--MBoe
Western Canadian
Sedimentary Basin..... 143,908 -- 143,908 22% $ 462,921 22%
Permian Basin.......... 53,375 61,351 114,726 17% 292,951 14%
Rocky Mountain
Region................ 78,973 23,677 102,650 16% 355,902 17%
Gulf Coast/East Texas
Region................ 1,800 86,927 88,727 13% 390,560 19%
Offshore Gulf of
Mexico................ -- 78,674 78,674 12% 339,995 16%
Other U.S.............. 21,295 16,477 37,772 6% 107,583 5%
--------- ------- --------- --- ---------- ---
Total--North America.... 299,351 267,106 566,457 86% 1,949,912 93%
--------- ------- --------- --- ---------- ---
International--MBoe
Azerbaijan............. -- 76,082 76,082 11% 135,867 7%
Other International.... -- 17,557 17,557 3% 1,887 0%
--------- ------- --------- --- ---------- ---
Total International..... -- 93,639 93,639 14% 137,754 7%
--------- ------- --------- --- ---------- ---
Total North America and
International.......... 299,351 360,745 660,096 100% $2,087,666 100%
========= ======= ========= === ========== ===
Oil--MBbls
U.S.................... 44,451 95,969 140,420 21%
Western Canadian
Sedimentary Basin..... 39,006 -- 39,006 6%
Azerbaijan............. -- 76,082 76,082 11%
Other International.... -- 17,180 17,180 3%
--------- ------- --------- ---
Total................ 83,457 189,231 272,688 41%
========= ======= ========= ===
Gas--MMcf
U.S.................... 596,987 849,368 1,446,355 37%
Western Canadian
Sedimentary Basin..... 601,907 -- 601,907 15%
Other International.... -- 2,266 2,266 0%
--------- ------- --------- ---
Total................ 1,198,894 851,634 2,050,528 52%
========= ======= ========= ===
NGLs--MBbls
U.S.................... 11,494 29,575 41,069 6%
Western Canadian
Sedimentary Basin..... 4,585 -- 4,585 1%
--------- ------- --------- ---
Total................ 16,079 29,575 45,654 7%
========= ======= ========= ===
Total--MBoe............. 299,351 360,745 660,096 100%
========= ======= ========= ===
</TABLE>
Primary Operating Areas--North America
New Devon's North American property base will be concentrated in five
primary operating areas: the Western Canadian Sedimentary Basin, which
encompasses portions of British Columbia, Alberta, Saskatchewan and Manitoba;
the Permian Basin of southeastern New Mexico and west Texas; the Rocky Mountain
Region, which spans from northeast Wyoming to northwest New Mexico; the
offshore Gulf of Mexico; and the Gulf Coast/East Texas Region in portions of
Texas and Louisiana.
Western Canadian Sedimentary Basin
New Devon's single largest reserve position will be in the Western Canadian
Sedimentary Basin with proved reserves of 143.9 million barrels of oil
equivalent, or 22% of the total company on a pro forma basis as of December 31,
1998. This basin is a large geologic feature encompassing portions of British
Columbia, Alberta, Saskatchewan and Manitoba. This basin feature forms of
wedge-shaped depression that tapers from a maximum thickness of 17,000 feet on
the western and southern margins to a zero edge along the northeast.
29
<PAGE>
New Devon's properties in this basin will range from shallow oil and natural
gas production in Northern Alberta to deep, long-lived gas reservoirs in the
Foothills area near the Alberta/British Columbia border. In addition,
approximately 2.2 million net acres of undeveloped leasehold in the Western
Canadian Sedimentary Basin should continue to provide New Devon with numerous
exploration and development opportunities.
Permian Basin
This region encompasses approximately 66,000 square miles in southeastern
New Mexico and West Texas and contains more than 500 major oil and gas fields.
Since 1987, several significant acquisitions of properties by Devon in the
Permian Basin have established prospective acreage in areas in which leasehold
positions could not otherwise be obtained. The Permian Basin will represent one
of New Devon's largest reserve positions with total reserves of 114.7 million
barrels of oil equivalent, or 17% of the total company on a pro forma basis as
of December 31, 1998. In addition, several hundred thousand acres of
undeveloped leasehold should continue to provide New Devon with numerous
exploration and development opportunities in the Permian Basin.
Rocky Mountain Region
The Rocky Mountain Region includes oil and gas producing basins that are
grouped together because of their geographic location rather than their
geological characteristics. The region generally encompasses all or portions of
the states of Colorado, Montana, New Mexico, North Dakota, Utah and Wyoming.
New Devon's properties will be primarily located in the San Juan Basin in
northwest New Mexico, the Raton Basin in northeast New Mexico and southeast
Colorado, and the Big Horn and Powder River basins in northeast Wyoming. The
Rocky Mountain Region will represent one of New Devon's largest reserve areas
with 102.7 million barrels of oil equivalent, or 16% of the total company on a
pro forma basis as of December 31, 1998. New Devon will also have over one
million acres of net undeveloped leasehold in the Rocky Mountain Region.
New Devon's single largest natural gas reserve position in the Rocky
Mountain Region will relate to its interests in two federal units in the San
Juan Basin. The San Juan Basin is a densely drilled area covering 3,700 square
miles. It has been historically considered the second largest gas producing
basin in the United States. Prior to 1990, the basin's gas production primarily
came from conventional sandstone formations at a depth of about 5,500 feet.
However, in the early 1980's, development of the shallower Fruitland coal
formation began. Coal seam gas production has increased total production so
significantly that the San Juan Basin could be considered the largest gas
producing basin in the United States.
New Devon's coal seam expertise will also play an important role in both the
Powder River and Raton basins. These basins, which are less developed than the
San Juan Basin, have become two of the more active domestic onshore exploration
areas in the United States. During the next five years, New Devon plans to
drill several thousand coalbed methane wells in the Powder River and Raton
Basins which could, in aggregate, add proved natural gas reserves in excess of
two trillion cubic feet. Peak production for the Powder River Basin is
anticipated for 2003, while peak production in the Raton Basin is estimated for
2004 to 2006. Additionally, New Devon anticipates initial operation of a 126-
mile gas gathering system servicing the Powder River Basin in the fourth
quarter of 1999. When it is fully developed in 2001, this system will have an
estimated capacity of 450 million cubic feet of gas per day and will have
access to multiple interstate pipelines.
Gulf Coast/East Texas Region
New Devon's interest in the Gulf Coast/East Texas Region consists of over
465,000 net acres in portions of the states of Texas and Louisiana and includes
both oil and gas producing zones. On a pro forma basis as of December 31, 1998,
New Devon's Gulf Coast/East Texas reserves were 88.7 million barrels of oil
equivalent, or 13% of the total company. In south Texas, where exploration by
the oil and gas industry is accelerating, 3-D seismic data covers New Devon's
major acreage positions underlain by Charco Lobo, the Middle Wilcox and the
Frio-Vicksburg formations.
30
<PAGE>
Offshore Gulf of Mexico
New Devon will be one of the ten largest producers on the shelf in the
Offshore Gulf of Mexico with operations on 75 blocks. On a pro forma basis as
of December 31, 1998, proved reserves in the Gulf totaled 78.7 million barrels
of oil equivalent, or 12% of the total company. New Devon will operate more
than 40 fields and 80 platforms on the central and western shelf. New Devon
also will hold interests in another 98 exploratory blocks, 39 of which are
deepwater. Of the 39 deepwater blocks, two blocks are in production and two
blocks are undergoing development. New Devon will conduct both shallow and
deepwater exploration and development drilling in the Gulf of Mexico.
Primary Operating Areas--International
New Devon's property base outside North America will include approximately
94 million barrels of oil equivalent reserves or 14% of the total company on a
pro forma basis as of December 31, 1998. New Devon will also have 10.5 million
net undeveloped acres outside of North America. While New Devon's international
operations will be focused primarily in Azerbaijan, New Devon will also have
interests in Venezuela, Brazil, Egypt, Qatar and Australia.
Azerbaijan
Most of New Devon's proved reserves that lie outside North America will be
in Azerbaijan. On a pro forma basis as of December 31, 1998, proved reserves in
Azerbaijan totaled 76.1 million barrels of oil equivalent, or 11% of the total
company. New Devon's properties in Azerbaijan will be located in the Caspian
Basin, which is considered home to some of the world's last known major
undeveloped hydrocarbon reserves. New Devon will hold a 4.8% carried interest
in the Azeri-Chirag-Gunashli joint development area, which is estimated to
contain five billion barrels of crude oil. Peak production for Azerbaijan is
estimated sometime between 2005 and 2008.
Developed and Undeveloped Acreage
The following table sets forth New Devon's developed and undeveloped oil and
gas lease and mineral acreage on a pro forma basis as of December 31, 1998.
Gross acres are the total number of acres in which New Devon will own a working
interest. Net refers to gross acres multiplied by New Devon's fractional
working interests therein.
<TABLE>
<CAPTION>
Developed Undeveloped
----------- -------------
Gross Net Gross Net
----- ----- ------ ------
(In Thousands of Acres)
<S> <C> <C> <C> <C>
United States--Onshore......................... 2,815 1,583 3,049 1,789
United States--Offshore........................ 328 204 532 384
Canada......................................... 1,120 584 2,995 2,175
Australia...................................... -- -- 679 271
Azerbaijan..................................... 10 -- 202 39
Egypt.......................................... -- -- 9,111 8,842
Qatar.......................................... -- -- 519 389
Venezuela...................................... 23 12 1,434 1,004
----- ----- ------ ------
Total........................................ 4,296 2,383 18,521 14,893
===== ===== ====== ======
</TABLE>
31
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF NEW DEVON AFTER THE MERGER
Directors
The New Devon certificate of incorporation classifies the New Devon board
into three classes having staggered terms of three years each. The number of
directors will be fixed from time to time by resolution of the New Devon board.
The New Devon board is currently set at four members. Upon completion of the
merger, we expect the New Devon board will be set at fourteen members,
initially consisting of the following:
<TABLE>
<CAPTION>
Current Board Expiration of
Name Age Membership First Term
---- --- ------------- -------------
<S> <C> <C> <C>
Thomas F. Ferguson(1)..................... 63 Devon 2001
David M. Gavrin(2)........................ 64 Devon 2001
Michael E. Gellert(3)..................... 68 Devon 2002
John A. Hagg.............................. 51 Devon 2000
Henry R. Hamman........................... 61 PennzEnergy 2000
William J. Johnson(4)..................... 62 -- 2002
Michael M. Kanovsky....................... 50 Devon 2002
Robert A. Mosbacher, Jr................... 48 PennzEnergy 2002
J. Larry Nichols.......................... 57 Devon 2000
James L. Pate(5).......................... 63 PennzEnergy 2002
H.R. Sanders, Jr.......................... 67 Devon 2002
Terry L. Savage........................... 54 PennzEnergy 2001
Brent Scowcroft........................... 74 PennzEnergy 2001
Robert B. Weaver.......................... 60 PennzEnergy 2000
</TABLE>
- --------
(1) Chairman of the Audit Committee. The Audit Committee will also consist of
one additional former Devon board member and one former PennzEnergy board
member.
(2) Chairman of the Compensation and Stock Option Committee. The Compensation
and Stock Option Committee will also consist of one additional former
Devon board member and two former PennzEnergy board members.
(3) Chairman of the Nominating Committee. The Nominating Committee will also
consist of one additional former Devon board member and two former
PennzEnergy board members.
(4) Designated by PennzEnergy and mutually approved by PennzEnergy's chairman
of the board and Devon's president. Mr. Johnson is a private consultant
for the oil and gas industry and is President and a director of JonLoc
Inc., an oil and gas company of which he and his family are the sole
shareholders. He also serves as a director of Tesoro Petroleum and J. Ray
McDermott, S.A. From 1991 to 1994, Mr. Johnson was President, Chief
Operating Officer and a director of Apache Corporation.
(5) Chairman of the Board and Chairman of the Executive Committee. The
Executive Committee will consist of Mr. Pate and Mr. Nichols.
The New Devon certificate provides that until New Devon's annual stockholder
meeting in 2000, (1) the initial directors of New Devon designated by Devon and
their designated successors will nominate successors to and fill any vacancies
in that Devon group of directors and (2) the initial directors of New Devon
designated by PennzEnergy and their designated successors will nominate
successors to and fill any vacancies in that PennzEnergy group of directors.
One member of the PennzEnergy group of directors must be a person mutually
agreed to by New Devon's chairman and president. The New Devon certificate
provides that at and after the annual stockholder meeting in 2000, a majority
of the whole board, will nominate successors and fill vacancies.
32
<PAGE>
Executive Officers
The New Devon board will elect executive officers of New Devon annually to
serve in their respective capacities until their successors are duly elected
and qualified or until their earlier resignation or removal. The following will
initially serve as executive officers of New Devon:
<TABLE>
<CAPTION>
Current
Company
Name Age Position in New Devon Affiliation
---- --- ------------------------------------- -----------
<S> <C> <C> <C>
J. Larry Nichols... 57 President and Chief Executive Officer Devon
J. Michael Lacey... 53 Vice President--Operations and
Exploration Devon
Duke R. Ligon...... 58 Vice President--General Counsel Devon
Darryl G. Smette... 52 Vice President--Marketing and
Administrative Planning Devon
H. Allen Turner.... 46 Vice President--Corporate
Development Devon
William T. Vaughn.. 52 Vice President--Finance Devon
Danny J. Heatly.... 43 Controller Devon
Gary L. McGee...... 50 Treasurer Devon
Marian J. Moon..... 49 Secretary Devon
</TABLE>
33
<PAGE>
SELLING STOCKHOLDER
This prospectus relates to 8,655,652 shares of Devon common stock plus up to
an additional 1,298,348 shares solely to cover over-allotments, which may be
delivered by Kerr-McGee, at its option, pursuant to the terms of the
exchangeable notes that are being offered by Kerr-McGee pursuant to the Kerr-
McGee prospectus and prospectus supplement. These shares of Devon common stock
are owned by Kerr-McGee. Assuming Kerr-McGee does not exercise its option to
redeem any portion of the exchangeable notes with cash and delivers all
9,954,000 shares of Devon common stock pursuant to the terms of the
exchangeable notes, Kerr-McGee will thereafter own no shares of Devon common
stock.
PLAN OF DISTRIBUTION
Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, Kerr-McGee has agreed to sell to the underwriters for
this offering, and the underwriters have severally agreed to purchase, the
number of DECS set forth opposite the name of such underwriters below:
<TABLE>
<CAPTION>
Number of
Underwriter DECS
----------- ----------
<S> <C>
Salomon Smith Barney Inc. ........................................
Credit Suisse First Boston Corporation............................
ABN AMRO Incorporated.............................................
Lehman Brothers Inc. .............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................................
----------
Total...........................................................
==========
</TABLE>
The underwriters, for whom Salomon Smith Barney Inc., Credit Suisse First
Boston Corporation, ABN AMRO Incorporated, Lehman Brothers Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives, have
advised us that they propose to offer some of the DECS directly to the public
initially at the public offering price set forth on the cover page of DECS
prospectus supplement and some of the DECS to certain securities dealers at a
discount from the public offering price of up to $ per DECS. Any such
securities dealers may resell any DECS purchased from the underwriters to other
brokers or dealers at a discount from the public offering price of up to $
per DECS. If all of the DECS are not sold at the initial offering price, the
underwriters may change the offering price and other selling terms.
We have agreed not to offer, sell, contract to sell, or otherwise dispose of
(or enter into any transaction which is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or otherwise) by us or
any of our affiliates or any person in privity with us or any of our
affiliates) directly or indirectly, including the filing (or participation in
the filing) of a registration statement with the Securities and Exchange
Commission in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section
16 of the Exchange Act, any shares of common stock or any securities
convertible into, or exchangeable for, or warrants to acquire shares of common
stock (other than the shares sold in connection with the offering of the DECS)
or announce an intention to effect any such transaction, on or prior to the
lockup termination date (as described below) without the prior written consent
of Salomon Smith Barney Inc., which consent will not be unreasonably withheld;
provided, however, that
. we may publicly announce and discuss our intention to offer up to $500
million of shares of Devon stock or securities convertible into, or
exchangeable for, or warrants to acquire shares of such stock and
register and offer such securities;
. we may issue shares of Devon common stock to (1) shareholders of
PennzEnergy in the merger and (2) shareholders of Devon in the proposed
merger of Devon Oklahoma Corporation with Devon in connection with the
merger;
34
<PAGE>
. we or any of our affiliates may offer shares of capital stock, or any
securities convertible into, or exchangeable for, or warrants to acquire
shares of such capital stock, to any owner of any business or assets
acquired or proposed to be acquired by us or any of our affiliates as
consideration for any such acquisition or proposed acquisition. However,
the securities issued for non-cash consideration will not exceed $250
million and, together with any securities issued for cash, will not
exceed $500 million prior to the lockup termination date;
. we may issue shares of common stock in connection with any exchange of
Northstar exchangeable shares; and
. Devon, PennzEnergy or any of their respective affiliates may issue shares
of capital stock pursuant to (1) any stock option plan, equity-incentive
plan, stock purchase plan or dividend reinvestment plan existing as of
July 14, 1999, or as contemplated by the merger agreement with
PennzEnergy, or (2) any security convertible into or exercisable or
exchangeable for any such capital stock outstanding as of July 14, 1999.
