FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO 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 EXCHANGE ACT OF 1934.
For the transition period _______ to _______.
Commission File Number: 1-10398
GIANT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0642718
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23733 North Scottsdale Road, Scottsdale, Arizona 85255
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 585-8888
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 amendments to this Form 10-K. [X]
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 [ ]
As of February 28, 1995, 11,709,129 shares of the registrant's
Common Stock, $.01 par value, were outstanding and the aggregate
market value of the voting stock held by non-affiliates of the
registrant was approximately $59,630,000, based on New York Stock
Exchange closing prices on February 28, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference in
Part III of this Form 10-K Report:
Proxy Statement for Registrant's 1995 Annual Meeting of
Stockholders - Items 10, 11, 12, and 13.<PAGE>
<PAGE>
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES.
GENERAL
Giant Industries, Inc., a Delaware corporation ("Giant" or the
"Company"), through its wholly-owned subsidiaries Giant Industries
Arizona, Inc. ("Giant Arizona") and Giant Exploration & Production
Company ("Giant E&P"), formerly Hixon Development Company ("Hixon"),
is engaged in the refining and marketing of petroleum products and the
exploration for and production of crude oil and natural gas. The
Company is the largest refiner and one of the largest marketers of
petroleum products in the Four Corners area of the southwestern United
States where New Mexico, Arizona, Colorado and Utah adjoin. The
Company provides quality petroleum products through Company-operated
branded facilities as well as through distributors,
industrial/commercial accounts and major oil companies. The Company
also is engaged in the transportation of crude oil and natural gas.
The Company was incorporated in 1989 to effect the concurrent
merger of Giant Arizona and Hixon into wholly-owned subsidiaries of
the Company. Giant Arizona was founded in 1961 and operated as a sole
proprietorship until incorporation in the State of Arizona in 1969.
Hixon was incorporated in the State of Texas in 1964. Concurrently
with the merger of Giant Arizona and Hixon, the Company completed an
initial public offering of 2,788,750 shares of the Company's Common
Stock. At December 31, 1994, the Company had outstanding 11,985,329
shares of Common Stock.
The Company's long-term strategy is to increase its market share
of refined products sold, capture a significant portion of the
anticipated future growth in demand for refined products in the Four
Corners market and further enhance the Company's integration. This
strategy is designed to increase control over the Company's crude oil
supply and the distribution of a greater portion of the Company's
refined products. Additionally, the Company intends to reduce
dependence on particular customers, obtain higher margins through
increased sales at the retail level and increase opportunities to
develop markets for the sale of refined products in targeted regions.
Through selective acquisitions, the Company plans to expand into new
markets where the Company's management believes it can duplicate its
successful business strategy. The Company also intends to maintain its
market presence in its secondary markets, including the Phoenix
metropolitan area, which could provide additional opportunities for
selective market expansion.
REFINING AND MARKETING
REFINING
Giant Arizona owns and operates the Ciniza Refinery (the
"Refinery") located on 880 acres near Gallup, New Mexico in the Four
Corners area. This area serves both as the Company's primary market
for its refined products and as the primary source of its crude oil
and natural gas liquids ("NGLs") supplies.
Management believes that the technical capabilities of the
Refinery, together with the high quality of locally available
feedstocks, enable the Company to achieve a refinery conversion yield
which is comparable to that achieved by larger refineries located
outside of the area. The Refinery is equipped with fluid catalytic
cracking, alkylation, naphtha hydrotreating, reforming, isomerization,
LPG recovery, cogeneration facilities and diesel hydrotreating and
sulfur recovery units to manufacture low sulfur diesel fuel. This
processing configuration enables the Refinery to yield in excess of
90% high value products, such as gasoline, diesel fuel and jet fuel,
from each barrel of crude oil refined and to manufacture a gasoline
slate that is 100% unleaded and diesel fuel that is 100% low sulfur
diesel.
Set forth below are data with respect to operations of the
Refinery and its primary refined products during the indicated
periods.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Feedstock throughput:(1)
Crude oil 19,100 20,300 20,800 19,300 17,800
NGLs and ethanol 4,500 5,000 4,800 4,300 4,200
------ ------ ------ ------ ------
Total 23,600 25,300 25,600 23,600 22,000
====== ====== ====== ====== ======
Crude oil throughput
(as a % of total) 81% 80% 81% 82% 81%
Rated crude oil
capacity utilized 92% 98% 101% 94% 94%
Refinery margin ($/bbl) $ 5.60 $ 6.69 $ 4.77 $ 3.88 $ 5.74
Products:(1)
Gasoline 15,200 16,300 16,100 15,200 14,300
Diesel fuel 5,200 5,400 5,400 5,200 4,400
Jet fuel 1,300 1,800 2,000 1,800 2,100
Other 1,900 1,800 2,100 1,400 1,200
------ ------ ------ ------ ------
Total 23,600 25,300 25,600 23,600 22,000
====== ====== ====== ====== ======
High Value Products:
Gasoline 64% 65% 63% 64% 65%
Diesel fuel 22% 21% 21% 22% 20%
Jet fuel 6% 7% 8% 8% 10%
------ ------ ------ ------ ------
Total 92% 93% 92% 94% 95%
====== ====== ====== ====== ======
(1) Average barrels per day
</TABLE>
During 1994, the Company made no capital expenditures to increase
rated crude oil refining capacity.
Each unit in a refinery requires regular maintenance and repair
(referred to as a "turnaround") during which it is not in operation.
Turnaround cycles vary for different units and, in general, refinery
management plans product inventories and unit maintenance to permit
some operations to continue even when certain units are inactive.
Maintenance turnarounds involve the Refinery's own personnel and some
additional contract labor. Turnarounds are effected on a continuous
24-hour basis in order to minimize the unproductive time of the units
involved. Giant has historically expensed current maintenance charges
and capitalized turnaround costs which are then amortized over the
estimated period until the next turnaround.
In general, a major turnaround is scheduled every four years. The
most recent major turnaround occurred during March and April 1994.
Unscheduled maintenance shutdowns also occur, but the Company believes
that the Refinery's record with respect to unscheduled maintenance
shutdowns is generally good compared with the industry as a whole.
RAW MATERIAL SUPPLY
The Refinery primarily processes a mixture of high gravity, low
sulfur crude oil, condensate and NGLs and a material known as Lisbon
condensate. The locally produced, high quality crude oil known as Four
Corners Sweet is the Refinery's primary feedstock. The Refinery also
supplements its supply of crude oil with Alaskan North Slope ("ANS")
crude oil, accessed from the West Coast through the Four Corners and
Texas-New Mexico pipeline systems, which together can transport
approximately 65,000 barrels per day. The Refinery has access to West
Texas Intermediate and other lesser known crude oils by rail, should
the need arise and should economic conditions allow the use of such
alternate crude oils.
Due in part to a decision to accumulate raw material inventory
during periods of reduced production such as those resulting from a
major maintenance turnaround at the refinery in early 1994 and an
accident in July 1994, and due in part to better than forecasted
receipts of crude oil from the field, the Company's inventories of
crude oil have increased to approximately 763,000 barrels as of
December 31, 1994. Based on projections of local crude oil
availability from the field, current levels of usage of ANS, and the
Company's inventory levels, the Company believes an adequate crude
oil supply will be available, without the use of additional
supplemental supply alternatives, to sustain refinery operations at
planned levels into the first quarter of 1996.
Because exploration and production activity has been at a
relatively low level over the last few years, total crude oil
production in the Four Corners area currently reflects the trend of
normal depletion of reservoirs without the supplements of significant
new discoveries. The Company believes that local crude oil supply
currently approximates 95% of aggregate local crude oil demand. The
Company is currently able to supplement local crude oil supplies with
ANS and other alternate grades of crude oil through its gathering
systems' interconnection with the Four Corners and Texas-New Mexico
common carrier pipeline systems and by truck or rail. Generally, such
crude oil is of lesser quality than locally available crude oils, and,
with the exception of ANS, the Company believes such crude oil
generally has a delivered cost greater than that of locally available
crude oil.
In response to the decline in local crude oil production, the
Company has evaluated, and will continue in the future to evaluate,
supplemental crude oil supply alternatives on both a short-term and
long-term basis. Among other alternatives, the Company has considered
making equipment modifications to the refinery to increase its ability
to use ANS crude oil from its current level of approximately 1,000
barrels per day and has considered the installation of additional rail
facilities to enable the Company to provide the incremental crude oil
to supplement local supply sources when required in the most cost
effective manner available. In addition, the Company has considered,
and has in fact entered into, additional long-term agreements with
local crude oil suppliers to provide additional security for the
Company's local supply sources.
As additional supplemental crude oil becomes necessary, the
Company intends to implement one or more of these available
alternatives as necessary and as is most advantageous under the then
prevailing conditions. The Company currently believes that the most
desirable strategy to supplement local crude oil supplies, on a long-
term basis, is the delivery of supplemental crude oil from outside of
the Four Corners area by pipeline. Implementation of supplemental
supply alternatives will result in additional raw material costs,
operating costs, capital costs, or a combination thereof in amounts
which are not presently ascertainable by the Company but which will
vary depending on factors such as the specific alternative
implemented, the quantity of supplemental crude oil required, and the
date of implementation. Implementation of some supply alternatives
requires the consent or cooperation of third parties and other
considerations beyond the control of the Company.
The Company's equity interest in producing wells currently
accounts for approximately 4% of the Refinery's crude oil
requirements. Crude oil is also acquired from a number of other
sources, including major oil companies and large and small independent
producers, under arrangements which contain market-responsive pricing
provisions. Many of these arrangements are subject to cancellation by
either party or have terms that are not in excess of one year. In
addition, these arrangements are subject to periodic renegotiation.
A portion of the Refinery's purchases are structured as exchange
agreements. In such exchanges, purchases are made in conjunction with
matching sales to the supplier at other domestic locations, as may be
negotiated periodically. The effect of such arrangements is to make a
portion of the cost of the Refinery's supply dependent upon market
conditions in other locations, which may differ from those pertaining
to the Four Corners area. To date, the general effect of the daily
supplies that are subject to exchange arrangements has been to slightly
increase the Company's effective cost for crude oil. To help offset
this slight increase the Company participates in various government
supply programs as they become available. The Company has recently
entered into a three year government supply contract to help supply
crude oil to the Refinery at more favorable prices. The Company also
acquires crude oil from approximately 125 independent producers under
division order arrangements in which the Company contracts to purchase
100% of a producer's well output at prices posted by the Company.
In addition to crude oil, the Refinery currently has the
capability of processing approximately 5,200 barrels per day of NGLs,
consisting of natural gasoline, normal butane and isobutane. NGLs are
used as gasoline blending components and to supply the Refinery's
isomerization and alkylation units. NGLs increase the percentage of
gasoline and the octane levels that the Refinery can produce, which
typically increase the Company's refinery margins. NGLs further
enhance refinery margins because the Company has historically been
able to purchase NGLs at a lower cost per barrel than crude oil.
An adequate supply of NGLs is available for delivery to the
Refinery, primarily through a Company-owned pipeline connecting the
Refinery to two natural gas liquids fractionation plants operated by a
large local producer and a subsidiary of a local utility company. The
Company currently acquires substantially all of its NGL feedstocks
pursuant to two long-term agreements with suppliers under which NGLs
are made available to the Company at the fractionation plants. These
agreements contain market sensitive pricing arrangements under which
prices are adjusted on a monthly basis. Should circumstances warrant,
an adequate supplemental supply of NGLs could be brought to the
Refinery from other sources via rail or transport trucks. The Company
believes that the competing refiner located in the Four Corners area
currently has higher NGL transportation costs than the Company and,
therefore, cannot achieve the Refinery's NGL utilization level on a
comparable cost basis.
OXYGENATES
Since 1991, the Company has owned an ethanol processing plant in
Portales, New Mexico. The ethanol plant, a dry mill facility, has the
capacity to produce approximately 14.0 million gallons of ethanol per
year, 137,000 tons of protein-enriched cattlefeed and beverage quality
carbon dioxide. Ethanol is an oxygenate which can be used as a
gasoline blending component. An oxygenate is an oxygen-containing
compound that can be used as a motor vehicle fuel supplement.
Substitution of oxygenated fuels for non-oxygenated gasoline can
reduce motor vehicle carbon monoxide emissions. Accordingly, the use
of gasoline containing oxygenates has been government-mandated in
certain geographical areas. The ethanol plant should provide the
Company with a secure supply of oxygenates for purposes of satisfying
current government-mandated oxygenated gasoline requirements in the
Company's marketing areas. Ethanol produced by the ethanol plant in
excess of the Company's needs is being sold to other refiners and
marketers. Potential ETBE plant demand may increase demand at the
Portales Plant.
Plant production was reduced during the second and third quarters
of 1994 due to margin pressure caused by high grain costs and low
ethanol prices. Grain prices were unusually high due to the poor
grain harvest in 1993.
TRANSPORTATION
All of the Refinery's crude oil is supplied through the Company's
240-mile pipeline gathering system, which directly reaches into the
San Juan Basin and connects with a common carrier pipeline to access
the Paradox Basin. The Refinery's pipeline gathering system includes
its NGL pipeline, which is approximately 13 miles long, a 78-mile west
crude oil line with a throughput capacity of approximately 13,000
barrels per day, a 110-mile east crude oil line with a capacity of
approximately 13,000 barrels per day and a 39-mile interconnection
line between the east and west lines. During 1994, approximately 2,100
barrels per day of production from individual wells were connected to
the pipeline gathering system by smaller lines. Both the east and west
lines feed directly into the Refinery. The crude oil pipeline
gathering system is supported by Company-owned truck transports which
collect crude oil from producing wells and deliver it to injection
points on the system.
MARKETING AND DISTRIBUTION
THE FOUR CORNERS MARKET. The Four Corners area, which is the
primary market area for the Company's refined products, is the area
within an approximate 200 mile radius around the Refinery and includes
greater Albuquerque, the largest market in New Mexico. Substantially
all of the Company's refined products are distributed in the Four
Corners market. The Company estimates that, during 1994, its gasoline
production was distributed 60% in New Mexico, 39% in Arizona and 1% in
Southern Colorado; and its diesel production was distributed 63% in
northwest New Mexico and 37% in northeast Arizona. The Company's truck
transports support the Refinery sales effort in its primary market as
well as its secondary markets. These vehicles hauled 51% of the
Refinery sales barrels in 1994. The remaining sales barrels were
either delivered by pipeline to the Company's Travel Center located
next to the Refinery or transported through arrangements made by
wholesale customers or exchange partners.
REFINED PRODUCT SALES. During 1994, the Company sold
approximately 5.5 million barrels of gasoline and 1.9 million barrels
of diesel fuel from the Refinery. The equivalent of approximately 42%
of the gasoline and 41% of the diesel sales were made through the
Company's retail outlets. Gasoline and diesel sales made under product
exchanges accounted for approximately 17% of the volume sold by the
Refinery. The remaining gasoline and diesel sales were made to
wholesalers, retailers and industrial/commercial customers.
Supplementing the Refinery sourced sales barrels were periodic
purchases, for resale, of gasoline and diesel from other sources.
Specific economic and/or market conditions are the major factors
affecting the timing and volume of these transactions.
The Company's other refined products, including military jet
fuels, are marketed to various third party customers.
RETAIL MARKETING. At December 31, 1994, the Company operated 51
self-service retail stations located in New Mexico, Arizona and
Colorado, and the Travel Center, located on I-40 near the Refinery.
The retail outlets sold approximately 131,000,000 gallons of gasoline
and diesel fuel in 1994, a 19% increase over 1993 sales volumes of
approximately 109,800,000 gallons. Gross merchandise sales in 1994
were approximately $42,700,000, a 31% increase over 1993 sales of
approximately $32,500,000.
The Company's service stations typically are modern, high-volume
self-service stations. The average service station volume increased to
approximately 145,500 gallons per month in 1994, a 2% increase over
1993 levels of approximately 143,000 gallons.
The Company's service stations are augmented by convenience
stores at most locations, which provide items such as general
merchandise, alcoholic and nonalcoholic beverages, fast foods, health
and beauty aids and automotive products.
In 1994, the Company entered into a Definitive Purchase and Sale
Agreement to acquire two retail units, located in the Company's
primary market area, from a privately-held retailer and jobber. One
unit was purchased on January 10, 1995 and the other unit, which is
located on the Navajo Reservation, will be operated by the Company
under a management agreement effective January 11, 1995, with formal
possession pending approval by the Navajo Nation.
The Company owns and operates the Travel Center adjacent to the
Refinery on I-40. The Travel Center provides a direct market for the
Refinery's diesel production and allows diesel fuel to be sold at
virtually no incremental transportation cost. In the twelve months
ended December 31, 1994, the Company sold approximately 20,000,000
gallons of diesel fuel at the Travel Center (approximately 25% of the
Refinery's total diesel production) to approximately 450 trucks per
day. The Travel Center facility includes 18 high volume diesel fueling
islands, a large truck repair facility, and a 29,000 square foot
shopping mall that contains a 265-seat full service restaurant, a
large convenience store, a fast food diner, a 24-hour movie theater, a
gift shop, a western wear and boot shop, a hair salon and other
accommodations such as showers, laundry, security and lighted parking.
The Giant Express, a scaled down version of the Giant Travel
Center, located on I-40 in Winslow, Arizona, approximately 150 miles
west of the Refinery, was sold November 2, 1994, to a privately-owned
truckstop operator. The sale included a 5-year supply agreement for
the facility, thus retaining an outlet for approximately 10% of the
Refinery's total diesel production.
EXPLORATION & PRODUCTION
GENERAL
The Company is engaged in the exploration for and the
acquisition, development and production of crude oil and natural gas
through Giant E&P and Ciniza Production Company, each a direct or
indirect wholly-owned subsidiary. At December 31, 1994, Intera
Information Technologies, Inc., (Intera), independent oil and gas
consulting engineers, conducted an audit of the Company's proved
oil and gas reserve estimates. It is Intera's opinion that the
Company's oil and gas reserve estimates are, in aggregate,
reasonable and have been prepared in accordance with generally
accepted petroleum engineering and evaluation principles as set
forth in the Standards Pertaining to the Estimating and Auditing
of Oil and Gas Reserve Information promulgated by the Society of
Petroleum Engineers. At December 31, 1994, the Company's total
proved reserves were estimated at 2,214,500 barrels of oil (85%
proved developed) and 11,859,800 Mcf of gas (78% proved developed).
At December 31, 1994, the Company's net equivalent barrels ("BOE")
of proved reserves were estimated at approximately 4,191,200 barrels
and at December 31, 1993, approximately 4,362,000 barrels. During
1994, the Company produced 492,800 BOE. Approximately 65% of this
production was replaced by reserve additions during 1994. The Company
realized a net increase of 285,900 barrels as a result of lower lease
operating expenses, improved well performance, new zone discoveries,
and an increase in oil prices from $12.50/bbl at year end 1993 to
$15.75/bbl at year end 1994. The Company also earned a positive
interest revision of 29% in certain proved developed gas properties
pursuant to a 1992 purchase and sale agreement described below. See
San Juan Basin Properties. This revision increased the Company's net
reserves by 1,017,800 Mcf. The remaining gas properties incurred a
net decrease of 801,000 Mcf, due to a drop in spot market gas prices
from $2.24/MMBtu on December 31, 1993 to $1.63/MMBtu on December 31,
1994. Total reserve additions and adjustments were 322,000 BOE. After
deducting 1994 production of 492,800 BOE from December 31,1993
reserves of 4,362,000 BOE, and adding revisions of 322,000 BOE, the
net result is a 4% (170,800 BOE) decrease in reserves.
Approximately 73.1% of the Company's total proved reserves are in
the San Juan and Paradox Basins, both of which are in the Four Corners
area. The remaining 26.9% of these reserves are located on the border
of Kansas and Oklahoma near the Anadarko Basin. The Company exchanges
crude oil from this area with other producers within the primary
market area of the Refinery.
The Company operates substantially all of its producing oil and
gas properties and thus controls disposition of the product. During
the twelve months ended December 31, 1994, the exploration and
production operations sold a daily average of approximately 737 net
barrels of oil and approximately 3,035 net Mcf of gas from a total of
187 net (299 gross) producing wells. Gross operated sales volumes
(including production owned by partners) averaged approximately 1,165
barrels of oil and 9,580 gross Mcf of gas per day.
<PAGE>
<PAGE>
The following table provides certain information regarding the
Company's principal oil and gas properties and reserves as of December
31, 1994.
<TABLE>
<CAPTION>
Proved Reserves
-----------------------------------
Number Number Average Total Proved Proved Developed
of Gross of Net Average Net ----------------- ----------------
Producing Producing Working Revenue Oil Gas Oil Gas
Wells(1) Wells(2) Interest(3) Interest(4) MBbls MMcf MBbls Mmcf
--------- --------- ----------- ----------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
San Juan Basin 251 151.7 61% 51% 1,213.3 10,564.0 1,091.0 8,174.6
Anadarko Basin(5) 40 28.5 71% 60% 932.2 1,163.5 737.1 990.7
Paradox Basin 8 6.4 80% 65% 69.0 132.3 56.0 103.2
--- ----- --- --- ------- -------- ------- -------
Total or Weighted
Averages 299 186.6 62% 53% 2,214.5 11,859.8 1,884.1 9,268.5
=== ===== === === ======= ======== ======= =======
</TABLE>
(1) Gross producing wells is the total number of producing wells in
which the Company has a working interest. Wells with multiple
completions in the same bore hole are counted as one well. The
Company had five gross (three net) multiple completion wells. Any
well in which one of the multiple completions is an oil
completion is classified as an oil well. At December 31, 1994,
the Company had 170 gross (127 net) producing oil wells and 129
gross (60 net) producing gas wells. The Company also operates 24
injection wells associated with waterflooding and pressure
maintenance operations.
(2) Net producing wells is the number of gross producing wells
multiplied by the percentage working interest owned by the
Company in the properties.
(3) Average based on the sum of working interest divided by the
number of wells.
(4) Average based on the sum of net revenue interests divided by the
number of wells. Some royalty rates decreased in 1993 and 1994
pursuant to Title 43 of the Code of Federal Regulations Part
3103.4-1, pertaining to stripper wells. This results in higher
net revenue interests.
(5) These properties are subject to reversionary working interests
varying from 4% to 6%. The Company does not believe that these
reversions will become effective for several years.
<PAGE>
<PAGE>
The following tables summarize the Company's oil and gas
revenues, average daily net production volumes sold of oil and gas,
weighted average oil and gas sales prices, total proved reserves,
production costs (lifting costs) and depreciation, depletion and
amortization ("DD&A") rates for the periods indicated.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Oil and Gas Revenues (in 000's)
San Juan Basin $3,851 $4,967 $6,583
Anadarko Basin 1,851 2,040 2,500
Paradox Basin 241 369 440
------ ------ ------
Total $5,943 $7,376 $9,523
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1994 1993 1992
-------------- -------------- --------------
Oil Gas Oil Gas Oil Gas
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Average Daily Net
Production Sold (1,4)
San Juan Basin 419 2,611 474 3,163 547 4,831
Anadarko Basin 279 361 275 376 313 397
Paradox Basin 39 63 56 72 58 58
----- ----- ----- ----- ----- -----
Total 737 3,035 805 3,611 918 5,286
===== ===== ===== ===== ===== =====
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1994 1993 1992
--------------- --------------- --------------
Oil Gas Oil Gas Oil Gas
(Bbl) (MCF) (Bbl) (MCF) (Bbl) (MCF)
------ ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Average Sales Price(4)
San Juan Basin $15.36 $ 1.58 $16.35 $ 1.85 $18.98 $ 1.58
Anadarko Basin 15.28 2.22 16.63 2.70 18.99 2.22
Paradox Basin 15.28 1.01 16.50 1.24 19.10 1.55
------ ------- ------ ------ ------ ------
Weighted Average
sales price $15.33 $ 1.64 $16.46 $ 1.92 $19.00 $ 1.63
====== ======= ====== ====== ====== ======
Proved Reserves
(in 000's) at
Year End (4) 2,215 11,860 2,196 12,998 3,285 15,943
Average Production Costs:
(Per Equivalent
Barrel)(3)
Average Lifting
Costs(2) $ 4.58 $ 5.89 $ 4.56
Average Production
Taxes 1.10 1.02 1.02
------ ------ ------
Total $ 5.68 $ 6.91 $ 5.58
====== ====== ======
Average DD&A Rate
(Per Equivalent
Barrel)(3)
(Units Only)* 5.32 7.50 6.31
</TABLE>
*Before the writedown of the carrying value of oil and gas properties.
(1) Net production sold represents product volumes sold after
deduction of all royalty and similar interests held by others.
(2) Lifting costs include direct lease operating expenses, workovers
and pipeline expenses (net of revenues).
(3) Equivalent barrels combine oil and gas volumes assuming that six
Mcf of gas is equivalent to one barrel of oil.
(4) All volumes and prices are stated on a per barrel basis for oil
and on a per Mcf basis for gas.
SAN JUAN BASIN PROPERTIES
In 1992, the Company sold a volume of reserves equal to
approximately 50% of its then working interest in certain proved
developed natural gas reserves along with a portion of the associated
gathering system. The purchase and sale agreement associated with that
transaction contains a provision whereby the ownership interest in the
subject reserves is adjusted annually at December 31, 1993 through
1996, based on year end reserve reports, so that the buyer receives a
cumulative working interest estimated for the life of the reserves
equal to the reserve volume purchased. At December 31, 1994, the
Company earned a positive interest revision of approximately 1,017,800
Mcf under this provision of that agreement.
As of December 31, 1994, the Company had net proved Coalbed
Methane gas reserves of 6,162,900 Mcf (5,874,400 Mcf operated plus
288,500 Mcf nonoperated). (This reserve calculation is determined
under SEC guidelines which, among other things, use the prices of oil
and gas as of December 31, 1994 for all future production.) This
represents an increase of 11.3% from the Company's December 31, 1993
estimate of 5,539,200 Mcf. The increase is primarily the result of
improved well performance and a resulting increase in the Company's
net revenue interest in certain properties pursuant to the 1992
purchase and sale agreement described above.
Prior to December 31, 1992, the Company had drilled or
participated in the drilling of 91 coal seam gas wells which qualified
for federal tax credits under Section 29 of the Fuel Use Act regarding
Alternative Fuels. The Company's interest in the production of the
estimated reserves at December 31, 1994, is expected to generate
approximately $2.9 million of federal income tax credits on a present
value basis which is available to be used to offset income taxes
through the year 2002. Through December 31, 1994, the Company had
generated approximately $3.8 million in federal tax credits of which
$1.3 million has been utilized to offset taxes payable, $1.6 million
will be carried forward to offset future tax obligations and $0.9
million was unable to be used. The Company's ability to utilize such
credits generated in the future depends upon the Company's ability to
generate taxable earnings.
ANADARKO BASIN
In 1994, the Company drilled four development wells in Anadarko
Basin pools discovered in 1993. One of the four wells is currently
being used as a pressure maintenance well supporting production from
the Novinger Zone oil pool discovered in 1993. The discovery well, and
the other three development wells drilled in 1994 are currently
producing oil and gas. Two of the development wells encountered oil in
additional horizons which represent new reserve additions in 1994.
<PAGE>
<PAGE>
OIL AND GAS RESERVES
The following table sets forth as of December 31, 1994, estimates
of the Company's proved reserves, projected future production and
estimated future net revenues from production of proved reserves,
using selling prices and estimated development and production costs as
of December 31, 1994. The discounted present values of estimated
future net revenues shown in the table are not intended to represent
the fair market value of oil and gas reserves owned by the Company.
<TABLE>
<CAPTION>
Proved Reserves
----------------------------------- Future Net Percent
Total Proved Proved Developed Percent Future Percent Revenues of
----------------- ---------------- of Total Net of Future Discounted Discounted
Oil Gas Oil Gas Proved Revenues(2) Net @ 10% Future Net
MBbls MMcf MBbls MMcf Reserves(1) ($M) Revenues ($M) Revenues
------- -------- ------- ------- ----------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
San Juan Basin 1,213.3 10,564.0 1,091.0 8,174.6 71.0% 18,070.9 61.2% 11,719.8 61.8%
Anadarko Basin 932.2 1,163.5 737.1 990.7 26.9% 10,787.8 36.5% 6,766.9 35.7%
Paradox Basin 69.0 132.3 56.0 103.2 2.1% 687.8 2.3% 471.5 2.5%
------- -------- ------- ------- ------ --------- ------ --------- ------
Totals 2,214.5 11,859.8 1,884.1 9,268.5 100.0% $29,546.5 100.0% $18,958.2 100.0%
======= ======== ======= ======= ====== ========= ====== ========= ======
</TABLE>
(1) Equivalent gas information is based on a ratio of gas to oil of
six Mcf to one Bbl.
(2) Production of oil and gas, unit prices, and gross revenues are
based on prices which take into account fixed and determinable
changes in existing prices as a result of contractual
arrangements, operation of law, or regulatory agency action. The
Company's reserve report assumes that plugging expenses equal
salvage value.
<PAGE>
<PAGE>
There are numerous uncertainties inherent in estimating
quantities of proved reserves and in projecting future rates of
production and timing of development expenditures, including many
factors beyond the control of the producer. The reserve data set forth
herein represents only estimates. Reserve engineering is a subjective
process of estimating underground accumulations of oil and gas that
cannot be measured in an exact way, and the accuracy of any reserve
estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. As a result,
estimates of different engineers often vary. In addition, results of
drilling, testing and production subsequent to the date of an estimate
may justify revision of such estimates. Accordingly, reserve estimates
are often different from the quantities of oil and gas that are
ultimately recovered. Further, the estimated future net revenues from
proved reserves and the present value thereof are based upon certain
assumptions about prices, timing of development and future production
levels and cost that may not prove correct over time. Predictions
about prices and future production levels are subject to great
uncertainty, and the meaningfulness of such estimates is highly
dependent upon the accuracy of the assumptions upon which they are
based.
Except to the extent the Company acquires additional properties
containing proved reserves or conducts successful exploration and
development activities, or both, the proved reserves, and the revenues
generated from the production thereof, will decline as reserves are
produced. Increases or decreases in prices of oil and gas will also
affect revenues and the present value of estimated future net cash
flows from the Company's properties. The revenues generated from the
Company's future exploration and production activities are therefore
highly dependent upon the level of success in acquiring or discovering
additional reserves and the costs incurred in doing so.
The Company has filed estimates of oil and gas reserve data with
the United States Department of Energy ("DOE") in accordance with the
DOE's annual survey of domestic oil and gas reserves. The reserves
reported to the DOE are required to be on a gross basis and,
therefore, are not comparable to reserve data reported herein.
