<PAGE> 1
As filed with the Securities and Exchange Commission on May 12, 1995
Registration No. 33-79494
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BENTON OIL AND GAS COMPANY
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
Delaware 1311 77-0196707
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code) Identification No.)
incorporation or
organization)
</TABLE>
1145 Eugenia Place
Suite 200
Carpinteria, California 93013
(305) 566-5600
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
A. E. Benton, President
1145 Eugenia Place
Suite 200
Carpinteria, California 93013
(305) 566-5600
(Address, including zip code, and telephone number, including area code,
of agent for service)
with copies to:
Jack A. Bjerke
Emens, Kegler, Brown
Hill & Ritter Co., L.P.A.
65 East State Street, Suite 1800
Columbus, Ohio 43215
------------------------
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement, as
determined by the Registrant.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. /X/
------------------------
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 Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the Registration Statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
PROSPECTUS
SUBJECT TO COMPLETION
MAY 12, 1995
BENTON OIL AND GAS COMPANY
DEBT SECURITIES
Benton Oil and Gas Company (the "Company") may offer, from time to time, Debt
Securities ("Debt Securities"), which may be either senior debt securities
("Senior Securities") or subordinated debt securities ("Subordinated
Securities"), consisting of debentures, notes or other unsecured evidences of
indebtedness in one or more series at an aggregate initial offering price not to
exceed $50,000,000 at prices and on terms to be determined at the time of sale.
All specified terms of the offering and sale of Debt Securities will be set
forth in one or more supplements to this Prospectus ("Prospectus Supplement"),
including the title, aggregate principal amount, whether such Debt Securities
are senior or subordinate, denominations, maturity, rate, if any, of interest
(which may be fixed or variable) or method of calculation thereof, and time of
payment of any interest, any terms for redemption at the option of the Company
or the holder, any terms for sinking fund payments, any conversion or exchange
rights, any listing on a securities exchange and the initial public offering
price and any other terms in connection with the offering and sale of such Debt
Securities. The Senior Securities will rank equally with all other unsecured
Senior Indebtedness (as defined) of the Company. The Subordinated Securities
will be subordinated to all existing and future Senior Indebtedness (as defined)
of the Company. The Debt Securities will be effectively subordinated to all
liabilities of the Company's subsidiaries, including trade payables. As of March
31, 1995, the aggregate amount of outstanding obligations of the Company's
subsidiaries that would have ranked senior to the Debt Securities was
approximately $33.9 million. As of March 31, 1995, the principal amount of
indebtedness of the Company that would have ranked pari passu with the Debt
Securities was approximately $15.0 million; and the principal amount of the
Company's secured indebtedness that would have effectively ranked senior to the
Debt Securities was $5.0 million.
The Company may sell Debt Securities to or through underwriters, and also may
sell Debt Securities directly to other purchasers or through agents. The
Prospectus Supplement will set forth the names of any underwriters or agents
involved in the sale of the Debt Securities in respect of which this Prospectus
is being delivered, the amounts, if any, to be purchased by underwriters and the
compensation, if any, of such underwriters or agents. See "Plan of
Distribution."
SEE "RISK FACTORS" FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1995
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No person has been authorized to give any information or make any representation
other than those contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or by any underwriter, agent or dealer. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Debt
Securities in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
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Page
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Incorporation of Certain Information by
Reference................................. 2
Prospectus Summary.......................... 3
Risk Factors................................ 11
The Company................................. 16
Use of Proceeds............................. 16
Description of Outstanding Indebtedness..... 17
Description of Debt Securities.............. 18
Plan of Distribution........................ 36
Legal Matters............................... 36
Experts..................................... 36
Available Information....................... 37
Glossary.................................... 38
</TABLE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, heretofore filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), are hereby incorporated by reference,
except as superseded or modified herein (i) the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, as amended by Form 10-K/A; and
(ii) the Company's Current Report on Form 8-K filed April 17, 1995.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and shall be part hereof from the date of filing of such
document. Any statement contained in the documents incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in any
other subsequently filed document that also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Prospectus.
The Company undertakes to provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon written
or oral request of such person, a copy of any and all of the documents or
information referred to above that has been or may be incorporated by reference
in this Prospectus (excluding exhibits to such documents unless such exhibits
are specifically incorporated by reference). Requests should be directed to
Benton Oil and Gas Company, 1145 Eugenia Place, Suite 200, Carpinteria,
California 93013 (the principal executive offices of the Company), telephone
(805) 566-5600, Attn: Corporate Secretary.
2
<PAGE> 4
Prospectus Summary
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and Consolidated Financial
Statements and related notes thereto appearing elsewhere in this Prospectus or
incorporated herein by reference. See the Glossary included elsewhere in this
Prospectus for definitions of certain oil and gas terms. Unless the context
otherwise requires or as otherwise specified herein, all references to the
"Company" refer to Benton Oil and Gas Company and its subsidiaries.
The Company
Benton Oil and Gas Company is primarily engaged in the development and
production of oil and gas properties. The Company's operations are focused in
the eastern region of Venezuela, the Gulf Coast region of Louisiana and the West
Siberia region of Russia. At December 31, 1994, the Company's proved reserves of
81.2 MMBOE consisted of 78.5 MMBbl of oil and 16.1 Bcf of natural gas. The
Company's proved reserves, net of production, have increased from 14.8 MMBOE at
December 31, 1990 to 81.2 MMBOE through purchases of reserves-in-place, awards
of development contracts, the acquisition of an additional equity interest in
the Company's Venezuelan subsidiaries, discoveries of oil and natural gas
reserves, extensions of existing producing fields and revisions of previously
estimated reserves. The standardized measure of discounted future net cash
flows, before provision for income taxes, relating to the Company's proved
reserves at December 31, 1994 was approximately $336.3 million. See "Business
- -- Reserves."
Business Strategy
The Company's business strategy is to operate in niche markets where it can
further develop existing oil and gas fields and seek new reserves in areas of
low geologic risk. The Company implements this strategy through the in-house
design and interpretation of 3-D seismic surveys, combined with well
recompletions and exploration and development drilling. The Company believes
that because of its concentration on 3-D seismic technology and the training and
qualifications of its management and technical team, the Company has gained
access to projects it otherwise would not have enjoyed and has a competitive
advantage in finding and developing reserves on an economic basis. The Company's
finding costs for its Proved Reserves from inception to December 31, 1994 were
$1.35 per BOE. The Company's estimate of future development costs for its
non-producing Proved Reserves at December 31, 1994 was $1.23 per BOE, which the
Company believes continues to give it a competitive advantage in finding and
developing reserves.
In the U.S., the Company integrates 3-D seismic technology with subsurface
geologic data from previously drilled wells. This geophysical evaluation enables
the Company to identify previously undetected reserves in existing fields.
Internationally, the Company seeks participation in projects with significant
reserve potential in areas with low geologic risk and known proved reserves
where, in certain situations, the Company can add value by employing modern
exploration, drilling, completion and production techniques. The Company has
formed ventures with local foreign partners in an effort to reduce risk, control
costs, and facilitate local transactions. The Company continues to evaluate
joint venture opportunities with domestic and foreign partners to implement its
business strategy.
Venezuelan Operations
Approximately 75% of the Company's Proved Reserves are located in eastern
Venezuela in the Uracoa, Bombal and Tucupita Fields in the South Monagas Unit.
The Company, together with a Venezuelan construction and engineering company,
Venezolana de Inversiones y Construcciones Clerico, C.A. ("Vinccler"), entered
into an operating service agreement with Lagoven, S.A. ("Lagoven"), an affiliate
of the national oil company, Petroleos de Venezuela, S.A. ("PDVSA") to
reactivate and further develop the three Venezuelan oil fields. The Company was
the first U.S. company to be awarded an oil field development and production
contract in Venezuela since that country's oil field reactivation program was
announced in 1991. Under the terms of the contract, Benton-Vinccler, C.A., the
Company's 80% owned subsidiary ("Benton-Vinccler"), is a contractor for Lagoven
and receives an operating fee in U.S. dollars (currently deposited directly in a
U.S. bank account) for each Bbl of oil produced. Production commenced in the
Uracoa Field during the second quarter of 1993. Production levels have steadily
increased during 1994, due largely to the use of modern drilling, completion and
production techniques, from an average daily production of 3,400 Bbl of oil
during the first quarter of 1994 to 6,700 Bbl of oil during the second quarter
of 1994 to 7,200 Bbl of oil during the third quarter of 1994 to 10,200 Bbl of
oil during the fourth quarter of 1994. Currently, 33 wells in the Field are
producing an aggregate of approximately 12,500 Bbl of oil per day.
Benton-Vinccler intends to completely develop the Uracoa Field by drilling
approximately 90 wells and intends to subsequently reactivate the Bombal Field.
3
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United States Operations
Approximately 4% of the Company's Proved Reserves are located in the United
States. Substantially all of the Company's domestic activities are located in
the Louisiana Gulf Coast at the West Cote Blanche Bay, Rabbit Island and Belle
Isle Fields. The Company has successfully pursued acquisition and joint venture
opportunities in the United States, which have become more readily available as
major oil and gas companies continue to consolidate operations and focus
exploration and development activities outside the United States. The Company
has formed joint ventures with Texaco, Inc. ("Texaco") and Oryx Energy Company
("Oryx") in the Gulf Coast, in which the Company conducts a 3-D seismic survey
and/or development program in exchange for an interest in a field or project
area or the right to drill future wells as a working interest partner.
The Company, Texaco and Oryx are currently producing from and further developing
the fields by using 3-D seismic technology integrated with subsurface geologic
data from previously drilled wells. The Company has identified multiple pay
zones, including lower risk shallow and medium depth prospects and selected
higher risk exploratory prospects, in all three fields. In addition, the Company
entered into certain agreements with Tenneco Ventures Corporation ("Tenneco")
relating to certain present and future exploration and development activities in
the Gulf Coast. This relationship will facilitate increased flexibility and
diversification in the Company's operations in the region.
Russian Operations
Approximately 22% of the Company's Proved Reserves are located in the North
Gubkinskoye Field in the West Siberia region of Russia. The Company's Russian
operations are conducted through GEOILBENT, Ltd. ("GEOILBENT"), a joint venture
comprised of the Company (34%), Purneftegas (33%), and Purneftegasgeologia
(33%). The Company's partners are the Russian state agencies which control
exploration, delineation, and development of oil and gas fields in this part of
the Western Siberian Basin. The joint venture, which has been registered with
the Ministry of Finance of the Russian Republic, develops, produces and markets
oil and condensate from the North Gubkinskoye Field. This Field, which has been
delineated and tested, is surrounded by other large proven fields, a number of
which are now being developed by major international oil and gas companies. In
1993, GEOILBENT completed the construction of a 37 mile crude oil pipeline from
the North Gubkinskoye Field to the Russian oil pipeline network and commenced a
multi-well drilling program in the Field. The ultimate development of the Field
is expected to involve several phases and the drilling of more than 350 wells.
Production from the Field commenced during the third quarter of 1993 and the
Field is currently producing approximately 4,500 Bbl of oil per day. GEOILBENT
commenced exporting oil during the fourth quarter of 1993 and its production is
being sold for U.S. dollars.
Recent Events
In March 1995, the Company and its affiliates and Tenneco sold to WRT Energy
Corporation a 43.75% working interest in the shallower depths (above
approximately 10,575 feet) in the West Cote Blanche Bay Field in Louisiana for
an aggregate purchase price of $20 million. Of this aggregate purchase price,
the Company received $14.9 million.
SUMMARY OF TERMS
Securities Offered............ An aggregate of $50 million principal amount of
Senior Securities and/or Subordinated Securities.
Maturity Date................. .
Interest Payment Dates........ The Debt Securities will bear interest at the
rate per annum set forth in the Prospectus
Supplement related to the Offered Debt
Securities, payable semi-annually on such dates
as set forth in the Prospectus Supplement.
Indenture..................... The Company's Senior Indenture related to the
Senior Securities, dated on such date and with
such Trustee as set forth in the Prospectus
Supplement related to the Senior Securities. The
Company's Subordinated Indenture related to the
Subordinated Securities, dated on such date and
with such Trustee as set forth in the Prospectus
Supplement related to the Subordinated
Securities.
4
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Optional Redemption........... The Senior Securities and the Subordinated
Securities will be redeemable, at the Company's
option, in whole or in part, at any time after
such date and at the redemption prices set forth
in the Prospectus Supplement related to the
Offered Debt Securities, plus accrued and unpaid
interest, if any, to the date of redemption.
Change in Control............. Upon a Change in Control, each holder of Senior
Securities or Subordinated Securities may require
the Company to repurchase each such holder's Debt
Securities at a purchase price in cash equal to
101% of their principal amount plus accrued and
unpaid interest, if any, to such repurchase date,
and the failure of the Company to repurchase such
holder's Debt Securities will constitute an Event
of Default. In the event of a Change in Control,
the Company may not be in a financial position to
pay the repurchase price of the Debt Securities.
At December 31, 1994, the Company had total
revenues of $34,704,806, and income of
$2,954,161. There can be no assurance that at
upon a Change in Control, the Company will have
access to cash or financing in order to pay the
repurchase price. In addition, similar Change in
Control provisions are contained in the Company's
8% Convertible Subordinated Debentures due May 1,
2002 and the 8% Convertible Notes due October 1,
2001, with a total aggregate principal amount
outstanding at December 31, 1994 of $11,090,000.
See "Description of Outstanding Indebtedness."
Pursuant to the terms of the Indentures, the
Notes and Debentures will be subordinated to both
the Senior Securities and the Subordinated
Securities. The Company's Senior Unsecured Notes
and Credit Facility each contain restrictions on
the Company's ability to redeem or repay
indebtedness. Upon a Change in Control, the
Company would be required to repay the
outstanding principal amount of these Senior
Indebtedness obligations (an aggregate of $20
million outstanding at December 31, 1994) before
repurchasing the Senior Securities and the
Subordinated Securities, or negotiate with the
holders of these debt instruments to permit the
repurchase. The Company's ability to repurchase
the debt Securities will be dependent upon the
availability of cash and other financing sources
to consummate such a repurchase. There can be no
assurance that the Company will have the
financial position to negotiate with the holders
of the Senior Indebtedness or pay the outstanding
indebtedness and repurchase the Senior Securities
and Subordinated Securities in the event of a
Change in Control. See "Description of
Outstanding Indebtedness."
A Change in Control is defined in the Indentures
to include the sale of all or substantially all
of the assets of the Company, and, in certain
circumstances, the sale of a substantial part of
the assets of Benton-Vinccler. The sale of all or
substantially all of the assets of the Company is
not defined in the Indentures and there is no
ascertainable established meaning of such phrase
under the laws of the state governing the
Indenture. This uncertainty of when the Company
has sold "substantially all of the assets of the
Company could have the effect of sales of assets
by the Company without the Trustee and/or the
Company interpreting such sale as a sale of
substantially all of the assets, and therefore no
repurchase of the Debt Securities. A sale by the
Company of a significant portion of its revenue
producing assets could limit the Company's
ability to service the Debt Securities and/or
repay the Debt Securities at their Stated
Maturity. The sale of a substantial part of the
assets of Benton-Vinccler is defined as the sale
or series of sales which either (i) exceed (based
on the book value of all assets sold during the
twelve month period) 25% of the net tangible
assets of Benton-Vinccler as of the end of its
most recently completed full fiscal quarter for
which financial information is available, or (ii)
contributed more than 25% of the net income of
Benton-Vinccler during its most recently
completed four full fiscal quarters for which
financial information is available. See
"Description of Debt Securities -- Change in
Control."
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Ranking of Senior
Securities.................... The Senior Securities will constitute senior
unsecured debt obligations of the Company and
will rank senior in right of payment to all
existing and future Subordinated Indebtedness,
pari passu with all unsecured Senior
Indebtedness, and effectively subordinated to all
secured Senior Indebtedness. The Senior
Securities will be effectively subordinated to
all liabilities of the Company's subsidiaries,
except to the extent that the Company is itself a
creditor to such subsidiary, in which case the
claims of the Company would still be subordinate
to any security interest in the assets of such
subsidiary, and indebtedness of such subsidiary
senior to that held by the Company. As of March
31, 1995, the aggregate amount of the outstanding
obligations of the Company's subsidiaries that
would have ranked effectively senior to the
Senior Securities was approximately $33.9
million. The aggregate amount of the outstanding
secured obligations of the Company that would
have ranked effectively senior to the Senior
Securities was approximately $5.0 million. The
principal amount of the Company's indebtedness
that would have ranked pari passu with the Senior
Securities was approximately $15.0 million. See
"Description of Outstanding Indebtedness."
Ranking of Subordinated
Securities.................... The Subordinated Securities will constitute
subordinated unsecured debt obligations of the
Company and will be subordinated in right of
payment to the prior payment in full of all
Senior Indebtedness, whether now outstanding or
incurred in the future. The Subordinated
Securities will also be effectively subordinated
to all liabilities, including trade payables and
capitalized lease obligations, if any, of the
Company's subsidiaries. The Subordinated
Securities will rank pari passu with all
Subordinated Indebtedness of the Company incurred
in the future, unless such Subordinated
Indebtedness specifies that it shall rank junior
to the Subordinated Securities. As of March 31,
1995, the aggregate amount of the outstanding
obligations of the Company's subsidiaries that
would have ranked effectively senior to the
Senior Securities was approximately $33.9
million. The aggregate amount of the outstanding
obligations of the Company that would have ranked
effectively senior to the Subordinated Securities
was approximately $5.0 million. The principal
amount of the Company's indebtedness that would
have ranked pari passu with the Subordinated
Securities was approximately $15.0 million. The
Subordinated Indenture limits the amount of other
unsecured indebtedness or securities which may be
issued by the Company, to the extent that the
Company and its Restricted Subsidiaries must be
in compliance with certain ratio requirements to
incur additional indebtedness. See "Description
of Outstanding Indebtedness" and "Description of
the Debt Securities -- Subordination."