The "lockup termination date" shall be the earlier of (1) the 45th day after
the date of the underwriting agreement or (2) if the registration statement
filed with respect to the Devon common stock offered by this prospectus is
declared effective by the Securities and Exchange Commission on or prior to
August 2, 1999, September 6, 1999, or (3) if, at Kerr-McGee's request, we do
not (a) file such registration statement with the Securities and Exchange
Commission on or prior to July 16, 1999, or (b) on or prior to July 22, 1999,
request the Securities and Exchange Commission to declare effective such
registration statement, September 6, 1999.
Kerr-McGee has agreed not to offer, sell, contract to sell, or otherwise
dispose of (or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) by us or our affiliates or any person in privity with us or any of
our affiliates) directly or indirectly, including the filing (or participation
in the filing) of a registration statement with the Securities and Exchange
Commission in respect of, any debt securities issued or guaranteed by us or
publicly announce an intention to effect any such transaction, for a period of
7 days after the date of the underwriting agreement without the prior written
consent of Salomon Smith Barney Inc. If the underwriters give any such consent,
it would not necessarily be preceded or followed by a public announcement of
consent.
Kerr-McGee has granted to the underwriters an option, exercisable for 30
days from the date of this prospectus, to purchase up to an additional
1,298,348 DECS from Kerr-McGee, at the same price per DECS as the initial DECS
purchased by the underwriters. The underwriters may exercise such option only
for the purpose of covering over-allotments, if any, in connection with the
DECS offering. If this option is exercised, each underwriter will be obligated,
subject to certain conditions, to purchase a number of additional DECS
approximately proportionate to such underwriter's initial purchase commitment.
The DECS will be a new issue of securities with no established trading
market. Application has been made to list the DECS on the New York Stock
Exchange and the underwriters intend to make a market in the DECS, subject to
applicable laws and regulations. However, the underwriters are not obligated to
do so and may discontinue any market-making at any time in their sole
discretion without notice. Accordingly, the underwriters cannot assure the
liquidity of the market for DECS.
In connection with this offering of DECS and Devon common stock, Salomon
Smith Barney Inc. on behalf of the underwriters may purchase and sell DECS and
Devon 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
amount of DECS than they are required to purchase from us, and in such case the
underwriters may purchase DECS in the open market following completion of the
offering to cover all or a portion of their short position. The underwriters
may also cover all or a portion of such short position in the DECS, up to
1,298,348 DECS, by exercising the underwriters' over-allotment option referred
to above. Stabilizing transactions consist of certain bids or purchases made
for the
35
<PAGE>
practice of preventing or retarding a decline in the market price of the DECS
or the Devon common stock while this offering is in progress. In addition, the
underwriters may impose penalty bids. This occurs when a particular underwriter
repays to the underwriters a portion of the underwriting discount received by
it because the underwriters have repurchased DECS sold by or for the account of
that underwriter in stabilizing or short-covering transactions. Any of the
activities by the underwriters described in this paragraph may stabilize,
maintain or otherwise affect the market price of the DECS or the Devon common
stock. As a result, the price of the DECS or the Devon common stock may be
higher than the price that otherwise might exist in the open market. The
underwriters may effect these transactions on the American Stock Exchange, in
the over-the-counter market or otherwise. If these activities are commenced,
they may be discontinued by the underwriters at any time.
At Kerr-McGee's option, when the DECS mature, Kerr-McGee may deliver shares
of Devon common stock pursuant to the terms of the DECS. For a description of
the terms of such exchange, see this prospectus and prospectus supplement of
Kerr-McGee to which this prospectus is attached.
The underwriting agreement provides that we and Kerr-McGee will indemnify
the underwriters against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the underwriters may be required to
make in respect of such liabilities.
In the ordinary course of their respective businesses, certain of the
underwriters and their affiliates may have engaged in and may in the future
engage in commercial and investment banking transactions with us, Kerr-McGee
and our respective affiliates, for which the underwriters and their affiliates
have receive or may receive customary compensation.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by McAfee & Taft A Professional Corporation. Certain legal matters
will be passed upon for the underwriters by Cleary, Gottleib, Steen & Hamilton.
EXPERTS
The consolidated financial statements of Devon as of and for each of the
years ended December 31, 1998, 1997 and 1996 have been incorporated by
reference herein in reliance upon the reports of KPMG LLP, independent
certified public accountants, and Deloitte & Touche LLP and
PricewaterhouseCoopers LLP, chartered accountants, incorporated by reference in
this document, and upon the authority of said firms as experts in accounting
and auditing.
The consolidated financial statements of PennzEnergy and its subsidiaries
incorporated by reference in this registration statement/prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and is incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
Certain information with respect to our oil and gas reserves derived from
the reports of LaRoche Petroleum Consultants, Ltd., AMH Group Ltd., Paddock
Lindstrom & Associates Ltd. and John P. Hunter & Associates, Ltd., independent
consulting petroleum engineers, has been included and incorporated by reference
herein upon the authority of said firms as experts with respect to matters
covered by such reports and in giving such reports.
Certain information with respect to PennzEnergy's oil and gas reserves
derived from the report of Ryder Scott Company, L.P., independent consulting
petroleum engineers, has been included and incorporated by reference herein
upon the authority of said firm as experts with respect to matters covered by
such report and in giving such report.
36
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Devon files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements
or other information we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-
SEC-0330 for further information on the public reference rooms. Our SEC filings
are also available to the public from commercial document retrieval services
and at the web site maintained by the SEC at "http://www.sec.gov".
We filed with the SEC a registration statement on Form S-3 with respect to
the common stock offered by this prospectus. This prospectus is a part of that
registration statement. As allowed by SEC rules, this prospectus does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information in, or incorporated by
reference in, this prospectus. This prospectus incorporates by reference the
documents set forth below that we or PennzEnergy have previously filed with the
SEC. These documents contain important information about our companies and
their finances.
<TABLE>
<CAPTION>
Devon SEC Filings
(File No. 001-10067) Period
------------------------------------ -----------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Report on Form 10-Q Quarter ended March 31, 1999
Current Report on Form 8-K/A Filed on February 2, 1999
Current Report on Form 8-K Filed on February 8, 1999
Current Report on Form 8-K Filed on February 22, 1999
Proxy Statement on Schedule 14A Filed on April 9, 1999
Current Report on Form 8-K Filed on April 28, 1999
Current Report on Form 8-K Filed on May 21, 1999
Current Report on Form 8-K Filed on June 1, 1999
Proxy Statement on Schedule 14A Filed on July 16, 1999
<CAPTION>
PennzEnergy SEC Filings
(File No. 001-05591) Period
------------------------------------ -----------------------------------
<S> <C>
Part II, Item 8. "Financial
Statements and Supplementary Data"
of the Annual Report on Form 10-K Fiscal year ended December 31, 1998
Part I, Item 1. "Financial
Statements" of the Quarterly Report
on Form 10-Q Quarter ended March 31, 1999
Part I. "Election of Directors--
Nominees" of the Proxy Statement on
Schedule 14A Filed on March 25, 1999
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this prospectus and the termination of the
offering.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this prospectus. You may obtain documents incorporated by reference
in this prospectus by requesting them in writing, by e-mail or by telephone
from us at the following address:
Devon Energy Corporation
20 North Broadway, Suite 1500
Oklahoma City, Oklahoma 73102-8260
Attention: Corporate Secretary
Tel: (405) 235-3611
[email protected]
37
<PAGE>
You can also get more information by visiting Devon's web site at
"http://www.devonenergy.com". Web site materials are not part of this
prospectus.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
Devon has made forward-looking statements in this document and in the
documents referred to in this document which are subject to risks and
uncertainties. These statements are based on the beliefs and assumptions of our
management and on the information currently available to it.
Statements and calculations concerning oil and gas reserves and their
present value also may be deemed to be forward-looking statements in that they
reflect the determination, based on estimates and assumptions, that oil and gas
reserves may be profitably exploited in the future. When used or referred to in
this document, these forward-looking statements may be preceded by, followed
by, or otherwise include the words "believes," "expects," "anticipates,"
"intends," "plans," "estimates," "projects" or similar expressions, or
statements that certain events or conditions "will" or "may" occur.
Except for our ongoing obligations to disclose material information as
required by the federal securities laws, we do not have any intention or
obligation to update forward-looking statements after we distribute this
document.
38
<PAGE>
COMMONLY USED OIL AND GAS TERMS
"Bbl" means barrel.
"Bbl/d" means Bbl per day.
"Bcf" means billion cubic feet.
"Boe" means equivalent barrels of oil, calculated by converting gas to
equivalent Bbls. The U.S. convention for this conversion is six Mcf equals one
Boe.
"Boe/d" means Boe per day.
"Cash margin" means total revenues less cash expenses. Cash expenses are all
expenses other than the non-cash expenses of depreciation, depletion and
amortization, deferred effect of changes in foreign currency exchange rate on
subsidiary's long-term debt, reduction of carrying value of oil and gas
properties and deferred income tax expense.
"MBbls" means thousand barrels.
"MBoe" means thousand Boe.
"Mcf" means thousand cubic feet.
"Mcfe" means thousand equivalent cubic feet of gas, calculated by converting
oil and NGLs to equivalent Mcf. The U.S. convention for this conversion is one-
sixth Bbl equals one Mcfe.
"MMBbls" means million barrels.
"MMBoe" means million Boe.
"MMBtu" means million British thermal units, a measure of heating value.
"MMcf" means million cubic feet.
"MMcf/d" means MMcf per day.
"Modified EBITDA" means earnings before interest (including deferred effect
of changes in foreign currency exchange rate on subsidiary's long-term debt,
and distributions on preferred securities of subsidiary trust), taxes,
depreciation, depletion and amortization and reduction of carrying value of oil
and gas properties.
"NGL" means natural gas liquids.
"Oil" includes crude oil and condensate.
"SEC 10% present value" is the pre-tax present value of future net cash
flows from proved reserves, discounted at 10% per year. Oil, gas and NGL prices
used to calculate future revenues are based on year-end prices held constant,
except where fixed and determinable price changes are provided by contractual
arrangements. Future development and production costs are also based on year-
end costs and assume the continuation of existing economic conditions.
"Standardized measure of discounted future net cash flows" is the SEC 10%
present value defined above, less applicable income taxes.
"Tcf" means trillion cubic feet.
39
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8,655,652 Shares
Devon Energy Corporation
Common Stock
[LOGO OF DEVON ENERGY CORPORATION]
--------
PROSPECTUS
July , 1999
--------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of estimated expenses incurred by Devon in
connection with the shares of common stock being registered hereby. Devon will
pay for the fees and expenses of the offering of the shares of common stock
offered hereby.
<TABLE>
<S> <C>
SEC Registration Fee................................................. $101,609*
Legal Fees and Expenses.............................................. 125,000
Printing and Engraving Expenses...................................... 90,000*
Accounting Fees and Expenses......................................... 15,000
Transfer Agent and Registrar Fees and Expenses....................... --
Blue Sky Fees and Expenses (including legal fees).................... --*
Miscellaneous........................................................ 10,000
--------
Total.............................................................. $341,609
========
</TABLE>
- --------
* Under the terms of the Registration Rights Agreement between Devon and Kerr-
McGee dated as of December 31, 1996, Kerr-McGee is responsible for the
payment of these items.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Oklahoma General Corporation Act (the "OGCA"), under which Devon is
incorporated, permits indemnification against expenses, including attorneys'
fees, actually and reasonably incurred by a director, officer or agent of a
corporation in connection with the defense of any action, suit or proceeding in
which such a person is a party by reason of such person being or having been a
director, employee or agent of the corporation, or of any corporation,
partnership, joint venture, trust or other enterprise in which he served as
such at the request of the corporation, provided that he acted in good faith
and in a manner reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful, and
provided further (if the threatened, pending or completed action or suit is by
or in the right of the corporation) that he shall not have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
corporation (unless the court determines that indemnity would nevertheless be
proper under the circumstances). Article Ninth of Registrant's Certificate of
Incorporation, provides for the elimination of directors' liability for
monetary damages for a breach of certain fiduciary duties and for
indemnification of directors, officers, employees or agents of Devon as
permitted by the OGCA. These provisions cannot be amended without the
affirmative vote of the holders of at least 80% of the outstanding shares
entitled to vote. Under Devon's Certificate of Incorporation, even though
Devon's directors stand in a fiduciary relation to Devon, they are not liable
to stockholders of Devon for damages for breach of any such fiduciary duty,
except that a director will be personally liable for (i) acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (ii) the payment of dividends or redemption or purchase of stock in
violation of the OGCA, (iii) any breach of the duty of loyalty to Devon or its
stockholders or (iv) any transaction from which the director derived an
improper personal benefit. Article Thirteenth of Devon's Certificate of
Incorporation, also provides for indemnification of Devon's directors and
officers. Such Article also permits Devon to purchase and maintain insurance on
behalf of Devon's directors and officers against any liability arising out of
their status as such, whether or not Registrant would have the power to
indemnify such directors and officers against such liability. These provisions
may be sufficiently broad to indemnify such persons for liabilities arising
under the Securities Act of 1933.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Document
----------- --------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Amended and Restated Agreement and Plan of Merger among
Registrant, Devon Delaware Corporation, Devon Oklahoma Corporation
and PennzEnergy Company dated as of May 19, 1999 (incorporated by
reference to Exhibit 2 to Registrant's Form S-4 filed on July 15,
1999).
3.1 Registrant's Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3 to Registrant's Form 8-K
dated as of December 11, 1998).
3.2 Registrant's By-laws (incorporated by reference to Exhibit 3.2 to
Registrant's Registration Statement on Form 8-B filed on June 7,
1995).
5.1 Opinion of McAfee & Taft A Professional Corporation**
23.1 Consent of KPMG LLP.*
23.2 Consent of Deloitte & Touche LLP.*
23.3 Consent of PricewaterhouseCoopers LLP.*
23.4 Consent of Arthur Andersen LLP*
23.5 Consent of LaRoche Petroleum Consultants, Ltd.*
23.6 Consent of AMH Group Ltd.*
23.7 Consent of Paddock Lindstrom & Associates Ltd.*
23.8 Consent of John P. Hunter & Associates, Ltd.*
23.9 Consent of Ryder Scott Company, L.P.*
23.10 Consent of McAfee & Taft A Professional Corporation (contained in
its opinion in Exhibit 5.1)
24.1 Power of Attorney.**
</TABLE>
- --------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes
(1) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(2) For purposes of determining any liability under the Securities Act,
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 undersigned 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;
(3) For the purpose of determining any liability under the Securities
Act, 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 offer of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act 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 any such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether or not such indemnification is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the registrant has
duly caused this amended Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Oklahoma City, State
of Oklahoma, on the 19th day of July, 1999.
DEVON ENERGY CORPORATION
/s/ J. Larry Nichols
By: __________________________________
J. Larry Nichols
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed by the following persons in the
capacities indicated on July 19, 1999.
<TABLE>
<S> <C> <C>
</TABLE>
Signature Title
/s/ Chairman of the Board
* and Director
- ----------------------------------
John W. Nichols
/s/ J. Larry Nichols President,
- ---------------------------------- Chief Executive
J. Larry Nichols Officer and Director
/s/ Vice President Finance
*
- ----------------------------------
William T. Vaughn
/s/ Controller
*
- ----------------------------------
Danny J. Heatly
/s/ Director
*
- ----------------------------------
Thomas F. Ferguson
/s/ Director
*
- ----------------------------------
John A. Hagg
/s/ Director
*
- ----------------------------------
David M. Gavrin
/s/ Director
*
- ----------------------------------
Michael M. Kanovsky
/s/ Director
*
- ----------------------------------
Michael E. Gellert
/s/ Director
*
- ----------------------------------
H.R. Sanders, Jr.
/s/ Marian J. Moon
* By___________________________
Marian J. Moon, Attorney in Fact
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Amended and Restated Agreement and Plan of Merger among Registrant,
Devon Delaware Corporation, Devon Oklahoma Corporation and PennzEnergy
Company dated as of May 19, 1999 (incorporated by reference to Exhibit 2
to Registrant's Form S-4 filed on July 15, 1999).
3.1 Registrant's Amended and Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3 to Registrant's Form 8-K dated
as of December 11, 1998).