<PAGE>
<PAGE>
Exploratory and Developmental Acreage
The following table provides information regarding the Company's
developed and undeveloped acreage held at December 31, 1994:
<TABLE>
<CAPTION>
Developed Acres Undeveloped Acres
------------------- ---------------------
Gross Net Gross Net
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
New Mexico 49,131.0 40,275.3 3,819.1 3,477.4
Colorado 11,360.4 2,138.4 2,345.0 801.3
Oklahoma 3,748.2 2,707.0 232.2 180.6
Kansas 6,125.6 4,281.9 2,206.1 2,206.1
Utah 8,611.3 7,178.2 10,476.8 9,412.1
Wyoming 18,107.7 18,047.7
Nevada 122,878.3 73,727.0
-------- -------- --------- ---------
Total 78,976.5 56,580.8 160,065.2 107,852.2
======== ======== ========= =========
</TABLE>
The following table sets forth certain information regarding the
Company's drilling activities for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1994(1) 1993 1992
----------- ----------- -----------
Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C>
Productive Wells 6.0 3.3 4.0 0.5 29.0 11.1
Dry Holes 1.0 0.6 1.0 1.0
</TABLE>
(1) A dry hole is an exploratory or development well found to be
incapable of producing either oil or gas in sufficient quantities
to justify completion as an oil or gas well. The Company drilled
one exploratory well (0.6 net wells) in 1994. That well is a dry
hole. Five productive development wells were drilled by the
Company in 1994. A sixth development well was drilled in 1994
which was completed as a pressure maintenance well.
<PAGE>
<PAGE>
The following table sets forth the capital expenditures (in
000's) incurred by the Company for oil and gas property acquisitions,
exploration and development during the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Property Acquisitions:
Unproved $ 357 $ 327 $ 200
Proved 326 87 39
Exploration 123 290 439
Development 2,759 3,211 1,786
------ ------ ------
Total $3,565 $3,915 $2,464
====== ====== ======
</TABLE>
MARKETING OF CRUDE OIL AND NATURAL GAS
Crude oil production in the Four Corners area is primarily
delivered directly to the Refinery via the Company's pipeline
gathering system for processing. Crude oil produced outside the Four
Corners area is exchanged for barrels in the Four Corners area.
The majority of the Company's natural gas in the San Juan Basin
is sold through third-party gas brokers at spot market prices and
transported to market by interstate and intrastate pipelines.
Contracts with these brokers are generally short-term in nature (less
than 18 months) and allow for prices to adjust to the marketplace.
The Company's natural gas marketing strategy has included
broadening its base of natural gas purchasers and obtaining releases
of curtailed contract gas for sale on the spot market. The Company has
been successful in pursuing the release of gas to the spot market and
the enforcement of contract provisions preventing curtailment. The
Company believes that because of the competitive nature of the
industry today, the loss of any one of its natural gas purchasers
would not have an adverse effect on its business.
EMPLOYEES
The Company and its subsidiaries employed 1,386 persons on
February 28, 1995, including 1,266 full-time and 120 part-time
employees. Approximately 1,166 were employed in refining and marketing
operations including 110 part-time employees. Of these, 617 (including
95 part-time) were employed in the service station division and 274
(including 13 part-time) were employed at the Travel Center.
Exploration and production operations employed 53 persons. The Company
currently has no labor union employees.
OTHER MATTERS
COMPETITIVE CONDITIONS
The industry in which the Company is engaged is highly
competitive. Many of the Company's competitors are large, integrated
oil companies which, because of their more diverse operations,
stronger capitalization and better brand name recognition, may be
better able than the Company to withstand volatile industry
conditions, including shortages or excesses of crude oil or refined
products or intense price competition.
The principal competitive factors affecting the Company's
refining and marketing operations are the quality, quantity and
delivered costs of crude oil, NGLs and other refinery feedstocks,
refinery processing efficiency, refined product mix, refined product
selling prices and the cost of delivering refined products to markets.
Certain of the Company's larger competitors have refineries which are
located outside the Four Corners area and which are larger and more
efficient than the Refinery and, as a result, have lower per barrel of
crude oil refinery processing costs. In addition to the major and
larger integrated oil companies, the Company competes with independent
refiners in Northwestern and Southeastern New Mexico, West Texas and
the Texas Panhandle for selling refined products. Refined products
from the Texas and Southeastern New Mexico refineries can be shipped
to Albuquerque, New Mexico, primarily through two common carrier
pipelines, one originating in El Paso, Texas and the second
originating in Amarillo, Texas. The capacity of the latter pipeline
was expanded by 2,000 Bbl per day during 1994. Although the long-term
effect on Company sales in the Albuquerque market cannot be determined
with any certainty, it is expected that any additional supply from
pipeline expansions could have an adverse short-term effect. The
principal competitive factors affecting the Company's retail marketing
business are location of service stations, product price, quality,
appearance and cleanliness of service stations and brand
identification.
The Company's exploration and production operation is subject to
intense competition particularly with respect to the acquisition of
desirable properties. There is also competition for the acquisition of
oil and gas leases suitable for exploration and the hiring of
experienced personnel.
The Company's competitors in oil and gas exploration development,
production and marketing include major integrated oil and gas
companies, numerous independent oil and gas companies, drilling and
production purchase programs and individual producers and operators.
The ability of the Company to increase its holdings of proved oil and
gas reserves in the future is directly dependent upon the Company's
ability to select and acquire suitable producing properties and
prospects for future drilling in competition with these companies and
the availability of capital. Many competitors have financial
resources, staffs, facilities and other resources significantly
greater than those of the Company.
Crude oil prices are affected by a variety of factors that are
beyond the control of the Company. The principal factors currently
influencing prices, in addition to local factors discussed previously
under the caption RAW MATERIAL SUPPLY, include the pricing and production
policies of members of the Organization of Petroleum Exporting Countries
("OPEC"), the availability to world markets of production from Kuwait,
Iraq and Russia and the worldwide and domestic demand for oil and
refined products. Oil pricing will continue to be unpredictable and
greatly influenced by governmental and political forces.
A small portion of the Company's natural gas continues to be sold
on contracts which control the gas price. As a result of the Federal
Energy Regulatory Commission's ("FERC") Order No. 636, no gas is now
sold to interstate pipeline companies, and these contracts have now
been transferred to third party marketing companies which have
recently purchased all of the gas the Company is able to deliver under
the contracts. The majority of the Company's natural gas is purchased
at the wellhead by natural gas marketers and brokers, who then arrange
for transportation of the natural gas from the wellhead to a sales
point where the gas is sold to an end user or local distribution
company. Prices paid by natural gas marketers and brokers fluctuate
monthly in response to market factors which are generally controlled
by demand for natural gas at the end user lever. While deliverability
of natural gas has not been curtailed by market factors, the Company
cannot accurately predict whether current levels of deliverability of
natural gas will continue in the future. The Company cannot control or
accurately predict future pricing.
REGULATORY, ENVIRONMENTAL AND OTHER MATTERS AFFECTING REFINING
AND MARKETING
OPERATIONS. The Company's refining and marketing operations are
subject to a variety of federal, state and local health and
environmental laws and regulations governing the discharge of
pollutants into the air and water, product specifications, and the
generation, treatment, storage, transportation and disposal of solid
and hazardous waste and materials. The Company believes that the
Refinery is capable of processing currently utilized feedstocks and
operating in substantial compliance with existing, currently effective
environmental laws and regulations. However, environmental laws and
regulations are becoming increasingly stringent, and the Company is
aware of additional laws and regulations which will become effective
in the future and which may affect the Company's business. The
following currently appear to be the most significant of such laws and
regulations. Where possible, the Company has attempted to estimate a
range of its cost of compliance based upon its current understanding
of such laws and regulations. The current estimates of costs provided
are preliminary only and actual costs may differ significantly from
these estimates.
The Company will be subject to additional environmental
regulations adopted by the Environmental Protection Agency ("EPA") and
state environmental agencies to implement the Clean Air Act Amendments
of 1990 (the "Amendments"). Among other things, the Amendments require
all major sources of hazardous air pollutants, as well as certain
other sources of air pollutants, to obtain state operating permits.
The permits must contain applicable federal and state emission
limitations and standards as well as satisfy other statutory
requirements. All sources subject to the permit program must pay an
annual permit fee. The Company believes that it could be required to
pay permit fees of approximately $40,000 in 1995.
The Amendments also require EPA to adopt emission standards for
categories of hazardous air pollutant sources. In accordance with this
directive, EPA will be adopting emission standards that will apply to
hazardous air pollutants emitted by petroleum refineries. The Company
anticipates that the standards will be applicable to emissions from,
among other things, process vents, storage vessels, equipment leaks,
wastewater operations and gasoline loading racks. The standards will
probably be based on maximum achievable control technology.
Additionally, EPA may adopt regulations that would require enhanced
monitoring of air emissions at the Refinery, and potentially at other
Company facilities. Since the standards have not yet been promulgated,
with the exception of certain standards applicable to loading racks,
the Company cannot estimate its compliance costs and does not know when
all of the standards will become effective. Based on the preliminary
information currently available, the Company believes that its
compliance costs may be in the range of $1,400,000 to $3,000,000 and
that compliance may begin to be required by late 1995.
The Company does not believe that any gasoline produced at the
Refinery will be subject to the Clean Air Act Amendments' Reformulated
Gasoline regulatory program, unless a state governor requests that
Reformulated Gasoline be required in certain areas. The Company is
already subject to the Amendments' Oxygenated Gasoline requirements,
or other state or local oxygenated fuel requirements, in connection
with gasoline sold in Bernalillo County, New Mexico, Maricopa County
and Pima County, Arizona, Denver County, Colorado and El Paso County,
Texas. The Company has not experienced any problems to date obtaining
oxygenates to comply with these requirements.
It is possible that the Company will be subject to other
standards and requirements adopted by EPA and state environmental
agencies to implement the Amendments. At this time, the Company cannot
accurately predict the nature and impact of such standards and
requirements.
The State of Arizona has adopted legislation requiring gasoline
sold in Maricopa County to have a Reid Vapor Pressure ("RVP") that
does not exceed nine pounds per square inch during the period
September 30 through March 31, beginning in 1994. The legislation also
requires gasoline sold in Maricopa County to have a RVP of seven
pounds per square inch during the period May 31 through September 30,
beginning in 1995. To date, the Company has chosen not to install
equipment necessary to produce gasoline complying with the standards,
and has pursued other alternatives for supplying the Maricopa County
market, such as acquiring petroleum products by trade with other
companies. Less than 1% of the Refinery's gasoline outturns were
physically sold in this market in 1994.
The Company will need to obtain new environmental permits in
order to comply with anticipated regulatory requirements and may also
need to obtain modifications to existing permits. Although there can
be no guarantee that the Company will be able to obtain all required
permits, the Company does not presently anticipate any unusual
problems in obtaining the necessary permits and permit modifications,
nor does it anticipate any significant problems in connection with the
renewal of existing permits prior to their expiration.
The Company cannot predict what additional health and
environmental legislation or regulations will be enacted or become
effective in the future or how existing or future laws or regulations
will be administered or interpreted with respect to products or
activities to which they have not been previously applied. Compliance
with more stringent laws or regulations, as well as more vigorous
enforcement policies of regulatory agencies, could have an adverse
effect on the financial position and the results of operations of the
Company and could require substantial expenditures by the Company for
the installation and operation of pollution control systems and
equipment not currently possessed by the Company.
NOTICES OF VIOLATIONS. Notices of Violations ("NOVs") are issued
by governmental authorities and may allege violations of environmental
requirements. The Company is in receipt of a Notice of Noncompliance,
dated February 9, 1993, from the NMED alleging that the Company failed
to comply with certain notification requirements contained in one of
the permits applicable to the Refinery's land treatment facility. As a
result of this Notice, the Company is submitting a proposal for
closure of all or a portion of the land treatment facility. NMED has
indicated that it probably will not require the Company to undertake
any remediation activities in connection with closure of the land
treatment facility, but it will be necessary for the Company to make
alternative arrangements for the disposal of petroleum contaminated
soil and other materials. The Company has received NOVs from time to
time relating to matters such as regulatory filing requirements. The
Company has responded or intends to respond to all such matters. The
Company does not believe any such matters to be material.
DISCHARGES AND RELEASES. Refining, pipeline, trucking and
marketing operations are inherently subject to accidental spills,
discharges or other releases of petroleum or hazardous substances
which may give rise to liability to governmental entities or private
parties under federal, state or local environmental laws, as well as
under common law. Accidental discharges of contaminants have occurred
from time to time during the normal course of the Company's operations,
including discharges associated with the Company's refinery, pipeline
and trucking operations. The Company has undertaken, intends to
undertake or has completed all investigative or remedial work thus far r
equested by governmental agencies to address potential contamination by
the Company.
The Company anticipates that it will incur remediation costs from
time to time in connection with current and former gasoline service
stations operated by the Company. The Company's experience has been
that such costs generally do not exceed $100,000 per location, and a
portion of such costs may be subject to reimbursement from State
underground storage tank funds.
The Company has conducted a Resource Conservation and Recovery
Act ("RCRA") facility investigation ("RFI") at its Ciniza Refinery in
accordance with requirements contained in its Federal RCRA permit. The
RFI identified several contaminated areas. The Company anticipates
that it will incur costs of approximately $100,000 over a period of
approximately two years to complete all necessary corrective action.
Additionally, EPA may require the Company to incur additional
monitoring costs of approximately $220,000 every five years.
The Company has discovered hydrocarbon contamination adjacent to
a 55,000 barrel crude oil storage tank that is no longer in use
located in Bloomfield, New Mexico. The Company believes that all or a
portion of the tank and the 5.5 acres owned by the Company on which
the tank is located may have been a part of a refinery owned by
various other parties that ceased operations approximately thirty-five
years ago. The Company is undertaking an investigation to determine
the source and extent of the contamination. The Company has accrued a
$250,000 environmental reserve in relation to this site.
Although the Company has invested substantial resources to
prevent and minimize future accidental discharges and to remediate
contamination resulting from prior discharges, there can be no
assurance that accidental discharges will not occur in the future,
that future action will not be taken in connection with past
discharges, that governmental agencies will not assess penalties
against the Company in connection with any past or future
contamination, or that third parties will not assert claims against
the Company for damages allegedly arising out of any past or future
contamination.
FARMINGTON PROPERTY/LEE ACRES LANDFILL. In 1973, the Company
constructed the Farmington Refinery which was operated until 1982. The
Company became aware of soil and shallow groundwater contamination at
this facility in 1985. The Company hired environmental consulting
firms to investigate the contamination and undertake remedial action.
The consultants identified several areas of contamination in the soils
and shallow groundwater underlying the Farmington property. A consultant
to the Company has indicated that contamination attributable to past
operations at the Farmington property has migrated off the refinery
property, including a free-phase hydrocarbon plume that extends
approximately 1,000 feet south of the refinery property. Remediation
activities are ongoing by the Company under OCD's supervision.
The Farmington property is located adjacent to the Lee Acres
Landfill (the "Landfill"), a closed landfill formerly operated by San
Juan County which is situated on lands owned by the United States
Bureau of Land Management ("BLM"). Industrial and municipal wastes
were disposed of in the Landfill by numerous sources. During the
period that it was operational, the Company disposed of office trash,
maintenance shop trash, used tires and water from the refinery's
evaporation pond at the Landfill. In May 1991, EPA notified the
Company that it may be a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") for the release or threatened release of hazardous
substances, pollutants or contaminants at the Landfill. At the present
time, the Company is unable to determine the extent of its potential
liability, if any, in the matter. In 1989, a consultant to the Company
estimated, based on various assumptions, that Giant's potential
liability could be approximately $1.2 million. This figure was based
upon the consultant's evaluation of such factors as available clean-up
technology, BLM's involvement at the site and the number of other
entities that may have had involvement at the site. The consultant,
however, did not conduct an analysis of any potential legal defenses
and arguments including possible setoff rights. Potentially
responsible party liability is joint and several, such that a
responsible party may be liable for all of the clean-up costs of a
site even though the party was responsible for only a small part of
such costs. Actual liability, if any, may differ significantly from
the consultant's estimate.
Preliminary studies have indicated that the groundwater gradient
in the vicinity of the Landfill is in the direction of the Farmington
property and that contaminants from the Landfill may be migrating
through the groundwater underlying the Farmington property. Sampling
data have also indicated the presence of contaminants in the
groundwater underlying a residential subdivision known as the Lee
Acres Subdivision, which may have migrated downgradient from the
Landfill and the Farmington property area. An alternate water supply
has been provided to residents of the Lee Acres Subdivision by BLM.
The Lee Acres Landfill was added to the National Priorities List
as a CERCLA Superfund site in 1990. In connection with this listing,
EPA defined the site as the Landfill and the Landfill's associated
groundwater plume. EPA excluded any releases from the Farmington
Refinery itself from the definition of the site.
BLM may assert claims against the Company and others for
reimbursement of investigative, cleanup and other costs incurred by
BLM in connection with the Landfill and surrounding areas. It is also
possible that the Company will assert claims against BLM in connection
with contamination that may be originating from the Landfill. Private
parties and other governmental entities may also assert claims against
BLM, the Company and others for property damage, personal injury and
other damages allegedly arising out of any contamination originating
from the Landfill and the Farmington property. Parties may also
request judicial determination of their rights and responsibilities,
and the rights and responsibilities of others, in connection with the
Landfill and the Farmington property. Currently, however, there is no
outstanding litigation against the Company by BLM or any other party.
The Company has reserved approximately $1,000,000 for possible future
environmental expenditures relating to its Farmington Property.
HANSEN CONTAINER SITE. The Company is in receipt of a request for
information from EPA (the "Information Request") in connection with a
site in Grand Junction, Colorado that was used to clean and
recondition used drums for resale (the "Hansen Container Site"). The
Company has been informed that EPA has incurred expenses to date of
approximately $3,000,000 in connection with contamination at the site.
EPA does not anticipate that cleanup costs will significantly exceed
this amount unless it is determined that there is groundwater
contamination at the site at levels requiring further action.
EPA sent out requests for information to more than 650 addressees
in connection with the Hansen Container Site. The Company has been
informed that information received in response to the requests for
information will be used to identify parties that EPA believes should
be liable for costs associated with the site.
Hansen, over a period of years, acquired empty drums from the
Company in order to resell them after reconditioning. It is the
Company's position that it has no liability in this matter.
RIGHTS-OF-WAY. Certain irregularities in title may exist with
respect to a limited number of the Company's rights-of-way or
franchises for its crude oil pipeline gathering system. The Company,
however, has continued its use of the entirety of its pipeline
gathering system. As of this date, no claim stemming from any right-
of-way or franchise matter has been asserted against the Company,
other than a September 14, 1993 request by BIA that the Company show
cause why one of its nonessential pipeline rights-of-way should not be
terminated due to nonuse. The Company believes that it has made the
requested showing. The Company does not believe that its use or
enjoyment of the pipeline gathering system will be adversely affected
by any such right-of-way matters or irregularities in title.
REGULATION AND OTHER FACTORS AFFECTING EXPLORATION AND
PRODUCTION
GENERAL. Oil and gas exploration and production activities are
heavily regulated by federal, state and local governmental entities;
and expenses and delays often associated with compliance with such
regulations may adversely affect the Company's operations. Regulations
affect, among other things, the timing and cost of drilling
operations, conservation matters, marketing, transportation and
production of oil and gas, prices received for such production, taxes
and numerous other matters. Many states also restrict allowable rates
of production of oil and gas to their respective statewide market
demands. In addition, some states have enacted statutes prescribing
ceiling prices for gas sold within such states. Regulations affecting
the Company's activities are frequently revised and new or amended
regulations in the future could significantly impact the Company's oil
and gas exploration operations.
The transportation and sale of natural gas has historically been
subject to regulation by federal and state regulatory authorities
pursuant to a number of statutes, including the Natural Gas Act of
1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA").
Due to major regulatory reforms instituted by FERC, the provisions of
the NGPA and the provisions of the Wellhead Natural Gas Deregulation
Act of 1989, the prices for natural gas received by the Company are
not currently subject to price controls. The provisions of the NGA and
the NGPA and regulations promulgated thereunder, however,
significantly impact the transportation of the Company's produced
natural gas through interstate and intrastate pipelines. Although the
Company is currently able to arrange for the transportation of its
produced gas volumes under generally satisfactory conditions, there
can be no assurance that future regulatory developments will not
adversely affect the Company.
Various federal, state and local laws and regulations which
relate to the protection of the environment may affect the Company's
operations and costs as a result of their effect on oil and gas
exploration, development and production operations. At present, the
Company believes it is in substantial compliance with applicable
environmental rules and regulations in areas in which it drills
and produces crude oil and natural gas. However, the Company is not
able to predict the ultimate cost associated with compliance with
current environmental regulations or future regulatory changes.
The Company is subject to all of the risks normally incident to
the exploration for and production of oil and gas, including blowouts,
cratering, down hole problems, pollution and fires, each of which
could result in damage to or destruction of oil and gas wells,
producing formations or production facilities, or damage to persons
and other property. As is common in the industry, the Company does not
fully insure against all these risks either because insurance is not
readily available or because the Company elects not to insure due to
prohibitive premium costs. The occurrence of an event not fully
covered by insurance could have a material adverse effect on the
financial position and results of operations of the Company. In
addition, exploratory drilling carries a significant risk that no
commercial oil or gas production will be obtained.
TITLE MATTERS. Title to the Company's oil and gas properties is
subject to royalty, overriding royalty, carried working and other
similar interests and contractual arrangements customary in the oil
and gas industry (including farmout and development agreements,
operating agreements and joint venture arrangements); to liens for
current taxes not yet due and to other minor defects and encumbrances.
The Company believes that such burdens do not materially detract from
the value of such properties or from the Company's interest therein or
materially interfere with the operation of the Company's business.
As is generally customary in the oil and gas industry in the case
of undeveloped properties, an in-house title review is made prior to
or at the time of acquisition. More comprehensive title
investigations, including in most cases receipt of a title opinion of
outside legal counsel, are generally made prior to the consummation of
an acquisition of producing property and before commencement of
drilling operations.
With regard to the Company's coal seam gas reserves, potential
legal questions may arise as to whether the right to produce such
reserves is granted to the Company by certain of its oil and gas
leases or are instead retained by the landowner or whether the
Company's right to produce such reserves is subject to or affected by
existing or future leases granted to others to develop the associated
coal reserves. The bulk of the Company's coal seam gas reserves are
held pursuant to substantially identical leases granted by the BLM. A
United States Department of Interior Solicitor's opinion issued in
1981 supports the Company's belief that it has the right to produce
coal seam gas reserves underlying lands subject to the Company's
existing oil and gas leases granted by the BLM and that any subsequent
coal leases or oil and gas leases granted by the BLM or other parties
will not have a material adverse effect on the Company's right to
produce such gas. The Company believes that the commercial
impracticability of mining the associated coal reserves and other
factors further reduce the risk of a bona fide dispute with anyone
other than the BLM regarding ownership of and the right to drill for
and produce the Company's coal seam gas. In view of the foregoing and
its analysis of relevant leases and current case law, the Company
believes that any potential future claims by the BLM or other parties
will not have any material adverse effect on its title to such coal
gas reserves.
TAX DISPUTE. The Company produces crude oil and natural gas, or
purchases crude oil as a first purchaser, from properties located in a
geographic area outside the boundaries of the Navajo Indian
Reservation in which the Navajo Tribe has asserted the right to impose
severance and other taxes. A portion of the Company's pipeline
gathering system also is located in this geographic area. The extent
of the Tribe's taxing authority in the geographic area is subject to
considerable doubt. The Company has received several tax assessments
from the Tribe pertaining to the geographic area, including a $1.8
million severance tax assessment issued in November 1991. The Company
has invoked its appeal rights with the Tribe's Tax Commission in
connection with these matters and intends to vigorously oppose the
severance tax assessment. It is the Company's understanding that its
appeals will be held in abeyance pending further judicial
clarification of the Tribe's taxing authority by means of litigation
involving other companies. It is possible, however, that the Company's
assessments will have to be litigated by the Company before final
resolution. The Company also may receive further tax assessments
before judicial resolution of the Tribe's taxing authority. The
Company intends to continue its production and purchasing activities
in the geographic area.
<PAGE>
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to ordinary routine litigation incidental
to its business. There is also hereby incorporated by reference the
information under the headings "Regulatory, Environmental, and Other
Matters Affecting Refining and Marketing" and "Regulation and Other
Factors Affecting Exploration and Production" in Items 1 and 2, the
discussions contained in Item 7, and the information regarding
contingencies in Note 14 to the Consolidated Financial Statements in
Item 8.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Executive Officers of the Registrant.
Executive
Officer
Name Age Position Since
---- --- -------- ---------
James E. Acridge 54 President and Chief October 1989
Executive Officer
A. Wayne Davenport 46 Vice President and May 1994
Corporate Controller
Fredric L. Holliger 47 Executive Vice President October 1989
and Chief Operating
Officer
James W. Griffitts 49 Vice President September 1990
Information Systems
Morgan Gust 47 Vice President and August 1990
General Counsel, Vice
President Administration,
and Secretary
Gary L. Nielsen 52 Vice President Finance, October 1989
Treasurer and Assistant
Secretary
The officers of the Company are elected annually by the
Board of Directors and each officer serves until his successor is
chosen and qualified or until his earlier resignation or removal.
There are no family relationships among the officers of the
Company.
James E. Acridge has served as Chairman of the Board of
Directors, President and Chief Executive Officer of the Company
since October 1989. Mr. Acridge also serves as Chairman of the
Nominating Committee. Mr. Acridge is Chairman of the Board of
Directors, President and Chief Executive Officer of Giant Arizona
and Chairman of the Board of Directors of Giant E&P. Mr. Acridge
founded Giant Arizona in 1969 and has served continuously as its
Chairman of the Board of Directors, President and Chief Executive
Officer.
A. Wayne Davenport has served as Vice President and
Corporate Controller since May 1994. He also serves in such
positions for Giant and Giant E&P. Prior to joining the Company
in March 1994, Mr. Davenport was an investor in crude oil and
natural gas properties and a consultant to the industry. From
February 1987 to September 1992, he served in various positions,
the last being Executive Vice President and Chief Financial
Officer, with Hondo Oil & Gas Company, a company engaged in
refining, marketing, exploration and production. Mr. Davenport
was an audit partner for the accounting firm of Ernst & Young
from May 1982 until February 1987.
Fredric L. Holliger has served as a director, Executive Vice
President and Chief Operating Officer of the Company since
October 1989. Mr. Holliger joined Giant Arizona as Senior Vice
President and President of the Giant Arizona refining division in
February 1989 and continues to serve as a director, Executive
Vice President and Chief Operating Officer of Giant Arizona.
Since May 1993, he has also served as a director and President
and Chief Executive Officer of Giant E&P. Before joining Giant
Arizona, he served for two years as President of Northern Natural
Gas Company, a division of Enron Corp., Omaha, Nebraska
("Northern Natural") and prior thereto was employed by Northern
Natural for 14 years, serving in a variety of marketing, supply,
operations and petroleum engineering capacities.
James W. Griffitts has served as Vice President Information
Systems since May 1994. He also serves in such positions for
Giant Arizona and Giant E&P. He served as Vice President
Accounting and Information Services from December 1991 to May
1994 and as Vice President, Information Systems for the Company
from September 1990 until December 1991. Prior to September 1990,
he served first Giant Arizona and then the Company as Director of
Information Systems. Mr. Griffitts joined Giant Arizona in
January 1977 and since that date has served in a variety of
positions in the areas of personnel, accounting and systems.
Morgan Gust has served as Secretary and General Counsel of
the Company since August 1990 and as Vice President since
September 1990. In addition, he has served as Vice President
Administration since October 1992. He also serves in such
capacities and as a director of Giant Arizona and Giant E&P.
Before joining the Company, Mr. Gust was President of Tucson
Resources, Inc., an investment and financial services company,
where he served first in the capacity of Vice President and
General Counsel and later as Executive Vice President. From
September 1975 to July 1988, Mr. Gust was a partner in the law
firm of Gust, Rosenfeld and Henderson.
Gary L. Nielsen has served as Treasurer and Assistant
Secretary of the Company since October 1989, Vice President since
September 1990, and Vice President Finance since September 1992.
He also serves in such capacities for both Giant Arizona and
Giant E&P. Mr. Nielsen joined Giant Arizona as its Treasurer in
October 1986. Before joining Giant Arizona, he was senior Vice
President and Chief Financial Officer of the casino hotel
division of Del Webb Corporation from April 1978 to March 1986,
and Chief Financial Officer of the Crescent Hotel Group from
March 1986 to October 1986.<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal United States market on which the Company's
Common Stock is traded is the New York Stock Exchange. The high
and low sales prices for the Common Stock for each full quarterly
period as reported on the New York Stock Exchange Composite Tape
for the last two fiscal years is as follows:
Quarter Ended High Low
------------------ ------ ------
December 31, 1994 9 1/4 6 3/4
September 30, 1994 8 7/8 7 1/8
June 30, 1994 9 7/8 7 3/8
March 31, 1994 10 3/4 8 5/8
December 31, 1993 12 3/4 10
September 30, 1993 13 3/8 9 1/4
June 30, 1993 10 1/2 7 3/8
March 31, 1993 7 3/4 5 1/8
The Company did not declare a dividend in any quarter in
1994 or 1993. On January 9, 1995, the Company's Board of
Directors declared a common stock dividend of $0.05 per share
payable to stockholders of record on January 23, 1995. This
dividend was paid on February 3, 1995. On March 2, 1995, the
Company's Board of Directors declared another common stock
dividend of $0.05 per share payable to stockholders of record on
April 24, 1995, with payment to be made May 5, 1995. Any future
dividends are subject to the results of the Company's operations,
declarations by the Board of Directors and existing debt
covenants, as described below.
On November 29, 1993, the Company issued $100,000,000 of 9
3/4% Senior Subordinated Notes ("Notes"). The Notes were issued
pursuant to an Indenture dated November 29, 1993 (the
"Indenture") among the Company, its Subsidiaries, as guarantors,
and NBD Bank, National Association, as trustee. The Indenture
contains a number of covenants, which, among other provisions,
place restrictions on the payment of dividends. A similar provision
is contained in the agreement governing the Company's 10.91% senior
unsecured note. At December 31, 1994, retained earnings available
for dividends under the terms of the Indenture was approximately
$13,800,000. The Indenture includes the payment of dividends in its
definition of "Restricted Payments" which are subject to limitations,
the most significant of which are summarized as follows:
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment, unless:
(a) no Default or Event of Default shall have
occurred and be continuing at the time of or immediately
after giving effect to such Restricted Payment;
(b) at the time of and immediately after giving
effect to such Restricted Payment, the Company would be able
to incur at least $1.00 of additional Indebtedness pursuant
to the first paragraph of the covenant captioned "Limitation
on Incurrence of Additional Indebtedness"; and
(c) immediately after giving effect to such
Restricted Payment, the aggregate amount of all Restricted
Payments declared or made after the Issue Date does not
exceed the sum of (A) 50% of the Consolidated Net Income of
the Company and its Restricted Subsidiaries (or in the event
such Consolidated Net Income shall be a deficit, minus 100%
of such deficit) during the period (treated as one
accounting period) subsequent to September 30, 1993 and
ending on the last day of the fiscal quarter immediately
preceding the date of such Restricted Payment and (B) $15
million. Consolidated Net Income excludes, among other
things, any full cost ceiling limitation writedown.