Certain Covenants............. The Senior Indenture and the Subordinated
Indenture each contains certain covenants that,
among other restrictions, limit the ability of
the Company and its Restricted Subsidiaries to
incur additional indebtedness, pay dividends and
make certain investments, engage in transactions
with its affiliates, sell assets, incur or suffer
to exist certain liens securing indebtedness
unless the Debt Securities are equally and
ratably secured, and engage in mergers and
consolidations. The Indentures limit the ability
of the Company and its Restricted Subsidiaries to
incur future indebtedness unless after giving
effect to the indebtedness, the ratio of
Indebtedness of the Company and its Restricted
Subsidiaries to Oil and Gas Reserve Estimate of
the company and its Restricted Subsidiary would
be no greater than 50%, and the EBITDA/Interest
Ratio would be greater than 2.0 to 1.0 prior to
June 1, 1995, 2.5 to 1.0 on or after June 1, 1995
and prior to June 1, 1996, and 3.0 to 1.0 on or
after June 1, 1996, and such indebtedness would
have an average life greater than the average
life of the Debt Securities and a stated maturity
later than the Stated Maturity of the Debt
Securities. In addition, the Indentures prohibit
the Company and its Restricted Subsidiaries from
creating or making liens to secure
6
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indebtedness, without making provision for all of
the Debt Securities to be equally and ratably
secured with the indebtedness so secured. Thus,
the provisions of the Senior Indenture restricts
the Company from incurring additional Senior
Indebtedness, and restrict the amount of
indebtedness that can be incurred which is equal
or subordinated to the Senior Securities. The
Subordinated Indenture does not restrict the
amount of Senior Indebtedness that can be
incurred by the Company and its Restricted
subsidiaries, provided that the Company and its
Restricted Subsidiaries are in compliance with
the ratios set forth above. See "Description of
Debt Securities -- Certain Covenants" and
"-- Subordination." The Senior Indenture and the
Subordinated Indentures will also prohibit the
Company's Restricted Subsidiaries from assuming
or guaranteeing indebtedness of the Company
unless such Restricted Subsidiaries
simultaneously guarantee the payment of the Debt
Securities. GEOILBENT is not a Restricted
Subsidiary pursuant to the definition contained
in the Indentures, and therefore is not subject
to the covenants which would limit its ability to
incur future indebtedness, provided the Company
or a Restricted subsidiary is not guaranteeing
such indebtedness. See "Description of the Debt
Securities -- Certain Covenants."
Use of Proceeds............... Except as otherwise described in the accompanying
Prospectus Supplement, the net proceeds from any
sale of Debt Securities will be used for general
corporate purposes, which may include refinancing
of indebtedness, acquisitions, capital
expenditures including developmental activities
in the Company's oil and gas properties, working
capital and repurchases or redemption of
securities.
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Summary Oil and Gas Reserve Information
The following sets forth summary information with respect to the estimates of
the Company's proved oil and gas reserves at December 31, 1994, 1993 and 1992,
prepared by the Company and audited by Huddleston & Co., Inc., independent
petroleum engineers.
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YEARS ENDED DECEMBER 31
Dollars in thousands 1994(1)(2) 1993 1992
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<S> <C> <C> <C>
VENEZUELA(3):
Crude oil and condensate (MBbl) 60,707 19,389 8,966
Natural gas (MMcf) -- -- --
Oil equivalent (MBOE) 60,707 19,389 8,966
UNITED STATES:
Crude oil and condensate (MBbl) 233 10,258 13,194
Natural gas (MMcf) 16,077 18,099 19,455
Oil equivalent (MBOE) 2,913 13,275 16,437
RUSSIA:
Crude oil and condensate (MBbl) 17,540 10,121 8,133
Natural gas (MMcf) -- -- --
Oil equivalent (MBOE) 17,540 10,121 8,133
TOTAL(3):
Crude oil and condensate (MBbl) 78,480 39,768 30,293
Natural gas (MMcf) 16,077 18,099 19,455
Oil equivalent (MBOE) 81,160 42,785 33,536
Standardized measure of discounted future net cash
flows, before provision for income taxes(3)(4) $ 336,320 $ 131,413 $ 141,810
</TABLE>
- ---------------
(1) Based on the Company's December 31, 1994 reserve report, of which 98% of the
reserves were audited by Huddleston & Co., Inc., independent petroleum
engineers.
(2) In November 1994, the Company sold to Tenneco a 10.8% working interest in
the West Cote Blanche Bay Field, which represented 24.9% of the Company's 43.3%
working interest in the Field. In March 1995, the Company and its affiliates and
Tenneco sold to WRT Energy Corporation a 43.75% working interest in the
shallower depths (above approximately 10,575 feet) in the West Cote Blanche Bay
Field. The reserves attributable to this sale are not included in the reserve
information.
(3) All Venezuelan reserves are attributable to an operating service agreement
between Benton-Vinccler and Lagoven under which all mineral rights are owned by
the Government of Venezuela.
(4) The Company values its reserves as of December 31 of each year, based on oil
and natural gas prices as of that date. Market prices for both oil and natural
gas are subject to a significant degree of variation both in domestic and
international markets, and this variation will affect the calculation of future
net cash flows reported by the Company at any specific date.
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary consolidated financial information set forth below should be read in
conjunction with the Consolidated Financial Statements of the Company and
related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference into this
Prospectus.
<TABLE>
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In thousands, except per share YEARS ENDED DECEMBER 31
amounts, ratios -------------------------------------
and operating data 1994(1) 1993(1) 1992
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STATEMENT OF OPERATIONS DATA:
Total revenues $ 34,705 $ 7,504 $ 8,622
Lease operating costs and
production taxes 9,531 5,110 4,414
Depletion, depreciation and
amortization 10,298 2,633 3,041
General and administrative expense 5,242 2,632 2,245
Interest expense 3,888 1,958 1,831
--------- --------- ---------
Income (loss) before income taxes
and minority interest 5,746 (4,829) (2,909)
Income tax expense 698 -- --
--------- --------- ---------
Income (loss) before minority
interest 5,048 (4,829) (2,909)
Minority interest 2,094 -- --
--------- --------- ---------
Net income (loss) $ 2,954 $ (4,829) $ (2,909)
========= ======== ========
Net income (loss) per common share $ 0.12 $ (0.26) $ (0.22)
========= ======== ========
Weighted average common shares
outstanding(2) 24,851 18,609 12,981
Ratio of earnings to fixed
charges(3) 1.94x -- --
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------
1994(1) 1993(1) 1992
--------- --------- ---------
<S> <C> <C> <C>
OPERATING DATA:
Net Production:
Crude oil and condensate (Bbl) 3,039,862 480,954 376,022
Natural gas (Mcf) 2,061,892 232,677 831,637
Oil equivalent (BOE) 3,383,511 519,734 514,628
Average U.S. sales price:
Crude oil and condensate ($ per
Bbl) $14.46 $17.30 $18.17
Natural gas ($ per Mcf) 1.79 2.19 1.66
Average U.S. lifting cost ($ per
BOE) 4.04 8.72 6.98
Average Venezuela sales price:
Crude oil and condensate ($ per
Bbl) 8.52 8.31 --
Average Venezuela lifting cost ($
per BOE) 1.51 7.26 --
Average Company finding cost ($
per BOE) 1.35 1.73 1.69
Estimated Company future
development cost ($ per BOE) 1.23 2.04 2.53
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
-------------------------------------
YEARS ENDED DECEMBER 31
1994(1) 1993(1) 1992
--------- --------- ---------
<S> <C> <C> <C>
OTHER DATA(4):
Capital Expenditures $ 53,456 $ 25,953 $ 16,753
EBITDA(5) 17,775 (202) 2,108
Consolidated Interest Expense(6) 3,888 1,958 1,831
EBITDA/Interest Ratio(7) 4.57x -- 1.15x
</TABLE>
<TABLE>
<CAPTION>
-------------------------------
In thousands, except ratios AT DECEMBER 31, 1994
<S> <C>
BALANCE SHEET DATA(1):
Working capital $ 21,785
Total assets 162,561
Long term debt, net of current portion 31,911
Stockholders' equity 88,259
OTHER DATA(4):
Oil and Gas Reserve Estimate(8) $ 287,487
Ratio of Indebtedness to Oil and Gas Reserve Estimate(9) 0.14x
</TABLE>
- ---------------
(1) The financial and operating data for the year ended December 31, 1994
include 100% of the operating results of Benton-Vinccler and reflect the 50%
ownership interest of Vinccler for January and February and the 20% ownership
interest of Vinccler for the rest of the year as a minority interest. Prior to
1994, the financial and operating data included only 50% of the operating
results of the joint venture which preceded Benton-Vinccler.
(2) The weighted average common shares include shares which may be issuable upon
exercise of outstanding stock options and warrants; however, they are not
included in the computation for the years ended December 31, 1993 and 1992,
since their effect would be to reduce the net loss per share and for the year
ended December 31, 1994, because their effect would result in dilution of less
than 3%.
(3) For the purpose of computing the ratios, "earnings" represents income (loss)
from operations before income taxes plus fixed charges exclusive of capitalized
interest, and "fixed charges" consists of interest, whether expensed or
capitalized, amortization of debt expense and an estimated portion of rent
expense representing interest costs. As a result of the losses incurred by the
Company for the years ended December 31, 1992 and 1993, earnings did not cover
fixed charges by $2,909,000 and $4,829,000, respectively.
(4) The Company's Russian operations are conducted through GEOILBENT, which is
only 34% owned by the Company and, consequently, does not qualify as a
Restricted Subsidiary as defined in the Senior Indenture. Accordingly, for
purposes of the Indentures, the Company's Russian operations will be excluded
from the calculation of EBITDA (except to the extent of any distributions
received by the Company from GEOILBENT), Consolidated Interest Expense,
EBITDA/Interest Ratio, Oil and Gas Reserve Estimate and Indebtedness. See
"Description of the Debt Securities -- Certain Covenants."
(5) EBITDA has been calculated as defined in the Indentures and has been
included solely to facilitate consideration of the covenants in the Senior
Indenture that are based, in part, on EBITDA. EBITDA (as defined in the
Indentures) should not be construed as an alternative to operating income or to
cash flows from operating activities (as determined in accordance with generally
accepted accounting principles), as an indicator of the Company's operating
performance or as a measure of liquidity. See "Description of the Debt
Securities -- Certain Definitions."
(6) Consolidated Interest Expense has been calculated as defined in the
Indentures. See "Description of the Debt Securities -- Certain Definitions."
(7) EBITDA/Interest Ratio has been calculated as defined in the Indentures. See
"Description of the Debt Securities -- Certain Definitions."
(8) The Oil and Gas Reserve Estimate has been calculated as defined in the
Indentures. See "Description of the Debt Securities -- Certain Definitions."
(9) Pursuant to the Indentures, indebtedness of the Company or any Restricted
Subsidiary that is secured by a deposit of cash or cash equivalents by the
Company and indebtedness of GEOILBENT are excluded from Indebtedness for the
purpose of calculating the ratio of Indebtedness to Oil and Gas Reserve
Estimate. Consequently, Benton-Vinccler's bank loan in an amount equal to $19.3
million at December 31, 1994, which is secured by a time deposit of the Company,
and the Company's share of GEOILBENT's indebtedness which totalled $1.3 million
at December 31, 1994, have been excluded from Indebtedness for the purpose of
calculating the ratio of Indebtedness to Oil and Gas Reserve Estimate at
December 31, 1994.
10
<PAGE> 12
RISK FACTORS
Prospective purchasers of the Debt Securities should read this entire Prospectus
carefully. Ownership of the Debt Securities involves certain risks. In addition
to the other information contained in this Prospectus, investors should
carefully consider the following factors in connection with an investment in the
Debt Securities.
RISKS RELATED TO THE COMPANY
Losses from Operations
The historical financial data for the Company reflect net losses of $2,909,335
and $4,828,590 for the years ended December 31, 1992 and 1993, respectively, and
income of $2,954,161 for the year ended December 31, 1994. The Company had total
revenues of $8,622,109, $7,503,796 and $34,704,806 for the years ended December
31, 1992, 1993 and 1994, respectively. The decreased revenues for the year ended
December 31, 1993 compared to the year ended December 31, 1992 was due in part
to the sale by the Company of certain non-strategic oil and gas properties.
During 1993, the Company made a significant amount of capital expenditures for
infra-structure, such as roads, pipelines and 3-D seismic surveys. Such
expenditures did not increase production from the Company's oil and gas
properties. However, the Company believes that with this infra-structure
complete, the Company will focus its capital expenditures on development of its
oil and gas properties, which the Company expects to continue the trend of
increased revenues from year ended December 31, 1994 to December 31, 1995. As
the Company's revenues increase, the Company expects continued improvement to
its profitability. The Company's ability to maintain its financing arrangements,
produce its oil and gas reserves and service its debt obligations would be
adversely affected by a lack of profitability. Any improvement in profitability
of the Company will be dependent upon improvement in the development of
reserves, revenues from the sale of oil and gas reserves and oil and gas
pricing, and there can be no assurance that such improvement will occur.
Foreign Operations
For 1994, the Company derived approximately 78% of its consolidated oil and gas
revenues and approximately 96% of its Proved Reserves from its foreign
operations in Venezuela and Russia. The Company's Venezuelan and Russian
operations are subject to political, economic and other uncertainties inherent
in the development of foreign properties including, without limitation, risks of
war, revolution, expropriation, cancellation, renegotiation or modification of
existing contracts, export and transportation regulations and tariffs, taxation
and royalty policies, foreign exchange restrictions, adverse changes in currency
value, international monetary fluctuations, environmental controls and other
hazards arising out of foreign government sovereignty over certain areas in
which the Company plans to conduct operations.
The Company's operations have not been materially adversely affected to date by
political instability or the recent banking crisis in Venezuela. Similarly, to
date, the Company's operations have not been materially adversely affected by
the recent political or economic instability in Russia. However, there can be no
assurance that the Company's operations will not be materially adversely
affected by political or economic instability or burdensome taxation in the
future. The Company currently carries no insurance against political
instability. However, the Company has applied for insurance to cover the risk of
currency repatriation and inconvertibility, expropriation and interference with
operations for its Venezuelan operations with the Overseas Private Investment
Corporation ("OPIC"), an agency of the United States government. There can be no
assurance that the Company will be able to obtain this insurance or if it can be
obtained, at a reasonable cost.
The Company has limited experience in conducting oil and gas operations in
Venezuela and Russia. The Company formed ventures with local partners in
Venezuela and Russia in an attempt to reduce some of the risks associated with
conducting operations in such countries and to facilitate local transactions.
The Company may encounter unforeseen difficulties in Venezuela and Russia,
including problems related to production and deliverability of oil and gas, and
any such difficulties could have a material adverse effect on the Company.
Furthermore, the timing and extent of the Company's development activities in
Venezuela are subject to the approval of Lagoven and the Ministry of Energy and
Mines. There can be no assurance that the development activities proposed by
Benton-Vinccler will receive the necessary approval. In addition, pursuant to
the Articles of Incorporation/By-Laws of Benton-Vinccler, the consent of both
the Company and Vinccler is a prerequisite to certain corporate transactions and
other matters relating to Benton-Vinccler, including, without limitation, any
sale of corporate assets, any assignment or sub-contracting of the operating
service agreement with Lagoven, any change in Benton-Vinccler's corporate
capital, duration or corporate purpose, any merger between Benton-Vinccler and
another company as well as certain amendments to Benton-Vinccler's Articles of
Incorporation/By-Laws. There can be no assurance that the Company and Vinccler
will agree upon any such proposed transactions or matters.
11
<PAGE> 13
In addition to the factors discussed above, Russia has established an export
tariff on all oil produced in and exported from Russia which, as imposed, has
the effect of reducing the potential profits to the Company and could render its
proved reserves attributable to Russia uneconomic. However, the Russian
Federation has issued or drafted various decrees and legislation under which
certain oil and gas joint ventures, including GEOILBENT, are eligible for relief
from such oil export tariff until such time as they have recovered certain of
their expenditures. GEOILBENT has received a waiver from the export tariff for
1995, and expects to apply for renewal of such waiver for 1996 and 1997.
However, there can be no assurance that any such renewals can be obtained.
Furthermore, after the waiver for 1995 was issued to GEOILBENT, a new Russian
law came into force which repeals all taxes and customs benefits previously
granted to participants in foreign economic activities, except for those granted
pursuant to certain federal laws, including the law "On Customs Tariffs." While
it is not clear whether the repeal applies to GEOILBENT's waiver for 1995,
GEOILBENT believes that its waiver should be regarded as granted pursuant to the
law "On Customs Tariffs." The legislative and regulatory environment in Russia
continues to be subject to frequent change and uncertainty.
The Company will not receive distributions from GEOILBENT until it has expended
its capital requirements under the terms of the joint venture agreement. To
date, the Company has spent approximately $20.1 million of the $25.8 million it
has committed to spend by the end of 1995. However, in 1994 oil and gas
production in Russia was adversely affected by volatility of net wellhead oil
prices and the oil export tariff. If these conditions continue, the Company
believes that the joint venture agreement may be modified to reduce that amount
or to extend the due date of its obligation and modify other terms. The Company
believes that after it has satisfied such capital commitments, it will not
receive any significant distributions from GEOILBENT for several years because
substantially all of the money received by GEOILBENT from the North Gubkinskoye
Field will be reinvested to fund future development activities.
Properties Under Development
As of December 31, 1994, approximately 79% of the Company's Proved Reserves were
undeveloped and required development activities consisting primarily of
recompletions, drilling of replacement wells and other development drilling. In
addition, approximately 3% of the Company's Proved Reserves were proved
developed behind-pipe or shut-in, requiring additional development work. As a
result, the Company will require substantial capital expenditures to develop all
of its proved reserves. At December 31, 1994, the anticipated future development
costs for proved reserves in the United States, Venezuela and Russia were $2.0
million, $79.5 million and $25.4 million, respectively. The Company will not
have the capital to develop all of these reserves after the offering of the
Securities. The Company expects to finance these future development costs
through the offering of the Securities, cash flow from operations and
non-recourse project financing. If such capital is not available, the Company
will either enter into joint ventures to develop the projects, which will result
in the Company retaining a smaller interest, or not develop the reserves. There
can be no certainty regarding the commercial feasibility of developing these
reserves, the availability of financing, or the timing or costs associated
therewith. If such capital is available, there can be no assurance that the
Company will be able to develop and produce sufficient reserves to recover the
costs expended and operate the wells profitably. In addition, the Company may
not be able to control the development activities in fields either operated by
industry partners or in which development activities are subject to approval by
its partners. If the Company and its industry partners are not able to meet the
financial and development obligations in these fields, the interests in the
affected properties may be sold, farmed out or forfeited.
Engineers' Estimates of Reserves and Future Net Revenue
This Prospectus contains estimates of the Company's oil and gas reserves and the
future net revenues therefrom which have been prepared by the Company and
audited by Huddleston & Co., Inc., independent petroleum engineers. Estimates of
commercially recoverable oil and gas reserves and of the future net cash flows
derived therefrom are based upon a number of variable factors and assumptions,
such as historical production from the subject properties, comparison with other
producing properties, the assumed effects of regulation by governmental agencies
and assumptions concerning future operating costs, severance and excise taxes,
export tariffs, abandonment costs, development costs and workover and remedial
costs, all of which may vary considerably from actual results. All such
estimates are to some degree speculative, and various classifications of
reserves are only attempts to define the degree of speculation involved. For
these reasons, estimates of the commercially recoverable reserves of oil and
natural gas attributable to any particular property or group of properties, the
classification, cost and risk of recovering such reserves and estimates of the
future net cash flows expected therefrom, prepared by different engineers or by
the same engineers at different times, may vary substantially. The difficulty of
making precise estimates is accentuated by the fact that 82% of the Company's
total Proved Reserves were non-producing as of December 31, 1994. Therefore, the
Company's actual production, revenues, severance and excise taxes, export
tariffs, development expenditures, workover and remedial expenditures,
abandonment expenditures and operating expenditures with respect to its reserves
will likely vary from such estimates, and such variances may be material.