3.2 Registrant's By-laws (incorporated by reference to Exhibit 3.2 to
Registrant's Registration Statement on Form 8-B filed on June 7, 1995).
5.1 Opinion of McAfee & Taft A Professional Corporation**
23.1 Consent of KPMG LLP.*
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Arthur Andersen LLP*
23.5 Consent of LaRoche Petroleum Consultants, Ltd.*
23.6 Consent of AMH Group Ltd.*
23.7 Consent of Paddock Lindstrom & Associates Ltd.*
23.8 Consent of John P. Hunter & Associates, Ltd.*
23.9 Consent of Ryder Scott Company, L.P.
23.10 Consent of McAfee & Taft A Professional Corporation (contained in its
opinion in Exhibit 5.1)
24.1 Power of Attorney.**
</TABLE>
- --------
*Filed herewith.
**Previously filed.
<PAGE>
EXHIBIT 1.1
KERR-MCGEE CORPORATION
_____ DECS/SM/ (Debt Exchangeable for Common Stock/SM/)*
____% Exchangeable Notes Due __________, 2004
(Subject to Exchange into Shares of Common Stock,
par value $.10 per share, of Devon Energy Corporation)
Underwriting Agreement
New York, New York
July __, 1999
Salomon Smith Barney Inc.
Credit Suisse First Boston Corporation
Lehman Brothers Inc.
Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated
ABN AMRO Incorporated
As Representatives of the several Underwriters,
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Kerr-McGee Corporation, a Delaware corporation ("Kerr-McGee"),
proposes to sell to the underwriters named in Schedule I hereto (the
"Underwriters"), for whom you (the "Representatives") are acting as
representatives, an aggregate of ____ DECS (Debt Exchangeable for Common Stock)
consisting of its ___% Exchangeable Notes Due __________, 2004 (the
"Underwritten DECS"), to be issued under an indenture (the "Indenture") dated as
of _____, 1999 between Kerr-McGee and ________________, as trustee (the
"Trustee"). In addition, the Underwriters will have an option to purchase up to
_____ DECS (the "Option DECS" and, together with the Underwritten DECS, the
"DECS"). At maturity (including as a result of acceleration or otherwise), the
DECS will be mandatorily exchanged by Kerr-McGee into shares of Common Stock,
par value $.10 per share, of Devon Energy Corporation (the "Devon Energy Common
Stock"), an Oklahoma corporation ("Devon Energy") (or, at Kerr-McGee's option
under the circumstances described in the Final Kerr-McGee Prospectus (as defined
below), cash with an equal value), at the rate specified in the Final Kerr-McGee
Prospectus. To the extent there are no additional Underwriters listed on
Schedule I other than
- -------------------
* Plus an option to purchase from Kerr-McGee Corporation, up to _____
additional DECS to cover over-allotments.
<PAGE>
you, the term Representatives shall mean you, as Underwriters, and the terms
Representatives and Underwriters shall mean the singular or the plural as the
context requires.
In connection with the foregoing and pursuant to the Registration
Rights Agreement dated December 31, 1996, as amended, between Devon Energy and
Kerr-McGee (the "Registration Rights Agreement"), Devon Energy has filed with
the Commission a registration statement with respect to ____shares (the
"Underwritten Shares") of Devon Energy Common Stock, in respect of the
Underwritten DECS plus an additional _____ shares (the "Option Shares" and,
together with the Underwritten Shares, the "Shares") of Devon Energy Common
Stock in respect of the Option DECS, for sale by Kerr-McGee as a selling
stockholder (to the extent Kerr-McGee shall so elect to deliver Devon Energy
Common Stock to holders of the DECS at maturity thereof pursuant to the terms of
the DECS), which registration statement is referred to in Section 2 of this
Agreement.
Certain terms used in this Agreement are defined in Section 20 of this
Agreement.
1. Representations and Warranties of Kerr-McGee. (a) Kerr-McGee
represents and warrants to, and agrees with, each Underwriter and Devon Energy
as set forth below in this Section 1.
(i) Kerr-McGee meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act"), has prepared and filed with the
Commission a registration statement (file number 333-76951) on Form S-3,
including a related basic prospectus, for the registration under the
Securities Act of 1933, as amended (the "Act"), of the offering and sale of
the DECS, and such registration statement has been declared effective by
the Commission in the form on file with the Commission on its Effective
Date. Kerr-McGee may have filed one or more amendments thereto, including a
related preliminary prospectus, each of which has previously been furnished
to you. Kerr-McGee will next file with the Commission one of the following:
(1) after the Effective Date of such registration statement, a final
prospectus supplement relating to the DECS in accordance with Rules 430A
and 424(b), (2) prior to the Effective Date of such registration statement,
an amendment to such registration statement (including the form of final
prospectus supplement) or (3) a final prospectus supplement in accordance
with Rules 415 and 424(b). In the case of clause (1), Kerr-McGee has
included in such registration statement, as amended at the Effective Date,
all information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in such registration statement and the
Final Kerr-McGee Prospectus. As filed, such final prospectus supplement or
such amendment and form of final prospectus supplement shall contain all
Rule 430A Information, together with all other such required information,
and, except to the extent the Representatives shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the Basic Kerr-McGee Prospectus and
any Preliminary Final Kerr-McGee Prospectus) as Kerr-McGee has advised you,
prior to the Execution Time, will be included or made therein. Such
registration statement, at the Execution Time, meets the requirements set
forth in Rule 415(a)(1)(x).
2
<PAGE>
(ii) On the Kerr-McGee Effective Date, the Kerr-McGee Registration
Statement did or will, and when the Final Kerr-McGee Prospectus is first
filed in accordance with Rule 424(b) and on the Closing Date (as
hereinafter defined) and on any date on which Option DECS are purchased, if
such date is not the Closing Date (a "settlement date"), the Final Kerr-
McGee Prospectus (and any supplement thereto) will, comply in all material
respects with the applicable requirements of the Act, the Exchange Act, and
the Trust Indenture Act, and the respective rules thereunder; on the Kerr-
McGee Effective Date, the Kerr-McGee Registration Statement did not or will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein not misleading; on the Kerr-McGee Effective Date and
on the Closing Date the Indenture did or will comply in all material
respects with the applicable requirements of the Trust Indenture Act and
the rules thereunder; and, on the Kerr-McGee Effective Date, the Final
Kerr-McGee Prospectus, if not filed pursuant to Rule 424(b), will not, and
on the date of any filing pursuant to Rule 424(b) and on the Closing Date,
the Final Kerr-McGee Prospectus (together with any supplement thereto) will
not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that Kerr-McGee makes no representations or warranties
as to (A) that part of the Kerr-McGee Registration Statement which shall
constitute the Statement of Eligibility and Qualification (Form T-1) under
the Trust Indenture Act of the Trustee or (B) the information contained in
or omitted from the Kerr-McGee Registration Statement or the Final
Kerr-McGee Prospectus (or any supplement thereto) in reliance upon and in
conformity with information furnished in writing to Kerr-McGee by or on
behalf of any Underwriter through the Representatives specifically for
inclusion in the Kerr-McGee Registration Statement or the Final Kerr-McGee
Prospectus (or any supplement thereto) or (C) the information contained in
or omitted from the Devon Energy Prospectus (attached as Appendix A to the
Preliminary Final Kerr-McGee Prospectus or the Final Kerr-McGee
Prospectus), other than information contained in or omitted from the Devon
Energy Prospectus in reliance upon and in conformity with information
furnished in writing to Devon Energy by Kerr-McGee specifically for
inclusion in the Devon Energy Prospectus.
(iii) Kerr-McGee and each of its subsidiaries which are
significant subsidiaries (as such term is defined in Rule 1-02 of
Regulation S-X) (each, as set forth on Annex A attached hereto, a
"Kerr-McGee Significant Subsidiary," and collectively, the "Kerr-McGee
Significant Subsidiaries") have been duly incorporated and are validly
existing as corporations in good standing under the laws of the
jurisdictions in which they are chartered or organized with full corporate
power and authority to own or lease, as the case may be, and to operate
their properties and conduct their businesses as described in the Final
Kerr-McGee Prospectus, and are duly qualified to do business as foreign
corporations and are in good standing under the laws of each jurisdiction
in which the failure so to qualify would have a material adverse effect on
the [financial condition, results of operations, prospects, earnings or
properties] of Kerr-McGee and its subsidiaries, taken as a whole;
3
<PAGE>
(iv) All the outstanding shares of capital stock of each Kerr-
McGee Significant Subsidiary have been duly authorized and validly issued
and are fully paid and nonassessable, and, except as otherwise set forth in
the Prospectus, all outstanding shares of capital stock of the Kerr-McGee
Significant Subsidiaries are owned by Kerr-McGee either directly or through
wholly owned subsidiaries free and clear of any perfected security interest
or any other security interests, claims, liens or encumbrances;
(v) The Indenture has been duly authorized and, if the Effective Time
of the Kerr-McGee Registration Statement is prior to the execution and
delivery of this Agreement, has been or otherwise upon such Effective Time
will be duly qualified under the Trust Indenture Act with respect to the
DECS offered thereby; the DECS have been duly authorized; and when DECS
offered are delivered and paid for pursuant to this Agreement on each
Closing Date, the Indenture will have been duly executed and delivered,
such DECS will have been duly executed, authenticated, issued and delivered
and will conform to the description thereof contained in the Final Kerr-
McGee Prospectus and the Indenture and such DECS will constitute valid and
legally binding obligations of Kerr-McGee, enforceable in accordance with
their terms, subject to bankruptcy insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(vi) The DECS have been approved for listing on The New York Stock
Exchange, subject to notice of issuance.
(vii) There is no franchise, contract or other document of a character
required to be described in the Kerr-McGee Registration Statement or Final
Kerr-McGee Prospectus, or to be filed as an exhibit thereto, which is not
described or filed as required; and the statements in the Basic Kerr-McGee
Prospectus under the caption "Description of Debt Securities" and in the
Final Kerr-McGee Prospectus Supplement under the captions "Description of
DECS" and "Certain United States Federal Income Tax Consequences" fairly
summarize the matters therein described.
(viii) This Agreement has been duly authorized, executed and delivered
by Kerr-McGee and constitutes a valid and binding obligation of Kerr-McGee
enforceable in accordance with its terms.
(ix) Kerr-McGee is not and, after giving effect to the offering and
sale of the DECS and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as defined in the
Investment Company Act of 1940, as amended.
(x) No consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained under
the Act and the Trust Indenture Act and such as may be required under the
blue sky laws of any jurisdiction in connection with the purchase and
distribution of the DECS and the Devon Energy
4
<PAGE>
Common Stock by the Underwriters in the manner contemplated herein and in
the Final Kerr-McGee Prospectus and the Devon Energy Prospectus.
(xi) Neither the issue and sale of the DECS nor the consummation of
any other of the transactions herein contemplated nor the fulfillment of
the terms hereof will conflict with, result in a breach or violation or
imposition of any material lien, charge or encumbrance upon any property or
assets of Kerr-McGee or any of its Kerr-McGee Significant Subsidiaries
pursuant to, (i) the charter or by-laws of Kerr-McGee or any of its Kerr-
McGee Significant Subsidiaries, (ii) the terms of any material indenture,
contract, lease, mortgage, deed of trust, note agreement, loan agreement or
other agreement, obligation, condition, covenant or instrument to which
Kerr-McGee or any of its Kerr-McGee Significant Subsidiaries is a party or
bound or to which its or their property is subject, or (iii) any statute,
law, rule, regulation, judgment, order or decree applicable to Kerr-McGee
or any of its Kerr-McGee Significant Subsidiaries of any court, regulatory
body, administrative agency, governmental body, arbitrator or other
authority having jurisdiction over Kerr-McGee or any of its Kerr-McGee
Significant Subsidiaries or any of its or their properties.
(xii) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving Kerr-
McGee or any of its subsidiaries or its or their property is pending or, to
the best knowledge of Kerr-McGee, threatened that (i) could reasonably be
expected to have a material adverse effect on the performance of this
Agreement or the consummation of any of the transactions contemplated
hereby or (ii) could reasonably be expected to have a material adverse
effect on the [financial condition, results of operations, prospects,
earnings or properties] of Kerr-McGee and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Final Kerr-McGee
Prospectus (exclusive of any supplement thereto).
(xiii) Neither Kerr-McGee nor any Kerr-McGee Significant Subsidiary is
in violation or default of (i) any provision of its charter or bylaws, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which it is a party or bound or to which its
property is subject, except if such violation or default with respect to
this clause (ii) could not reasonably be expected to have a material
adverse effect on the [financial condition, results of operations,
prospects, earnings or properties] of Kerr-McGee and its subsidiaries,
taken as a whole, or (iii) any statute, law, rule, regulation, judgment,
order or decree of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over
Kerr-McGee or such Kerr-McGee Significant Subsidiary or any of its
properties, as applicable, except with respect to this clause (iii) such as
could not reasonably be expected to have a material adverse effect on the
[financial condition, results of operations, prospects, earnings or
properties] of Kerr-McGee and its subsidiaries, taken as a whole.
(xiv) Kerr-McGee and its subsidiaries possess all licenses,
certificates, permits and other authorizations issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither Kerr-McGee nor
5
<PAGE>
any such subsidiary has received any notice of proceedings relating to
the revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
[financial condition, results of operations, prospects, earnings or
properties] of Kerr-McGee and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Final Kerr-McGee Prospectus
(exclusive of any supplement thereto).
(xv) [Kerr-McGee and its subsidiaries are (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received and are in compliance with all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) have
not received notice of any actual or potential liability for the
investigation or remediation of any disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, except where such
non-compliance with Environmental Laws, failure to receive required
permits, licenses or other approvals, or liability would not, individually
or in the aggregate, have a material adverse effect on the [financial
condition, results of operations, prospects, earnings or properties] of
Kerr-McGee and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set forth
in or contemplated in the Final Kerr-McGee Prospectus (exclusive of any
supplement thereto). Except as set forth in the Final Kerr-McGee
Prospectus, neither Kerr-McGee nor any of the subsidiaries has been named
as a "potentially responsible party" under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
(xvi) In the ordinary course of its business, Kerr-McGee periodically
reviews the effect of Environmental Laws on the business, operations and
properties of Kerr-McGee and its subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws, or
any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties). On the basis of
such review, Kerr McGee has reasonably concluded that such associated costs
and liabilities would not, singly or in the aggregate, have a material
adverse effect on the [financial condition, results of operations,
prospects, earnings or properties] of Kerr McGee and its subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the Final
Kerr-McGee Prospectus (exclusive of any supplement thereto).]
(xvii) The subsidiaries listed on Annex A attached hereto are the only
significant subsidiaries of Kerr-McGee as defined by Rule 1-02 of
Regulation S-X.
(xviii) Kerr-McGee and its subsidiaries have implemented a
comprehensive, detailed program to analyze and address the risk that the
computer hardware and software used by them may be unable to recognize and
properly execute date-sensitive functions involving
6
<PAGE>
certain dates prior to and any dates after December 31, 1999 (the "Year
2000 Problem"), and has determined that such risk will be remedied on a
timely basis without material expense and will not have a material adverse
effect upon the financial condition and results of operations of Kerr-McGee
and its subsidiaries, taken as a whole; and Kerr-McGee believes, after due
inquiry, that each supplier, vendor, customer or financial service
organization used or serviced by Kerr-McGee and its subsidiaries has
remedied or will remedy on a timely basis the Year 2000 Problem, except to
the extent that a failure to remedy by any such supplier, vendor, customer
or financial service organization would not have a material adverse effect
on Kerr-McGee and its subsidiaries, taken as a whole. Kerr-McGee is in
compliance in all material respects with the Commission Release Nos. 33-
7558 and 33-7609 related to Year 2000 compliance, as amended or
supplemented to date.
(xix) Subsequent to the respective dates as of which information is
presented in the Kerr-McGee Registration Statement and the Final Kerr-McGee
Prospectus, except as otherwise stated therein, there has been no material
adverse change or any development involving a prospective material adverse
change in the condition (financial or otherwise), business, properties or
results of operations of Kerr-McGee and its subsidiaries taken as a whole.
(xx) Kerr-McGee has not taken and will not take, directly or
indirectly, any action designed to or which has constituted or which might
reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any security of
Devon Energy to facilitate the sale or resale of the DECS or the Devon
Energy Common Stock and has not effected any sales of Devon Energy Common
Stock which, if effected by the issuer, would be required to be disclosed
in response to Item 701 of Regulation S-K.
