<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
(Mark One)
[X]
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994 or
Transition Report Pursuant to Section 13 or 15(d)
[ ] of the Securities Act of 1934 for the
Transition Period from to
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Commission File No.: 1-10762
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BENTON OIL AND GAS COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 77-0196707
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1145 EUGENIA PLACE, SUITE 200 93013
CARPINTERIA, CALIFORNIA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (805) 566-5600
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- -------------------- -----------------------------------------
Common Stock, $.01 Par Value NASDAQ-NMS
8% Convertible Subordinated Debentures due in 2002 NASDAQ
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days:
Yes [X] No [ ]
On March 29, 1995, the aggregate market value of the shares of voting
stock of Registrant held by non-affiliates was approximately
$251,675,151 based on a closing sales price on NASDAQ-NMS of $10.50.
As of March 29, 1995, 24,931,862 shares of the Registrant's common
stock were outstanding.
DOCUMENT INCORPORATED BY REFERENCE
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K [ ].
<PAGE> 2
BENTON OIL AND GAS COMPANY
FORM 10-K/A
Amendment No. 1
TABLE OF CONTENTS
Page
PART II............................................................ 1
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 1
PART III........................................................... 9
Item 10. Directors and Executive Officers of the Registrant... 9
Item 11. Executive Compensation............................... 12
Item 12. Security Ownership of Certain Beneficial Owners and
Management.......................................... 15
Item 13. Certain Relationships and Related Transactions....... 17
SIGNATURES......................................................... 18
<PAGE> 3
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
VENEZUELA
In July 1992, the Company and Vinccler, a Venezuelan construction and
engineering company, entered into an operating service agreement to
reactivate and further develop three Venezuelan oil fields with
Lagoven, an affiliate of PDVSA. Under the agreement, Benton-Vinccler,
a corporation owned 80% by the Company and 20% by Vinccler, receives
an operating fee paid in U.S. dollars (currently deposited directly
into a U.S. bank account each quarter) for each Bbl of crude oil
produced (subject to periodic adjustments to reflect changes in the
special energy index of the U.S. Consumer Price Index) and will be
reimbursed in U.S. dollars for its capital expenditures, provided that
such operating fee and capital recovery fee cannot exceed the maximum
fee amount per Bbl set forth in the agreement (which amount will be
periodically adjusted to reflect changes in the average of certain
world crude oil prices). Accordingly, the per Bbl revenues and
expenses are not comparable to the domestic and Russian operating data
and financial results.
At December 31, 1993 the Company's investment in the joint venture
which preceded Benton-Vinccler was proportionately consolidated based
on the Company's ownership interest of 50% at that date. The Company
and Vinccler subsequently transferred the joint venture's assets to
Benton-Vinccler, a corporation. Although initially the Company and
Vinccler each owned 50% of the capital stock of Benton-Vinccler, on
March 4, 1994, the Company purchased capital stock of Benton-Vinccler
from Vinccler representing an additional 30% ownership interest. The
Company has included the results of operations of Benton-Vinccler in
its consolidated statement of income since January 1, 1994 and has
reflected the 50% ownership interest of Vinccler during January and
February and the 20% ownership interest of Vinccler subsequent thereto
as a minority interest. As production from Venezuela has increased,
the Company's investment in Benton-Vinccler has become an increasingly
important component of its overall operating and financial
performance.
UNITED STATES
The Company has historically conducted its operations in various
regions of the United States and has expanded its operations
internationally during the last three years. Substantially all of its
recent domestic activity has been focused in the Gulf Coast region of
Louisiana. The Company has acquired and earned significant interests
in Gulf Coast fields operated by Texaco and Oryx by incurring capital
expenditures to purchase working interests, acquire and process 3-D
seismic data, drill development wells and recomplete existing wells in
the West Cote Blanche Bay Field, and to complete 3-D seismic surveys
and certain development activities in order to earn the right to drill
future wells as a working interest partner in the Rabbit Island and
Belle Isle Fields.
In 1993 the Company entered into an agreement with Tenneco whereby
Tenneco purchased a 50% interest in the Company's operations in the
Rabbit Island and Belle Isle Fields in Louisiana and was given the
right to participate as a 50% partner in all of the Company's future
activities in the Gulf Coast for the next five years, excluding the
West Cote Blanche Bay Field. The Company believes that its
relationship with Tenneco will provide it with the ability to
accelerate the development of such fields, as well as provide an
alternative outlet to market its Gulf Coast natural gas production.
In November 1994, the Company sold a 10.8% working interest (24.9% of
the Company's 43.3% working interest) in the West Cote Blanche Bay
Field for approximately $5.8 million and future consideration of up to
$3.7 million. In March 1995, as part of an effort to focus on deeper
gas and oil zones at West Cote Blanche Bay, the Company, its
affiliates and Tenneco sold their working interest in certain
zones to WRT.
RUSSIA
The Company is a partner in GEOILBENT, a Russian-American joint
venture which develops, produces and markets oil from the North
Gubkinskoye Field in the West Siberia region of Russia. GEOILBENT's
production from the field is exported and sold for currency freely
convertible into U.S. dollars. In the event of any distribution by
GEOILBENT, the Company has the right to receive such distribution in
the form of freely convertible currency (provided that under certain
circumstances distributions may be made in the form of export quality
Urals grade crude). The Company will not receive distributions from
GEOILBENT until it has
<PAGE> 4
fulfilled its financial contribution requirements under the terms of
the GEOILBENT joint venture and charter fund agreements. As of March 1995, the
Company has contributed approximately $20.1 million of a total of $25.8 million
it is required to contribute by the end of 1995 pursuant to the GEOILBENT
agreements. The Company expects that after it has satisfied such contribution
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. The joint venture agreement grants the Company a 34% interest and
each of the two Russian partners a 33% interest in GEOILBENT. The Company's
investment in GEOILBENT is proportionately consolidated based on the Company's
ownership interest. For oil and gas reserve information as of December 31,
1994, the Company reported its 34% share of the reserves attributable to
GEOILBENT.
GROWTH IN INTERNATIONAL ACTIVITIES
The Company's costs of operations in Venezuela and Russia in 1993 and
1994 include certain fixed or minimum office, administrative, legal
and personnel related costs and certain start up costs, including
short term facilities rentals, organizational costs, contract services
and consultants, etc. Such costs are expected to grow over time as
operations increase, but in the aggregate to become less significant
on a unit of production basis. The start up costs are expected to
decrease over time both in the aggregate and on a per unit basis. In
Venezuela, for the year ended December 31, 1993, the operating costs
and general and administrative expenses were $7.26 and $2.25 per Bbl,
respectively. However, for the year ended December 31, 1994 the
operating costs and general and administrative expenses decreased to
$1.51 and $0.66 per Bbl, respectively. In Russia, for the year ended
December 31, 1993, the operating costs and general and administrative
expenses were $16.22 and $12.96 per Bbl, respectively, decreasing to
$9.63 and $1.58 per Bbl, respectively for the year ended December 31,
1994. The Company's Venezuelan operations grew considerably during
1994 and are expected to grow for some time thereafter, and its
operating costs and general and administrative expenses are expected
to increase in magnitude but to remain relatively low or decrease on a
per unit basis. The Company's Russian operations grew less
significantly during 1994. Consequently, the operating costs and
general and administrative costs grew less rapidly than those in
Venezuela; however, the per unit costs are expected to decrease over
time. Also, capital expenditures through 1993 in both Venezuela
($8 million) and Russia ($17 million) focused more on start-up
infrastructure items such as roads, pipelines, and facilities rather
than drilling. Beginning in 1994, a higher proportion of capital
expenditures have been and will continue to be spent on drilling and
production activities, particularly in Venezuela. Future
infrastructure costs will be related to enhancing production
rather than start-up operations.
