FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
---------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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---------------------------------------------------------
Commission file number 1-10509
SNYDER OIL CORPORATION
- --------------------------------------------------------------------------------
Delaware 75-2306158
- -------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
777 Main Street, Fort Worth, Texas 76102
- ------------------------------------------ ------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (817) 338-4043
------------------
- --------------------------------------------------------------------------------
(Former name,former address and former fiscal year,
if changed since last report.)
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 .
29,587,562 Common Shares were outstanding as of August 5, 1997
<PAGE>
PART I. FINANCIAL INFORMATION
The financial statements included herein have been prepared in
conformity with generally accepted accounting principles. The statements are
unaudited, but reflect all adjustments which, in the opinion of management, are
necessary to fairly present the Company's financial position and results of
operations.
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<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<CAPTION>
June 30, December 31,
1997 1996
------------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets
Cash and equivalents $ 44,102 $ 27,922
Accounts receivable 37,822 58,944
Inventory and other 7,913 11,212
------------ ------------
89,837 98,078
------------ ------------
Investments 128,824 129,681
------------ ------------
Oil and gas properties, successful efforts method 928,375 887,721
Accumulated depletion, depreciation and amortization (304,423) (252,334)
------------ ------------
623,952 635,387
------------ ------------
Gas facilities and other 28,947 28,111
Accumulated depreciation and amortization (11,652) (11,798)
------------ ------------
17,295 16,313
------------ ------------
$ 859,908 $ 879,459
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 45,444 $ 51,867
Accrued liabilities 43,874 37,043
------------ ------------
89,318 88,910
------------ ------------
Senior debt 97,001 188,231
Subordinated notes 271,256 103,094
Convertible subordinated notes - 80,748
Deferred taxes payable 19,761 9,034
Other noncurrent liabilities 21,413 28,064
Minority interest 84,061 86,710
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par, 10,000,000 shares authorized,
6% Convertible preferred stock, 1,033,500 shares
issued and outstanding 10 10
Common stock, $.01 par, 75,000,000 shares authorized,
31,586,932 and 31,456,027 shares issued 316 315
Capital in excess of par value 260,920 260,221
Retained earnings 41,589 25,711
Common stock held in treasury, 2,532,100 and 250,000 shares at cost (42,873) (3,510)
Unrealized gain on investments 17,136 11,921
------------ ------------
277,098 294,668
------------ ------------
$ 859,908 $ 879,459
============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share data)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
------------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Revenues
Oil and gas sales $ 48,988 $ 44,330 $ 116,836 $ 80,452
Gas transportation, processing and marketing 1,996 4,344 6,205 8,795
Gains on sales of equity interests in investees 19,968 2,788 32,968 3,195
Gains on sales of properties 2,235 3,142 4,842 3,122
Other 1,229 2,164 2,320 2,923
--------- --------- --------- ---------
74,416 56,768 163,171 98,487
--------- --------- --------- ---------
Expenses
Direct operating 12,503 12,620 26,524 23,379
Cost of gas and transportation 1,757 3,415 5,948 7,111
Exploration 3,690 290 5,390 804
General and administrative 5,320 2,709 10,812 6,577
Interest 6,977 6,126 13,764 9,740
Other 1,044 2,760 2,800 3,439
Loss on sale of subsidiary interest 10,000 15,481 10,000 15,481
Depletion, depreciation and amortization 23,389 22,745 46,597 39,516
--------- --------- --------- ---------
Income (loss) before taxes, minority interest
and extraordinary item 9,736 (9,378) 41,336 (7,560)
--------- --------- --------- ---------
Provision (benefit) for income taxes
Current 500 8 500 33
Deferred 2,618 - 11,489 (335)
--------- --------- --------- ---------
3,118 8 11,989 (302)
--------- --------- --------- ---------
Minority interest in subsidiaries 626 597 3,429 948
--------- --------- --------- ---------
Income (loss) before extraordinary item 5,992 (9,983) 25,918 (8,206)
Extraordinary item-early extinguishment of debt,
net of benefit for income taxes of $1,533 2,848 - 2,848 -
--------- --------- --------- ---------
Net income (loss) 3,144 (9,983) 23,070 (8,206)
Preferred dividends 1,550 1,552 3,100 3,105
--------- --------- --------- ---------
Net income (loss) applicable to common $ 1,594 $ (11,535) $ 19,970 $ (11,311)
========= ========= ========= =========
Net income (loss) per common share before
extraordinary item $ .15 $ (.37) $ .75 $ (.36)
========= ========= ========= =========
Net income (loss) per common share $ .05 $ (.37) $ .66 $ (.36)
========= ========= ========= =========
Weighted average shares outstanding 29,841 31,450 30,435 31,376
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Preferred Stock Common Stock Capital in Retained
------------------ ------------------ Excess of Earnings Treasury
Shares Amount Shares Amount Par Value (Deficit) Stock
------ ------ ------ ------ --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 1,035 $ 10 31,430 $ 314 $ 265,911 $ (29,001) $ (2,457)
Common stock grants and
exercise of options - - 267 3 3,179 - (258)
Issuance of common - - 399 4 3,689 - -
Repurchase of common - - (640) (6) (6,243) - (795)
Repurchase of preferred (1) - - - (142) - -
Dividends - - - - (6,173) (8,238) -
Net income - - - - - 62,950 -
------- ------- ------- ------- ------- -------- ---------
Balance, December 31, 1996 1,034 10 31,456 315 260,221 25,711 (3,510)
Common stock grants and
exercise of options - - 130 1 674 - -
Conversion of subordinated
notes into common - - 1 - 25 - -
Repurchase of common - - - - - - (39,363)
Dividends - - - - - (7,192) -
Net income - - - - - 23,070 -
------- ------- ------- ------- ---------- ------- --------
Balance, June 30, 1997
(Unaudited) 1,034 $ 10 31,587 $ 316 $ 260,920 $ 41,589 $(42,873)
======= ======= ======= ======= ========= ======== ========
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
SNYDER OIL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Six Months Ended June 30,
-------------------------------
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Operating activities
Net income (loss) $ 23,070 $ (8,206)
Adjustments to reconcile net income (loss)
to net cash provided by operations
Amortization of deferred credits - (1,052)
Gains on sales of equity interests in investees (32,968) (3,195)
Gains on sales of properties (4,842) (3,122)
Equity in (earnings) losses of investees (367) 770
Exploration expense 5,390 804
Loss on sale of subsidiary interest 10,000 15,481
Depletion, depreciation and amortization 46,597 39,516
Deferred taxes 11,489 (335)
Minority interest in subsidiaries 3,429 948
Loss on early extinguishment of debt, net 2,848 -
Changes in operating assets and liabilities
Decrease (increase) in
Accounts receivable 21,122 (4,343)
Inventory and other 1,253 1,662
Increase (decrease) in
Accounts payable (6,423) 6,305
Accrued liabilities (957) 3,314
Other liabilities (7,609) (4,939)
---------- ----------
Net cash provided by operations 72,032 43,608
---------- ----------
Investing activities
Acquisition, exploration and development (80,889) (52,998)
Proceeds from investments 38,631 1,057
Outlays for investments - (4,705)
Proceeds from sales of properties 11,597 25,227
---------- ----------
Net cash used by investing (30,661) (31,419)
---------- ----------
Financing activities
Issuance of common 1,249 619
Repurchase of stock (39,363) (1,460)
Increase in indebtedness 22,963 5,312
Loss on early extinguishment of debt, net (2,848) -
Dividends (7,192) (7,209)
Deferred credits - 1,030
---------- ----------
Net cash used by financing (25,191) (1,708)
---------- ----------
Increase in cash 16,180 10,481
Cash and equivalents, beginning of period 27,922 27,263
---------- ----------
Cash and equivalents, end of period $ 44,102 $ 37,744
========== ==========
Noncash investing and financing activities
Acquisition of properties and stock via stock issuances - $ 3,693
Exchange of subsidiary stock for stock of investee $ 30,923 -
The accompanying notes are an integral part of these statements.
</TABLE>
6
<PAGE>
SNYDER OIL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND NATURE OF BUSINESS
Snyder Oil Corporation (the "Company") is engaged in the acquisition,
exploration and development of domestic oil and gas properties, primarily in the
Gulf of Mexico, the Rockies and northern Louisiana. The Company also has
investments in two international exploration and production companies, SOCO
International plc ("SOCI plc") and Cairn Energy plc ("Cairn"). The Company, a
Delaware corporation, is the successor to a company formed in 1978.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Snyder
Oil Corporation ("SOCO") and its subsidiaries (collectively, the "Company").
Affiliates in which the Company owns more than 50% but less than 100% are fully
consolidated, with the related minority interest being deducted from subsidiary
earnings and stockholders' equity. Affiliates in which the Company owns between
20% and 50% are accounted for under the equity method. Affiliates in which the
Company owns less than 20% are accounted for under the cost method. The Company
accounts for its interest in joint ventures and partnerships using the
proportionate consolidation method, whereby its share of assets, liabilities,
revenues and expenses are consolidated.
Risks and Uncertainties
Historically, the market for oil and gas has experienced significant
price fluctuations. Prices for gas in the Rocky Mountain region, where the
Company currently produces approximately 70% of its natural gas, have
traditionally been particularly volatile. Prices are significantly impacted by
the local weather, supply in the area, seasonal variations in local demand and
limited transportation capacity to other regions of the country. Increases or
decreases in prices received, particularly in the Rocky Mountains, could have a
significant impact on the Company's future results of operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Producing Activities
The Company utilizes the successful efforts method of accounting for
its oil and gas properties. Consequently, leasehold costs are capitalized when
incurred. Unproved properties are assessed periodically within specific
geographic areas and impairments in value are charged to expense. During the six
months ended June 30, 1997, the Company provided unproved property impairments
of $467,000. Exploratory expenses, including geological and geophysical expenses
and delay rentals, are charged to expense as incurred. Exploratory drilling
costs are initially capitalized, but charged to expense if and when the well is
determined to be unsuccessful. Costs of productive wells, unsuccessful
developmental wells and productive leases are capitalized and amortized on a
unit-of-production basis over the life of the remaining proved or proved
developed reserves, as applicable. Gas is converted to equivalent barrels at the
rate of 6 Mcf to 1 barrel. Amortization of capitalized costs is generally
provided on a property-by-property basis. Estimated future abandonment costs
(net of salvage values) are accrued at unit-of-production rates and taken into
account in determining depletion, depreciation and amortization.
The Company follows Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of". SFAS 121 requires the Company to assess
7
<PAGE>
the need for an impairment of capitalized costs of oil and gas properties on a
property-by-property basis. If an impairment is indicated based on undiscounted
expected future cash flows, then it is recognized to the extent that net
capitalized costs exceed discounted expected future cash flows. During the six
months ended June 30, 1997, the Company did not provide for any such
impairments.
Section 29 Tax Credits
The Company from time to time enters into arrangements to monetize its
Section 29 tax credits. These arrangements result in revenue increases of
approximately $.40 per Mcf on production volumes from qualified Section 29
properties. As a result of such arrangements, the Company recognized additional
gas revenues of $1.5 million and $1.1 million during the six month periods ended
June 30, 1997 and 1996, respectively. These arrangements are expected to
continue through 2002.
Gas Imbalances
The Company uses the sales method to account for gas imbalances. Under
this method, revenue is recognized based on the cash received rather than the
proportionate share of gas produced. Gas imbalances at year end 1996 and June
30, 1997 were insignificant.
Financial Instruments
The following table sets forth the book values and estimated fair
values of financial instruments (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------- ----------------------
Book Fair Book Fair
Value Value Value Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash and equivalents $ 44,102 $ 44,102 $ 27,922 $ 27,922
Investments 128,824 128,824 129,681 163,477
Senior debt (97,001) (97,001) (188,231) (188,231)
Subordinated notes (271,256) (277,434) (103,094) (105,650)
Convertible subordinated notes - - (80,748) (82,866)
Long-term commodity contracts - 5,840 - 5,040
Interest rate swap - 16 - (19)
</TABLE>
The book value of cash and equivalents approximates fair value because
of the short maturity of those instruments. See Note (3) for a discussion of the
Company's investments. The fair value of senior debt is presented at face value
given its floating rate structure. The fair value of certain of the subordinated
notes and all of the convertible subordinated notes are estimated based on their
June 30, 1997 and December 31, 1996 closing prices on the New York Stock
Exchange. The fair value of the remaining subordinated notes are estimated based
on their bid price as of June 30, 1997.
From time to time, the Company enters into commodity contracts to
hedge the price risk of a portion of its production. Gains and losses on such
contracts are deferred and recognized in income as an adjustment to oil and gas
sales in the period to which the contracts relate. In 1994, the Company entered
into a long-term gas swap arrangement in order to lock in the price differential
between the Rocky Mountain and Henry Hub prices on a portion of its Rocky
Mountain gas production. The contract covers 20,000 MMBtu per day through 2004.
At June 30, 1997, that volume represented approximately 16% of the Company's
consolidated Rocky Mountain gas production. The fair value of the contract was
based on the market price quoted for a similar instrument.
In September 1995, the Company entered into an interest rate swap
covering $50 million of its bank debt. The agreement requires payment to a
counterparty based on a fixed rate of 5.585% and requires the counterparty to
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<PAGE>
pay the Company interest at the then current 30 day LIBOR rate. Accounts
receivable or payable under this agreement are recorded as adjustments to
interest expense and are settled on a monthly basis. The agreement matures in
September 1997, with the counterparty having the option to extend it for two
years. At June 30, 1997 and December 31, 1996, the fair value of the agreement
was estimated at the net present value discounted at 10%.
Other
All liquid investments with an original maturity of three months or
less are considered to be cash equivalents. Certain amounts in prior years
consolidated financial statements have been reclassified to conform with current
classification. In the opinion of management, those adjustments to the financial
statements (all of which are of a normal and recurring nature, unless otherwise
disclosed) necessary to present fairly the financial position and results of
operations have been made. These interim financial statements should be read in
conjunction with the 1996 annual report on Form 10-K.
(3) INVESTMENTS
The Company has investments in foreign and domestic energy companies.
The following table sets forth the book values and estimated fair values of
these investments:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------------------ ------------------------
(In thousands)
Book Fair Book Fair
Value Value Value Value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Equity method investments $ - $ - $ 8,789 $ 42,585
Marketable securities 128,824 128,824 115,558 115,558
Long-term notes receivable - - 5,334 5,334
--------- --------- --------- ----------
$ 128,824 $ 128,824 $ 129,681 $ 163,477
========= ========= ========= =========
</TABLE>
The Company follows SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities", which requires that investments in marketable
securities accounted for on the cost method and long-term notes receivable must
be adjusted to their market value with a corresponding increase or decrease to
stockholders' equity. The pronouncement does not apply to investments accounted
for by the equity method.
Command Petroleum Limited
From May 1993 to November 1996, the Company had an investment in
Command Petroleum Limited ("Command"), an Australian oil company, which was
accounted for by the equity method. In November 1996, the Company accepted an
offer for its interest in Command. The Company received 16.2 million shares of
freely marketable common stock of Cairn, an international independent oil
company based in Edinburgh, Scotland whose shares are listed on the London Stock
Exchange. The Company recognized a gain of $65.5 million as a result of this
exchange. The Company's investment in Cairn is accounted for under the cost
method and is reflected as marketable securities in the table above. Immediately
prior to the acceptance of Cairn's offer, the Company accrued for a transaction
in which a director of the Company exchanged his option to purchase 10% of the
outstanding common stock of SOCO International, Inc. (through which the
investment in Command was held) and issued promissory notes to the Company
totaling $591,000 for 10% of the outstanding common stock of two SOCO
International, Inc. subsidiaries, SOCO International Holdings ("Holdings") and
SOCO International Operations ("Operations"). As a result of this transaction,
the Company recorded a $260,000 loss. Additionally, minority interest expense of
$4.3 million was recorded related to the director's 10% ownership as a result of
the Command gain. The actual exchange occurred in December 1996 and the
promissory notes remained outstanding at June 30, 1997. Subsequent to quarter
end, the Company exchanged 530,000 shares of the Company's treasury stock for
the director's 10% interest in Holdings. As a result, Holdings is now a wholly
owned subsidiary.