(xxi) If Kerr-McGee elects to exchange the DECS for the Shares on the
Exchange Date (as defined in the DECS), then on such Exchange Date it will
be the record and beneficial owner of the Shares to be sold by it hereunder
free and clear of all liens, encumbrances, equities and claims and will
have duly indorsed such Shares in blank, and, assuming that each holder of
DECS acquires its interest in the Shares it receives on the Exchange Date
from Kerr McGee without notice of any adverse claim (within the meaning of
Section 8-105 of the New York Uniform Commercial Code ("UCC")), upon sale
and delivery of, and payment for, such Shares, as provided herein and in
the terms of the DECS, each such holder will own the Shares, free and clear
of all liens, encumbrances, equities and claims whatsoever.
(b) In respect of any statements in or omissions from the Devon
Energy Registration Statement or the Devon Energy Prospectus or any supplements
thereto made in reliance upon and in conformity with information furnished in
writing to Devon Energy by Kerr-McGee specifically for inclusion therein,
Kerr-McGee makes the same representations and warranties to Devon Energy as
Kerr-McGee makes to each Underwriter under paragraph (a)(ii) of this Section 1.
7
<PAGE>
2. Representations and Warranties of Devon Energy. Devon Energy
represents and warrants to, and agrees with, each Underwriter and Kerr-McGee as
set forth below in this Section 2.
(a) Devon Energy meets the requirements for use of Form S-3 under the
Act and has prepared and filed with the Commission a registration statement
(file number 333-______) on Form S-3, including a related preliminary
prospectus, for registration under the Act of the offering and sale of the
Shares. Devon Energy may have filed one or more amendments thereto,
including a related preliminary prospectus, each of which has previously
been furnished to you. Devon Energy will next file with the Commission one
of the following: either (1) prior to the Devon Energy Effective Date of
such registration statement, a further amendment to such registration
statement, including the form of final prospectus or (2) after the Devon
Energy Effective Date of such registration statement, a final prospectus in
accordance with Rules 430A and 424(b). In the case of clause (2), Devon
Energy has included in such registration statement, as amended at the Devon
Energy Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in such
registration statement and the Devon Energy Prospectus with respect to the
Shares and the offering thereof. As filed, such amendment and form of
final prospectus, or such final prospectus, shall contain all Rule 430A
Information, together with all other such required information with respect
to the Shares and the offering thereof, and, except to the extent the
Representatives shall agree in writing to a modification, shall be in all
substantive respects in the form furnished to you prior to the Execution
Time or, to the extent not completed at the Execution Time, shall contain
only such specific additional information and other changes (beyond that
contained in the latest Preliminary Devon Energy Prospectus) as Devon
Energy has advised you, prior to the Execution Time, will be included or
made therein. Any reference herein to the Devon Energy Registration
Statement, Preliminary Devon Energy Prospectus or the Devon Energy
Prospectus shall be deemed to refer to and include the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 which
were filed under the Exchange Act on or before the Devon Energy Effective
Date or the issue date of a Preliminary Devon Energy Prospectus or the
Devon Energy Prospectus, as the case may be; and any reference herein to
the terms "amend," "amendment" or "supplement" with respect to the Devon
Energy Registration Statement, any Preliminary Devon Energy Prospectus or
the Devon Energy Prospectus shall be deemed to refer to and include the
filing by Devon Energy of any document under the Exchange Act after the
Devon Energy Effective Date, or the issue date of any Preliminary Devon
Energy Prospectus or the Devon Energy Prospectus, as the case may be,
deemed to be incorporated therein by reference.
(b) On the Devon Energy Effective Date, the Devon Energy Registration
Statement did or will, and when the Devon Energy Prospectus is first filed
(if required) in accordance with Rule 424(b) and on the Closing Date and on
any settlement date (as defined below), the Devon Energy Prospectus (and
any supplements thereto) will, comply in all material respects with the
applicable requirements of the Act, the Exchange Act and the respective
rules thereunder; on the Devon Energy Effective Date and at the Execution
Time, the Devon Energy Registration Statement did not or will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated
8
<PAGE>
therein or necessary in order to make the statements therein not
misleading; and, on the Devon Energy Effective Date, the Devon Energy
Prospectus, if not filed pursuant to Rule 424(b), will not, and on the date
of any filing pursuant to Rule 424(b) and on the Closing Date, the Devon
Energy Prospectus (together with any supplement thereto) will not, include
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that Devon Energy makes no representations or warranties as to the
information contained in or omitted from the Devon Energy Registration
Statement, or the Devon Energy Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished in writing to
Devon Energy (i) by or on behalf of any Underwriter through the
Representatives specifically for inclusion in the Devon Energy Registration
Statement or the Devon Energy Prospectus (or any supplement thereto) or
(ii) by Kerr-McGee, in either case, specifically for inclusion in the Devon
Energy Registration Statement or the Devon Energy Prospectus (or any
supplement thereto).
(c) Each of Devon Energy and each of its subsidiaries which are
significant subsidiaries (as such term is defined in Rule 1-02 of
Regulation S-X) (each, as set forth on Annex B attached hereto, a "Devon
Energy Significant Subsidiary," and collectively, the "Devon Energy
Significant Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
jurisdiction in which it is chartered or organized with full corporate
power and authority to own or lease, as the case may be, and to operate its
properties and conduct its business as described in the Devon Energy
Prospectus and is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each jurisdiction in which the
failure so to qualify would have a material adverse effect on the
[financial condition, results of operations, prospects, earnings or
properties] of Devon Energy and its subsidiaries, taken as a whole.
(d) Devon Energy's authorized equity capitalization is as set forth
in the Devon Energy Prospectus; the capital stock of Devon Energy conforms
in all material respects to the description thereof contained in the Devon
Energy Prospectus; the outstanding shares of Devon Energy Common Stock have
been duly and validly authorized and issued and are fully paid and
nonassessable; the Shares have been duly and validly authorized, and, when
issued and delivered to and paid for by the Underwriters pursuant to this
Agreement, will be fully paid and nonassessable; the Shares are duly
listed, and admitted and authorized for trading, subject to official notice
of issuance, on the American Stock Exchange (the "AMEX"); the certificates
for the Shares are in valid and sufficient form; the holders of outstanding
shares of capital stock of Devon Energy are not entitled to preemptive or
other rights to subscribe for the Shares; and, except as set forth in the
Devon Energy Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or rights to convert any
obligations into or exchange any securities for, shares of capital stock of
or ownership interests in Devon Energy are outstanding.
(e) All of the outstanding shares of capital stock of each Devon
Energy Significant Subsidiary have been duly and validly authorized and
issued and are fully
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paid and nonassessable and, except as otherwise set forth in the Devon
Energy Prospectus, all outstanding shares of capital stock of the Devon
Energy Significant Subsidiaries are owned by Devon Energy either directly
or through wholly-owned subsidiaries free and clear of any perfected
security interests, claims, liens or encumbrances.
(f) This Agreement has been duly authorized, executed and delivered
by Devon Energy and constitutes a valid and binding obligation of Devon
Energy enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
(g) No holders of securities of Devon Energy, other than Kerr-McGee,
have rights to the registration of such securities under the Devon Energy
Registration Statement.
(h) Devon Energy and its subsidiaries are (i) in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received and are in compliance with all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) have
not received notice of any actual or potential liability for the
investigation or remediation of any disposal or release of hazardous or
toxic substances or wastes, pollutants or contaminants, except where such
non-compliance with Environmental Laws, failure to receive required
permits, licenses or other approvals, or liability would not, individually
or in the aggregate, have a material adverse effect on the [financial
condition, results of operations, prospects, earnings or properties] of
Devon Energy and its subsidiaries, taken as a whole, whether or not arising
from transactions in the ordinary course of business, except as set forth
in or contemplated in the Devon Energy Prospectus (exclusive of any
supplement thereto). Except as set forth in the Devon Energy Prospectus,
neither Devon Energy nor any of the subsidiaries has been named as a
"potentially responsible party" under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
(i) In the ordinary course of its business, Devon Energy periodically
reviews the effect of Environmental Laws on the business, operations and
properties of Devon Energy and its subsidiaries, in the course of which it
identifies and evaluates associated costs and liabilities (including,
without limitation, any capital or operating expenditures required for
clean-up, closure of properties or compliance with Environmental Laws, or
any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties). On the basis
of such review, Devon Energy has reasonably concluded that such associated
costs and liabilities would not, singly or in the aggregate, have a
material adverse effect on the [financial condition, results of operations,
prospects, earnings or properties] of Devon Energy and its subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the Devon
Energy Prospectus (exclusive of any supplement thereto).
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(j) No action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries or its or their property is pending or,
to the best knowledge of the Company, threatened that (i) could reasonably
be expected to have a material adverse effect on the performance of this
Agreement or the consummation of any of the transactions contemplated
hereby or (ii) could reasonably be expected to have a material adverse
effect on the [financial condition, results of operations, prospects,
earnings or properties] of the Company and its subsidiaries, taken as a
whole, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Devon Energy
Prospectus (exclusive of any supplement thereto).
(k) No consent, approval, authorization, filing with or order of any
court or governmental agency or body is required in connection with the
transactions contemplated herein, except such as have been obtained under
the Act and such as may be required under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares
by the Underwriters in the manner contemplated herein and in the Final
Kerr-McGee Prospectus or the Devon Energy Prospectus.
(l) Neither the issue and sale of the Shares nor the consummation by
Devon Energy of any other of the transactions herein contemplated nor the
fulfillment of the terms hereof will conflict with, result in a breach or
violation or imposition of any material lien, charge or encumbrance upon
any property or assets of Devon Energy or any of its Devon Energy
Significant Subsidiaries pursuant to, (i) the charter or by-laws of Devon
Energy or any of its Devon Energy Significant Subsidiaries, (ii) the terms
of any indenture, contract, lease, mortgage, deed of trust, note agreement,
loan agreement or other agreement, obligation, condition, covenant or
instrument to which Devon Energy or any of its Devon Energy Significant
Subsidiaries is a party or bound or to which its or their property is
subject, or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to Devon Energy or any of its Devon Energy Significant
Subsidiaries of any court, regulatory body, administrative agency,
governmental body, arbitrator or other authority having jurisdiction over
Devon Energy or any of its Devon Energy Significant Subsidiaries or any of
its or their properties.
(m) Devon Energy and its subsidiaries possess all licenses,
certificates, permits and other authorizations issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as presently conducted, except where the failure to
possess such licenses, certificates, permits or other authorizations would
not, individually or in the aggregate, have a material adverse effect on
the [financial condition, results of operations, prospects, earnings or
properties] of Devon Energy and its subsidiaries, taken as a whole, and
neither Devon Energy nor any such subsidiary has received any notice of
proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the [financial condition, results of operations,
prospects, earnings or properties] of Devon Energy and its subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the Devon
Energy Prospectus (exclusive of any supplement thereto).
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(o) Devon Energy is not an "investment company" as defined in the
Investment Company Act of 1940, as amended.
(p) Devon Energy and its subsidiaries have implemented a
comprehensive, detailed program to analyze and address the risk that the
computer hardware and software used by them may be unable to recognize and
properly execute date-sensitive functions involving certain dates prior to
and any dates after December 31, 1999 (the "Year 2000 Problem"), and has
determined that such risk will be remedied on a timely basis without
material expense and will not have a material adverse effect upon the
financial condition and results of operations of Devon Energy and its
subsidiaries, taken as a whole; and Devon Energy believes, after due
inquiry, that each supplier, vendor, customer or financial service
organization used or serviced by Devon Energy and its subsidiaries has
remedied or will remedy on a timely basis the Year 2000 Problem, except to
the extent that a failure to remedy by any such supplier, vendor, customer
or financial service organization would not have a material adverse effect
on Devon Energy and its subsidiaries, taken as a whole. Devon Energy is in
compliance in all material respects with the Commission Release Nos.
33-7558 and 33-7609 related to Year 2000 compliance, as amended or
supplemented to date.
(q) The Devon Energy Common Stock is duly listed and admitted for
trading on the AMEX.
3. Purchase and Sale. (a) Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, Kerr-McGee
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from Kerr-McGee, the number of DECS set forth opposite
that Underwriter's name on Schedule I hereto, at a price of $______ per DECS,
plus accrued interest, if any, on the DECS from _______, 1999 to the Closing
Date.
(b) Subject to the terms and conditions and in reliance upon the
representations and warranties herein set forth, Kerr-McGee hereby grants an
option to the several Underwriters to purchase, severally and not jointly, up to
_______ of the Option DECS at the same purchase price as the Underwriters shall
pay for the Underwritten DECS. Said option may be exercised only to cover over-
allotments in the sale of the Underwritten DECS by the Underwriters. Said
option may be exercised in whole or in part at any time (but not more than once)
on or before the 30th day after the date of the Final Kerr-McGee Prospectus upon
written or telegraphic notice by the Representatives to Kerr-McGee setting forth
the number of the Option DECS as to which the several Underwriters are
exercising the option and the settlement date. The number of the Option DECS to
be purchased by each Underwriter shall be the same percentage of the total
number of the Option DECS to be purchased by the several Underwriters as such
Underwriter is purchasing of the Underwritten DECS, subject to such adjustments
as you in your absolute discretion shall make to eliminate any fractional Option
DECS.
4. Delivery and Payment. Delivery of and payment for the
Underwritten DECS and the Option DECS (if the option provided for in Section
3(b) hereof shall have been exercised on or before the third Business Day prior
to the Closing Date) shall be made at 10:00 AM New York City time, on
__________, 1999, or at such time on such later date not more than three
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Business Days after the foregoing date as the Representatives shall designate,
which date and time may be postponed by agreement between the Representatives
and Kerr-McGee or as provided in Section 11 hereof (such date and time of
delivery and payment for the DECS being herein called the "Closing Date").
Delivery of the DECS shall be made to the Representatives for the respective
accounts of the several Underwriters against payment by the several Underwriters
through the Representatives of the purchase price thereof to or upon the order
of Kerr-McGee by wire transfer payable in same-day funds to an account specified
by Kerr-McGee. Delivery of the DECS shall be made through the facilities of The
Depository Trust Company unless the Representatives shall otherwise instruct.
If the option provided for in Section 3(b) hereof is exercised after
the third Business Day prior to the Closing Date, Kerr-McGee will deliver the
Option DECS (at the expense of Kerr-McGee) to the Representatives, at 388
Greenwich Street, New York, New York, on the date specified by the
Representatives (which shall be within three Business Days after exercise of
said option) for the respective accounts of the several Underwriters, against
payment by the several Underwriters through the Representatives of the purchase
price thereof to or upon the order of Kerr-McGee by wire transfer payable in
same-day funds to an account specified by Kerr-McGee. If settlement for the
Option DECS occurs after the Closing Date, Kerr-McGee and Devon Energy will
deliver to the Representatives on the settlement date for the Option DECS, and
the obligation of the Underwriters to purchase the Option DECS shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 7 hereof.
5. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the DECS for sale to the public as set forth in
the Final Kerr-McGee Prospectus.
6. Agreements of Kerr-McGee.
Kerr-McGee agrees with the several Underwriters that:
(a) Prior to the termination of the offering of the DECS, Kerr-McGee
will not file any amendment of the Kerr-McGee Registration Statement or
supplement (including the Final Kerr-McGee Prospectus or any Preliminary
Final Kerr-McGee Prospectus) to the Basic Kerr-McGee Prospectus unless
Kerr-McGee has furnished you a copy for your review prior to filing and
will not file any such proposed amendment or supplement to which you
reasonably object. Subject to the foregoing sentence, if the Kerr-McGee
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Final Kerr-McGee Prospectus is otherwise required
under Rule 424(b), Kerr-McGee will cause the Final Kerr-McGee Prospectus,
properly completed, and any supplement thereto to be filed with the
Commission pursuant to the applicable paragraph of Rule 424(b) within the
time period prescribed and will provide evidence satisfactory to the
Representatives of such timely filing. Kerr-McGee will promptly advise the
Representatives (1) when the Final Kerr-McGee Prospectus, and any
supplement thereto, shall have been filed (if required) with the Commission
pursuant to Rule 424(b), (2) when, prior to termination of the offering of
the DECS, any amendment to the Kerr-McGee Registration Statement shall have
been filed or become effective, (3) of any request by the Commission or its
staff for any amendment of the Kerr-McGee
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<PAGE>
Registration Statement or for any supplement to the Final Kerr-McGee
Prospectus or for any additional information, (4) of the issuance by the
Commission of any stop order suspending the effectiveness of the Kerr-McGee
Registration Statement or the institution or threatening of any proceeding
for that purpose and (5) of the receipt by Kerr-McGee of any notification
with respect to the suspension of the qualification of the DECS for sale in
any jurisdiction or the institution or threatening of any proceeding for
such purpose. Kerr-McGee will use its reasonable best efforts to prevent
the issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when a prospectus relating to the DECS is
required to be delivered under the Act, any event occurs as a result of
which the Final Kerr-McGee Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or if it shall be necessary to
amend the Kerr-McGee Registration Statement or supplement the Final
Kerr-McGee Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, Kerr-McGee promptly will (1) notify the
Representatives of such event, (2) prepare and file with the Commission,
subject to the second sentence of paragraph (a) of this Section 6, an
amendment or supplement which will correct such statement or omission or
effect such compliance, and (3) supply any supplemented Final Kerr-McGee
Prospectus to you in such quantities as you may reasonably request.