OTHER
The Company follows the full-cost method of accounting for its
investments in oil and gas properties. The Company capitalizes all
acquisition, exploration, and development costs incurred. The Company
accounts for its oil and gas properties using cost centers on a
country by country basis. Proceeds from sales of oil and gas
properties are credited to the full-cost pools. Capitalized costs of
oil and gas properties are amortized within the cost centers on an
overall unit-of-production method using proved oil and gas reserves as
determined by independent petroleum engineers. Costs amortized
include all capitalized costs (less accumulated amortization), the
estimated future expenditures (based on current costs) to be incurred
in developing proved reserves, and estimated dismantlement,
restoration and abandonment costs. See Note 1 of Notes to
Consolidated Financial Statements.
The following discussion of the results of operations and financial
condition for the years ended December 31, 1994 and 1993 and for each
of the years in the three year period ended December 31, 1994 should
be read in conjunction with the Company's Consolidated Financial
Statements and related notes thereto.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1993
The Company had revenues of $34,704,807 for the year ended December
31, 1994. Expenses incurred during the period consisted of lease
operating costs and production taxes of $9,531,264, depletion,
depreciation and amortization expense of $10,298,112, general and
administrative expense of $5,241,295, interest expense of $3,887,961,
and a minority interest of $2,094,211. The net income for the period
was $2,954,161 or $0.12 per share.
By comparison, the Company had revenues of $7,503,796 for the year
ended December 31, 1993. Expenses incurred during the period
consisted of lease operating costs and production taxes of $5,110,264,
depletion, depreciation and amortization expense of $2,632,924,
general and administrative expense of $2,631,445 and interest expense
of $1,957,753. The net loss for the period was $4,828,590 or $0.26
per share.
<PAGE> 5
Revenues increased $27,201,010, or 362%, during the year ended
December 31, 1994 compared to the corresponding period of 1993
primarily due to increased revenues from Benton-Vinccler's operations
in Venezuela, the Company's increased ownership of Benton-Vinccler,
the initiation of oil sales in Russia in late 1993, gain on exchange
rates in Venezuela and Russia, gas sales from the #831 well in the
West Cote Blanche Bay Field and increased investment earnings. The
increase was partially offset by lower oil sales from the West Cote
Blanche Bay Field, lower sales prices and the sale of the Company's
interest in the Pershing property in 1993. Sales quantities for the
year ended December 31, 1994 from Venezuela and Russia were 2,519,514
and 294,364 Bbl, respectively, compared to 160,425 and 28,263 Bbl,
respectively, for the year ended December 31, 1993. Prices for crude
oil averaged $8.52 (pursuant to terms of an operating service
agreement) from Venezuela and $11.93 from Russia for the year ended
December 31, 1994 compared to $8.31 and $11.46 from Venezuela and
Russia, respectively for the year ended December 31, 1993. Domestic
sales quantities for the year ended December 31, 1994 were 225,954 Bbl
of crude oil and condensate and 2,061,892 Mcf of natural gas compared
to 292,266 Bbl of crude oil and condensate and 232,677 Mcf of natural
gas for the year ended December 31, 1993. Domestic prices for crude
oil and natural gas averaged $14.46 per Bbl and $1.79 per Mcf during
the year ended December 31, 1994 compared to $17.30 per Bbl and $2.19
per Mcf during the year ended December 31,1993. The Company has
realized net foreign exchange gains during 1994 primarily as a result
of the decline in the value of the Venezuelan bolivar and Russian
ruble during periods when Benton-Vinccler and GEOILBENT had
substantial net monetary liabilities denominated in bolivars and
rubles. The Venezuelan government has frozen the exchange rate at 170
bolivars to the dollar; the Company cannot predict the timing or
impact of future changes in the exchange rate.
Lease operating costs and production taxes increased $4,421,000, or
87% during the year ended December 31, 1994 compared to 1993 primarily
due to the growth of the Company's Venezuelan and Russian operations
and were partially offset by the sale of the Company's interest in the
Pershing property in 1993 and reduced operating costs at the West Cote
Blanche Bay Field. Depletion, depreciation and amortization increased
$7,665,188, or 291% during the year ended December 31, 1994 compared
to 1993 primarily due to increased oil production in Venezuela, gas
sales from the #831 well in the West Cote Blanche Bay Field and the
initiation of oil production in Russia. Depletion expense per BOE
produced from the United States, Venezuela and Russia during the year
ended December 31, 1994 was $7.46, $1.98 and $2.85, respectively,
compared to $6.47, $1.43 and $3.51 during 1993. The increase in
general and administrative expense of $2,609,850 or 99%, in 1994
compared to 1993 was primarily due to the growth of and the Company's
increased ownership of Benton-Vinccler, the commencement of operations
in Russia and increased corporate activity associated with the growth
of the Company's business. Interest expense increased $1,930,208, or
99%, in 1994 compared to 1993 primarily due to increased borrowing to
fund operations in Venezuela and Russia.
The Company has included the results of operations of Benton-Vinccler
in its consolidated statement of income since January 1, 1994 and has
reflected the 50% ownership interest of Vinccler during January and
February and the 20% ownership interest of Vinccler thereafter as a
minority interest. For the year ended December 31, 1994, minority
interest expense was $2,094,211.
YEARS ENDED DECEMBER 31, 1993 AND 1992
For the year ended December 31, 1993, the Company had revenues of
$7,503,796 compared to $8,622,109 for the year ended December 31,
1992, representing a decrease of $1,118,313. This decrease was
primarily due to lower oil and gas sales from the West Cote Blanche
Bay Field due to lower oil prices and the field's natural production
decline, as well as the sale of certain nonstrategic properties in
California and Oklahoma. Domestic production for the year ended
December 31, 1993 was 292,266 Bbl of crude oil and condensate and
232,677 Mcf of natural gas compared to production of 376,022 Bbl of
crude oil and condensate and 831,637 Mcf of natural gas during 1992.
For the year ended December 31, 1993, domestic crude oil and natural
gas prices received by the Company averaged $17.30 per Bbl and $2.19
per Mcf, respectively, compared to $18.17 per Bbl and $1.66 per Mcf,
respectively, during 1992. Oil production for the year ended December
31, 1993 from Venezuela and Russia, which commenced during 1993 in
both countries, was 160,425 Bbl and 28,263 Bbl, respectively. Average
oil prices per Bbl for the year ended December 31, 1993 received by
the Company in Venezuela and Russia were $8.31 (pursuant to terms of
an operating service agreement) and $11.46, respectively.
Lease operating costs and production taxes for the year ended
December 31, 1993 were $5,110,264, an increase of 16% from $4,413,620
in 1992, reflecting the initiation and growth of the Company's
Venezuelan and Russian operations, particularly in the fourth quarter
of 1993. The increase was partially offset by the sale of the
Company's interest in its California and Pershing properties.