9
<PAGE>
SOCO International Operations, Inc. and SOCO International plc
In 1993, SOCO Perm Russia, Inc. ("SOCO Perm"), was organized by the
Company and a U.S. industry participant. SOCO Perm and a Russian partner formed
the Permtex joint venture to develop proven oil fields in the Volga-Urals Basin
of Russia. In April 1996, SOCO Perm closed a private placement which reduced the
Company's interest to 34.91%. The Company recognized a gain of $2.6 million as a
result of this transaction.
In 1994, the Company formed a consortium to explore the Tamtsag Basin
of eastern Mongolia, SOCO Tamtsag Mongolia, Inc. ("SOCO Tamtsag"). In 1996, the
Company completed the exchange of a portion of its interest to an industry
participant for consulting services valued at $1.5 million. As a result of this
transaction, the Company's ownership was reduced to 42% and an $832,000 gain was
recognized.
In May 1997, a newly formed entity, SOCI plc, completed an initial
public offering of its shares on the London Stock Exchange. Simultaneously with
the offering, the Company exchanged its shares of Operations, which included the
Company's interests in Russia, Mongolia and Thailand, for shares of SOCI plc.
Certain minority interest owners in these ventures also contributed their
interests. As part of the listing, SOCI plc acquired Cairn's UK onshore company
as well as certain assets in Yemen and Tunisia that were formerly owned by
Command. The offering raised approximately $75 million of new equity capital for
SOCI plc. The Company received 7.8 million shares (15.9% of the total) of SOCI
plc, which it has agreed not to sell for the two year period following the
listing. The Company recognized a gain of $20.0 million as a result of this
exchange. The Company's investment in SOCI plc is accounted for under the cost
method.
Marketable Securities
The Company has investments in equity securities of two publicly
traded foreign energy companies, Cairn and SOCI plc. Both investments are
accounted for on the cost method. In the first quarter of 1997, the Company sold
4.5 million Cairn shares at an average price of $8.81 per share realizing $39.2
million in proceeds. These transactions resulted in a gain of $13.0 million. The
Company's total cost basis in the Cairn and SOCI plc shares was $69.0 million
and $30.9 million, respectively, at June 30, 1997. The market value of the Cairn
and SOCI plc shares approximated $94.3 million and $34.5 million, respectively,
at June 30, 1997. In accordance with SFAS 115, at June 30, 1997 and December 31,
1996, respectively, investments were increased by $28.9 million and $20.4
million in gross unrealized holding gains, stockholders' equity was increased by
$17.1 million and $11.9 million, minority interest liability was increased by
$1.7 million and $1.3 million and deferred taxes payable were increased by $10.1
million and $7.2 million.
Notes Receivable
The Company held long-term notes receivable due from privately held
corporations and a director, with a book value of zero and $591,000 at June 30,
1997 and December 31, 1996. At December 31, 1996, the Company also held a
long-term note receivable due from SOCO Tamtsag which was contributed to SOCI
plc along with the Company's interest in SOCO Tamtsag in May 1997. The notes
from other privately held corporations are secured by certain assets, including
stock and oil and gas properties. The notes from a director, which originated in
connection with an option to purchase 10% of the Company's international
affiliates, are secured by shares of the Company owned by the director and are
due April 10, 1998. The notes, which had a book value of $627,000 at June 30,
1997, have been reclassified as inventory and other in the second quarter of
1997. At June 30, 1997 and December 31, 1996, the fair value of the notes
receivable, based on existing market conditions and the anticipated future net
cash flow related to the notes, approximated their carrying cost.
(4) OIL AND GAS PROPERTIES AND GAS FACILITIES
The cost of oil and gas properties at June 30, 1997 and December 31,
1996 includes $32.4 million and $32.7 million of unevaluated leasehold. Such
properties are held for exploration, development or resale. The following table
sets forth costs incurred related to oil and gas properties and gas processing
and transportation facilities:
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<PAGE>
<TABLE>
<CAPTION>
Six
Months Ended Year Ended
June 30, December 31,
1997 1996
-------------- --------------
(In thousands)
<S> <C> <C>
Proved acquisitions $ 984 $ 273,088
Acreage acquisitions 895 24,589
Development 41,464 43,075
Gas processing, transportation and other 993 3,612
Exploration 5,682 4,588
----------- ----------
$ 50,018 $ 348,952
=========== ==========
</TABLE>
Of the $41.5 million development expenditures, the majority was
concentrated in the Gulf of Mexico and the Rockies. During the six months ended
June 30, 1997, the Company placed 51 wells on sales, drilled three development
and four exploratory dry holes and had 21 wells in progress at quarter end.
Exploration costs include the costs of four exploratory dry holes and
continuing seismic programs in the Gulf of Mexico and north Louisiana.
Proved acquisitions during 1996 included $218.4 million related to the
formation of Patina Oil & Gas Corporation ("Patina") and the subsequent May 1996
acquisition of Gerrity Oil & Gas Corporation ("GOG"). The Company currently owns
74% of Patina, and it is consolidated into the Company's financial statements.
(5) INDEBTEDNESS
The following indebtedness was outstanding on the respective dates:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(In thousands)
<S> <C> <C>
SOCO bank facility $ 12,001 $ 93,731
Patina bank facility 85,000 94,500
------------ ------------
Senior debt $ 97,001 $ 188,231
============ ============
SOCO subordinated notes $ 173,571 $ -
Patina subordinated notes 97,685 103,094
------------ ------------
Subordinated notes $ 271,256 $ 103,094
============ ============
SOCO convertible subordinated notes $ - $ 80,748
============ ============
</TABLE>
SOCO maintains a $500 million revolving credit facility ("SOCO
Facility"). The facility is divided into a $400 million long-term portion and a
$100 million short-term portion. The borrowing base available under the facility
was $120 million at June 30, 1997. The majority of the borrowings under the
facility currently bear interest at LIBOR plus .75% with the remainder at prime,
with an option to select CD plus .75%. The margin on LIBOR or CD increases to 1%
when the Company's consolidated senior debt becomes greater than 80% of its
consolidated tangible net worth as defined. During the six months ended June 30,
1997, the average interest rate under the facility was 6.5%. The Company pays
certain fees based on the unused portion of the borrowing base. Among other
requirements, covenants require maintenance of a current working capital ratio
of 1 to 1 as defined, limit the incurrence of debt and restrict dividends, stock
repurchases, certain investments, other indebtedness and unrelated business
activities. Such restricted payments are limited by a formula that includes
proceeds from certain securities, cash flow and other items. Based on such
limitations, more than $132 million was available for the payment of dividends
and other restricted payments at June 30, 1997.
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<PAGE>
Patina maintains a $140 million revolving credit facility ("Patina
Facility"). The borrowing base available under the facility was $110 million at
June 30, 1997. Patina may elect that all or a portion of the facility bear
interest at a rate per annum equal to: (i) the higher of (a) prime rate plus a
margin equal to .25% (the "Applicable Margin") and (b) the Federal Funds
Effective Rate plus .5% plus the Applicable Margin, or (ii) the rate at which
Eurodollar deposits for one, two, three or six months (as selected by Patina)
are offered in the interbank Eurodollar market plus a margin which fluctuates
from .625% to 1.125% determined by a debt to EBITDA ratio. During the six months
ended June 30, 1997, the average interest rate under the facility was 6.8%.
The Patina Facility agreement contains certain financial covenants,
including but not limited to a maximum total debt to capitalization ratio, a
maximum total debt to EBITDA ratio and a minimum current ratio. The bank credit
agreement also contains certain negative covenants, including but not limited to
restrictions on indebtedness; certain liens; guaranties, speculative derivatives
and other similar obligations; asset dispositions; dividends, loans and
advances; creation of subsidiaries; investments; leases; acquisitions; mergers;
changes in fiscal year; transactions with affiliates; changes in business
conducted; sale and leaseback and operating lease transactions; sale of
receivables; prepayment of other indebtedness; amendments to principal
documents; pledges of assets; issuance of securities; and nonspeculative
commodity hedging.
In June 1997, SOCO issued $175.0 million of 8.75% Senior Subordinated
Notes ("Subordinated Notes") due June 15, 2007. The notes were sold at a
discount resulting in an 8.875% effective interest rate. The net proceeds of the
offering were $168.8 million. The notes are redeemable at the option of the
Company on or after June 15, 2002, initially at 104.375% of principal, and at
prices declining to 100% of principal on or after June 15, 2005. Upon the
occurrence of a change of control, as defined in the Notes, SOCO would be
obligated to make an offer to purchase all outstanding Subordinated Notes at a
price of 101% of the principal amount thereof. In addition, SOCO would be
obligated, subject to certain conditions, to make offers to purchase the
Subordinated Notes with the net cash proceeds of certain asset sales or other
dispositions of assets at a price of 100% of the principal amount thereof. The
Notes are unsecured general obligations of SOCO and are subordinated to all
senior indebtedness of SOCO and to any existing and future indebtedness of
SOCO's subsidiaries. The Notes contain covenants that, among other things, limit
the ability of SOCO to incur additional indebtedness, pay dividends, engage in
transactions with shareholders and affiliates, create liens, sell assets, engage
in mergers and consolidations and make investments in unrestricted subsidiaries.
In 1996, as part of an acquisition, Patina recorded $98.8 million of
11.75% Subordinated Notes ("Notes") due July 15, 2004 issued on July 1, 1994.
The Notes were recorded at a market value of $104.6 million or 105.875% of their
principal amount. Patina assumed the Notes in March 1997 when a wholly owned
subsidiary was merged into Patina. During 1996, $1.5 million of the Notes were
repurchased by the Company and retired. During the six months ended June 30,
1997, $6.2 million of the Notes were repurchased by the Company and retired.
Interest is payable each January 15 and July 15. The Notes are redeemable at the
option of Patina, in whole or in part, at any time on or after July 15, 1999,
initially at 105.875% of their principal amount, declining to 100% on or after
July 15, 2001. Upon the occurrence of a change of control, as defined in the
Notes, Patina would be obligated to make an offer to purchase all outstanding
Notes at a price of 101% of the principal amount thereof. In addition, Patina
would be obligated, subject to certain conditions, to make offers to purchase
the Notes with the net cash proceeds of certain asset sales or other
dispositions of assets at a price of 101% of the principal amount thereof. The
Notes are unsecured general obligations of Patina and are subordinated to all
senior indebtedness of Patina and to any existing and future indebtedness of
Patina's subsidiaries. The Notes contain covenants that, among other things,
limit the ability of Patina to incur additional indebtedness, pay dividends,
engage in transactions with shareholders and affiliates, create liens, sell
assets, engage in mergers and consolidations and make investments in
unrestricted subsidiaries.
In 1994, SOCO issued $86.3 million of 7% convertible subordinated
notes due May 15, 2001. The net proceeds were $83.4 million. The notes were
convertible into common stock at $22.57 per share. During 1996 and the first six
months of 1997, the Company repurchased $3.8 million and $824,000, respectively,
of these notes in accordance with a repurchase program. The notes were redeemed
by the Company in June 1997 at 103.51% of principal. As a result of the note
redemption, the Company incurred a loss of $4.4 million, $2.8 million net of
tax, which has been recorded as an extraordinary item in the accompanying
financial statements.
12
<PAGE>
Scheduled maturities of indebtedness for the next five years are zero
in 1997 and 1998, $85.0 million in 1999, $12.0 million in 2000 and zero in 2001.
The long-term portions of the Patina Facility and SOCO Facility are scheduled to
expire in 1999 and 2000. However, it is management's policy to renew both the
short-term and long-term facilities and extend their maturities on a regular
basis.
Consolidated cash payments for interest were $14.4 million and $7.6
million, respectively, for the six month periods ended June 30, 1997 and 1996.
(6) FEDERAL INCOME TAXES
At June 30, 1997, the Company had no liability for foreign taxes. A
reconciliation of the United States federal statutory rate to the Company's
effective income tax rate for the six month periods ended June 30, 1997 and 1996
follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Federal statutory rate 35% (35%)
Loss in excess of net deferred tax liability - 31%
Utilization of net deferred tax asset (3%) -
-------- --------
Effective income tax rate 32% (4%)
======== ========
</TABLE>
For tax purposes, Patina is not included in the Company's consolidated
United States federal income tax return. The Company, excluding Patina, had
regular net operating loss carryforwards of $112 million and alternative minimum
tax loss carryforwards of $28.9 million at December 31, 1996. These
carryforwards expire between 1997 and 2010. At December 31, 1996, the Company,
excluding Patina, had long-term capital loss carryforwards of $3.9 million which
will expire in 2000. At December 31, 1996, the Company, excluding Patina, also
had alternative minimum tax credit carryforwards of $644,000 which are available
indefinitely. Patina had regular net operating loss carryforwards of $70.2
million and alternative minimum tax loss carryforwards of $35.1 million at
December 31, 1996. Utilization of $31.9 million regular net operating loss
carryforwards and $31.6 million alternative minimum tax loss carryforwards will
be limited to $5.2 million per year. These carryforwards expire from 2006
through 2011. At December 31, 1996, Patina had alternative minimum tax credit
carryforwards of $478,000 which are available indefinitely. Current income taxes
shown in the financial statements reflect cash taxes paid based on estimates of
alternative minimum taxes.
(7) STOCKHOLDERS' EQUITY
A total of 75 million common shares, $.01 par value, are authorized of
which 31.6 million were issued and 29.1 million were outstanding at June 30,
1997. The Company also has 2.1 million warrants outstanding. The warrants are
exercisable at a price of $21.04 per share. Under the terms of the warrants,
common stock dividends not paid out of retained earnings reduce the exercise
price when paid and increase the number of warrants outstanding. Half of the
warrants expire in each of February 1998 and February 1999. In 1996, the Company
issued 666,000 shares of common stock, with 399,000 shares issued in exchange
for the remaining outstanding stock of SOCO Offshore, Inc. and 267,000 shares
issued primarily for the exercise of stock options. In 1996, the Company
repurchased 725,000 shares of common stock for $7.0 million. During the six
months ended June 30, 1997, the Company issued 131,000 shares of common stock
primarily for the exercise of stock options. During the six months ended June
30, 1997, the Company repurchased 2.3 million shares of common stock for $39.4
million. Quarterly dividends of $.065 per share were paid in 1996 and the first
six months of 1997. For book purposes, for the period between June 1995 and
September 1996, the common stock dividends were in excess of retained earnings
and as such were treated as distributions of capital.
A total of 10 million preferred shares, $.01 par value, are authorized.