(c) As soon as practicable, Kerr-McGee will make generally available
to its security holders and to the Representatives an earnings statement or
statements of Kerr-McGee and its subsidiaries which will satisfy the
provisions of Section 11(a) of the Act and Rule 158 under the Act.
(d) Kerr-McGee will furnish to the Representatives and counsel for
the Underwriters, without charge, signed copies of the Kerr-McGee
Registration Statement (including exhibits thereto) and to each other
Underwriter a copy of the Kerr-McGee Registration Statement (without
exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of each
Preliminary Final Kerr-McGee Prospectus and the Final Kerr-McGee Prospectus
and any supplement thereto as the Representatives may reasonably request.
Kerr-McGee will pay the expenses of printing or other production of all
documents relating to the offering.
(e) Kerr-McGee will arrange, if necessary, for the qualification of
the DECS and the Shares for sale under the laws of such jurisdictions as
the Representatives may designate, will maintain such qualifications in
effect so long as required for the distribution of the DECS and the Shares
and will pay any fee of the National Association of Securities Dealers,
Inc., in connection with its review of the offering; provided that in no
event shall Kerr-McGee be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action that
would subject it to service of process in suits, other than those arising
out of the offering or sale of the DECS or Shares in any jurisdiction where
it is not now so subject.
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<PAGE>
(f) Kerr-McGee will not, without the prior written consent of Salomon
Smith Barney Inc., offer, sell, contract to sell, or otherwise dispose of
(or enter into any transaction which is designed to, or might reasonably be
expected to, result in the disposition (whether by actual disposition or
effective economic disposition due to cash settlement or otherwise) by
Kerr-McGee or any affiliate of Kerr-McGee or any person in privity with
Kerr-McGee or any affiliate of Kerr-McGee) directly or indirectly,
including the filing (or participation in the filing) of a registration
statement with the Commission in respect of, any debt securities issued or
guaranteed by Kerr-McGee or publicly announce an intention to effect any
such transaction (other than in connection with the DECS), for a period of
7 days after the date of the Underwriting Agreement.
(g) Kerr-McGee will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected
to cause or result, under the Exchange Act or otherwise, in stabilization
or manipulation of the price of any security of Kerr-McGee to facilitate
the sale or resale of the DECS or the Shares.
7. Agreements of Devon Energy.
Devon Energy agrees with the several Underwriters and Kerr-McGee that:
(a) Devon Energy will use its best efforts to cause the Devon Energy
Registration Statement, if not effective at the Execution Time, and any
amendment thereof, to become effective. Prior to the termination of the
offering of the DECS, Devon Energy will not file any amendment of the Devon
Energy Registration Statement or supplement to the Devon Energy Prospectus
unless Devon Energy has furnished you and Kerr-McGee a copy for your review
and Kerr-McGee's information prior to filing and will not file any such
proposed amendment or supplement to which you or Kerr-McGee reasonably
objects. Subject to the foregoing sentence, if the Devon Energy
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Devon Energy Prospectus is otherwise required under
Rule 424(b), Devon Energy will cause the Devon Energy Prospectus, properly
completed, and any supplement thereto to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representatives
and Kerr-McGee of such timely filing. Devon Energy will promptly advise
the Representatives and Kerr-McGee (1) when the Devon Energy Registration
Statement, if not effective at the Execution Time, and any amendment
thereto, shall have become effective, (2) when the Devon Energy Prospectus,
and any supplement thereto, shall have been filed (if required) with the
Commission pursuant to Rule 424(b), (3) when, prior to termination of the
offering of the Shares, any amendment to the Devon Energy Registration
Statement shall have been filed or become effective, (4) if any request by
the Commission or its staff for any amendment of the Devon Energy
Registration Statement or supplement to the Devon Energy Prospectus or for
any additional information, (5) of the issuance by the Commission of any
stop order suspending the effectiveness of the Devon Energy Registration
Statement or the institution or threatening of any proceeding for that
purpose and (6) of the receipt by Devon Energy of any notification with
respect to the suspension of the qualification of the Shares for sale in
any jurisdiction or the institution or threatening of any proceeding for
such purpose. Devon Energy will use its best efforts to
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<PAGE>
prevent the issuance of any such stop order or the suspension of any such
qualification and, if issued, to obtain as soon as possible the withdrawal
thereof.
(b) If, at any time when a prospectus relating to the Devon Energy
Common Stock is required to be delivered under the Act, any event occurs as
a result of which the Devon Energy Prospectus as then supplemented would
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, or if it shall be
necessary to amend the Devon Energy Registration Statement or supplement
the Devon Energy Prospectus to comply with the Act or the Exchange Act or
the respective rules thereunder, Devon Energy promptly will (1) notify the
Representatives and Kerr-McGee of such event, (2) prepare and file with the
Commission, subject to the second sentence of paragraph (a) of this Section
7, an amendment or supplement which will correct such statement or omission
or effect such compliance, and (3) supply only the supplemented Devon
Energy Prospectus to you in such quantities as you may reasonably request
and supply one copy of the supplemented Devon Energy Prospectus to Kerr-
McGee.
(c) As soon as practicable, Devon Energy will make generally
available to its security holders and to the Representatives an earnings
statement or statements of Devon Energy and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under the
Act.
(d) Devon Energy will furnish to the Representatives and counsel for
the Underwriters and Kerr-McGee and its counsel, without charge, signed
copies of the Devon Energy Registration Statement (including exhibits
thereto) and to each other Underwriter and Kerr-McGee a copy of the Devon
Energy Registration Statement (without exhibits thereto) and, so long as
delivery of a prospectus by an Underwriter or dealer may be required by the
Act, as many copies of each Preliminary Devon Energy Prospectus and the
Devon Energy Prospectus and any supplement thereto as the Representatives
may reasonably request. Kerr-McGee will pay the expenses of printing or
other production of all documents relating to the offering.
(e) Devon Energy will, if necessary, cooperate with Kerr-McGee for
purposes of the qualification of the DECS for sale under the laws of such
jurisdictions as the Representatives may designate and maintenance of such
qualifications in effect so long as required for the distribution of the
DECS and the Shares; Devon Energy will arrange for the qualification of the
Shares for sale under the laws of such jurisdictions as the Representatives
may designate and will maintain such qualifications in effect so long as
required for the distribution of the DECS and the Shares; provided, that in
no event shall Devon Energy be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action that
would subject it to service of process in suits, other than those arising
out of the offering or sale of the Shares in any jurisdiction where it is
not now so subject.
(f) Devon Energy and Devon Delaware (as defined below) will not,
without the prior written consent of Salomon Smith Barney Inc. (which shall
not be unreasonably
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withheld), offer, sell, contract to sell, or otherwise dispose of (or enter
into any transaction which is designed to, or might reasonably be expected
to, result in the disposition (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise) by Devon Energy,
Devon Delaware or any affiliate of either of them or any person in privity
with either of them or any affiliate of either of them) directly or
indirectly, including the filing (or participation in the filing) of a
registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call
equivalent position within the meaning of Section 16 of the Exchange Act,
any shares of common stock or any securities convertible into, or
exchangeable for, or warrants to acquire shares of common stock (other than
the Shares in connection with the offering by Kerr-McGee of the DECS) or
publicly announce an intention to effect any such transaction, on or prior
to the Lockup Termination Date (as defined below); provided, however, that:
(i) Devon Energy or Devon Delaware may publicly announce and
discuss its intention to offer and sell, for up to $500 million,
shares of its capital stock or securities convertible into, or
exchangeable for, or warrants to acquire shares of such capital stock
(any such offering, a "Devon Offering"); and
(ii) Devon Energy or Devon Delaware may file a registration
statement with the Commission relating to a Devon Offering and may
offer the shares to be registered thereby;
provided further, that, for the avoidance of doubt:
(A) Devon Delaware Corporation, a Delaware corporation ("Devon
Delaware"), which is to be renamed Devon Energy Corporation following
the proposed merger of PennzEnergy with Devon Delaware, may issue
shares of its common stock to (1) shareholders of PennzEnergy Company
("PennzEnergy") in the proposed merger of PennzEnergy with Devon
Delaware and (2) shareholders of Devon Energy in the proposed merger
of Devon Oklahoma Corporation, an Oklahoma corporation ("Devon
Oklahoma"), with Devon Energy (each such merger as described in Devon
Energy's proxy statement dated __________, 1999);
(B) Devon Energy or any of its affiliates may offer to issue and
issue shares of its capital stock, or any securities convertible into,
or exchangeable for, or warrants to acquire shares of such capital
stock, in any such case, to any owner of any business or assets
acquired or proposed to be acquired by Devon Energy or any of its
affiliates, as consideration for any such acquisition or proposed
acquisition, and in connection therewith publicly announce any such
issuance or contemplated issuance or file with the Commission any
related registration statement; provided, however, that securities
issuances for other than cash consideration as contemplated by this
paragraph shall not exceed $250 million and, together with any
securities issuances for cash as contemplated above, shall not exceed
$500 million of aggregate securities issuances prior to the Lockup
Termination Date;
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(C) Devon Energy or Devon Delaware may issue shares of its common
stock in connection with any exchange, redemption or retraction of
Northstar Energy Corporation exchangeable shares; and
(D) Devon Energy, Devon Delaware, PennzEnergy or any of their
respective affiliates may issue shares of capital stock pursuant to
(x) any stock option plan, equity incentive plan, stock purchase plan
or dividend reinvestment plan existing as of July 14, 1999 or as
contemplated by the Amended and Restated Agreement and Plan of Merger,
dated May 19, 1999, by and among Devon Energy, Devon Delaware, Devon
Oklahoma and PennzEnergy and the related Registration Statement on
Form S-4 of Devon Energy, or (y) any security convertible into or
exercisable or exchangeable for any such capital stock outstanding as
of July 14, 1999.
The "Lockup Termination Date" shall be the earlier of (I) the 45th day
after the date of this Agreement or (II) if the Devon Energy Registration
Statement is declared effective by the Commission on or prior to August 2,
1999, September 6, 1999 or (III) if, at Kerr-McGee's request (assuming
that, in Devon Energy's reasonable judgment, a Devon Energy Registration
Statement is available for filing and would comply with the rules under the
Act), Devon Energy does not (x) file the Devon Energy Registration
Statement with the Commission on or prior to July 16, 1999 or (y) on or
prior to July 22, 1999, request the Commission to declare the Devon Energy
Registration Statement effective, September 6, 1999.
(g) Devon Energy will not take, directly or indirectly, any action
designed to or which has constituted or which might reasonably be expected
to cause or result, under the Exchange Act or otherwise, in stabilization
or manipulation of the price of any security of Devon Energy to facilitate
the sale or resale of the DECS or the Shares.
(h) Devon Energy will furnish the Trustee, in sufficient quantities
for transmission to holders of the DECS, Devon Energy's annual report to
shareholders and reports on Forms 10-K and 10-Q as soon as practicable
after such reports are required to be filed with the Commission.
(i) Devon Energy will take such actions as may be reasonably
necessary to comply with the rules and regulations of the AMEX in respect
of the offering of the Shares contemplated hereby.
(j) Devon Energy will use its reasonable best efforts to furnish to
Kerr-McGee the opinion of McAfee & Taft, A Professional Corporation,
counsel for Devon Energy, dated as of the Closing Date, substantially
similar to the opinion to be provided pursuant to Section 8(e) hereof, and
the officers' certificate, dated as of the Closing Date, substantially
similar to the certificate to be provided pursuant to Section 8(g) hereof.
(k) Devon Energy will use its reasonable best efforts to have the
letters of KPMG LLP and Arthur Andersen LLP, dated as of the Execution Time
and as of the Closing
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Date, to be provided pursuant to Section 8(i) and Section 8(j) hereof,
respectively, addressed to Kerr-McGee in addition to the Representatives.
8. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the DECS shall be subject to the
accuracy of the representations and warranties on the part of Kerr-McGee and
Devon Energy contained herein as of the Execution Time, the Closing Date and any
settlement date pursuant to Section 4 hereof, to the accuracy of the statements
of Kerr-McGee and Devon Energy made in any certificates pursuant to the
provisions hereof, to the performance by Kerr-McGee and Devon Energy of their
respective obligations hereunder and to the following additional conditions:
(a) If the Devon Energy Registration Statement has not become
effective prior to the Execution Time, unless the Representatives agree in
writing to a later time, the Devon Energy Registration Statement will become
effective not later than (i) 6:00 PM, New York City time, on the date of
determination of the public offering price, if such determination occurred at or
prior to 3:00 PM New York City time, on such date or (ii) 9:30 AM, New York City
time on the Business Day following the day on which the public offering price
was determined, if such determination occurred after 3:00 PM New York City time
on such date; if filing of the Final Kerr-McGee Prospectus or the Devon Energy
Prospectus, or any supplements thereto, is required pursuant to Rule 424(b),
such Final Kerr-McGee Prospectus or Devon Energy Prospectus, and any such
supplements, will be filed in the manner and within the time period required by
Rule 424(b); and no stop order suspending the effectiveness of the Kerr-McGee
Registration Statement or the Devon Energy Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
threatened.
(b) (i) Kerr-McGee shall have furnished to the Representatives an
opinion of ____________, corporate counsel for Kerr-McGee, dated as of the
Closing Date and addressed to the Representatives, to the effect that:
(A) each of Kerr-McGee and each of its Kerr-McGee Significant
Subsidiaries has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which it
is organized, with full corporate power and authority to own its properties
and conduct its business as described in the Final Kerr-McGee Prospectus,
and is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each jurisdiction in which the failure so
to qualify would have a material adverse effect on the [financial
condition, results of operations, prospects, earnings or properties] of
Kerr-McGee and its subsidiaries, taken as a whole;
(B) all the outstanding shares of capital stock of each of the Kerr-
McGee Significant Subsidiaries, except for director's qualifying shares and
as otherwise set forth in the Kerr-McGee Registration Statement, are owned
by Kerr-McGee either directly or through wholly owned subsidiaries free and
clear of any perfected security interest and, to the knowledge of such
counsel, after due inquiry, any other security interest, claim, lien or
encumbrance;
(C) Kerr-McGee's authorized equity capitalization is as set forth in
the Final Kerr-McGee Prospectus; the DECS are duly listed, and admitted and
authorized for
19
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trading subject to official notice of issuance, on the AMEX, and, except as
set forth in the Final Kerr-McGee Prospectus, no options, warrants or other
rights to purchase, agreements or other obligations to issue, or rights to
convert any obligations into or exchange any securities for, shares of
capital stock of or ownership interests in Kerr-McGee are outstanding;
(D) to the knowledge of such counsel, there is no pending or
threatened action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving Kerr-
McGee or any of its subsidiaries or its or their property, of a character
required to be disclosed in the Kerr-McGee Registration Statement which is
not adequately disclosed in the Final Kerr-McGee Prospectus, and there is
no franchise, contract or other document of a character required to be
described in the Kerr-McGee Registration Statement or Final Kerr-McGee
Prospectus, or to be filed as an exhibit thereto, which is not described or
filed as required;
(E) to the best knowledge of such counsel, Kerr-McGee is the record
and beneficial owner of the Shares free and clear of all liens,
encumbrances, equities and claims;
(F) neither the execution and delivery of the Indenture, the issue and
sale of the DECS and the Shares, nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof
will conflict with, result in a breach or violation of or imposition of any
lien, charge or encumbrance upon any property or assets of Kerr-McGee or
any Kerr-McGee Significant Subsidiary pursuant to, (i) the charter or by-
laws of Kerr-McGee or any Kerr-McGee Significant Subsidiary, (ii) the terms
of any material indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition,
covenant or instrument to which Kerr-McGee or any Kerr-McGee Significant
Subsidiary is a party or bound or to which its or their property is
subject, or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to Kerr-McGee or any Kerr-McGee Significant Subsidiary of
any court, regulatory body, administrative agency, governmental body,
arbitrator or other authority having jurisdiction over Kerr-McGee or its
subsidiaries or any of its or their properties; and
(G) no holders of securities of Kerr-McGee have rights to the
registration of such securities under the Kerr-McGee Registration
Statement.