Depletion, depreciation and amortization expenses were $2,632,924 for
the year ended December 31, 1993, a decrease of 13% from $3,041,375
for 1992 primarily due to a decrease in oil and gas production
quantities. General and administrative expenses for the year ended
December 31, 1993 were $2,631,445, an increase of 17% from $2,245,236
for 1992 primarily due to the initiation and growth of Venezuelan and
Russian operations. Interest expense for the year ended December 31,
1993 was $1,957,753, an increase of 7% compared to $1,831,213 for 1992
primarily due to the increase in debt financing in Venezuela offset by
a reduction in 1993 of debt incurred to acquire interests in West Cote
Blanche Bay.
<PAGE> 6
CAPITAL RESOURCES AND LIQUIDITY
The oil and gas industry is a highly capital intensive business. The
Company requires capital principally to fund the following costs: (i)
drilling and completion costs of wells and the cost of production and
transportation facilities; (ii) capital expenditures under certain
agreements for geological, geophysical and seismic costs; (iii)
purchase of leases and other interests in oil and gas producing
properties; and (iv) general and administrative expenses. The amount
of available capital will affect the scope of the Company's operations
and the rate of its growth.
The net funds raised and/or used in each of the operating, investing
and financing activities for each of the years in the three year
period ended December 31, 1994 are summarized in the following table
and discussed in further detail below.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1994 1993 1992
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<S> <C> <C> <C>
Net cash provided by
(used in) operating activities $ 13,462,789 $ (1,789,965) $ (648,108)
Net cash used in investing activities (53,849,913) (18,618,794) (10,944,169)
Net cash provided by financing
activities 18,271,574 43,043,889 21,588,284
------------ ------------ -----------
Net increase (decrease) in cash $(22,115,550) $ 22,635,130 $ 9,996,007
============ ============ ===========
</TABLE>
FOR THE YEAR ENDED DECEMBER 31, 1994
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During the year ended December 31, 1994, the Company derived net
proceeds of approximately $21.4 million from the issuance of long-term
notes and approximately $23.2 million from short term borrowings used
to provide working capital, to fund operations in Venezuela and Russia
and to repay $24.7 million of commercial paper, short term borrowings
and notes payable.
During the year ended December 31, 1994, the Company had drilling and
production related capital expenditures of $38.4 million, of which
$23.2 million was attributable to the development of the South Monagas
Unit in Venezuela, $8.6 million related to the development of the
North Gubkinskoye Field in Russia, $5.9 million related to drilling
activity in the West Cote Blanche Bay, Belle Isle and Rabbit Island
Fields in Louisiana, and $0.7 million was attributable to other
projects. In addition, the Company acquired capital stock from
Vinccler representing an additional 30% ownership interest in Benton-
Vinccler for $3.0 million in cash, the issuance of non-interest
bearing promissory notes with a face value of $10.0 million and the
issuance of 200,000 shares of Common Stock.
At December 31, 1994, the Company had current assets of $62.4 million
(including $19.3 million of cash restricted as collateral for a loan
to Benton-Vinccler), and current liabilities of $40.6 million,
resulting in working capital of $21.8 million and a current ratio of
1.5 to 1. The decrease in working capital of $4.9 million from
December 31, 1993 was due primarily to the acquisition of an
additional 30% ownership interest in, and the resulting additional
consolidation of the financial condition of, Benton-Vinccler; further
borrowings to fund the Venezuelan and Russian operations; and capital
expenditures for the development of the South Monagas Unit and the
West Cote Blanche Bay Field. The decrease was substantially offset by
the proceeds from a $15 million senior unsecured long-term debt
financing with an institution completed in September 1994, $5 million
secured long-term debt financing with a bank completed in December
1994 and the sale of the Company's working interest in the shallow
depths in the West Cote Blanche Bay Field for approximately $14.9
million (which was completed in 1995 and reported as property held for
sale at December 31, 1994).
The Company is currently in discussions with certain commercial and
investment banks in Venezuela and the United States to refinance a
portion or all of Benton-Vinccler's existing indebtedness and to
provide further financing for a portion of Benton-Vinccler's capital
requirements. Such financing may have no or limited recourse to the
Company, in which case the restricted cash securing Benton-Vinccler's
existing indebtedness in amounts equal to any such refinanced amounts
would become unrestricted. There can be no assurance that such
financing will become available on terms acceptable to Benton-Vinccler
or that such financing will result in the reclassification of any of
the Company's restricted cash.
<PAGE> 7
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 current liabilities (not less than
1.1 to 1.0), a maximum ratio of funded liabilities to net worth
(cannot exceed .60 to 1.0) and a minimum ratio of funded liabilities
to U.S. oil and gas revenues (cannot exceed 1.0 to 1.0). At
December 31, 1994, the Company was in compliance with each of these
financial covenants. The note agreement also provides for limitations
on certain capital expenditures, dividends, sales of assets and
mergers. Additionally, in connection with the issuance of the notes,
the Company issued warrants entitling the holder to purchase 250,000
shares of common stock at $9.00 per share, subject to adjustment in
certain circumstances, that are exercisable on or before September
30, 2002.
In November 1994, the Company sold to Tenneco a 10.8% working
interest (24.9% of the Company's 43.3% working interest) in the West
Cote Blanche Bay Field for approximately $5.8 million and future
consideration of up to $3.7 million.
On December 27, 1994, the Company entered into a revolving secured
credit facility with a commercial bank. 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 will become a term loan due December 31,
1999. Borrowings under the credit agreement are secured in part by
mortgages on the Company's U.S. properties and in part by a guarantee
provided by a financial institution which arranged the credit
facility. Interest on borrowings under the credit agreement accrues,
at the Company's option, at either a floating rate (higher of prime
rate plus 3% or the Federal Funds Rate plus 5%) or a fixed rate (rate
of interest at which deposits of dollars are available to lender in
the interbank eurocurrency market plus 4.5%). The floating rate
borrowings may be prepaid at any time without penalty and the fixed
rate borrowings may be repaid on the last day of an interest period
without penalty, or at the option of the Company during an interest
period upon payment of a make-whole premium. In exchange for the
credit enhancement, the arranging financial institution and commercial
bank received warrants entitling the holder to purchase 50,000 shares
of common stock at $12.00 per share, subject to adjustment in certain
circumstances, that are exercisable on or before December 2004, and
the arranging institution receives a 5% net profits interest in the
Company's properties whose development is financed by the facility.
The credit agreement contains financial covenants including a minimum
ratio of current assets to current liabilities (not less than 1.1 to
1.0) and maximum ratio of certain liabilities to net worth (cannot
exceed .60 to 1.0) or domestic oil and gas reserves (cannot exceed 1.0
to 1.0) and also provides for limitations on liens, dividends, sales
of assets and mergers. At December 31, 1994, the Company was in
compliance with each of these financial covenants. At December 31,
1994, the principal amount outstanding under this facility was $5.0
million.
FOR THE YEAR ENDED DECEMBER 31, 1993
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During 1993, the Company derived net proceeds of approximately $35.7
million from the public offering of 7,000,000 shares of Common Stock;
$0.6 million from the exercise of stock options and warrants; and $7.8
million from the sale of nonstrategic property interests in Louisiana
and Oklahoma.