In 1993, 4.1 million depositary shares (each representing a quarter interest in
a share of $100 liquidation value stock) of 6% preferred stock were sold through
an underwriting. The net proceeds were $99.3 million. The stock is convertible
into common stock at $20.46 per share. Under the terms of the stock, common
stock dividends not paid out of retained earnings reduce the conversion price
when paid. The stock is exchangeable at the option of the Company for 6%
13
<PAGE>
convertible subordinated debentures on any dividend payment date. The 6%
convertible preferred stock is currently redeemable at the option of the
Company. The liquidation preference is $25.00 per depositary share, plus accrued
and unpaid dividends. At June 30, 1997, the redemption price was $25.90 per
depositary share. The redemption price declines $.15 per year to $25.00 per
depositary share in 2003. During 1996, the Company repurchased 6,000 depositary
shares for $142,000. The Company paid $3.1 million ($1.50 per 6% convertible
depositary share per annum) in preferred dividends during the six months ended
June 30, 1997 and 1996.
Earnings per share are computed by dividing net income, less dividends
on preferred stock, by weighted average shares outstanding. Differences between
primary and fully diluted earnings per share were insignificant for all periods
presented.
The Company maintains a stock option plan for certain employees
providing for the issuance of options at prices not less than fair market value.
Options to acquire up to three million shares of common stock may be outstanding
at any given time. The specific terms of grant and exercise are determined by a
committee of independent members of the Board. A stock grant and option plan is
also maintained by the Company whereby each nonemployee Director receives 500
common shares quarterly in payment of their annual retainer. It also provides
for 2,500 options to be granted annually to each nonemployee Director. The
majority of currently outstanding options vest over a three year period (30%,
60%, 100%) and expire five years from the date of grant.
(8) COMMITMENTS AND CONTINGENCIES
The Company rents offices at various locations under noncancelable
operating leases. Minimum future payments under such leases approximate $1.2
million for the remainder of 1997, $2.4 million for 1998, $2.6 million for 1999,
$2.6 million for 2000 and $1.6 million for 2001.
In September 1996, the Company and other interest owners in a lease in
southern Texas were sued by the royalty owners in Texas state court in Brooks
County, Texas. The Company's working interest in the lease is approximately 20%.
The complaint alleges, among other things, that the defendants have failed to
pay proper royalties under the lease and have breached their duties to
reasonably develop the lease. The plaintiffs also claim damages for fraud and
trespass, and demand actual and punitive damages. Although the complaint does
not specify the amount of damages claimed, an earlier letter from plaintiffs
claimed damages in excess of $50 million. The Company and the other interest
owners have filed an answer denying the claims and intend to contest the suit
vigorously.
At this time, the Company is unable to estimate the range of potential
loss, if any, from the foregoing uncertainty. However, the Company believes its
resolution should not have a material adverse effect upon the Company's
financial position, although an unfavorable outcome in any reporting period
could have a material impact on the Company's results of operations for that
period.
The Company's operations are affected by political developments and
federal and state laws and regulations. Oil and gas industry legislation and
administrative regulations are periodically changed for a variety of political,
economic and other reasons. Numerous departments and agencies, federal, state,
local and Indian, issue rules and regulations binding on the oil and gas
industry, some of which carry substantial penalties for failure to comply. The
regulatory burden on the oil and gas industry increases the Company's cost of
doing business, decreases flexibility in the timing of operations and may
adversely affect the economics of capital projects.
The financial statements reflect favorable legal proceedings only upon
receipt of cash, final judicial determination or execution of a settlement
agreement. The Company is a party to various other lawsuits incidental to its
business, none of which are anticipated to have a material adverse impact on its
financial position or results of operations.
(9) SUBSEQUENT EVENT
On July 31, 1997, the Company agreed to a series of transactions
intended to result in the sale of all of the 14 million shares of common stock
of Patina held by the Company. As part of these transactions, Patina filed a
registration statement with the Securities and Exchange Commission covering the
14
<PAGE>
underwritten public offering by the Company of 7.5 million shares of Patina
common stock. Patina has agreed to purchase all shares owned by the Company that
are not sold in the public offering. To fund the purchase of these shares,
Patina has received commitments covering the sale of up to $63 million of a new
class of convertible preferred stock and $3 million of shares of common stock to
members of Patina's management.
The Company may withdraw from the transaction at any time until the
prospectus for the public offering is broadly distributed to prospective
offerees, or in the event the offering does not cover at least 5 million shares
or the public offering price is less than $7.50 per share (before deducting
assumed underwriters' commissions of 5.5%). Closing of the transactions is
subject to a number of conditions, including effectiveness of the registration
facility, of sufficient funds to purchase all shares not sold in the public
offering.
Based on the expected terms of the transactions, the Company would
incur a loss as a result of the sale. Therefore, the Company recorded an
estimated pretax loss of $10 million, primarily attributable to underwriting and
similar expenses to be borne by the Company, in the second quarter of 1997.
The following table summarizes the unaudited pro forma effects on the
Company's financial statements assuming the Patina divestiture had been
consummated June 30, 1997 (for balance sheet data) and on January 1, 1997 and
1996 (for statement of operations data). Future results may differ substantially
from pro forma results due to changes in oil and gas prices, production declines
and other factors. Therefore, pro forma statements cannot be considered
indicative of future operations.
<TABLE>
<CAPTION>
As of and for the Six
Months Ended June 30,
----------------------------
1997 1996
----------- ----------
(In thousands)
<S> <C> <C>
Total assets $566,040 N/A
Total debt $185,572 N/A
Oil and gas sales $ 64,723 $ 50,636
Total revenues $110,831 $ 68,377
Production direct operating margin $ 47,521 $ 32,658
Income (loss) before extraordinary item $ 21,648 $ (6,034)
Net income (loss) $ 18,800 $ (6,034)
Net income (loss) per common share $ .52 $ (.29)
Weighted average shares outstanding 30,435 31,376
Production volume (MBOE) 4,223 3,848
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Snyder Oil Corporation (the "Company") is engaged in the acquisition,
exploration and development of domestic oil and gas properties, primarily in the
Gulf of Mexico, the Rockies and northern Louisiana. The Company also has
investments in two international exploration and production companies, SOCO
International plc and Cairn Energy plc.
In May 1996, the Company consolidated its properties in the Wattenberg
Field of Colorado with those of Gerrity Oil and Gas Corporation ("GOG") to
create Patina Oil and Gas Corporation ("Patina"), thereby converting its working
interest in the field initially into a 70% interest (currently a 74% interest)
in the field's largest producer. Patina is reflected in the Company's financial
statements as a consolidated subsidiary, with the related minority interest
being deducted from subsidiary earnings and stockholders' equity. Unless
indicated otherwise, amounts in this discussion reflect the consolidated results
of the Company, including Patina. References to the Company "excluding Patina"
refer to the Company on a consolidated basis but after excluding amounts
attributable to Patina.
On July 31, 1997, the Company agreed to a series of transactions
intended to result in the sale of all of the 14 million shares of common stock
of Patina held by the Company. As part of these transactions, Patina filed a
registration statement with the Securities and Exchange Commission covering the
underwritten public offering by the Company of 7.5 million shares of Patina
common stock. Patina has agreed to purchase all shares owned by the Company that
are not sold in the public offering. To fund the purchase of these shares,
Patina has received commitments covering the sale of up to $63 million of a new
class of convertible preferred stock and $3 million of shares of common stock to
members of Patina's management.
The Company may withdraw from the transaction at any time until the
prospectus for the public offering is broadly distributed to prospective
offerees, or in the event the offering does not cover at least 5 million shares
or the public offering price is less than $7.50 per share (before deducting
assumed underwriters' commissions of 5.5%). Closing of the transactions is
subject to a number of conditions, including effectiveness of the registration
facility, of sufficient funds to purchase all shares not sold in the public
offering. If the Company withdraws from the transaction (other than as the
result of the failure of certain conditions, including the minimum size and
price conditions described above) and a majority of Patina's voting securities
are sold to a third party within certain periods thereafter, and in certain
other circumstances, the prospective purchasers of Patina's preferred stock and
Thomas J. Edelman, Patina's Chief Executive Officer, may exercise options to
purchase up to 4 million shares of Patina common stock from the Company, subject
to an aggregate minimum spread guaranteed by the Company of $3 million.
Based on the expected terms of the transactions, the Company would
incur a loss as a result of the sale. Therefore, the Company recorded an
estimated pretax loss of $10 million, primarily attributable to underwriting and
similar expenses to be borne by the Company, in the second quarter of 1997.
Results of Operations
Total revenues for the three month and six month periods ended June 30,
1997 increased to $74.4 million and $163.2 million, representing increases of
$17.6 million and $64.7 million from the same periods in 1996. The increases
were primarily due to $4.7 million and $36.4 million increases in oil and gas
sales and $17.2 million and $29.8 million increases in gains on sales of equity
interests in investees, respectively. The increases in oil and gas sales are a
combination of a 1% and 21% rise in the price received per equivalent barrel
("BOE") and a 9% and 20% increase in BOE production. Natural gas prices
rebounded toward the end of 1996 resulting in an average price for the three
month and six month periods ended June 30, 1997 of $1.85 and $2.34 per Mcf
compared to $1.62 and $1.69 per Mcf during the same period in 1996. Oil prices
improved as compared to the first six months of 1996 to average $19.74 per
16
<PAGE>
barrel during the first six months of 1997, although the second quarter of 1997
average price of $18.33 represented a decrease from the second quarter of 1996
average price of $20.52. The increase in production as compared to the three and
six month periods ended June 30, 1996 is due primarily to the production from
the properties acquired in the Patina transaction in May 1996. The increase in
gains on sales of equity interests in investees was due to sales of Cairn Energy
plc ("Cairn") stock and a gain on the sale of the Company's interest in SOCO
International Operations, Inc. ("Operations") in exchange for 7.8 million shares
of SOCO International plc ("SOCI plc"), a newly formed, publicly traded entity
on the London Stock Exchange. Excluding Patina, total revenues were $51.6 and
$110.8 million for the three month and six month periods ended June 30, 1997.
Net income before extraordinary items for the second quarter of 1997
was $6.0 million as compared to a net loss of $10.0 million experienced in the
same period in 1996. Net income benefitted from the gain on the sale of the
Company's interest in Operations which totaled approximately $13.0 million, net
of tax, partially offset by an estimated loss of $6.5 million, net of tax,
related to the Patina transaction. During the second quarter of 1997, the
Company redeemed its 7% Convertible Subordinated Notes due May 15, 2001. The
Company recorded an extraordinary charge for a loss on early extinguishment of
debt of $2.8 million, net of tax. See "Financial Condition and Capital
Resources." After consideration of this item, net income for the quarter was
$3.1 million.
Production margin (oil and gas sales less direct operating expenses)
for the quarter ended June 30, 1997 was $36.5 million, an increase of 15% from
the same period in 1996. Average daily production during the second quarter of
1997 was 41,118 BOE, an increase of 9% over the same period in 1996. Excluding
Patina, production margin was $18.1 million and average daily production was
22,706 BOE. The increased production resulted from the GOG acquisition (three
months in the current quarter versus two months in the prior year quarter) and
three acquisitions in the Gulf of Mexico during 1996 offset somewhat by
decreased production due to the sale of nonstrategic properties throughout 1996.
The Company focused the last two years on divesting of noncore assets and
acquiring strategic assets that allow for future growth. The Company expects to
continue to increase development during 1997 which, along with two acquisitions
in the Gulf of Mexico in the fourth quarter of 1996, should result in continued
increases in production over prior periods through 1997 excluding, in each case,
the effects of Patina. Even with higher production levels, total operating
expenses for the second quarter of 1997 decreased by $117,000 ($1.0 million
excluding Patina) from the same period in 1996. This is primarily due to the
sale of noncore properties which tended to have higher operating costs and an
increased emphasis on operating efficiencies. Operating costs per BOE were $3.34
compared to $3.67 in the same period in 1996.
Gains on sales of equity interests in investees were $20.0 million for
the quarter ended June 30, 1997. In May 1997, a newly formed entity, SOCI plc,
completed an initial public offering of its shares on the London Stock Exchange.
Simultaneously with the offering, the Company exchanged its shares of
Operations, which included the Company's interests in Russia, Mongolia and
Thailand, for shares of SOCI plc. Certain minority interest owners in these
ventures also contributed their interests. As part of the listing, SOCI plc
acquired Cairn's UK onshore company as well as certain assets in Yemen and
Tunisia that were formerly owned by Command. The offering raised approximately
$75 million of new equity capital for SOCI plc. The Company received 7.8 million
shares (15.9% of the total) of SOCI plc, and has agreed not to sell any shares
for the two year period following the listing. The Company recognized a gain of
$20.0 million as a result of this exchange.
Gains on sales of properties were $2.2 million for the quarter compared
to $3.1 million in the prior year quarter. The gain during the second quarter of
1997 was due to the sale of the Santa Fe Springs Unit as part of the Company's
ongoing divestiture plan.
General and administrative expenses, net of reimbursements, for the
second quarter 1997 were $5.3 million, a $2.6 million increase from the same
period in 1996. The increase is primarily a result of two items. Several of the
properties sold during 1996, although having high operating costs and depletion,
depreciation and amortization rates, provided significant general and
administrative expense reimbursements. Also, as part of the formation of Patina
and the GOG acquisition, the Company received a nonrecurring reimbursement from
Patina for general and administrative expenses incurred during the organization
and acquisition process. The reimbursement was recorded in the second quarter of
1996. The Company's general and administrative expenses continue to decrease
compared to the last two quarters (decreases of $514,000 and $172,000 compared
to the fourth quarter of 1996 and the first quarter of 1997, respectively).
Excluding Patina, these expenses totaled $4.0 million during the quarter ended
June 30, 1997.
17
<PAGE>
Interest expense was $7.0 million during the second quarter of 1997,
$4.0 million of which was incurred by Patina, compared to $6.1 million during
the same period in 1996. The majority of the increase is the result of higher
interest rates.
Depletion, depreciation and amortization expense for the second quarter
increased to $23.4 million from $22.7 million in the same period in 1996. The
minimal increase, in spite of increased production, is due to a decrease in the
total depletion, depreciation and amortization rate per BOE from $6.62 in the
second quarter of 1996 to $6.25 during the same period in 1997. Excluding
Patina, total depletion, depreciation and amortization expense was $11.0 million
reflecting an overall rate of $5.34 per BOE.
Acquisition, Exploration and Development
During the six months ended June 30, 1997, the Company incurred $50.0
million in capital expenditures, including $41.5 million for development, $5.7
million for exploration, $1.9 million for property acquisitions and $1.0 million
for fixed assets.
Of the $41.5 million of development expenditures, $19.6 million was
concentrated in the Gulf of Mexico, $5.1 million in the Washakie Basin of
southern Wyoming, $3.4 million in the Green River Basin of southern Wyoming and
$2.5 million in the Piceance Basin of western Colorado. In addition, Patina
incurred $8.0 million of the total expenditures of the Company. During the six
months ended June 30, 1997, the Company placed 51 wells on sales, drilled three
developmental and four exploratory dry holes and had 21 wells in progress at
quarter end.
Exploration costs include the costs of four exploratory dry holes and
continuing seismic programs in the Gulf of Mexico and north Louisiana. Patina
incurred $62,000 of exploration costs during the six month period ended June 30,
1997.