(ii) Kerr-McGee shall have requested and caused Simpson Thacher &
Bartlett, counsel for Kerr-McGee, to have furnished to the Representatives their
opinion dated as of the Closing Date and addressed to the Representatives, to
the effect that:
(A) the statements made in the Basic Kerr-McGee Prospectus under the
caption "Description of Debt Securities" and in the Final Kerr-McGee
Prospectus Supplement under the caption "Description of DECS," insofar as
they purport to constitute summaries of certain terms of documents referred
to therein, constitute accurate summaries of the terms of such documents in
all material respects; the statements set forth under the heading "Certain
United States Federal Income Tax
20
<PAGE>
Consequences" in the Final Kerr-McGee Prospectus, insofar as such
statements purport to summarize certain federal income tax laws of the
United States, constitute a fair summary of the principal U.S. federal
income tax consequences of the purchase of DECS by an initial U.S. Holder
(as defined in the Final Kerr-McGee Prospectus);
(B) no consent, approval, authorization, order, registration or
qualification of or with any Federal or New York governmental agency or
body or any Delaware governmental agency or body acting pursuant to the
Delaware General Corporation Law or, to our knowledge, any Federal or New
York court or any Delaware court acting pursuant to the Delaware General
Corporation Law is required for the issue and sale of the DECS by Kerr-
McGee and the compliance by Kerr-McGee with all of the provisions of the
Underwriting Agreement, except for the registration under the Act of the
DECS, and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the DECS by the
Underwriters;
(C) the Indenture has been duly authorized, executed and delivered by
Kerr-McGee and duly qualified under the Trust Indenture Act and, assuming
due authorization, execution and delivery thereof by the Trustee,
constitutes a valid and legally binding obligation of Kerr-McGee
enforceable against Kerr-McGee in accordance with its terms;
(D) the DECS have been duly authorized, executed and issued by Kerr-
McGee and, assuming due authentication thereof by the Trustee and upon
payment and delivery and in accordance with the Underwriting Agreement,
will constitute valid and legally binding obligations of Kerr-McGee
enforceable against Kerr-McGee in accordance with their terms and entitled
to the benefits of the Indenture;
(E) the Kerr-McGee Registration Statement has become effective under
the Act and the Basic Kerr-McGee Prospectus, the Preliminary Final Kerr-
McGee Prospectus and the Final Kerr-McGee Prospectus Supplement were each
filed pursuant to Rule 424(b) of the rules and regulations of the
Commission under the Act and, to our knowledge, no stop order suspending
the effectiveness of the Kerr-McGee Registration Statement has been issued
or proceeding for that purpose has been instituted or threatened by the
Commission;
(F) the Underwriting Agreement has been duly authorized, executed and
delivered by Kerr-McGee;
(G) Kerr-McGee is not and, after giving effect to the offering and
sale of the DECS and the application of the proceeds thereof as described
in the Final Kerr-McGee Prospectus, will not be an "investment company"
within the meaning of and subject to regulation under the Investment
Company Act of 1940, as amended; and
(H) such counsel has not independently verified the accuracy,
completeness or fairness of the statements made or included in the Kerr-
McGee Registration Statement and the Final Kerr-McGee Prospectus or the
documents incorporated by reference therein
21
<PAGE>
and takes no responsibility therefor, except as and to the extent set forth
in paragraph (A) above. Such counsel shall also state that in the course of
the preparation by Kerr-McGee of the Kerr-McGee Registration Statement and
the Final Kerr-McGee Prospectus, excluding the documents incorporated
therein by reference, such counsel participated in conferences with certain
officers and employees of Kerr-McGee, with representatives of Arthur
Andersen and counsel to Kerr-McGee. Such opinion shall also state that such
counsel did not participate in the preparation of documents incorporated by
reference in the Final Kerr-McGee Prospectus. Based upon such counsel's
examination of the Kerr-McGee Registration Statement and the Final
Kerr-McGee Prospectus and the documents incorporated by reference therein,
and such counsel's investigations made in connection with the preparation
of the Kerr-McGee Registration Statement and the Final Kerr-McGee
Prospectus, including any documents incorporated by reference therein and
such counsel's participation in conferences referred to above, (i) such
counsel is of the opinion that the Kerr-McGee Registration Statement, as of
its effective date, and the Final Kerr-McGee Prospectus, as of its date,
complied as to form in all material respects with requirements of the Act,
the Trust Indenture Act and the applicable rules and regulations of the
Commission thereunder and that the documents incorporated by reference in
the Final Kerr-McGee Prospectus complied as to form when filed in all
material respects with the requirements of the Exchange Act and the
applicable rules and regulations of the Commission thereunder, except that,
in each case, such counsel need not express an opinion with respect to the
financial statements or other financial data contained or incorporated by
reference in the Kerr-McGee Registration Statement, the Final Kerr-McGee
Prospectus or the documents incorporated by reference in the Final
Kerr-McGee Prospectus, and (ii) such counsel has no reason to believe that
the Kerr-McGee Registration Statement, as of its effective date, contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading or that the Final Kerr-McGee Prospectus
(including the documents incorporated by reference therein) contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that in
each case, such counsel need not express a belief with respect to the
financial statements or other financial data contained or incorporated by
reference in the Kerr-McGee Registration Statement, the Final Kerr-McGee
Prospectus or the documents incorporated by reference into the Final
Kerr-McGee Prospectus.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the States of
New York and Delaware or the United States, to the extent such counsel deems
proper and specified in such opinion, upon the opinion of other counsel of good
standing whom such counsel believes to be reliable and who are satisfactory to
counsel for the Underwriters and (B) as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible officers of Kerr-McGee and
public officials. References to the Final Kerr-McGee Prospectus in this
paragraph (b) include any supplements thereto at the Closing Date.
(c) The Representatives shall have received from Cleary, Gottlieb,
Steen & Hamilton, counsel for the Underwriters, such opinion or opinions, dated
the Closing Date, with
22
<PAGE>
respect to the issuance and sale of the DECS, the Indenture, the Kerr-McGee
Registration Statement, the Final Kerr-McGee Prospectus (together with any
supplement thereto), the Shares, the Devon Energy Registration Statement, the
Devon Energy Prospectus (together with any supplement thereto) and other related
matters as the Representatives may reasonably require, and Kerr-McGee and Devon
Energy shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(d) Devon Energy shall have furnished to the Representatives the
opinion of McAfee & Taft, a Professional Corporation, counsel for Devon Energy,
dated as of the Closing Date, to the effect that:
(i) each of Devon Energy and each of its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the jurisdiction in which it is chartered or organized,
with full corporate power and authority to own its properties and conduct
its business as described in the Devon Energy Prospectus, and is duly
qualified to do business as a foreign corporation and is in good standing
under the laws of each jurisdiction which requires such qualification
wherein it owns or leases material properties or conducts material business
as listed in the Devon Energy Prospectus, except where the failure to
qualify would not have a material adverse effect on the [financial
condition, results of operations, prospects, earnings or properties] of
Devon Energy and its consolidated subsidiaries, taken as a whole;
(ii) all the outstanding shares of capital stock of each subsidiary
have been duly and validly authorized and issued and are fully paid and
nonassessable, and, except as otherwise set forth in the Devon Energy
Prospectus, all outstanding shares of capital stock of the subsidiaries are
owned by Devon Energy either directly or through wholly owned subsidiaries
free and clear of any perfected security interest and, to the knowledge of
such counsel, after due inquiry, any other security interests, claims,
liens or encumbrances;
(iii) Devon Energy's authorized equity capitalization is as set forth
in the Devon Energy Prospectus; the Shares are duly listed and admitted for
trading on the AMEX; the Devon Energy Common Stock conforms in all material
respects to the description thereof contained in the Devon Energy
Prospectus; the outstanding shares of Devon Energy Common Stock (including
the Shares) have been duly and validly authorized and issued and are fully
paid and non-assessable; the certificates for the Shares are in valid and
sufficient form;
(iv) to the best knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving Devon Energy or any
of its subsidiaries of a character required to be disclosed in the Devon
Energy Registration Statement which is not adequately disclosed in the
Devon Energy Prospectus, and there is no franchise, contract or other
document of a character required to be described in the Devon Energy
Registration Statement or Devon Energy Prospectus, or to be filed as an
exhibit, which is not described or filed as required; and the statements in
the Devon Energy Prospectus under
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<PAGE>
the headings "Description of Capital Stock" fairly summarize the matters
therein described;
(v) the Devon Energy Registration Statement has become effective
under the Act; any required filing of the Devon Energy Prospectus, and of
any supplements thereto, pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); to the best
knowledge of such counsel, no stop order suspending the effectiveness of
the Devon Energy Registration Statement has been issued, no proceedings for
that purpose have been instituted or threatened;
(vi) this Agreement has been duly authorized, executed and delivered
by Devon Energy;
(vii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by Devon
Energy of the transactions contemplated herein, except such as have been
obtained under the Act and such as may be required under the blue sky laws
of any jurisdiction in connection with the purchase and distribution of the
DECS by the Underwriters and the distribution of the Shares pursuant to the
terms of the DECS and such other approvals (specified in such opinion) as
have been obtained;
(viii) neither the distribution of the Shares, nor the consummation
of any other of the transactions herein contemplated nor the fulfillment of
the terms hereof will conflict with, result in a breach or violation of, or
constitute a default under any law or the charter or by-laws of Devon
Energy or the terms of any indenture or other agreement or instrument known
to such counsel and to which Devon Energy or any of its subsidiaries is a
party or bound or any judgment, order or decree known to such counsel to be
applicable to Devon Energy or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body or arbitrator
having jurisdiction over Devon Energy or any of its subsidiaries; and
(ix) No holders of securities of Devon Energy, other than Kerr-McGee,
have rights to the registration of Devon Energy Common Stock under the
Devon Energy Registration Statement.
In addition such counsel shall state that, although such counsel makes no
representation as to the accuracy or completeness of the statements of fact
contained in the Devon Energy Registration Statement and the Devon Energy
Prospectus, no facts have come to such counsel's attention which lead such
counsel to believe that, at the Devon Energy Effective Date, the Devon Energy
Registration Statement and the Devon Energy Prospectus (other than the financial
statements and other financial or accounting information contained therein or
omitted therefrom as to which such counsel need express no opinion) did not
comply as to form in all material respects with the applicable requirements of
the Act and the Exchange Act and the respective rules thereunder; and such
counsel has no reason to believe that at the Devon Energy Effective Date the
Devon Energy Registration Statement (other than the financial statements and
other financial or accounting information included therein or omitted therefrom
as to which such counsel need express no opinion) contained any untrue statement
of a material fact or omitted to
24
<PAGE>
state any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Devon Energy Prospectus (other
than the financial statements and other financial or accounting information
included therein or omitted therefrom as to which such counsel need express no
opinion) includes any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State of
Oklahoma or the United States, to the extent such counsel deems proper and
specified in such opinion, upon the opinion of other counsel of good standing
whom such counsel believes to be reliable and who are satisfactory to counsel
for the Underwriters and (B) as to matters of fact, to the extent such counsel
deems proper, on certificates of responsible officers of Devon Energy and public
officials. References to the Devon Energy Prospectus in this paragraph (d)
include any supplements thereto at the Closing Date.
(e) Kerr-McGee shall have furnished to the Representatives a
certificate of Kerr-McGee, signed by the Chairman of the Board or the President
and the principal financial or accounting officer of Kerr-McGee, dated the
Closing Date, to the effect that the signers, of such certificate have carefully
examined the Kerr-McGee Registration Statement, the Final Kerr-McGee Prospectus,
any supplements to the Final Kerr-McGee Prospectus and this Agreement and that:
(i) the representations and warranties of Kerr-McGee in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and Kerr-
McGee has complied with all the agreements and satisfied all the conditions
on its part to be performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the Kerr-McGee
Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to Kerr-McGee's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
or incorporated by reference in the Final Kerr-McGee Prospectus (exclusive
of any supplement thereto), there has been no material adverse effect on
the condition (financial or otherwise), prospects, earnings, business or
properties of Kerr-McGee and its subsidiaries taken as a whole, whether or
not arising from transactions in the ordinary course of business, except as
set forth in or contemplated in the Final Kerr-McGee Prospectus (exclusive
of any supplement thereto).
(f) Devon Energy shall have furnished to the Representatives a
certificate of Devon Energy, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of Devon Energy,
dated the Closing Date, to the effect that the signers of such certificate have
carefully examined the Devon Energy Registration Statement, the Devon Energy
Prospectus, any supplements to the Devon Energy Prospectus and this Agreement
and that:
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<PAGE>
(i) the representations and warranties of Devon Energy in this
Agreement are true and correct in all material respects on and as of the
Closing Date with the same effect as if made on the Closing Date and Devon
Energy has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied at or prior to the
Closing Date;
(ii) no stop order suspending the effectiveness of the Devon Energy
Registration Statement has been issued and no proceedings for that purpose
have been instituted or, to Devon Energy's knowledge, threatened; and
(iii) since the date of the most recent financial statements included
or incorporated by reference in the Devon Energy Prospectus (exclusive of
any supplement thereto), there has been no material adverse effect on the
condition (financial or otherwise), prospects, earnings, business or
properties of Devon Energy and its subsidiaries, taken as a whole, whether
or not arising from transactions in the ordinary course of business, except
as set forth in or contemplated in the Devon Energy Prospectus (exclusive
of any supplement thereto).
(g) Kerr-McGee shall have requested and caused Arthur Andersen LLP to
have furnished to the Representatives at the Execution Time and at the Closing
Date, letters, dated respectively as of the Execution Time and as of the Closing
Date, in form and substance satisfactory to the Representatives, confirming that
they are independent accountants within the meaning of the Act and the Exchange
Act and the respective applicable rules and regulations adopted by the
Commission thereunder and that they have performed a review of the unaudited
interim financial information of Kerr-McGee for the three-month period ended
March 31, 1999, and as at March 31, 1999, in accordance with Statement on
Auditing Standards No. 71, and stating in effect that:
(i) in their opinion the audited financial statements and financial
statement schedules included or incorporated in the Kerr-McGee Registration
Statement and the Final Kerr-McGee Prospectus and reported on by them
comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related rules and
regulations adopted by the Commission;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Kerr-McGee and its subsidiaries; their
limited review, in accordance with standards established under Statement on
Auditing Standards No. 71, of the unaudited interim financial information
for the three-month period ended March 31, 1999, and as at March 31, 1999;
carrying out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of the
stockholders, directors and [executive, finance, audit] committees of Kerr-
McGee and its subsidiaries; and inquiries of certain officials of Kerr-
McGee who have responsibility for financial and accounting matters of Kerr-
McGee and its subsidiaries as to transactions and events subsequent to
December 31, 1998, nothing came to their attention which caused them to
believe that:
26
<PAGE>
(1) any unaudited financial statements included or incorporated
by reference in the Kerr-McGee Registration Statement and the Final
Kerr-McGee Prospectus do not comply as to form in all material
respects with applicable accounting requirements of the Act and with
the related rules and regulations adopted by the Commission with
respect to financial statements included or incorporated by reference
in quarterly reports on Form 10-Q under the Exchange Act; and said
unaudited financial statements are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included or
incorporated by reference in the Kerr-McGee Registration Statement and
the Final Kerr-McGee Prospectus;
(2) with respect to the period subsequent to March 31, 1999,
there were any changes, at a specified date not more than five days
prior to the date of the letter, in the [long-term debt] of Kerr-McGee
and its subsidiaries or, capital stock of Kerr-McGee, or decreases in
the [stockholders' equity] of Kerr-McGee, [other appropriate line
items] as compared with the amounts shown on the March 31, 1999
consolidated balance sheet included or incorporated in the Kerr-McGee
Registration Statement and the Final Kerr-McGee Prospectus, or for the
period from April 1, 1999 to such specified date there were any
decreases, as compared with the corresponding period in the preceding
year in [consolidated revenues, net income or net income per share] of
Kerr-McGee and its subsidiaries, except in all instances for changes
or decreases set forth in such letter, in which case the letter shall
be accompanied by an explanation by Kerr-McGee as to the significance
thereof unless said explanation is not deemed necessary by the
Representatives;
(3) the information included or incorporation by reference in the
Kerr-McGee Registration Statement and the Final Kerr-McGee Prospectus
in response to Regulation S-K, Item 301 (Selected Financial Data),
Item 302 (Supplementary Financial Information), Item 402 (Executive
Compensation) and Item 503(d) (Ratio of Earnings to Fixed Charges) is
not in conformity with the applicable disclosure requirements of
Regulation S-K.
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of
Kerr-McGee and its subsidiaries) set forth in the Kerr-McGee Registration
Statement and the Final Kerr-McGee Prospectus and in Exhibit 12 to the
Kerr-McGee Registration Statement, including the information set forth under the
captions "[ ]" and "[ ]"in the Final Kerr-McGee Prospectus, the
information included or incorporated by reference in Items [ ] of Kerr-McGee's
Annual Report on Form 10-K, incorporated by reference in the Kerr-McGee
Registration Statement and the Final Kerr-McGee Prospectus, agrees with the
accounting records of Kerr-McGee and its subsidiaries, excluding any questions
of legal interpretation.