During 1993, the Company had capital expenditures of $26.2 million,
of which $10.5 million related to the development of the North
Gubkinskoye Field in Russia, $6.8 million related to its Venezuelan
operations, $4.6 million was attributable to the 3-D seismic survey
being conducted on the Rabbit Island Field, $2.4 million related to
the recompletion of wells in the West Cote Blanche Bay Field, and $1.5
million related to seismic and drilling activities at the Belle Isle
Field. The remaining $0.4 million was attributable to other projects.
At December 31, 1993, the Company had current assets of $39.5 million
and current liabilities of $12.8 million, resulting in working capital
of $26.7 million compared to $10.5 million at December 31, 1992. The
increase in working capital from December 31, 1992 was due primarily
to funds generated by equity and property sale transactions.
During the year ended December 31, 1993, 272,828 shares of Redeemable
common stock were resold by certain selling stockholders for net
proceeds to the selling stockholders of approximately $2.0 million,
which, in addition to $0.2 million paid in cash by the Company during
the year, completed the early termination of an agreement entered into
by the Company in July 1992 which guaranteed that minimum cumulative
proceeds from the resale of such shares would be no less than $2.6
million through July 1, 1993. See Note 9 of Notes to Consolidated
Financial Statements.
<PAGE> 8
For the Year Ended December 31, 1992
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During 1992, the Company derived net proceeds of $28.0 million from
the public offerings of 5,196,785 shares of Common Stock; $5.7 million
from the public offering of 8% Convertible Subordinated Debentures due
in 2002 (aggregate principal amount of $6.4 million); and $2.4 million
from the exercise of stock options and warrants. The Company also
derived net proceeds of $3.0 million from the sale of certain
nonstrategic oil and gas properties. Total net proceeds from the
public stock offerings, the 8% Convertible Subordinated Debentures,
the stock options and warrants and the sale of oil and gas properties
were $39.1 million.
During 1992, the Company had capital expenditures of $14.0 million,
primarily for the development of the West Cote Blanche Bay and North
Gubkinskoye Fields. In addition, in March 1992, the Company acquired
additional working interests in several oil and gas properties in
Louisiana, California and Texas in which the Company already had an
interest. After giving effect to certain closing adjustments,
including adjustment of joint interest receivables, the Company issued
213,957 shares of Common Stock to the sellers as full consideration
for the acquisition.
During 1992, the Company made payments of $14.9 million on its
current and long-term notes payable, including the remaining balance
of $4.6 million outstanding at the beginning of the year under a loan
agreement with a financing institution.
At December 31, 1992, the Company had current assets of $14.8 million
and current liabilities of $4.3 million, resulting in working capital
of $10.5 million, compared to a working capital deficit of $14.8
million at December 31, 1991. The increase in working capital from
December 31, 1991 was due primarily to funds generated from the
equity, debt and property sale transactions during 1992, net of the
application of a portion of those funds to reduce long term debt.
VENEZUELAN OPERATIONS
Under the terms of the operating service agreement between Benton-
Vinccler and Lagoven, Benton-Vinccler was obligated to make certain
capital and operating expenditures by December 31, 1995. This
obligation was secured by a standby letter of credit in favor of
Lagoven in the amount of approximately $19 million. During February
1994, Benton-Vinccler fulfilled this obligation and, accordingly, a
standby letter of credit is no longer required.
In February 1994, the Company and Benton-Vinccler 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, of which $10 million 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.
In March 1994, the Company acquired capital stock from Vinccler
representing an additional 30% ownership interest in Benton-Vinccler
and thus increased its ownership from 50% to 80%. The purchase price
was $3.0 million in cash, the issuance of non-interest bearing
promissory notes with a face value of $10.0 million (present value of
$9.2 million) payable in various installments through January 1996 and
the issuance of 200,000 shares of the Company's Common Stock. In
addition, the Company has agreed to arrange for all of Benton-
Vinccler's future financing and to provide any further collateral or
guarantees, if required for such financing.
During the fourth quarter of 1994, Benton-Vinccler acquired
approximately $1.7 million of drilling and production equipment from
trading companies under terms which include 12 month financing. The
Company expects that other such trade financing may be available to
Benton-Vinccler, particularly if political risk insurance is made
available from OPIC (the Overseas Private Investment Corporation, an
agency of the U.S. government).
The Company has budgeted approximately $40-50 million for capital
expenditures in Venezuela during 1995. The Company is presently
pursuing several options for long-term financing for Benton-Vinccler.
There can be no assurance that such financing will be available on
terms acceptable to Benton-Vinccler. To the extent such permanent
financing cannot be secured, Benton-Vinccler will fund its operations
from its working capital and cash flow from operations which may
result in reduced capital expenditures.
In June 1994, the Venezuelan government, amid economic uncertainties
and bank crises, suspended certain constitutional rights and
implemented certain exchange and price controls. Currently, exchange
and price controls remain in place, with no indication of
<PAGE> 9
when or how much such controls will be lifted or relaxed.
To date, neither the current economic uncertainties nor the
exchange and price controls have had an adverse effect on
the Company's operations in Venezuela, although the
controls have limited the potential sources of credit financing
for Benton-Vinccler's growth. The Company reflects an account
receivable in the amount of $8.0 million on its consolidated
balance sheet, representing the operating service fee for the quarter
ended December 31, 1994 owed by Lagoven to Benton-Vinccler. Payment
of the account receivable was received February 6, 1995. The Company
continues to evaluate the economic and political environment in
Venezuela to assess the potential effect on the Company and its
Venezuelan operations.
RUSSIAN OPERATIONS
Under the terms of GEOILBENT's joint venture agreement, the Company
has committed to make cumulative equity contributions totaling
approximately $25.8 million by December 31, 1995. As of March 1995,
the Company's contribution since inception totaled approximately $20.1
million. The Company expects to complete its obligation primarily by
reinvesting its share of cash flow from operations and by contributing
cash and oil field equipment and materials. The Company expects to
contribute a total of $6-7 million to GEOILBENT during 1995. The
Company continues to retain Morgan Guaranty as a financial advisor to
develop appropriate financial plans and to determine potential funding
sources for the venture.
In June 1994, GEOILBENT entered into a production payment advance
agreement with NAFTA Moscow, the export agency which markets
GEOILBENT's oil production to purchasers in Europe. The payment
advance of $2.5 million against future oil shipments, which bore an
effective discount rate of 12% was repaid through withholdings from
oil sales on a monthly basis through December 1994. GEOILBENT is
conducting discussions for similar arrangements with NAFTA Moscow in
1995.
In August 1994, GEOILBENT entered into an agreement with
International Moscow Bank for a $4 million loan with the following
terms: 14 monthly payments, interest at LIBOR plus 7.5%, with
interest only payments for the first four months and monthly principal
and interest payments thereafter. In connection with this agreement,
the Company provided to International Moscow Bank a guarantee of
payment under which the Company has agreed to pay such loan in full if
GEOILBENT fails to make the scheduled payments. At December 31, 1994,
the Company's share of the outstanding balance was $1.3 million.
In March 1995, GEOILBENT's credit facility with International Moscow
Bank was expanded to $6 million, with interest only payments for 3
months and monthly principal and interest payments thereafter. The
Company has similarly guaranteed this indebtedness, through which the
Company intends to fulfill substantially all of its remaining charter
fund contribution requirements.