Also see the "Capital Structure" discussion in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included in Item 7 hereof.
Capitalized items used but not defined above have the
meaning assigned to them in the Indenture.
There were 337 holders of record of Common Stock on March 1,
1995.<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes recent financial information
of the Company. This selected financial data should be read in
conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations at Item 7 and the
Consolidated Financial Statements, related notes thereto, and the
Auditors' Report included in Item 8 hereof:
<TABLE>
<CAPTION>
FINANCIAL AND OPERATING HIGHLIGHTS
(In Millions, Except Percentages, Per Share and Operating Data)
Year Ended December 31,
-------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FINANCIAL STATEMENT DATA
Net Revenues $ 293.5 $ 315.8 $ 304.8 $ 287.5 $ 301.0
Writedown of Oil and Gas Properties 3.4 15.5 13.8
Operating Income (Loss)(1) 15.9 14.3 1.1 (1.6) 17.6
Net Earnings (Loss) 4.5 5.9 (2.4) (6.6) 7.0
Earnings (Loss) Per Common Share .37 .48 (.20) (.54) .57
Weighted Average Common
Shares Outstanding 12.1 12.2 12.2 12.2 12.2
Dividends Per Common Share .225 .30
Stockholders' Equity 109.7 105.9 98.6 99.8 107.4
Book Value Per Common Share 9.15 8.69 8.07 8.16 8.78
Return on Average Stockholders' Equity 4.2% 5.8% 6.7%
Total Assets 285.6 279.3 244.3 270.1 254.5
Working Capital 65.6 64.3 12.9 12.7 .8
Long-Term Debt as a Percentage
of Total Capitalization(2) 51.4% 52.5% 46.8% 51.1% 40.9%
Long-Term Debt 116.1 117.3 86.9 104.3 74.2
OPERATIONS DATA
REFINING AND MARKETING:
Rated Crude Oil Capacity Utilized 92% 98% 101% 94% 94%
Refinery Sourced Sales Barrels (Bbls/Day) 23,054 24,412 24,477 23,787 22,375
Average Crude Oil Costs (Per Bbl) $ 16.97 $ 18.09 $ 20.21 $ 21.76 $ 24.18
Refinery Margin ($/Bbl) $ 5.60 $ 6.69 $ 4.77 $ 3.88 $ 5.74
Service Stations:
Fuel Gallons Sold (In Thousands) 100,685 77,684 71,068 67,447 52,514
Product Margin ($/Gallon) $ 0.177 $ 0.177 $ 0.150 $ 0.121 $ 0.112
Merchandise Sold (In Thousands) $ 32,727 $ 22,367 $ 18,159 $ 14,958 $ 10,289
Merchandise Margin 29% 28% 27% 28% 30%
Number of Outlets at Year-End 51 51 42 44 31
Travel Centers: (3)
Fuel Gallons Sold (In Thousands) 30,337 32,148 38,253 33,229 27,029
Product Margin ($/Gallon) $ 0.118 $ 0.128 $ 0.121 $ 0.124 $ 0.157
Merchandise Sold (In Thousands) $ 9,929 $ 10,125 $ 10,041 $ 8,970 $ 7,609
Merchandise Margin 45% 45% 47% 47% 48%
Number of Outlets at Year-End 1 2 2 2 1
Retail Fuel Volumes Sold as a % of
Refinery Sourced Sales Barrels 37% 29% 29% 28% 23%
EXPLORATION AND PRODUCTION:
Crude Oil Production Sold (Net Bbls/Day) 737 805 918 1,207 1,462
Natural Gas Production Sold (Net Mcf/Day) 3,035 3,611 5,286 4,152 3,678
Crude Oil Average Selling Price (Per Bbl) $ 15.33 $ 16.46 $ 19.00 $ 20.13 $ 23.61
Natural Gas Average Selling
Price (Per Mcf) $ 1.64 $ 1.92 $ 1.63 $ 1.34 $ 1.73
Lifting Costs ($/BOE) $ 5.68 $ 6.91 $ 5.58 $ 5.07 $ 4.53
Year-End Proved Reserves, Net:(4)
Crude Oil (Thousand Barrels) 2,215 2,196 3,285 3,320 4,203
Natural Gas (MMcf) 11,860 12,998 15,943 35,083 44,100
Combined (OEB) 4,191 4,362 5,942 9,167 11,553
Percent of Refinery Crude Oil Throughput
Represented by:
Equity Interests 4% 4% 4% 6% 8%
Controlling Interests 6% 6% 7% 10% 13%
</TABLE>
(1) The 1994, 1993 and 1992 amounts include a $3.4 million, $15.5
million and $13.8 million pre-tax charge, respectively, for the
reduction of the carrying value of crude oil and natural gas
properties.
(2) In certain prior reports, the Company included deferred income
taxes as a component of total capitalization. Deferred income
taxes are excluded from capitalization calculations in this
report.
(3) The Company's Giant Express travel center was sold November 2,
1994.
(4) Based on annual reserve report.<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1994 AND DECEMBER 31, 1993
---------------------------------------------------------------------
The primary factors affecting the comparative results of the
Company's 1994 and 1993 operations are the writedown of the Company's
proved oil and gas properties in 1993 compared to 1994, a decline
in refining margins, the acquisition of nine retail units, an increase
in interest costs, a decline in refinery sourced sales volumes and
higher operating expenses and grain costs.
EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM
---------------------------------------------------
Earnings before income taxes and extraordinary item were $5.8
million for the year ended December 31, 1994, a decrease of $4.2
million or 42% from $10.0 million for the year ended December 31,
1993. The decrease is primarily the result of a 16% decline in average
refinery margins, a 6% decrease in refinery sourced finished product
sales volumes, higher ethanol plant grain costs and higher interest
and operating expenses. These factors were partially offset by a $12.1
million decrease in the writedown in the carrying value of oil and gas
properties due to "ceiling test" calculations in 1994 compared to 1993
and a 19% increase in finished product sales volumes and a 31%
increase in merchandise sales from the Company's retail units.
For the years ended December 31, 1994 and 1993, the Company's
exploration and production operations ("Giant E&P") recorded losses of
$4.3 million and $17.1 million, respectively, including the "ceiling
test" writedowns. The 1994 writedown was primarily due to low crude
oil and natural gas prices at September 30, 1994, impairment of
certain unproved properties and downward revisions of certain
reserves. The 1993 writedown was primarily due to downward revisions
of oil and gas reserves and low crude oil prices at December 31, 1993.
Exclusive of the "ceiling test" writedowns, the 1994 period reflected
a smaller loss compared to the same 1993 period due primarily to lower
production costs relative to declines in crude oil and natural gas
production and selling prices.
REVENUES
--------
Revenues for the year ended December 31, 1994, decreased $22.3
million or 7% to $293.5 million from $315.8 million in the comparable
1993 period. The decrease is primarily due to an 11% decline in
refinery weighted average selling prices, a 6% decrease in refinery
sourced finished product sales volumes and a 1% decline in retail
selling prices. Offsetting these decreases was a 19% increase in the
volume of finished products sold from the retail units along with a
31% increase in merchandise sales. Also included in 1994 revenues is a
$0.5 million gain resulting from the settlement of property damage
claims relating to the accident at the refinery in July.
The decline in refinery sourced finished product sales volumes
was primarily due to a scheduled major maintenance turnaround started
in March and completed in April and an accident at the refinery in
mid-July which damaged the alkylation unit and curtailed production
for a period of approximately sixty days. The increase in retail
finished product and merchandise sales is the result of increased same
store volumes and the acquisition of nine units in the Company's
primary market area.
Volumes of refined products sold through retail outlets increased
approximately 19% from 1993 levels primarily due to a 30% increase in
volumes sold from the service stations offset in part by a 6% decrease
in travel center volumes, 5% at the Giant Travel Center and 11% at the
Giant Express which was sold on November 2, 1994.
Revenues from Giant E&P, including intercompany revenues of $4.1
million in 1994 and $4.8 million in 1993, totaled $6.0 million for the
year ended December 31, 1994, a decrease of $1.4 million or 20% from
the $7.4 million reported for the comparable 1993 period. This
decrease is due to an 8% decline in crude oil production, a 7%
decline in average crude oil selling prices, a 16% decline in natural
gas production and a 15% decline in natural gas selling prices. The
decline in natural gas production is due to a 1993 year end adjustment
of coal seam gas reserves sold in 1992, determined pursuant to an
annual redetermination clause contained in the 1992 purchase and sale
agreement.
COST OF PRODUCTS SOLD
---------------------
For the year ended December 31, 1994, cost of products sold
decreased $14.4 million or 7% to $193.4 million from $207.8 million
for the corresponding 1993 period. A 6% decline in average crude oil
costs and a 6% decline in the volume of finished products sold from
the refinery accounts for most of the decrease. These decreases were
partially offset by an increase in costs relating to increased
merchandise sales from the retail units and a $1.8 million increase in
average grain costs due to forward grain purchase contracts and higher
costs resulting from the effects of the poor grain harvest of 1993.
Also included in 1994 cost of products sold is $1.4 million of
preliminary estimates of reimbursements for losses under the Company's
business interruption insurance policies relating to the refinery
accident in July.
Cost of products sold by Giant E&P decreased approximately 30%
for the year ended December 31, 1994, compared to the same 1993
period. The decline is primarily related to a decrease in production.
OPERATING EXPENSES
------------------
For the year ended December 31, 1994, operating expenses
increased $5.0 million or 10% to $53.9 million from $48.9 million in
the corresponding 1993 period. The increase is primarily due to
operating expenses of the nine retail units acquired, an increase in
payroll and related costs for other operations and increases in repairs
and maintenance and utility costs at the refinery. Partially offsetting
these increases was a decrease in refinery purchased fuel costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
For the year ended December 31, 1994, selling, general and
administrative expenses decreased $1.7 million or 13% to $11.9 million
from $13.6 million for the year ended December 31, 1993. The decline
is primarily due to a decrease in the management incentive bonus
accrual and the recording of a $1.0 million insurance settlement in
the first quarter of 1994 relating to environmental costs incurred in
prior years. Partially offsetting these decreases were increases in
payroll and related costs and a reduction in 1993 third quarter
expenses by $0.9 million for a decrease in the estimated liability for
self insured workmen's compensation claims.
DEPRECIATION, DEPLETION AND AMORTIZATION
----------------------------------------
For the year ended December 31, 1994, depreciation, depletion and
amortization ("DD&A") declined $0.6 million to $15.0 million from
$15.6 million in the corresponding 1993 period. The decrease is
primarily due to a decline in DD&A in the Company's exploration and
production operations related to declines in production and the
writedown of proved oil and gas properties. This decrease is
partially offset by increases related to nine retail units acquired,
the completion and start up of a diesel desulfurization unit at the
refinery in September 1993 and amortization of costs relating to the
major maintenance turnaround completed at the refinery in April 1994.
INTEREST EXPENSE (INCOME)
-------------------------
For the year ended December 31, 1994, interest expense increased
$6.0 million or 105% to $11.8 million from $5.8 million in the same
1993 period. The increase is primarily due to the issuance of $100
million of 9 3/4% senior subordinated notes in November 1993, the
proceeds of which were partially used to retire existing debt with
lower effective interest rates, but with significantly shorter
maturities. In addition, the amortization of proceeds from a
terminated interest rate swap were lower in the 1994 period.
For the year ended December 31, 1994, interest income increased
$0.2 million or 17% to $1.7 million from $1.5 million in the
comparable 1993 period primarily due to the investment of larger
amounts of excess cash, in part from the issuance of the senior
subordinated notes, at slightly higher interest rates.
INCOME TAXES
------------
Income taxes for the years ended December 31, 1994 and 1993 were
computed in accordance with Statement of Financial Accounting
Standards No. 109 ("SFAS No. 109"), resulting in effective tax rates
of approximately 22% and 38%, respectively. The difference in the two
rates is primarily due to the relationship of relatively consistent
amounts of alcohol fuel and coal seam gas tax credits in each year to
varying amounts of annual income and the effect of the statutory rate
increase in 1993 on deferred income taxes resulting from the enactment
of the Revenue Reconciliation Act of 1993 which increased the
statutory U.S. federal income tax rate to 35% from 34%.
OUTLOOK
-------
The Company's future results of operations, which continue to be
determined by its principal business of refining and marketing of
petroleum products, are primarily dependent on producing and selling
sufficient quantities of refined products at margins sufficient to
cover fixed and variable expenses.
COMPARISON OF THE YEARS ENDED DECEMBER 31, 1993 AND DECEMBER 31, 1992
---------------------------------------------------------------------
The primary factors affecting the comparative results of the
Company's 1993 and 1992 operations are the significant improvement in
1993 in refining and retail margins, the writedown of the Company's
proved oil and gas properties in both 1993 and 1992 and higher
operating expenses incurred in 1993. The Company believes that the
relatively higher margins were due to a general improvement in
economic conditions in its market area, increased market demand and
operating problems at other regional refineries during the first and
second quarters of 1993 which resulted in decreased output. In the
fourth quarter of 1993, the Company had an impairment in the carrying
amount of its proved oil and gas properties. A similar writedown was
made in the first quarter of 1992. In both years the impairment was
partially due to downward revisions of oil and gas reserves, along
with low crude oil prices at December 31, 1993 and low natural gas
prices at March 31, 1992. Operating expenses increased in 1993
primarily due to the reinstatement of a management incentive bonus and
higher payroll and related costs, primarily in retail operations.
EARNINGS (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEM
----------------------------------------------------------
Earnings before income taxes and extraordinary item increased
$16.1 million from a loss of $6.1 million for the year ended December
31, 1992, to earnings of $10.0 million for the year ended December 31,
1993. The increase is primarily due to a 40% improvement in average
refining margins, a 16% increase in retail refined product margins,
increased merchandise sales through the service stations at slightly
higher margins, a reduction in interest expense and an increase in
interest income. Partially offsetting these positive factors were
higher operating costs in 1993 and a $15.5 million charge in 1993 for
a writedown in the carrying value of the Company's oil and gas
properties compared to a similar charge of $13.8 million in 1992.
For the year ended December 31, 1993, the loss of Giant E&P
compared to the year ended December 31, 1992, increased $2.9 million,
including the $1.7 million increase in the writedown of the oil and
gas properties. The remainder of the decline was primarily due to a
decrease in crude oil and natural gas production and a decline in
crude oil selling prices. These declines were partly offset by
increases in natural gas selling prices.
REVENUES
--------
For the year ended December 31, 1993, revenues increased $10.9
million or 4% when compared to the corresponding 1992 period. The
increase was primarily due to higher retail refined product selling
prices and merchandise sales offset in part by a 1% decline in
finished product volumes sold from the refinery. Weighted average
refinery selling prices were less than 1% higher in 1993 than in 1992.
For the comparable periods, volumes of refined products sold
through retail outlets increased approximately 1%. A 9% increase in
service station volumes was partially offset by a 16% decline in
travel center volumes. The decline in volumes at the Travel Center was
due to a combination of factors including severe weather conditions
along I-40 in the first quarter of 1993, increased price competition
and the recent requirement that posted prices for diesel fuel in New
Mexico include state excise taxes, resulting in the commercial truck
customer having to pay these taxes at the time of purchase. Service
station volumes increased primarily due to station maturity and the
addition of nine stations in the fourth quarter of 1993 operated under
a management agreement.
Revenues, including intercompany revenues, for Giant E&P
decreased $2.1 million for the year ended December 31, 1993, compared
to the same 1992 period. The decrease was due to a 12% decline in
crude oil production, a 13% decline in crude oil selling prices and a
32% decline in natural gas production, partially offset by an 18%
increase in natural gas selling prices. Natural gas production has
declined in part due to the sale of a portion of the Company's coal
seam gas reserves in 1992.
COST OF PRODUCTS SOLD
---------------------
Cost of products sold for the year ended December 31, 1993
decreased $9.0 million or 4% compared to the same 1992 period. The
decrease is primarily the result of a 10% decline in crude oil costs,
an 8% decline in average grain costs and a 1% decline in refined
product sales from the refinery. Partially offsetting these decreases
were higher costs relating to higher merchandise sales at the retail
units.
Cost of products sold by Giant E&P decreased approximately 4% for
the year ended December 31, 1993 compared to the corresponding 1992
period, primarily as a function of the decline in production.
OPERATING EXPENSES
------------------
Operating expenses increased $4.8 million or 11% for the year
ended December 31, 1993 compared to the corresponding 1992 period.
Increases in payroll and related costs, higher repair and maintenance
expenditures and increased purchased fuel and chemical costs accounted
for substantially all of the increase.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
Selling, general and administrative expenses increased $1.8 million
or 15% for the year ended December 31, 1993 compared to the same 1992
period. Reinstatement of the management incentive bonus, offset by a
$0.9 million adjustment to workmen's compensation expense resulting
from a decrease in the estimated liability for self insured claims
accounts for substantially all of the increase.
DEPRECIATION, DEPLETION AND AMORTIZATION
----------------------------------------
Depreciation, depletion and amortization decreased $1.6
million or 9% for the year ended December 31, 1993 compared to the
year ended December 31, 1992. The decrease is primarily due to the
extension of the service lives of certain refinery equipment from 16
to 24 years, which was effective in the fourth quarter of 1992.
INTEREST EXPENSE (INCOME)
-------------------------
Interest expense declined $1.9 million or 25% in the twelve
months ended December 31, 1993 compared to the same 1992 period. The
decrease was primarily due to a reduction in the amount of long-term
debt outstanding, a general decline in short-term interest rates, an
interest rate management strategy utilizing an interest rate swap and
interest capitalized in the 1993 period. The average amount of long-
term debt outstanding in 1993 was $8.3 million lower than in 1992. The
increase in interest income was due to the investment of excess cash
in short-term investments and marketable securities.
INCOME TAXES
------------
The provision for income taxes for the years ended December 31,
1993 and 1992, have been computed in accordance with Statement of
Financial Accounting Standards No. 109 resulting in an effective tax
rate of approximately 38% for the 1993 period and an effective tax
benefit rate of approximately 60% for the 1992 period. The difference
in the two rates is partially due to the enactment of the Revenue
Reconciliation Act of 1993 which increased the statutory U.S. federal
income tax rate to 35% for all of 1993. This increase includes an
adjustment to current income taxes payable as well as to previously
recorded deferred income taxes payable. In addition, the 1993
effective rate reflects relatively higher state income taxes due to
state loss carryback provisions affecting 1992 and lower alcohol fuel
and coal seam gas credits.
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT
--------------------------------------------
The extraordinary loss of approximately $0.4 million in 1993 on
the early extinguishment of debt resulted from the prepayment of
certain long-term debt from the proceeds of the issuance of
$100,000,000 in senior subordinated notes. The loss results primarily
from the writeoff of deferred financing costs and prepayment
penalties.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATIONS
-------------------------
Net cash provided by operating activities totaled $12.4 million
for the year ended December 31, 1994, compared to $37.6 million for
the comparable 1993 period. Operating cash flows decreased primarily
as the result of a decline in net earnings adjusted for non-cash items
and net changes in working capital items, primarily increases in
receivables and inventories.
WORKING CAPITAL
---------------
Working capital at December 31, 1994 consisted of current assets
of $108.0 million and current liabilities of $42.4 million, or a
current ratio of 2.55:1. At December 31, 1993, the current ratio was
2.71:1 with current assets of $102.0 million and current liabilities
of $37.6 million.
Current assets have increased since December 31, 1993, primarily
due to an increase in inventories and receivables. Inventories have
increased as a result of a 123% increase in raw material volumes on
hand, partially resulting from the Company's decision to accumulate
raw material inventory during periods of reduced production such as
those resulting from the scheduled major maintenance turnaround in
March and April and a refinery accident in July. Finished product
inventory volumes were up slightly from 1993 year end levels.
Receivables have increased due to higher trade receivables resulting
from higher refinery sourced sales volumes and prices in December 1994
and an increase in other receivables because of insurance
reimbursements accrued as a result of the refinery accident in July,
excise tax reimbursements resulting from exchange sales and an
increase in interest receivable on marketable security investments. In
addition, income tax refunds have increased due to the overpayment of
estimated income taxes. These increases are partially offset by a
decrease in cash and cash equivalents and marketable securities, a
decrease in prepaid expenses, principally deposits and prepaid
insurance premiums, and a decrease in current deferred income tax
assets.
Current liabilities have increased due to an increase in accounts
payable and the current portion of long-term debt. Accounts payable
have increased primarily due to an increase in the purchase price and
volumes of raw materials acquired in December 1994. Partially
offsetting these increases is a decrease in accrued liabilities
primarily due to a decrease in management incentive bonus accruals,
the reclassification of deferred insurance refunds in part to a
long-term reserve for environmental liabilities and in part as a
recovery of previously incurred environmental expenditures and a
decline in estimated income taxes payable. These decreases were offset
in part by an increase in accrued interest payable.
CAPITAL EXPENDITURES AND RESOURCES
----------------------------------
Net cash used in investing activities for the purchase of
property, plant and equipment totaled approximately $21.0 million for
the year 1994, including the cash portion of the acquisition of nine
retail units and certain other assets from a privately-held
retailer/jobber; scheduled major maintenance turnaround costs;
equipment replacement at the refinery due to an accident in July;
costs incurred to secure a supplemental and standby power supply for
the refinery and adjacent travel center; various other operational and
environmental projects at the refinery; construction, rebuilding and
remodeling of various retail units; oil and gas well drilling and
leasehold costs and various other projects. In addition, as part of
the Company's short-term cash management program there were net
purchases of marketable securities.
On July 16, 1994, a propane treatment vessel associated with the
refinery's alkylation unit failed, causing several units at the
refinery to be temporarily shutdown and damaging the alkylation unit,
necessitating extensive repairs. Repairs to the propane treatment
vessel and adjacent equipment damaged in the incident were completed
and the alkylation unit returned to full operation on September 16,
1994. The Company has settled all claims with its insurance companies
relating to property damage coverage under its policies as the claims
relate to this incident for approximately $0.7 million.
On November 2, 1994, the Company completed the sale of its Giant
Express truck stop located in Winslow, Arizona for approximately $5.5
million. In addition to the cash purchase price, the agreement
includes a 5 year product supply contract for the facility, which
enables the Company to retain the outlet for a portion of its Ciniza
Refinery's diesel fuel production. The sale of this facility will not
have a material impact on the Company's future results of operations.
The Company has budgeted approximately $41.2 million for capital
expenditures in 1995. Approximately $11.7 million is budgeted for
non-discretionary projects that are required by law or regulation or
to maintain the physical integrity of existing assets. These projects
include, among others, operational and environmental projects at the
refinery and exploration and production operations, multiple pump
dispensers and card readers for the retail operations and
informational system enhancements to improve all operations. The
remaining budget of $29.5 million is for discretionary projects to
sustain or enhance the current level of operations or to grow or
increase earnings on existing or new business. The primary projects in
this category include the acquisition and development of oil and gas
properties, drilling and improvement of current exploration and
production holdings and the acquisition, construction, rebuilding and
remodeling of retail units.
The amount of these budgeted discretionary projects that are
actually undertaken in 1995 will depend on, among other things,
identifying acceptable acquisitions, general business conditions and
results of operations. All of the budgeted capital projects undertaken
are expected to be funded from working capital. Working capital,
including that necessary for capital expenditures and debt service
will be funded through cash generated from operating activities,
existing cash and marketable securities balances and, if necessary,
future borrowings. Future liquidity, both short and long-term, will
continue to be primarily dependent on producing and selling sufficient
quantities of refined products at margins sufficient to cover fixed
and variable expenses.
Although the Company is not currently aware of any pending
circumstances which would change these capital budget expectations,
changes in the tax laws, the imposition of any changes in federal and
state clean air and clean fuel requirements and other changes in
environmental laws and regulations may also increase future capital
expenditure levels. Future capital expenditures are also subject to
business conditions affecting the industry. In addition, the Company
continues to investigate other strategic acquisitions, including the
possibility of acquiring an additional refinery, and other capital
improvements to its existing facilities. The Company is also actively
pursuing the possible sale or exchange of non-strategic or
underperforming assets.
Much of the capital currently planned to be spent by the Company
for environmental compliance is integrally related to operations or to
operationally required projects, and the Company does not specifically
identify capital expenditures related to such projects on the basis of
environmental as opposed to economic purposes. However, with respect
to capital expenditures budgeted primarily to satisfy environmental
regulations, it is estimated that approximately $0.6 million, $5.0
million and $6.6 million was spent in 1994, 1993 and 1992,
respectively, and $1.3 million is expected to be spent in 1995. With
respect to the Company's operating expenses for environmental
compliance, while records are not kept specifically identifying or
allocating such expenditures, management believes that the Company
incurs significant operating expense for such purposes.
CAPITAL STRUCTURE
-----------------
At December 31, 1994, and December 31, 1993, the Company's
long-term debt was 51% and 53% of total capital, respectively. The
decrease is the result of an increase in retained earnings and a
decrease in long-term debt.
The Company's capital structure includes $100 million of 10 year
9 3/4% senior subordinated notes ("Notes"). Repayment of the Notes is
jointly and severally guaranteed on an unconditional basis by the
Company's direct and indirect wholly-owned subsidiaries, subject to a
limitation designed to ensure that such guarantees do not constitute a
fraudulent conveyance. Except as otherwise allowed in the Indenture
pursuant to which the Notes were issued, there are no restrictions on
the ability of such subsidiaries to transfer funds to the Company in
the form of cash dividends, loans or advances. General provisions of
applicable State law, however, may limit the ability of any subsidiary
to pay dividends or make distributions to the Company in certain
circumstances.
The Company has a $20.0 million uncommitted line of credit
available to support the issuance of letters of credit in the ordinary
course of business. At December 31, 1994, there were approximately
$13.6 million in irrevocable letters of credit outstanding under this
arrangement. This uncommitted line of credit is subject to a negative
pledge on working capital.
On April 15, 1994, the Company's Board of Directors authorized
the repurchase of up to 5% or approximately 600,000 shares of the
Company's common stock. On October 5, 1994, the Board of Directors
voted to increase the number of shares authorized to be repurchased to
1,000,000 shares, or approximately 8% of all outstanding shares. These
purchases may be made over the next year from time to time as
conditions permit. Shares may be repurchased through privately-
negotiated transactions, block share purchases and open market
transactions. Through the end of the year, the Company had repurchased
202,300 shares of its common stock for approximately $1.7 million at a
weighted average cost of $8.16 per share, including commissions. As of
February 28, 1995, the Company had repurchased an additional 276,200
shares at a weighted average cost of $8.30 per share, including
commissions. These shares are being treated as treasury shares.
Any repurchased shares would be available for a variety of
corporate purposes. The number of shares actually repurchased will be
dependent upon market conditions and there is no guarantee as to the
exact number of shares to be repurchased by the Company. The Company
may suspend or discontinue the program at any time without notice.
On January 9, 1995, the Company's Board of Directors declared a
common stock dividend of $0.05 per share payable to stockholders of
record on January 23, 1995. This dividend was paid on February 3, 1995.
This was the first dividend paid since the Company suspended its
regular quarterly dividend in November 1991. On March 2, 1995, the
Company's Board of Directors declared another common stock dividend of
$0.05 per share payable to stockholders of record on April 24, 1995,
with payment to be made May 5, 1995. Future dividends, if any, are
subject to the results of the Company's operations, existing debt
covenants and declaration by the Company's Board of Directors.
OTHER
-----
Federal, state and local laws and regulations relating to health
and the environment affect nearly all of the operations of the
Company. As is the case with all companies engaged in similar
industries, the Company faces significant exposure from actual or
potential claims and lawsuits involving environmental matters. These
matters involve alleged soil and water contamination, air pollution
and personal injuries or property damage allegedly caused by exposure
to hazardous materials manufactured, handled or used by the Company.
Future expenditures related to health and environmental matters cannot
be reasonably quantified in many circumstances due to the speculative
nature of remediation and clean-up cost estimates and methods, the
imprecise and conflicting data regarding the hazardous nature of
various types of waste, the number of other potentially responsible
parties involved, various defenses which may be available to the
Company and changing environmental laws and interpretations of
environmental laws.
It is expected that rules and regulations implementing federal,
state and local laws relating to health and the environment will
continue to affect the operations of the Company. The Company cannot
predict what additional health or environmental legislation or
regulations will be enacted or become effective in the future or how
existing or future laws or regulations will be administered or
enforced with respect to products or activities of the Company.
Compliance with more stringent laws or regulations, as well as more
vigorous enforcement policies of the regulatory agencies, could have
an adverse effect on the financial position and the results of
operations of the Company and could require substantial expenditures
by the Company for the installation and operation of pollution control
systems and equipment not currently possessed by the Company.
In May 1991, the EPA notified the Company that it may be a
potentially responsible party for the release, or threatened release,
of hazardous substances, pollutants or contaminants at the Lee Acres
Landfill, which is adjacent to the Company's Farmington refinery which
was operated until 1982. At the present time, the Company is unable to
determine the extent of its potential liability, if any, in the
matter. In 1989, a consultant to the Company estimated, based on
various assumptions, that the Company's share of potential liability
could be approximately $1.2 million. This figure was based upon the
consultant's evaluation of such factors as available clean-up
technology, BLM's involvement at the site and the number of other
entities that may have had involvement at the site. The consultant,
however, did not conduct an analysis of the Company's potential legal
defenses and arguments including possible setoff rights. Potentially
responsible party liability is joint and several, such that a
responsible party may be liable for all of the clean-up costs at a
site even though the party was responsible for only a small part of
such costs. Actual liability, if any, may differ significantly from
the consultant's estimate. In addition, the Company is remediating a
free-phase hydrocarbon plume that extends approximately 1,000 feet
south of the Farmington refinery.
In 1994, the Company established an environmental liability
accrual for approximately $1.4 million relating to ongoing
environmental projects, including the remediation of the free-phase
hydrocarbon plume described above. In late 1994, the Company accrued
an additional $0.3 million relating to hydrocarbon contamination on
5.5 acres the Company owns in Bloomfield, New Mexico. At December 31,
1994, the balance of the accrual was approximately $1.6 million and
was recorded in the current and long-term sections of the Company's
consolidated balance sheet.