References to the Final Kerr-McGee Prospectus in this paragraph (g) include any
supplement thereto at the date of the letter.
27
<PAGE>
(h) Devon Energy shall have requested and caused KPMG LLP to have
furnished to the Representatives, at the Execution Time and at the Closing Date,
letters, dated respectively as of the Execution Time and as of the Closing Date,
in form and substance reasonably satisfactory to the Representatives, confirming
that they are independent accountants within the meaning of the Act and the
respective applicable rules and regulations adopted by the Commission thereunder
and that they have performed a review of the unaudited interim financial
information of Devon Energy for the three-month period ended March 31, 1999 and
as at March 31, 1999 in accordance with Statement on Auditing Standards No. 71,
and stating in effect that:
(i) in their opinion the audited financial statements of Devon Energy
included or incorporated by reference in the Devon Energy Registration
Statement and the Devon Energy Prospectus and reported on by them comply as
to form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related rules and
regulations adopted by the Commission;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by Devon Energy and its subsidiaries; their
limited review, in accordance with standards established under Statement on
Auditing Standards No. 71, of the unaudited interim financial information
of Devon Energy for the three-month period ended March 31, 1999, and as at
March 31, 1999; carrying out certain specified procedures (but not an
examination in accordance with generally accepted auditing standards) which
would not necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of the meetings
of the stockholders, directors and all board committees of Devon Energy and
its subsidiaries; and inquiries of certain officials of Devon Energy who
have responsibility for financial and accounting matters of Devon Energy
and its subsidiaries as to transactions and events subsequent to December
31, 1998, nothing came to their attention which caused them to believe
that:
(1) any unaudited financial statements of Devon Energy included
or incorporated in the Devon Energy Registration Statement and the
Devon Energy Prospectus do not comply as to form in all material
respects with applicable accounting requirements of the Act and with
the related rules and regulations adopted by the Commission with
respect to financial statements of Devon Energy included in quarterly
reports on Form 10-Q under the Exchange Act; and said unaudited
financial statements are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent with
that of the audited financial statements of Devon Energy included or
incorporated by reference in the Devon Energy Registration Statement
and the Devon Energy Prospectus; or
(2) with respect to the period subsequent to March 31, 1999,
there were any changes, at a specified date not more than five days
prior to the date of the letter, in the long-term debt of Devon Energy
or capital stock of Devon Energy, or any decreases in stockholders'
equity of Devon Energy, as compared with the amounts shown on the
March 31, 1999 consolidated balance sheet of Devon Energy included or
incorporated by reference in the Devon Energy Registration Statement
and the Devon Energy Prospectus, or for the period from April 1, 1999
28
<PAGE>
to such specified date there were any decreases, as compared with the
corresponding period in the preceding year in consolidated total
revenues, net income or in the total or per-share amounts of net
income, except in all instances for changes or decreases set forth in
such letter, in which case the letter shall be accompanied by an
explanation by Devon Energy as to the significance thereof unless said
explanation is not deemed necessary by the Representatives.
(3) the information included or incorporated by reference in the
Devon Energy Registration Statement and the Devon Energy Prospectus in
response to Regulation S-K, Item 301 (Selected Financial Data), Item
302 (Supplementary Financial Information), Item 402 (Executive
Compensation) and Item 503(d) (Ratio of Earnings to Fixed Charges) is
not in conformity with the applicable disclosure requirements of
Regulation S-K.
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to historical accounting,
financial or statistical information derived from the general accounting
records of Devon Energy and its subsidiaries) set forth in the Devon Energy
Registration Statement and the Devon Energy Prospectus, including the
information set forth under the caption "Selected Financial Information" in
the Devon Energy Prospectus, the information included or incorporated by
reference in Items 1, 2, 6, 7 and 11 of Devon Energy's Annual Report on
Form 10-K, incorporated by reference in the Devon Energy Registration
Statement and the Devon Energy Prospectus, and the information included in
the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included or incorporated by reference in Devon
Energy's Quarterly Reports on Form 10-Q, incorporated by reference in the
Devon Energy Registration Statement and the Devon Energy Prospectus, agrees
with the accounting records of Devon Energy and its subsidiaries, excluding
any questions of legal interpretation.
References to the Devon Energy Prospectus in this paragraph (h) include any
supplement thereto at the date of the letter.
(i) Devon Energy shall have requested that PennzEnergy cause Arthur
Andersen LLP to have furnished to the Representatives, at the Execution Time and
at the Closing Date, letters, dated respectively as of the Execution Time and as
of the Closing Date, in form and substance reasonably satisfactory to the
Representatives, confirming that they are independent accountants within the
meaning of the Act and the respective applicable rules and regulations adopted
by the Commission thereunder and that they have performed a review of the
unaudited interim financial information of PennzEnergy for the three-month
period ended March 31, 1999 and as at March 31, 1999 in accordance with
Statement on Auditing Standards No. 71, and stating in effect that:
(i) in their opinion the audited financial statements included or
incorporated by reference in the Devon Energy Registration Statement and
the Devon Energy Prospectus and reported on by them comply as to form in
all material respects with the applicable
29
<PAGE>
accounting requirements of the Act and the Exchange Act and the related
rules and regulations adopted by the Commission;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by PennzEnergy and its subsidiaries; their
limited review, in accordance with standards established under Statement on
Auditing Standards No. 71, of the unaudited interim financial information
for the three-month period ended March 31, 1999, and as at March 31, 1999;
carrying out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the comments set
forth in such letter; a reading of the minutes of the meetings of the
stockholders, directors and all board committees of PennzEnergy and its
subsidiaries; and inquiries of certain officials of PennzEnergy who have
responsibility for financial and accounting matters of PennzEnergy and its
subsidiaries as to transactions and events subsequent to December 31, 1998,
nothing came to their attention which caused them to believe that:
(1) any unaudited financial statements of PennzEnergy included
or incorporated in the Devon Energy Registration Statement and the
Devon Energy Prospectus do not comply as to form in all material
respects with applicable accounting requirements of the Act and with
the related rules and regulations adopted by the Commission with
respect to financial statements included in quarterly reports on Form
10-Q under the Exchange Act; and said unaudited financial statements
are not in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited
financial statements of PennzEnergy included or incorporated by
reference in the Devon Energy Registration Statement and the Devon
Energy Prospectus; or
(2) with respect to the period subsequent to March 31, 1999,
there were any changes, at a specified date not more than five days
prior to the date of the letter, in the long-term debt of PennzEnergy
or capital stock of PennzEnergy, or any decreases in stockholders'
equity of PennzEnergy, as compared with the amounts shown on the March
31, 1999 consolidated balance sheet of PennzEnergy included or
incorporated by reference in the Devon Energy Registration Statement
and the Devon Energy Prospectus, or for the period from April 1, 1999
to such specified date there were any decreases, as compared with the
corresponding period in the preceding year in consolidated total
revenues, net income or in the total or per-share amounts of net
income, except in all instances for changes or decreases set forth in
such letter, in which case the letter shall be accompanied by an
explanation by PennzEnergy as to the significance thereof unless said
explanation is not deemed necessary by the Representatives.
References to the Devon Energy Prospectus in this paragraph (i) include any
supplement thereto at the date of the letter.
(j) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in each of the Kerr-McGee Registration Statement and
the Devon Energy Registration Statement (exclusive of any amendment thereof) and
each of the Final Kerr-McGee
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Prospectus and the Devon Energy Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in the
letter or letters referred to in paragraphs (g), (h) and (i) of this Section 8
or (ii) any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), earnings, business or
properties of either Kerr-McGee or Devon Energy and their respective
subsidiaries, taken as a whole, whether or not arising from transactions in the
ordinary course of business, except as set forth in or contemplated in each of
the Final Kerr-McGee Prospectus and the Devon Energy Prospectus (exclusive of
any supplement thereto) the effect of which, in any case referred to in clause
(i) or (ii) above, is, in the sole judgment of the Representatives, so material
and adverse as to make it impractical or inadvisable to proceed with the
offering or delivery of the DECS as contemplated by each of the Kerr-McGee
Registration Statement and the Devon Energy Registration Statement (exclusive of
any amendment thereof) and each of the Final Kerr-McGee Prospectus and the Devon
Energy Prospectus (exclusive of any supplement thereto).
(k) Subsequent to the Execution Time, there shall not have been any
decrease in the rating of any of Kerr-McGee's or Devon Energy's debt securities
by any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the Act) or any notice given of any intended or
potential decrease in any such rating or of a possible change in any such rating
that does not indicate the direction of the possible change.
(l) Prior to the Closing Date, each of Kerr-McGee and Devon Energy
shall have furnished to the Representatives such further information,
certificates and documents as the Representatives may reasonably request.
If any of the conditions specified in this Section 8 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representatives and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by the Representatives. Notice of
such cancellation shall be given to Kerr-McGee and Devon Energy in writing or by
telephone or facsimile confirmed in writing.
9. Reimbursement of Underwriters' Expenses. If the sale of the DECS
provided for herein is not consummated because any condition to the obligations
of the Underwriters set forth in Section 8 hereof is not satisfied, because of
any termination pursuant to Section 12 hereof or because of any refusal,
inability or failure on the part of Kerr-McGee or Devon Energy to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Underwriters, Kerr-McGee will reimburse the Underwriters
severally upon demand for all reasonable out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the proposed purchase and sale of the DECS. The
Underwriters agree to pay such expenses, fees and disbursements in any other
event. In no event will Kerr-McGee be liable to any of the Underwriters for
damages on account of loss of anticipated profits.
10. Indemnification and Contribution. (a) Kerr-McGee agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each
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Underwriter, and each person who controls any Underwriter within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other Federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Kerr-McGee Registration Statement as originally filed or in any
amendment thereof, or in the Basic Kerr-McGee Prospectus, any Preliminary Final
Kerr-McGee Prospectus or the Final Kerr-McGee Prospectus (including any
information contained in or omitted from any Preliminary Devon Energy Prospectus
or Devon Energy Prospectus in reliance on and in conformity with information
furnished to Devon Energy by Kerr-McGee), or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that Kerr-
McGee will not be liable under the indemnity agreement in this paragraph (a) to
the extent that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to Kerr-McGee by or on behalf of any Underwriter through
the Representatives specifically for inclusion therein or in reliance and in
conformity with the Statement of Eligibility of the Trustee; provided, further,
that Kerr-McGee will not be liable under the indemnity agreement in this
paragraph (a) to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to Kerr-McGee by Devon Energy
specifically for inclusion therein (including the information contained in any
Preliminary Devon Energy Prospectus or Devon Energy Prospectus included in any
such document (other than information contained in or omitted from any such
Preliminary Devon Energy Prospectus or Devon Energy Prospectus in reliance on
and conformity with information furnished to Devon Energy by Kerr-McGee
specifically for inclusion therein)); and provided, further that Kerr-McGee
shall not be liable to any Underwriter under the indemnity agreement in this
paragraph (a) with respect to the Preliminary Final Kerr-McGee Prospectus to the
extent that any such loss, claim, damage or liability of such Underwriter
results from the fact that such Underwriter sold DECS to a person as to whom it
shall be established that there was not sent or given, at or prior to the
written confirmation of such sale, a copy of the Final Kerr-McGee Prospectus
(excluding documents incorporated by reference), as the case may be, or of the
Final Kerr-McGee Prospectus as then amended or supplemented (excluding documents
incorporated by reference) in any case where such delivery is required by the
Act and where Kerr-McGee has previously furnished copies thereof in sufficient
quantity to such Underwriter and the loss, claim, damage or liability of such
Underwriter results from an untrue statement or omission of a material fact
contained in the Final Preliminary Kerr-McGee Prospectus and corrected in the
Final Kerr-McGee Prospectus (excluding documents incorporated by reference) or
in the Final Kerr-McGee Prospectus as then amended or supplemented (excluding
documents incorporated by reference). This indemnity agreement will be in
addition to any liability which Kerr-McGee may otherwise have.
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(b) Kerr-McGee agrees to indemnify and hold harmless Devon Energy,
each of its directors, each of its officers who signs the Devon Energy
Registration Statement, and each person who controls Devon Energy within the
meaning of either the Act or the Exchange Act, against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Devon Energy Registration Statement as originally filed or
in any amendment thereof, or in the Preliminary Devon Energy Prospectus or the
Devon Energy Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that the
untrue statement or alleged untrue statement or omission or alleged omission is
made in reliance upon and in conformity with written information furnished in
writing to Devon Energy by Kerr-McGee specifically for inclusion therein, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action. The indemnity
agreement shall be in addition to any liability which Kerr-McGee may otherwise
have.
(c) Devon Energy agrees to indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter,
and each person who controls any Underwriter within the meaning of either the
Act or the Exchange Act and Devon Energy agrees to indemnify and hold harmless
Kerr-McGee, the directors, officers, employees and agents of Kerr-McGee, and
each person who controls Kerr-McGee within the meaning of either the Act or the
Exchange Act, in either case, against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact contained in
(i) the Devon Energy Registration Statement as originally filed or in any
amendment thereof, or in any Preliminary Devon Energy Prospectus or the Devon
Energy Prospectus, or in any amendment thereof or supplement thereto, or (ii)
the Kerr-McGee Registration Statement as originally filed or in any amendment
thereof, or in any Preliminary Final Kerr-McGee Prospectus or the Final Kerr-
McGee Prospectus, or in any amendment thereto or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state in the
documents referred to in clause (i) or (ii) above a material fact required to be
stated in the documents referred to in clause (i) or (ii) above or necessary to
make the statements therein not misleading, but in the case of the documents
referred to clause (ii) only to the extent that the untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished in writing to Kerr-McGee by
Devon Energy specifically for inclusion therein (including the information
contained in any Preliminary Devon Energy Prospectus or Devon Energy Prospectus
included in any such document (other than information contained in or omitted
from any such Preliminary Devon Energy Prospectus or Devon Energy Prospectus in
reliance on and conformity with information furnished to Devon Energy by Kerr-
McGee specifically for inclusion therein)), and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with
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investigating or defending any such loss, claim, damage, liability or action;
provided, however, that Devon Energy will not be liable under the indemnity
agreement in this paragraph (c) to the extent that any such loss, claim, damage
or liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the documents referred
to in clause (i) above in reliance upon and in conformity with written
information furnished to Devon Energy by or on behalf of any Underwriter through
the Representatives specifically for inclusion therein; provided, further that
Devon Energy shall not be liable under the indemnity agreement in this paragraph
(c) to the extent that any such loss, claim, damage or liability arises out of
or is based on any such untrue statement or alleged untrue statement or omission
or alleged omission made in the documents referred to in clause (i) above in
reliance upon and in conformity with written information furnished to Devon
Energy by Kerr-McGee specifically for inclusion therein; and provided, further
Devon Energy shall not be liable to any Underwriter under the indemnity
agreement in this paragraph (c) with respect to the Preliminary Devon Energy
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results from the fact that such Underwriter sold DECS to a person as
to whom it shall be established that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the Devon Energy Prospectus
(excluding documents incorporated by reference) or of the Devon Energy
Prospectus as then amended or supplemented (excluding documents incorporated by
reference), as the case may be, in any case where such delivery is required by
the Act and where Devon Energy has previously furnished copies thereof in
sufficient quantity to such Underwriter and the loss, claim, damage or liability
of such Underwriter results from an untrue statement or omission of a material
fact contained in the Preliminary Devon Energy Prospectus and corrected in the
Devon Energy Prospectus (excluding documents incorporated by reference) or in
the Devon Energy Prospectus as then amended or supplemented (excluding documents
incorporated by reference). This indemnity agreement will be in addition to any
liability which Devon Energy may otherwise have.
(d) Each Underwriter severally and not jointly agrees to indemnify
and hold harmless Kerr-McGee, each of its directors, each of its officers who
signs the Kerr-McGee Registration Statement, and each person who controls
Kerr-McGee within the meaning of either the Act or the Exchange Act, to the same
extent as the foregoing indemnity in paragraph (a) from Kerr-McGee to each
Underwriter, but only with reference to written information furnished to
Kerr-McGee by or on behalf of such Underwriter through the Representatives
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
any Underwriter may otherwise have. Kerr-McGee acknowledges that the statements
set forth in the [___ paragraph] of the cover page, in the [__ paragraph] of the
inside cover page and in the ___ paragraph under the heading ["Plan of
Distribution"] in any Preliminary Final Kerr-McGee Prospectus or the Final
Kerr-McGee Prospectus constitute the only information furnished in writing by or
on behalf of the several Underwriters for inclusion in the documents referred to
in the foregoing indemnity.