Financial Condition and Capital Resources
At June 30, 1997, the Company had total assets of $859.9 million. Total
capitalization was $729.4 million, of which 38% was represented by stockholders'
equity, 37% by subordinated debt, 13% by senior debt and 12% by minority
interest. During the six months ended June 30, 1997, net cash provided by
operations was $72.0 million, an increase of 65% compared to the same period in
1996. Excluding Patina, net cash provided by operations was $38.5 million. As of
June 30, 1997, commitments for capital expenditures, primarily for new
production facilities in the Gulf of Mexico, totaled $16.0 million, $180,000 of
which was attributable to Patina. The Company anticipates that 1997 expenditures
for development drilling will approximate $112 million. Approximately $85
million is expected to be spent for development drilling programs, $19 million
for expanded exploratory activity and $8 million for gas facilities and other
activities. Approximately $48 million is targeted for continued development in
the Gulf of Mexico, $38 million for expanded development of major Rocky Mountain
projects (including $15 million for Patina) and $2 million for additional
leasing and seismic costs in North Louisiana. The level of these and other
future expenditures is largely discretionary, and the amount of funds devoted to
any particular activity may increase or decrease significantly, depending on
available opportunities and market conditions. The Company plans to finance its
ongoing acquisition, exploration and development expenditures using internally
generated cash flow, existing credit facilities, proceeds from sales of
investments and proceeds from sales of nonstrategic properties. In addition,
joint ventures or future public offerings of debt or equity securities may be
utilized.
During the six months ended June 30, 1997, Patina accounted for $33.5
million of the Company's net cash provided by operations. Cash generated by
Patina will, however, be retained by Patina to fund its development program,
reduce debt and pursue acquisitions in the DJ Basin or elsewhere. Moreover,
Patina's credit facility currently prohibits the payment of dividends on its
common stock. Accordingly, Patina's cash flow is intended to be used to reduce
debt levels, fund a limited development program and any future acquisitions
which may be consummated and may not be available to fund the Company's other
operations or to pay dividends to its stockholders. During the second quarter of
1997, Patina reduced its total debt by $4.7 million.
SOCO maintains a $500 million revolving credit facility (the "SOCO
Facility"). The SOCO Facility is divided into a $100 million short-term portion
and a $400 million long-term portion that expires on December 31, 2000.
18
<PAGE>
Management's policy is to renew the facility on a regular basis. Credit
availability is adjusted semiannually to reflect changes in reserves and asset
values. The borrowing base available under the facility at June 30, 1997 was
$120 million. The majority of the borrowings under the facility currently bear
interest at LIBOR plus .75% with the remainder at prime, with an option to
select CD plus .75%. The margin on LIBOR or CD increases to 1% when the
Company's consolidated senior debt becomes greater than 80% of its consolidated
tangible net worth as defined. During the six months ended June 30, 1997, the
average interest rate under the revolver was 6.5%. The Company pays certain fees
based on the unused portion of the borrowing base. Among other requirements,
covenants require maintenance of a current working capital ratio of 1 to 1 as
defined, limit the incurrence of debt and restrict dividends, stock repurchases,
certain investments, other indebtedness and unrelated business activities. Such
restricted payments are limited by a formula that includes proceeds from certain
securities, cash flow and other items. Based on such limitations, more than $132
million was available for the payment of dividends and other restricted payments
as of June 30, 1997.
In June 1997, SOCO issued $175.0 million of 8.75% Senior Subordinated
Notes due June 15, 2007. The notes were sold at a discount resulting in an
8.875% effective interest rate. The net proceeds of the offering were $168.8
million. The notes are redeemable at the option of the Company on or after June
15, 2002, initially at 104.375% of the principal, and at prices declining to
100% of principal on or after June 15, 2005. The notes include a number of
restrictive covenants, none of which is currently expected to significantly
impact the Company's activities. The proceeds from the notes were used to redeem
the Company's convertible subordinated notes due May 15, 2001, and reduce the
balance outstanding under the SOCO Facility. The notes were redeemed at 103.51%
of principal. As a result of the note redemption, the Company incurred a loss of
$4.4 million, $2.8 million net of tax. Through the issuance of the new notes and
the redemption of the old notes, the Company has effectively extended its debt
maturity by over six years.
Patina maintains a $140 million revolving credit facility ("Patina
Facility"). The borrowing base available under the facility at June 30, 1997 was
$110 million. Patina may elect that all or a portion of the facility bear
interest at a rate per annum equal to: (i) the higher of (a) prime rate plus a
margin equal to .25% (the "Applicable Margin") and (b) the Federal Funds
Effective Rate plus .5% plus the Applicable Margin, or (ii) the rate at which
Eurodollar deposits for one, two, three or six months (as selected by Patina)
are offered in the interbank Eurodollar market plus a margin which fluctuates
from .625% to 1.125% determined by a debt to EBITDA ratio. During the six months
ended June 30, 1997, the average interest rate under the facility was 6.8%.
The Patina Facility agreement contains certain financial covenants,
including but not limited to a maximum total debt to capitalization ratio, a
maximum total debt to EBITDA ratio and a minimum current ratio. The bank credit
agreement also contains certain negative covenants, including but not limited to
restrictions on indebtedness; certain liens; guaranties, speculative derivatives
and other similar obligations; asset dispositions; dividends, loans and
advances; creation of subsidiaries; investments; leases; acquisitions; mergers;
changes in fiscal year; transactions with affiliates; changes in business
conducted; sale and leaseback and operating lease transactions; sale of
receivables; prepayment of other indebtedness; amendments to principal
documents; pledges of assets; issuance of securities; and nonspeculative
commodity hedging.
In 1996, as part of an acquisition, Patina recorded $98.8 million of
11.75% Subordinated Notes ("Notes") due July 15, 2004 issued on July 1, 1994.
The Notes were recorded at a market value of $104.6 million or 105.875% of their
principal amount. Patina assumed the Notes in March 1997 when a wholly owned
subsidiary was merged into Patina. During 1996, $1.5 million of the Notes were
repurchased by the Company and retired. During the six months ended June 30,
1997, $6.2 million of the Notes were repurchased by the Company and retired.
Interest is payable each January 15 and July 15. The Notes are redeemable at the
option of Patina, in whole or in part, at any time on or after July 15, 1999,
initially at 105.875% of their principal amount, declining to 100% on or after
July 15, 2001. Upon the occurrence of a change of control, as defined in the
Notes, Patina would be obligated to make an offer to purchase all outstanding
Notes at a price of 101% of the principal amount thereof. In addition, Patina
would be obligated, subject to certain conditions, to make offers to purchase
the Notes with the net cash proceeds of certain asset sales or other
dispositions of assets at a price of 101% of the principal amount thereof. The
Notes are unsecured general obligations of Patina and are subordinated to all
senior indebtedness of Patina and to any existing and future indebtedness of
Patina's subsidiaries. The Notes contain covenants that, among other things,
limit the ability of Patina to incur additional indebtedness, pay dividends,
engage in transactions with shareholders and affiliates, create liens, sell
19
<PAGE>
assets, engage in mergers and consolidations and make investments in
unrestricted subsidiaries.
The Company from time to time enters into arrangements, primarily by
Patina, to monetize its Section 29 tax credits. These arrangements result in
revenue increases of approximately $.40 per Mcf on production volumes from
qualified Section 29 properties. As a result of such arrangements, the Company
recognized additional gas sales of $2.5 million in 1996. During the six months
ended June 30,1997, the Company recognized additional gas sales of $1.5 million.
These arrangements are expected to increase revenues through 2002.
The Company seeks to diversify its exploration and development risks by
seeking partners for its significant development projects and maintains a
program to divest marginal properties and assets which do not fit its long range
plans. During the first six months of 1997, the Company received $11.6 million
in proceeds from sales of properties which were used primarily to fund
development expenditures. None of the sales were individually significant.
In November 1996, the Company accepted an offer from Cairn for its
interest in Command Petroleum Limited ("Command"). The Company received 16.2
million shares of freely marketable common stock of Cairn, and recorded a gain
of $65.5 million, with no associated current tax liability. However, a deferred
tax provision of $4.0 million was recorded related to this transaction.
Immediately prior to the acceptance of Cairn's offer, the Company accrued for a
transaction in which a director of the Company exchanged his option to purchase
10% of the outstanding common stock of SOCO International, Inc. (through which
the investment in Command was held) and issued promissory notes to the Company
totaling $591,000 for 10% of the outstanding common stock of two SOCO
International, Inc. subsidiaries, SOCO International Holdings, Inc. and SOCO
International Operations, Inc. As a result of this transaction, the Company
recorded a $260,000 loss. Additionally, minority interest expense of $4.3
million was recorded related to the director's 10% ownership as a result of the
Command gain. The actual exchange occurred in December 1996 and the promissory
notes remained outstanding at June 30, 1997. During the six months ended June
30, 1997, the Company sold 4.5 million Cairn shares at an average of $8.81 per
share realizing $39.2 million in proceeds. These transactions resulted in a
pretax gain of $13.0 million.
In May 1997, a newly formed entity, SOCI plc, completed an initial
public offering of its shares on the London Stock Exchange. The Company
contributed to SOCI plc all the assets of Operations, which included the
Company's interests in Russia, Mongolia and Thailand. Certain minority interest
owners in these ventures also contributed their interests. As part of the
listing, SOCI plc acquired Cairn's UK onshore company as well as certain assets
in Yemen and Tunisia that were formerly owned by Command. The offering raised
approximately $75 million of new equity capital for SOCI plc. The Company
received 7.8 million shares (15.9% of the total) of SOCI plc, which it has
agreed not to sell for the two year period following the listing. The Company
recognized a gain of $20.0 million as a result of this exchange. This
transaction accomplished the Company's goal of achieving a more appropriate
valuation of its international assets while also providing SOCI plc access to
the optimum equity market to secure funding for its range of international
projects.
The Board has authorized the repurchase of up to $70 million of the
Company's securities. During 1996 and the first six months of 1997, the Company
repurchased 3.0 million common shares for $46.3 million, 6,000 preferred
depositary shares for $142,000 and $4.6 million principal amount convertible
subordinated notes for $4.3 million.
The Company believes that its capital resources are adequate to meet
the requirements of its business. However, future cash flows are subject to a
number of variables including the level of production and oil and gas prices,
and there can be no assurance that operations and other capital resources will
provide cash in sufficient amounts to maintain planned levels of capital
expenditures or that increased capital expenditures will not be undertaken.
20
<PAGE>
Inflation and Changes in Prices
While certain of its costs are affected by the general level of
inflation, factors unique to the petroleum industry result in independent price
fluctuations. Over the past five years, significant fluctuations have occurred
in oil and gas prices. Although it is difficult to estimate future prices of oil
and gas, price fluctuations have had, and will continue to have, a material
effect on the Company.
The following table indicates the average oil and gas prices received
over the last five years and highlights the price fluctuations by quarter for
1997 and 1996. Average gas prices for the six months ended June 30, 1997 and the
year ended December 31, 1996 were increased by $.03 and $.08 per Mcf,
respectively, by the benefit of the Company's hedging activities. Average price
computations exclude contract settlements and other nonrecurring items to
provide comparability. Average prices per equivalent barrel indicate the
composite impact of changes in oil and gas prices. Natural gas production is
converted to oil equivalents at the rate of 6 Mcf per barrel.
<TABLE>
<CAPTION>
Average Prices
-------------------------------------------
Crude Oil
and Natural Equivalent
Liquids Gas Barrels
--------- --------- ----------
(Per Bbl) (Per Mcf) (Per BOE)
<S> <C> <C> <C>
Annual
------
1996 $ 20.39 $ 1.97 $ 14.35
1995 16.96 1.35 11.00
1994 14.80 1.67 11.82
1993 15.41 1.94 13.41
1992 18.87 1.74 13.76
Quarterly
---------
1997
----
First $ 21.18 $ 2.83 $ 18.10
Second 18.33 1.85 13.09
1996
----
First $ 17.95 $ 1.78 $ 12.80
Second 20.52 1.62 12.90
Third 20.25 1.78 13.60
Fourth 22.26 2.64 17.69
</TABLE>
In June 1997, the Company received an average of $17.50 per barrel and
$1.96 per Mcf for its production.
21
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
As reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, Patina has assumed the Company's liabilities relating to a
purported class action that had been brought against the Company in the United
States District Court of Colorado alleging underpayment of royalties and other
matters. In January 1997, the judge ordered that the class not be certified. The
case, and a similar action brought against GOG (and assumed by Patina), were
subsequently settled by Patina for amounts that are not material to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Two matters were submitted to a vote of the Company's stockholders at the
Company's Annual Meeting, held on May 21, 1997. All management's nominees for
director, as listed in the Company's Proxy Statement, were elected with over 92%
of votes cast in favor of each nominee. Separately, amendments to the Company's
1989 Stock Option Plan, as described in the Company's Proxy Statement, were
approved, with 24.6 million votes cast in favor of approval, 600,000 votes cast
against adoption and 345,000 votes abstaining.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
10.11.6 Sixth Amendment dated as of May 19, 1997 to Fifth Restated
Credit Agreement.
10.14 Stock Repurchase Agreement, dated as of July 31, 1997, between
the Company and Patina Oil & Gas Corporation.
10.15 Form of Stock Option Agreement dated July 31, 1997 between the
Company and certain persons covering an aggregate of 4,000,000
shares of common stock of Patina Oil & Gas Corporation.
11.1 Computation of Per Share Earnings.
12 Computation of Ratio of Earnings to Fixed Charges and Ratio of
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
27 Financial Data Schedule.
(b) The Following reports on Form 8-K were filed during the quarter ended March
31, 1997:
April 24, 1997 -- Item 5. Other Events.
June 2, 1997 -- Item 5. Other Events.
June 10, 1997 -- Item 5. Other Events.
22
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
SNYDER OIL CORPORATION
By (Mark A. Jackson)
-----------------------
Mark A. Jackson
Senior Vice President and Chief Financial Officer
August 6, 1997
23
<PAGE>
EXHIBIT 10.11.6
SIXTH AMENDMENT TO FIFTH RESTATED CREDIT AGREEMENT
This Sixth Amendment to Fifth Restated Credit Agreement (this "SIXTH
AMENDMENT") is entered into as of the 19th day of May, 1997, by and among Snyder
Oil Corporation ("BORROWER"), NationsBank of Texas, N.A., as Agent ("AGENT"),
and NationsBank of Texas, N.A. ("NATIONSBANK"), Bank One, Texas, N.A. ("BANK
ONE"), Wells Fargo Bank, N.A. ("WELLS FARGO"), Texas Commerce Bank National
Association ("TCB," and together with NationsBank, Bank One and Wells Fargo,
collectively referred to herein as the "ORIGINAL BANKS") and Credit Lyonnais New
York Branch as Banks (the "BANKS").
W I T N E S E T H:
WHEREAS, the Banks, Borrower and Agent are parties to that certain Fifth
Restated Credit Agreement dated as of June 30, 1994, as amended by that certain
(i) letter agreement by and among Borrower and the Original Banks dated as of
May 1, 1995, (ii) Second Amendment to Fifth Restated Credit Agreement by and
among Borrower, Agent and the Original Banks dated as of June 30, 1995, (iii)
Third Amendment to Fifth Restated Credit Agreement by and among Borrower, Agent
and the Original Banks dated as of November 1, 1995, (iv) Fourth Amendment to
Fifth Restated Credit Agreement by and among Borrower, Agent and Original Banks
dated as of April 4, 1996, and (v) Fifth Amendment to Fifth Restated Credit
Agreement by and among Borrower, Agent and the Original Banks dated as of
November 1, 1996 (as amended, the "CREDIT AGREEMENT") (unless otherwise defined
herein, all terms used herein with their initial letter capitalized shall have
the meaning given such terms in the Credit Agreement); and
WHEREAS, pursuant to the Credit Agreement, the Banks have made certain
Loans to Borrower, and Agent has issued certain Letters of Credit on behalf of
Borrower; and
WHEREAS, Borrower has advised the Banks that Borrower intends to issue
certain ten year non-amortizing Senior Subordinated Notes (the "SENIOR
SUBORDINATED NOTES"), in an aggregate principal amount up to $200,000,000; such
Senior Subordinated Notes being more particularly described in that certain
Preliminary Prospectus Supplement (To Prospectus Dated August 4, 1994) dated May
__, 1997, a copy of which has been delivered to each Bank; and
WHEREAS, Borrower has requested that the Credit Agreement be amended in
certain respects in connection with the proposed issuance of such Senior
Subordinated Notes; and
WHEREAS, subject to the terms and conditions herein contained, the Banks
have agreed to Borrower's requests.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed,
Borrower, Agent and each Bank hereby agree as follows:
<PAGE>
SECTION 1. AMENDMENTS. Subject to the satisfaction of each condition
precedent set forth in SECTION 3 hereof and in reliance on the representations,
warranties, covenants and agreements contained in this Sixth Amendment, the
Credit Agreement shall be amended effective May __, 1997 (the "EFFECTIVE DATE")
in the manner provided in this SECTION 1.