SUBSEQUENT EVENTS AND ANTICIPATED CAPITAL REQUIREMENTS
In March 1995, the Company and its affiliates and Tenneco sold to WRT
Energy Corporation a 43.75% working interest in certain depths (above
approximately 10,575 feet) in the West Cote Blanche Bay Field for an
aggregate purchase price of $20 million. Of the aggregate purchase
price, the Company will receive approximately $14.9 million. The
proceeds from this sale have been reflected as a property held for
sale at December 31, 1994 and will be used to fund certain portions of
the Company's 1995 drilling and development activities and for working
capital purposes.
The Company anticipates funding its total 1995 capital expenditures,
which it expects to be approximately $50-60 million, from cash flow
from operations, sales of property interests, project and trade
financing sources or the issuance of debt or equity securities. There
can be no assurance that such financing will become available under
terms and conditions acceptable to the Company, which may result in
reduced capital expenditures in any or all three of the Company's
principal areas of operations.
EFFECTS OF INFLATION, CHANGING PRICES AND FOREIGN EXCHANGE RATES
The Company's results of operations and cash flow are affected by
changing oil and gas prices. If the price of oil and gas increases,
there could be a corresponding increase in the cost to the Company for
drilling and related services, as well as an increase in revenues.
Continued fluctuating oil and gas prices may affect the Company's
total planned development activities and capital expenditure program.
Within the United States, inflation has had a minimal effect on the
Company. The Company's foreign operations may be adversely affected
by inflation in Russia and Venezuela, but the Company cannot predict
the extent of such effect. With respect to Benton-Vinccler and
GEOILBENT, substantially all of the sources of funds, including the
Company's contributions and the
<PAGE> 10
proceeds from oil sales and credit financings, are denominated in U.S.
dollars, which may help to limit the impact of inflation in those countries.
Effective May 1, 1994, the Company entered into a commodity hedge
agreement with Morgan Guaranty designed to reduce a portion of the
Company's risk from oil price movements. Pursuant to the hedge
agreement, with respect to the period from May 1, 1994 through the end
of 1996, the Company will receive from Morgan Guaranty $16.82 per Bbl
and the Company will pay to Morgan Guaranty the average price per Bbl
of West Texas Intermediate Light Sweet Crude Oil ("WTI") (determined
in the manner set forth in the hedge agreement). Such payments will
be made with respect to production of 1,000 Bbl of oil per day for
1994, 1,250 Bbl of oil per day for 1995 and 1,500 Bbl of oil per day
for 1996. During the quarter ended December 31, 1994, the average
price per Bbl of WTI was $17.65 and the Company's net exposure for the
quarter was $76,084. Total exposure for the year ended December 31,
1994 under the hedge agreement was $328,868. The Company's oil
production is not materially affected by seasonality. The returns
under the hedge agreement are affected by world-wide crude oil prices,
which are subject to wide fluctuation in response to a variety of
factors that are beyond the control of the Company.
To the extent practicable, while oil sales and financings have been
in U.S. dollars, local transactions in Russia and Venezuela are
conducted in local currency. GEOILBENT pays its employees and
purchases certain equipment and services in local currency.
Similarly, Benton-Vinccler pays its employees and purchases certain
equipment and services in local currency. This allows both
Benton-Vinccler and GEOILBENT to maximize benefits when possible from
the current favorable exchange rates. Payments to Benton-Vinccler
under the Operating Service Agreement and payments to GEOILBENT for
delivery and sale of oil are made in U.S. dollars, or currency that is
freely exchangeable for U.S. dollars. There are no restrictions in
either Venezuela or Russia that restrict converting U.S. dollars into
local currency. However, during 1994, Venezuela implemented exchange
controls which significantly limit the ability to convert local
currency into U.S. dollars. Because payments made to Benton-Vinccler
are made in U.S. dollars into its United States bank accounts, and
Benton-Vinccler is not subject to regulations requiring the conversion
or repatriation of those dollars back into the country, the exchange
controls have not had a material adverse effect on Benton-Vinccler or
the Company.
During the year ended December 31, 1994, the Company realized net
foreign exchange gains, primarily as a result of the decline in the
value of the Venezuelan bolivar and the Russian ruble during periods
when Benton-Vinccler and GEOILBENT had substantial net monetary
liabilities denominated in bolivars and rubles. The Company's net
foreign exchange gains attributable to its Venezuelan and Russian
operations were $1,003,132 and $442,175, respectively, during the
year ended December 31, 1994. The Company cannot predict the extent of
future gains and losses, but attempts to minimize its exposure to
losses.
<PAGE> 11
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the directors, executive officers and key
employees of the Company as of April 26, 1995 is set forth below:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
A.E. Benton (1) 52 Chairman of the Board; Chief Executive Officer;
President
William H. Gumma 47 Senior Vice President - Operations; Director
Michael B. Wray (1)(2) 58 Consultant; Chairman of Finance Committee;
Director
David H. Pratt 45 Vice President - Finance; Chief Financial
Officer; Treasurer
Joseph C. White 63 Vice President - Operations
Clarence Cottman, III 38 Vice President - Business Development
Gregory S. Grabar 39 Vice President - Corporate Development and
Administration
Chris C. Hickok 37 Vice President - Controller; Chief Accounting
Officer
Bruce M. McIntyre (1)(2)(3) 66 Director
Richard W. Fetzner (2) (3) 65 Director
<FN>
- ------------
(1) Member of Finance Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
</TABLE>
A.E. Benton, founder of the Company, was first elected President,
Chief Executive Officer and Chairman of the Board of Directors of the
Company in September 1988. He has served as Director of the Company
since September 1988. From October 1986 to October 21, 1988, Mr.
Benton was employed as president and a director of Benton Petroleum.
From 1081 to 1986, Mr. Benton was employed by May Petroleum Inc.,
becoming its senior vice president of exploration. From 1979 to 1981,
Mr. Benton was employed by TransOcean Oil Company and, upon
TransOcean's acquisition by Mobil Oil Corporation, he was employed by
another subsidiary of Mobil Oil Corporation as manager of geophysics.
He was employed from 1968 to 1979 by Amoco Oil Company in various
positions, including director of applied geophysical research. Mr.
Benton has a B.S. degree in geophysics from California State
University. Mr. Benton serves as a director of First Seismic
Corporation.
William H. Gumma was first elected Vice President - Gulf Coast
Operations in August 1989 and was elected Senior Vice President -
Operations of the Company in September 1990. In November 1994, Mr.
Gumma was appointed a Director of the Company to fill a vacancy on the
Board of Directors. From 1988 to 1989, Mr. Gumma was chief
geophysicist-international for Maxus Energy Corp. (formerly Diamond
Shamrock, Inc.), where he directed geophysical exploration in Europe,
South America and North Africa. From 1986 to 1988, Mr. Gumma served
as vice president of exploration for BHB Petroleum, Inc. From 1983 to
1986, Mr. Gumma served as chief geophysicist and later as Gulf Coast
exploration manager for May Petroleum Inc. From 1980 to 1983, Mr.
Gumma was chief geophysicist for Spectrum Oil and Gas Company. From
1978 to 1980, he was district geophysicist for Inexco Oil Company.