12
<PAGE> 14
In addition, actual future net cash flows will be affected by factors such as
actual production, supply and demand for oil and natural gas, availability and
capacity of gas gathering systems and pipelines, curtailments in consumption by
natural gas purchasers, changes in governmental regulations or taxation and the
impact of inflation on costs. The timing of actual future net revenue from
proved reserves, and thus their actual present value, can be affected by the
timing of the incurrence of expenditures in connection with development of oil
and gas properties. The 10% discount factor, which is required by the Commission
to be used to calculate present value for reporting purposes, is not necessarily
the most appropriate discount factor based on interest rates in effect from time
to time and risks associated with the oil and gas industry. Discounted present
value, no matter what discount rate is used, is materially affected by
assumptions as to the amount and timing of future production, which may and
often do prove to be inaccurate.
Development of Additional Reserves
The Company's future success may also depend upon its ability to find or acquire
additional oil and gas reserves that are economically recoverable. Except to the
extent that the Company conducts successful exploration or development
activities or acquires properties containing proved reserves, the proved
reserves of the Company will generally decline as reserves are produced. There
can be no assurance that the Company will be able to discover additional
commercial quantities of oil and gas, or that the Company will be able to
continue to acquire interests in underdeveloped oil and gas fields and enhance
production and reserves by conducting workovers and recompletions, drilling
replacement wells and drilling development wells, or that the Company will have
continuing success drilling productive wells and acquiring underdeveloped
properties at low finding costs.
Financing the Company's Growth
The Company has satisfied a portion of its capital needs through public and
private equity and debt placements of its securities and private placements of
interests in oil and gas limited partnerships and joint ventures. Since 1991,
the Company has not offered a significant amount of securities in private
placements and does not anticipate privately placing any limited partnership
interests in the future. These private placements were not registered under the
Securities Act of 1933, as amended (the "Securities Act") in reliance on the
"private offering" exemption contained in Section 4(2) of the Securities Act and
Rule 506 promulgated under the Securities Act. The availability of this
exemption is dependent upon a number of factors, including the information
furnished to investors, their investment experience, the method of placing the
securities, and the possible integration of several offerings. For the most
part, these placements have been made to "accredited investors" as that term is
defined under Rule 501(e) of the Securities Act. The Company has taken steps to
ensure that it has complied with the various federal and state requirements with
respect to these placements. However, there can be no assurance that an investor
or group of investors would not assert a claim for rescission or damages under
the Securities Act or similar laws or, with respect to the joint ventures,
partnerships or other private placements claiming that the placements were not
offered properly, the investors were misled or that the partnerships or joint
ventures were not operated properly, which claims could have an adverse effect
on the Company.
Retention and Attraction of Key Personnel
The Company depends to a large extent on the abilities and continued
participation of certain key employees, the loss of whose services could have a
material adverse effect on the Company's business. In an effort to minimize the
risk, the Company has entered into employment agreements with certain key
employees, and has purchased a $5.0 million key-man life insurance policy on the
life of A.E. Benton. Furthermore, as a result of the Company's recent growth,
the Company currently is seeking additional accounting and operating personnel.
There can be no assurance that the Company will be able to attract and retain
such personnel on acceptable terms and the failure to do so could have a
material adverse effect on the Company.
RISKS RELATED TO AN INVESTMENT IN THE DEBT SECURITIES
Substantial Leverage
The Company could incur substantial indebtedness in the Offering if the Debt
Securities are offered hereby. If the Company offers and sells a substantial
principal amount of Debt Securities hereunder, the Company will require
substantial cash flow to meet its principal repayment and interest obligations
on the Debt Securities. After giving effect to the Offering, assuming the sale
of $50 million principal amount of Debt Securities, as if it had occurred on
December 31, 1994, the Company would have had total pro forma indebtedness of
approximately $122,559 million at such date. After giving effect to the
offering, assuming the sale of $50 million principal amount of Debt Securities,
as if they had occurred as of January 1, 1994, the Company's fixed charges would
13
<PAGE> 15
have exceeded earnings by $10.3 million for the year ended December 31, 1994.
The Company expects to use a substantial portion of the proceeds of any sale of
the Debt Securities for development activities at its oil and gas properties
which the Company anticipates will increase oil and gas production and cash flow
to enable the Company to repay or refinance the Debt Securities when due.
However, there can be no assurance that expenditure of the proceeds of the
offering of the Debt Securities hereunder will result in sufficient increased
cash flow to repay or refinance the Debt Securities when due. In addition, the
Indenture will impose significant operating and financial restrictions on the
Company. Such restrictions will affect, and in many respects limit or prohibit,
among other things, the ability of the Company and its Restricted Subsidiaries
to incur additional indebtedness, pay dividends and make certain investments,
engage in transactions with affiliates, sell assets, incur or suffer to exist
certain liens securing indebtedness unless the Notes are equally and ratably
secured, and engage in mergers or consolidations. The Indenture will also
prohibit the Company's Restricted Subsidiaries from assuming or guaranteeing
indebtedness of the Company unless such Restricted Subsidiaries simultaneously
guarantee the payment of the Notes. The leveraged position of the Company and
the restrictive covenants contained in the Indenture could significantly limit
the ability of the Company to respond to changing business or economic
conditions or to respond to substantial declines in operating results. See
"Description of the Debt Securities."
Liquidity Needs; Ability to Repay Debt Securities
The Company may from time to time fund a portion of its working capital needs
and capital expenditure requirements from external financing. In addition, the
Company expects that in order to repay the principal amount of the Notes or to
purchase the Notes upon the occurrence of a Change in Control, it may be
required to seek additional financing or engage in asset sales or in similar
transactions. There can be no assurance that sufficient funds for any of the
foregoing purposes would be available to the Company at the time they were
required. See "Description of the Debt Securities."
Holding Company Structure
The Debt Securities will be obligations exclusively of the Company. Because the
Company's operations are conducted almost entirely through its subsidiaries, the
cash flow and the consequent ability of the Company to service its debt,
including the Debt Securities, are dependent upon the earnings of the Company's
subsidiaries and the distribution of those earnings to the Company. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Debt Securities
or to make funds available therefore, whether by dividends, loans or other
payments. In addition, the payment of dividends and the making of loans and
advances to the Company by its subsidiaries may be subject to statutory or
contractual restrictions and are contingent upon the earnings of those
subsidiaries and subject to various business considerations.
Lack of a Public Market for the Debt Securities
The Debt Securities will be a new issue of securities, and the Company does not
intend to list them on any securities exchange. If the Debt Securities are
traded after their initial issuance, they may trade at a discount from their
initial public offering price depending upon prevailing interest rates, the
market for similar securities and other factors. No assurance can be given that
any market for the Debt Securities will develop, or, if any such market
develops, as to the liquidity of such market.
RISKS RELATED TO THE OIL AND GAS INDUSTRY
Risk of Oil and Gas Operations
The Company's operations are subject to all of the risks normally incident to
the operation and development of oil and gas properties and the drilling of oil
and gas wells, including encountering unexpected formations or pressures,
blowouts, cratering and fires, and, in horizontal wellbores, the increased risk
of mechanical failure and collapsed holes, the occurrence of any of which could
result in personal injuries, loss of life, environmental damage and other damage
to the properties of the Company or others. In addition, because the Company
acquires interests in underdeveloped oil and gas fields that have been operated
by others for many years, the Company may be liable for any damage or pollution
caused by any prior operations of such oil and gas fields. Moreover, offshore
operations are subject to a variety of operating risks peculiar to the marine
environment -- such as hurricanes or other adverse weather conditions -- to more
extensive governmental regulation, including certain regulations that may, in
certain circumstances, impose absolute liability for environmental damage, and
to interruption or termination of business activities by government authorities
based upon environmental or other considerations. In accordance with customary
industry practice, the Company is not fully insured against these risks, nor are
all such risks insurable. Accordingly, there can be no assurance that such
insurance as the Company does maintain will be adequate to cover any losses or
exposure for liability.
14
<PAGE> 16
Current Oil and Gas Industry Conditions
Historically, the markets for oil and natural gas have been volatile and are
likely to continue to be volatile in the future. Prices for oil and natural gas
are subject to wide fluctuation in response to relatively minor changes in
supply of and demand for oil and natural gas, market uncertainty and a variety
of additional factors that are beyond the control of the Company. These factors
include political conditions in the Middle East, the foreign supply of oil and
natural gas, the price of foreign imports, the level of consumer product demand,
weather conditions, domestic and foreign government regulations, the price and
availability of alternative fuels and overall economic conditions. Lower oil and
natural gas prices also may reduce the amount of the Company's oil and natural
gas that is economic to produce. In addition, the marketability of the Company's
production depends upon the availability and capacity of gas gathering systems
and pipelines.
Government Regulation; Environmental Risks
The Company's business is regulated by certain federal, state, local and foreign
laws and regulations relating to the development, production, marketing and
transmission of oil and gas, as well as environmental and safety matters. There
can be no assurance that laws and regulations enacted in the future will not
adversely affect the Company's exploration for, or the production and marketing
of, oil and gas.
Oil and gas operations are subject to extensive foreign, federal, state and
local laws regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment. Numerous governmental
departments issue rules and regulations to implement and enforce such laws which
are often difficult and costly to comply with and which carry substantial
penalties for failure to comply. The regulatory burden on the oil and gas
industry increases its cost of doing business and consequently affects its
profitability. These laws, rules and regulations affect the operations of the
Company. Compliance with environmental requirements generally could have a
material adverse effect upon the capital expenditures, earnings or competitive
position of the Company.
Competition
The oil and gas exploration and production business is highly competitive. A
large number of companies and individuals engage in the drilling for oil and
gas, and there is a high degree of competition for desirable oil and gas
properties suitable for drilling and for materials and third-party services
essential for their exploration and development. Many of the Company's
competitors have greater financial and other resources than does the Company.
15
<PAGE> 17
THE COMPANY
The Company is primarily engaged in the development and production of oil and
gas properties. The Company's operations are focused in the eastern region of
Venezuela, the Gulf Coast region of Louisiana and the West Siberia region of
Russia. At December 31, 1994, the Company's proved reserves of 81.2 MMBOE
consisted of 78.5 MMBbl of oil and 16.1 Bcf of natural gas. The Company's proved
reserves, net of production, have increased from 14.8 MMBOE at December 31, 1990
to 81.2 MMBOE through purchases of reserves-in-place, awards of development
contracts, discoveries of oil and natural gas reserves, extensions of existing
producing fields and revisions of previously estimated reserves. The
standardized measure of discounted future net cash flows, before provision for
income taxes, relating to the Company's proved reserves at December 31, 1994 was
approximately $336.3 million.
The Company was incorporated in Delaware in September 1988 and operates
principally through its wholly-owned subsidiary Benton Oil and Gas Company of
Louisiana in Louisiana and its 80% owned subsidiary Benton-Vinccler in
Venezuela. Currently, both Benton Oil and Gas Company of Louisiana and
Benton-Vinccler qualify as Restricted Subsidiaries as defined in the Indentures.
The Company's Russian operations are conducted through GEOILBENT, which is only
34% owned by the Company and, consequently, does not qualify as a Restricted
Subsidiary as defined in the Senior Indenture. Accordingly, for purposes of the
Indentures, the Company's Russian operations will be excluded from the
calculation of EBITDA (except to the extent of any distributions received by the
Company from GEOILBENT), Consolidated Interest Expense, EBITDA/Interest Ratio,
Oil and Gas Reserve Estimate and Indebtedness. See "Description of the Debt
Securities -- Certain Covenants." The Company's principal executive offices are
located at 1145 Eugenia Place, Suite 200, Carpinteria, California 93013, and its
telephone number is (805) 566-5600.
USE OF PROCEEDS
Except as otherwise described in the accompanying Prospectus Supplement, the net
proceeds from any sale of Debt Securities will be used for general corporate
purposes, which may include refinancing of indebtedness, acquisitions, capital
expenditures including developmental activities in the Company's oil and gas
properties, working capital and repurchases or redemption of securities.
16
<PAGE> 18
Description of Outstanding Indebtedness
The summaries contained herein of certain provisions of the indebtedness of the
Company do not purport to be complete and, except in the case of the short term
debt, are qualified in their entirety by the provisions of the various
agreements and indentures related thereto which are filed as exhibits hereto or
incorporated by reference herein.
SENIOR UNSECURED NOTES
On September 30, 1994, the Company issued $15 million in senior unsecured notes
due September 30, 2002, with interest at 13% per annum. Interest is payable
semi-annually on March 30 and September 30 beginning March 30, 1995. Annual
principal payments of $3 million are due on September 30 of each year beginning
on September 30, 1998. Early payment of the notes could result in a substantial
prepayment penalty. The note agreement contains financial covenants including a
minimum ratio of current assets to liabilities and a maximum ratio of
liabilities to net worth or domestic oil and gas reserves. The note agreement
also provides for limitations on liens, additional indebtedness, certain capital
expenditures, dividends, sales of assets and mergers.
CREDIT FACILITY
On December 27, 1994, the Company entered into a revolving secured credit
facility. Under the credit agreement, the Company may borrow up to $15 million,
with the initial available principal limited to $10 million, on a revolving
basis for two years, at which time the facility shall represent a term loan due
December 31, 1999. Borrowings under the credit agreement are secured by
mortgages on the Company's U.S. properties. Interest on borrowings under the
credit agreement accrues, at the borrower's option, at either a fixed rate or a
floating rate. The borrower also has the option to change or continue the type
of interest rate borne by the loan. Floating rate borrowings accrue interest at
the higher of the prime rate (announced by Christiania Bank og Kreditkasse in
New York) plus 3%, or the Federal Funds Rate plus 5%, and may be prepaid at any
time without penalty. Fixed rate borrowings (Eurodollar loans) accrue interest
at the rate of interest at which deposits of dollars are available to the lender
in the interbank eurocurrency market plus 4.5% and may be repaid on the last day
of an interest period without penalty, or at the option of the borrower upon
payment of a make-whole premium.
The credit agreement contains financial covenants including a minimum ratio of
current assets to liabilities and maximum ratio of liabilities to net worth or
domestic oil and gas reserves. The credit agreement also provides for
limitations on liens, dividends, sales of assets and mergers.
At December 31, 1994, the principal amount of such loan outstanding was $5.0
million.
SHORT TERM DEBT
The Company, through Benton-Vinccler, has entered into a six month loan
arrangement with Morgan Guaranty which has subsequently been renewed on a
monthly basis. Under such arrangement, Benton-Vinccler may borrow up to $25
million, $10 million of which may be borrowed on a revolving basis. Borrowings
under this loan arrangement are secured by cash collateral in the form of a time
deposit from the Company. The loan arrangement contains no restrictive covenants
and no financial ratio requirements. The principal amount of such loan
outstanding at December 31, 1994 was $19.3 million. Benton-Vinccler can borrow
an additional $5.7 million under the loan arrangement if the Company provides a
time deposit to secure such additional borrowings.
Interest on borrowings under the loan facility accrues, at the borrower's
option, at either a fixed rate or a floating rate. The borrower also has the
option to change or continue the type of interest rate borne by the loan.
Floating rate borrowings (domestic loans) accrue interest at the higher of
Morgan Guaranty's prime rate or the sum of .50% plus the Federal Funds Rate and
may be prepaid at any time without penalty. Fixed rate borrowings (Eurodollar
loans) accrue interest at an adjusted LIBOR rate plus a margin of .75%. A
Eurodollar loan may not be repaid at the Company's option on a date other than
the last day of an interest period.
Events of default include failure to pay principal and interest when due,
failure to pay principal or interest on any other indebtedness of
Benton-Vinccler or any of its subsidiaries when due or upon acceleration thereof
and insolvency of Benton-Vinccler or any subsidiary thereof.
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8% CONVERTIBLE SUBORDINATED NOTES DUE OCTOBER 1, 2001
In October 1991, the Company issued $4,662,000 principal amount of privately
placed 8% Convertible Subordinated Notes due October 1, 2001, convertible into
Common Stock at the option of the noteholder at any time prior to maturity at
85.259 shares per $1,000 principal amount of Notes, subject to adjustments in
certain events, with interest payments due April 1 and October 1. At the
Company's option, it may redeem the Notes in whole or in part at any time after
October 1, 1993 at 105% of the principal amount plus accrued interest declining
1% annually to the principal amount on October 1, 1998. The Notes provide that
the holders can redeem their Notes following a change of control (as defined) of
the Company.
The Note Agreement does not contain any restrictions on the payment of
dividends, the repurchase of securities of the Company or any financial
covenants, nor does the Note Agreement require the Company to maintain any
sinking fund or reserves for repayment of the Notes. The Note Agreement does not
limit senior indebtedness or any other indebtedness secured or unsecured.
Events of default include failure to pay principal and interest when due, breach
of covenants, failure to pay principal of or interest on or any material
indebtedness of the Company when due or upon acceleration thereof and bankruptcy
or insolvency of the Company.
8% CONVERTIBLE SUBORDINATED DEBENTURES DUE MAY 1, 2002
In May 1992, the Company issued $6,428,000 principal amount of publicly offered
8% Convertible Subordinated Debenture due May 1, 2002, convertible into Common
Stock at the option of the holder at any time prior to maturity at 101.157
shares per $1,000 principal amount of Debentures with interest payments due May
1 and November 1. At the Company's option, it may redeem the Debentures in whole
or in part at any time on or after May 1, 1994 at 105% of the principal amount
plus accrued interest, declining 1% annually to the principal amount on May 1,
1999. The Debentures also provide that the holders can redeem their Debentures
following a change of control (as defined) of the Company. The Company may, at
its option pay the repurchase price in cash or shares of its Common Stock.
The Indenture does not contain any restrictions on the payment of dividends, the
repurchase of any securities of the Company or any financial covenants nor does
the Indenture require any sinking fund or reserves for payment of the
Debentures. The Indenture does not contain any limitation on senior indebtedness
or any other indebtedness, secured or unsecured.
Events of default include failure to pay principal and interest when due, breach
of covenants, failure to pay principal of or interest on or any material
indebtedness of the Company when due or upon acceleration thereof and bankruptcy
or insolvency of the Company.
DESCRIPTION OF DEBT SECURITIES
The following description of the Debt Securities sets forth certain general
terms and provisions of the Debt Securities to which any Prospectus Supplement
may relate ("Offered Debt Securities"). The particular terms of the Offered Debt
Securities and the extent to which such general provisions may apply will be
described in a Prospectus Supplement relating to such Offered Debt Securities.
The Debt Securities will be general unsecured obligations of the Company and
will constitute either senior debt securities or subordinated debt securities.