1.1. AMENDMENT TO DEFINITIONS. The definition of "Loan Papers" and
"Restricted Payment" contained in Section 1.1 of the Credit Agreement shall be
amended to read in full as follows:
"Loan Papers" means this Agreement, the Letter Agreement, the Second
Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment,
the Sixth Amendment, the Notes, the Mortgages, the Restricted Subsidiary
Guarantees and all other certificates, documents or instruments delivered
in connection with this Agreement, as the foregoing may be amended from
time to time.
"Restricted Payment" means (a) any Distribution by Borrower, (b) any
capital contribution, loan or advance by Borrower or any Restricted
Subsidiary to any Unrestricted Subsidiary of Borrower, (c) the issuance of
a Guarantee by Borrower or any Restricted Subsidiary with respect to any
Debt or other obligation of any Unrestricted Subsidiary, (d) the
retirement, redemption or prepayment prior to the scheduled maturity by
Borrower or a Restricted Subsidiary of Debt of Borrower or such Restricted
Subsidiary which is subordinate to the Obligations, including without
limitation, the Fourth Debentures and the Convertible Debentures (and, in
the case of the Third Convertible Debentures and the Fourth Debentures,
any redemption payments required as a result of any asset sale or change
of control), and (e) any Investment by Borrower which is a Permitted
Investment pursuant to subsection (e) of the definition of Permitted
Investment. For purposes of this definition, at the time Borrower or any
Restricted Subsidiary issues any Guarantee of any Debt or other obligation
of any Unrestricted Subsidiary, Borrower or such Restricted Subsidiary
will be deemed to have made a Restricted Payment in an amount equal to the
maximum potential liability of Borrower or such Restricted Subsidiary
under such Guarantee (not to exceed, however, the aggregate outstanding
Debt [including accrued but unpaid interest and fees] and other
obligations which are guaranteed pursuant to any such Guarantee).
1.2. ADDITIONAL DEFINITIONS. Section 1.1 of the Credit Agreement shall be
amended to add the following definitions to such Section:
"Draft Prospectus" means that certain Preliminary Prospectus
Supplement (To Prospectus Dated August 4, 1994) dated May __, 1997, which
is in draft form and subject to completion, a copy of which has been
previously provided by Borrower to the Banks.
2
<PAGE>
"Fourth Debentures" means Borrower's Senior Subordinated Notes in an
aggregate amount not to exceed $200,000,000 and which shall be on the
terms and conditions set forth in the Draft Prospectus.
"Fourth Indenture Trustee" means Texas Commerce Bank National
Association and any successor trustee appointed pursuant to the Fourth
Indenture.
"Fourth Indenture" means an Indenture entered into by and between
Borrower and the Fourth Indenture Trustee setting forth certain terms of
the Fourth Debentures and which shall contain the terms and conditions set
forth in the Draft Prospectus.
"Sixth Amendment" means that certain Sixth Amendment to Fifth
Restated Credit Agreement dated as of May ___, 1997, by and among
Borrower, Agent and the Banks.
1.3. DEBT COVENANT. Section 9.1 of the Credit Agreement shall be amended to
read in full as follows:
SECTION 9.1. TOTAL ADDITIONAL DEBT OF BORROWER AND RESTRICTED
SUBSIDIARIES. Neither Borrower nor any Restricted Subsidiary will incur
any Debt other than (a) Debt secured by Permitted Encumbrances described
in subpart (1) of the definition of Permitted Encumbrances, (b)
Nonrecourse Debt, (c) Third Party Letters of Credit permitted by SECTION
2.1 hereof, (d) the Loans, (e) margin accounts with brokers and dealers
relating to Margin Stock and other securities, and (f) Guarantees of Debt
and other liabilities of other Restricted Subsidiaries and of Borrower
provided that such Debt and other liabilities are permitted pursuant to
this Agreement; PROVIDED, THAT, the Debt permitted pursuant to SECTION
9.1(A) and (B) shall not exceed $15,000,000 in the aggregate; PROVIDED,
FURTHER THAT, the Third Party Letter of Credit Exposure under Cash Secured
Third Party Letters of Credit shall not exceed at any time five percent
(5%) of the Borrowing Base in effect at such time; and PROVIDED, FURTHER
THAT, the maximum aggregate outstanding balance of Borrower's and its
Subsidiaries' margin accounts shall not exceed one percent (1%) of
Borrower's Consolidated Tangible Net Worth at any time. In addition to the
foregoing, Borrower may issue (i) the Second Convertible Debentures in
exchange for the Second Preferred Stock, (ii) the Third Convertible
Debentures, and (iii) the Fourth Debentures provided that (A) the Third
Convertible Debentures are called for redemption within 30 days following
issuance of the Fourth Debentures, and (B) the proceeds of the issuance of
the Fourth Debentures are used, in part and within 90 days following such
issuance, to redeem the Third Convertible Debentures in full; provided,
that Borrower shall give each Bank ninety (90) days advance notice of
Borrower's intention to complete any exchange of Convertible Debentures
for Preferred Stock, and if Majority Banks require that Borrower and the
Restricted Subsidiaries grant Liens on their oil and gas properties and
Related Assets pursuant
3
<PAGE>
to SECTION 5.1(B), Borrower will not complete such exchange until all
requisite Mortgages have been executed and delivered by Borrower and the
Restricted Subsidiaries and Agent has notified Borrower that all such
Mortgages have been filed of record and that all other steps necessary to
perfect (and confirm perfection) of the Liens created by such Mortgages
have been taken.
1.4. RESTRICTED PAYMENTS COVENANT. Section 9.2 of the Credit Agreement
shall be amended to read in full as follows:
SECTION 9.2. RESTRICTED PAYMENTS. Neither Borrower nor any
Restricted Subsidiary will declare or make any Restricted Payment;
provided, that, so long as no Default or Event of Default, Borrowing Base
Deficiency or noncompliance with SECTION 10.4 exists (without giving
effect to the cure periods provided by SECTION 4.4 or 10.4), and provided
further that no Default or Event of Default, Borrowing Base Deficiency or
non compliance with SECTION 10.4 would result from such Restricted Payment
(without giving effect to the cure periods provided by SECTION 4.4 or
10.4), Borrower and Restricted Subsidiaries may (a) make Restricted
Payments in an aggregate amount (measured cumulatively from January 1,
1996) not to exceed the sum of the following (i) $75,000,000, plus (ii)
the net cash proceeds to Borrower from all equity offerings completed by
Borrower of Borrower's equity securities after January 1, 1996, plus (iii)
all cash Distributions actually received by Borrower or any Restricted
Subsidiary from Unrestricted Subsidiaries after January 1, 1996, plus (iv)
fifty percent (50%) of Borrower's Consolidated Cash Flow earned on or
after January 1, 1996 to the date of determination, (b) declare and make a
Qualified Redemption of the Second Issue, (c) issue the Second Convertible
Debentures in exchange for the Second Preferred Stock, and (d) redeem the
Third Convertible Debentures with the proceeds of the issuance of the
Fourth Debentures.
1.5. AMENDMENTS TO MATERIAL COVENANTS. SECTION 9.6 of the Credit Agreement
shall be amended to read in full as follows:
SECTION 9.6. AMENDMENTS TO MATERIAL DOCUMENTS. Neither Borrower nor
any Restricted Subsidiary shall enter into or permit any modifications or
amendment of, or waive any material right or obligation of any Person
under, (a) its certificate or articles of incorporation, bylaws or other
organizational document other than amendments, modifications and waivers
which are not, individually or in the aggregate, material, (b) the First
Preferred Stock Designation, the Second Preferred Stock Designation, the
First Indenture, the Second Indenture, the Third Indenture, the Fourth
Indenture, the Convertible Debentures, or the Fourth Debentures, (c) the
DJ Transaction Documents, or (d) the Patina Transaction Documents other
than, in the case of clauses (c) and (d) preceding, amendments,
modifications and waivers which are not, individually or in the aggregate
material; provided, that Borrower shall provide Agent and each Bank
written notice of each immaterial amendment,
4
<PAGE>
modification or waiver of any DJ Transaction Documents or Patina
Transaction Documents not later than fifteen (15) days after the date
Borrower or its Restricted Subsidiary enters into such amendment,
modification, or waiver specifying in detail the subject thereof.
1.6. USE OF PROCEEDS COVENANT. Section 9.7 of the Credit Agreement shall be
amended to read in full as follows:
SECTION 9.7. USE OF PROCEEDS. The proceeds of Borrowings will not be
used for any purpose other than (a) working capital, (b) to finance the
acquisition, exploration and development of oil and gas properties and
Related Assets and the transportation, processing and marketing of
hydrocarbons by Borrower and Restricted Subsidiaries, (c) Restricted
Payments permitted pursuant to SECTION 9.2 and Investments permitted
pursuant to SECTION 9.8 provided, that none of such proceeds (including,
without limitation, proceeds of Letters of Credit issued hereunder) will
be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock, and
none of such proceeds will be used in violation of applicable law
(including, without limitation, the Margin Regulations). Notwithstanding
anything to the contrary contained herein, from and after the issuance of
the Fourth Debentures and continuing until the next Determination Date
thereafter, the proceeds of any Borrowing (any "proposed Borrowing") which
is made at any time when the sum of (a) the aggregate Letter of Credit
Exposure of all Banks at such time, plus (b) the aggregate outstanding
principal balance of all Loans at such time (collectively, the
"outstanding credit") exceeds Seventy Million and No/100 Dollars
($70,000,000) (such computation to be made after giving effect to such
proposed Borrowing) shall, to the extent the outstanding credit exceeds
Seventy Million and No/100 Dollars ($70,000,000) after giving effect to
such proposed Borrowing, be used only by Borrower and its Restricted
Subsidiaries and only to finance substantially contemporaneous capital
expenditures for the acquisition, exploration and development of oil and
gas properties and the acquisition and improvement of Related Assets.
SECTION 2. MANDATORY REDUCTIONS IN BORROWING BASE. Borrower acknowledges
and agrees that notwithstanding anything to the contrary contained herein or in
the Credit Agreement, simultaneously with the issuance of the Senior Subordinate
Notes, the Total Borrowing Base then in effect under the Credit Agreement will
reduce by eighty percent (80%) of the amount by which the aggregate principal
amount of the Senior Subordinate Notes so issued exceeds $150,000,000. All of
such reduction shall be allocated to the Borrowing Base for Facility A. Borrower
shall be required to immediately make a mandatory prepayment of principal of the
Facility A Notes in an amount sufficient to eliminate any Borrowing Base
Deficiency resulting from such reduction. Borrower acknowledges that the maximum
amount of Senior Subordinate Notes Borrower is permitted to issue under the
Credit Agreement is $200,000,000.
5
<PAGE>
SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENTS. The
amendments to the Credit Agreement contained in SECTION 1 of this Sixth
Amendment shall be effective only upon, and are conditioned upon, the delivery
to Agent and each Bank of such resolutions, certificates and other documents as
Agent or any Bank shall request relative to the Note Issuance and the
authorization, execution and delivery by Borrower of this Sixth Amendment. If
the foregoing condition has not been satisfied by the Effective Date, this Sixth
Amendment and all obligations of the Banks and Agent contained herein shall, at
the option of Majority Banks, terminate.
SECTION 4. REDESIGNATION OF CERTAIN SUBSIDIARIES. Notwithstanding anything
to the contrary contained herein or in the Credit Agreement, Borrower, Agent and
each Bank hereby acknowledge and agree that, from and after the Effective Date,
(i) Snyder Acquisition Corporation, (ii) Institutional Services, Inc., (iii)
SOCO Thomasville, Inc. and the Subsidiaries of SOCO Thomasville, Inc., (iv) SOCO
California Properties, Inc., and (v) SOCO Technologies, Inc. (the Subsidiaries
listed in clauses (i) through (v) above are collectively referred to herein as
the "REDESIGNATED SUBSIDIARIES"), shall each be automatically redesignated as
Unrestricted Subsidiaries for purposes of the Credit Agreement and the other
Loan Papers without the necessity of any further act on the part of Borrower,
Agent, any such Redesignated Subsidiary or any Bank. In connection with the
foregoing, Banks and Agent hereby release and discharge (a) each of the
Redesignated Subsidiaries from all obligations and liabilities of each under,
and with respect to, that certain Amended and Restated Guaranty dated as of July
1, 1993 (as amended through the date hereof), and (b) the Liens in favor of
Agent encumbering the capital stock of each Redesignated Subsidiary pledged
under, and pursuant to, that certain Amended and Restated Pledge Agreement dated
as of July 1, 1993 (as amended through the date hereof), and Agent is hereby
authorized to execute, deliver and file of record appropriate releases of such
Liens and to take such other action as shall be necessary to evidence such
release, including, without limitation, the release to Borrower of all
certificates in Agent's possession evidencing the issued and outstanding capital
stock of each Redesignated Subsidiary.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER. To induce the Banks
and Agent to enter into this Sixth Amendment, Borrower hereby represents and
warrants to Agent as follows:
5.1 Each representation and warranty of Borrower and each Restricted
Subsidiaries contained in the Credit Agreement and the other Loan Papers is true
and correct on the date hereof and will be true and correct after giving effect
to the amendments set forth in SECTION 1 hereof.
5.2 The execution, delivery and performance by Borrower of this Sixth
Amendment are within the Borrower's corporate powers, have been duly authorized
by necessary action, require no action by or in respect of, or filing with, any
governmental body, agency or official and do not violate or constitute a default
under any provision of applicable law or any Material Agreement binding upon
Borrower or the Subsidiaries of Borrower or result in the creation or imposition
of any Lien upon any of the assets of Borrower or the Subsidiaries of Borrower
except Permitted Encumbrances.
6
<PAGE>
5.3 This Sixth Amendment constitutes the valid and binding obligation of
Borrower enforceable in accordance with its terms, except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditor's rights generally, and (ii) the availability of equitable
remedies may be limited by equitable principles of general application.
5.4 (a) The aggregate fair market value of all assets owned by the
Redesignated Subsidiaries (taken as a whole) as of the date hereof is less than
$1,000,000, and (b) the aggregate amount of Consolidated Cash Flow attributable
to the Redesignated Subsidiaries (taken as a whole) during the four (4) fiscal
quarters immediately preceding the date hereof is less than $1,000,000.
SECTION 6. MISCELLANEOUS.
6.1 NO DEFENSES. Borrower hereby represents and warrants to the Banks that
there are no defenses to payment, counterclaims or rights of set-off with
respect to the Loans existing on the date hereof.
6.2 REAFFIRMATION OF LOAN PAPERS; EXTENSION OF LIENS. Any and all of the
terms and provisions of the Credit Agreement and the Loan Papers shall, except
as amended and modified hereby, remain in full force and effect. Borrower hereby
extends the Liens securing the Obligations until the Obligations have been paid
in full, and agrees that the amendments and modifications herein contained shall
in no manner affect or impair the Obligations or the Liens securing payment and
performance thereof.