The Company is subject to audit on an ongoing basis of the
various taxes that it pays to federal, state, local and Tribal
agencies. These audits may result in additional assessments or refunds
along with interest and penalties. In some cases the jurisdictional
basis of the taxing authority is in dispute and is the subject of
litigation or administrative appeals. In one such case, the Company
has received several tax assessments from the Navajo Tribe, including
a $1.8 million severance tax assessment issued to Giant Industries
Arizona, Inc., a wholly-owned subsidiary of the Company, in November
1991 relating to crude oil removed from properties located outside the
boundaries of the Navajo Indian Reservation in an area of disputed
jurisdiction. It is the Company's position that it is in substantial
compliance with laws applicable to the disputed area, and such
assessments are or will be the subject of litigation or administrative
appeals.
The Company uses the full cost method of accounting for oil and
gas activities. Under this method, the Company is required to write
down capitalized costs, adjusted for accumulated amortization and
related deferred income taxes, if those costs exceed a "cost ceiling."
This "cost ceiling" is determined by calculating the value of the
Company's estimated reserves utilizing, among other things, the price
of crude oil and natural gas at the end of each quarter. During
periods of declining prices and reserves, the Company may be required
to write down these capitalized costs due to impairment in value. At
December 31,1994, the Company's adjusted capitalized costs and the
"cost ceiling" were approximately the same. Whether or not a writedown
will be necessary in the future depends upon future prices and reserve
volumes.
The Company is in the process of completing its insurance claims
for reimbursement under its business interruption policies as the
claims relate to the accident that occurred at the refinery in July
1994. The Company has accrued $1.4 million as a preliminary estimate
of expected reimbursement under these policies. The Company expects
to reach final settlement with the insurance companies during the
second quarter of 1995.
Due in part to a decision to accumulate raw material inventory
during periods of reduced production such as those resulting from a
major maintenance project at the refinery in early 1994 and an
accident in July 1994, and due in part to better than forecasted
receipts of crude oil from the field, the Company's inventories of
crude oil have increased to approximately 763,000 barrels as of
December 31, 1994. Based on projections of local crude oil
availability from the field, current levels of usage of Alaska North
Slope crude oil ("ANS"), and the Company's inventory levels, the
Company believes an adequate crude oil supply will be available,
without the use of additional supplemental supply alternatives, to
sustain refinery operations at planned levels into the first quarter
of 1996.
Because exploration and production activity has been at a
relatively low level over the last few years, total crude oil
production in the Four Corners area currently reflects the trend of
normal depletion of reservoirs without the supplements of significant
new discoveries. The Company believes that local crude oil supply
currently approximates 95% of aggregate local crude oil demand. The
Company is currently able to supplement local crude oil supplies with
ANS and other alternate grades of crude oil through its gathering
systems' interconnection with the Four Corners and Texas-New Mexico
common carrier pipeline systems and by truck or rail. Generally, such
crude oil is of lesser quality than locally available crude oils, and,
with the exception of ANS, the Company believes such crude oil
generally has a delivered cost greater than that of locally available
crude oil.
In response to the decline in local crude oil production, the
Company has evaluated, and will continue in the future to evaluate,
supplemental crude oil supply alternatives on both a short-term and
long-term basis. Among other alternatives, the Company has considered
making equipment modifications to the refinery to increase its ability
to use ANS crude oil from its current level of approximately 1,000
barrels per day and has considered the installation of additional rail
facilities to enable the Company to provide the incremental crude oil
to supplement local supply sources when required in the most cost
effective manner available. In addition, the Company has considered,
and has in fact entered into, additional long-term agreements with
local crude oil suppliers to provide additional security for the
Company's local supply sources.
As additional supplemental crude oil becomes necessary, the
Company intends to implement one or more of these available
alternatives as necessary and as is most advantageous under the then
prevailing conditions. The Company currently believes that the most
desirable strategy to supplement local crude oil supplies, on a long-
term basis, is the delivery of supplemental crude oil from outside of
the Four Corners area by pipeline. Implementation of supplemental
supply alternatives will result in additional raw material costs,
operating costs, capital costs, or a combination thereof in amounts
which are not presently ascertainable by the Company but which will
vary depending on factors such as the specific alternative
implemented, the quantity of supplemental crude oil required, and the
date of implementation. Implementation of some supply alternatives
requires the consent or cooperation of third parties and other
considerations beyond the control of the Company.<PAGE>
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Giant Industries, Inc.
Scottsdale, Arizona
We have audited the accompanying consolidated balance sheets of
Giant Industries, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Giant Industries, Inc. and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 6, 1995<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------
1994 1993
--------- ---------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,597 $ 19,807
Marketable securities 35,631 36,146
Receivables:
Trade, less allowance for doubtful
accounts of $546,000 and $429,000 15,880 14,236
Income tax refunds 2,144 254
Other 4,488 846
--------- ---------
22,512 15,336
Inventories 32,270 23,341
Prepaid expenses and other 2,476 3,571
Deferred income taxes 2,490 3,749
--------- ---------
Total current assets 107,976 101,950
--------- ---------
Property, plant and equipment 306,717 292,519
Less accumulated depreciation,
depletion and amortization (143,801) (130,276)
--------- ---------
162,916 162,243
Other assets 14,675 15,106
--------- ---------
$ 285,567 $ 279,299
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 4,107 $ 3,035
Accounts payable 20,707 14,883
Accrued expenses 17,591 19,725
--------- ---------
Total current liabilities 42,405 37,643
--------- ---------
Long-term debt, net of current portion 116,090 117,270
Deferred income taxes 13,752 15,850
Other liabilities 3,630 2,622
Stockholders' equity:
Preferred stock, par value,
$.01 per share, 10,000,000 shares
authorized, none issued
Common stock, par value $.01 per share,
50,000,000 shares authorized,
12,187,629 and 12,192,770
shares issued 122 122
Additional paid-in capital 72,373 72,417
Retained earnings 40,373 35,852
Unearned employee benefits
related to ESOP (514) (1,347)
Unearned compensation related to
restricted stock (614) (1,130)
Unrealized loss on securities
available-for-sale, net (398)
--------- ---------
111,342 105,914
Less common stock in treasury-at
cost, 202,300 shares (1,652)
--------- ---------
109,690 105,914
--------- ---------
$ 285,567 $ 279,299
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
----------------------------------------------
1994 1993 1992
----------- ----------- -----------
(In thousands except shares and per share data)
<S> <C> <C> <C>
Net revenues $ 293,458 $ 315,757 $ 304,833
Cost of products sold 193,359 207,767 216,757
----------- ----------- -----------
Gross margin 100,099 107,990 88,076
Operating expenses 53,884 48,884 44,124
Selling, general and administrative expenses 11,930 13,642 11,875
Depreciation, depletion and amortization 15,040 15,637 17,203
Reduction of carrying value of crude oil
and natural gas properties 3,395 15,511 13,800
----------- ----------- -----------
Operating income 15,850 14,316 1,074
Interest expense (11,805) (5,765) (7,700)
Interest and investment income 1,733 1,486 582
----------- ----------- -----------
Earnings (loss) before income taxes and
extraordinary item 5,778 10,037 (6,044)
Provision (benefit) for income taxes 1,257 3,772 (3,627)
----------- ----------- -----------
Earnings (loss) before extraordinary item 4,521 6,265 (2,417)
Extraordinary loss on early extinguishment
of debt, net of income tax benefit of $252 (384)
----------- ----------- -----------
Net earnings (loss) $ 4,521 $ 5,881 $ (2,417)
=========== =========== ===========
Earnings (loss) per common share:
Earnings (loss) before extraordinary item $ 0.37 $ 0.51 $ (0.20)
Extraordinary loss (0.03)
----------- ----------- -----------
Net earnings (loss) $ 0.37 $ 0.48 $ (0.20)
=========== =========== ===========
Weighted average number of shares outstanding 12,127,481 12,225,177 12,231,365
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Unearned
Unearned compen- Unrealized
Common stock employee sation loss on Total
----------------- Additional benefits related to securities Treasury Stock stock-
Shares Par paid-in Retained related to restricted available- ---------------- holders'
issued value capital earnings ESOP stock for-sale Shares Cost equity
---------- ----- ---------- -------- ---------- ---------- ---------- ------- ------- --------
(In thousands except number of shares)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1992 12,231,386 $122 $72,839 $32,388 $(2,897) $(2,651) $ 99,801
Benefits allocated to
employees by ESOP 650 650
Compensation related to
restricted stock awards 568 568
Restricted stock award
shares forfeited (7,618) (75) 75
Net loss (2,417) (2,417)
---------- ---- ------- ------- ------- ------- ----- ------- ------- --------
Balances, December 31, 1992 12,223,768 122 72,764 29,971 (2,247) (2,008) 98,602
Stock options exercised 3,700 37 37
Benefits allocated to
employees by ESOP 900 900
Compensation related to
restricted stock awards 494 494
Restricted stock award
shares forfeited (34,698) (384) 384
Net earnings 5,881 5,881
---------- ---- ------- ------- ------- ------- ----- ------- ------- --------
Balances, December 31, 1993 12,192,770 122 72,417 35,852 (1,347) (1,130) 105,914
Purchase of treasury stock 202,300 $(1,652) (1,652)
Stock options exercised 500 3 3
Benefits allocated to
employees by ESOP 833 833
Compensation related to
restricted stock awards 469 469
Restricted stock award
shares forfeited (5,641) (47) 47
Unrealized loss on
securities available-
for-sale $(398) (398)
Net earnings 4,521 4,521
---------- ---- ------- ------- ------- ------- ----- ------- ------- --------
Balances, December 31, 1994 12,187,629 $122 $72,373 $40,373 $ (514) $ (614) $(398) 202,300 $(1,652) $109,690
========== ==== ======= ======= ======= ======= ===== ======= ======= ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
------------------------------------
1994 1993 1992
--------- -------- --------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 4,521 $ 5,881 $ (2,417)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Reduction of carrying value of oil and gas properties 3,395 15,511 13,800
Depreciation, depletion and amortization 15,040 15,637 17,203
Deferred income taxes (583) (5,189) (6,416)
Restricted stock award compensation 469 494 568
Extraordinary loss on extinguishment of debt 384
Gain on involuntary conversion of refinery assets (533)
Proceeds from settlement of interest rate swap agreement 1,514
Increase (decrease) in other liabilities 1,019 (1,190)
Other 344 37 186
Changes in operating assets and liabilities:
(Increase) decrease in receivables (7,176) (1,565) 3,268
(Increase) decrease in inventories (8,929) 1,458 (3,584)
Decrease (increase) in prepaid expenses and other 1,095 (1,781) 198
Increase (decrease) in accounts payable 5,824 (3,122) (1,789)
(Decrease) increase in accrued expenses (2,134) 9,494 886
--------- -------- --------
Net cash provided by operating activities 12,352 37,563 21,903
--------- -------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment
and other assets (21,025) (13,567) (10,781)
Proceeds from sale of property, plant and
equipment and other assets 5,679 509 5,409
Insurance proceeds from involuntary conversion of
refinery assets 438
Purchase of ESOP loan from bank (1,347)
Payments received on ESOP loan 833
Purchases of marketable securities (101,562) (57,109)
Proceeds from sales and maturities of marketable securities 100,849 20,963
--------- -------- --------
Net cash used in investing activities (14,788) (50,551) (5,372)
--------- -------- --------
Cash flows from financing activities:
Proceeds of long-term debt 100,000
Payments of long-term debt (3,025) (73,885) (15,185)
Purchase of treasury stock (1,652)
Deferred financing costs (100) (2,199)
Proceeds from exercise of stock options 3 37
--------- -------- --------
Net cash (used in) provided by financing activities (4,774) 23,953 (15,185)
--------- -------- --------
Net (decrease) increase in cash and cash equivalents (7,210) 10,965 1,346
Cash and cash equivalents:
Beginning of year 19,807 8,842 7,496
--------- -------- --------
End of year $ 12,597 $ 19,807 $ 8,842
========= ======== ========
</TABLE>
Noncash Investing and Financing Activities. For the year ended
December 31, 1994, a portion of the acquisition price of nine
retail units was seller financed for $2,917,000.
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<PAGE>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
Giant Industries, Inc. ("Giant" or the "Company") was organized
to combine the refining and marketing business of Giant Industries
Arizona, Inc. ("Giant Arizona") with the exploration and production
business of Hixon Development Company ("Hixon") through a merger in
December 1989 in which Giant Arizona and Hixon became wholly-owned
subsidiaries of the Company. In conjunction with the merger, the
Company completed its initial public offering. In 1990, Hixon was
renamed Giant Exploration & Production Company ("Giant E&P").
DESCRIPTION OF BUSINESS
The Company operates primarily as an independent refiner and
marketer of petroleum products and also engages in the exploration for
and the acquisition, development and production of crude oil,
condensate and natural gas primarily in New Mexico, Kansas and
Oklahoma. The Company has one operating refinery in New Mexico with a
crude oil throughput capacity of 20,800 barrels per day and total
capacity including natural gas liquids of 26,000 barrels per day.
Its principal business is the refining of crude oil into
petroleum products which are sold through branded retail outlets as
well as through distributors, industrial/commercial accounts and major
oil companies. The Company also operates an ethanol production plant
which supplies ethanol for blending at the Company's refinery as well
as for sale to third party customers. As an adjunct to its retail
outlets, the Company sells merchandise through stores.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Giant and all its subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
NET REVENUES
Revenues are recognized from sales when product ownership is
transferred to the customer. Excise and other similar taxes are
excluded from net revenues.
STATEMENTS OF CASH FLOWS
All highly liquid instruments with an original maturity of three
months or less are considered to be cash equivalents.
FUTURES CONTRACTS
The Company periodically enters into futures contracts to hedge
its exposure to price fluctuations on crude oil and refined products.
Gains and losses on hedge contracts are deferred and reported as a
component of the related transaction. For the purposes of the
Statement of Cash Flows, hedging transactions are considered to be
operating activities.
INTEREST RATE SWAPS
Commencing in 1991, interest rate management techniques such as
swaps and caps were entered into in order to effectively manage and
reduce net interest expense. Periodic net settlements on swap
transactions are reported as an adjustment to net interest expense.
MARKETABLE SECURITIES
Marketable securities, all of which are available-for-sale,
consisting of taxable corporate bonds, non-taxable municipal bonds and
variable rate preferred stocks are stated at fair value. Fair value is
estimated based on quoted market prices. Marketable securities are
managed as part of the Company's short-term cash management program.
CONCENTRATION OF CREDIT RISK
Credit risk with respect to customer receivables is concentrated
in a small geographic area in which the Company operates and relates
to customers in the oil and gas industry. To minimize this risk, the
Company performs ongoing credit evaluations of its customers'
financial position and requires collateral, such as letters of credit,
in certain circumstances.
INVENTORIES
Inventories are stated at the lower of cost or market. Costs for
crude oil and refined products produced by the refinery are determined
by the last-in, first-out ("LIFO") method. Costs for exchange and
terminal refined products and shop supplies are determined by the
first-in, first-out ("FIFO") method. Costs for merchandise
inventories are determined by the retail inventory method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and, except for
oil and gas properties, are depreciated on the straight-line method
over their respective estimated useful lives. The estimated useful
lives for the various categories of property, plant and equipment are:
Oil and gas properties Units of production
Buildings and improvements 7-30 years
Machinery and equipment 7-24 years
Pipelines 30 years
Furniture and fixtures 2-15 years
Vehicles 3-7 years
The full cost method of accounting is followed for oil and gas
properties. Under this method of accounting, the cost of unsuccessful
as well as successful exploration and development activities are
capitalized as oil and gas properties.
The sum of net capitalized costs and estimated future development
and dismantlement costs is amortized over the production of proved
reserves using the units of production method. Depreciation,
depletion and amortization per equivalent barrel of production sold
for the years ended December 31, 1994, 1993 and 1992 was $5.32, $7.50,
and $6.31, respectively, excluding the effect of the Company's
writedown of oil and gas properties. Excluded from amounts subject to
amortization are costs associated with unevaluated properties of
$1,551,000 and $2,973,000 at December 31, 1994 and 1993, respectively,
until proved reserves associated with the properties have been
determined or impairment occurs. Net capitalized costs exceeding the
estimated present value of future cash inflows from proved oil and gas
reserves reduced by estimated future operating expenses and
development expenditures are charged to current operations. Gain or
loss on the sale or other disposition of oil and gas properties is not
recognized unless significant oil and gas reserves are involved.
Routine maintenance, repairs and replacement costs are charged
against earnings as incurred. Turnaround costs, which consist of
complete shutdown and inspection of significant units of the refinery
at intervals of two or more years for necessary repairs and
replacements, are deferred and amortized over the period until the
next expected shutdown. Expenditures which materially increase
values, expand capacities or extend useful lives are capitalized.
Interest expense is capitalized as part of the cost of constructing
major facilities and equipment.
TREASURY STOCK
In 1994, the Company's Board of Directors authorized the
repurchase of 1,000,000 shares of the Company's common stock, or
approximately 8% of all outstanding shares. These purchases may be
made over the next year from time to time as conditions permit. Shares
may be repurchased through privately-negotiated transactions, block
share purchases and open market transactions. Through the end of the
year, the Company had repurchased 202,300 shares at a cost of
approximately $1,652,000. These shares are being treated as treasury
shares.
ENVIRONMENTAL EXPENDITURES
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to
an existing condition caused by past operations, and which do not
contribute to current or future revenue generation, are expensed.
Liabilities are recorded when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably
estimated. Generally, the timing of these accruals coincides with the
completion of a feasibility study.
INCOME TAXES
The provision (benefit) for income taxes is based on earnings
(loss) reported in the financial statements. Deferred income taxes
are provided on temporary differences between reported earnings and
taxable income.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is computed on the weighted
average number of shares of common stock outstanding during each
period. The exercise of outstanding stock options would not result in
a material dilution of earnings per share.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1993 and 1992
financial statements to conform to the statement classifications used
in 1994, including selling, general and administrative expenses and
depreciation, depletion and amortization previously included in cost
of products sold and operating expenses.
<PAGE>
<PAGE>
NOTE 2--MARKETABLE SECURITIES
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS No. 115 requires the
classification of securities at acquisition into one of three
categories: held-to-maturity, available-for-sale, or trading--with
different reporting requirements for each classification. All of the
Company's marketable securities are classified as available-for-sale.
Securities that are being held for indefinite periods of time,
including those securities which may be sold in response to needs for
liquidity are classified as available-for-sale. At December 31, 1994,
the Company's marketable securities had a fair value of $35,631,000. A
valuation allowance of $654,000 was recorded in 1994 to reduce the
carrying value of the portfolio to estimated fair value and the after-
tax adjustment necessary to mark the securities to market reduced
stockholders' equity by $398,000. This adjustment had no effect on the
current results of operations. A summary of the Company's securities
is as follows:
<TABLE>
<CAPTION>
December 31, 1993
December 31, 1994 -----------------
------------------------------------------------ Cost Which
Gross Gross Approximates
Amortized Unrealized Unrealized Estimated Estimated
Cost Gains Losses Fair Value Fair Value
--------- ---------- ---------- ---------- ----------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Obligations of
states and
political
subdivisions $ 34,270 $ 2 $ (236) $ 34,036 $ 29,076
Corporate debt
securities 55 55 3,200
Equity securities 1,960 (420) 1,540 3,870
--------- ---------- ---------- ---------- ---------
$ 36,285 $ 2 $ (656) $ 35,631 $ 36,146
========= ========== ========== ========== =========
</TABLE>
<PAGE>
<PAGE>
Contractual maturities of securities, other than equity
securities, at December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
--------- ----------
(In thousands)
<S> <C> <C>
Due in
1995 $ 28,080 $ 27,928
1996 6,245 6,163
-------- --------
$ 34,325 $ 34,091
======== ========
</TABLE>
Actual maturities may differ from contractual maturities because the
borrowers have the right to call or prepay certain obligations,
sometimes without call or prepayment penalties.
An analysis of the caption "Unrealized loss on securities available-
for-sale, net" in the Consolidated Balance Sheet is as follows:
<TABLE>
<CAPTION>
(In thousands)*
<S> <C>
Unrealized loss on securities available-
for-sale, January 1, 1994--adoption
of SFAS No. 115 $ 0
Net change in unrealized loss,
due principally to higher interest rates (398)
-----------
Unrealized loss on securities available-
for-sale, December 31, 1994 $ (398)
===========
*(These amounts have been tax effected.)
</TABLE>
Included in the Company's investment portfolio is $2,000,000
of Orange County, California Tax and Revenue Anticipation Notes due
July 28, 1995. Orange County filed for bankruptcy on December 6, 1994.
The Company has written this investment down by $200,000 as of December
31, 1994, to reflect an other than temporary impairment.
In recording gains and losses on the sale of marketable
securities, cost is determined using specific identification. Such
gains and losses are nominal for all years presented.
<PAGE>
<PAGE>
NOTE 3--ACCOUNTING CHANGE:
During the fourth quarter of 1992, the Company extended the
service lives of certain refinery equipment from 16 to 24 years. The
effect of this change in estimate was to increase net earnings by
$1,164,000 or $0.10 per share for 1994 and 1993 and $270,000 or $0.02
per share for 1992.
<PAGE>
<PAGE>
NOTE 4--INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1994 1993
------- -------
(In thousands)
<S> <C> <C>
First-in, first-out ("FIFO") method:
Crude oil $13,611 $ 4,820
Refined products 11,054 10,607
Refinery and shop supplies 5,705 5,372
Retail method:
Merchandise 2,428 2,495
------- -------
Subtotal 32,798 23,294
Allowance for last-in, first-out ("LIFO") method (528) 3,747
Allowance for lower of cost or market (3,700)
------- -------
Total $32,270 $23,341
======= =======
</TABLE>
The Company uses the LIFO method of inventory valuation. The
portion of inventories valued on a LIFO basis totaled $21,717,000 and
$12,699,000 at December 31, 1994 and 1993, respectively. The
following data will facilitate comparison with operating results of
companies using the FIFO method.
If inventories had been determined using the FIFO method at
December 31, 1994, 1993 and 1992, net earnings and earnings per share
for the years ended December 31, 1994, 1993 and 1992 would have been
higher (lower) by $357,000 and $0.03, $237,000 and $0.02 and
($191,000) and ($0.02), respectively.
<PAGE>
<PAGE>
NOTE 5--PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost, consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1994 1993
--------- ---------
(In thousands)
<S> <C> <C>
Land and improvements $ 21,188 $ 20,789
Oil and gas properties 79,939 76,309
Buildings and improvements 52,044 51,259
Machinery and equipment 120,666 114,263
Pipelines 8,426 8,153
Furniture and fixtures 14,618 15,642
Vehicles 5,442 4,645
Construction in progress 4,394 1,459
--------- ---------
Subtotal 306,717 292,519
Accumulated depreciation, depletion
and amortization (143,801) (130,276)
--------- ---------
Total $ 162,916 $ 162,243
========= =========
</TABLE>
<PAGE>
<PAGE>
NOTE 6--ACCRUED EXPENSES:
Accrued expenses are comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1994 1993
------- -------
(In thousands)
<S> <C> <C>
Interest $ 1,285 $ 836
Income taxes 486 1,950
Environmental-current portion (see Note 14) 484 2,403
Management incentive bonus 300 2,475
Excise taxes 5,952 5,376
Other 9,084 6,685
------- -------
Total $17,591 $19,725
======= =======
</TABLE>
<PAGE>
<PAGE>
NOTE 7--LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------------
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
9 3/4% senior subordinated notes, due
2003, interest payable semi-annually $100,000 $100,000
10.91% senior unsecured note, due 1994 to
1999, interest payable quarterly 11,250 13,750
Notes payable to others, collateralized
by real estate, 9% to 11%, due 1994
to 2010, interest payable monthly or
annually 4,594 5,088
8% secured promissory note, due 1995 to
1997, interest payable quarterly 2,917
Other 1,436 1,467
-------- --------
Subtotal 120,197 120,305
Less current portion (4,107) (3,035)
-------- --------
Total $116,090 $117,270
======== ========
</TABLE>
The Indenture supporting the 9 3/4% senior subordinated notes
("Notes") contains certain covenants that, among other things,
restrict the ability of the Company and its subsidiaries to create
liens, incur or guarantee debt, pay dividends, sell certain assets or
subsidiary stock, engage in certain mergers, engage in certain
transactions with affiliates or alter the Company's current line of
business. At December 31, 1994, the Company was in compliance with
these covenants. In addition, the Company is, subject to certain
conditions, obligated to offer to purchase a portion of the Notes at a
price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase, with the net cash
proceeds of certain sales or other dispositions of assets. Upon a
change of control, the Company will be required to offer to purchase
all of the Notes at 101% of the principal amount thereof, plus accrued
interest, if any, to the date of purchase. At December 31, 1994,
retained earnings available for dividends under the terms of the
Indenture was approximately $13,800,000.
The 10.91% senior unsecured note is due to The Prudential
Insurance Company of America ("Prudential") and the related agreement
includes certain covenants, determined on a FIFO inventory basis, that
require the Company to maintain a minimum net worth and working
capital; places certain restrictions on, while not precluding, the
purchase or redemption of the Company's capital stock, payment of
dividends and payments of subordinated debt and interest; limits the
dollar amount of new operating leases; and specifies certain
conditions for new long-term debt obligations. At December 31, 1994,
the Company was in compliance with these covenants. The remaining
balance is payable in nine semi-annual installments of $1,250,000
through 1999.
On March 1, 1994, the Company issued a $2,917,000, 8% promissory
note as part of the purchase price of nine service stations. The
principal is due in three equal annual installments with the first
payment due on March 1, 1995. Interest is payable quarterly.
At December 31, 1994, there was a $20,000,000 uncommitted credit
facility in place with a major bank to support the issuance of letters
of credit. At that date, the Company had $13,621,000 of irrevocable
letters of credit outstanding under this arrangement. This
uncommitted line of credit is subject to a negative pledge on working
capital.
In 1994 and 1993, the Company's interest expense was reduced by
approximately $288,000 and $1,304,000, respectively, as a result of
amortizing the proceeds received from a terminated interest rate swap
agreement. At December 31, 1994, there was approximately $606,000 of
deferred swap proceeds to be amortized over the remaining term of the
10.91% Prudential note.
Aggregate annual maturities of long-term debt as of December 31,
1994 are: 1995 - $4,107,000; 1996 - $4,178,000; 1997 - $4,257,000;
1998 - $3,153,000; 1999 - $3,346,000; and all years thereafter -
$101,156,000.
<PAGE>
<PAGE>
NOTE 8--FINANCIAL INSTRUMENTS AND HEDGING ACTIVITY:
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS
No. 107, "Disclosures About Fair Value of Financial Instruments" and
SFAS No. 119, "Disclosures about Derivative Financial Instruments and
Fair Value of Financial Instruments." The estimated fair value
amounts have been determined by the Company using available market
information and valuation methodologies described below. However,
considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates
presented herein may not be indicative of the amounts that the Company
could realize in a current market exchange. The use of different
market assumptions or valuation methodologies may have a material
effect on the estimated fair value amounts.
The carrying amounts and estimated fair values of the Company's
financial instruments are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1994 1993
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Balance Sheet--Financial
Instruments:
Assets:
Marketable securities $ 35,631 $ 35,631 $ 36,146 $ 36,146
Liabilities:
Fixed rate long-term debt $120,068 $106,854 $120,152 $118,751
</TABLE>
The carrying values of cash and cash equivalents, receivables,
accounts payable and accrued expenses approximate fair values due to
the short-term maturities of these instruments. Variable rate
long-term debt instruments are estimated to approximate fair values as
rates are tied to short-term indices.
MARKETABLE SECURITIES
The fair value of marketable securities was determined based on
quoted market prices from various brokers. See Note 2.
FIXED RATE LONG-TERM DEBT
The fair value of fixed rate long-term debt was estimated by
discounting future cash flows using rates estimated to be currently
available for debt of similar terms and remaining maturities.
HEDGING ACTIVITIES
The Company purchases crude oil futures contracts to reduce price
volatility and to lock-in margins in its refining and marketing
operations. In addition, the Company uses forward grain purchase
contracts and options to reduce price volatility on and to secure
grain supplies for its ethanol production operations. These contracts
permit settlement by delivery of commodities and, therefore, are not
financial instruments, as defined by SFAS No. 105. The Company uses
these contracts in its hedging activities. At December 31, 1994, the
Company's hedging activities had futures contracts maturing in 1995
covering 168,000 barrels of crude oil and grain purchase contracts for
approximately 190,000,000 pounds of grain, equating to approximately
90% of grain demand through September of 1995. In addition, options
had been purchased on approximately 58,000,000 pounds of the
contracted grain commitment. At December 31, 1993, the Company's
hedging activities had futures contracts maturing in 1994 covering
395,000 barrels of crude oil and grain purchase contracts maturing in
1994 and 1995 for approximately 146,000,000 pounds of grain. The
crude oil futures contracts qualify as hedges, and any gains or losses
resulting from market changes will be offset by losses or gains on the
Company's hedging contracts. The grain purchase contracts are forward
purchase contracts and have the effect of locking-in the Company's
grain cost. The options purchased will allow the Company to
participate in the market if grain prices drop significantly. Gains
and losses on hedging contracts are deferred and reported as a
component of the related transaction. Net deferred gains (losses) for
the Company's petroleum hedging activities were approximately $17,000
and $(476,000) at December 31, 1994 and 1993, respectively.
The Company is exposed to loss in the event of nonperformance by
the other parties to these contracts. However, the Company does not
anticipate nonperformance by the counterparties.
<PAGE>
<PAGE>
NOTE 9--INCOME TAXES:
The provision (benefit) for income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1994 1993 1992
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Current: Federal $ 1,547 $ 6,750 $ 2,765
State 294 2,211 24
Deferred: Federal (881) (3,952) (6,159)
State 297 (1,237) (257)
------- ------- -------
$ 1,257 $ 3,772 $(3,627)
======= ======= =======
</TABLE>
Income taxes paid in 1994, 1993 and 1992 were $5,379,000,
$6,672,000 and $3,803,000, respectively.