From 1972 to 1978, Mr. Gumma was employed by Amoco Oil Company in
various positions. Mr. Gumma received his B.S. from the Colorado
School of Mines and his M.S. in geophysics from Oregon State
University.
Michael B. Wray has served as Director of the Company since November
1988. Mr. Wray is currently serving as a consultant to the Company
and the Chairman of the Finance Committee. From January 1992 until
July 1993, Mr. Wray served as vice president-finance and
administration of Del Mar Operating, Inc. From 1985 through 1991 and
currently, Mr. Wray has been and is an independent financial
consultant to oil and gas exploration and production companies. From
1979 to 1985, Mr. Wray served as a senior financial officer of
Guardian Oil Company, Huffco Petroleum Corporation and May Petroleum
Inc. Prior to that time, Mr. Wray worked for over 15 years in New
York as an investment banker, security analyst and officer in various
investment firms including Donaldson, Lufkin & Jenrette, Inc., Drexel
& Co. and L.F. Rothschild & Co. Mr. Wray began his career as an
attorney with Morgan, Lewis & Bockius in Philadelphia. Mr. Wray holds
a B.A. degree from Amherst College and a law degree from Columbia Law
School.
<PAGE> 12
David H. Pratt was first elected Vice President - Finance, Chief
Financial Officer and Treasurer in April 1989. From 1987 to 1989, Mr.
Pratt was a consultant in the accounting services and systems
industry. From 1982 to 1987, Mr. Pratt was employed by May Petroleum
Inc., becoming assistant treasurer. He also served as budget and
planning manager, and managed corporate and partnership investor
relations and other administrative areas. From 1974 to 1982, Mr.
Pratt was employed by Arthur Andersen & Co. and he became a Certified
Public Accountant in 1975. Mr. Pratt holds B.S. and M.B.A. degrees
from Texas Christian University.
Joseph C. White was elected Vice President - Operations of the
Company in February 1993. Previously, Mr. White was president of J.C.
White and Associates, Inc., an independent consulting firm that
prepared the Company's independent reserve reports from 1988 through
1992. Mr. White was employed by Texaco for 30 years in a variety of
engineering and management positions. In 1968, he was appointed
assistant to the senior vice president for Texaco's worldwide
producing operations. In 1972, he was appointed assistant division
manager for Texaco's Denver Division in Colorado. In this position,
he was responsible for all engineering and operational matters for
Texaco's operations in the Rocky Mountain area.
Clarence Cottman, III was first appointed land manager in June 1989,
was elected Vice President - Land of the Company in September 1990 and
was elected Vice President - Business Development in July 1993. Mr.
Cottman, a Certified Petroleum Landman, was previously employed by
Oryx Energy Company (formerly Sun Exploration and Production Company)
from June 1982 to May 1989. Mr. Cottman has held a variety of
exploration and production land positions in Oryx's Dallas, Houston,
and Denver offices. Most recently, he was district landman for Oryx
in Ventura, California, and responsible for all land activity on the
West Coast. Mr. Cottman holds a B.A. degree from Rochester Institute
of Technology and an M.B.A. from the University of Rhode Island. Mr.
Cottman is the son-in-law of Richard W. Fetzner.
Gregory S. Grabar was first elected Vice President - Corporate
Development and Administration in April 1993 and was first appointed
manager of administration in October 1990. From 1989 to 1990, Mr.
Grabar was in the corporate finance department of Citicorp Real
Estate, Inc. From 1988 to 1989, Mr. Grabar was a consultant in the
accounting services industry. From 1981 to 1988, Mr. Grabar was a
vice president in the corporate finance department at Bateman Eichler,
Hill Richards, Inc., a Kemper Securities Inc. company. From 1977 to
1981, Mr. Grabar was in both the audit and tax departments of Arthur
Andersen & Co. and became a Certified Public Accountant. Mr. Grabar
graduated cum laude from California State University with a B.A. in
business administration and received his M.B.A. from the University of
California at Los Angeles.
Chris C. Hickok was first appointed controller in November 1991 and
was elected Vice President-Controller in January 1995. From March
1979 to September 1991, Mr. Hickok was employed by Mission Resources,
Inc. and held various positions in the accounting and finance
department including financial analyst, assistant controller and
controller. Mr. Hickok holds a B.S. degree in business administration
from California State University at Hayward and is a Certified
Management Accountant.
Bruce M. McIntyre has served as Director of the Company since
November 1988. Mr. McIntyre is a private investor and a consultant in
the oil and gas industry, in which he has been involved since 1952.
He also serves in a management capacity with several small, private
companies in the energy field. He currently serves as a director and
president of MSC Corp., a private company which manages oil wells in
Illinois and Oklahoma. From 1981 to 1984, Mr. McIntyre served as
president of Rocky Mountain Exploration Company, ultimately
negotiating its merger into Carmel Energy, Inc. on whose board of
directors he served until March 1986. Prior to that time, Mr.
McIntyre held various management positions with C&K Petroleum, Inc.
(now ENSTAR Petroleum, Inc.), Jenney Oil Company and Sinclair Oil &
Gas Company. Mr. McIntyre is a graduate of Harvard College and the
Harvard University Graduate School of Business Administration.
Richard W. Fetzner has served as Director of the Company since May
1990. Since 1989, Dr. Fetzner has been an associate professor of
business administration at California Lutheran University in Thousand
Oaks, California. From 1984 to 1989, Dr. Fetzner served in various
academic capacities at the University of Singapore and California
Lutheran University and was a consultant to the World Bank. From 1979
to 1984, Dr. Fetzner served as group vice president of Sun Company,
Inc. and president of Sun Exploration and Production Company in
Dallas, Texas. From 1958 to 1979, he served in various management and
professional positions with Sun Oil Company and its subsidiaries
including president of Sun International, Inc. and Sun Marine
Transport, Inc. Dr. Fetzner holds a B.A. from Augustana College, an
M.S. in geology from the University of Wisconsin, a Ph.D. in geology
and economics from the University of Wisconsin and an M.B.A. from
Drexel University. Dr. Fetzner is the father-in-law of Clarence
Cottman, III.
<PAGE> 13
COMMITTEES TO THE BOARD OF DIRECTORS
Finance Committee. In June 1994, the Board of Directors of the
Company formed a Finance Committee in recognition of the Company's
increasingly complex financing and reporting requirements,
particularly related to the future financing and accounting for its
international projects, which are becoming more important to the
Company's overall financial condition. The Finance Committee is
responsible for the general overview of the Company's ongoing
financing and reporting requirements. Due to the continued financing
of the Company's growth and anticipated international project
financing, the Finance Committee is charged with reviewing and
analyzing financing alternatives proposed and negotiated by the
officers of the Company and making recommendations to the Board of
Directors regarding such financing alternatives and to assist the
officers in establishing and overseeing the reporting requirements of
the Company, specifically those related to its international
operations. Messrs. Wray (Chairman), Benton and McIntyre currently
serve as members of the Finance Committee.
Compensation Committee. The Compensation Committee is responsible
for making recommendations to the Board of Directors regarding
salaries, benefits and bonuses to be paid to Company officers and
employees. In addition, the Compensation Committee has responsibility
for the administration of the Company's stock option plans. Messrs.
McIntyre (Chairman) and Wray are presently members of this committee.