(e) Each Underwriter severally agrees to indemnify and hold harmless
Devon Energy and Kerr-McGee, each of their respective directors, each of their
respective officers who signs the Devon Energy Registration Statement or the
Kerr-McGee Registration Statement, respectively, and each person who controls
Devon Energy or Kerr-McGee within the meaning of either the Act or the Exchange
Act, to the same extent as the foregoing indemnity in paragraph (c) from Devon
Energy to each Underwriter and Kerr-McGee, but only with reference to written
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<PAGE>
information relating to such Underwriter furnished to Devon Energy or Kerr-McGee
by or on behalf of such Underwriter through the Representatives specifically for
inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any Underwriter
may otherwise have. Devon Energy acknowledges that the statements set forth in
the [__] paragraph of the inside cover page and under the heading "Plan of
Distribution" in any Preliminary Devon Energy Prospectus or the Devon Energy
Prospectus constitute the only information furnished in writing by or on behalf
of the several Underwriters for inclusion in the documents referred to in the
foregoing indemnity.
(f) Promptly after receipt by an indemnified party under this Section
10 of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party under
this Section 10, notify the indemnifying party in writing of the commencement
thereof; but the failure so to notify the indemnifying party (i) will not
relieve it from any liability under paragraphs (a), (b), (c), (d) or (e) above
unless and to the extent it did not otherwise learn of such action and such
failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraphs (a), (b), (c), (d) or (e)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, that such counsel shall be satisfactory to
the indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the indemnified
party shall have the right to employ separate counsel (including local counsel),
and the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, or (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action suit or proceeding.
(g) In the event that the indemnity provided in paragraph (a), (b),
(c), (d) or (e) of this Section 10 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, Kerr-McGee, Devon Energy and the
Underwriters agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
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<PAGE>
connection with investigating or defending same) (collectively "Losses") to
which Kerr-McGee, Devon Energy and one or more of the Underwriters may be
subject in such proportion as is appropriate to reflect the relative benefits
received by Kerr-McGee, Devon Energy and the Underwriters from the offering of
the DECS; provided, however, that in no case shall any Underwriter (except as
may be provided in any agreement among underwriters relating to the offering of
the DECS) be responsible for any amount in excess of the underwriting discount
or commission applicable to the DECS purchased by such Underwriter hereunder. If
the allocation provided by the immediately preceding sentence is unavailable for
any reason, Kerr-McGee, Devon Energy and the Underwriters severally shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of Kerr-McGee, Devon Energy and
the Underwriters in connection with the statements or omissions which resulted
in such Losses as well as any other relevant equitable considerations. Benefits
received by Kerr-McGee or Devon Energy on the one hand and the Underwriters on
the other with respect to such offering shall be deemed to be equal to the total
net proceeds from the offering (before deducting expenses) received by Kerr-
McGee, and the total underwriting discounts and commissions, respectively, in
each case as set forth on the cover page of the Final Kerr-McGee Prospectus.
Relative fault shall be determined by reference to, among other things, whether
any untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information provided by Kerr-McGee
and Devon Energy on the one hand or the Underwriters on the other, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. Kerr-McGee, Devon
Energy and the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (g), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 10, each person who
controls an Underwriter within the meaning of either the Act or the Exchange Act
and each director, officer, employee and agent of an Underwriter shall have the
same rights to contribution as such Underwriter, and each person who controls
Kerr-McGee or Devon Energy within the meaning of either the Act or the Exchange
Act, each officer of Kerr-McGee or Devon Energy who shall have signed the
Registration Statement and each director of Kerr-McGee or Devon Energy shall
have the same rights to contribution as Kerr-McGee or Devon Energy, subject in
each case to the applicable terms and conditions of this paragraph (g).
(h) Notwithstanding the foregoing, all agreements between Kerr-McGee
and Devon Energy in connection with the respective rights and the amount of
liability of each party to the other shall remain in full force and effect to
the extent provided therein.
11. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the DECS agreed to be purchased by such
Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the principal amount of DECS
set forth opposite their names in Schedule I hereto bears to the aggregate
principal amount of DECS set forth opposite the names of all the remaining
Underwriters) the DECS which the defaulting Underwriter or Underwriters agreed
but failed to purchase; provided, however, that in
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<PAGE>
the event that the aggregate principal amount of DECS which the defaulting
Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of
the aggregate amount of DECS set forth in Schedule I hereto, the remaining
Underwriters shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the DECS, and if such nondefaulting Underwriters
do not purchase all the DECS, this Agreement will terminate without liability to
any nondefaulting Underwriter, Kerr-McGee or Devon Energy. In the event of a
default by any Underwriter as set forth in this Section 11, the Closing Date
shall be postponed for such period, not exceeding five Business Days, as the
Representatives shall determine in order that the required changes in the Kerr-
McGee or Devon Energy Registration Statement and the Final Kerr-McGee or Devon
Energy Prospectus or in any other documents or arrangements may be effected.
Nothing contained in this Agreement shall relieve any defaulting Underwriter of
its liability, if any, to Kerr-McGee, Devon Energy and any nondefaulting
Underwriter for damages occasioned by its default hereunder.
12. Termination. This Agreement shall be subject to termination in
the absolute discretion of the Representatives, by notice given to Kerr-McGee
and Devon Energy prior to delivery of and payment for the DECS, if prior to such
time (i) trading in Kerr-McGee's or Devon Energy's common stock shall have been
suspended by the Commission or trading in securities generally on the New York
Stock Exchange or the AMEX shall have been suspended or limited or minimum
prices shall have been established on either of such Exchanges, (ii) a banking
moratorium shall have been declared either by Federal or New York State
authorities or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency, or war,
or other calamity or crisis the effect of which on financial markets is such as
to make it, in the sole judgment of the Representatives, impracticable or
inadvisable to proceed with the offering or delivery of the DECS as contemplated
by the Final Kerr-McGee Prospectus (exclusive of any supplement thereto).
13. Representations and Indemnities to Survive. Subject to the
limitations imposed by any applicable statute of limitations, the respective
agreements, representations, warranties, indemnities and other statements of
Kerr-McGee and Devon Energy or their respective officers and of the Underwriters
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter,
Kerr-McGee or Devon Energy or any of the officers, directors, employees, agents
or controlling persons referred to in Section 10 hereof, and will survive
delivery of and payment for the DECS. The provisions of Sections 9 and 10
hereof shall survive the termination or cancellation of this Agreement.
14. Other Agreement. Nothing herein shall alter the rights and
obligations of Kerr-McGee and Devon Energy under the Registration Rights
Agreement, the terms of which shall survive and shall not be deemed to have been
terminated by any termination of this Underwriting Agreement or the consummation
of the offering of DECS contemplated hereby.
15. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Representatives, will be mailed,
delivered or telefaxed to the Salomon Smith Barney Inc. General Counsel (Fax
No.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney
Inc., at 388 Greenwich Street, New York, New York, 10013, Attention: General
Counsel; or if sent to Kerr-McGee, will be mailed, delivered or
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telefaxed to the Kerr-McGee General Counsel (Fax No. (405) 270-3649) and
confirmed to it at the Kerr-McGee Corporation, 123 Robert S. Kerr Avenue,
Oklahoma City, Oklahoma 73102, Attention: General Counsel; or if sent to Devon
Energy, will be mailed, delivered or telefaxed to ____________ and confirmed to
it at___________________________________________________, attention of the Legal
Department.
16. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 10 hereof, and no other person will have any right or obligation
hereunder.
17. Applicable Law. This agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed within the State of New York.
18. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.
19. Headings. The section headings used herein are for convenience
only and shall not affect the construction hereof.
20. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.
"Act" shall mean the Securities Act of 1933, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Basic Kerr-McGee Prospectus" shall mean the prospectus referred to in
paragraph (a) (i) of this Section 1 contained in the Kerr-McGee
Registration Statement at the Kerr-McGee Effective Date.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
legal holiday or a day on which banking institutions or trust companies are
authorized or obligated by law to close in New York City [or ].
"Commission" shall mean the Securities and Exchange Commission.
"Devon Energy Effective Date" shall mean each date that the Devon
Energy Registration Statement and any post-effective amendment or
amendments thereto became or become effective.
"Devon Energy Prospectus" shall mean the prospectus relating to the
Shares that is first filed pursuant to Rule 424(b) after the Execution Time
or, if no filing pursuant to Rule 424(b) is required, shall mean the form
of final prospectus relating to the Shares included in the Devon Energy
Registration Statement at the Devon Energy Effective Date.
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"Devon Energy Registration Statement" shall mean the registration
statement referred to in paragraph (a) of this Section 2 including
incorporated documents, exhibits and financial statements, as amended at
the Execution Time and, in the event any post-effective amendment thereto
becomes effective prior to the Closing Date, shall also mean such
registration statement as so amended. Such term shall include any Rule
430A Information deemed to be included therein at the Devon Energy
Effective Date as provided by Rule 430A.
"Effective Date" shall mean each date and time that the Registration
Statement, any post-effective amendment or amendments thereto and any Rule
462(b) Registration Statement became or become effective.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"Execution Time" shall mean the date and time that this Agreement is
executed and delivered by the parties hereto.
"Final Kerr-McGee Prospectus" shall mean the prospectus supplement
relating to the DECS that is first filed pursuant to Rule 424(b) after the
Execution Time together with the Basic Kerr-McGee Prospectus.
"Kerr-McGee Effective Date" shall mean each date that the Kerr-McGee
Registration Statement and any post-effective amendment or amendments
thereto became or become effective.
"Kerr-McGee Registration Statement" shall mean the registration
statement referred to in paragraph (a) (i) of this Section 1, including
incorporated documents, exhibits and financial statements, as amended at
the Execution Time and, in the event any post-effective amendment thereto
becomes effective prior to the Closing Date shall also mean such
registration statement as so amended. Such term shall include any Rule
430A Information deemed to be included therein at the Kerr-McGee Effective
Date as provided by Rule 430A.
"Preliminary Devon Energy Prospectus" shall mean any preliminary
prospectus referred to in paragraph (a) of this Section 2 and any
preliminary prospectus included in the Devon Energy Registration Statement
at the Devon Energy Effective Date that omits Rule 430A Information.
"Preliminary Final Kerr-McGee Prospectus" shall mean any preliminary
prospectus supplement to the Basic Kerr-McGee Prospectus which describes
the DECS and the offering thereof, is used prior to filing the Final Kerr-
McGee Prospectus and is filed, together with the Basic Kerr-McGee
Prospectus, pursuant to Rule 424(b).
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in paragraph 1(a) above and any preliminary prospectus included
in the Registration Statement at the Effective Date that omits Rule 430A
Information.
39
<PAGE>
"Prospectus" shall mean the prospectus relating to the Securities that
is first filed pursuant to Rule 424(b) after the Execution Time or, if no
filing pursuant to Rule 424(b) is required, shall mean the form of final
prospectus relating to the Securities included in the Registration
Statement at the Effective Date.
"Registration Statement" shall mean the registration statement
referred to in paragraph 1(a) above, including exhibits and financial
statements, as amended at the Execution Time (or, if not effective at the
Execution Time, in the form in which it shall become effective) and, in the
event any post-effective amendment thereto or any Rule 462(b) Registration
Statement becomes effective prior to the Closing Date, shall also mean such
registration statement as so amended or such Rule 462(b) Registration
Statement, as the case may be. Such term shall include any Rule 430A
Information deemed to be included therein at the Effective Date as provided
by Rule 430A.
"Rule 424," "Rule 430A" and "Regulation S-K" refer to such rules or
regulation under the Act.
"Rule 430A Information" shall mean information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
Any reference herein to the Kerr-McGee Registration Statement, the
Basic Kerr-McGee Prospectus, any Preliminary Final Kerr-McGee Prospectus or the
Final Kerr-McGee Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Exchange Act on or before the Kerr-McGee Effective
Date or the issue date of the Basic Kerr-McGee Prospectus, any Preliminary Final
Kerr-McGee Prospectus or the Final Kerr-McGee Prospectus, as the case may be;
and any reference herein to the terms "amend," "amendment" or "supplement" with
respect to the Kerr-McGee Registration Statement, the Basic Kerr-McGee
Prospectus, any Preliminary Final Kerr-McGee Prospectus or the Final Kerr-McGee
Prospectus shall be deemed to refer to and include the filing of any document
under the Exchange Act after the Kerr-McGee Effective Date, or the issue date of
any Preliminary Final Kerr-McGee Prospectus or the Final Kerr-McGee Prospectus,
as the case may be, deemed to be incorporated therein by reference.
40
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among Kerr-
McGee, Devon Energy and the several Underwriters.
Very truly yours,
Kerr-McGee Corporation
By: ____________________________
Name:
Title:
Devon Energy Corporation
By:_____________________________
Name:
Title:
Devon Delaware Corporation
By:_____________________________
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Smith Barney
Credit Suisse First Boston Corporation
Lehman Brothers Inc.
Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith
ABN AMRO Incorporated
By: Salomon Smith Barney Inc.
By: ___________________________
Name:
Title:
For themselves and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.
41
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Amount of
Underwritten DECS
Underwriter to be Purchased
- ----------- -------------------------
<S> <C>
Salomon Smith Barney Inc.......................................
Credit Suisse First Boston Corporation.........................
Lehman Brothers Inc............................................
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................................
ABN AMRO Incorporated..........................................
-------------
Total................................................
=============
</TABLE>
<PAGE>
ANNEX A
Kerr-McGee Significant Subsidiaries
-----------------------------------
<PAGE>
ANNEX B
Devon Energy Significant Subsidiaries
-------------------------------------
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Devon Energy Corporation
We consent to incorporation by reference herein of our report dated January
26, 1999, relating to the consolidated balance sheets of Devon Energy
Corporation and subsidiaries as of December 31, 1998, 1997 and 1996 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years then ended, which report appears in the December
31, 1998 annual report on Form 10-K of Devon Energy Corporation and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG LLP
Oklahoma City, Oklahoma
July 19, 1999
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this registration statement
on Form S-3 of Devon Energy Corporation of our report dated January 20, 1999 to
the shareholders of Northstar Energy Corporation, relating to the consolidated
balance sheets of Northstar Energy Corporation and subsidiaries as at December
31, 1998 and 1997 and the related consolidated statements of operations and
comprehensive income (loss), stockholders' equity, and cash flows for each of
the years than ended, which report appears in the December 31, 1998 annual
report on Form 10-K of Devon Energy Corporation.
We also consent to the reference to our firm under the heading "Experts" in
the prospectus.
/s/ DELOITTE & TOUCHE LLP
-------------------------------------
Chartered Accountants
Calgary, Alberta
Canada
July 19, 1999
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to incorporation by reference in this registration statement on
Form S-3 of Devon Energy Corporation of our report dated February 5, 1997,
relating to the consolidated balance sheet of Northstar Energy Corporation and
subsidiaries as of December 31, 1996 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended, which
report appears in the December 31, 1998 annual report on Form 10-K of Devon
Energy Corporation. We also consent to the reference to our firm in this
prospectus as experts in accounting and auditing.
PRICEWATERHOUSECOOPERS LLP
Calgary, Alberta, Canada
July 19, 1999
t
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated March 19, 1999
included in the PennzEnergy Company Form 10-K 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 16, 1999
<PAGE>
EXHIBIT 23.5
ENGINEER'S CONSENT
We consent to the reference to our appraisal report for Devon Energy
Corporation as of the years ended December 31, 1996, 1997 and 1998,
incorporated herein by reference.
LAROCHE PETROLEUM CONSULTANTS, LTD.
/s/ William E. LaRoche
-------------------------------------
William E. LaRoche
Partner
July 19, 1999
<PAGE>
EXHIBIT 23.6
ENGINEER'S CONSENT
We consent to the reference to our appraisal report for Devon Energy
Corporation as of the years ended December 31, 1996, 1997 and 1998,
incorporated herein by reference.
AMH GROUP LTD.
/s/ A. K. Ashton
-------------------------------------
A. K. Ashton
President
July 19, 1999
<PAGE>
EXHIBIT 23.7
ENGINEER'S CONSENT
Paddock Lindstrom & Associates Ltd.
We consent to the reference to our appraisal report for Northstar Energy
Corporation as of the years ended December 31, 1996, 1997 and 1998,
incorporated herein by reference.
PADDOCK LINDSTROM & ASSOCIATES LTD.
/s/ D.L. Paddock
-------------------------------------
D.L. Paddock, P. Eng.
Vice President
July 19, 1999
<PAGE>
EXHIBIT 23.8
ENGINEER'S CONSENT
We consent to the reference to our appraisal report for Northstar Energy
Corporation as of December 31, 1997, incorporated herein by reference.
JOHN P. HUNTER & ASSOCIATES, LTD.
/s/ John P. Hunter
---------------------------------------
John P. Hunter
July 19, 1999
<PAGE>
EXHIBIT 23.9
ENGINEER'S CONSENT
We consent to the reference to our appraisal report for PennzEnergy Company
as of the years ended December 31, 1996, 1997, and 1998, incorporated herein by
reference.
RYDER SCOTT COMPANY, L.P.
July 19, 1999