A reconciliation of the difference between the provision
(benefit) for income taxes and income taxes at the statutory U.S.
federal income tax rate is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1994 1993 1992
------- ------- -------
(In thousands)
<S> <C> <C> <C>
Income taxes (benefit) at
statutory U.S. federal
income tax rate $ 2,022 $ 3,513 $(2,055)
Increase (decrease) in taxes
resulting from:
State taxes, net 351 643 (154)
Statutory rate change related
to deferred income taxes 642
General business credits, net (802) (888) (932)
Federal tax credits from
nonconventional fuel (560) (742) (1,181)
Other, net 246 604 695
------- ------- -------
$ 1,257 $ 3,772 $(3,627)
======= ======= =======
</TABLE>
Deferred income taxes are provided to reflect temporary
differences in the basis of net assets for income tax and financial
reporting purposes. The tax effected temporary differences and credit
carryforwards which comprise deferred taxes are as follows:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------------ ------------------------------
Assets Liabilities Total Assets Liabilities Total
------- ----------- -------- ------- ----------- --------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Nondeductible accruals for
uncollectible receivables $ 217 $ 217 $ 170 $ 170
Insurance accruals 716 716 556 556
Insurance settlements 597 597 954 954
Other nondeductible accruals 382 382 180 180
Inventory costs capitalized
for income tax purposes 323 323 420 420
Nondeductible accrual for
lower of cost or market
adjustment on inventory 1,469 1,469
Nondeductible writedown of
marketable securities 255 255
------- -------- -------- ------ -------- --------
Total current 2,490 2,490 3,749 3,749
------- -------- -------- ------ -------- --------
Other nondeductible accruals 528 528 251 251
Other reserves 638 638 638 638
Restricted stock awards $ (179) (179) $ (361) (361)
Operating lease (1,061) (1,061) (1,114) (1,114)
Accelerated depreciation,
depletion and amortization
including intangible
drilling costs (21,700) (21,700) (20,529) (20,529)
Other 235 (8) 227 173 (13) 160
Tax credit carryforwards 7,795 7,795 5,105 5,105
------- -------- -------- ------ -------- --------
Total noncurrent 9,196 (22,948) (13,752) 6,167 (22,017) (15,850)
------- -------- -------- ------ -------- --------
Total $11,686 $(22,948) $(11,262) $9,916 $(22,017) $(12,101)
======= ======== ======== ====== ======== ========
</TABLE>
At December 31, 1994, the Company had a minimum tax credit
carryforward of approximately $5,694,000 available to offset future
income taxes payable to the extent regular income taxes payable
exceeds alternative minimum taxes payable. Minimum tax credits can be
carried forward indefinitely.
At December 31, 1994, the Company also had approximately
$2,101,000 of general business credits available to offset future
regular taxes payable. Pursuant to Federal income tax law, these
carryover credits must be used before any minimum tax credit carry-
forward can be used. Of the total general business credit available,
$868,000 will expire in 2008 and $1,233,000 will expire in 2009.<PAGE>
<PAGE>
NOTE 10--EMPLOYEE STOCK OWNERSHIP PLAN:
The Company and its subsidiaries have an Employee Stock Ownership
Plan ("ESOP") which is a noncontributory defined contribution plan
established primarily to acquire shares of the Company's common stock
for the benefit of all eligible employees. The ESOP's assets include
1,534,878 and 1,599,204 shares of the Company's common stock at
December 31, 1994 and 1993, respectively. At December 31, 1994 and
1993, 1,460,322 and 1,403,711, respectively, of these shares had been
allocated to participants and 74,556 and 195,493, respectively,
remained unallocated. Shares are allocated to participants when
principal payments are made on the loan discussed below. Allocations
to participant accounts are made on a formula based on the ratio that
each participant's compensation, during the Plan year, bears to the
compensation of all such participants. The Company treats all ESOP
shares as outstanding for earnings per share purposes.
The ESOP originally borrowed $6,500,000 from a bank and purchased
shares of the Company's common stock from existing shareholders. The
loan was purchased by the Company from the bank in 1993, when the loan
had a principal balance of $1,347,000. The loan obligation of the
ESOP bears interest at 80% of the prime rate. In 1994, the ESOP made
a principal payment of $833,000 leaving a balance of $514,000 due and
payable in September 1995. The loan obligation is considered unearned
employee benefit expense and, as such, recorded as a reduction of the
Company's stockholders' equity. Both the loan obligation and the
unearned benefit expense are reduced by the amount of any loan
repayments made by the ESOP. Contributions to the ESOP are made at
the discretion of the Board of Directors. The Company made
contributions of $900,000, $889,000 and $900,000 to the ESOP for 1994,
1993 and 1992, respectively.
<PAGE>
<PAGE>
NOTE 11--STOCK INCENTIVE PLAN:
The Company established the 1989 Stock Incentive Plan under which
500,000 shares of the Company's common stock were authorized to be
issued to deserving employees in the form of options and/or restricted
stock. The Plan is administered by the Compensation Committee of the
Board of Directors.
The following summarizes stock option transactions under this
plan:
<TABLE>
<CAPTION>
Number of Option
Options outstanding at Shares Prices
---------------------- --------- ------
<S> <C> <C>
January 1, 1992 200,142 $8.96 to 10.63
Granted 52,000 5.25
-------
December 31, 1992 252,142 5.25 to 10.63
Granted 113,500 7.75
Forfeited (57,085) 8.96 to 10.63
Exercised (3,700) 5.25 to 10.63
-------
December 31, 1993 304,857 5.25 to 10.63
Granted 10,000 9.25 to 10.38
Forfeited (2,000) 5.25
Exercised (500) 5.25
-------
December 31, 1994 312,357 $5.25 to 10.63
=======
Options exercisable at December 31:
1994 154,481 $5.25 to 10.63
1993 85,503 5.25 to 10.63
1992 74,202 8.96 to 10.63
</TABLE>
In 1990, an additional 29,500 shares of restricted stock were
granted under this plan of which 8,572 were forfeited in 1993 and
1,286 in 1994. At December 31, 1994, there were 163,801 shares
available for future grants.
Prior to adoption of the 1989 Stock Incentive Plan, the Company
granted shares to employees under Restricted Stock Plans as follows:
Shares
---------
1989 124,097*
1988 214,447**
*Net of 21,045 shares forfeited.
**Net of 33,746 shares forfeited.
All of the options or restricted stock grants are subject to
forfeiture with vesting ranging from 14% to 33% annually beginning one
year after the date of grant for restricted stock and exercise dates
of stock options. Compensation expense related to restricted stock
grants is charged to earnings over the appropriate vesting period.
All options were granted at fair market value at the date of grant and
expire on the tenth anniversary of the grant date.
<PAGE>
<PAGE>
NOTE 12--401(k) PLAN:
In 1993, the Company adopted a 401(k) retirement plan for its
employees. This plan complements the Company's Employee Stock
Ownership Plan by allowing the employees to invest on a pre-tax basis
in non-Giant stock investments thus diversifying their retirement
portfolios. For the year ended December 31, 1994 and 1993, the
Company had expensed $189,000 and $109,000, respectively, for matching
contributions under this plan.
<PAGE>
<PAGE>
NOTE 13--INTEREST, OPERATING LEASES AND RENT EXPENSE:
Interest paid and capitalized for 1994 was $11,644,000 and $0,
for 1993 was $4,711,000 and $249,000, and for 1992 was $7,871,000 and
$162,000, respectively.
The Company is committed to annual minimum rentals under
noncancelable operating leases that have initial or remaining lease
terms in excess of one year as of December 31, 1994 as follows:
<TABLE>
<CAPTION>
Land, building, machinery
and equipment leases
(In thousands)
-------------------------
<S> <C>
1995 $1,103
1996 2,710
1997 610
1998 550
1999 458
Later years 471
------
Total minimum payments required $5,902
======
</TABLE>
Total rent expense was $1,890,000, $1,584,000 and $1,430,000 for
1994, 1993 and 1992, respectively.
<PAGE>
<PAGE>
NOTE 14--COMMITMENTS AND CONTINGENCIES:
The Company and certain subsidiaries are defendants to various
legal actions. Certain of these pending legal actions involve or may
involve compensatory, punitive or other damages. Litigation is
subject to many uncertainties and it is possible that some of the
legal actions, proceedings or claims referred to above could be
decided adversely. Although the amount of liability at December 31,
1994 with respect to these matters is not ascertainable, the Company
believes that any resulting liability should not materially affect the
Company's financial condition or results of operations.
Federal, state and local laws and regulations relating to health
and the environment affect nearly all of the operations of the
Company. As is the case with all companies engaged in similar
industries, the Company faces significant exposure from actual or
potential claims and lawsuits involving environmental matters. These
matters involve alleged soil and water contamination, air pollution
and personal injuries or property damage allegedly caused by exposure
to hazardous materials manufactured, handled or used by the Company.
Future expenditures related to health and environmental matters cannot
be reasonably quantified in many circumstances due to the speculative
nature of remediation and clean-up cost estimates and methods, the
imprecise and conflicting data regarding the hazardous nature of
various types of waste, the number of other potentially responsible
parties involved, various defenses which may be available to the
Company and changing environmental laws and interpretations of
environmental laws.
The United States Environmental Protection Agency notified the
Company in May 1991 that it may be a potentially responsible party for
the release or threatened release of hazardous substances, pollutants,
or contaminants at the Lee Acres Landfill, which is owned by the
United States Bureau of Land Management ("BLM") and which is adjacent
to the Company's Farmington refinery which was operated until 1982.
Potentially responsible party liability is joint and several, such
that a responsible party may be liable for all of the clean-up costs
at a site even though it was responsible for only a small part of such
costs. At the present time, the Company is unable to determine the
extent of potential liability, if any, in this matter and has made no
provision therefore in its financial statements.
In 1994, the Company established an environmental liability
accrual for approximately $1,400,000 relating to ongoing environmental
projects, including the remediation of a free-phase hydrocarbon plume
at the Company's Farmington Refinery. In late 1994, the Company
accrued an additional $250,000 relating to hydrocarbon contamination
on 5.5 acres the Company owns in Bloomfield, New Mexico. At
December 31, 1994, the balance of the accrual was approximately
$1,600,000, recorded in the current and long-term section of the
Company's consolidated balance sheet.
The Company has received several tax notifications and
assessments from the Navajo Tribe relating to crude oil and natural
gas removed from properties located outside the boundaries of the
Navajo Indian Reservation in an area of disputed jurisdiction,
including a $1,800,000 severance tax assessment issued to Giant
Arizona in November 1991. The Company has invoked its appeal rights
with the Tribe's Tax Commission in connection with this assessment and
intends to vigorously oppose the assessment. It is the Company's
understanding that these appeals will be held in abeyance pending
further judicial clarification of the Tribe's taxing authority by
means of litigation involving other companies. It is possible,
however, that the Company's assessments will have to be litigated by
the Company before final resolution. The Company may receive further
tax assessments before judicial resolution of the Tribe's taxing
authority.
<PAGE>
<PAGE>
NOTE 15--QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
<TABLE>
<CAPTION>
Year Ended December 31, 1994
-----------------------------------
Quarter
-----------------------------------
First Second Third Fourth
------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $63,795 $74,285 $77,461 $77,917
Cost of products sold 40,881 46,940 53,576 51,962
------- ------- ------- -------
Gross margin 22,914 27,345 23,885 25,955
------- ------- ------- -------
Operating expenses 12,631 13,038 14,500 13,715
Selling, general and administrative expenses 2,209 3,545 3,124 3,052
Depreciation, depletion and amortization 3,801 3,896 3,685 3,658
Reduction of carrying value of
oil and gas properties 3,395
Net earnings (loss) 1,412 2,957 (2,253) 2,405
Net earnings (loss) per common share $ 0.12 $ 0.24 $ (0.19) $ 0.20
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1993
-----------------------------------
Quarter
-----------------------------------
First Second Third Fourth
------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net revenues $77,363 $85,919 $81,878 $70,597
Cost of products sold 53,412 56,107 52,432 45,816
------- ------- ------- -------
Gross margin 23,951 29,812 29,446 24,781
------- ------- ------- -------
Operating expenses 11,273 11,906 12,447 13,258
Selling, general and administrative expenses 3,006 3,566 2,966 4,104
Depreciation, depletion and amortization 3,893 3,917 3,879 3,948
Reduction of carrying value of
oil and gas properties 15,511
Earnings (loss) before extraordinary item 3,267 6,263 5,005 (8,270)
Earnings (loss) per common share before
extraordinary item $ 0.27 $ 0.51 $ 0.41 $ (0.68)
Net earnings (loss) 3,267 6,263 5,005 (8,654)
Net earnings (loss) per common share $ 0.27 $ 0.51 $ 0.41 $ (0.71)
</TABLE>
<PAGE>
<PAGE>
NOTE 16--SUPPLEMENTARY FINANCIAL INFORMATION FOR OIL AND GAS
PRODUCING ACTIVITIES (UNAUDITED):
The following is historical information relating to the Company's
oil and gas operations.
Excluded from amounts subject to amortization as of December 31,
1994 and 1993 are $1,551,000 and $2,973,000, respectively, of costs
associated with unevaluated properties. The majority of the
evaluation activities are expected to be completed in five years.
COSTS EXCLUDED FROM AMORTIZATION
<TABLE>
<CAPTION>
Year Costs Incurred Excluded
----------------------------- Costs at
Prior December 31,
Years 1992 1993 1994 1994
----- ---- ---- ---- ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Property acquisition $667 $200 $327 $357 $1,551
==== ==== ==== ==== ======
</TABLE>
CAPITALIZED COSTS
The Company's net investment in oil and gas properties was as
follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1994 1993
------- -------
(In thousands)
<S> <C> <C>
Capitlized costs:
Proved properties $78,388 $73,336
Unproved properties 1,551 2,973
------- -------
79,939 76,309
Less accumulated depreciation, depletion
and amortization 56,919 50,945
------- -------
Net capitalized costs $23,020 $25,364
======= =======
</TABLE>
During 1994 and 1993, the Company recognized non-cash writedowns
of its oil and gas properties of $3,395,000 and $15,511,000,
respectively, for the excess of net capitalized costs over the
estimated present value of net future cash inflows. These writedowns
were recorded as increases to accumulated depreciation, depletion and
amortization.
COSTS INCURRED
Costs incurred (exclusive of general support facilities) in oil
and gas exploration activities (all in the United States) were as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1994 1993 1992
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Property acquisition costs:
Proved properties $ 326 $ 87 $ 39
Unproved properties 357 327 200
------ ------ ------
Subtotal 683 414 239
Development costs 2,759 3,211 1,786
Exploration costs 123 290 439
------ ------ ------
Total $3,565 $3,915 $2,464
====== ====== ======
</TABLE>
ESTIMATED QUANTITIES (ALL IN THE UNITED STATES) OF PROVED OIL AND GAS
RESERVES
Proved reserves are 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 reservoirs under existing economic and operating
conditions. Proved developed reserves are those which are expected to
be recovered through existing wells with existing equipment and
operating methods. The Company's reserves are located primarily in
the southwestern United States.
<PAGE>
<PAGE>
The following schedules set forth the Company's net proved and
proved developed oil and gas reserves, as determined by independent
consultants, along with a summary of the changes in the quantities of
net proved reserves:
<TABLE>
<CAPTION>
Oil Gas
(Thousands (Millions
of barrels) of cubic feet)
------------ --------------
<S> <C> <C>
Proved Reserves:
At January 1, 1992 3,320 35,083
Revisions of previous estimates 144 (9,875)
Extension, discoveries and other additions 158 284
Sales of minerals in place (7,571)
Production (337) (1,978)
------ ------
At December 31, 1992 3,285 15,943
------ ------
Revisions of previous estimates (1,036) (2,748)
Extension, discoveries and other additions 234 1,284
Production (287) (1,481)
------ ------
At December 31, 1993 2,196 12,998
------ ------
Revisions of previous estimates 151 (187)
Extension, discoveries and other additions 135 404
Production (267) (1,355)
------ ------
At December 31, 1994 2,215 11,860
====== ======
</TABLE>
Revisions are due to unsuccessful drilling efforts, downward
revisions of well economic productivity and limitations in drilling
for the replacement of reserves caused by reduced capital
expenditures. In 1992, the Company sold a volume of reserves equal to
approximately 50% of its then working interest in certain proved
developed natural gas reserves along with a portion of the associated
gathering system. The purchase and sale agreement associated with
that transaction contains a provision whereby the ownership interest
in the subject reserves is adjusted annually at December 31, 1993
through 1996, based on year-end reserve reports, so that the buyer
receives a cumulative working interest estimated for the life of the
reserves equal to the reserve volume purchased. In 1994, there was a
positive gas revision for the Company equal to approximately 1,018
million cubic feet and in 1993, there was a negative gas revision of
approximately 1,159 million cubic feet.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Oil Gas
(Thousands (Millions
of barrels) of cubic feet)
------------ --------------
<S> <C> <C>
Proved developed reserves included in above:
At December 31, 1992 3,076 11,100
At December 31, 1993 1,855 8,225
At December 31, 1994 1,884 9,269
</TABLE>
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
RELATING TO PROVED OIL AND GAS RESERVES
The Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves ("Standardized Measure") is a
disclosure requirement under SFAS No. 69. The Standardized Measure
does not purport to present the fair market value of a company's
proved oil and gas reserves. This would require consideration of
expected future economic and operating conditions, which are not taken
into account in calculating the Standardized Measure.
Under the Standardized Measure, future cash inflows were
estimated by applying year-end prices, adjusted for fixed and
determinable escalations, to the estimated future production of
year-end proved reserves. Prices tend to be volatile and have
decreased significantly for natural gas and increased somewhat for
crude oil since year-end. Future cash inflows were reduced by
estimated future production and development costs to determine pre-tax
cash inflows. Future income taxes were computed by applying the
statutory tax rate to the excess of pre-tax cash inflows over the
Company's tax basis in the associated proved oil and gas properties.
Tax credits, including the federal coal seam gas credit, and permanent
differences were also considered in the future income tax calculation.
Future net cash inflows after income taxes were discounted using a 10%
annual discount rate to arrive at the Standardized Measure.
<PAGE>
<PAGE>
Set forth below is the Standardized Measure relating to proved
oil and gas reserves:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Future cash inflows $ 54,061 $ 56,958 $ 88,949
Future production and
development costs (24,515) (23,722) (27,250)
-------- -------- --------
Future net cash flows
before income taxes 29,546 33,236 61,699
10% annual discount for estimated
timing of cash flows (10,588) (12,589) (24,050)
-------- -------- --------
Discounted future net cash
flows before income taxes 18,958 20,647 37,649
Income taxes (discounted) (915) (5,712)
-------- -------- --------
Standardized measure of
discounted future net cash flows $ 18,958 $ 19,732 $ 31,937
======== ======== ========
</TABLE>
<PAGE>
<PAGE>
Changes in the Standardized Measure of Discounted Future Net Cash
Flows Relating to Proved Oil and Gas Reserves for 1994, 1993 and 1992:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Sales of oil and gas produced,
net of production costs $(3,416) $ (4,496) $ (6,573)
Net changes in prices and
production costs relating to
future production (4,368) (10,758) 8,769
Extensions, discoveries and
improved recovery 970 2,331 1,354
Development costs incurred
during the period 2,759 3,211 1,786
Changes in estimated future
development costs 133 (2,459) (2,494)
Revisions in previous quantity
estimates 644 (10,031) (8,166)
Net changes due to purchases and
sales of minerals in place (6,861)
Accretion of discount 1,973 3,194 4,149
Net changes in income taxes 915 4,797 1,619
Other (384) 2,006 (3,141)
------- -------- --------
Net decrease (774) (12,205) (9,558)
Beginning of year 19,732 31,937 41,495
------- -------- --------
End of year $18,958 $ 19,732 $ 31,937
======= ======== ========
</TABLE>
<PAGE>
<PAGE>
Results of operations for exploration and production
activities (all in the United States):
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Revenues $ 5,959 $ 7,409 $ 9,512
Production costs and
other expenses (4,055) (4,776) (5,365)
Reduction of carrying value
of crude oil and natural
gas properties (3,395) (15,511) (13,800)
Depreciation, depletion
and amortization (2,794) (4,222) (4,556)
------- -------- --------
(4,285) (17,100) (14,209)
Income tax benefit 1,493 5,733 5,778
------- -------- --------
Results of operations for
producing activities (excluding
corporate overhead
and interest expense) $(2,792) $(11,367) $ (8,431)
======= ======== ========
</TABLE>
<PAGE>
<PAGE>
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
<PAGE>
<PAGE>
PART III
Certain information required by Part III is omitted from
this Report by virtue of the fact that the Registrant will file
with the Securities and Exchange Commission a definitive proxy
statement relating to the Company's Annual Meeting of
Stockholders to be held May 18, 1995 pursuant to Regulation 14A
(the "Proxy Statement") not later than 120 days after the end of
the fiscal year covered by this Report, and certain information
to be included therein is incorporated herein by reference. The
Company expects to disseminate the Proxy Statement to
stockholders on or about March 30, 1995.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required
by this Item is incorporated by reference to the information
contained in the Proxy Statement under the caption "Election of
Directors."
The information concerning the Company's executive officers
required by this Item is incorporated by reference to the section
in Part I, Item 4 hereof entitled "Executive Officers of the
Registrant."
The information concerning compliance with Section 16(a) of
the Exchange Act required by this Item is incorporated by
reference to the information contained in the Proxy Statement
under the caption "Security Ownership of Certain Beneficial
Owners and Management."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by
reference to the information contained in the Proxy Statement
under the captions "Election of Directors," "Executive
Compensation," "Compensation Committee Report on Executive
Compensation" and "Compensation Committee Interlocks and Insider
Participation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item is incorporated by
reference to the information contained in the Proxy Statement
under the captions "Election of Directors" and "Security
Ownership of Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by
reference to the information contained in the Proxy Statement
under the captions "Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions."<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) The following financial statements are included
in Item 8:
(i) Independent Auditors' Report
(ii) Consolidated Balance Sheets - December 31, 1994
and 1993
(iii) Consolidated Statements of Operations - Years
ended December 31, 1994, 1993 and 1992
(iv) Consolidated Statements of Stockholders' Equity
- Years ended December 31, 1994, 1993 and 1992
(v) Consolidated Statements of Cash Flows - Years
ended December 31, 1994, 1993 and 1992
(vi) Notes to Consolidated Financial Statements
(2) Financial Statement Schedule. The following financial
statement schedule of Giant Industries, Inc. for the years ended
December 31, 1994, 1993 and 1992 is filed as part of this Report
and should be read in conjunction with the Consolidated Financial
Statements of Giant Industries, Inc.
Independent Auditors' Report on Schedule . . . . . S-1
Schedule II - Valuation and Qualifying Accounts . . S-2
Schedules not listed above have been omitted because
they are not applicable or are not required or because the
information required to be set forth therein is included in the
Consolidated Financial Statements or Notes thereto.
(3) Exhibits. The Exhibits listed on the accompanying
Index to Exhibits immediately following the financial statement
schedule are filed as part of, or incorporated by reference
into, this Report.
Contracts with management and any compensatory plans or
arrangements relating to management are as follows:
Exhibit
No. Description
------- -----------
10.1 1989 Stock Incentive Plan of the Registrant.
Incorporated by reference to Exhibit 10.1 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, File No. 1-10398.
10.3 ESOP Substitute Excess Deferred Compensation Benefit
Plan. Incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, File No. 1-10398.
10.6 Amended 1988 Restricted Stock Plan of Registrant.
Incorporated by reference to Exhibit 10.3 to Form S-1.
10.7 1989 Stock Option Plan of Registrant. Incorporated by
reference to Exhibit 10.4 to Form S-1.
10.30 Employment Agreement, dated as of November 16, 1989,
between James E. Acridge and the Company. Incorporated by
reference to Exhibit 10.52 to Amendment No. 2.
10.31 Employment Agreement, dated as of November 16, 1989,
between Fredric L. Holliger and the Company. Incorporated
by reference to Exhibit 10.53 to Amendment No. 2.
10.32 Employment Agreement, dated as of August 1, 1990 between
Morgan Gust and the Company. Incorporated by reference to
Exhibit 10.64 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, File No. 1-10398.
10.35 Giant Industries, Inc. and Affiliated Companies 401(k)
Plan. Incorporated by reference to Exhibit 10.46 to
Amendment No. 2 to the Form S-3 Registration Statement
under the Securities Act of 1933 as filed November 12,
1993, File No. 33-69252.
_________________________________
Form S-1--Refers to the Form S-1 Registration Statement
under the Securities Act of 1933 as filed October 16, 1989, File
No. 33-31584.
Amendment No. 2--Refers to the Amendment No. 2 to Form S-1
Registration Statement under the Securities Act of 1933 as filed
November 20, 1989, File No. 33-31584.
(b) Reports on Form 8-K. No reports on Form 8-K were
filed by the Company during the fiscal year ended December 31,
1994.<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 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.
GIANT INDUSTRIES, INC.
By: / s / James E. Acridge
------------------------------
James E. Acridge
Chairman of the Board, President
and Chief Executive Officer
March 30, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date
indicated.
/s/ James E. Acridge
---------------------------------------
James E. Acridge, Chairman of the Board,
President, Chief Executive Officer
and Director
March 30, 1995
/s/ A. Wayne Davenport
---------------------------------------
A. Wayne Davenport
Vice President and Corporate Controller
(Principal Accounting Officer)
March 30, 1995
/s/ Fredric L. Holliger
---------------------------------------
Fredric L. Holliger, Executive Vice President,
Chief Operating Officer and Director.
March 30, 1995
<PAGE>
<PAGE>
/s/ Gary L. Nielsen
---------------------------------------
Gary L. Nielsen, Vice President Finance
and Treasurer (Principal Financial Officer)
March 30, 1995
/s/ F. Michael Geddes
---------------------------------------
F. Michael Geddes, Director
March 30, 1995
/s/ George C. Hixon
---------------------------------------
George C. Hixon, Director
March 30, 1995
/s/ Harry S. Howard, Jr.
---------------------------------------
Harry S. Howard, Jr., Director
March 30, 1995
/s/ Richard T. Kalen, Jr.
---------------------------------------
Richard T. Kalen, Jr., Director
March 30, 1995
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Giant Industries, Inc.
Scottsdale, Arizona
We have audited the consolidated financial statements of Giant
Industries, Inc. and subsidiaries (the "Company") as of
December 31, 1994 and 1993, and for each of the three years in
the period ended December 31, 1994, and have issued our report
thereon dated March 6, 1995. Our audits also included the
financial statement schedule of the Company listed in Item 14.
This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 6, 1995
S-1
<PAGE>
<PAGE>
<TABLE>
SCHEDULE II
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Three years ended December 31, 1994
(In thousands)
<CAPTION>
Charged
Balance at (credited) Balance
beginning to costs Deduction at end
of period and expenses (a) of period
---------- ------------ --------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts $429 $167 $ (50) $546
==== ==== ===== ====
Year ended December 31, 1993:
Allowance for doubtful accounts $415 $133 $(119) $429
==== ==== ===== ====
Year ended December 31, 1992:
Allowance for doubtful accounts $335 $127 $ (47) $415
==== ==== ===== ====
(a) Deductions are specific trade accounts determined to be uncollectible.
S-2
/TABLE
<PAGE>
<PAGE>
GIANT INDUSTRIES, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1994
INDEX TO EXHIBITS
Definitions:
Form S-1--Refers to the Form S-1 Registration Statement under the
Securities Act of 1933 as filed October 16, 1989, File No. 33-31584.
Amendment No. 1--Refers to the Amendment No. 1 to Form S-1
Registration Statement under the Securities Act of 1933 as filed
October 27, 1989, File No. 33-31584.
Amendment No. 2--Refers to the Amendment No. 2 to Form S-1
Registration Statement under the Securities Act of 1933 as filed
November 20, 1989, File No. 33-31584.
Amendment No. 3--Refers to the Amendment No. 3 to Form S-1
Registration Statement under the Securities Act of 1933 as filed
December 12, 1989, File No. 33-31584.
Form S-3--Refers to the Form S-3 Registration Statement under the
Securities Act of 1933 as filed September 22, 1993, File No. 33-69252.
Exhibit No. Description
----------- -----------
3.1 Restated Certificate of Incorporation of the Giant
Industries, Inc., a Delaware corporation (the "Company").
Incorporated by reference to Exhibit 3.1 to Amendment No. 3.
3.2 Bylaws of the Company, as amended. Incorporated by
reference to Exhibit 3.2 to Amendment No. 3.
3.3 Articles of Incorporation of Giant Exploration & Production
Company, a Texas corporation ("Giant Exploration"), formerly
Hixon Acquisition Corp. Incorporated by reference to Exhibit
2.1, Annex III to Form S-1.
3.4 Bylaws of Giant Exploration. Incorporated by reference to
Exhibit 2.1, Annex IV to Form S-1.
3.5 Articles of Incorporation of Giant Industries Arizona, Inc.,
an Arizona corporation ("Giant Arizona") formerly Giant
Acquisition Corp. Incorporated by reference to Exhibit 2.1,
Annex V to Form S-1.
3.6 Bylaws of Giant Arizona. Incorporated by reference to
Exhibit 2.1, Annex VI to Form S-1.
3.7 Articles of Incorporation of Ciniza Production Company.
Incorporated by reference to Exhibit 3.7 to Form S-3.
<PAGE>
<PAGE>
3.8 Bylaws of Ciniza Production Company. Incorporated by
reference to Exhibit 3.8 to Form S-3.
3.9 Articles of Incorporation of Giant Stop-N-Go of New Mexico,
Inc. Incorporated by reference to Exhibit 3.9 to Form S-3.
3.10 Bylaws of Giant Stop-N-Go of New Mexico, Inc. Incorporated
by reference to Exhibit 3.10 to Form S-3.
3.11 Articles of Incorporation of Giant Four Corners, Inc.
Incorporated by reference to Exhibit 3.11 to Form S-3.
3.12 Bylaws of Giant Four Corners, Inc. Incorporated by
reference to Exhibit 3.12 to Form S-3.
3.13*** Articles of Incorporation of Giant Mid-Continent, Inc.
3.14*** Bylaws of Giant Mid-Continent, Inc.
4.1 Amended and Restated Note Agreement, dated as of
September 30, 1993, among the Prudential Insurance Company
of America ("Prudential"), Pruco Life Insurance Company
("Pruco"), the Company and Giant Arizona, relating to
$20,000,000 of 10.91% Senior Notes due March 31, 1999.
Incorporated by reference to Exhibit 4.13 to Amendment
No. 2 to the Form S-3 Registration Statement under the
Securities Act of 1933 as filed November 12, 1993,
File No. 33-69252.
4.2*** Letter Amendment No. 1, dated December 31, 1994, to Amended
and Restated Note Agreement, dated September 30, 1993,
among Prudential, Pruco, the Company and Giant Arizona.
4.3 Indenture, dated as of November 29, 1993 among the Company,
as Issuer, the Subsidiary Guarantors, as guarantors, and
NBD Bank, National Association, as Trustee, relating to
$100,000,000 of 9 3/4% Senior Subordinated Notes due 2003.
Incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K dated November 29, 1993, File
No. 1-10398.
10.1 1989 Stock Incentive Plan of the Company. Incorporated by
reference to Exhibit 10.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989,
File No. 1-10398.