Audit Committee. The primary functions of the Audit Committee
include making recommendations to the Board of Directors on the
selection of the Company's auditors, reviewing the arrangements and
scope of the independent auditors' examination, meeting with the
independent auditors to review the adequacy of internal audit
procedures and performing any other duties or functions deemed
appropriate by the Board of Directors. Messrs. Fetzner (Chairman) and
McIntyre are currently members of this committee.
<PAGE> 14
ITEM 11. EXECUTIVE COMPENSATION
REMUNERATION OF EXECUTIVE OFFICERS
The following table sets forth as to the Chief Executive Officer and
the two other executive officers whose annual salary and bonus
exceeded $100,000, information regarding all forms of compensation
paid or payable by the Company for services in all capacities for the
years indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards
---------------------------------- ---------------------------------
Other
Name and Principal Annual All Other
Position Year Salary Bonus Compensation Options/SARs Compensation
-------- ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
A. E. Benton, 1994 $250,000 $ 0 (1) 250,000 $ 473(2)
Chief Executive Officer, 1993 165,000 50,000 125,000 448
President 1992 165,000 35,000 150,000 442
William H. Gumma 1994 175,000 20,000 (1) 100,000 273(2)
Senior Vice President - 1993 125,000 30,000 50,000 195
Operations 1992 105,000 20,000 75,000 208
David H. Pratt 1994 110,000 0 (1) 20,000 181(2)
Vice President - Finance 1993 90,000 20,000 15,000 183
1992 90,000 0 20,000 170
<FN>
- ---------------
(1) The aggregate amount of perquisite compensation to be
reported herein is less than the lesser of either $50,000 or 10
percent of the total of annual salary and bonus reported for the
named executive officer. No other annual compensation was paid or
payable to the named executive officers in the years indicated.
(2) Represents premiums paid by the Company with respect to term life
insurance for the benefit of the named executive officer.
</TABLE>
The following table shows information concerning options to purchase
Common Stock, granted to certain individuals during 1994.
<TABLE>
<CAPTION> ----------------------------------------------------------------------------------
% of Total
Options/SARs Grant Date
Granted to Exercise or Present
Options/SARs Employees in Base Price Expiration Value
Name Granted (#) Fiscal Year ($/sh) Date ($) (1)
- ---- ----------- ----------- ------ ---- ---------
<S> <C> <C> <C> <C> <C>
A.E. Benton 125,000 15.2% $5.625 4/21/04 $ 703,125
A.E. Benton 125,000 15.2% 9.125 12/30/04 1,140,625
William H. Gumma 50,000 6.1% 5.625 4/21/04 281,250
William H. Gumma 50,000 6.1% 9.125 12/30/04 456,250
David H. Pratt 20,000 2.4% 5.625 4/21/04 112,500
</TABLE>
- ------------
(1) To calculate the present value of option/SAR grants, the Company has
used the Black-Scholes option pricing model. The actual value,
if any, will depend on the excess of the stock price over the exercise
price on the date the option is exercised, so that there is no assurance
the value realized will be at or near the value estimated by the
Black-Scholes model. The estimated
<PAGE> 15
values under that model for the stock options granted on April 21, 1994
are based on the assumptions that include (i) a stock price volatility of
3.2798, calculated using daily stock prices for approximately five years
and one month (since the Company's initial public offering) prior to the
grant date, (ii) a risk-free rate of return based on a 10-year U.S.
Treasury rate at the time of grant of 6.99%, and (iii) an option exercise
term of ten years. The estimated values under that model for the stock
options granted on December 30, 1994 are based on the assumptions that
include (i) a stock price volatility of 3.0909, calculated using daily
stock prices for approximately five years and nine months (since the
Company's initial public offering) prior to the grant date, (ii) a
risk-free rate of return based on a 10-year U.S. Treasury rate at the time
of grant of 7.82% and (iii) an option exercise term of ten years. No
adjustments were made for the non-transferability of the options or to
reflect any risk of forfeiture prior to vesting. The Commission requires
disclosure of the potential realizable value or present value of each
grant. The Company's use of the Black-Scholes model to indicate the
present value of each grant is not an endorsement of the model, which is
based on certain assumptions, including the assumption that the option will
be held for the full ten-year term prior to exercise. No gain is possible
without an increase in the stock price, which will benefit all stockholders
of the Company.
The following table provides information regarding the exercise of
stock options during 1994 by certain individuals and the year-end
value of unexercised options for certain individuals.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Aggregated Options/SAR Exercises in 1994 and Year-End Option/SAR Values
Number of Unexercised Value of Unexercised
Options/SARs at Year-End (#) In-the-Money Options/SARs ($)
---------------------------- -----------------------------
Shares
Name Acquired on Value
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A.E. Benton 0 0 441,667 258,333 $1,428,834 $547,917
William H. Gumma 0 0 167,367 108,333 506,002 226,042
David H. Pratt 0 0 98,333 36,667 359,633 84,167
- ---------------------
</TABLE>
EMPLOYMENT AGREEMENTS
In June 1992, the Board of Directors approved employment agreements
with certain key employees of the Company (the "Employment
Agreements"), which contain severance provisions in the event of a
change in control of the Company. The Company has entered into
similar agreements with other officers and key employees.
Pursuant to each Employment Agreement, in the event of a proposed
change in control (as defined in the Employment Agreement), the
employee has agreed to remain with the Company until the earliest of
(a) 180 days from the occurrence of such proposed change in control,
(b) termination of the employee's employment by reason of death or
disability (as defined in the Employment Agreement), or (c) the date
on which the employee first becomes entitled to receive benefits under
the Employment Agreement by reason of disability or termination of his
employment following a change in control. Except for this agreement
by the employee to so remain employed by the Company, the Company or
the employee may terminate the employee's employment prior to or after
a change in control either immediately or after certain notice
periods, subject to the Company's obligation to provide benefits
specified in the Employment Agreement.
Each Employment Agreement is for a period of either two or three
years. In the event of a change in control, the term of the
Employment Agreements will continue in effect for a period not less
than 24 months after such change in control, subject to certain
exceptions described therein. Following a change in control of the
Company and for a period of 24 months after such event, if the
employee is terminated without cause (as defined in the Employment
Agreement) or if employment is terminated by the employee for good
reason (as defined in the Employment Agreement), the employee is
entitled to a cash severance payment equal to three times his annual
base salary at the rate in effect prior to termination. The employee,
and his dependents, will also be entitled to participate in all life,
accidental death, medical and dental insurance plans of the Company in
which the employee was entitled to participate at termination for a
period of up to two years (and up to seven years in certain
circumstances). However, such amounts will not be payable if
termination is due to death, normal retirement, permanent disability,
or voluntary action of the employee other than for good reason (as
defined in the Employment Agreement), or by the Company for cause (as
defined in the Employment Agreement) or if such payment is not
deductible by the Company as a result of the operation of Section 280G
of the Internal Revenue Code, as amended.
<PAGE> 16
Messrs. Benton and Gumma each entered into Employment Agreements for
terms of three years on June 26, 1992. Pursuant to the terms of the
agreements, Mr. Benton's initial base salary was $165,000 and Mr.
Gumma's initial base salary was $105,000. For 1994, Mr. Benton's
annual base salary was $250,000 and Mr. Gumma's annual base salary was
$175,000. Salaries are reviewed annually and bonuses are within the
discretion of the Board of Directors.