The Debt Securities that will be senior debt securities ("Senior Debt
Securities") will be issued under a Senior Indenture ("Senior Indenture")
between the Company and a trustee, the form of which is filed as an exhibit to
the Registration Statement. Debt Securities that will be subordinated debt
securities ("Subordinated Debt Securities") will be issued under a Subordinated
Indenture (collectively with the Senior Indenture, the "Indentures") between the
Company and a trustee, the form of which is filed as an exhibit to the
Registration Statement. The terms of the Debt Securities will be governed by the
provisions of the Indentures as well as those terms made a part of the
Indentures by the Trust Indenture Act of 1939, as amended. The following summary
of certain provisions of the Indentures does not purport to be complete and such
summary is subject to, and is qualified in its entirety by reference to, all of
the provisions of the Indentures. Capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the Indentures.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt Securities
which can be issued thereunder and provide that Debt Securities may be issued
from time to time thereunder in one or more series, each in an aggregate
principal amount authorized by the Company prior to issuance. The Subordinated
Indenture and the Senior Indenture limit the amount of indebtedness which the
Company may Incur.
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Reference is made to the Prospectus Supplement for the following terms of the
Offered Debt Securities: (a) the title and aggregate principal amount of the
Offered Debt Securities; (b) the date or dates on which the Offered Debt
Securities will mature; (c) the rate or rates (which may be fixed or variable)
per annum, if any, at which the Offered Debt Securities will bear interest or
the method of determining such rate or rates; (d) the date or dates from which
such interest, if any, will accrue and the date or dates at which such interest,
if any, will be payable; (e) the terms for redemption or early payment, if any,
including any mandatory or optional sinking fund or analogous provision; (f) the
terms for conversion or exchange, if any, of the Offered Debt Securities; (g)
the classification as Senior Debt Securities or Subordinated Debt Securities;
(h) whether such Offered Debt Securities will be issued in fully registered form
or in bearer form or any combination thereof; (i) if other than U.S. dollars,
the currency, currencies or currency unit or units in which such Offered Debt
Securities will be denominated and in which the principal of and premium and
interest, if any, on such Offered Debt Securities will be payable; (j) whether,
and the terms and conditions on which, the Company or a Holder may elect that,
or the other circumstances under which, payment of principal of or premium or
interest, if any, on such Offered Debt Securities is to be made in a currency or
currencies or currency unit or units other than that in which such Offered Debt
Securities are denominated; (k) information with respect to book-entry
procedures, if any; and (l) any other specific terms of the Offered Debt
Securities. Reference is also made to the Prospectus Supplement for information
with respect to any additional covenants that may be included in the terms of
the Offered Debt Securities.
No service charge will be made for any registration of transfer or exchange of
the Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
If any of the Offered Debt Securities are sold for any foreign currency or
currency unit or if the principal of or premium or interest, if any, on any of
the Offered Debt Securities is payable in any foreign currency or currency unit,
the restrictions, elections, tax consequences, specific terms and other
information with respect to such Offered Debt Securities and such foreign
currency or currency unit will be set forth in the Prospectus Supplement
relating thereto.
CERTAIN COVENANTS
The Indentures contain a number of covenants which restrict the ability of the
Company and its Restricted Subsidiaries to engage in certain activities. For
purposes of such covenants and the related definitions, the term Company shall
mean Benton Oil and Gas Company only, and shall not refer to any Subsidiary or
Affiliate of Benton Oil and Gas Company. In addition, whenever such covenants or
related definitions require any calculation of the income, interest expense,
discounted future net revenues attributable to proved oil and gas reserves or
other financial data of the Company or any Restricted Subsidiary, such
calculation shall, except to the extent that such covenants or definitions
provide to the contrary, exclude the income, interest expense, discounted future
net revenues attributable to proved oil and gas reserves or other financial data
of any Unrestricted Subsidiary or Affiliate of the Company (including GEOILBENT)
or such Restricted Subsidiary, as the case may be.
The Indentures contain, among others, the following covenants:
Limitation on Indebtedness. The Company will not, and will not permit any of
its Restricted Subsidiaries to, Incur any Indebtedness (including any Acquired
Indebtedness) unless (i) no Default or Event of Default under the Senior
Indenture shall have occurred and be continuing at the time or as a consequence
of the Incurrence of such Indebtedness, (ii) after giving effect thereto
(including, in connection with any acquisition being financed through the
Incurrence of such Indebtedness, any Acquired Indebtedness and any proved oil
and gas reserves being acquired in connection therewith) (a) the ratio expressed
as a percentage of (1) the Indebtedness of the Company and its Restricted
Subsidiaries (excluding any Indebtedness to the extent such Indebtedness is
secured by a deposit of cash or Cash Equivalents by the Company) to (2) the Oil
and Gas Reserve Estimate of the Company and its Restricted Subsidiaries would
not be greater than 50% and (b) the EBITDA/Interest Ratio would be greater than
(1) prior to June 1, 1995, 2.0 to 1.0, (2) on or after June 1, 1995 and prior to
June 1, 1996, 2.5 to 1.0 and (3) on or after June 1, 1996, 3.0 to 1.0, (iii) in
the event such Indebtedness would be Incurred by the Company but would not be
Permitted Company Secured Indebtedness, such Indebtedness would have an Average
Life greater than the Average Life of the Notes and a stated maturity later than
the Stated Maturity of the Senior Debt Securities and (iv) in the event such
Indebtedness would be Incurred by a Restricted Subsidiary, such Indebtedness
would also qualify as Permitted Restricted Subsidiary Indebtedness.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries may
Incur Permitted Indebtedness if no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the Incurrence of
such Indebtedness.
For purposes of calculating the amount of any Indebtedness of the Company and
its Restricted Subsidiaries, (i) any Indebtedness of a Restricted Subsidiary
that is fully and unconditionally guaranteed by the Company or secured by a
deposit of cash or Cash
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Equivalents of the Company shall be deemed to be Indebtedness of such Restricted
Subsidiary and (ii) the Vinccler Notes shall be deemed to be Indebtedness of the
Company.
Limitation on Indebtedness of Unrestricted Subsidiaries. The Company will not
permit any Unrestricted Subsidiary to Incur any Indebtedness (including Acquired
Indebtedness) other than Non-Recourse Indebtedness.
Limitation on Restricted Payments. The Company will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment, if at the time of such Restricted Payment or after giving
effect to such Restricted Payment (i) the Company would not be able to Incur at
least $1.00 of additional Indebtedness (excluding Permitted Indebtedness)
pursuant to the provisions of the Indentures described above under "Limitation
on Indebtedness" and (ii) the aggregate amount expended for all Restricted
Payments (excluding any payments permitted by clauses (ii) through (viii) and
(x) of the immediately succeeding paragraph) (the amount of any such Restricted
Payment, if other than cash, as determined by the Board of Directors, whose
determination shall be evidenced by a board resolution) exceeds the sum of:
(a) 50% of the aggregate Consolidated Net Income of the Company and its
Restricted Subsidiaries (or, if such aggregate Consolidated Net Income
shall be a loss, minus 100% of such loss) accrued for the period (taken as
one accounting period) beginning on July 1, 1994 and ending on the last day
of the Company's last fiscal quarter ending prior to the date of such
proposed Restricted Payment, plus
(b) 100% of the aggregate Net Proceeds received by the Company after June
30, 1994 from the issuance and sale (other than to a Subsidiary of the
Company) of (1) Capital Stock (including options, warrants or other rights
to acquire Capital Stock) other than any such Capital Stock convertible
into or exchangeable for (whether at the option of the Company or the
holder thereof) a security other than Capital Stock and other than any such
Capital Stock issued for any purpose specified in clauses (vii) or (viii)
of the succeeding paragraph and (2) Indebtedness convertible into or
exchangeable for Capital Stock but only to the extent such Indebtedness has
been converted or exchanged, plus
(c) the aggregate amount of any Repaid Investments and Restricted
Subsidiary Investments but only to the extent such amount did not otherwise
increase the amount available for Restricted Payments pursuant to (a) above
or clause (v) of the immediately succeeding paragraph.
The foregoing provisions shall not be violated by reason of (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at the
date of declaration such payment would comply with the foregoing provision, (ii)
any Investment in the Company by any Restricted Subsidiary and any Investment in
any Restricted Subsidiary or any person which concurrently with such Investment
becomes a Restricted Subsidiary by the Company or another Restricted Subsidiary,
(iii) any dividend payable to the Company by any Restricted Subsidiary or to any
Restricted Subsidiary by another Restricted Subsidiary, (iv) any dividend
payable to a holder (other than the Company or another Restricted Subsidiary) of
Capital Stock (other than Preferred Stock) of a Restricted Subsidiary; provided
that such dividend is paid concurrently with the payment of a dividend by such
Restricted Subsidiary to the Company or another Restricted Subsidiary and the
amount of such dividend does not exceed such holder's pro rata share (based on
such holder's percentage ownership of the outstanding Capital Stock (other than
Preferred Stock) of such Restricted Subsidiary) of the aggregate amount of the
dividend payable to all holders of Capital Stock of such Restricted Subsidiary,
(v) any Investment in a person that is not a Restricted Subsidiary not to exceed
in the aggregate for all such Investments the greater of 8.5% of the Oil and Gas
Reserve Estimate or $20 million; provided that to the extent that any such
Investment subsequently qualifies as a Repaid Investment or a Restricted
Subsidiary Investment, the amount of Investments otherwise permitted under this
clause (v) shall be increased by such Repaid Investment or Restricted Subsidiary
Investment, (vi) any dividend, distribution or other payment on or with respect
to Capital Stock of the Company to the extent payable solely in shares of
Capital Stock of the Company, (vii) any purchase, redemption or other
acquisition or retirement for value or any defeasance of any Subordinated
Indebtedness, in exchange for, by conversion into or from the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company) of
Capital Stock of the Company or new Subordinated Indebtedness; provided the
Average Life of such new Subordinated Indebtedness is greater than the Average
Life of the Debt Securities, the stated maturity of such new Subordinated
Indebtedness is later than the Stated Maturity of the Debt Securities and the
new Subordinated Indebtedness is subordinated to the Debt Securities to at least
the extent that the Subordinated Indebtedness being purchased, redeemed,
acquired, retired or defeased was subordinated to the Debt Securities, (viii)
any purchase, redemption or other acquisition or retirement for value of any
shares of Capital Stock of the Company in exchange for, by conversion into or
from the Net Proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of Capital Stock of the Company, (ix) any Investment
in a person that represents the portion of the consideration for an Asset Sale
that is not, and is not required to be pursuant to the provisions of the Senior
Indenture described below under "Disposition of Proceeds of Asset Sales," cash
or Cash Equivalents and (x) payments or distributions
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pursuant to or in connection with a consolidation, merger or transfer of assets
that complies with the provisions of the Senior Indenture described below under
"Consolidation, Merger, Conveyance, Transfer or Lease"; provided that, in the
case of any of the foregoing, no Default or Event of Default has occurred and is
continuing or shall occur as a consequence thereof.
Limitation on Transactions with Affiliates. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, enter into any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) (such a transaction
or series of related transactions, an "Affiliate Transaction") with (i) any
Affiliate of the Company or any Subsidiary or (ii) any officer, director or
employee of the Company or any Subsidiary or any Affiliate thereof unless (i)
such Affiliate Transaction is on terms that are no less favorable to the Company
or such Subsidiary, as the case may be, than those that would have been
available in a comparable arm's-length transaction with an unaffiliated third
party and (ii) (a) with respect to any Affiliate Transaction involving aggregate
payments equal to or in excess of $1 million (or, in the case of any loan or
advance to any officer, director or employee of the Company or its Restricted
Subsidiaries, $100,000), but less than $2.5 million, such Affiliate Transaction
shall have received the approval of a majority of the Disinterested Directors
(as evidenced by a board resolution of such Disinterested Directors) and (b)
with respect to any Affiliate Transaction involving aggregate payments equal to
or greater than $2.5 million, the Company shall have obtained a written opinion
of an Independent Financial Advisor stating that the terms of such Affiliate
Transaction is fair to the Company or the Subsidiary, as the case may be, from a
financial point of view.
The foregoing limitations shall not apply to (i) any transaction between the
Company and any Restricted Subsidiary or between Restricted Subsidiaries, (ii)
the payment of reasonable and customary regular fees to directors of the Company
who are not employees of the Company, (iii) any employment contract to which any
officer, director or employee is a party or stock option plan or grant of any
option thereunder to any officer, director or employee; provided that any such
agreement or arrangement (or series of related agreements or arrangements)
involving aggregate payments (or in the case of any option grant, with an
aggregate exercise price) equal to or in excess of $100,000 shall have received
the approval of the Compensation Committee of the Board of Directors which
Committee shall be comprised of Disinterested Directors (as evidenced by a
resolution of such Committee), or (iv) any Restricted Payments not prohibited by
the provisions of the Senior Indenture described above under "Limitation on
Restricted Payments."
Disposition of Proceeds of Asset Sales. The Company will not, and will not
permit any Restricted Subsidiary to, make any Asset Sale unless (i) such Asset
Sale is for not less than the fair market value of the properties and assets
sold, (ii) at least 85% of the consideration (not including the assumption of
any Indebtedness of the Company or any Restricted Subsidiary (other than
Subordinated Indebtedness)) consists of cash, Cash Equivalents or Publicly
Traded Stock (so long as prior to such Asset Sale the Board of Directors has
made a determination as evidenced by a board resolution, to sell such Publicly
Traded Stock for cash within ten Business Days after the date of such Asset Sale
and such Publicly Traded Stock does not constitute more than 30% of such 85%),
except (a) in the case of an Asset Sale involving oil and gas properties, the
consideration may consist solely or in part of tangible properties to be used in
the Company's or its Restricted Subsidiaries' Oil and Gas Business ("Tangible
Business Properties") having a fair market value at least equal to the fair
market value of the assets exchanged and (b) the Company and its Restricted
Subsidiaries may enter into farm-out transactions consistent with industry
standards and otherwise in accordance with the terms of the Senior Indenture
including, but not limited to, the provisions described above under "Limitation
on Transactions with Affiliates" above, (iii) unless prior to the date of such
Asset Sale the Board of Directors has made a determination, as evidenced by a
board resolution, to use all of the Net Cash Proceeds of such Asset Sale that
consist of cash and Cash Equivalents to permanently repay or prepay Senior
Indebtedness or Indebtedness of a Restricted Subsidiary within thirty days after
the date of such Asset Sale, the Company could Incur an additional $1.00 of
Indebtedness (other than Permitted Indebtedness) pursuant to the provisions of
the Senior Indenture described above under "Limitation on Indebtedness," (iv)
within ten Business Days after the date of such Asset Sale, any Publicly Traded
Stock required by a board resolution to be sold for cash, is sold for cash and
(v) as otherwise set forth below. For purposes of the foregoing, in the case of
any required fair market value determination with respect to any Asset Sale or
oil and gas properties or Publicly Traded Stock acquired in connection with such
Asset Sale having a fair market value in excess of $5 million, such
determination shall be made by the Board of Directors as evidenced by a board
resolution.
Subject to clause (iii) above, within twelve months of any Asset Sale, the
Company shall either (i) apply or cause the application of an amount equal to
the Net Cash Proceeds of such Asset Sale, or a portion thereof, to the permanent
repayment or prepayment of Senior Indebtedness or Indebtedness of any Restricted
Subsidiary or (ii) invest such Net Cash Proceeds, or a portion thereof, in the
acquisition or development of Tangible Business Properties. The amount of such
Net Cash Proceeds not applied, used or invested as set forth in clause (i) or
(ii) above shall constitute "Excess Proceeds."
If the aggregate amount of Excess Proceeds, together with any remaining Excess
Proceeds from any prior Asset Sale, equals or exceeds $10 million, the Company
shall so notify the Trustee in writing and shall offer to purchase from all
holders of the Senior
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Debt Securities (an "Asset Sale Offer"), and shall purchase from holders
accepting such Asset Sale Offer on the date fixed for such Asset Sale Offer (the
"Asset Sale Offer Date"), the maximum amount (expressed in integral multiples of
aggregate principal amount of $1,000) of Debt Securities that may be purchased
out of the Excess Proceeds, in accordance with the procedures set forth in the
Indentures, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any. To the extent
that the aggregate amount of Debt Securities tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds relating thereto (such shortfall
constituting a "Deficiency"), then the Company may use such Deficiency, or a
portion thereof, for general corporate purposes. Upon completion of an Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Limitation on Liens Securing Indebtedness. The Company will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien of any kind upon any of their respective assets or properties now owned
or acquired after the date of the Senior Indenture, or any income or profits
therefrom, securing any Indebtedness of the Company or any Restricted Subsidiary
(other than Permitted Liens) without making provision for all of the Notes to be
equally and ratably secured with (or prior to) such Indebtedness, provided,
however that if such Lien securing such Indebtedness ceases to exist, such equal
and ratable (or prior) Lien for the benefit of the holders of the Debt
Securities shall cease to exist; provided, further, that the Lien securing any
Subordinated Indebtedness shall be subordinated to the Lien securing the Debt
Securities to at least the extent that such Subordinated Indebtedness is
subordinated to the Debt Securities.
Limitation on Conduct of Business. The Company will operate and will cause its
Restricted Subsidiaries to be operated in a manner such that their business
activities will be the Oil and Gas Business.
Limitation on Dividends and other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on Capital Stock
of any Restricted Subsidiary or any Redeemable Stock of any Restricted
Subsidiary owned by the Company or any Restricted Subsidiary, (ii) pay any
Indebtedness owed to the Company or any Restricted Subsidiary, (iii) make any
Investment in the Company or any Restricted Subsidiary or (iv) transfer any of
its property or assets to the Company or any Restricted Subsidiary, except (a)
any encumbrance or restriction pursuant to an agreement in effect on the date of
the Senior Indenture, (b) any encumbrance or restriction with respect to any
person that is not a Restricted Subsidiary on the date of the Senior Indenture,
in existence at the time such person becomes a Restricted Subsidiary and not
created in connection with, or in contemplation of, such person becoming a
Restricted Subsidiary so long as such encumbrance or restriction is not
applicable to any person or the property or assets of any person other than the
person becoming a Restricted Subsidiary, (c) any encumbrance or restriction
pursuant to any agreement that extends, refinances, renews or replaces any
agreement containing any encumbrance or restriction described in the foregoing
clauses (a) and (b), provided, however, that the terms and conditions of any
such encumbrance or restriction are not less favorable to the holders of the
Debt Securities than those contained in the agreement evidencing the restriction
or encumbrance so extended, refinanced, renewed or replaced, (d) any encumbrance
or restriction arising under law and (e) any restriction arising under customary
non-assignment and non-subletting clauses in leases. Nothing contained in the
provisions of the Indentures described in this paragraph shall prevent the
Company or any Restricted Subsidiary from entering into any agreement permitting
the incurrence of Liens otherwise permitted under the provisions of the
Indentures described above under the "Limitation on Liens Securing
Indebtedness."