10.2 Employee Stock Ownership Plan and Trust Agreement of the
Company, as amended. Incorporated by reference to Exhibit
10.1 of the Company's Report on Form 10-Q for the quarter
ended September 30, 1994, File No. 1-10398.
10.3 ESOP Substitute Excess Deferred Compensation Benefit Plan.
Incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1992, File 1-10398. <PAGE>
<PAGE>
10.4 Loan Agreement, dated December 20, 1991, between NBD Bank,
National Association and Continental Bank, N.A. as trustee
under the Employee Stock Ownership Plan and Trust Agreement
of the Company. Incorporated by reference to Exhibit 10.7
to the Company's Annual Report on Form 10-K for fiscal year
ended December 31, 1991, File No. 1-10398.
10.5 Term Note for $2,896,831.80, dated December 20, 1991,
between NBD Bank, National Association and the Employee
Stock Ownership Plan and Trust Agreement of the Company.
Incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for fiscal year ended
December 31, 1991, File No. 1-10398.
10.6 Amended 1988 Restricted Stock Plan of the Company.
Incorporated by reference to Exhibit 10.3 Form S-1.
10.7 1989 Stock Option Plan of the Company. Incorporated by
reference to Exhibit 10.4 to Form S-1.
10.8 Form of Assignment of Oil & Gas and Mineral Leases between
Mtrust Corp., N.A., Alexander P. Hixon and George C. Hixon,
Trustees of the Elizabeth F. Hixon Trust, and Hixon
Development Company. Incorporated by reference to Exhibit
10.12 to Form S-1.
10.9 Form of Assignment of Overriding Royalty Interest between
Mtrust Corp., N.A., Alexander P. Hixon and George C. Hixon,
Trustees of the Elizabeth F. Hixon Trust, and Hixon
Development Company. Incorporated by reference to Exhibit
10.13 to Form S-1.
10.10 Purchase Agreement, dated November 29, 1990, between Giant
Arizona and Prime Pinnacle Peak Properties Limited
Partnership. Incorporated by reference to Exhibit 10.16 of
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-10398.
10.11 Escrow Instructions, dated January 7, 1991, between Prime
Pinnacle Peak Properties Limited Partnership and Giant
Arizona. Incorporated by reference to Exhibit 10.17 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-10398.
10.12 Agreement for Leasing of Service Station Site, dated
March 1, 1991, between Giant Arizona and Prime Pinnacle Peak
Properties Limited Partnership. Incorporated by reference
to Exhibit 10.18 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, File
No. 1-10398.
<PAGE>
<PAGE>
10.13 First Amendment to Agreement for Leasing of Service Station
Site, dated March 1, 1991, between Giant Arizona and Prime
Pinnacle Peak Properties Limited Partnership. Incorporated
by reference to Exhibit 10.18 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992,
File 1-10398.
10.14 Purchase and Sale Agreement, dated as of May 7, 1991,
between New Bank of New England N.A., Den Norske Bank,
Kansallis--Osake--Pankki--and Portales Energy Company, Inc.
and the Company. Incorporated by reference to Exhibit 10.4
to the Company's Report on Form 10-Q for the quarter ended
June 30, 1991, File No. 1-10398.
10.15 Aircraft Lease Purchase Agreement, dated as of June 21,
1991, between Metlife Capital Corporation and the Company.
Incorporated by reference to Exhibit 10.1 to the Company's
Report on Form 10-Q for the quarter ended June 30, 1991,
File No. 1-10398.
10.16 Promissory Note for $600,000, dated December 1, 1988, from
JEA to Metlife Capital Corporation ("Metlife").
Incorporated by reference to Exhibit 10.38 to Form S-1.
10.17 Promissory Note for $825,000, dated December 20, 1988, from
JEA to Metlife. Incorporated by reference to Exhibit 10.39
to Form S-1.
10.18 Promissory Note for $750,000, dated December 28, 1987, from
JEA to Metlife. Incorporated by reference to Exhibit 10.40
to Form S-1.
10.19 Promissory Note for $825,000, dated June 28, 1988, from JEA
to Metlife. Incorporated by reference to Exhibit 10.41 to
Form S-1.
10.20 Promissory Note for $900,000, dated August 31, 1988, from
JEA to Metlife. Incorporated by reference to Exhibit 10.42
to Form S-1.
10.21 Promissory Note for $1,125,000, dated April 21, 1989, from
JEA to Metlife. Incorporated by reference to Exhibit 10.43
to Form S-1.
10.22 Promissory Note for $1,087,500, dated December 30, 1988,
from JEA to Metlife. Incorporated by reference to Exhibit
10.44 to Form S-1.
10.23 Promissory Note for $1,082,900, dated December 30, 1988,
from JEA to Metlife. Incorporated by reference to Exhibit
10.45 to Form S-1.
10.24* Sales Agreement, dated June 6, 1989, between Giant Arizona
and Mobil Oil Corporation. Incorporated by reference to
Exhibit 10.47 to Amendment No. 2. <PAGE>
<PAGE>
10.25* Amendment, dated April 20, 1990, to Sales Agreement, dated
June 6, 1989, between Giant Arizona and Mobil Oil
Corporation. Incorporated by reference to Exhibit 10.51 of
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, File No. 1-10398.
10.26* Sales Agreement, dated February 10, 1989, between Giant
Arizona and Conoco Inc. Incorporated by reference to Exhibit
10.48 to Amendment No. 2.
10.27** Crude Oil and Condensate Sales and Purchase Agreement, dated
August 1, 1994, between Meridian Oil Trading Inc. (Seller)
and Giant Refining Company, a division of Giant Industries
Arizona, Inc. (Buyer).
10.28** Natural Gas Liquids Sales and Purchase Agreement, dated
October 27, 1994, between Meridian Oil Hydrocarbons Inc.
and Giant Refining Company, a division of Giant Industries
Arizona, Inc.
10.29* Natural Gasoline Purchase and Sale Agreement, dated
September 1, 1990, between Sunterra Gas Processing Company
and Giant Arizona. Incorporated by reference to Exhibit
10.57 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, File No. 1-10398.
10.30 Employment Agreement, dated as of November 16, 1989, between
James E. Acridge and the Company. Incorporated by reference
to Exhibit 10.52 to Amendment No. 2.
10.31 Employment Agreement, dated as of November 16, 1989, between
Fredric L. Holliger and the Company. Incorporated by
reference to Exhibit 10.53 to Amendment No. 2.
10.32 Employment Agreement, dated as of August 1, 1990 between
Morgan Gust and the Company. Incorporated by reference to
Exhibit 10.64 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, File
No. 1-10398.
10.33 Consulting Agreement, dated January 1, 1990, between the
Company and Kalen and Associates. Incorporated by reference
to Exhibit 10.66 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990, File
No. 1-10398.
10.34 Consulting Agreement, dated March 12, 1992, between the
Company and Geddes and Company. Incorporated by reference
to Exhibit 10.1 to the Company's Report on Form 10-Q for the
quarter ended June 30, 1992, File No. 1-10398.
<PAGE>
<PAGE>
10.35 Giant Industries, Inc. and Affiliated Companies 401(k) Plan.
Incorporated by reference to Exhibit 10.46 to Amendment No.
2 to the Form S-3 Registration Statement under the
Securities Act of 1933 as filed November 12, 1993, File No.
33-69252.
11.1*** Statement regarding computation of earnings per share.
18.1 Letter regarding change in accounting principles.
Incorporated by reference to Exhibit 18.1 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, File No. 1-10398.
21.1*** Subsidiaries of the Company.
23.1*** Consent of Intera Information Technologies, Inc.
23.2*** Consent of Deloitte & Touche LLP to incorporate reports in
previously filed Registration Statement.
27 *** Financial Data Schedule.
99.1*** Information required by Rule 15d-21 under the Securities Act
of 1934 for the year ended December 31, 1994 for the Giant
Industries, Inc. and Affiliated Companies Employee Stock
Ownership Plan.
*Certain information contained in these documents has been afforded
confidential treatment.
**Incomplete versions filed; portions for which confidential treatment
has been requested filed supplementary.
***Filed herewith.
EXHIBIT 3.13
ARTICLES OF INCORPORATION
OF
GIANT MID-CONTINENT, INC.
_________________________
We, the undersigned incorporators, having associated
ourselves together for the purpose of forming a corporation under
the laws of the State of Arizona, adopt the following Articles of
Incorporation:
I.
NAME
The name of the corporation is Giant Mid-Continent, Inc.
II.
PURPOSE
This corporation is organized for the purpose of trans-
acting any or all lawful business for which corporations may be
incorporated under the laws of the State of Arizona, as amended
from time to time.
III.
INITIAL BUSINESS
The corporation initially intends actually to conduct
in the State of Arizona the business of exploring for, producing,
refining, marketing, selling and otherwise dealing in gasoline
and all other petroleum products.
IV.
AUTHORIZED CAPITAL
The corporation shall have authority to issue five
hundred thousand (500,000) common shares with one cent ($.01) par
value per share. Shares shall be paid for at such time, and in
such manner, as the Board of Directors shall determine.
V.
BOARD OF DIRECTORS
The Board of Directors shall be comprised of not less
than one (1) nor more than seven (7) members, the exact number of
which shall initially be fixed by the incorporators and
thereafter from time to time by resolution of the Board of
Directors. The initial Board of Directors shall consist of three
(3) members, who shall serve as directors until the first annual
meeting of the shareholders or until their successors are elected
and qualified, and whose names and addresses are:
Name Address
James E. Acridge 23733 N. Scottsdale Road
Scottsdale, Arizona 85255
Fredric L. Holliger 23733 N. Scottsdale Road
Scottsdale, Arizona 85255
Morgan M. Gust 23733 N. Scottsdale Road
Scottsdale, Arizona 85255
VI.
LIMITATION OF DIRECTOR LIABILITY
No director of the corporation shall be personally
liable to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director; provided,
however, that this Article shall not eliminate or limit the
liability of a director for (i) any breach of the director's duty
of loyalty to the corporation or its shareholders; (ii) acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) authorizing the
unlawful payment of a dividend or other distribution on the
corporation's capital stock or the unlawful purchase of its
capital stock; (iv) a violation of Arizona Revised Statutes
Section 10-041 -- Director conflicts of interest; or (v) any
transaction from which the director derived an improper personal
benefit.
VII.
INCORPORATORS
The names and addresses of the incorporators are:
Name Address
Carlos A. Guerra 23733 N. Scottsdale Road
Scottsdale, Arizona 85255
Morgan M. Gust 23733 N. Scottsdale Road
Scottsdale, Arizona 85255
All powers, duties and responsibilities of the
incorporators shall cease at the time of delivery of these
Articles of Incorporation to the Arizona Corporation Commission
for filing.
VIII.
STATUTORY AGENT
FC Service Corporation, an Arizona corporation, Two
North Central Avenue, Suite 2200, Phoenix, Arizona 85004-2390, is
hereby appointed the initial Statutory Agent for the corporation
for the State of Arizona.
IX.
Known Place of Business
The corporation's known place of business is 23733
North Scottsdale Road, Scottsdale, Arizona 85255.
IN WITNESS WHEREOF, the undersigned incorporators have
hereunto affixed their signatures this 22nd day of December,
1994.
/s/ Carlos A. Guerra
__________________________________
Carlos A. Guerra
/s/ Morgan M. Gust
__________________________________
Morgan M. Gust
EXHIBIT 3.14
BYLAWS
of
GIANT MID-CONTINENT, INC.
ARTICLE I
Corporation Articles
Section 1.01. Reference to Articles. Any reference herein
made to the corporation's Articles shall be deemed to refer to its
Articles of Incorporation and all amendments thereto as at any
given time on file with the Arizona Corporation Commission,
together with any and all certificates filed by the corporation
with the Arizona Corporation Commission (or any successor to its
functions) pursuant to applicable law.
Section 1.02. Seniority. The Articles shall in all respects
be considered senior and superior to these Bylaws, with any
inconsistency to be resolved in favor of the articles, and with
these Bylaws to be deemed automatically amended from time to time
to eliminate any such inconsistency which may then exist.
ARTICLE II
Corporation Offices
Section 2.01. Known Place of Business. The known place of
business of the corporation in the State of Arizona shall be the
office of its statutory agent unless otherwise designated in the
Articles. The corporation may have such other offices, either
within or without the State of Arizona, as the board of directors
may designate or as the business of the corporation may require
from time to time.
Section 2.02. Changes. The board of directors may change the
corporation's known place of business or its statutory agent from
time to time by filing a statement with the Arizona Corporation
Commission pursuant to applicable law.
ARTICLE III
Shareholders
Section 3.01. Annual Meetings. Each annual meeting of the
shareholders is to be held during the second quarter of each year,
commencing with the year 1995, at a time and place as determined by
the board of directors, or in the absence of action by the board,
as set forth in the notice given, or waiver signed, with respect to
such meeting pursuant to Section 3.03 below. At the annual
meeting, shareholders shall elect a board of directors and transact
such other business as may be properly brought before the meeting.
If for any reason any annual meeting is not held on the date
determined as set forth above, a deferred annual meeting may
thereafter be called and held in lieu thereof, at which the same
proceedings (including the election of directors) may be conducted.
Any director elected at any annual meeting, deferred annual
meeting, or special meeting shall continue in office until the
election of his successor, subject to his earlier resignation
pursuant to Section 7.01 below.
Section 3.02. Special Meetings. Special meetings of the
shareholders may be held whenever and wherever called for by the
chairman of the board, the president or the board of directors, or
by the written demand of the holders of not less than ten percent
(10%) of all issued and outstanding shares of the corporation
entitled to vote at any such meeting. Any written demand by
shareholders shall state the purpose or purposes of the proposed
meeting, and business to be transacted at any such meeting shall be
confined to the purposes stated in the notice thereof, and to such
additional matters as the chairman of the meeting may rule to be
germane to such purposes.
Section 3.03. Notices. Not less than ten (10) nor more than
fifty (50) days (inclusive of the date of meeting) before the date
of any meeting of the shareholders and at the direction of the
person or persons calling the meeting, the secretary of the
corporation, or any other officer of the corporation, shall cause
a written notice setting forth the time, place, and general
purposes of the meeting to be delivered personally or to be
deposited in the mail, with first class or airmail postage prepaid,
addressed to each shareholder of record at his last address as it
appears on the corporation's records on the applicable record date.
Section 3.04. Waiver of Notice. Any shareholder may waive
call or notice of any annual, deferred annual, or special meeting
(and any adjournment thereof) at any time before, during which, or
after it is held. Attendance of a shareholder at any such meeting
in person or by proxy shall automatically evidence his waiver of
call and notice of such meeting (and any adjournment thereof)
unless he or his proxy is attending the meeting for the express
purpose of objecting to the transaction of business because the
meeting has not been properly called or noticed. No call or notice
of a meeting of the shareholders shall be necessary if each
shareholder waives the same in writing or by attendance.
Section 3.05. Shareholders of Record. For the purpose of
determining shareholders entitled to notice of or to vote at any
meeting of shareholders (and at any adjournment of such meeting),
or shareholders entitled to consent to corporate action without a
meeting or shareholders entitled to receive payment of any
dividend, or for any other lawful action, the board of directors
may fix in advance a record date which shall not be more than
seventy (70) nor less than ten (10) days before the date of such
meeting or any such other action.
If no record date is fixed by the board of directors for
determining shareholders entitled to notice of, and to vote at, a
meeting of shareholders, the record date shall be at four o'clock
in the afternoon on the day before the day on which notice is
given, or, if notice is waived, at the commencement of the meeting.
If no record date is fixed for determining shareholders entitled to
express written consent to corporate action without a meeting, the
record date shall be the time of the day on which the first written
consent is served upon an officer or director of the corporation.
A determination of shareholders of record entitled to
notice of, and to vote at, a meeting of shareholders shall apply to
any adjournment of the meeting; provided, however, that the board
of directors may fix a new record date for the adjourned meeting,
and further provided that the adjournment or adjournments of any
such meeting do not exceed thirty (30) days in the aggregate.
Section 3.06. Shareholder Record. The officer or agent
having charge of the stock transfer books for shares of the
corporation shall make, at least ten (10) days before every meeting
of shareholders, a complete record of the shareholders entitled to
vote at the meeting (and at any adjournment thereof), arranged in
alphabetical order, showing the address and the number of shares
registered in the name of each shareholder. Such record shall be
produced and kept open (i) at the office of the corporation before
the time of the meeting, and (ii) at the time and place of the
meeting; such record shall be subject to the inspection of any
shareholder during such times for any purpose germane to the
meeting.
Section 3.07. Proxies. Any shareholder entitled to vote
thereat may vote by proxy at any meeting of the shareholders (and
at any adjournment thereof) which is specified in such proxy,
provided that his or her proxy is executed in writing by such
shareholder or his or her duly authorized attorney-in-fact. No
proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise specifically provided thereon. The
burden of proving the validity of any undated, irrevocable or
otherwise contested proxy at a meeting of the shareholders shall
rest with the person seeking to exercise the proxy. A telegram,
cablegram or facsimile appearing to have been transmitted by a
shareholder or by his duly authorized attorney-in-fact may be
accepted as a sufficiently written and executed proxy.
Section 3.08. Voting. Except for the election of directors
(which shall be governed by cumulative voting pursuant to
applicable law) and except as may otherwise be required by the
corporation's articles, these bylaws or by statute, each issued and
outstanding share of the corporation (specifically excluding shares
held in the treasury of the corporation) represented at any meeting
of the shareholders in person or by a proxy given pursuant to
Section 3.07 above, shall be entitled to one vote on each matter
submitted to a vote of the shareholders at such meeting. Unless
otherwise required by the corporation's articles or by applicable
law, any question submitted to the shareholders shall be resolved
by a majority of the votes cast thereon, provided that such votes
constitute a majority of the quorum of that particular meeting,
whether or not such quorum is then present. Voting shall be by
ballot on any question as to which a ballot vote is demanded before
the voting begins, by any person entitled to vote on such question;
otherwise, a voice vote shall suffice. No ballot or change of vote
shall be accepted after the polls have been declared closed
following the ending of the announced time for voting.
Section 3.09. Voting of Shares by Certain Holders. Shares of
the corporation held by another corporation may be voted by such
corporation's officer, agent, or proxy as its bylaws may prescribe,
or in the absence of such bylaw provision, by any other person
designated by resolution of its board of directors, and such
officer, agent, or other person so designated may vote such
corporation's shares in this corporation in person or by proxy
appointed by him.
Shares held by an administrator, executor, legal
representative, guardian, conservator, or other legal representa-
tive, may be voted by such representative, either in person or by
proxy, without a transfer of such shares into his name. Shares
standing in the name of a trustee, other than a trustee in
bankruptcy, may be voted by such representative, either in person
or by proxy, but no such trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver, trustee in
bankruptcy, or assignee for the benefit of creditors may be voted
by such representative, either in person or by proxy. Shares held
by or under the control of such a receiver or trustee may be voted
by such receiver or trustee, either in person or by proxy, without
the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such
receiver or trustee was appointed.
A shareholder whose shares are pledged shall be entitled
to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
If shares stand in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety, or tenants by community
property or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the
corporation is given a written instrument or order appointing them
or creating the relationship wherein it is so provided, their acts
with respect to voting shall have the following effect: (1) if only
one votes, his act binds, (2) if more than one votes, the act of
the majority so voting binds all, and (3) if more than one votes,
but the vote is evenly split on any particular matter, each faction
may vote the shares in question proportionally.
Section 3.10. Quorum. At any meeting of the shareholders,
the presence in person or by proxy of the holders of a majority of
the shares of the corporation issued, outstanding, and entitled to
vote at the meeting shall constitute a quorum of the shareholders
for all purposes. In the absence of a quorum, any meeting may be
adjourned from time to time by its chairman, without notice other
than by announcement at the meeting, until a quorum is formed. At
any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the
meeting as originally noticed. Once a quorum has been formed at
any meeting, the shareholders from time to time remaining in
attendance may continue to transact business until adjournment,
notwithstanding the prior departure of enough shareholders to leave
less than a quorum. If an adjournment is for more than thirty (30)
days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at the
meeting.
Section 3.11. Election Inspectors. The board of directors,
in advance of any meeting of the shareholders, may appoint an
election inspector or inspectors to act at such meeting (and at any
adjournment thereof). If an election inspector or inspectors are
not so appointed, the chairman of the meeting may, or upon request
of any person entitled to vote at the meeting shall, make such
appointment. If any person appointed as an inspector fails to
appear or to act, a substitute may be appointed by the chairman of
the meeting. If appointed, the election inspector or inspectors
(acting through a majority of them if there be more than one) shall
determine the number of shares outstanding, the authenticity,
validity and effect of proxies and the number of shares represented
at the meeting in person and by proxy; they shall receive and count
votes, ballots and consents and announce the results thereof; they
shall hear and determine all challenges and questions pertaining to
proxies and voting; and, in general, they shall perform such acts
as may be proper to conduct elections and voting with complete
fairness to all shareholders. No such election inspector need be
a shareholder of the corporation.
Section 3.12. Organization and Conduct of Meetings. Each
meeting of the shareholders shall be called to order and thereafter
chaired by the chairman of the board of directors if there is one;
or, if not, or if the chairman of the board is absent or so
requests, then by the president; or if both the chairman of the
board and the president are unavailable, then by such other officer
of the corporation or such shareholder as may be appointed by the
board of directors. The corporation's secretary shall act as
secretary of each meeting of the shareholders; in his or her
absence the chairman of the meeting may appoint any person (whether
a shareholder or not) to act as secretary for the meeting. After
calling a meeting to order, the chairman thereof may require the
registration of all shareholders intending to vote in person and
the filing of all proxies with the election inspector or
inspectors, if one or more have been appointed (or, if not, with
the secretary of the meeting). After the announced time for such
filing of proxies has ended, no further proxies or changes,
substitutions or revocations of proxies shall be accepted. If
directors are to be elected, a tabulation of the proxies so filed
shall, if any person entitled to vote in such election so requests,
be announced at the meeting (or adjournment thereof) before the
closing of the election polls. Absent a showing of bad faith on
his part, the chairman of a meeting shall, among other things, have
absolute authority to fix the period of time allowed for the
registration of shareholders and the filing of proxies, to
determine the order of business to be conducted at such meeting and
to establish reasonable rules for expediting the business of the
meeting (including any informal, or question and answer portions
thereof).
Section 3.13. Shareholder Approval or Ratification. The
board of directors may submit any contract or act for approval or
ratification of the shareholders, either at a duly constituted
meeting of the shareholders (the notice of which either includes
mention of the proposed submittal or is waived pursuant to Section
3.04 above) or by unanimous written consent to corporate action
without a meeting pursuant to Section 3.15 below. If any contract
or act so submitted is approved or ratified by a majority of the
votes cast thereon at such meeting or by such unanimous written
consent, the same shall be valid and as binding upon the
corporation and all of its shareholders as it would be if it were
the act of the shareholders.
Section 3.14. Informalities and Irregularities. All
informalities or irregularities in any call or notice of a meeting
of the shareholders or in the areas of credentials, proxies,
quorums, voting, and similar matters, shall be deemed waived if no
objection is made at the meeting.
Section 3.15. Action by Shareholders Without a Meeting. Any
action required or permitted to be taken at a meeting of the
shareholders of the corporation may be taken without a meeting if
a consent in writing, setting forth the action so taken, is signed
by all of the shareholders entitled to vote with respect to the
subject matter thereof. Such consent may be executed in
counterparts and shall have the same effect as a unanimous vote of
the shareholders of the corporation at a duly convened meeting.
ARTICLE IV
Board of Directors
Section 4.01. Membership. The board of directors shall be
comprised of not less than one (1) nor more than seven (7) members
who need not be shareholders of the corporation. The directors
shall regularly be elected at each annual meeting of the
shareholders. The board of directors shall have the power to
increase or decrease its size within the aforesaid limits and to
fill any vacancies that may occur in its membership in the interval
between the annual meetings of the shareholders, whether resulting
from an increase in the size of that board or otherwise. Each
director elected by the shareholders or the board of directors
shall hold office until his or her successor is duly elected and
qualified; provided, however, that the shareholders entitled to
vote for the election of directors at a shareholders' meeting may
fill any vacancy in the board of directors, if not already filled,
or substitute another person to fill the vacancy, in which case the
term of office of the person elected by the board of directors
shall forthwith terminate.
Section 4.02. General Powers. The board of directors shall
have the power to control and manage all of the affairs and
property of the corporation and to exercise, in addition to the
powers and authorities expressly conferred upon it by these bylaws
or by the articles of incorporation, all powers as may be
exercised, and to do all such things that may be done by the
corporation which are not expressly reserved to the shareholders,
as permitted by the laws of the State of Arizona. It may restrict,
enlarge, or otherwise modify the powers and duties of any or all of
the officers of this corporation. Without limiting the generality
of the foregoing, the board of directors may fix record dates for
determining shareholders of various classes having the right to
notice of and to vote at meetings and adjournments thereof, or the
right to receive dividends or other distributions, or the right to
give consents to or to dissent from certain actions or for any
other purpose for which record dates are or might be relevant, and
to determine whether or not transfer books should be closed in
connection therewith.
Section 4.03. Regular Meetings. A regular annual meeting of
the board of directors shall be held as soon as practicable after
the adjournment of each annual meeting of the shareholders, either
at the place of the shareholders' meeting or at such other place as
the directors elected at the shareholders' meeting may have been
informed of at or before the time of their election. Additional
regular meetings may be held at regular intervals at such places
and at such times as the board of directors may determine.
Section 4.04. Special Meetings. Special meetings of the
board of directors may be held whenever and wherever called for by
the chairman of the board, the president, or the number of
directors that would be required to constitute a quorum.
Section 4.05. Notices. No notice need be given of regular
meetings of the board of directors. Written notice of the time and
place (but not necessarily the purpose or all of the purposes) of
any special meeting shall be given to each director in person or
via mail, telegram or facsimile addressed to him at his latest
address appearing on the corporation's records. Notice to any
director of any such special meeting shall be deemed given
sufficiently in advance when (i) if given by mail, the same is
deposited in the mail, with first class or airmail postage prepaid,
at least four (4) days before the meeting date, (ii) if personally
delivered or given by telegram or facsimile, the same is handed to
the director, or the telegram is delivered to the telegraph office
for fast transmittal or the facsimile is initiated, at least
forty-eight (48) hours before the convening of the meeting, or
(iii) by communicating actual notice to the director at least
twenty-four (24) hours before convening the meeting. Any person
who has given notice hereunder may make an affidavit that notice
was given, which, as to the facts, shall be conclusive.
Section 4.06. Waiver of Notice. Any director may waive call
or notice of any meeting (and any adjournment thereof) at any time
before, during which, or after it is held. Attendance of a
director at any meeting shall automatically evidence his waiver of
call and notice of such meeting (and any adjournment thereof)
unless he is attending the meeting for the express purpose of
objecting to the transaction of business because the meeting has
not been properly called or noticed. No call or notice of a
meeting of directors shall be necessary if each of them waives the
same in writing or by attendance. Any meeting, once properly
called and noticed (or as to which call and notice have been
waived) and at which a quorum is formed, may be adjourned to
another time and place by a majority of those in attendance.
Section 4.07. Quorum. A quorum for the transaction of
business at any meeting or adjourned meeting of the board of
directors shall consist of a majority of the directors then in
office. Once a quorum has been formed, the directors from time to
time remaining in attendance at such meeting before its adjournment
shall continue to be legally competent to transact business
properly brought before the meeting, notwithstanding the prior
departure from the meeting of enough directors to leave less than
a quorum.
Section 4.08. Voting. Any matter submitted to a meeting of
the board of directors shall be resolved by a majority of the votes
cast thereon.
Section 4.09. Power to Act Notwithstanding Vacancy. Pending
the filling of vacancies in the board of directors, a majority of
a full board of directors may exercise the powers of the board of
directors.
Section 4.10. Removal. Any director may be removed from the
board of directors, with or without cause, subject only to
limitations provided by law.
Section 4.11. Audit Committee. The board of directors may,
by a resolution or resolutions adopted by a majority of the members
of the whole board, appoint from among its members an audit
committee, which shall consist of three or more members of the
board of directors. The audit committee shall each year recommend
to the board of directors for appointment by the board of
directors, after submission to the shareholders for their approval,
independent public accountants to audit the books, records and
accounts of the corporation and to perform such other duties as the
board of directors may from time to time prescribe. The audit
committee shall review all recommendations made by the
corporation's independent public accountants to the board of
directors with respect to the accounting methods used and the
system of internal control followed by the corporation and shall
thereupon advise the board of directors. The audit committee shall
have authority to examine into and make recommendations to the
board of directors with respect to the scope of the audit conducted
by the corporation's independent public accountants. Except as
otherwise specifically provided herein, the audit committee shall
be subject to all limitations, restrictions, and requirements of
any other committee of the board of directors as provided in
Section 4.12 below.
Section 4.12. Executive and Other Committees. The board of
directors, by a resolution or resolutions adopted by a majority of
the members of the whole board, may appoint from among its members
an executive committee and any other committees, standing or
temporary, as it may deem appropriate. Each committee shall
consist of two or more members of the board of directors. Each
committee shall have and may exercise any and all powers as are
conferred or authorized by the resolution appointing it. A
majority of each committee may determine its action and may fix the
time and place of its meetings, unless provided otherwise by the
board of directors. The board of directors shall have the power at
any time to fill vacancies in, to change the size or membership of,
and to discharge any committee. Any member of any committee may be
removed, with or without cause, by the board of directors. The
board of directors may dissolve any committee at any time.
If appointed, the executive committee shall have and may
exercise the powers of the board of directors in the management of
the business and affairs of the Corporation while the board is not
in session, subject to such limitations as may be included in the
board's resolution appointing the committee. Notwithstanding any
other provision to the contrary, the executive committee and any
other committee of the board of directors appointed pursuant to
these Bylaws shall not have the authority of the board of directors
in reference to the following matters: (i) the submission to
shareholders of any action that requires shareholders'
authorization or approval under applicable law; (ii) the filling of
vacancies on the board of directors or on any committee of the
board of directors; (iii) the amendment or repeal of the Bylaws, or
the adoption of new Bylaws; and (iv) the fixing of compensation of
directors for serving on the board or on any committee of the board
of directors.
Each committee shall keep a written record of its acts and
proceedings and shall submit that record to the board of directors
at each regular meeting and at any other times as requested by the
board of directors. Failure to submit the records, or failure of
the board to approve any action indicated therein will not,
however, invalidate the action to the extent it has been carried
out by the corporation prior to the time the record of such action
was, or should have been, submitted to the board of directors as
provided herein.
Section 4.13. Tenure. Except in the case of resignation,
disqualification, removal, or the inability to serve for any
reason, each member of any committee established under this Article
IV shall hold office until the next regular annual meeting of the
board of directors until his or her successor is elected and
qualified.