REMUNERATION OF DIRECTORS
Directors are elected at the annual stockholders' meeting and hold
office until the next annual stockholders' meeting and until their
successors are elected and qualified. Directors who are not Company
officers are paid a fee of $2,000 for each Board meeting attended,
$500 for each committee meeting attended and $250 for participation in
telephonic meetings. Directors are reimbursed for all travel and
related expenses.
Additionally, the Company's Director Stock Option Plan provides that
each person who is elected to serve as a non-employee director of the
Company is annually and automatically granted an option to purchase
10,000 shares of Common Stock at an exercise price equal to the market
price on the date of grant.
During 1994, Mr. Wray served as a consultant to the Company to
provide financial advice. In consideration of such services, the
Company paid Mr. Wray an aggregate of $208,872 during 1994, paid
moving expenses of $5,257 and reimbursed Mr. Wray for all travel and
business related expenses. The Company has provided Mr. Wray with use
of a Company car for 1995. See Item 13. Certain Relationships and
Related Transactions.
<PAGE> 17
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the beneficial ownership of the Common
Stock of the Company as of April 26, 1995, unless otherwise indicated,
by (i) each person known to the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock, (ii) each Director,
(iii) certain officers, and (iv) all executive officers and directors
as a group. The Company has been informed by such persons listed
below that the persons have sole investment and voting power with
respect to the Common Stock owned by them.
<TABLE>
<CAPTION>
---------------------------------------------
Shares Beneficially Percentage of Shares
Owned Beneficially Owned (1)
------ ----------------------
<S> <C> <C>
Scudder, Stevens & Clark
345 Park Avenue
New York, NY 10154 2,266,700(2) 9.07%
A.E. Benton
1145 Eugenia Place
Suite 200
Carpinteria, CA 93013 1,285,000(3) 5.00%
Bruce M. McIntyre 90,000(4) *
Michael B. Wray 100,300(5) *
Richard W. Fetzner 61,667(6) *
William H. Gumma 275,700(7) 1.09%
David H. Pratt 291,667(8) 1.16%
All directors and executive
officers as a group
(10 persons) 2,523,034 9.45%
- ------------
</TABLE>
*Less than 1%
(1) The percentage of Common Stock is based upon 25,003,194 shares of
Common Stock outstanding as of April 25, 1995.
(2) The number of shares and the nature of the beneficial ownership of
Scudder, Stevens & Clark is as of April 18, 1995 and is based upon the
Schedule 13G filed with the Commission. Pursuant to such Schedule 13G,
Scudder, Steven & Clark reported sole dispositive power with respect to
all such shares.
(3) Includes 685,000 shares subject to options which are currently
exercisable within 60 days after April 26, 1995, under the
Company's stock option plans.
(4) Includes 80,000 shares subject to options which are currently
exercisable or exercisable within 60 days after April 26, 1995,
under the Company's stock option plans.
(5) Includes 80,000 shares subject to options which are currently
exercisable or exercisable within 60 days after April 26, 1995,
under the Company's stock option plans.
(6) Includes 61,667 shares subject to options which are currently
exercisable or exercisable within 60 days after April 26, 1995,
under the Company's stock option plans.
(7) Includes 275,700 shares subject to options which are currently
exercisable or exercisable within 60 days after April 26, 1995,
under the Company's stock option plans.
(8) Includes 291,667 shares subject to options which are currently
exercisable or exercisable within 60 days after April 26, 1995,
under the Company's stock option plans.
<PAGE> 18
(9) Includes 1,689,035 shares subject to options which are currently
exercisable or exercisable within 60 days after April 26, 1995,
under the Company's stock option plans.
<PAGE> 19
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1994, Mr. Wray entered into a consulting agreement with
the Company to provide financial advice for a period of six months
with compensation of $15,000 per month. In May 1994, as amended in
January 1995, Mr. Wray's January consulting agreement was canceled and
a new consulting agreement was entered into pursuant to which Mr. Wray
will provide advice through December 31, 1995 with compensation of
$20,000 per month, and the use of a Company car, with all travel and
business related expenses reimbursed by the Company. In June 1994, in
recognition of the complex nature of the financing and reporting
requirements of the Company, particularly related to the future
financing of its international projects, the Board of Directors of the
Company formed the Finance Committee of the Board. Mr. Wray was
elected Chairman of the Finance Committee.
In April 1992, in connection with the exercise of stock options by
David H. Pratt, a Vice President of the Company, the Company collected
$220,776 from Mr. Pratt in anticipation of paying employee federal
income taxes. It was subsequently determined that it was not
necessary to make such payment for Mr. Pratt and, in April 1992, the
Company executed a promissory note to Mr. Pratt bearing annual
interest at the prime rate plus 1%. The note was repaid in September
1992.
In February 1993, the Company guaranteed a loan made to A.E. Benton,
President, and Chairman of the Board of Directors of the Company, in
an aggregate amount of $1.2 million. The indebtedness was incurred by
Mr. Benton to refinance existing indebtedness. The promissory note
evidencing such indebtedness was due and payable on December 15, 1993
with an annual interest rate of 8%, a then current market rate for a
loan of this type. Mr. Benton was obligated to make monthly interest
payments until December 15, 1993, when any remaining unpaid interest
plus the principal would be due. The Company secured the guarantee by
a deposit of $1.4 million with the bank who loaned the money to Mr.
Benton. In May 1993, the $1.2 million loan was repaid by Mr. Benton
to the bank and the guarantee was extinguished.
On December 31, 1993, the Company guaranteed a loan made to Mr.
Benton for $300,000. The promissory note evidencing such indebtedness
is due and payable on June 30, 1995, with an annual interest rate of
5.85%. The Company secured the guarantee by a deposit of $300,000
with the bank who loaned the money to Mr. Benton. In January 1994,
the Company loaned $800,000 to Mr. Benton in the form of a promissory
note with interest at prime plus 1%. The promissory note is payable
in November 1995, or upon demand by the Company, whichever occurs
first. In September 1994, Mr. Benton made a payment of $207,014
against this loan. The Company loaned Mr. Pratt $95,000 on November
11, 1993 on the same terms as the $800,000 loan to Mr. Benton. The
loan is payable in November 1995.
Mr. Benton is a director of First Seismic Corporation. First Seismic
has an exclusive agency agreement with the Company for the sale of
certain seismic data. Since July 1988, First Seismic has received
less than $4,000 in commission revenues from the Company.
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Carpinteria, State of California, on this
28th day of April, 1995.
BENTON OIL AND GAS COMPANY
By: /s/ A. E. Benton
-------------------------------------------------
A.E. Benton, Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been duly signed on the 28th day of April, 1995 by the
following persons in the capacities indicated:
/s/ A.E. Benton Principal Executive Officer and Director
- ---------------------------
A.E. Benton
/s/ David H. Pratt Principal Financial Officer
- ---------------------------
David H. Pratt
/s/ Chris C. Hickok Principal Accounting Officer
- ---------------------------
Chris C. Hickok
/s/ Bruce M. McIntyre Director
- ---------------------------
Bruce M. McIntyre
/s/ Michael B. Wray Director
- ---------------------------
Michael B. Wray
/s/ Richard W. Fetzner Director
- ---------------------------
Richard W. Fetzner
/s/ William H. Gumma Director
- ---------------------------
William H. Gumma