Limitation on Guaranties. The Company will not permit any Restricted
Subsidiary, directly or indirectly, to assume, guarantee or in any other manner
become liable with respect to the payment of any Indebtedness of the Company
unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Senior Indenture providing for a guarantee of the
payment of the Senior Debt Securities by such Restricted Subsidiary; provided,
however, in the case of such Restricted Subsidiary's assumption, guarantee, or
other liability with respect to Subordinated Indebtedness, such guarantee,
assumption or other liability shall be subordinated to such Restricted
Subsidiary's guarantee of the Notes to at least the extent that such
Subordinated Indebtedness is subordinated to the Debt Securities; and provided,
further, that the provisions of the Indentures described in this paragraph shall
not be applicable to any guarantee, assumption or other liability with respect
to the payment of any Indebtedness of the Company by any Restricted Subsidiary
in existence on the date of the Senior Indenture or that (i) existed at the time
such person became a Restricted Subsidiary of the Company and (ii) was not
incurred in connection with, or in contemplation of, such person becoming a
Restricted Subsidiary. Notwithstanding the foregoing, any such guarantee of the
Debt Securities by a Restricted Subsidiary shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon the
release or discharge of such guarantee of such Indebtedness, other than a
release or discharge by, or as a result of, any payment under such guarantee by
such Restricted Subsidiary.
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CHANGE IN CONTROL
The Indentures provide that if there shall have occurred a Change in Control,
Debt Securities shall be purchased by the Company, at the option of the holder
thereof, in whole or in part in integral multiples of aggregate principal amount
of $1,000, on a date that is not earlier than 45 days nor later than 60 days
from the date the Change in Control Notice is given to holders or such later
date as may be necessary for the Company to comply with requirements under the
Exchange Act (such date or such later date, being the "Change in Control
Purchase Date"), at a purchase price in cash (the "Change in Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to any Change in Control Purchase Date, subject to
satisfaction by or on behalf of the holder of the requirements established
pursuant to the Indentures. The Company shall comply with any applicable tender
offer rules then in effect, including Section 14(e) of the Exchange Act and Rule
14e-1 promulgated thereunder (or any successor provisions), in connection with a
Change in Control offer. In the event of any conflict between such tender offer
rules and the provisions set forth in the Indentures, such tender offer rules
shall control.
"Change in Control" of the Company means the occurrence of any of the following:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) (or any
successor provisions) of the Exchange Act) is or becomes the "beneficial owner"
(as defined in Rules 13d-3 and 13d-5 (or any successor provisions) under the
Exchange Act) of 50% or more of the total voting power of the Voting Stock of
the Company; (ii) there shall be consummated any consolidation or merger of the
Company (a) in which the Company is not the continuing or surviving corporation
or (b) pursuant to which the outstanding Voting Stock of the Company would be
converted into cash, securities or other property, in each case other than a
consolidation or merger of the Company in which (1) the outstanding Voting Stock
of the Company is changed into or exchanged for Voting Stock of the continuing
or surviving corporation and (2) the holders of the Company's Voting Stock
immediately prior to the consolidation or merger own, directly or indirectly, at
least a majority of the Voting Stock of the continuing or surviving corporation
immediately after the consolidation or merger, (iii) the Company sells,
transfers or otherwise disposes of all or substantially all of its assets, (iv)
the cessation of Continuing Directors for any reason to constitute a majority of
the Board of Directors then in office, (v) so long as any Indebtedness issued
pursuant to the Convertible Note Agreement remains outstanding, a Change in
Control as defined therein, (vi) so long as any Indebtedness remains outstanding
under the Convertible Debenture Indenture, a Fundamental Change as defined
therein, (vii) the Company ceases to own on a fully diluted basis, directly or
indirectly through one or more Restricted Subsidiaries that are Wholly Owned
Subsidiaries of the Company, 80% of the outstanding Voting Stock of
Benton-Vinccler, and (viii) Benton-Vinccler sells, transfers or otherwise
disposes of a substantial part of its assets; provided that neither of the
events described in clause (vii) or (viii) will constitute a "Change in Control"
if (x) during the four full fiscal quarters ended immediately prior to the
occurrence of such event, the EBITDA of the Company and its Restricted
Subsidiaries attributable to Benton-Vinccler as a percentage of the EBITDA of
the Company and its Restricted Subsidiaries, was less than 20% and (y)
immediately prior to such event, the Oil and Gas Reserve Estimate of the Company
and its Restricted Subsidiaries attributable to Benton-Vinccler as a percentage
of the Oil and Gas Reserve Estimate of the Company and its Restricted
Subsidiaries, is less than 20%.
In connection with clause (viii) of the preceding paragraph, a sale, transfer or
other disposition of assets of Benton-Vinccler shall be deemed to be a sale,
transfer or other disposition of a "substantial part" of the assets of
Benton-Vinccler if such assets, when added to all other assets of
Benton-Vinccler sold, transferred or otherwise disposed of (other than the
disposition of hydrocarbons or other mineral products in the ordinary course of
business) during the immediately preceding twelve months either (i) exceed
(based on the book value of all assets so sold, transferred or otherwise
disposed of during such twelve months) 25% of the net tangible assets of
Benton-Vinccler as of the end of its most recently completed full fiscal quarter
for which financial information is available determined in accordance with GAAP
or (ii) contributed more than 25% of the net income of Benton-Vinccler during
its most recently completed four full fiscal quarters for which financial
information is available determined in accordance with GAAP.
The Company's ability to repurchase the Debt Securities will be dependent upon
the availability of cash and other financing sources to consummate such a
repurchase. The Company currently expects to incur additional Indebtedness to
finance its capital expenditure requirements and, therefore, the Company's
ability to incur additional Indebtedness to repurchase the Debt Securities may
be adversely affected by what might then be a higher debt to equity ratio. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Resources and Liquidity."
The Change in Control provisions of the Indentures may make it more difficult or
discourage a takeover of the Company and the removal of incumbent management.
The Change in Control provision is not the result of management's knowledge of
any specific effort to accumulate shares of Common Stock or to obtain control of
the Company by means of a merger, tender offer, solicitation or otherwise, nor
is it part of a plan by management to adopt an anti-takeover provision.
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CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Company may not, without the consent of the holders of all Debt Securities
then outstanding, consolidate with, merge into or convey, sell, transfer, lease,
exchange or otherwise dispose of all of its assets and properties substantially
as an entirety to, any other person unless (i) the successor is a corporation or
partnership organized under the laws of the United States or any political
subdivision thereof or therein, (ii) the successor assumes all obligations of
the Company under the Indentures and the Debt Securities, (iii) after giving
effect to such consolidation, merger, conveyance, sale, transfer, lease,
exchange or other disposition, no Default or Event of Default, shall have
occurred and be continuing, (iv) the successor would have a pro forma
Consolidated Net Worth after giving effect to such consolidation, merger,
conveyance, sale, transfer, lease, exchange or other disposition and prior to
any purchase accounting adjustments at least equal to the Consolidated Net Worth
of the Company prior to such consolidation, merger, conveyance, sale, transfer,
lease, exchange or other disposition and (v) certain other conditions are met.
Upon any consolidation or merger or any conveyance, sale, transfer, lease,
exchange or other disposition of the properties and assets of the Company
substantially as an entirety to any person in accordance with the provisions
described above, the successor formed by such consolidation or into which the
Company is merged or to which such conveyance, sale, transfer, lease, exchange
or other disposition is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indentures with the
same effect as if such successor had been named as the Company in the
Indentures; and thereafter, except in the case of a conveyance, sale, transfer,
lease, exchange or other disposition of properties to another person, the
predecessor person shall be released from all obligations and covenants under
the Indentures and the Debt Securities.
PROVISION OF FINANCIAL INFORMATION
To the extent permitted under the Exchange Act, whether or not the Company is
required to comply with Section 13(a) or 15(d) (or any successor provision) of
the Exchange Act, the Company will file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13(a) or 15(d) (or any
successor provision) if the Company were so required, such documents to be filed
with the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Company would have been required to file such documents if
the Company were so required. The Company will also in any event (i) within 15
days of each Required Filing Date transmit by mail to all holders of Debt
Securities, without cost to such holders, copies of the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13(a) or 15(d) (or any
successor provision) and (ii) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request supply copies of such documents to any prospective holder of Debt
Securities.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any person, Indebtedness of such
person (i) existing at the time such person becomes a Restricted Subsidiary or
(ii) assumed in connection with the acquisition of assets from another person,
including Indebtedness Incurred in connection with, or in contemplation of, such
person becoming a Restricted Subsidiary or such acquisition, as the case may be.
"Affiliate" means, with respect to any person, any other person directly or
indirectly controlling, controlled by, or under common control with, such
person, or any other person that owns, directly or indirectly, 5% or more of
such person's Voting Stock or any Affiliate of any such 5% or more owner. For
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with"), as applied to any person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such person, whether through the ownership of Voting Stock, by contract or
otherwise.
"Amount" means, (i) with respect to any Indebtedness outstanding at any time
other than Preferred Stock, the principal amount thereof; provided that the
amount of any such Indebtedness outstanding at any time that was issued at a
price less than the principal amount thereof shall equal the amount of the
liability in respect thereof at such time determined in accordance with GAAP and
(ii) with respect to any Indebtedness outstanding at any time that is Preferred
Stock, the aggregate liquidation value thereof at such time.
"Asset Acquisition" means (i) an Investment by the Company or any Restricted
Subsidiary in any other person pursuant to which such person shall become a
Restricted Subsidiary of the Company or any Restricted Subsidiary or shall be
merged into or consolidated with the Company or any Restricted Subsidiary or
(ii) an acquisition by the Company or any Restricted Subsidiary of the assets of
any person other than the Company or any Restricted Subsidiary that constitute
substantially all of a division or line of business of such person.
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"Asset Disposition" means the sale or other disposition by the Company or any
Restricted Subsidiary (other than to the Company or another Restricted
Subsidiary) of (i) all or substantially all of the Capital Stock of any
Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any Restricted
Subsidiary.
"Asset Sale" means any conveyance, transfer, lease or other disposition
(including, without limitation, by way of any merger, consolidation or other
similar transaction), directly or indirectly, in one or a series of related
transactions, of any Capital Stock or Redeemable Stock of any Restricted
Subsidiary (other than the sale and issuance of directors' qualifying shares) or
any other properties or assets of the Company or any Restricted Subsidiary
(other than any such conveyance, transfer, lease or other disposition (i) that
is permitted under the provisions of the Indentures described under
"Consolidation, Merger, Conveyance, Transfer or Lease" above, (ii) that involves
any transfer of Capital Stock, Redeemable Stock or other property or assets of a
Restricted Subsidiary to the Company or any other Restricted Subsidiaries or of
the Company to a Restricted Subsidiary, (iii) of (1) hydrocarbon or other
mineral products or (2) other assets in an amount not to exceed $2.5 million in
any twelve month period, in each case in the ordinary course of business or (iv)
that involves the abandonment of any lease of non-producing acreage).
"Average Life" means, as of any date of determination, with respect to any
Indebtedness, the quotient obtained by dividing (a) the sum of the product of
(i) the number of years from such date of determination to the date of each
successive scheduled principal payment of such Indebtedness and (ii) the amount
of such principal payment by (b) the sum of all such principal payments.
"Board of Directors" means the Board of Directors of the Company or any
authorized committee of such Board.
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
such person's capital stock or partnership interests whether now outstanding or
issued after the date of the Indentures, except Redeemable Stock.
"Capitalized Lease Obligation" means, with respect to any person, any obligation
relating to any property (whether real, personal or mixed) of that person as
lessee which, in conformity with GAAP, is required to be accounted for as a
capital lease for financial reporting purposes, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Cash Equivalents" means, at any time, (i) any evidence of Indebtedness with a
maturity of 180 days or less issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality thereof
(provided that the full faith and credit of the United States of America is
pledged in support thereof), (ii) repurchase obligations for investments of the
type described in clause (i) for which delivery of the investment is made
against payment, (iii) demand or time deposits, bankers' acceptances and
certificates of deposit or acceptances with a maturity of 180 days or less of
any financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$300,000,000, and (iv) commercial paper with a maturity of 180 days or less
issued by a corporation (except any Affiliate or Subsidiary of the Company)
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by Standard & Poor's Corporation and at least
P-1 by Moody's Investors Service, Inc.
"Commodity Swap Agreement" means any commodity swap agreement or other similar
agreement or arrangement.
"Consolidated Interest Expense" means, for any period, the aggregate amount
(without duplication) of (i) interest expense in accordance with GAAP
(including, in accordance with the following sentence, interest attributable to
Capitalized Lease Obligations and the undischarged balance of production
payments) during such period in respect of all Indebtedness of the Company and
its Restricted Subsidiaries (including (a) amortization of original issue
discount on any Indebtedness, (b) the interest portion of all deferred payment
obligations, calculated in accordance with GAAP, and (c) all commissions,
discounts and other fees and charges owed with respect to bankers' acceptance
financings and Currency Agreements, Interest Rate Agreements and Commodity Swap
Agreements, in each case to the extent attributable to such period), and (ii)
dividend requirements of the Company and its Restricted Subsidiaries with
respect to Redeemable Stock and with respect to all other Preferred Stock of any
Restricted Subsidiaries (in each case whether in cash or otherwise (except
dividends payable solely in shares of Capital Stock of the Company or any
Restricted Subsidiary)) paid, declared, accrued or accumulated during such
period, in each case to the extent attributable to such period and excluding
items eliminated in consolidation. For purposes of this definition, (a) interest
with respect to a Capitalized Lease Obligation or a production payment shall be
deemed to accrue at an interest rate reasonably determined by the Company to be
the rate of interest implicit in such Capitalized Lease Obligation or production
payment in accordance with GAAP and (b) interest expense attributable to any
Indebtedness represented by the guarantee by the Company or a Restricted
Subsidiary of an obligation of another person shall be deemed to be the interest
expense attributable to the Indebtedness guaranteed.
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"Consolidated Net Income" means, for any period, the aggregate net income (or
loss) of the Company and its Restricted Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP; provided that the
following items shall be excluded from Consolidated Net Income (without
duplication): (i) the net income of any person in which the Company or any of
its Restricted Subsidiaries has an interest (which interest does not cause the
net income of such person to be consolidated with the net income of the Company
in accordance with GAAP) except to the extent of the amount of dividends or
distributions actually paid to the Company or its Restricted Subsidiaries by
such person in such period; (ii) solely for the purposes of calculating the
amount of Restricted Payments that may be made pursuant to the Indenture (and in
such case, except to the extent includable pursuant to the foregoing clause (i)
above), the net income (or loss) of any person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such person are acquired by the Company or any of its
Restricted Subsidiaries, (iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation and (iv) all
extraordinary and non-recurring gains and losses or gains or losses attributable
to asset sales not in the ordinary course of business (including any sale of
Capital Stock of a Restricted Subsidiary). If the Consolidated Net Income for
any fiscal quarter of the Company includes a ceiling limitation writedown (a
"Writedown Quarter") in accordance with the full cost accounting method rules of
the Commission (such a writedown, an "Actual Writedown") but such Actual
Writedown would have been less or would not have been required had such ceiling
limitation been calculated using oil and gas prices in effect on the last day of
either of the two fiscal quarters of the Company immediately succeeding such
Writedown Quarter (such Actual Writedown, as so recalculated, a "Hypothetical
Writedown"), then Consolidated Net Income for such Writedown Quarter shall be
increased by the amount by which such Actual Writedown exceeds such Hypothetical
Writedown; provided that in no event shall any such increase singly, or in the
case of any such increases for both quarters immediately succeeding such
Writedown Quarter, in the aggregate, exceed the amount of such Actual
Writedown).
"Consolidated Net Worth" means, with respect to any person, as at any date of
determination, the consolidated stockholders' equity (or like balance sheet
designation) of such person as determined in accordance with GAAP.
"Continuing Directors" means any member of the Board of Directors on the date of
the Indenture, any director elected after the date thereof in any annual meeting
of the stockholders upon the recommendation of the Board of Directors and any
other member of the Board of Directors who is elected to succeed a Continuing
Director by a majority of Continuing Directors who are then members of the Board
of Directors.
"Convertible Debenture Indenture" means the Indenture dated as of May 15, 1992
between the Company and Meridian Trust Company of California.
"Convertible Note Agreement" means the Note Agreement dated as of October 1,
1991 between the Company and the purchasers listed therein.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"Default" means any event which is, or after notice or passage of time or both
would be, an Event of Default.
"Disinterested Director" means, with respect to an Affiliate Transaction, a
member of the Board of Directors who has no direct or indirect financial
interest, and whose employer has no direct or indirect financial interest, in
such Affiliate Transaction.
"EBITDA" means, for any period, without duplication, Consolidated Net Income for
such period, increased (to the extent deducted in determining Consolidated Net
Income) by the sum of (i) Consolidated Interest Expense, (ii) income taxes
(other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or gains or losses attributable
to asset sales not in the ordinary course of business), (iii) depreciation and
depletion expense, (iv) amortization expense and (v) all other non-cash items
reducing Consolidated Net Income less all non-cash items increasing Consolidated
Net Income (other than, in each case, minority interests which shall, in all
cases, be excluded from the calculation of EBITDA) all as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in conformity
with GAAP.
"EBITDA/Interest Ratio" means the ratio of (i) EBITDA for the Reference Period
immediately prior to the date of the transaction giving rise to the need to
calculate the EBITDA/Interest Ratio (the "Transaction Date") to (ii)
Consolidated Interest Expense for such Reference Period. In making the foregoing
calculation, (a) pro forma effect shall be given to (1) any Indebtedness
Incurred subsequent to the end of such Reference Period, (2) any Indebtedness
Incurred during such Reference Period to the extent such Indebtedness is
outstanding on the Transaction Date and (3) any Indebtedness to be Incurred on
the Transaction Date, in each
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case as if such Indebtedness had been Incurred on the first day of such
Reference Period and after giving effect to the application of the proceeds
thereof; (b) Consolidated Interest Expense attributable to interest or dividends
on any Indebtedness (whether existing or being Incurred) computed on a pro forma
basis and bearing a floating interest or dividend rate shall be computed as if
the rate in effect on the date of computation (taking into account any Interest
Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months) had been the applicable rate for
the entire period; (c) there shall be excluded from Consolidated Interest
Expense any Consolidated Interest Expense related to any amount of Indebtedness
that was outstanding during such Reference Period or thereafter but that is not
outstanding or is to be repaid on the Transaction Date, except for Consolidated
Interest Expense accrued (as adjusted pursuant to clause (b)) during such
Reference Period under a revolving credit or similar arrangement to the extent
of the commitment thereunder (or under any successor revolving credit or similar
arrangement) on the Transaction Date; and (d) pro forma effect shall be given to
Asset Dispositions and Asset Acquisitions that occur during such Reference
Period or thereafter and on or prior to the Transaction Date as if they had
occurred on the first day of such Reference Period.