Section 4.14. Meetings. Regular meetings of committees
established under this Article IV may be held without notice at
such times and places as the committees may fix from time to time
by resolution. Special meetings of a committee may be called by
any member thereof upon giving notice to other members of the
committee in the manner provided in Section 4.04 for special
meetings of the board of directors.
Section 4.15. Quorum. A majority of the members of a
committee shall constitute a quorum for the transaction of business
at any meeting thereof, and action of any committee must be
authorized by the affirmative vote of a majority of the members
present at a meeting at which a quorum is present.
Section 4.16. Presumption of Assent. A director of the
corporation who is present at a meeting of the board of directors
or of any committee at which action is taken on any matter shall be
presumed to have assented to the action taken unless his dissent is
entered in the minutes of the meeting or unless he files his
written dissent to such action with the person acting as secretary
of the meeting before the adjournment thereof or forwards such
dissent by registered or certified mail to the secretary of the
corporation within two business days after the adjournment of the
meeting. A right to dissent shall not be available to a director
who voted in favor of the action.
Section 4.17. Compensation. By resolution of the board of
directors, each director may be paid his expenses, if any, of
attendance at each meeting of the board of directors or of any
committee, and may be paid a fixed sum for attendance at each such
meeting and/or a stated salary as a director or committee member.
No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation
therefrom.
Section 4.18. Action by Directors Without a Meeting. Any
action required or permitted to be taken at a meeting of the board
of directors or of any committee thereof may be taken without a
meeting if a consent in writing, setting forth the action so taken,
is signed by all directors or committee members. Such consent may
be executed in counterparts and shall have the same effect as a
unanimous vote of the directors or committee members of the
corporation at a duly convened meeting.
Section 4.19. Meetings by Conference Telephone. Any member
of the board of directors or of a committee of the board may
participate in any meeting of the board or such committee by means
of a conference telephone or similar communication equipment
whereby all members participating in such meeting can hear one
another. Such participation shall constitute attendance in person,
unless otherwise stated as provided in Section 4.06 above.
Section 4.20. Organization, Agenda and Procedure. The
chairman of the board, or in his absence, the president, or in the
absence of the president, any director chosen by a majority of the
directors present, shall act as chairman of the meetings of the
board of directors. In the absence of the secretary or any
assistant secretary, any person appointed by the chairman shall act
as secretary of such meetings. The agenda of and procedure for such
meetings shall be as determined by the board of directors.
ARTICLE V
Officers - General
Section 5.01. Elections and Appointments. The board of
directors shall elect or appoint a president, one or more vice
presidents, a secretary, and a treasurer, and may choose a chairman
of the board. The regular election or appointment of officers
shall take place at each annual meeting of the board of directors,
but elections of officers may be held at any other meeting of the
board. A person elected or appointed to any office shall continue
to hold that office until the election or appointment of his
successor, subject to action earlier taken pursuant to Sections
5.04 and 7.01 below. Any two or more offices may be held by the
same person, except the offices of president and secretary.
Section 5.02. Additional Appointments. In addition to the
officers contemplated in Section 5.01 above, the board of directors
may elect or appoint other corporate or divisional officers or
agents with such authority to perform such duties as may be
prescribed from time to time by the board of directors, by the
president or, in the case of assistant officers (as, for example,
one or more assistant secretaries), by the superior officer of any
person so elected or appointed. Each of such persons (in the order
designated by the board) shall be vested with all of the powers and
charged with all of the duties of his or her superior officer in
the event of such superior officer's absence or disability.
Section 5.03. Bonds and Other Requirements. The board of
directors may require any officer to give bond to the corporation
(with sufficient surety, and conditioned for the faithful
performance of the duties of his or her office) and to comply with
such other conditions as may from time to time be required of him
or her by the board.
Section 5.04. Removal; Delegation of Duties. The board of
directors may, whenever in its judgment the best interests of the
corporation will be served thereby, remove any officer or agent of
the corporation or temporarily delegate his or her powers and
duties to any other officer or to any director. Such removal or
delegation shall be without prejudice to the contract rights, if
any, of the person so removed or whose powers and duties have been
delegated. Election or appointment of an officer or agent shall
not of itself create contract rights.
Section 5.05. Salaries. The salaries of officers may be
fixed from time to time by the board of directors or (except as to
the president's own) left to the discretion of the president. No
officer shall be prevented from receiving a salary by reason of the
fact that he or she is also a director of the corporation.
ARTICLE VI
Specific Officers
Section 6.01. Chairman of the Board. The board of directors
may elect a chairman to serve as a general executive officer of the
corporation, and, if specifically designated as such by the board,
as the chief executive officer of the corporation. If elected, the
chairman shall preside at all meetings of the board of directors
and be vested with such other powers and duties as the board may
from time to time delegate to him or her.
Section 6.02. President and Vice President. Unless otherwise
specified by resolution of the board of directors, the president
shall be the chief executive officer of the corporation. The
president shall supervise the business and affairs of the
corporation and the performance by all of its other officers of
their respective duties, subject to the control of the board of
directors (and of its chairman, if the chairman has been
specifically designated as chief executive officer of the
corporation). One or more vice presidents shall be elected by the
board of directors to perform such duties as may be designated by
the board or be assigned or delegated to them by the chief
executive officer. Any one of the vice presidents as authorized by
the board shall be vested with all of the powers and charged with
all of the duties of the president in the event of his or her
absence or inability to act. Except as may otherwise be
specifically provided in a resolution of the board of directors,
the president or any vice president shall be a proper officer to
sign, on behalf of the corporation, any deed, bill of sale,
assignment, option, mortgage, pledge, note, bond, evidence of
indebtedness, application, consent (to service of process or
otherwise), agreement, indenture or other instrument of any
significant importance to the corporation. The president or any
vice president may represent the corporation at any meeting of the
shareholders of any other corporation in which this corporation
then holds shares, and may vote this corporation's shares in such
other corporation in person or by proxy appointed by him or her,
provided that the board of directors may from time to time confer
the foregoing authority upon any other person or persons.
Section 6.03. Secretary. The secretary shall keep the
minutes of meetings of the shareholders, board of directors, and
any committee, and all unanimous written consents of the
shareholders, board of directors, and any committee of the
corporation, and shall see that all notices are duly given in
accordance with the provisions of these bylaws or as required by
law, and in case of his or her absence or refusal or neglect so to
do, notices may be served by any person thereunto directed by the
president. The secretary shall be custodian of the corporate seal
and corporate records, and, in general, perform all duties incident
to the office. Except as may otherwise be specifically provided in
a resolution of the board of directors, the secretary and each
assistant secretary shall be a proper officer to take charge of the
corporation's stock transfer books and to compile the voting record
pursuant to Section 3.06 above, and to impress the corporation's
seal on any instrument signed by the president, any vice president,
or any other duly authorized person, and to attest to the same.
Section 6.04. Treasurer. The treasurer shall keep full and
accurate accounts of receipts and disbursements in books belonging
to the corporation, and shall cause all money and other valuable
effects to be deposited in the name and to the credit of the
corporation in such depositories, subject to withdrawal in such
manner, as may be designated by the board of directors. He or she
shall render to the president, the directors, and the shareholders
at proper times an account of all his or her transactions as
treasurer and of the financial condition of the corporation. The
treasurer shall be responsible for preparing and filing such
financial reports, financial statements, and returns as may be
required by law.
ARTICLE VII
Resignations and Vacancies
Section 7.01. Resignations. Any director, committee member,
or officer may resign from his or her office at any time by written
notice delivered or addressed to the corporation at its known place
of business. Any such resignation shall be effective upon its
receipt by the corporation unless some later time is fixed in such
notice, and then from that time. The acceptance of a resignation
shall not be required to make it effective.
Section 7.02. Vacancies. If the office of any director,
committee member, or officer becomes vacant by reason of his or her
death, resignation, disqualification, removal, or otherwise, the
board of directors may choose a successor to hold office for the
unexpired term.
ARTICLE VIII
Indemnification and Insurance
Section 8.01. Indemnification. To the extent permitted by
Arizona law and any other applicable law, if any director, officer,
employee or agent of the corporation is made a party to or is
involved in (for example as a witness) any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including an action by or in the
right of the corporation, and whether formal or informal, because
such person is or was a director, officer, employee or agent of the
corporation, as the case may be, the corporation: (i) may indemnify
such person from and against any judgments, penalties, fines,
amounts paid in settlement and reasonable expenses (including but
not limited to expenses of investigation and preparation, and fees
or disbursements of counsel, accountants or other experts) incurred
by such person in such action, suit or proceeding; and (ii) may
advance to such persons expenses incurred in such action, suit or
proceeding.
The terms "director," "officer," "employee" or "agent" shall
mean (i) a director, officer, employee or agent of the corporation,
as the case maybe; (ii) a person serving at the corporation's
request as a director, officer, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise;
and (iii) such broader definition as may be provided under Arizona
law as in effect from time to time. The foregoing provisions for
indemnification and advancement of expenses are not exclusive, and
the corporation may at its discretion provide for indemnification
or advancement of expenses in a resolution of its shareholders or
directors, in a contract or in its Articles. It is the
corporation's policy to provide to its directors, officers,
employees, and agents indemnity to the fullest extent permitted by
Arizona law.
Any repeal or modification of the foregoing provisions of this
Article VIII for indemnification or advancement of expenses shall
not affect adversely any right or protection stated in such
provisions with respect to any act or omission of a director,
officer, employee or agent of the corporation occurring prior to
the time of such repeal or modification.
Section 8.02. Insurance. The corporation shall have the
power to purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprises against any
liability asserted against him and incurred by him in any capacity
or arising out of his status, whether or not the corporation would
have the power to indemnify him against liability hereunder.
ARTICLE IX
Seal
The board of directors may provide for a seal of the
corporation, which shall have inscribed thereon the name of the
corporation and the state and year of its incorporation.
ARTICLE X
Certificates Representing Shares
Section 10.01. Form. Each certificate representing shares of
the corporation shall be in such form as may from time to time be
prescribed by the board of directors, shall be consecutively
numbered, and shall exhibit such information as may be required by
applicable law.
Section 10.02. Signatures and Seal. All certificates issued
for shares of the corporation (whether new, re-issued, or
transferred) shall bear the signatures of the president or a vice
president, and of the secretary or an assistant secretary, and the
impression of the corporation's corporate seal, if any. The sig-
natures of such officers of the corporation and the impression of
its corporate seal may be in facsimile form on any certificate that
is countersigned by a transfer agent and/or registered by a
registrar duly appointed by the corporation and other than the
corporation itself or one of its employees. If a supply of
unissued certificates bearing the facsimile signature of a person
remains when that person ceases to hold the office of the
corporation indicated on such certificates, they may still be
countersigned, registered, issued, and delivered by the
corporation's transfer agent and/or registrar thereafter, the same
as though such person had continued to hold the office indicated on
such certificate.
Section 10.03. Ownership. The corporation shall be entitled
to treat the registered owner of any share as the absolute owner
thereof and, accordingly, shall not be bound to recognize any
beneficial, equitable or other claim to, or interest in, such share
on the part of any other person, whether or not it has notice
thereof, except as may expressly be provided by applicable law.
Section 10.04. Transfer Agents and Registrars: Transfers.
The board of directors may appoint one or more transfer agents or
registrars with respect to shares of the stock of the corporation.
The board of directors may make such rules and regulations as it
may deem expedient and as are not inconsistent with these Bylaws,
concerning the issue, transfer, and registration of certificates
for shares of the stock of the corporation. Transfers of shares of
the corporation may be made on the stock transfer books of the
corporation only at the direction of the person named in the
certificate (or by his or her duly authorized attorney-in-fact) and
upon the surrender of such certificate. The transfer of the shares
of the corporation shall be subject to such restrictions on
transfer, if any, as may be imposed by the Articles of
Incorporation, by any amendment thereof, by these Bylaws or by any
agreement of the shareholders. No transfer shall affect the right
of the corporation to pay any dividend due upon the shares or to
treat the holder of record as the holder-in-fact until the transfer
has been recorded in the books of the corporation.
Section 10.05. Lost Certificates. In the event of the loss,
theft, or destruction of any certificates representing shares of
the corporation or of any predecessor corporation, the corporation
may issue (or, in the case of any such shares as to which a
transfer agent and/or registrar have been appointed, may direct
such transfer agent and/or registrar to countersign, register, and
issue) a new certificate, and cause the same to be delivered to the
owner of the shares represented thereby, provided that the owner
shall have submitted such evidence showing, or an affidavit
reciting, the circumstances of the alleged loss, theft, or
destruction, and his ownership of the certificate, as the
corporation considers satisfactory, together with any other facts
that the corporation considers pertinent, and further provided that
a bond of indemnity, with or without surety, shall have been
provided in form and amount satisfactory to the corporation (and to
its transfer agent and/or registrar, if applicable), unless the
shares represented by the certificate lost, stolen, or destroyed
have at the time of the issuance of the new certificate a market
value of $500 or less (as determined by the corporation on the
basis of such information as it may select), in which case the
requirement of a bond may be waived. The corporation may act
through its president, any vice president, its secretary, or its
treasurer for any purpose of this Section 10.05.
ARTICLE X
Dividends
Subject to such restrictions or requirements as may be imposed
by applicable law or the corporation's articles or as may otherwise
be binding upon the corporation, the board of directors may from
time to time declare and the corporation may pay dividends on
shares of the corporation outstanding on the dates of record fixed
by the board, to be paid in cash, in property, or in shares of the
corporation on or as of such payment or distribution dates as the
board may prescribe.
ARTICLE XI
Amendments
These bylaws may be altered, amended, supplemented, repealed,
or temporarily or permanently suspended, in whole or in part, or
new bylaws may be adopted, at any duly constituted meeting of the
board of directors (the notice of which meeting either includes
mention of the proposed action relative to the bylaws or is waived
pursuant to Section 4.06 above) or, alternatively, by unanimous
written consent to corporate action without a meeting of the board
of directors, pursuant to Section 4.18 above. If, however, any
such action arises as a matter of necessity at any such meeting and
is otherwise proper, no notice thereof shall be required. Any
amendment made to a bylaw shall be noted on the margin of the bylaw
amended, referring to the page of the record where the amendment
appears.
<PAGE>
Certificate of Adoption
The undersigned secretary does hereby certify that the
foregoing bylaws were adopted by the board of directors of Giant
Mid-Continent, Inc. pursuant to a written consent of the board of
directors dated December 22, 1994.
/s/ Morgan M. Gust
_________________________________
Morgan M. Gust, Secretary
EXHIBIT 4.2
GIANT INDUSTRIES, INC.
(LETTERHEAD)
LETTER AMENDMENT NO. 1
December 31, 1994
The Prudential Insurance Company
of America
Pruco Life Insurance Company
100 Mulberry Street
Newark, NJ 07102
Ladies and Gentlemen:
We refer to the Amended and Restated Note Agreement between Giant
Industries Arizona, Inc., an Arizona corporation (the "COMPANY"),
Giant Industries, Inc., a Delaware corporation (the "GUARANTOR"), The
Prudential Insurance Company of America ("PRUDENTIAL") and Pruco Life
Insurance Company ("PRUCO"), dated as of September 30, 1993 (the
"AGREEMENT"), pursuant to which the Company issued and sold, and
Prudential and Pruco purchased, the Company's 10.91% Notes due March
31, 1999. Unless otherwise defined herein, the terms defined in the
Agreement shall be used herein as therein defined.
The Company owns municipal securities totaling approximately
$5,000,000 that mature in excess of one year from December 30, 1994.
The purchase resulted from a confusion as to the covenants in our
$100,000,000 Subordinated Note as opposed to the covenants in the
Agreement. The Company feels that it is in its best interest to hold
the securities until market conditions warrant sale or until maturity.
In addition, the Guarantor purchased $2,000,000 of Orange County,
1994-1995 Pooled Tax and Revenue Anticipation Notes ("TRANS"). At the
date of purchase, the securities were rated MIG I and otherwise met
all of the requirements of paragraph 5C(3)(vi). Orange County
recently filed for bankruptcy protection and, effective December 6,
1994, Moody's and Standard and Poor's suspended ratings pending
"clarification of the County's intention and ability to pay debt
service under bankruptcy." While the agencies have issued revised
ratings on several issues of the County's indebtedness, the rating on
TRANS remains suspended. The Company feels that it is in its best
interest to continue to hold this security until the bankruptcy
proceedings
<PAGE>
<PAGE>
The Prudential Insurance Company
of America
Pruco Life Insurance Company
Page 2
are more clearly defined and we are able to determine our best course
of action. The Company has requested that you amend paragraph 5C(3)
of the Agreement to permit the Company to hold the above described
securities until such time as they are sold or mature.
Pursuant to the request of the Company, and to amend the terms of
the Agreement, the undersigned hereby agrees with you as follows:
PARAGRAPH 5C(3). LOANS, ADVANCES AND INVESTMENTS. Paragraph
5C(3) of the Agreement is amended by deleting the word "and" after
clause (x), renumbering clause "(xi)" to become new clause (xiii) and
by inserting two new clauses (xi) and (xii) to read as follows:
"(xi) the Guarantor or any Subsidiary of the Guarantor may
own investments in direct obligations of any state of the United
States of America or municipality thereof, in each case maturing,
called or prefunded not more than two years from December 30,
1994 and being rated AA- by S&P or Aa3 or better by Moody's and
which were held by the Guarantor or any Subsidiary as of December
31, 1994 until maturity or sale,
(xii) the Guarantor may own up to $2,000,000 of Orange
County, 1994-1995 Pooled Tax and Revenue Anticipation Notes
("TRANS") which were owned by the Guarantor as of December 31,
1994 until maturity or sale by the Guarantor, and"
On and after the effective date of this letter amendment, each
reference in the Agreement to "this Agreement", "hereunder", "hereof",
or words of like import referring to the Agreement, and each reference
in the Notes to "the Agreement", "thereunder", "thereof", or words of
like import referring to the Agreement, shall mean the Agreement as
amended by this letter amendment. The Agreement, as amended by this
letter amendment, are and shall continue to be in full force and
effect and are hereby in all respects ratified and confirmed.
The execution, delivery and effectiveness of this letter
amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy under the Agreement nor
constitute a waiver of any provision of the Agreement. The
effectiveness of this letter amendment is conditioned upon the
accuracy of the factual matters described above.
This letter amendment may be executed in any number of
counterparts and by any combination of the parties hereto in separate
counterparts, each of which counterparts
<PAGE>
<PAGE>
The Prudential Insurance Company
of America
Pruco Life Insurance Company
Page 3
shall be an original and all of which taken together shall constitute
one and the same letter amendment.
If you agree to the terms and provisions hereof, please evidence
your agreement by executing and returning at least one counterpart of
this letter amendment to Giant Industries, Inc., 23733 North
Scottsdale Road, Scottsdale, AZ 85255, Attention: Gary L. Nielsen,
Vice President & Treasurer. This letter amendment shall become
effective as of the date first above written when and if counterparts
of this letter amendment shall have been executed by us and you.
Very truly yours,
GIANT INDUSTRIES ARIZONA, INC.
By: /s/ Gary L. Nielsen
-----------------------------------
Title: Vice President
GIANT INDUSTRIES, INC., as
Guarantor
By: /s/ Gary L. Nielsen
-----------------------------------
Title: Vice President
Agreed and accepted as of
the date first above written:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Tom Donahue
-------------------------------
Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ Tom Donahue
-------------------------------
Vice President
<PAGE>
<PAGE>
CONSENT
Each of the undersigned is a Guarantor under a Guaranty dated as
of November 11, 1993 (each being a "GUARANTY") in favor of The
Prudential Insurance Company of America and Pruco Life Insurance
Company who are parties to the Agreement referred to in the foregoing
letter amendment. Each of the undersigned hereby consents to said
letter amendment and hereby confirms and agrees that its Guaranty is
and shall continue to be in full force and effect and is hereby
confirmed and ratified in all respects except that, upon the
effectiveness of, and on and after the date of, said letter amendment,
all references in the Guaranty to the Agreement, "thereunder",
"thereof", or words of like import referring to the Agreement shall
mean the Agreement as amended by said letter amendment.
GIANT FOUR CORNERS, INC.
By: /s/ Gary L. Nielsen
------------------------------
Title: Vice President
CINIZA PRODUCTION COMPANY
By: /s/ Gary L. Nielsen
------------------------------
Title: Vice President
GIANT EXPLORATION & PRODUCTION
COMPANY
By: /s/ Gary L. Nielsen
------------------------------
Title: Vice President
GIANT STOP-N-GO OF NEW MEXICO, INC.
By: /s/ Gary L. Nielsen
------------------------------
Title: Vice President
MERIDIAN OIL TRADING INC.
EXHIBIT 10.27
August 1, 1994
Luke K. Wethers
Giant Refining Company
23733 North Scottsdale Road
Scottsdale, Arizona 85255
MERIDIAN OIL TRADING INC. SALES CONTRACT NO.
0S-0-25-10721
GIANT INDUSTRIES ARIZONA, INC. PURCHASE CONTRACT NO.
Gentlemen:
The following constitutes the entire agreement ("Agreement")
between MERIDIAN OIL TRADING INC., (hereinafter referred to as
"Seller" or "Meridian"), and GIANT REFINING COMPANY, a division
of GIANT INDUSTRIES ARIZONA, INC., (hereinafter collectively
referred to as "Buyer" or "Giant"), whereby Seller agrees to sell
and deliver, and Buyer agrees to purchase and receive typical
Four Corners Sweet crude oil and condensate (herein sometimes
referred to as "crude oil") under the terms and conditions as
herein set forth:
QUALITY: Typical Four Corners Sweet Crude Oil and
Condensate ("crude oil").
QUANTITY: * XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
DELIVERY PERIOD: August 1, 1994 through July 31, 1999
inclusive.
DELIVERY/LOCATION: Seller shall deliver and Buyer shall receive
the crude oil as referenced under "Quantity"
at the following locations:
1. * XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX in San Juan County,
New Mexico into the facilities of Ciniza Pipe Line, for
an account designated by Giant;
2. * XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXX, San Juan County, New Mexico into the
facilities of Ciniza Pipe Line, for an account
designated by Giant;
3. * XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX in Rio Arriba County, New
Mexico into facilities of Ciniza Pipe Line, for an
account designated by Giant; and
4. * XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Rio Arriba
County, New Mexico into facilities of Ciniza Pipe Line,
for an account designated by Giant.
PRICE: The price shall be assessed each month based upon the
following:
A. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
1. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX
2. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
3. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
4. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX
5. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX
B. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
1. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX
2. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX
3. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
4. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX
5. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX
C. For pricing purposes, all crude oil delivered hereunder
shall be deemed to be delivered in equal daily quantities.
** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
PAYMENT: Payment shall be made by wire transfer on or before the
20th of the month following the month of delivery. In the event
payment due date falls on a Saturday or a New York bank holiday
other than Monday, payment shall be due on the immediately
preceding New York banking day. In the event payment due date
falls on a Sunday or Monday New York bank holiday, payment shall
be due on the next succeeding New York banking day.
CREDIT REQUIREMENT: Giant agrees to provide Meridian with a
Parent Guaranty, however, should Giant exceed their credit line
as determined by Meridian, Giant agrees to deliver an Irrevocable
Standby Letter of Credit in a format, amount and from a bank
acceptable to Meridian not later than one business day prior to
the scheduling date of the contract month.
NOTICE PROVISION: All notices, communications, statements and
payment hereunder shall be given in writing and shall be
effective as of the time served personally, sent by telecopy or
sent by certified or registered U.S. mail, return receipt
requested, addressed to each party as follows:
Meridian: Meridian Oil Trading Inc.
Post Office Box 4239
Houston, Texas 77210-4239
Telecopy: 713-624-9603
Giant: Giant Industries Arizona, Inc.
Attention: Raw Materials Supply
Post Office Box 12999
Scottsdale, Arizona 85267
Telecopy: 602-585-8892
SPECIAL PROVISIONS: All other terms and conditions not
specifically stated shall be governed by MOTI's General Terms and
Contracts dated May 1, 1992 for domestic crude oil transactions.
This document evidences our understanding of the entire agreement
and shall constitute the formal contract. Please acknowledge
your acceptance of and agreement to the above terms and
conditions by return telecopy within three (3) business days.
Failing receipt of your return confirmation, we will consider
these terms and conditions as binding.
Regards,
/s/ Donald J. Wray
-------------------------------
Donald J. Wray
Director of Crude Oil Marketing
Meridian Oil Trading Inc.
DJW;jhw
ACCEPTED AND AGREED TO
this 8 day of August, 1994.
GIANT INDUSTRIES ARIZONA, INC.
By: /s/ Luke K. Wethers
--------------------------------
Luke K. Wethers
Its: Vice President
----------------------------
Raw Materials Supply
*Confidential information regarding quantity and location redacted.
**Confidential information regarding price redacted.
EXHIBIT 10.28
GIANT INDUSTRIES, INC.
(LETTERHEAD)
October 27, 1994
Mr. B. C. Hendricks
Meridian Oil Hydrocarbons, Inc.
NGL Marketing
Post Office Box 4239
Houston, Texas 77210-4239
MERIDIAN OIL HYDROCARBONS INC. CONTRACT NOS.:
NATURAL GASOLINE - 28938; ISOBUTANE - 28936; NORMAL BUTANE - 29911
GIANT INDUSTRIES ARIZONA, INC. CONTRACT NO. 7449-NGL-P/S
Gentlemen:
The following constitutes the entire agreement ("Agreement")
between MERIDIAN OIL HYDROCARBONS INC., (hereinafter referred to as
"Meridian"), and GIANT REFINING COMPANY, a division of GIANT
INDUSTRIES ARIZONA, INC., (hereinafter collectively referred to as
"Giant"), whereby Meridian and Giant agree to sell and deliver to
each other and agree to purchase and receive from each other
natural gas liquids (herein sometimes referred to as "NGLs") under
the terms and conditions as herein set forth:
I. MERIDIAN'S SALE TO GIANT
QUALITY: Typical natural gasoline, isobutane and normal
butane ("Product") produced at the Wingate Plant located in
McKinley County, New Mexico. The Product sold herein shall
meet the specifications set forth on Exhibits "A", "B" and "C"
attached hereto.
QUANTITY: * XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
DELIVERY: The point of delivery of the Product sold and
purchased herein shall be FOB the inlet flange of Giant's
pipeline at the Wingate Plant, or into such other means of
transportation as are mutually acceptable.
PRICE: The price shall be assessed each month based upon the
following:
A. For natural gasoline sales and purchases:
1. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX, Giant shall pay
Meridian the ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX for
natural gasoline as found in the first publication
of the OIL PRICE INFORMATION SERVICE ("OPIS") for
the month of delivery ** XXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
2. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX, Giant shall pay
Meridian the ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX for
natural gasoline as found in the first publication
of the OIL PRICE INFORMATION SERVICE ("OPIS") for
the month of delivery ** XXXXXXXXXXXXXXXXXXXX; and
3. ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX, subject
to the price change as stated herein, Giant shall
pay Meridian the ** XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
for natural gasoline as found in the first
publication of the OIL PRICE INFORMATION SERVICE
("OPIS") for the month of delivery ** XXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXX. At Meridian's option, if Meridian sells
natural gasoline from the Wingate Plant which is
delivered into Arizona, New Mexico, Southern
Colorado, Southern Utah or West Texas and results
in a lower Wingate Plant netback than the balance
of the volume herein, then Meridian ** XXXXXXXXXXX
XXXXX determined herein, on a like volume
hereunder, ** xxxxxxxxxxxxxxxxx Wingate Plant
netback.
B. For isobutane sales and purchases:
1. ** xxxxxxxxxxxxxxxxxxxxxxxxxxxx, Giant shall pay
Meridian the ** xxxxxxxxxxxxxxxxxxxxxxxxxxxxx for
isobutane as found in the first publication of the
OIL PRICE INFORMATION SERVICE ("OPIS") for the
** xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
2. ** xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx, Giant
shall pay ** xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxx for isobutane as found in the first
publication of the OIL PRICE INFORMATION SERVICE
** xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxx
C. For normal butane sales and purchases:
1. ** xxxxxxxxxxxxxx, Giant shall pay Meridian the
** xxxxxxxxxxxxxxxxxxxxxxxxxxxxx normal butane as
found in the first publication of the OIL PRICE
INFORMATION SERVICE ("OPIS") for the month of
** xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
II. GIANT'S SALE TO MERIDIAN
QUALITY: Typical refinery grade normal butane ("Normal
Butane") produced at the Ciniza Refinery located in McKinley
County, New Mexico. For the Normal Butane sold herein, Giant
shall attempt to meet the specifications set forth on Exhibit
D attached hereto.
QUANTITY: ** xxxxxxxxxxxxxxxxx Normal Butane nominated to
Meridian by Giant from the Ciniza Refinery.
DELIVERY: The point of delivery of the Normal Butane sold and
purchased herein shall be FOB the outlet flange of the Ciniza
Refinery facilities into rail cars provided by Meridian, or
into such other means of transportation as are mutually
acceptable.
PRICE: The price for the Normal Butane sold and purchased
herein shall be ** xxxxxxxxxxxxxxxxxxxxxxxxxx
INTENT: ** xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
III. GENERAL TERMS
PAYMENT: Payment shall be made by the buying party to the
selling party within fifteen days of the buyer's receipt of
invoice for the NGLs sold and delivered. The seller may
require the buyer to make prepayments or provide letters of
credit, at the buyer's option, or to make such other
reasonable arrangements as the seller deems advisable to
assure payment for sales made or to be made hereunder. Any
such financial assurances shall be based upon objective
financial criteria. In the event the seller requires the
buyer to make prepayments, and the buyer does not accept
delivery of all of the NGLs for which the buyer has prepaid,
the seller shall reimburse to the buyer the amount of the
overpayment within fifteen days of the end of the calendar
month for which the overpayment was made. The buyer shall pay
interest on all past due invoices for each day any such
invoice is past due, and the seller shall pay interest on all
overpayments for each day reimbursement of any such
overpayment is past due, at a rate per annum equal to one
percentage point above the prime rate published by The Chase
Manhattan Bank, N.A., as the rate it charges its largest most
credit worthy customers at its principal office in New York
City, but in no event shall the past due interest charged be
in excess of the highest lawful rate.
TERM: This Agreement shall be binding upon execution and,
unless otherwise terminated pursuant to its provisions, shall
continue for a term of five (5) years from August 1, 1994
until 7:00 a.m., August 1, 1999.