6.3 PARTIES IN INTEREST. All of the terms and provisions of this Sixth
Amendment shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns.
6.4 LEGAL EXPENSES. Borrower hereby agrees to pay on demand all reasonable
fees and expenses of counsel to Agent incurred by Agent, in connection with the
preparation, negotiation and execution of this Sixth Amendment and all related
documents.
6.5 COUNTERPARTS. This Sixth Amendment may be executed in counterparts,
and all parties need not execute the same counterpart; however, no party shall
be bound by this Sixth Amendment until all parties have executed a counterpart.
Facsimiles shall be effective as originals.
6.6 COMPLETE AGREEMENT. THIS SIXTH AMENDMENT, THE CREDIT AGREEMENT
AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
6.7 HEADINGS. The headings, captions and arrangements used in this Sixth
Amendment are, unless specified otherwise, for convenience only and shall not be
deemed to limit, amplify or modify the terms of this Sixth Amendment, nor affect
the meaning thereof.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to
be duly executed by their respective authorized officers on the date and year
first above written.
BORROWER:
SNYDER OIL CORPORATION,
a Delaware corporation
By:/s/ Peter E. Lorenzen
Peter E. Lorenzen
Its:Vice President
AGENT:
NATIONSBANK OF TEXAS, N.A.
By:/s/ J.Scott Fowler
J.Scott Fowler
Its:Vice President
BANKS:
NATIONSBANK OF TEXAS, N.A.
By:/s/ J. Scott Fowler
J. Scott Fowler
Its:Vice President
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:/s/ Dale S. Hurd
Dale S. Hurd
Its:Senior Vice President
BANK ONE, TEXAS, N.A.
By:/s/ Brad Bartek
Brad Bartek
Its:Vice President
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WELLS FARGO BANK, N.A.
By:/s/ Chad Kirkham
Chad Kirkham
Its:Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By:/s/ Jacques-Yves Mulliez
Jacques-Yves Mulliez
Its:Senior Vice President
1/234135.4
9
EXHIBIT 10.14
SHARE REPURCHASE AGREEMENT
This Share Repurchase Agreement (this "Agreement") is dated as of July
31, 1997 by and between Snyder Oil Corporation, a Delaware corporation ("SOCO")
and Patina Oil & Gas Corporation, a Delaware corporation ("Patina").
WHEREAS, SOCO owns beneficially and of record 14,000,000 shares (the
"Shares") of Common Stock of Patina ("Common Stock"), 2,000,000 of which are
designated Series A Common Stock;
WHEREAS, SOCO and Patina have entered into that certain Registration
Rights Agreement dated as of May 2, 1996 (the "Registration Rights Agreement"),
pursuant to which SOCO has certain rights to cause Patina, at its expense, to
register the sale of Shares by SOCO under the Securities Act of 1933, as amended
(the "Securities Act");
WHEREAS, SOCO desires, subject to the terms and conditions set forth in
this Agreement, to sell all of the Shares through a combination of: (i) an
underwritten secondary offering of a portion of the Shares by SOCO (the
"Offering") and (ii) a repurchase of any Shares not sold in the Offering by
Patina, which repurchase would be consummated simultaneously with the
consummation of the Offering (the "Repurchase");
WHEREAS, SOCO and Patina acknowledge that certain third parties may
have an interest in pursuing an acquisition of all or a portion of the capital
stock of Patina, and that it would be in the best interests of Patina and its
stockholders to permit those third parties ("Prospective Purchasers") to review
certain confidential information relating to Patina and its assets, liabilities
and operations, provided that such Prospective Purchasers execute a
confidentiality and standstill agreement mutually acceptable to SOCO and Patina;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Patina and certain investors (the "Investors") have entered into a
Stock Purchase Agreement (the "Stock Purchase Agreement") pursuant to which such
investors have agreed to acquire shares of 8.5% Convertible Preferred Stock (the
"New Preferred Stock"), of Patina on the terms and subject to the conditions set
forth therein;
WHEREAS, concurrently with the execution and delivery of this
Agreement, SOCO has granted options to the Investors (or, in certain instances,
affiliates thereof) to purchase an aggregate of 2,000,000 shares of Common Stock
pursuant to Stock Option Agreements with such optionees (the "Stock Option
Agreement");
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NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Demand Registration. Pursuant to Section 2(A) of the Registration
Rights Agreement, SOCO hereby requests registration of at least 5,000,000 Shares
and not more than 7,500,000 Shares (in each case, before giving effect to any
underwriter's overallotment option). Patina acknowledges that such request has
been made in accordance with the Registration Rights Agreement and satisfied the
requirements set forth in Section 2(A). Notwithstanding any provision in this
Agreement to the contrary, SOCO reserves the right, in its absolute and sole
discretion, to withdraw the Shares from the Offering at any time prior to the
Distribution Date (as defined below) by giving notice to Patina.
2. Repurchase.
(a) If the Offering is consummated, Patina hereby agrees to purchase
from SOCO, and SOCO agrees to sell to Patina, any Shares owned by SOCO at the
time of the consummation of the Offering (the "Closing") that are not sold by
SOCO to the underwriters at the Closing.
(b) Notwithstanding the foregoing, if the consummation of the Offering
and the Repurchase would result in a Qualifying Termination Event specified in
Section 2(a)(iv)(y) of the Stock Option Agreements, then Patina shall not
purchase any shares subject to the options granted in the Stock Option
Agreements unless and until any Shares underlying options granted under the
Stock Option Agreements have not been purchased upon exercise thereof, in which
case Patina shall purchase all such Shares on the second business day following
the expiration of such options.
(c) Any Shares required to be repurchased by Patina pursuant to this
Section 2 shall be repurchased for a purchase price equal to the public offering
price in the Offering less underwriters' discounts and commissions, in each case
as shown on the cover page of the final prospectus for the Offering, but without
any deduction for expenses (the "Net Offering Price").
(d) Notwithstanding the foregoing, upon the occurrence of a First
Reserve Funding Delay, then Patina shall not be required to purchase a number of
Shares equal to the First Reserve Shares until the "Fund VII Amount" (as defined
in the Stock Purchase Agreement) is funded by First Reserve Fund VII, Limited
Partnership ("First Reserve") and Patina shall pay as additional consideration
for the First Reserve Shares interest on the Fund VII Amount based upon the
Applicable Rate, with interest accruing from the Closing Date until the receipt
by SOCO of the Fund VII Amount.
(i) The term "Applicable Rate" shall mean an interest rate per
annum equal to (A) 1% plus (B) an interest rate per annum shown on page
3750 of the Dow Jones & Company Telerate screen or any successor page
as the composite offered rate for London interbank deposits with a
period equal to one month as shown under the heading "USD", as
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of 11:00 A.M. (London time) on the day of the Closing; provided that
the applicable rate determined pursuant to this definition shall be
rounded to the nearest whole multiple of 1/16 of 1% per annum, if such
rate is not such a multiple.
(ii) A "First Reserve Funding Delay" shall occur if First
Reserve shall not have delivered funds to Patina at the Closing but
instead shall have delivered to Patina an irrevocable, unconditional
commitment to fund the Fund VII Amount within ten business days after
delivery of the Notice of Issuance in accordance with the Stock
Purchase Agreement.
(iii) The term "First Reserve Shares" shall mean the maximum
number of whole shares of Common Stock that can be purchased with the
First Reserve Amount at a purchase price equal to the Net Offering
Price.
(iv) The term "Notice of Issuance" shall have the meaning set
forth in the Stock Purchase Agreement.
(e) If and to the extent that the underwriters in the Offering do not
exercise any overallotment option (the "Overallotment Option") granted to them
by SOCO in such a manner that such exercise can be consummated at the Closing,
then Patina agrees to repurchase any Shares that remain subject to the
Overallotment Option, but Patina shall acquire such Shares subject to such
Overallotment Option.
(f) Patina represents and warrants that it has sufficient surplus under
the Delaware General Corporation Law in order to effect the Repurchase and
agrees that it will not take any action that would cause it to cease to have
sufficient surplus for such purpose.
3. Conditions to the Obligations of the Parties.
(a) The obligations of both parties to consummate the transactions
contemplated hereby shall be subject to the satisfaction or waiver of the
following conditions:
(i) The registration statement in connection with the Offering
shall have become effective under the Securities Act, and no stop order
shall have been issued in connection therewith; and
(ii) Patina shall have received sufficient funds from the sale
by Patina of capital stock and/or borrowings under Patina's existing
credit facility to pay the full purchase price under the Repurchase;
provided, however, that the occurrence of a First Reserve Funding Delay
shall be deemed receipt of the Fund VII Amount for purposes of this
clause (ii).
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(b) In addition to the conditions set forth in Section 3(a), the
obligations of SOCO to consummate the transactions contemplated hereby shall be
subject to the satisfaction or waiver of the following conditions:
(i) The representations and warranties of Patina contained
herein shall be made again as of the Closing, and such representations
and warranties shall be true and correct in all material respects as of
the date hereof and the Closing, and Patina shall have provided SOCO
with an officer's certificate to such effect;
(ii) Patina shall have materially complied with its covenants
to be complied with under this Agreement and the Registration Rights
Agreement prior to the Closing, and Patina shall have provided SOCO
with an officer's certificate to such effect;
(iii) The Net Offering Price in the Offering shall not be
less than $7.0875 per Share;
(iv) The Offering shall have been consummated with respect to
at least 5 million Shares on or prior to the earlier of (A) the
termination of the Offering Period (as defined below) and (B) 90 days
after the date hereof;
(v) Documents in form reasonable acceptable to SOCO
terminating the Business Opportunity Agreement (the "Business
Opportunity Agreement") and the Corporate Services Agreement (the
"Corporate Services Agreement"), each of which is between SOCO and
Patina and each of which is dated as of May 2, 1996, shall have been
executed and delivered by Patina, effective as of the Closing; and
(vi) A Transition Agreement in such form as shall be mutually
agreeable to SOCO and Patina in their reasonable judgment shall have
been executed by Patina (the "Transition Agreement"), effective as of
the Closing.
(c) In addition to the conditions set forth in Section 3(a), the
obligations of Patina to consummate the transactions contemplated hereby shall
be subject to the satisfaction or waiver of the following conditions:
(i) SOCO shall have complied with its covenants to be complied
with under this Agreement and the Registration Rights Agreement prior
to the Closing, and SOCO shall have provided Patina with an officer's
certificate to such effect;
(ii) John C. Snyder and William J. Johnson shall have
tendered their resignations as directors of Patina, effective as of
the Closing;
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(iii) Documents in form reasonable acceptable to Patina
terminating the Business Opportunity Agreement and the Corporate
Services Agreement shall have been executed and delivered by SOCO,
effective as of the Closing; and
(iv) The Transition Agreement shall have been executed and
delivered by SOCO, effective as of the Closing.
4. Expenses.
(a) The following terms shall have the following respective
definitions:
(i) "Sale Transaction" shall mean an acquisition (by tender
offer, exchange offer, merger, consolidation, share exchange or
otherwise) by a third party of Patina (or its shares or assets) in
which such third party acquires, directly or indirectly, at least a
majority of the combined voting power of the outstanding capital stock
of Patina.
(ii) "Company Sale Transaction" shall mean a Sale Transaction
that is (A) approved by the Independent Committee (as defined in the
Confidentiality and Standstill Agreement described below) or (B) in
which the holders of a majority of the Common Stock (excluding any
shares beneficially owned by SOCO or any subsidiary thereof) sell or
otherwise transfer their shares pursuant to such Sale Transaction.
(iii) "SOCO Sale Transaction" shall mean a Sale Transaction
other than a Company Sale Transaction.
(iv) "Applicable Period" shall mean the period beginning on
the date hereof and ending 12 months following any termination of the
this Agreement or withdrawal of shares from the Offering (whichever is
earlier); provided, however, that with respect to any Sale Transaction
involving an acquiror that does not visit Patina's data room after July
1, 1997 and prior to the Distribution Date, the term Applicable Period
shall mean the period beginning on the date hereof and ending six
months following any termination of this Agreement or withdrawal of
shares from the Offering (whichever is earlier).
(b) If (i) the Offering is not consummated for any reason and (ii) a
SOCO Sale Transaction is consummated prior to the end of the Applicable Period,
then SOCO shall pay Patina a non-accountable expense reimbursement of $2
million.
(c) If (i) the Offering is not consummated for any reason and (ii) a
Company Sale Transaction is consummated prior to the end of the Applicable
Period, then SOCO shall not be obligated to pay any of Patina's costs or
expenses and Patina shall be solely responsible therefor.
(d) If (i) the Offering is not consummated for any reason and (ii)
neither a SOCO Sale Transaction nor a Company Sale Transaction is consummated
prior to the end of the Applicable
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Period, then SOCO shall pay Patina a non-accountable expense reimbursement of
$500,000; provided, however, that no such reimbursement shall be required if any
of the conditions set forth in Section 3(b)(i) or 3(b)(ii) shall not have been
satisfied.
(e) If the Offering and Repurchase are consummated, then SOCO shall not
be obligated to pay any of Patina's costs or expenses and Patina shall be solely
responsible therefor.
(f) Except as otherwise expressly provided in this Agreement or the
Registration Rights Agreement, each party shall be responsible for its expenses
in connection with the transactions contemplated by this Agreement.
5. Taking of Necessary Action; Cooperation and Exchange of Information.
(a) Each of the parties hereto agrees to use all reasonable efforts
promptly to take or cause all action and promptly to do or cause to be done all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Without limiting the generality of the foregoing, SOCO agrees to vote in favor
of any matter submitted to Patina's stockholders by Patina that is required by
law or applicable securities exchange regulation to be approved by Patina's
stockholders in order to consummate the transactions contemplated by the Stock
Purchase Agreement. Notwithstanding the foregoing provisions of this paragraph
(a), SOCO's obligations under this paragraph (a) shall be subject to the
provisions of the final sentence of Section 1 hereof and the parties acknowledge
that SOCO may continue to pursue the sale of all or part of its Shares to one or
more Prospective Purchasers.
(b) Patina agrees that it will not issue directly or indirectly issue
any equity securities of Patina or any subsidiary of Patina or any securities
exercisable for or convertible into any such equity securities, or agree to do
so, unless the consummation of the issuance thereof is conditioned upon the
occurrence of the sale by SOCO of all shares of Common Stock held by SOCO prior
to or simultaneously with such issuance. Patina will promptly provide SOCO with
true and complete copies of any agreements entered into by Patina in connection
with the foregoing, and shall not amend or waive any covenant or condition
contained in any such agreement in a manner that is inconsistent with the
provisions of this paragraph (b). Notwithstanding the foregoing, Patina may
issue equity securities as consideration in acquisition transactions so long as
the aggregate fair market value of any equity securities so issued does not
exceed $10 million. For purposes of this paragraph (b) the fair market value of
Common Stock shall be the closing price on the New York Stock Exchange on the
trading day immediately preceding the consummation of the applicable acquisition
transaction and for any other equity security shall be determined by in good
faith by the Board of Directors of Patina.
(c) Patina and SOCO agree to (and to use all reasonable efforts to
cause their respective officers, directors, employees, underwriters and advisors
to) cooperate with each other in connection with the Offering, the Repurchase
and the investigation of Patina by Prospective Purchasers, and to
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promptly disclose to each other any material developments in connection with
such activities. Patina agrees that it will conduct its business in the ordinary
course of business, consistent with past practice. Except in the ordinary course
of business, neither Patina nor any of its officers, directors, employees,
underwriters or advisors will contact any of the Prospective Purchasers without
reasonable advance notice to SOCO. Furthermore, Patina agrees that neither it
nor any of its officers, directors, employees, underwriters or advisors will
enter into any material acquisition transaction or discuss any such transaction
with any Prospective Purchaser or any other third party, without reasonable
advance notice to SOCO.