"Event of Default" has the meaning provided in "Events of Default."
"GAAP" means, with respect to any determination pursuant to the terms of the
Indenture, such accounting principles as are generally accepted in the United
States at the time of such determination.
"Guarantee" means, as applied to any obligation, (i) a guaranty (other than by
endorsement of negotiable instruments for collection in the ordinary course of
business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of any part or all of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"Incur" means with respect to any Indebtedness, to incur, create, issue, assume,
guarantee or otherwise become liable for or with respect to or extend the
maturity of or become responsible for, the payment of, contingently or
otherwise, such Indebtedness; provided that neither the accrual of interest
(whether such interest is payable in cash or kind) nor the accretion of original
issue discount shall be considered an Incurrence of Indebtedness; provided
further that (i) in the case of any Indebtedness of the Company to any
Restricted Subsidiary, such Indebtedness shall be deemed to have been Incurred
by the Company at the time such Indebtedness is sold, transferred or otherwise
disposed of by such Restricted Subsidiary or such Restricted Subsidiary is
designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted
Subsidiary, (ii) in the case of any Indebtedness of a Restricted Subsidiary to
the Company or another Restricted Subsidiary, such Indebtedness shall be deemed
to have been Incurred by such Restricted Subsidiary at the time such
Indebtedness is sold, transferred or otherwise disposed of by the Company or
such other Restricted Subsidiary or the Restricted Subsidiary holding such
Indebtedness is designated as an Unrestricted Subsidiary or otherwise ceases to
be a Restricted Subsidiary and (iii) any Indebtedness of an Unrestricted
Subsidiary that ceases to be Non-Recourse Indebtedness shall be deemed to have
been Incurred by such Unrestricted Subsidiary at the time of such cessation.
"Indebtedness" means, without duplication, with respect to any person, (i) all
obligations of such person (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or only to a
portion thereof), (b) evidenced by bonds, notes, debentures or similar
instruments, (c) representing the balance deferred and unpaid of the purchase
price of any property or services (excluding accounts payable or other
obligations arising in the ordinary course of business), (d) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (e) for
the payment of money relating to a Capitalized Lease Obligation, or (f)
evidenced by a letter of credit or reimbursement obligation of such person with
respect to any letter of credit (regardless of whether such reimbursement
obligation is to the issuer of the letter of credit or another person); (ii) all
net obligations of such person under Interest Rate Agreements, Commodity Swap
Agreements and Currency Agreements; (iii) the undischarged balance of any
production payments as to which such person is obligated or its property is
dedicated; (iv) all liabilities of others of the kind described in the preceding
clause (i), (ii) or (iii) that such person has guaranteed or that are otherwise
its legal liability; (v) Indebtedness (as otherwise defined in this definition)
of others secured by a Lien on any asset of such person, whether or not such
Indebtedness is assumed by such person (provided that if the obligations so
secured have not been assumed in full by such person or are not otherwise such
person's legal liability in full, then such obligations shall be deemed to be in
an amount equal to the greater of (a) the lesser of (1) the full amount of such
obligations and (2) the fair market value of such asset, as determined in good
faith by the board of directors of such person, which determination shall be
evidenced by a board resolution, and (b) the amount of obligations as have been
assumed by such person or which are otherwise such person's legal liability);
and (vi) the liquidation preference and any mandatory redemption payment
obligations in respect of (a) all Redeemable Stock of such person and its
Subsidiaries and (b) all Preferred Stock of such Subsidiaries.
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"Independent Financial Advisor" means a nationally recognized investment banking
firm (i) which does not (and whose directors, officers, employees and Affiliates
do not) have a direct or indirect material financial interest in the Company and
(ii) which, in the sole judgment of the Board of Directors, is otherwise
independent and qualified to perform the task for which such firm is being
engaged.
"Independent Petroleum Engineers" means, with respect to any person, a
nationally recognized petroleum engineering firm (i) which does not (and whose
directors, officers, employees and Affiliates do not) have a direct or indirect
material financial interest in such person and (ii) which, in the sole judgment
of the board of directors of such person, is otherwise independent and qualified
to perform the task for which such firm is being engaged.
"Interest Rate Agreement" means any interest rate swap agreement, interest rate
collar agreement or other similar agreement or arrangement designed to protect
the Company or any of its Restricted Subsidiaries against fluctuations in
interest rates.
"Investment" means, with respect to any person, any investment in another
person, whether by means of a share purchase, capital contribution, loan,
advance (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the balance sheet of such person) or
similar credit extension constituting Indebtedness of such other person and any
guarantee of obligations of any other person.
"Lien" means any mortgage, lien, security interest, charge or encumbrance of any
kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security interest).
"Material Subsidiary" means, at the time of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) accounted for more than 5%
of (a) the revenues of the Company and its Restricted Subsidiaries, on a
consolidated basis, or (b) EBITDA, in each case for the most recently completed
fiscal year of the Company for which financial information is available or (ii)
owned more than 5% of the assets of the Company and its Restricted Subsidiaries,
on a consolidated basis, as at the end of such fiscal year, all as shown on or
derived from the consolidated financial statements of the Company for such
fiscal year.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds thereof
in the form of cash or Cash Equivalents (including proceeds from the sale of
Publicly Traded Stock and payments in respect of deferred payment obligations
when received in the form of cash or Cash Equivalents), net of (i) brokerage
commissions and other reasonable fees and expenses (including fees and expenses
of counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all taxes payable as a result of such Asset Sale, (iii) payments made to
retire Indebtedness where payment of such Indebtedness is required in connection
with such Asset Sale, (iv) obligations and expenses incurred in connection with
the repatriation to the United States of any proceeds of such Asset Sale, (v) in
the case of any Asset Sale made by a Restricted Subsidiary, any dividend or
distribution of a portion of the proceeds of such Asset Sale to a holder (other
than the Company or another Restricted Subsidiary) of Capital Stock (other than
Preferred Stock) of such Restricted Subsidiary; provided that such dividend is
paid or distribution is made concurrently with the payment of a dividend or
making of a distribution of a portion of such proceeds by such Restricted
Subsidiary to the Company or another Restricted Subsidiary and the amount of
such dividend or distribution does not exceed such holder's pro rata share
(based on such holder's percentage ownership of the outstanding Capital Stock
(other than Preferred Stock) of such Restricted Subsidiary) of the aggregate
amount of the proceeds of such Asset Sale being dividended or distributed and
(vi) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Net Proceeds" means, in the case of any sale by the Company of Capital Stock,
the aggregate net cash proceeds received by the Company, after payment of
expenses, commissions, discounts and any other transaction costs incurred in
connection therewith.
"Non-Recourse Indebtedness" means, with respect to any Unrestricted Subsidiary,
Indebtedness of such Unrestricted Subsidiary as to which (i) neither the Company
nor any Restricted Subsidiary (a) provides credit support including any
undertaking, agreement or instrument which would constitute Indebtedness or (b)
is directly or indirectly liable for such Indebtedness and (ii) no default with
respect to such Indebtedness (including any rights which the holders thereof may
have to take enforcement action against such Unrestricted Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other Indebtedness
of the Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
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"Oil and Gas Business" means the exploration for and the development,
acquisition, production, processing, marketing, storage and transportation of
hydrocarbons and other related energy and natural resources businesses.
"Oil and Gas Reserve Estimate" means, as of any date of determination, the
estimated discounted future net revenues attributable to proved oil and gas
reserves of the Company and its Restricted Subsidiaries calculated in accordance
with the Commission's guidelines (before any state or federal income taxes) as
set forth in the most recently prepared reserve report of the Company and its
Restricted Subsidiaries that has been audited by Independent Petroleum Engineers
(which report shall be prepared as of a date no earlier than the end of the most
recently completed fiscal year of the Company for which financial information is
available) (the "Audited Report"), decreased, in the case of clause (i) below,
and increased or decreased, as appropriate, in the case of clauses (ii) and
(iii) below, by the Company's petroleum engineers to reflect, as of such date of
determination, the estimated discounted future net revenues attributable to (i)
the ownership interest of any holder (other than the Company or another
Restricted Subsidiary) of Capital Stock (other than Preferred Stock) of any
Restricted Subsidiary (based on such holder's percentage ownership of such
Capital Stock as of such date of determination), but only to the extent such
ownership interest is not otherwise deducted from the discounted future net
revenues of the Company and its Restricted Subsidiaries set forth in the Audited
Report, (ii) proved oil and gas reserves acquired or disposed of since the date
of the Audited Report and (iii) increases or decreases in proved oil and gas
reserves of the Company and its Restricted Subsidiaries due to exploration,
development or exploitation activities or changes in geological conditions since
the date of the Audited Report; provided that such adjustments are calculated in
accordance with the Commission's guidelines by the Company's petroleum engineers
utilizing the prices utilized in, and on a basis otherwise consistent with, the
Audited Report. Notwithstanding the foregoing, (1) if the estimated discounted
future net revenues from any proved oil and gas reserves acquired since the date
of the Audited Report have been audited by Independent Petroleum Engineers and a
report with respect thereto as of a date no earlier than the end of the most
recently completed fiscal year of the person from whom such reserves were
acquired has been prepared, such report (or, if a more recent audited reserve
report is available, the most recent of such reports) shall be utilized for
purposes of calculating the adjustment to discounted future net revenues of such
person attributable to such acquired reserves, (2) if the estimated discounted
future net revenues of the Company and its Restricted Subsidiaries, as adjusted
pursuant to clauses (ii) and (iii) of the preceding sentence (excluding any
adjustments calculated pursuant to clause (1) of this sentence) would vary by
more than 10% from the discounted future net revenues of the Company and its
Restricted Subsidiaries set forth in the Audited Report, such adjustments shall
be audited by Independent Petroleum Engineers and (3) so long as Benton-Vinccler
is a Restricted Subsidiary, for purposes of calculating the Oil and Gas Reserve
Estimate of the Company and its Restricted Subsidiaries attributable to
Benton-Vinccler as of any date of determination, the proportionate share of the
Company and its Restricted Subsidiaries (based on their percentage ownership
interest of Benton-Vinccler as of such date of determination) of the estimated
discounted future net revenues attributable to the proved oil and gas reserves
subject to the operating service agreement dated as of July 31, 1992 with
Lagoven (as amended or supplemented from time to time and including any
successor agreements or arrangements) shall be included in such Oil and Gas
Reserve Estimate on the same basis as such net revenues would be included if
such proved oil and gas reserves were owned by Benton-Vinccler.
"Performance Letter of Credit" means, with respect to any person, a letter of
credit or bond to secure the performance in any country of any obligations of
such person under any contract entered into in the ordinary course of such
person's Oil and Gas Business; provided that the provision of any such letter of
credit or bond is required by local law or, in the case of any such letter of
credit or bond securing the performance of obligations outside the United
States, is customarily required in connection with contracts relating to the Oil
and Gas Business in such country and, in either case, such letter of credit or
bond requires that any payment thereunder by the issuer thereof be immediately
repaid by such person.
"Permitted Benton-Vinccler Indebtedness" means Indebtedness of Benton-Vinccler
in an aggregate amount not to exceed $25 million at any time outstanding.
"Permitted Commodity Swap Agreements" means Commodity Swap Agreements entered
into in order to protect the Company or its Restricted Subsidiaries against
fluctuations in oil or gas prices with respect to their current or good faith
estimated future oil and gas production irrespective of whether such production
is owned by the Company or a Restricted Subsidiary or is produced by the Company
or a Restricted Subsidiary pursuant to an arrangement under which the Company or
a Restricted Subsidiary acts as a contractor for a third party that owns such
production.
"Permitted Company Secured Indebtedness" means secured Indebtedness of the
Company Incurred after the date of the Indentures (other than pursuant to clause
(xi) of the definition of Permitted Indebtedness) in an aggregate amount not to
exceed the greater of $10 million or 4% of the Oil and Gas Reserve Estimate, in
each case outstanding at any time less the aggregate amount of Permitted
Restricted Subsidiary Indebtedness outstanding at such time.
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"Permitted Indebtedness" means (i) the Debt Securities; (ii) Indebtedness of the
Company (other than the Vinccler Notes) and its Restricted Subsidiaries (other
than Benton-Vinccler) outstanding on the date of the Indenture; (iii)
obligations of the Company and its Restricted Subsidiaries pursuant to Interest
Rate Agreements, Currency Agreements and Permitted Commodity Swap Agreements and
compensation payable thereunder; (iv) Indebtedness of the Company to a
Restricted Subsidiary or of a Restricted Subsidiary to the Company or another
Restricted Subsidiary (but only so long as such Indebtedness is held or owned by
the Company or a Restricted Subsidiary); (v) Indebtedness of the Company
Incurred for the purpose of financing the working capital requirements of the
Company or any Restricted Subsidiary in an aggregate amount not to exceed the
greater of $5 million or 3% of the Oil and Gas Reserve Estimate, in each case at
any time outstanding; (vi) Indebtedness (excluding Acquired Indebtedness) of the
Company in addition to Indebtedness permitted by clauses (i) through (v) in an
aggregate amount not to exceed $5 million at any time outstanding; (vii)
Permitted Benton-Vinccler Indebtedness; (viii) Performance Letters of Credit
with respect to which the account party is the Company or any Restricted
Subsidiary; provided that the reimbursement obligation of the Company or such
Restricted Subsidiary thereunder is unsecured; (ix) unsecured obligations of the
Company or any Restricted Subsidiary to reimburse any other person for all or a
portion of such other person's reimbursement obligations with respect to any
Performance Letter of Credit; provided that such Performance Letter of Credit
secures the performance of obligations of the Company or a Restricted Subsidiary
(in addition to any performance obligations of such other person which such
Performance Letter of Credit may secure) under any contract entered into by the
Company or such Restricted Subsidiary in the ordinary course of its Oil and Gas
Business; (x) the Vinccler Notes; and (xi) Indebtedness of the Company or any
Restricted Subsidiary the proceeds of which are used to renew, extend, refinance
or repurchase, or Indebtedness of the Company or any Restricted Subsidiary
exchanged for, Indebtedness permitted by clause (i) or (ii) above so long as (a)
the aggregate amount of such new Indebtedness (or, if such new Indebtedness will
be issued at a price less than the principal amount thereof, the aggregate issue
price thereof) would not be greater than the sum of the aggregate amount of the
Indebtedness being renewed, extended, refinanced, repurchased or exchanged and
any premium, accrued interest expense, commissions and other transaction costs
incurred in connection with such renewal, extension, refinancing, repurchase or
exchange (but only if such costs are of a kind and in an amount that would
customarily be incurred in connection with such types of transactions), (b) if
the Indebtedness being renewed, extended, refinanced, repurchased or exchanged
is Indebtedness of the Company, such new Indebtedness would be Indebtedness of
the Company and, unless the Indebtedness being renewed, extended, refinanced,
repurchased or exchanged is fully secured, such new Indebtedness would have an
Average Life greater than the Average Life of the Senior Debt Securities and a
stated maturity later than the Stated Maturity of the Notes and (c) such new
Indebtedness would be Subordinated Indebtedness if the Indebtedness renewed,
extended, refinanced, repurchased or exchanged is Subordinated Indebtedness and
such new Subordinated Indebtedness would be subordinated to the Senior Debt
Securities at least to the extent that the Subordinated Indebtedness being
renewed, extended, refinanced, repurchased or exchanged is subordinated to the
Senior Debt Securities.
"Permitted Liens" means Liens upon any real or tangible personal property
securing (i) any Indebtedness of the Company or any Restricted Subsidiary
existing on the date of the Indenture and any renewals, extensions, refinancings
or exchanges of such Indebtedness permitted under the Indenture; provided that
any such Lien securing any renewed, extended, refinanced or exchanged
Indebtedness shall only attach to the property that secured such Indebtedness
prior to such renewal, extension, refinancing or exchange; (ii) any Permitted
Benton-Vinccler Indebtedness; (iii) any Permitted Restricted Subsidiary
Indebtedness; (iv) any Permitted Company Secured Indebtedness; (v) Permitted
Commodity Swap Agreements; and (vi) any other Indebtedness of the Company or any
Restricted Subsidiary required by its terms to be secured in the event that the
Notes are required to be secured pursuant to the terms of the Indenture;
provided that (a) if such other Indebtedness is Subordinated Indebtedness, the
Lien securing such other Indebtedness shall be subordinated to the Lien securing
the Senior Debt Securities to at least the extent that such Subordinated
Indebtedness is subordinated to the Senior Debt Securities, (b) in no event
shall the Lien securing such other Indebtedness be prior to the Lien securing
the Senior Debt Securities and (c) if the Lien securing the Senior Debt
Securities ceases to exist, the Lien securing such other Indebtedness shall also
cease to exist.
"Permitted Restricted Subsidiary Indebtedness" means Indebtedness of any
Restricted Subsidiary (excluding Permitted Benton-Vinccler Indebtedness)
Incurred after the date of the Indentures (other than pursuant to clause (xi) of
the definition of Permitted Indebtedness) in an aggregate amount for all such
Restricted Subsidiaries not to exceed the greater of $10 million or 4% of the
Oil and Gas Reserve Estimate, in each case outstanding at any time less the
aggregate amount of Permitted Company Secured Indebtedness outstanding at such
time.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof; provided that the term
joint venture shall not include any contractual arrangement between the Company
or any Restricted Subsidiary and one or more third parties pursuant to which the
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Company or such Restricted Subsidiary and such third party or parties agree to
share the costs and benefits of exploring and developing oil and gas properties
so long as (i) the interest of the Company or such Restricted Subsidiary in such
properties and the hydrocarbons or other mineral products derived therefrom is
owned directly by the Company or such Restricted Subsidiary, (ii) such
contractual arrangement does not grant any Lien on the Company's or such
Restricted Subsidiary's ownership interest in such properties or products
derived therefrom or permit such third party or parties to restrict in any
manner the ability of the Company or such Restricted Subsidiary to use,
transfer, sell or otherwise dispose of such ownership interest (excluding, in
each case, any agreement to sell such products to such third party or parties so
long as such agreement was negotiated on an arm's-length basis) and (iii) no
independent legal entity is created by such contractual arrangement.
"Preferred Stock" means, with respect to any person, Capital Stock or Redeemable
Stock of such person of any class or classes (however designated) whether now
outstanding or issued after the date of the Indenture, that ranks prior, as to
the payment of dividends or as to the distribution of assets upon any voluntary
or involuntary liquidation of such person, to any other class of Capital Stock
of such person and includes, without limitation, all classes and series of
preferred or preference stock.
"Publicly Traded Stock" means, with respect to any person, Voting Stock of such
person which is registered under Section 12 of the Exchange Act and which is
actively traded on the New York Stock Exchange or American Stock Exchange or in
the National Association of Securities Dealers Automated Quotation System
(National Market System).