FORCE MAJEURE: In the event that either Meridian or Giant is
rendered unable, by reason of an event of force majeure, to
perform, wholly or in part, any obligation or commitment under
this Agreement, then upon such party giving written notice and
full particulars of such event as soon as practicable after
the occurrence thereof, the obligations of both parties,
except payment by the buyer for the NGLs delivered by the
seller hereunder, shall be suspended to the extent and for the
period of such force majeure condition, and such force majeure
condition shall be remedied as far as possible with all
reasonable dispatch; provided, however, that nothing herein
shall require the settlement of labor disputes if such
settlement is inadvisable in the discretion of the party
having the difficulty.
The term "force majeure" as used herein shall mean any cause
or causes beyond the control of such party, including, but not
restricted to, the following: acts of God; acts of federal,
state or local government or any agency thereof; compliance
with valid rules, regulations, or orders of any governmental
authority or any officer, department, agency, or
instrumentality thereof; fire; storm; flood; earthquake;
washouts; explosion; accident; acts of the public enemy;
rebellion; strike; lockout; disputes or differences with
workmen; labor shortages; breakage or accident to machinery or
pipelines.
TAXES: Any tax, excise (manufacturer's or otherwise),
inspection fee, duty, license fee, tonnage charge, assessment,
or other like charge which is levied, assessed or imposed by
federal, state, tribal or local authority upon the products
and/or transactions contemplated hereunder (including the
processing, delivery, sale, use or consumption of the products
or privilege of doing any of same), and/or which is imposed on
or measured by the price of the products or the proceeds of
sale hereunder (other than income tax), shall be added to the
price set forth herein and shall be paid by the buyer unless
said price or prices specifically state that they include any
such charge or charges. If the buyer claims an exemption from
any charges contemplated hereunder, the seller shall exclude
the amount of such charges from the sale price, provided that
the buyer furnish the seller with necessary written
documentation and/or exemption certificate which evidences the
buyer's exemption. The buyer agrees to indemnify the seller
from any and all losses, costs, expenses, fees, penalties,
interests and liabilities of any kind ("Losses") that the
seller may suffer, provided such Losses are reasonable, in the
event the buyer requests that the seller not include any
charge or charges that the buyer has reasonable cause to
believe are invalid.
PRIOR AGREEMENTS: This Agreement shall cancel and supersede
all prior NGL agreements between Meridian and Giant as of
August 1, 1994.
NOTICES: Written notices required under this Agreement shall
be sent to:
Meridian: Meridian Oil Hydrocarbons, Inc.
NGL Marketing
Post Office Box 4239
Houston, Texas 77210-4239
Telecopy: 713-624-9617
Giant: Giant Industries Arizona, Inc.
Raw Materials Supply
Post Office Box 12999
Scottsdale, Arizona 85267
Telecopy: 602-585-8892
Notices may be delivered by mail or in hand and shall be
effective upon receipt at the addresses set forth above.
MISCELLANEOUS:
A. The validity, interpretation and performance of this
Agreement shall be governed and construed in accordance
with the laws of the State of Texas.
B. This Agreement shall extend to and be binding on the
parties hereto, their heirs, administrators, legal
representatives, successors and assigns.
C. Meridian and Giant shall comply with the terms,
conditions, and other provisions contained in Meridian's
general conditions pertaining to and governing natural
gas liquids transactions ("General Conditions") as set
forth on Exhibit E.
D. Continued publication of posted prices. If at any time
OPIS shall cease to be published, or shall fail to publish
weekly average, then Seller shall designate an alternate
Publication for the purpose of establishing the price;
provided that Seller shall not designate any such
publication that does not provide a price basis
representative of the fair market value of the liquids
at the time such publication is designated.
E. In the event of a conflict between this Agreement and the
General Conditions, the terms and conditions of this
Agreement shall prevail.
This document evidences our understanding of the entire
agreement and shall constitute the formal contract.
Please acknowledge your acceptance of and agreement to the
above terms and conditions by executing this Agreement
effective the date first above written.
MERIDIAN OIL HYDROCARBONS, INC.
By: /s/ L. Edward Parker
--------------------------------
L. Edward Parker,
Executive Vice President, Marketing
GIANT INDUSTRIES ARIZONA, INC.
By: /s/ Guy W. Yates
--------------------------------
Guy W. Yates
Senior Vice President
*Confidential information regarding quantity redacted.
**Confidential information regarding volume and price redacted.<PAGE>
<PAGE>
EXHIBIT A
NATURAL GASOLINE SPECIFICATIONS
TEST METHOD STANDARD
SPECIFICATION POINT (latest issue) UNIT
------------------- -------------- --------
Vapor Pressure: (Reid) ASTM D-323
----------------------
At 100 degrees F, psia, minimum None
At 100 degreesF, psia, maximum 14.0
Distillation: ASTM D-86
-------------
10% evaporated temp. degrees F, minimum 90
50% evaporated temp. degrees F, minimum 115
90% evaporated temp. degrees F, minimum 180
End point temp. degrees F, maximum 280
Composition:
------------
(Liquid Volume Specs%) ASTM D-2597
Hexanes and Heavier, maximum 50.0
Pentanes, minimum 50.0
Butanes, maximum 4.0
Propane, maximum 0.0
Corrosiveness: ASTM D-130
--------------
Copper Strip at 100 degrees F No.1
Color: ASTM D-156
------
Saybolt Number, minimum +25
Doctor Test: GPA Publication 1138 Negative
------------
Dryness: Inspection
--------
Free Water None
Sulfur: ASTM D-3120
-------
PPMW, maximum 15.0
<PAGE>
<PAGE>
EXHIBIT B
ISOBUTANE SPECIFICATIONS
TEST METHOD STANDARD
SPECIFICATION POINT (latest issue) UNIT
------------------- -------------- --------
Vapor Pressure: ASTM D-1267
---------------
At 100 degrees F, psia, minimum 56.0
At 100 degrees F, psia, maximum 70.0
Volatile Residue: ASTM D-1837
-----------------
Temperature at 95%
Evaporated, degrees F, maximum 16.0
Composition:
------------
(Liquid Volume Specs%) ASTM D-2163
Isobutane, minimum 95.0
Propane, maximum 2.5
Normal Butane, maximum 4.5
Corrosiveness: ASTM D-1838
--------------
Copper Strip at 100 degrees F No.1
Volatile Sulfur: ASTM D-2784
----------------
Grains/100 ft. 3 at 60 degrees F 10
and 14.7 PSIA maximum
Hydrogen Sulfide: ASTM D-2420 Pass
-----------------
Dryness: Inspection
--------
Free Water None<PAGE>
<PAGE>
EXHIBIT C
NORMAL BUTANE SPECIFICATIONS
TEST METHOD STANDARD
SPECIFICATION POINT (latest issue) UNIT
------------------- -------------- --------
Vapor Pressure: ASTM D-1267
---------------
At 100 degrees F, psia, minimum 50.0
At 100 degrees F, psia, maximum 60.0
Volatile Residue: ASTM D-1837
-----------------
Temperature at 95%
Evaporated, degrees F, maximum 36
Composition:
------------
(Liquid Volume Specs %) ASTM D-2163
Normal Butane, minimum 90.0
Propane, maximum 1.0
Corrosiveness: ASTM D-1838
--------------
Copper Strip at 100 degrees F No.1
Volatile Sulfur: ASTM D-2784
----------------
Grains/100 ft. 3 at 60 degrees F
and 14.7 PSIA. maximum 10
Hydrogen Sulfide: ASTM D-2420 Pass
-----------------
Dryness: Inspection
--------
Free Water None<PAGE>
<PAGE>
EXHIBIT D
REFINERY GRADE NORMAL BUTANE
SPECIFICATIONS
TEST METHOD STANDARD
SPECIFICATION POINT (latest issue) UNIT
------------------- -------------- --------
Vapor Pressure: ASTM D-1267
---------------
At 100 degrees F, psia, minimum 30.0
At 100 degrees F, psia, maximum 60.0
Composition:
------------
(Liquid Volume Specs %) ASTM D-2163
Butanes, minimum 50.0
Propane, maximum 1.0
Pentanes, maximum 25.0
Hexanes and Heavier, maximum 1.0
Corrosiveness: ASTM D-1838
--------------
Copper Strip at 100 degrees F No.1
Volatile Sulfur: ASTM D-2784
----------------
Grains/100 ft. 3 at 60 degrees F
and 14.7 PSIA. maximum 10
Hydrogen Sulfide: ASTM D-2420 Pass
-----------------
Dryness: Inspection
--------
Free Water None<PAGE>
<PAGE>
EXHIBIT E
GENERAL CONDITIONS
------------------
CLAIMS: Any claim for defect or variance in quality or for shortage
shall be made, and seller shall be notified and given an opportunity
to inspect before the product is removed from the container into which
seller makes delivery, and a failure of buyer to observe this
provision shall operate as a waiver of such claim.
RETURNS: None of the products purchased hereunder may be returned for
credit to buyer's account or exchanged for other goods except with the
written consent of seller and upon such terms as it may fix.
ASSIGNMENT: This Agreement may not be assigned by either party hereto
without the written consent of the other party, except to a subsidiary
company or to a successor to such party who purchases all or
substantially all of such party's assets.
VOLUME CORRECTION: The volume of all products sold and delivered
hereunder shall be corrected to 60 degrees Fahrenheit.
CLAIMS - LIMITATION OF LIABILITY - INDEMNIFICATION: Seller warrants
that it has good right and title to sell the NGLs hereunder and that
the NGLs supplied hereunder shall conform to seller's standard
specification or specifications as defined in exhibits, if any,
attached hereto. SELLER MAKES NO WARRANTY OF MERCHANTABILITY AND
THERE IS NO WARRANTY THAT PRODUCT SUPPLIED HEREUNDER SHALL BE FIT
FOR ANY PARTICULAR PURPOSE NOR IS THERE ANY OTHER WARRANTY, EXPRESS OR
IMPLIED, EXCEPT AS EXPRESSLY PROVIDED HEREUNDER. Any recommendations
made by seller concerning the use or application of the NGLs are
believed reliable, but seller makes no warranty of results to be
obtained.
BUYER'S EXCLUSIVE REMEDY SHALL BE FOR DAMAGES AND SELLER'S TOTAL
LIABILITY FOR ANY AND ALL LOSSES AND DAMAGES ARISING OUT OF ANY
CAUSE WHATSOEVER (WHETHER SUCH CAUSE BE BASED IN CONTRACT, NEGLIGENCE,
STRICT LIABILITY, OTHER TORT OR OTHERWISE) SHALL IN NO EVENT EXCEED
THE PURCHASE PRICE OF THE PRODUCT IN RESPECT TO WHICH SUCH CAUSE
ARISES OR, AT SELLER'S OPTION, THE REPLACEMENT OF SUCH PRODUCT, AND IN
NO EVENT SHALL SELLER BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES RESULTING FROM ANY SUCH CAUSE.
MALODORANTS: Seller will not be responsible for adding malodorants to
the products sold hereunder unless specifically requested in writing
by buyer.
<TABLE>
EXHIBIT 11.1
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE DATA
<CAPTION>
Year Ended December 31,
-------------------------------------------
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Earnings (loss) before
extraordinary item $ 4,521,000 $ 6,265,000 $ (2,417,000)
Extraordinary loss, net (384,000)
----------- ------------ ------------
Net earnings (loss) $ 4,521,000 $ 5,881,000 $ (2,417,000)
=========== ============ ============
Weighted average number
of shares outstanding
during the period 12,127,481 12,225,177 12,231,365
=========== ============ ============
Earnings (loss) per common share:
Earnings (loss) before
extraordinary item $ 0.37 $ 0.51 $ (0.20)
Extraordinary loss, net (0.03)
----------- ------------ ------------
$ 0.37 $ 0.48 $ (0.20)
=========== ============ ============
Additional Primary Computation
------------------------------
Earnings before extraordinary item $ 4,521,000 $ 6,265,000
Extraordinary loss, net (384,000)
----------- ------------
Net earnings $ 4,521,000 $ 5,881,000
=========== ============
Additional adjustment to
weighted average number of
shares outstanding:
Weighted average number of
shares outstanding above 12,127,481 12,225,177
Add - dilutive effect of
outstanding options(a) 31,821 60,097
----------- -----------
Weighted average number of shares
outstanding as adjusted 12,159,302 12,285,274
=========== ============
Earnings (loss) per common share:(b)
Earnings before extraordinary item $ 0.37 $ 0.51
Extraordinary loss, net (0.03)
----------- ------------
$ 0.37 $ 0.48
=========== ============
</TABLE>
<PAGE>
<TABLE>
GIANT INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE DATA
<CAPTION>
Year Ended December 31,
---------------------------
1994 1993
----------- -----------
<S> <C> <C>
Fully Diluted Computation
-------------------------
Earnings before extraordinary item $ 4,521,000 $ 6,265,000
Extraordinary loss, net (384,000)
----------- -----------
Net earnings $ 4,521,000 $ 5,881,000
=========== ===========
Additional adjustment to
weighted average number of
shares outstanding:
Weighted average number of
shares outstanding above 12,127,481 12,225,177
Add - dilutive effect of
outstanding options(a) 33,456 84,629
----------- -----------
Weighted average number of shares
outstanding as adjusted 12,160,937 12,309,806
=========== ===========
Earnings (loss) per common share:(b)
Earnings before extraordinary item $ 0.37 $ 0.51
Extraordinary loss, net (0.03)
----------- -----------
$ 0.37 $ 0.48
=========== ===========
(a) As determined by the application of the treasury stock method.
(b) This calculation is submitted in accordance with Regulation S-K
item 601(b)(11) although not required by footnote 2 to paragraph
14 of APB Opinion No. 15 because it results in dilution of less
than 3%.
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF
GIANT INDUSTRIES, INC.
(a Delaware corporation)
Jurisdiction of Names Under Which
Subsidiary Incorporation Company Does Business
---------- --------------- ---------------------
Giant Industries
Arizona, Inc. Arizona TransWest Tank Lines,
Giant Refining Company,
Ciniza Pipe Line
Company
- Ciniza Production
Company* New Mexico
- Giant Stop-N-Go of
New Mexico, Inc.* New Mexico
- Giant Four Corners,
Inc.* Arizona
- Giant Mid-Continent,
Inc.* Arizona
Giant Exploration &
Production Company Texas
_______________
*A wholly-owned subsidiary of Giant Industries Arizona, Inc.
EXHIBIT 23.1
Intera Information Technologies Inc.
(LETTERHEAD)
INTERA (LOGO)
March 28, 1995
Giant Industries, Inc.
23733 North Scottsdale Road
Scottsdale, Arizona 85255
Gentlemen:
The firm of Intera Information Technologies, Inc. ("Intera")
was retained to conduct a year-end audit, effective December 31,
1994, of reserves for oil and gas interests held by Giant
Industries Inc. ("Giant") through its wholly-owned subsidiaries,
Ciniza Production Company, and Giant Exploration & Production
Company. This letter authorizes Giant to use Intera's report,
dated February 1, 1995, regarding the December 31, 1994 reserve
audit, in its Form 10-K Annual Report to be filed with the United
States Securities and Exchange Commission.
Intera has no interests in Giant or any of its affiliated
companies or subsidiaries and is not entitled to receive any such
interest as payment for such reports. Intera is not employed by
Giant on a contingent basis.
Very truly yours,
INTERA PETROLEUM DIVISION
/s/ Daniel D. Domeracki
--------------------------------
Daniel D. Domeracki
Vice President, Operations
Formerly Intera ECL-Bergeson Petroleum Technologies
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-35357 of Giant Industries, Inc. on Form S-8 of our reports
dated March 6, 1995 appearing in the Annual Report on Form 10-K of
Giant Industries, Inc. for the year ended December 31, 1994.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 12,597
<SECURITIES> 35,631
<RECEIVABLES> 16,426
<ALLOWANCES> 546
<INVENTORY> 32,270
<CURRENT-ASSETS> 107,976
<PP&E> 306,717
<DEPRECIATION> 143,801
<TOTAL-ASSETS> 285,567
<CURRENT-LIABILITIES> 42,405
<BONDS> 116,090
<COMMON> 122
0
0
<OTHER-SE> 109,568
<TOTAL-LIABILITY-AND-EQUITY> 285,567
<SALES> 293,458
<TOTAL-REVENUES> 293,458
<CGS> 193,359
<TOTAL-COSTS> 262,283
<OTHER-EXPENSES> 3,395
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,805
<INCOME-PRETAX> 5,778
<INCOME-TAX> 1,257
<INCOME-CONTINUING> 4,521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,521
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 99.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 11-K
ANNUAL REPORT
_____________
PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal year Ended December 31, 1994
GIANT INDUSTRIES, INC. AND AFFILIATED COMPANIES
EMPLOYEE STOCK OWNERSHIP PLAN
GIANT INDUSTRIES, INC.
______________________
The principal executive offices of Giant Industries, Inc. are
located at 23733 North Scottsdale Road, Scottsdale, Arizona 85255.
<PAGE>
<PAGE>
FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements and Supplemental Schedule
Page Number
-----------
Independent Auditors' Report F-1
Statements of net assets available F-2
for benefits - December 31, 1994 and 1993
Statements of changes in net assets F-3
available for benefits - Years ended
December 31, 1994, 1993, and 1992
Notes to financial statements F-4 to F-7
Supplemental Schedule:
Schedule of assets held for investment purposes F-8
(b) Exhibits - none
2<PAGE>
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Committee has duly caused this annual report
to be signed by the undersigned thereunto duly authorized.
EMPLOYEE STOCK OWNERSHIP PLAN OF GIANT
INDUSTRIES, INC. AND AFFILIATED COMPANIES
Date: 3-20-95 Signature: /s/ Gary L. Nielsen
_______________________________
Gary L. Nielsen,
Vice President Finance-Treasurer
Date: 3-20-95 Signature: /s/ Morgan Gust
_______________________________
Morgan Gust,
Vice President-General Counsel
Date: 3-20-95 Signature: /s/ Debra A. McKinney
_______________________________
Debra A. McKinney,
Director of Personnel
3<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Administrative Committee of the
Employee Stock Ownership Plan of
Giant Industries, Inc. and Affiliated Companies
Scottsdale, Arizona
We have audited the accompanying statements of net assets available for
benefits of the Employee Stock Ownership Plan of Giant Industries, Inc.
and Affiliated Companies as of December 31, 1994 and 1993, and the
related statements of changes in net assets available for benefits for
each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Plan's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the net assets available for benefits
of the Employee Stock Ownership Plan of Giant Industries, Inc. and
Affiliated Companies as of December 31, 1994 and 1993, and the changes
in net assets available for benefits for each of the three years in the
period ended December 31, 1994 in conformity with generally accepted
accounting principles.
Our audits were conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplemental schedule
for the year ended December 31, 1994 on page F-8 is presented for the
purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974.
This schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in our
audit of the basic 1994 financial statements and, in our opinion, is
fairly stated in all material respects when considered in relation to
the basic financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 17, 1995
F-1<PAGE>
<PAGE>
<TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN
OF
GIANT INDUSTRIES, INC. AND AFFILIATED COMPANIES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1994 AND 1993
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
------
Investments at fair value (Notes 3, 4 and 5):
Preferred stocks $ - $ 36,975
Common stocks - 336,813
Mutual funds 1,066,062 17,725
Limited partnership 22,200 1
Common stock of Giant Industries, Inc. 11,511,590 16,391,841
Loans to participants 50,614 63,573
----------- -----------
Total Investments 12,650,466 16,846,928
----------- -----------
Interest and dividends receivable 1,832 4,630
Other receivables 3,116 5,141
Cash and cash equivalents 45,625 718,220
----------- -----------
50,573 727,991
----------- -----------
Total Assets 12,701,039 17,574,919
----------- -----------
LIABILITIES
-----------
Other liabilities 10,259 10,749
Note payable (Note 6) 513,679 1,346,913
----------- -----------
Total Liabilities 523,938 1,357,662
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $12,177,101 $16,217,257
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
<PAGE>
<TABLE>
EMPLOYEE STOCK OWNERSHIP PLAN
OF
GIANT INDUSTRIES, INC. AND AFFILIATED COMPANIES
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
<CAPTION>
1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Additions:
Net appreciation in fair
value of investments (Note 3) $ - $ 8,166,489 $ 687,362
Interest and dividend income 30,035 52,490 67,250
Employer contribution 900,000 889,441 900,000
----------- ----------- ----------
Total Additions 930,035 9,108,420 1,654,612
----------- ----------- ----------
Deductions:
Net depreciation in fair value of
investments (Note 3) 4,249,045 - -
Distributions to terminated employees 654,130 828,258 716,199
Interest expense 66,766 96,167 143,355
Other 250 - 2,395
----------- ----------- ----------
Total Deductions 4,970,191 924,425 861,949
----------- ----------- ----------
Net (Decrease) Increase (4,040,156) 8,183,995 792,663
----------- ----------- ----------
Net Assets Available for Benefits:
Beginning of Year 16,217,257 8,033,262 7,240,599
----------- ----------- ----------
End of Year $12,177,101 $16,217,257 $8,033,262
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN
OF
GIANT INDUSTRIES, INC. AND AFFILIATED COMPANIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1. DESCRIPTION OF THE PLAN:
GENERAL - On June 30,1987, Giant Industries, Inc. (the
"Company") converted through an amendment, its Joint
Profit Sharing Plan to an Employee Stock Ownership Plan.
The Employee Stock Ownership Plan (the "Plan") of Giant
Industries, Inc. and Affiliated Companies is a non-
contributory defined contribution plan which covers all
eligible employees. The purpose of the Plan is to
enable participants to share in the ownership of the
Company. The Summary Plan Description describes the
Plan, including contribution allocations, termination,
vesting and benefit provisions.
CONTRIBUTIONS - The Plan provides for a contribution
from the Company from its current or accumulated net
income as may be determined annually at the discretion
of its Board of Directors.
PARTICIPATION AND VESTING - Each employee hired on or
after July 1, 1993 shall become a participant on his or
her participation date, which is defined as the January
1 or July 1 coincident with or next following the date
on which the employee shall have completed one year of
service. The participation date of any employee hired
prior to July 1, 1993 shall be determined in accordance
with the terms of the Plan prior to the seventh
amendment. Participants' interests in their accounts
vest over a seven year period. In the event the Plan is
terminated by the Company, all participants would
immediately become 100% vested in their accrued benefits
as of the date of Plan termination.
ALLOCATIONS - Each participant's account is credited
with an allocation of the Company's contribution,
investment income and forfeitures of terminated
participants' non-vested accounts. Allocations to
participant accounts are made on a formula based on the
ratio that each participant's compensation, as defined,
during the Plan year, bears to the compensation of all
such participants.
F-4<PAGE>
<PAGE>
PLAN ADMINISTRATION - The Company administers the Plan
through an administrative committee comprised of three
employees who are appointed by the Company's Board of
Directors. Most expenses pertaining to the
administration of the Plan are being paid by the
Company, at the Company's option. Bank of America is
the Plan's trustee and custodian and Boyce & Associates
is the Plan's recordkeeper.
AMENDMENTS - The Plan was amended six times prior to
1993.
A seventh amendment was executed on August 4, 1993, to
be effective as of January 1, 1993. This amendment
changed Plan eligibility provisions for employees hired
on or after July 1, 1993, eliminated the availability of
life insurance within the Plan, amended dividend
allocation procedures and amended participant loan
provisions. In addition, changes were made to keep the
Plan in compliance with current regulations.
An eighth amendment was executed on October 5, 1994 to
be effective as of July 1, 1987. This amendment was
adopted in order to comply with the Tax Reform Act of
1986 and any subsequent amendments to the Internal
Revenue Code, including but not limited to the
Unemployment Compensation Amendments of 1992 and the
Omnibus Budget Reconciliation Act of 1993, and any
related Internal Revenue Service regulations and
pronouncements.
2. SIGNIFICANT ACCOUNTING POLICIES:
The accounting records of the Plan are maintained on the
accrual basis. Investments included in the Statement of
Net Assets Available for Benefits are stated at fair
value. The fair value of marketable securities and
mutual funds is determined based on quoted market prices
as of the Plan's year end. The fair value of the
limited partnership is management's best estimate based
on an independent appraisal provided by Bank of America.
Giant Industries, Inc.'s common stock value is
determined based on the quoted market price as reported
by the New York Stock Exchange as of the Plan's year
end. The net change in the fair value of investments is
recorded in the Statements of Changes in Net Assets
Available for Benefits as net appreciation
(depreciation) in fair value of investments.
F-5<PAGE>
<PAGE>
3. Investments:
The following table presents the fair value of
investments, with common stock of the Company being the
only investment greater than 5% of the Plan's net assets
at December 31, 1993. Mutual funds and common stock of
the Company represent investments greater than 5% of the
Plan's net assets at December 31, 1994.
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------------------------ ------------------------------------
Number of Number of
shares or shares or
principal Fair principal Fair
amount Cost Value amount Cost Value
--------- ----------- ------------ --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Marketable Securities:
Preferred Stocks $ - $ - 1,100 $ 21,733 $ 36,975
Common Stocks - - 7,000 238,161 336,813
Mutual Funds:
ML Lee Acquisition 25 25,000 17,725 25 25,000 17,725
Bank of America:
Equity Fund 91,071 208,708 218,516 - - -
Fixed Income Fund 138,043 275,769 279,055 - - -
Core Equity Growth Fund 8,753 165,462 169,415 - - -
Short Term Government Fund 87,277 161,777 162,449 - - -
Convertible Securities Fund 43,188 110,308 108,045 - - -
Aggressive Equity Fund 25,410 110,308 110,857 - - -
Limited Partnership:
Recorp. Mtg.
Investors II 1.5 60,000 22,200 1.5 60,000 1
----------- -----------
Sub Total 1,088,262 391,514
Giant Industries, Inc.
Common Stock 1,534,878 7,424,053 11,511,590 1,599,204 7,791,871 16,391,841
Loans to Participants 50,614 50,614 63,573 63,573
----------- -----------
$12,650,466 $16,846,928
=========== ===========
</TABLE>
<PAGE>
<PAGE>
Net appreciation (depreciation) in fair value of the Plan's
investments (including investments bought, sold and held during
the period) for the years ended December 31 consists for the
following:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- --------
<S> <C> <C> <C>
Realized Appreciation/(Depreciation)
Corporate bonds $ - $ 622 $ (1,094)
Preferred stocks (589) - 2,374
Common stocks - - 5,502
Unrealized Appreciation/(Depreciation)
Corporate bonds - - 307
Preferred stocks - 2,150 7,550
Common stocks (6,530) 40,228 20,215
Mutual funds 20,584 (4,300) (75)
Recorp. Mtg. Investors II 22,199 - -
Giant Industries, Inc., common stock (4,284,709) 8,127,789 652,583
----------- ---------- --------
Net (Depreciation) Appreciation $(4,249,045) $8,166,489 $687,362
=========== ========== ========
</TABLE>
F-6<PAGE>
<PAGE>
4. INVESTMENTS IN COMMON STOCK OF GIANT INDUSTRIES, INC.:
The Company stock owned by the Plan is made up of
allocated and unallocated shares. The allocated shares
are those which are held in the accounts of the
participants of the Plan. The unallocated shares are
those which are held by the Plan Trustee. These shares
are allocated to participants when principal payments
are made on the note payable.
During 1994, 1993, and 1992, the Plan allocated 120,937,
130,616 and 94,342, respectively, of the unallocated
shares of the Company stock to the participants as a
result of principal repayments on the note payable.
During 1994, 1993, and 1992 the Company contributed
$900,000, $889,441, and $900,000, respectively, of which
$66,766, $96,167 and $143,355, respectively, were used
to make interest payments on the note, and $833,234,
$793,274, and $756,645, respectively, were used to
reduce the principal balance on the note.
The following is a summary of the allocated and
unallocated shares of the Company stock owned by the
Plan at December 31 (all shares are rounded to
whole shares):
<TABLE>
<CAPTION>
1994 1993 1992
---------------------- ---------------------- ---------------------
Shares Fair Value Shares Fair Value Shares Fair Value
--------- ----------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Allocated
Shares 1,460,322 $10,952,418 1,403,711 $14,388,038 1,390,116 $7,298,109
Unallocated
Shares 74,556 559,172 195,493 2,003,803 326,109 1,712,072
--------- ----------- --------- ----------- --------- ----------
Total Shares 1,534,878 $11,511,590 1,599,204 $16,391,841 1,716,225 $9,010,181
========= =========== ========= =========== ========= ==========
</TABLE>
5. RELATED PARTY TRANSACTIONS:
The total balance of loans to participants at December 31,
1994 and 1993 includes $50,134 and $62,752, respectively,
of balances due from executive officers of the Company.
6. NOTE PAYABLE:
During 1993, the Company purchased the Plan's existing
note payable to the bank. The outstanding balance
at December 31, 1994 bears interest at 80% of the prime
rate and is due in September 1995.
7. FEDERAL INCOME TAX STATUS:
The Plan obtained its latest determination letter dated
September 16, 1994 in which the Internal Revenue Service
stated that the Plan, as then designed, was in compliance
with the applicable requirements of the Internal Revenue
Code.
F-7<PAGE>
<PAGE>
EMPLOYEE STOCK OWNERSHIP PLAN OF
GIANT INDUSTRIES, INC. AND AFFILIATED COMPANIES
SUPPLEMENTAL SCHEDULE
ITEM 27a - ASSETS HELD FOR INVESTMENT PURPOSES
AT DECEMBER 31, 1994
<TABLE>
<CAPTION>
DESCRIPTION
OF INVESTMENT
INCLUDING
MATURITY DATE,
RATE OF INTEREST,
IDENTITY OF ISSUE, BORROWER, COLLATERAL, PAR CURRENT
LESSOR, OR SIMILAR PARTY OR MATURITY VALUE COST VALUE
--------------------------- ----------------- ---------- -----------
<S> <C> <C> <C>
Mutual Funds:
-------------
ML Lee Acquisition 25 Shares $ 25,000 $ 17,725
Bank of America
---------------
Equity Fund 91,071 Shares 208,708 218,516
Fixed Income Fund 138,043 Shares 275,769 279,055
Core Equity Growth Fund 8,753 Shares 165,462 169,415
Short Term Government Fund 87,277 Shares 161,777 162,449
Convertible Securities Fund 43,188 Shares 110,308 108,045
Aggressive Equity Fund 25,410 Shares 110,308 110,857
--------- ---------- -----------
393,767 Shares $1,057,332 $ 1,066,062
========= ========== ===========
Limited Partnership:
--------------------
Recorp. Mtg. Investors II 1.5 Units $ 60,000 $ 22,200
========= ========== ===========
Giant Industries, Inc.
Common Stock 1,534,878 Shares $7,424,053 $11,511,590
---------------------- ========= ========== ===========
Loans to Participants Loans at 12%, $ 50,614 $ 50,614
--------------------- collateralized by ========== ===========
vested accounts,
due 1996 through
2002
F-8
</TABLE>