(d) Patina hereby represents and covenants to SOCO that any proxy
statement distributed by Patina to its stockholders in connection with the
transactions contemplated hereby and any related proxy soliciting material (and
any amendments or supplements thereto), on the date filed with the Securities
and Exchange Commission on the date mailed to Patina's stockholders, and on the
date of any related stockholder meeting, will comply in all material respects
with all applicable requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
no representation or covenant is given in this paragraph (d) with respect to
information furnished in writing by SOCO for use by Patina in any such proxy
statement or proxy soliciting materials.
6. Confidentiality and Standstill Agreement.
(a) SOCO hereby agrees that prior to any Prospective Purchaser's being
given access to any confidential information regarding Patina or its assets,
liabilities or operations, such Prospective Purchaser must execute a
Confidentiality and Standstill Agreement substantially in the form attached
hereto as Appendix I, and Patina agrees that any significant, substantive
modifications to the form of any such agreement will be submitted to SOCO for
its approval prior to the execution thereof by a Prospective Purchaser. For
purposes of this Agreement, a change to the Confidentiality and Standstill
Agreement that adversely affects SOCO's rights shall be deemed, without
limitation, a "significant, substantive modification." Furthermore, Patina will
not enter into an amendment to any such agreement without the prior consent of
SOCO.
(b) SOCO agrees it will not take any action one of the intended
consequences of which is to permit any Prospective Purchaser to enjoy a right
denied to such Prospective Purchaser in its Confidentiality and Standstill
Agreement or avoid an obligation or restriction set forth in such agreement.
(c) SOCO hereby agrees that for a 30-day period (the "Offering Period")
commencing on the date that a preliminary prospectus relating to the Offering is
broadly distributed to prospective offerees in the Offering (the "Distribution
Date"), SOCO and its affiliates will (i) cease all discussions and contacts with
any Prospective Purchasers (regardless of whether previously contacted by SOCO)
with respect to the acquisition of securities or assets of Patina, (ii) not take
any
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action with respect to, or in pursuit of, the acquisition of securities or
assets of Patina by any third party, and (iii) not resume any such activities
prior to the end of the Offering Period. Patina will give SOCO at least seven
calendar days' notice of the expected Distribution Date (which will not be prior
to the date that is 45 days after the date hereof) and in no event shall the
restrictions set forth in this paragraph commence until seven days after the
most recent such notice to SOCO by Patina.
7. Amendments. This Agreement may be amended or modified upon the
written consent thereto of Patina and SOCO.
8. Termination. This Agreement may be terminated upon by SOCO upon the
failure of any condition set forth in Section 3(a) or 3(b) upon five business
days notice to Patina. This Agreement may be terminated upon by Patina upon the
failure of any condition set forth in Section 3(a) or 3(c) upon five business
days notice to SOCO.
9. Assignments. This Agreement shall be binding on and inure to the
benefit of the respective successors and assigns of the parties hereto.
10.Entire Agreement; Governing Law. This Agreement constitutes the
entire agreement of the parties relating to the subject matter hereof and all
prior or contemporaneous written or oral agreements are merged herein. This
Agreement shall be governed by the laws of the State of Delaware.
11. Notices. Any notice, request, instruction, correspondence or
other document to be given hereunder by either party to the other (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed, postage prepaid, or by telegram or telecopier, as follows:
If to SOCO:
Snyder Oil Corporation
777 Main Street, Suite 2500
Fort Worth, Texas 76012
Phone: (817) 882-5905
Telecopy No.: (817) 882-5982
Attention: General Counsel
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With a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Phone: (713) 758-2346
Telecopy No.: (713) 758-2346
Attention: J. Mark Metts, Esq.
If to Patina:
Patina Oil & Gas Corporation
1625 Broadway
Denver, Colorado 80202
Attention: General Counsel
Phone: (303) 389-3600
Telecopy No.: (303) 595-7407
With copies to:
Thomas J. Edelman
Chairman of Patina Oil & Gas Corporation
667 Madison Avenue, 22nd Floor
New York, New York 10021
Phone: (212) 371-1117
Telecopy No.: (212) 888-6877
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Phone: (212) 455-2000
Telecopy No.: (212) 455-2502
Attention: Robert L. Friedman, Esq.
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
during the recipient's normal business hours. Any party may change any address
to which Notice is to be given to it by giving Notice as provided above of such
change of address.
12.Counterparts. This Agreement may be executed in multiple
counterparts, each of which taken together shall constitute one and the same
instrument.
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13. References to Other Agreements. To the extent that this Agreement
refers to any other agreement, or any provision thereof, such reference shall be
deemed to be to such agreement or provision in the form initially executed by
the parties thereto (regardless of whether such agreement or provision is
amended) unless and to the extent that (a) such amendment does not adversely
affect the non-signing party or (b) the non-signing party consents in writing to
such amendment.
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IN WITNESS WHEREOF, SOCO and Patina have caused this Agreement to be
signed by their respective officers thereunto duly authorized.
SNYDER OIL CORPORATION
By: /s/ Thomas J. Edelman
Name: Thomas J. Edelman
Title: Chairman
PATINA OIL & GAS CORPORATION
By: /s/ Peter E. Lorenzen
Name: Peter E. Lorenzen
Title: Vice President
11
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EXHIBIT 10.15
FORM OF STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement"), is dated as of July 31,
1997 by and between Snyder Oil Corporation, a Delaware corporation ("SOCO") and
the other person whose signature appears on the signature page hereof
("Optionee").
WHEREAS, SOCO owns beneficially and of record 14,000,000 shares (the
"SOCO Shares") of Common Stock of Patina ("Common Stock"), 2,000,000 of which
are designated Series A Common Stock;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Optionee and certain other persons have entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") with Patina, pursuant to which
Optionee and such other persons have agreed to acquire shares of 8.5%
Convertible Preferred Stock (the "New Preferred Stock"), of Patina on the terms
and subject to the conditions set forth therein;
WHEREAS, as a condition to Optionee's willingness to enter into the
Stock Purchase Agreement, Optionee has requested that SOCO agree, and SOCO has
so agreed, to grant to Optionee an option with respect to certain shares of the
Common Stock, on the terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement, SOCO (i) has granted options to the other purchasers of New Preferred
Stock under comparable option agreements, which options (together with the
option under this Agreement) cover an aggregate of 2,000,000 shares of Common
Stock and (ii) has granted options to Thomas J. Edelman under similar option
agreements, which options cover an aggregate of 2,000,000 shares of Common
Stock;
WHEREAS, SOCO has given Patina notice of its current intention to sell
a portion of the shares of Common Stock owned by it in an underwritten public
offering (the "Offering");
WHEREAS, concurrently with the execution and delivery of this
Agreement, SOCO and Patina have entered into a Share Repurchase Agreement
pursuant to which Patina has agreed, among other things, to repurchase from SOCO
all shares of Common Stock owned by SOCO at the time of the consummation of the
Offering that are not sold by SOCO to the underwriters at such time (the
"Repurchase");
NOW THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Grant of Option. SOCO hereby grants Optionee an irrevocable option
(the "Option") to purchase from SOCO the number of shares of Common Stock set
forth for Optionee on the signature page hereof, subject to adjustment as
provided in Section 8 hereof (such shares being
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referred to herein as the "Option Shares") in the manner set forth below at an
exercise price of $8.00 per Company Share (the "Exercise Price"), payable in
cash in accordance with Section 4 hereof.
2. Exercise of Option.
(a)The following terms shall have the following respective definitions:
(i) The term "Applicable Percentage" shall mean (A) the number
of Option Shares on the date hereof divided by (B) 2,000,000.
(ii) The term "Applicable Sharing Threshold" shall mean (A)
$2,500,000 multiplied by (B) the Applicable Percentage.
(iii) "Sale Transaction" shall mean an acquisition (by tender
offer, exchange offer, merger, consolidation, share exchange or
otherwise) by a third party of Patina (or its shares or assets) in
which such third party acquires, directly or indirectly, at least a
majority of the assets or combined voting power of the outstanding
capital stock of Patina.
(iv) "Qualifying Termination Event" shall mean (y) the
termination of the Stock Purchase Agreement as a result of the failure
of the conditions set forth in Section 5.04 thereof, preceded or
followed within 20 business days by the sale by SOCO of at least
12,000,000 shares of Common Stock whether in the Offering, pursuant to
the Share Repurchase Agreement or otherwise or (z) the withdrawal of
Shares from the Offering by SOCO or the termination of the Share
Repurchase Agreement by SOCO other than because of (A) a failure of any
of the conditions set forth in Sections 3(b)(i) or 3(b)(ii) of the
Share Repurchase Agreement, (B) a failure of any of the conditions set
forth in Sections 3(b)(iii) or 3(b)(iv) of the Share Repurchase
Agreement other than as a direct result of a failure by SOCO to use
commercially reasonable efforts in connection with the Offering to take
such actions as are customarily required to be taken by a selling
stockholder in an offering such as the Offering (provided, however,
that SOCO may, subject to compliance with Section 6(c) of the Share
Repurchase Agreement, continue to pursue, but not consummate, the sale
of all or part of its Shares to one or more prospective purchasers
without being deemed to fail to use such efforts) or (C) a failure of
the condition set forth in Section 3(a)(ii) of the Share Repurchase
Agreement as a result of the termination of the Stock Purchase
Agreement by any party thereto.
(v) The term "Spread" shall mean:
(A) the excess, if any, of
(1) the "Offer Price" for shares of Common
Stock as of the date Optionee gives the Exercise
Notice under Section 2(e) or Section 2(f) hereof
(defined as the highest price per share offered for
all shares of Common
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Stock for which an offer is made as of such date
pursuant to the Sale Transaction that has been
announced prior to such date and that has not been
terminated or withdrawn as of such date; provided,
however, that in the event that the Sale Transaction
is structured primarily as an asset sale, the Offer
Price shall be equal to the average closing price on
the New York Stock Exchange for the Common Stock over
a period of 10 consecutive New York Stock Exchange
trading days ("Trading Day") ending on the third
Trading Day prior to the closing of such Sale
Transaction); over
(2) the Exercise Price,
multiplied by
(B) the number of Option Shares purchasable pursuant
to the Option, but only if the Offer Price is greater
than the Exercise Price.
(vi) The term "Put Price" shall mean the greater of (A) $2
million multiplied by the Applicable Percentage and (B) the Spread.
(b) The Option may be exercised by Optionee, in whole but not in part,
at any time after a Qualifying Termination Event and prior to the termination
hereof.
(c) The Option shall terminate upon the earliest to occur of: (i)
consummation of the Offering and the Repurchase in accordance with the Share
Repurchase Agreement, (ii) the withdrawal of the SOCO Shares from the Offering
or the termination of the Share Repurchase Agreement, in each case other than as
a result of a Qualifying Termination Event; (iii) five days after the
consummation of a Sale Transaction, (iv) 11 business days after the occurrence
of a Qualifying Termination Event specified in Section 2(a)(iv)(y) and (v) the
expiration of 12 months following any termination of the Share Repurchase
Agreement or withdrawal of shares from the Offering (whichever is earlier);
provided, however, that with respect to any Sale Transaction involving an
acquiror that does not visit Patina's data room after July 1, 1997 and prior to
the Distribution Date (as defined in the Share Repurchase Agreement), the Option
may not be exercised after six months following any termination of the Share
Repurchase Agreement or withdrawal of shares from the Offering (whichever is
earlier). Notwithstanding the foregoing, the Option may not be exercised by
Optionee if Optionee (or any of its affiliates) is in material breach of any of
its material representations or warranties, or in material breach of any of its
covenants or agreements, contained in this Agreement or in the Stock Purchase
Agreement.
(d) SOCO agrees to notify Optionee promptly in writing if (i) a
Qualifying Termination Event occurs, (ii) a definitive agreement for a Sale
Transaction has been executed, or (iii) a Sale Transaction has been publicly
announced, it being understood that the giving of such notice by SOCO shall not
be a condition to the right of Optionee to exercise the Option.
3
<PAGE>
(e) If Optionee wishes to exercise the Option, Optionee shall deliver
to SOCO a written notice (an "Exercise Notice") specifying that Optionee wishes
to exercise the Option, which notice shall be delivered to SOCO prior to the
termination of the Option. The closing of a purchase of Option Shares (a
"Closing") shall occur on the fifth business day following the date of the
Optionee's Exercise Notice at SOCO's principal executive offices, unless
otherwise agreed by SOCO and the Optionee; provided, however, that if the
Optionee elects to exercise the Optionee Put described below, the Closing shall
be subject to, and shall not occur earlier than simultaneously with, the
consummation of the applicable Sale Transaction; provided further that if a
Qualifying Termination Event specified in Section 2(a)(iv)(y) occurs, the
Closing shall be subject to, and shall not occur earlier than simultaneously
with the sale by SOCO of the 12,000,000 shares of Common Stock referred to in
such section.
(f) If the Optionee's exercise of the Option relates to the occurrence
of a Qualifying Termination Event specified in Section 2(a)(iv)(z), in lieu of
purchasing shares upon exercise of the Option, Optionee may elect to cause SOCO
to repurchase the Option at the Closing (the "Optionee Put") for a purchase
price equal to the Put Price. In order to be effective, each Exercise Notice
shall specify Optionee's election to either (i) purchase the shares of Common
Stock covered by such Exercise Notice or (ii) cause the Option to be repurchased
by SOCO pursuant to the Optionee Put.
(g) Notwithstanding the foregoing, if the Optionee's exercise of the
Option relates to the occurrence of a Qualifying Termination Event specified in
Section 2(a)(iv)(z), and if the Put Price for the Option exceeds the Applicable
Sharing Threshold, then the Put Price shall be reduced by, or the exercise price
shall be increased by, as applicable, an amount in cash equal to (i) 50%,
multiplied by (ii) the excess of the Put Price (prior to such adjustment) over
the Applicable Sharing Threshold.
(h) If Optionee exercises the Optionee Put pursuant to Section 2(f)
hereof, SOCO shall at the Closing pay the required amount to Optionee in
immediately available funds and Optionee shall surrender to SOCO the Option, and
Optionee shall warrant that it owns the Option free and clear of all liens,
claims, damages, charges and encumbrances of any kind or nature whatsoever.
3. Conditions to Closing. The obligation of SOCO to transfer the Option
Shares to Optionee hereunder is subject to the conditions that no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect; provided,
however, that the Optionee shall be afforded the opportunity, by notice to SOCO,
to postpone the Closing for a reasonable period of time, not to exceed 30 days
after the date of the Exercise Notice, to enable the appropriate parties to use
commercially reasonable efforts to respond to, or remove, such impediment to
Closing.
4. Closing. At any Closing at which the Optionee Put is not exercised,
(a) SOCO will deliver to Optionee (or its designee) a single certificate in
definitive form representing the number of the Option Shares designated by
Optionee in its Exercise Notice, such certificate to be registered in the name
of Optionee and to bear the legend set forth in Section 9 hereof and (b)
Optionee will deliver to SOCO the aggregate price for the Option Shares so
designated and being purchased by
4
<PAGE>
wire transfer of immediately available funds or certified check or bank check.
SOCO shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 4
hereof in the name of Optionee or its designee.