"Redeemable Stock" means, with respect to any person, any and all shares,
interests, participations, rights or other equivalents (however designated) of
such person's capital stock or partnership interests whether now outstanding or
issued after the date of the Indentures that by their terms or otherwise are or
may be required to be redeemed prior to the Stated Maturity of the Debt
Securities or are redeemable at the option of the holder thereof (including,
without limitation, upon the happening of any specified event or with the
passage of time) at any time prior to the Stated Maturity of the Debt
Securities; provided that if the only event that could require redemption of any
such securities prior to the Stated Maturity of the Debt Securities is a change
in control of the Company (defined in a manner substantially identical to the
definition of Change in Control in the Indentures) and such right of redemption
is expressly subordinated to the right of the holders of the Debt Securities to
require repurchase of the Debt Securities upon the occurrence of a Change in
Control pursuant to the terms of the Indentures, then such securities shall not
be deemed to be Redeemable Stock.
"Reference Period" means, with respect to any determination to be made pursuant
to the terms of the Indentures, the four full fiscal quarters for which
financial information is available immediately preceding any date upon which
such determination is to be made.
"Repaid Investment" means (i) the amount of any Investment in a person (which is
a Restricted Payment) made by the Company or a Restricted Subsidiary after the
date of the Indenture (a) to the extent such amount has been unconditionally
repaid in cash to the Company or such Restricted Subsidiary (including any such
repayment in the form of a dividend but excluding any payments of interest) or
(b) to the extent of the net proceeds received in cash or Cash Equivalents from
the sale thereof and (ii) the amount of any Indebtedness of a person guaranteed
by the Company or a Restricted Subsidiary after the date of the Indenture (which
guarantee is a Restricted Payment) to the extent such amount has been
unconditionally released from such guarantee; provided that in each case such
amount shall not exceed the amount of such Investment as recorded on the books
of the Company or such Restricted Subsidiary in accordance with GAAP at the time
such Investment was made.
"Restricted Payment" means, with respect to any person, (i) the declaration or
payment of any dividend or other distribution in respect of Capital Stock or
Redeemable Stock of such person or any Subsidiary of such person, (ii) any
payment on account of the purchase, redemption or other acquisition or
retirement for value of Capital Stock or Redeemable Stock of such person or any
Subsidiary of such person (including options, warrants or other rights to
acquire such Capital Stock or Redeemable Stock), (iii) any payment on account of
the purchase, redemption or other acquisition or retirement for value of, or any
payment in respect of any amendment of the terms of, or any defeasance of, any
Subordinated Indebtedness, directly or indirectly, by such person or a
Subsidiary of such person prior to the scheduled maturity, any scheduled
repayment of principal or any scheduled sinking fund payment, as the case may
be, of such Subordinated Indebtedness and (iv) any Investment by such person
other than any Investment in Cash Equivalents.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary; provided that so long as Benton-Vinccler is a direct or
indirect Subsidiary of the Company it shall remain a Restricted Subsidiary.
"Restricted Subsidiary Investment" means, with respect to any person that
becomes a Restricted Subsidiary, the amount of any Investment in such person
(which is a Restricted Payment) made by the Company or a Restricted Subsidiary
after the date of the
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Indenture but prior to the time such person becomes a Restricted Subsidiary;
provided that such amount shall not exceed the amount of such Investment as
recorded on the books of the Company or such Restricted Subsidiary in accordance
with GAAP at the time such Investment was made.
"Senior Indebtedness" means any Indebtedness of the Company (whether outstanding
on the date hereof or hereinafter incurred), unless such Indebtedness is
subordinate or junior in right of payment to the Debt Securities.
"Stated Maturity," when used with respect to any Note, means the date specified
in such Note as the fixed date on which the principal of such Note is due and
payable.
"Subordinated Indebtedness" means any Indebtedness (whether outstanding on the
date hereof or hereinafter incurred) which is subordinate or junior in right of
payment to the Debt Securities.
"Subsidiary" of any person means (i) a corporation a majority of whose Voting
Stock is at the time, directly or indirectly, owned by such person, by one or
more Subsidiaries of such person or by such person and one or more Subsidiaries
of such person or (ii) any other person (other than a corporation) in which such
person, directly or indirectly, at the date of determination thereof, has (x) at
least a majority ownership interest or (y) the power to elect or direct the
election of a majority of the directors or other governing body of such person.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company or of a
Restricted Subsidiary (other than Benton-Vinccler) that is designated as an
Unrestricted Subsidiary by a resolution adopted by the Board of Directors in
accordance with the requirements of the following sentence and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Company may designate any
Subsidiary of the Company or of a Restricted Subsidiary (excluding any
Restricted Subsidiary that had been designated as an Unrestricted Subsidiary
prior to its designation as a Restricted Subsidiary but including a newly
acquired or newly formed Subsidiary of the Company or any Restricted Subsidiary)
to be an Unrestricted Subsidiary by a resolution of the Board of Directors, if
immediately after giving effect to such designation, (i) the Company could Incur
at least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the Indenture, (ii) the Company could make an additional Restricted
Payment of $1.00 pursuant to the Indenture, (iii) such Subsidiary does not own
or hold any Capital Stock or Redeemable Stock of, or any Lien on any property
of, the Company or any Restricted Subsidiary and (iv) such Subsidiary is not
liable, directly or indirectly, with respect to any Indebtedness other than
Non-Recourse Indebtedness. The Board of Directors may designate any Unrestricted
Subsidiary (excluding any Unrestricted Subsidiary that had been a Restricted
Subsidiary prior to its designation as an Unrestricted Subsidiary) to be a
Restricted Subsidiary; provided that, immediately after giving effect to such
designation, the Company could Incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the Indenture. Upon any such
designation by the Board of Directors, the Company shall promptly file with the
Trustee a copy of a board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing. As of the date of the Indenture, the Company has no Unrestricted
Subsidiaries.
"Vinccler Notes" means the promissory notes in an aggregate principal amount
equal to $10 million issued to Vinccler by the Company and guaranteed by
Benton-Vinccler.
"Voting Stock" means, with respect to any person, securities of any class or
classes of Capital Stock in such person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the board of
directors or other governing body of such person but not including Capital Stock
having the right to vote thereon solely upon the happening of a contingency
unless and until such contingency has occurred, and then only so long as such
Capital Stock has voting rights with respect thereto.
"Wholly Owned Subsidiary" means, with respect to any person, any Subsidiary of
such person if all of the Capital Stock (excluding Preferred Stock) in such
Subsidiary (other than any director's qualifying shares) is owned directly or
indirectly by such person.
EVENTS OF DEFAULT
An Event of Default will occur under the Indentures with respect to the Debt
Securities if any one of the following events occurs:
(a) default in the payment of any installment of interest on the Debt Securities
as and when the same becomes due and payable, and the continuance of such
default for 30 days; or
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(b) default in the payment of the principal of the Debt Securities, the amount
payable upon the redemption of any Debt Securities, the Change in Control
Purchase Price or the Asset Sale Offer Price when the same becomes due and
payable as provided under the Indentures, whether at Stated Maturity, upon
redemption, upon declaration of acceleration, when due for purchase by the
Company or otherwise; or
(c) default in the performance or breach of any covenant or agreement of the
Company under the Indentures (other than a default in the performance or breach
of a covenant or agreement that is specifically dealt with elsewhere herein) and
continuance of such default or breach for a period of 30 days after there has
been given, by registered or certified mail, to the Company by the Trustee or to
the Company and the Trustee by the holders of at least 25% in principal amount
of the outstanding Debt Securities a written notice specifying such default or
breach and stating that such notice is a "Notice of Default" under the
Indentures; or
(d) default in the payment of any principal, premium, if any, or interest when
due or after the expiration of any applicable grace period in respect of any
Indebtedness of the Company or any Restricted Subsidiary (including, without
limitation, reimbursement obligations with respect to Performance Letters of
Credit) having an outstanding principal amount (or with an outstanding
reimbursement obligation) of $2.5 million or more individually or in the
aggregate or the acceleration of the maturity of any such Indebtedness; or
(e) one or more final judgments or orders rendered against the Company or any
Restricted Subsidiary which require the payment in money, either individually or
in an aggregate amount, of more than $500,000 shall remain unsatisfied or
unstayed for 30 consecutive days after any such judgment or order becomes final
and nonappealable; or
(f) the entry of a decree or order by a court having jurisdiction in the
premises (i) for relief in respect of the Company or any Material Subsidiary in
an involuntary case or proceeding under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or (ii) adjudging the Company or
any such Material Subsidiary as bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company or any such Material Subsidiary under any such law, or (iii) appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or any such Material Subsidiary or of any
substantial part of any of their properties, or ordering the winding up or
liquidation of any of their affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 60 consecutive days; or
(g) the institution by the Company or any Material Subsidiary of a voluntary
case or proceeding under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Company or any Material
Subsidiary to the entry of a decree or order for relief in respect of the
Company or such Material Subsidiary in any involuntary case or proceeding under
any such law or to the institution of bankruptcy or insolvency proceedings
against the Company or such Material Subsidiary, or the filing by the Company or
any Material Subsidiary of a petition or answer or consent seeking
reorganization or relief under any such law, or the consent by the Company or
any Material Subsidiary to the filing of any such petition or to the appointment
of or taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of any of the Company or such Material
Subsidiary or any substantial part of any of their properties, or the making by
the Company or any Material Subsidiary of an assignment for the benefit of
creditors, or the admission by the Company or any Material Subsidiary in writing
of an inability to pay any of their debts generally as they become due or the
taking of corporate action by the Company or any Material Subsidiary in
furtherance of any such action.
If an Event of Default with respect to the Offered Debt Securities (other than
as specified in clauses (f) and (g) above) occurs and is continuing, either the
Trustee or the holders of at least 25% in aggregate principal amount of the
Offered Debt Securities then outstanding, by written notice to the Company (and
to the Trustee if such notice is given by holders) may, and the Trustee at the
request of such holders shall, declare the Debt Securities and the accrued
interest thereon to be immediately due and payable, as specified below. Upon a
declaration of acceleration, such amount shall be due and payable immediately
after receipt by the Company of such written notice. If an Event of Default
specified in clause (f) or (g) above occurs and is continuing, then the Debt
Securities and the accrued interest thereon shall become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any holder. At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the holders of a majority in aggregate principal amount of the Debt
Securities outstanding, by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if (a) the Company has
paid or deposited with the Trustee a sum sufficient to pay (i) all sums paid or
advanced by the Trustee and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel and (ii) the amounts payable
in respect of any Debt Securities which have become due otherwise than by such
declaration of acceleration and overdue interest thereon (to the extent of such
overdue interest at the rate borne by the Debt Securities), (b) the rescission
would not conflict with any judgment or decree and (c) all existing Events of
Default, other than the non-payment of the
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principal amount of the Notes which have become due solely by such declaration
of acceleration, have been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereon provided in the
following paragraph.
The holders of not less than a majority in aggregate principal amount of the
outstanding Debt Securities, by notice to the Trustee (and without notice to any
other holder) on behalf of the holders of all the Debt Securities may waive any
past Default under the Indentures with respect to such Debt Securities and its
consequences, except (i) an Event of Default described in clause (b) of the
first paragraph under this section or (ii) a default in the payment of interest
on any Debt Securities or in respect of a covenant or provision that under the
terms of the Indentures cannot be modified or amended without the consent of the
holder of each outstanding Debt Securities affected thereby. Upon any such
waiver, such default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of the
Indentures; but no such waiver shall extend to any subsequent or other default
or impair any right consequent thereto.
In the Indentures, (i) the Company will covenant that (to the extent that it may
lawfully do so) it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of the Indentures and the Company will expressly
waive (to the extent that it may lawfully do so) all benefit or advantage of any
such law and (ii) the Company will covenant that it will not hinder, delay or
impede the execution of any power granted to the Trustee under the Indentures
and will suffer and permit the execution of every such power as though no such
law had been enacted.
DEFEASANCE
The Indentures will provide that (i) the Company may be discharged from any and
all obligations in respect of the outstanding Debt Securities or (ii) the
Company may omit to comply with certain restrictive covenants and that such
omission shall not be deemed to be an Event of Default under the Indentures and
the Debt Securities in the case of either clause (i) or (ii) upon irrevocable
deposit with the Trustee, in trust, of money and/or U.S. government obligations
which will provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent certified accountants to pay the principal of and
each installment of interest, if any, on the outstanding Debt Securities. With
respect to clause (ii), the obligations under the Indentures other than with
respect to such covenants and the Events of Default other than the Event of
Default relating to such covenants shall remain in full force and effect. Such
trust may only be established if, among other things (a) with respect to clause
(i), the Company has delivered to the Trustee an Opinion of Counsel stating that
the Company has received from, or there has been published by, the Internal
Revenue Service a ruling or there has been a change in law, and based thereon
such Opinion of Counsel confirms that holders of the Debt Securities will not
recognize gain or loss for federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to federal income tax on
the same amount, in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not occurred or, with respect
to clause (ii), the Company has delivered to the Trustee an Opinion of Counsel
to the effect that the holders of the Debt Securities will not recognize gain or
loss for federal income tax purposes as a result of such deposit and defeasance
and will be subject to federal income tax on the same amount, in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred; (b) no Event of Default or Default shall have occurred or be
continuing; (c) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that such deposit shall not cause the Trustee or the trust so
created to be subject to the Investment Company Act of 1940, as amended; and (d)
certain other customary conditions precedent are satisfied.
MODIFICATION OF INDENTURE
The Indentures contain provisions permitting the Company and the Trustee, with
the consent of the holders of not less than a majority in aggregate principal
amount of Debt Securities at the time outstanding, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating any
of the provisions of the Indentures or any supplemental indenture or modifying
in any manner the rights of the holders of the Debt Securities; provided that no
such supplemental indenture shall (i) extend the final maturity of any Debt
Securities, or reduce the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon, or reduce any amount payable on
redemption of any Debt Securities or upon an Event of Default, or reduce the
Change in Control Purchase Price of the Asset Sale Offer Price, or impair or
affect the right of any holder to institute suit for the payment thereof without
the consent of the holder of each Debt Securities so affected, or (ii) reduce
the aforesaid percentage of Debt Securities, the consent of the holders of which
is required for any supplemental indenture, without the consent of the Holders
of all Debt Securities then outstanding.
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<PAGE> 36
THE TRUSTEE
Each Indenture contains certain limitations on the right of the Trustee, as a
creditor of the Company, to obtain payment of claims in certain cases and to
realize on certain property received with respect to any such claims, as
security or otherwise. The Trustee is permitted to engage in other transactions,
except that, if it acquires any conflicting interest (as defined), it must
eliminate such conflict or resign.
The Trustee has made loans to the Company and its subsidiaries and affiliates
from time to time in the ordinary course of business and at prevailing interest
rates under agreements with commercial bank groups. In addition, the Trustee
serves as a depositary of funds of, and performs other services for, the Company
and its trustee under two other indentures pursuant to which several outstanding
series of the Company's debentures have been issued.
SUBORDINATION
The payment of the principal of and premium, if any, and interest on the
Subordinated Debt Securities is, to the extent set forth in the Subordinated
Indenture, subordinated in right of payment to the prior payment in full of all
Senior Indebtedness, whether now outstanding or incurred in the future. Upon any
payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding up, assignment for the benefit of creditors or
marshalling of assets and liabilities or any bankruptcy, insolvency,
receivership, liquidation, reorganization or similar proceedings of the Company,
the holders of all Senior Indebtedness will first be entitled to receive any
payment in full of all amounts due or to become due thereon before the Holders
of the Subordinated Debt Securities will be entitled to receive any payment
(other than any payment in the form of Permitted Junior Securities) on account
of the principal of or premium, if any, or interest on the Subordinated Debt
Securities.
No payment (other than any payment in the form of Permitted Junior Securities)
on account of principal of and premium, if any, or interest on the Subordinated
Debt Securities may be made if a Payment Event of Default shall have occurred
and be continuing. In addition, no payment (other than any payment in the form
of Permitted Junior Securities) on account of principal of or premium, if any,
or interest on the Subordinated Debt Securities may be made if a Non-payment
Event of Default shall have occurred and be continuing, for the period (a
"Payment Blockage Period") commencing on receipt of notice of such event of
default by the Trustee from holders of at least a majority in principal amount
of any Designated Senior Indebtedness (or any other trustee or other
representative therefor) and ending on the earlier of (i) the date such
Non-payment Event of Default has been cured or waived or has ceased to exist or
any acceleration of such Designated Senior Indebtedness has been rescinded or
annulled or such Designated Senior Indebtedness shall have been discharged and
(ii) the date 176 days after such receipt of notice. Any number of such notices
may be given; provided, however, that, during any 360-day period, the aggregate
Payment Blockage Periods shall not exceed 176 days and there shall be a period
of at least 184 consecutive days when no Payment Blockage Period is in effect.
No default, existing or continuing when a Payment Blockage Period begins may be
the basis for any subsequent Payment Blockage Period unless such default has
been cured for a period of at least 90 consecutive days. In the event that,
notwithstanding the restrictions described in the preceding sentences, the
Company makes any payment to the Trustee or a Holder of Subordinated Debt
Securities prohibited by any such restriction, with such Trustee or Holder, as
the case may be, knowing of such contravention before receipt thereof, then such
payment will be required to be paid over and delivered forthwith to the Company
to the extent necessary to pay in full all such Senior Indebtedness.
The subordination rights of holders of Senior Indebtedness will not be
prejudiced or impaired by any acts or failures to act by the Company or by any
such holder. The subordination of the Subordinated Debt Securities set forth
above will not prevent the occurrence of any Event of Default under the
Subordinated Indenture. Furthermore, the subordination of the Subordinated Debt
Securities as set forth above will not impair, as between the Company, the
Holders of the Subordinated Debt Securities and creditors of the Company other
than holders of Senior Indebtedness, the obligations of the Company to make
payments on the Subordinated Debt Securities in accordance with their terms. In
certain circumstances, as set forth in the Indenture, the Holders of
Subordinated Debt Securities will be subrogated to certain rights of the holders
of Senior Indebtedness upon payment in full of all Senior Indebtedness.
By reason of such subordination, in the event of insolvency of the Company, the
holders of Senior Indebtedness (as well as other creditors of the Company who
are holders of indebtedness that is not subordinated to the Senior Indebtedness)
may recover more, ratably, than the Holders of the Subordinated Debt Securities.
The Subordinated Debt Securities will also be effectively subordinated to all
liabilities, including trade payables and capitalized lease obligations, if any,
of the Company's subsidiaries. Any right of the Company to receive the assets of
any of its subsidiaries upon their liquidation or reorganization (and the
consequent right of the Holders of the Subordinated Debt Securities to
participate in those
35
<PAGE> 37
assets) will be subject to the prior payment of claims of that subsidiary's
creditors (including trade creditors), except to the extent that the Company is
itself a creditor of such subsidiary, in which case the claims of the Company
would still be subject to the prior payment of claims secured by security
interests in the assets of such subsidiary and any other indebtedness of such
subsidiary senior to that held by the Company.
Subordinated Debt Securities are issued under the Subordinated Indenture, the
aggregate principal amount of Senior Indebtedness outstanding as of a recent
date will be set forth in the Prospectus Supplement. The Subordinated Indenture
does not restrict the amount of Senior Indebtedness that the Company may incur,
provided that the Company complies with the ratio requirements set forth
therein.
PLAN OF DISTRIBUTION
The Company may offer Debt Securities to or through underwriters, through agents
or directly to other purchasers.
The distribution of Debt Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such market prices
or at negotiated prices.
In connection with the sale of Debt Securities, underwriters or agents may
receive compensation from the Company or from purchasers in the form of
discounts, concessions or commissions. Underwriters, agents and dealers
participating in the distribution of the Debt Securities may be deemed to be
underwriters within the meaning of the Securities Act.
Pursuant to agreements which may be entered into between the Company and any
underwriters or agents named in the Prospectus Supplement, such underwriters or
agents may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as agents for the Company to solicit offers
by certain institutional investors to purchase Debt Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but shall in all cases be
subject to the approval of the Company. The obligations of the purchaser under
any such contract will not be subject to any conditions except (i) the
investment in the Debt Securities by the institution shall not at the time of
delivery be prohibited by the laws of any jurisdiction in the United States to
which such institution is subject, and (ii) if a portion of the Debt Securities
is being sold to underwriters, the Company shall have sold to such underwriters
the Debt Securities not sold for delayed delivery. Underwriters and such other
persons will not have any responsibility in respect of the validity or
performance of such contracts.
All Debt Securities offered will be a new issue of securities with no
established trading market. Any underwriters to whom such Debt Securities are
sold by the Company for public offering and sale may make a market in such Debt
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of or the trading markets for any Debt Securities.
Certain of the underwriters or agents and their associates may be customers of,
engage in transactions with and perform services for the Company in the ordinary
course of business.
The specific terms and manner of sale of the Debt Securities in respect of which
this Prospectus is being delivered are set forth or summarized in the Prospectus
Supplement.
LEGAL MATTERS
The validity of the issuance of the Debt Securities offered will be passed upon
for the Company by Emens, Kegler, Brown, Hill & Ritter, Co., L.P.A., Columbus,
Ohio. Certain legal matters related to the Debt Securities offered will be
passed upon for the underwriters or agents, if any, by a law firm named in the
Prospectus Supplement relating to a particular issue of Debt Securities.
EXPERTS
The financial statements of the Company as of December 31, 1993 and 1994 and for
each of the three years in the period ended December 31, 1994 incorporated into
this Prospectus by reference to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated by reference in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
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<PAGE> 38
The information appearing herein or incorporated herein by reference with
respect to proved oil and gas reserves of the Company at December 31, 1993 and
1994, to the extent stated herein or incorporated herein by reference, was
estimated by the Company and audited by Huddleston & Co., Inc., independent
petroleum engineers, and is included herein or incorporated herein by reference
on the authority of such firm as experts in petroleum engineering.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports and other information with the
Commission. Reports, proxy statements and other information statements filed by
the Company with the Commission pursuant to the informational requirements of
the Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission, at Room 1024, Judiciary Plaza Building, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the following regional offices of the
Commission: 7 World Trade Center, New York, New York 10048 and 500 West Madison
Street, 14th Floor, Chicago, Illinois 60661. Copies of such material may be
obtained at prescribed rates from the Public Reference Section of the Commission
at Room 1024, Judiciary Plaza Building, 450 Fifth Street, N.W., Washington, D.C.
20549.
The Company has filed with the Commission a Registration Statement on Form S-3
(the "Registration Statement") under the Securities Act with respect to the
Securities. This Prospectus, filed as part of the Registration Statement, does
not contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Securities, reference is made to
the Registration Statement and to the exhibits and schedules thereto, which may
be inspected at the Commission's offices without charge or copies of which may
be obtained from the Commission upon payment of the prescribed fees. Statements
made in the Prospectus as to the contents of any contract, agreement or document
referred to are not necessarily complete, and in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, and each such statement is qualified in its entirety by
such reference.
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GLOSSARY
When the following terms are used in the text they have the meanings indicated.
MCF. "Mcf" means thousand cubic feet. "MMcf" means million cubic feet. "Bcf"
means billion cubic feet. "Tcf" means trillion cubic feet.
BBL. "Bbl" means barrel. "MBbl" means thousand barrels. "MMBbl" means million
barrels. "BBbl" means billion barrels.
BOE. "BOE" means barrels of oil equivalent, which are determined using the
ratio of one barrel of crude oil, condensate or natural gas liquids to six Mcf
of natural gas so that six Mcf of natural gas is referred to as one barrel of
oil equivalent or "BOE." "MBOE" means thousands of barrels of oil equivalent.
"MMBOE" means millions of barrels of oil equivalent.
CAPITAL EXPENDITURES. "Capital Expenditures" means costs associated with
exploratory and development drilling (including exploratory dry holes);
leasehold acquisitions; seismic data acquisitions; geological, geophysical and
land-related overhead expenditures; delay rentals; producing property
acquisitions; and other miscellaneous capital expenditures.
COMPLETION COSTS. "Completion Costs" means, as to any well, all those costs
incurred after the decision to complete the well as a producing well. Generally,
these costs include all costs, liabilities and expenses, whether tangible or
intangible, necessary to complete a well and bring it into production, including
installation of service equipment, tanks, and other materials necessary to
enable the well to deliver production.
DEVELOPMENT WELL. A "Development Well" is a well drilled as an additional well
to the same reservoir as other producing wells on a lease, or drilled on an
offset lease not more than one location away from a well producing from the same
reservoir.
EXPLORATORY WELL. An "Exploratory Well" is a well drilled in search of a new
and as yet undiscovered pool of oil or gas, or to extend the known limits of a
field under development.
FINDING COST. "Finding Cost," expressed in dollars per BOE, is calculated by
dividing the amount of total capital expenditures incurred related to
acquisitions, exploration and development costs (reduced by proceeds from any
sale of oil and gas properties) by the amount of total net reserves added or
reduced as a result of property acquisitions and sales, drilling activities and
reserve revisions during the same period.
FUTURE DEVELOPMENT COST. "Future Development Cost" of proved non-producing
reserves, expressed in dollars per BOE, is calculated by dividing the amount of
future capital expenditures related to development properties by the amount of
total proved non-producing reserves associated with such activities.
GROSS ACRES OR WELLS. "Gross Acres or Wells" are the total acres or wells, as
the case may be, in which an entity has an interest, either directly or through
an affiliate.
LIFTING COSTS. "Lifting Costs" are the expenses of lifting oil from a producing
formation to the surface, consisting of the costs incurred to operate and
maintain wells and related equipment and facilities, including labor costs,
repair and maintenance, supplies, insurance, production, severance and windfall
profit taxes.
MMBTU. "MMBTU" means one million British thermal units. A British thermal unit
is the amount of heat needed to raise the temperature of one pound of water one
degree Fahrenheit.
NET ACRES OR WELLS. A party's "Net Acres" or "Net Wells" are calculated by
multiplying the number of gross acres or gross wells in which that party has an
interest by the fractional interest of the party in each such acre or well.
OIL AND GAS LEASE. An "Oil and Gas Lease" is an agreement whereby the grantee
receives for a period of time the full or partial interest in oil and gas
properties, oil and gas mineral rights, fee rights, or other rights of the
grantor granting the grantee the right to drill for, produce and sell oil and
gas upon payment of rentals, bonuses and/or royalties. Oil and Gas Leases are
generally acquired from private landowners and federal and state governments.
PRODUCING PROPERTIES OR RESERVES. "Producing Reserves" are Proved Developed
Reserves expected to be produced from existing completion intervals now open for
production in existing wells. "Producing Properties" are properties to which
Producing Reserves have been assigned by an independent petroleum engineer.
PROVED DEVELOPED BEHIND-PIPE RESERVES. "Proved Developed Behind-Pipe Reserves"
are reserves contained in geological formations through which an existing well
has been drilled but from which the well has not yet produced. The reserves are
said to be "behind pipe" because the oil and gas are sealed out of the well bore
by the casing leading to the existing completion interval.
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<PAGE> 40
Behind-Pipe Reserves are classified as Proved Developed only if the cost of
completing the well for production of such reserves is relatively small compared
to the cost of a new well.
PROVED DEVELOPED RESERVES. "Proved Developed Reserves" are Proved Reserves
which can be expected to be recovered through existing wells with existing
equipment and operating methods.
PROVED RESERVES. "Proved Reserves" are the estimated quantities of crude oil,
natural gas and natural gas liquids which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years from
known oil and gas reservoirs under existing economic and operating conditions,
that is, on the basis of prices and costs as of the date the estimate is made
and any price changes provided for by existing conditions.
PROVED UNDEVELOPED RESERVES. "Proved Undeveloped Reserves" are Proved Reserves
which can be expected to be recovered from new wells on undrilled acreage, or
from existing wells where a relatively major expenditure is required for
recompletion.
RESERVES. "Reserves" means crude oil and natural gas, condensate and natural
gas liquids, which are net of leasehold burdens, are stated on a net revenue
interest basis, and are found to be commercially recoverable.
ROYALTY INTEREST. A "Royalty Interest" is an interest in an oil and gas
property entitling the owner to a share of oil and gas production (or the
proceeds of the sale thereof) free of the costs of production.
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS, BEFORE PROVISION FOR
INCOME TAXES. The "Standardized measure of discounted future net cash flows,
before provision for income taxes" is a method of determining the present value
of Proved Reserves. Future net revenues from Proved Reserves are estimated
assuming that oil and gas prices and production and development costs remain
constant. The resulting stream of revenues, before provision for income taxes,
is then discounted at the rate of 10% per year to obtain a present value.
3-D SEISMIC. "3-D Seismic" is the method by which a three dimensional image of
the earth's subsurface is created through the interpretation of aerially
collected seismic data. 3-D surveys allow for a more detailed understanding of
the subsurface than do conventional surveys and contribute significantly to
field appraisal, development and production.
UNDEVELOPED ACREAGE. "Undeveloped Acreage" is oil and gas acreage (including,
in applicable instances, rights in one or more horizons which may be penetrated
by existing wellbores, but which have not been tested) to which Proved Reserves
have not been assigned by independent petroleum engineers.
WORKING INTEREST. A "Working Interest" is the operating interest under an Oil
and Gas Lease which gives the owner the right to drill, produce and conduct
operating activities on the property and a share of production, subject to all
royalties, overriding royalties and other burdens and to all costs of
exploration, development and operations and all risks in connection therewith.
In this Prospectus, natural gas volumes are stated at the legal pressure base of
the state or area in which the reserves are located at 60 degrees Fahrenheit.
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<PAGE> 41
[BENTON OIL AND GAS COMPANY LOGO]
<PAGE> 42
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered (other than underwriting
discounts) are estimated to be as follows:
<TABLE>
<S> <C>
SEC filing fee $ 17,858
NASD filing fee 5,500
Printing and engraving 150,000
Accounting fees and expenses 175,000
Legal fees and expenses 210,000
Blue Sky filing fees 20,000
Rating Agency fees 70,000
Trustee fees 15,000
Miscellaneous 81,642
--------
Total $745,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under provisions of the Certificate of Incorporation and Bylaws of the Company,
each person who is or was a director or officer of the Company shall be
indemnified by the Company as a matter of right to the full extent permitted or
authorized by law. The effects of the Certificate of Incorporation, Bylaws and
General Corporation Law of Delaware may be summarized as follows:
(a) Under Delaware law, to the extent that such a person is successful
on the merits in defense of a suit or proceeding brought against him by
reason of the fact that he is a director or officer of the Company, he
shall be indemnified against expenses (including attorneys' fees)
reasonably incurred in connection with such action.
(b) If unsuccessful in defense of a third-party civil suit or a criminal
suit, or if such a suit is settled, such a person shall be indemnified
under such law against both (1) expenses (including attorneys' fees) and
(2) judgments, fines and amounts paid in settlement if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company, and with respect to any criminal action,
had no reasonable cause to believe his conduct was unlawful.
(c) If unsuccessful in defense of a suit brought by or in the right of
the Company, or if such suit is settled, such a person shall be indemnified
under such law only against expenses (including attorneys' fees) incurred
in the defense or settlement of such suit if he acted in good faith and in
a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company except that if such a person is adjudged to be
liable in a suit in the performance of his duty to the Company, he cannot
be made whole even for expenses unless the court determines that he is
fairly and reasonably entitled to indemnity for such expenses.
(d) The Company may not indemnify a person in respect of a proceeding
described in (b) or (c) above unless it is determined that indemnification
is permissible because the person has met the prescribed standard of
conduct by any one of the following: (i) the Board of Directors, by a
majority vote of a quorum consisting of directors not at the time parties
to the proceeding, (ii) if a quorum of directors not parties to the
proceeding cannot be obtained, or, if obtainable but the quorum so directs,
by independent legal counsel selected by the Board of Directors or the
committee thereof; or (iii) by the stockholders.
The Underwriting Agreement filed as Exhibit 1.1 hereto also contains certain
provisions pursuant to which officers, directors and controlling persons of the
Company may be entitled to be indemnified by the underwriters named therein.
II-1
<PAGE> 43
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement (for debt securities).*
4.1 Form of Indenture with respect to Senior Indebtedness.****
4.2 Form of Indenture with respect to Subordinated Indebtedness.****
5.1 Opinion of Emens, Kegler, Brown, Hill & Ritter Co., L.P.A. regarding validity of the
Securities.*
12.1 Statement of Computation of Ratios. (Incorporated by reference to Exhibit 11.1 to the
Company's Form 10-K for the year ended December 31, 1994)
23.1 Consent of Deloitte & Touche LLP. (Included on page II-5)**
23.2 Consents of Emens, Kegler, Brown, Hill & Ritter Co., L.P.A.****
23.3 Consent of J.C. White and Associates, Inc.***
23.4 Consent of Huddleston & Co., Inc.***
24.1 Power of Attorney. (Included on Signature Page)***
24.2 Power of Attorney of the Company.***
25.1 Statement of Eligibility and Qualifications on Form T-1 relating to Senior Indenture and
Subordinated Indenture.*
99.1 Form of Indenture dated May, 1992 between the Company and Meridian Trust Company of
California. (Incorporated by reference to Exhibit 4.3 to the Company's S-1 Registration
Statement No. 33-46077).
99.2 Note Agreement related to the 8% Convertible Subordinated Notes between the Company and
the Purchasers thereof (Incorporated by reference to Exhibit 10.20 to the Company's S-1
Registration Statement No. 33-43662).
99.3 Purchase Agreement between the Company and Venezolana de Inversiones Y Construcciones
Clerico, C.A. dated March 4, 1994.***
99.4 Note Agreement dated September 30, 1994 between the Company and the Purchasers thereof
related to the 13% Senior Notes due September 30, 2002 (Incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994).
99.5 Credit Agreement dated December 27, 1994 among the Company, Benton Oil and Gas Company of
Louisiana, New York Gas Fund I and Christiania Bank og Kreditkasse.***
99.6 Agreements and Promissory Notes between the Company and Morgan Guaranty Trust Company
related to loans to Benton-Vinccler not to exceed $10 million dated February 10, 1994 and
February 24, 1994.***
99.7 Agreement No. 0094372 Concerning the Transportation of the GEOILBENT, LTD.'s Crude Oil
from Russia for Export dated January 27, 1994.***
99.8 Purchase and Sale Agreement by and among Benton Oil and Gas Company of Louisiana and Tesla
Resources, Inc. related to the West Cote Blanche Bay Field, Louisiana dated as of March
31, 1995 (Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form
8-K filed on April 17, 1995).
99.9 Purchase and Sale Agreement by and among Benton Oil and Gas Company of Louisiana, Tenneco
Gas Production Corporation and Tenneco Ventures Corporation related to the West Cote
Blanche Bay Field, Louisiana dated as of November 29, 1994 (Incorporated by reference to
Exhibit 2.2 to the Company's Current Report on Form 8-K filed on April 17, 1995).
<FN>
- ---------------
* To be filed as an exhibit to Form 8-K or as an exhibit to a post-effective
amendment to this Registration Statement in reference to the specific
offering of Securities, if any, to which it relates.
** Filed herewith.
*** Filed as exhibit to original filing of Registration Statement No. 33-79494.
**** Filed as exhibit to amendment no. 1 to this Registration No. 33-79494.
</TABLE>
(b) Financial Statement Schedules
All schedules have been omitted because the required information is not
significant, or is included in the financial statements or the notes thereto or
is not applicable.
II-2
<PAGE> 44
ITEM 17. UNDERTAKING
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that are incorporated by reference
in the Registration Statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by the controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(c) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430a and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes if securities are to be offered
pursuant to competitive bidding (1) to use its best efforts to distribute prior
to the opening of bids, to prospective bidders, underwriters and dealers, a
reasonable number of copies of a prospectus which at that time meets the
requirements of section 10(a) of the Securities Act, and relating to the
securities offered at competitive bidding, as contained in this Registration
Statement, together with any supplements thereto, and (2) to file an amendment
to this Registration Statement reflecting the results of bidding, terms of the
reoffering and related matters to the extent required by the applicable form,
not later than the first use, authorized by the issuer after the opening of
bids, of a prospectus relating to the securities offered at competitive bidding,
unless no further public offering of such securities by the issuer and no
reoffering of such securities by the purchasers is proposed to be made.
(f) The undersigned Registrant hereby undertakes to file applications for the
purpose of determining the eligibility of the Senior Trustee and the
Subordinated Trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Trust Indenture Act.
II-3
<PAGE> 45
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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<PAGE> 46
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Carpinteria, State of
California, on the 11th day of May, 1995.
BENTON OIL AND GAS COMPANY
/s/ A. E. BENTON
By:
A. E. Benton, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on May 11, 1995 by
the following persons in the capacities indicated:
<TABLE>
<S> <C>
/s/ A. E. BENTON President, Chief Executive Officer and Director
A. E. Benton
/s/ DAVID H. PRATT Vice President -- Finance, Principal Financial Officer
David H. Pratt
/s/ BRUCE M. MCINTYRE Director
Bruce M. McIntyre
/s/ MICHAEL B. WRAY Director
Michael B. Wray
/s/ WILLIAM H. GUMMA Director
William H. Gumma
/s/ RICHARD W. FETZNER Director
Richard W. Fetzner
</TABLE>
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<PAGE> 47
Independent Auditors' Consent
We consent to the incorporation by reference into this Amendment No. 2 to the
Registration Statement of Benton Oil and Gas Company (No. 33-79494) on Form S-3
of our report dated March 31, 1995, appearing in the annual report on Form 10-K
of Benton Oil and Gas Company for the year ended December 31, 1994, and to the
reference to our firm under the caption "Experts" in the Prospectus which forms
a part of this Registration Statement.
DELOITTE & TOUCHE LLP
Los Angeles, California
May 11, 1995
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