5. Representations and Warranties of SOCO. SOCO represents and warrants
to Optionee that (a) upon delivery of the Option Shares to Optionee upon the
exercise of the Option, Optionee will acquire the Option Shares free and clear
of all claims, liens, charges, encumbrances and security interests of any nature
whatsoever, (b) none of SOCO, any of its affiliates or anyone acting on its or
their behalf has issued, sold or offered any security of Patina to any person
under circumstances, or taken any other action, that would cause the sale and
transfer of the Option Shares, as contemplated by this Agreement, to be subject
to the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), as in effect on the date hereof and, assuming the
representations of Optionee contained in Section 6 hereof are true and correct,
the issuance, sale and delivery of the Option Shares hereunder upon exercise of
the Option will be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof and (c) the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein do not, and will not, conflict with or violate
any terms of any contract, note, instrument, indenture, agreement, certificate
of incorporation, bylaws, law, rule, regulation or restriction applicable to
SOCO or its affiliates (other than Patina).
6. Representations and Warranties of Optionee. Optionee represents and
warrants to SOCO that any Option Shares acquired upon exercise of the Option
will be acquired for Optionee's own account, and will not be, and the Option is
not being, acquired by Optionee with a view to the distribution thereof in
violation of any applicable provision of the Securities Act.
7. No Rights as Stockholder. No holder of the Option shall be, or have
any of the rights or privileges of, a stockholder of Patina in respect of any
shares subject to the Option unless and until such holder's exercise of the
Option (but not including an exercise of the Optionee Put) is consummated in
accordance with the provisions of this Agreement. The decision to proceed with
the Offering, the Repurchase or any other transaction relating to Patina (as
well as the terms of any such transaction) shall, as between SOCO and Optionee,
be in the absolute and sole discretion of SOCO, and nothing in this Agreement
shall create any fiduciary or other duties from SOCO to Optionee, except for
those contractual obligations expressly set forth herein.
8. Adjustment Upon Changes in Capitalization. Without limiting any
restriction on SOCO contained in this Agreement, in the event of any change in
Common Stock by reason of stock dividends, splitups, mergers, recapitalizations,
combinations, exchange of shares or the like, the type and number of shares or
securities subject to the Option, and the purchase price per share provided in
Section 1 hereof, as well as the type and number of shares or securities
referred to in Sections 2(a)(iv)(y) and 2(e), shall be adjusted appropriately to
restore to Optionee its rights hereunder.
5
<PAGE>
9.Restrictive Legends. Each certificate representing shares of Common
Stock issued to Optionee hereunder shall include a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF JULY 31, 1997, A COPY OF WHICH MAY BE OBTAINED
FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Optionee shall have
delivered to SOCO a copy of a letter from the staff of the Securities and
Exchange Commission, or an opinion of counsel, in form and substance
satisfactory to SOCO, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the provisions to this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
10. Binding Effect; No Assignment; No Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as expressly
provided for in this Agreement, neither this Agreement nor the rights or the
obligations of either party hereto are assignable, except by operation of law,
or with the written consent of the other party, which consent shall not be
unreasonably withheld. Nothing contained in this Agreement, express or implied,
is intended to confer upon any person other than the parties hereto and their
respective permitted assigns any rights or remedies of any nature whatsoever by
reason of this Agreement.
11. Specific Performance. The parties hereby acknowledge and agree that
the failure of SOCO to perform its agreement and covenants hereunder will cause
irreparable injury to Optionee for which damages, even if available, will not be
an adequate remedy. Accordingly, SOCO hereby consents to the issuance of
injunctive relief by any court of competent jurisdiction to compel performance
of SOCO's obligations and to the granting by any such court of the remedy of
specific performance of its obligations hereunder.
12.Further Assurances. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
6
<PAGE>
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. If
any court or other competent authority holds any provisions of this Agreement to
be null, void or unenforceable, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Agreement in order, as nearly
as possible, to effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision and the economic effects thereof.
Each party agrees that, should any court or other competent authority hold any
provision of this Agreement or part hereof to be null, void or unenforceable, or
order any party to take any action inconsistent herewith, or not take any action
required herein, the other party shall not be entitled to specific performance
of such provision or part hereof or to any other remedy, including without
limitation money damages, for breach hereof or of any other provision of this
Agreement or part hereof as the result of such holding or order.
14.Notices. Any notice, request, instruction, correspondence or other
document to be given hereunder by either party to the other (herein collectively
called "Notice") shall be in writing and delivered personally or mailed, postage
prepaid, or by telegram or telecopier, as follows:
If to SOCO:
Snyder Oil Corporation
777 Main Street, Suite 2500
Fort Worth, Texas 76012
Phone: (817) 882-5905
Telecopy No.: (817) 882-5982
Attention: General Counsel
With a copy to:
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, Texas 77002
Phone: (713) 758-2346
Telecopy No.: (713) 758-2346
Attention: J. Mark Metts, Esq.
If to Optionee, to the address set forth on the signature page
hereof, and, if applicable, with a copy to any counsel listed on the signature
page hereof.
Notice given by personal delivery or mail shall be effective upon actual
receipt. Notice given by telegram or telecopier shall be effective upon actual
receipt if received during the recipient's normal business hours, or at the
beginning of the recipient's next business day after receipt if not received
7
<PAGE>
during the recipient's normal business hours. Any party may change any address
to which Notice is to be given to it by giving Notice as provided above of such
change of address.
15.Entire Agreement; Governing Law. This Agreement constitutes the entire
agreement of the parties relating to the subject matter hereof and all prior or
contemporaneous written or oral agreements are merged herein. This Agreement
shall be governed by the laws of the State of Delaware.
16. Counterparts. This Agreement may be executed in multiple counterparts,
each of which taken together shall constitute one and the same instrument.
17. Expenses. Except as otherwise expressly provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
18. Amendments; Waiver. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
19. Mutual Waiver of Jury Trial. Because disputes arising in connection
with complex financial transactions are most quickly and economically resolved
by an experienced and expert person and the parties wish applicable state and
federal laws to apply (rather than arbitration rules), the parties desire that
their disputes be resolved by a judge applying such applicable laws. Therefore,
to achieve the best combination of the benefits of the judicial system and of
arbitration, the parties hereto waive all right to trial by jury in any action,
suit or proceeding brought to enforce or defend any rights or remedies under
this Agreement.
20. Extension of Time Periods. The time periods for exercise of certain
rights under Sections 2 and 4 hereof shall be extended (a) to the extent
necessary to obtain all regulatory approvals for the exercise of such rights,
and for the expiration of all statutory waiting periods and (b) to the extent
necessary to avoid any liability under Section 16(b) of the Securities Exchange
Act of 1934, as amended, by reason of such exercise.
21. References to Other Agreements. To the extent that this Agreement
refers to any other agreement, or any provision thereof, such reference shall be
deemed to be to such agreement or provision in the form initially executed by
the parties thereto (regardless of whether such agreement or provision is
amended) unless and to the extent that (a) such amendment does not adversely
affect the non-signing party or (b) the non-signing party consents in writing to
such amendment.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
------------------------------------------
By________________________________________
Name:
Title:
Address:
========================
- ------------------------
Attention: _______________
Telecopier: ______________
Number of Shares Subject to Option:
- -----------------------
Optionee's Counsel (for Notice Purposes):
========================
- ------------------------
Attention: _______________
Telecopier: ______________
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
FIRST RESERVE FUND VII, L.P.
By: First Reserve Corporation, its General Partner
By________________________________________
Name: William E. Macaulay
Title: President and Chief Executive Officer
Address:
First Reserve Fund VII, L.P.
475 Steamboat Road
Greenwich, Connecticut 06830
Telecopier: (203) 661-6729
Number of Shares Subject to Option:
1,000,000 shares
Optionee's Counsel (for Notice Purposes):
Gibson Dunn & Crutcher, L.L.P.
1801 California, Suite 4100
Denver, Colorado
Attention: Thomas R. Dension, Esq.
Telecopier: 303-296-5310
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners,
Its General Partner
By________________________________________
Name: Arnold L. Chavkin
Title: General Partner
Address:
Chase Equity Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, New York 10017
Telecopier: (212) 622-3101
Number of Shares Subject to Option:
636,923 shares
Optionee's Counsel (for Notice Purposes):
O'Sullivan, Gorsov & Kambell
30 Rockefeller Plaza, 41st Floor
New York, New York 10112
Attention: Harvey Eisenburg, Esq.
Telecopier: (212) 408-0646
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
HIGHBRIDGE INTRNATIONAL LDC
By________________________________________
Name: Glenn R. Dubin
Title: Co-Chairman
Address:
High Bridge International LDC
c/o Highbridge Capital Management
767 Fifth Avenue, 23rd Floor
New York, New York 10153
Telecopier: (212) 486-9379
Number of Shares Subject to Option:
300,000 shares
Optionee's Counsel (for Notice Purposes):
Ron Resnick, Esq.
========================
Attention: _______________
Telecopier: ______________
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
BEDFORD FALLS INVESTORS, L.P.
By: Metropolitan Capital Advisors, LP
its General Partner
By: Metropolitan Capital Advisors, Inc.
its General Partner
By________________________________________
Name: Jeffrey Schwartz
Title: Chief Executive Officer
Address:
660 Madison Avenue, 20th Floor
New York, New York 10021
Telecopier: (212) 486-8819
Number of Shares Subject to Option:
40,000 shares
Optionee's Counsel (for Notice Purposes):
========================
- ------------------------
Attention: _______________
Telecopier: ______________
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
------------------------------------------
Wiliam P. Nicoletti
Address:
William P. Nicoletti
c/o Nicoletti & Company
1155 Avenue of the Anericas - 29th Fl.
New York, NY 10036
Telecopier: 391-7420
Number of Shares Subject to Option:
3,077 shares
Optionee's Counsel (for Notice Purposes):
========================
- ------------------------
Attention: _______________
Telecopier: ______________
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
------------------------------------------
PETER SEAMAN
Address:
Peter Seaman
c/o Universal Studios
100 University City Plaza
Universal Building #507
Suite 3G
Universal City, CA 91608
Telecopier: (818) 866-1546
Number of Shares Subject to Option:
1,538 shares
Optionee's Counsel (for Notice Purposes):
========================
- ------------------------
Attention: _______________
Telecopier: ______________
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
------------------------------------------
IRIK P. SEVIN
Address:
Irik P. Sevin
c/o Petroleum Heat & Power Co., Inc.
2187 Atlantic Street
P.O. Box 1457
Stanford, CT 06904
Telecopier: (203) 328-7421
Number of Shares Subject to Option:
3,077 shares
Optionee's Counsel (for Notice Purposes):
========================
- ------------------------
Attention: _______________
Telecopier: ______________
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
SNYDER OIL CORPORATION
By________________________________________
Name:
Title:
OPTIONEE:
------------------------------------------
ALLEN FINKELSON
Address:
Allen Finkelson
c/o Cravath, Swaine & Moore
Worldwide Plaza - 46th Floor
New York, New York 10019
Telecopier: (212) 765-1047
Number of Shares Subject to Option:
3,077 shares
Optionee's Counsel (for Notice Purposes):
========================
- ------------------------
Attention: _______________
Telecopier: ______________
17
<PAGE>
<TABLE>
EXHIBIT 11.1
SNYDER OIL CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(Unaudited)
<CAPTION>
Six Months
Year Ended December 31, Ended June 30,
--------------------------------------- ------------------
1994 1995 1996 1997
---------- ---------- --------- ------------------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Net income (loss) $12,372 ($39,831) $62,950 $23,070
Dividends on preferred stock (10,806) (6,210) (6,210) (3,100)
--------- --------- --------- ---------
Net income (loss) available to common $1,566 ($46,041) $56,740 $19,970
========= ========= ========= =========
Weighted average shares outstanding 23,704 30,186 31,308 30,435
Assumed exercise of vested common stock options
net of treasury shares repurchased 290 138 179 289
Assumed conversion of 6% preferred stock 4,881 4,881 5,051 5,051
--------- --------- --------- ---------
Weighted average common stock and equivalents outstanding 28,875 35,205 36,538 35,775
========= ========= ========= =========
Primary netincome (loss) per common share:
Net income (loss) $0.52 ($1.32) $2.01 $0.76
Dividends on preferred stock (0.45) (0.21) (0.20) (0.10)
--------- --------- --------- ---------
Net income (loss) available to common $0.07 ($1.53) $1.81 $0.66
========= ========= ========= =========
Fully diluted net income (loss) per common share:
Net income (loss) $0.43 ($1.13) $1.72 $0.64
Dividends on preferred stock 0.00 0.00 0.00 0.00
--------- --------- --------- ---------
Net income (loss) available to common $0.43 ($1.13) $1.72 $0.64
========== ========= ========= =========
</TABLE>
<TABLE>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
<CAPTION>
Six
Months Ended
Year Ended December 31, June 30,
----------------------------------------------------------------------- --------------
1992 1993 1994 1995 1996 1997
------------ ------------ ----------- ------------ ------------ --------------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes, minority
interest and extraordinary item $15,027 $22,538 $13,510 ($40,604) $74,701 $41,336
Interest expense 4,997 5,315 10,337 21,679 23,587 13,764
------------ ------------ ----------- ------------ ------------ --------------
Earnings before taxes, minority
interest, extraordinary item and
interest expense $20,024 $27,853 $23,847 ($18,925) $98,288 $55,100
============ ============ =========== ============ ============ ==============
Interest expense $4,997 $5,315 $10,337 $21,679 $23,587 $13,764
Preferred stock dividends of
majority owned subsidiary - - - - 1,520 990
------------ ------------ ----------- ------------ ------------ --------------
Total fixed charges $4,997 $5,315 $10,337 $21,679 $25,107 $14,754
============ ============ =========== ============ ============ ==============
Ratio of earnings to fixed charges 4.01 5.24 2.31 N/A(1) 3.91 3.73
============ ============ =========== ============ ============ ==============
<FN>
(1) Earnings were inadequate to cover fixed charges by $40.6 million.
</FN>
</TABLE>
1
<PAGE>
<TABLE>
EXHIBIT 12
SNYDER OIL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
(Unaudited)
<CAPTION>
Six
Year Ended December 31, Months Ended
----------------------------------------------------------------------- June 30,
1992 1993 1994 1995 1996 1997
------------ ------------ ----------- ------------ ------------ --------------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before taxes, minority
interest and extraordinary item $15,027 $22,538 $13,510 ($40,604) $74,701 $41,336
Interest expense 4,997 5,315 10,337 21,679 23,587 13,764
------------ ------------ ----------- ------------ ------------ --------------
Earnings before taxes, minority
interest, extraordinary item and
interest expense $20,024 $27,853 $23,847 ($18,925) $98,288 $55,100
============ ============ =========== ============ ============ ==============
Interest expense $4,997 $5,315 $10,337 $21,679 $23,587 $13,764
Preferred stock dividends 4,800 9,100 10,806 6,210 6,210 3,100
Adjustment to tax effect preferred
stock dividends - - - - 429 1,434
Preferred stock dividends of
majority owned subsidiary - - - - 1,520 990
------------ ------------ ----------- ------------ ------------ --------------
Total fixed charges $9,797 $14,415 $21,143 $27,889 $31,746 $19,288
============ ============ =========== ============ ============ ==============
Ratio of earnings
to combined fixed charges
and preferred dividends 2.04 1.93 1.13 N/A(1) 3.10 2.86
============ ============ =========== ============ ============ ==============
<FN>
(1) Earnings were inadequate to cover combined fixed charges and preferred dividends by $46.8 million.
</FN>
</TABLE>
2
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000860713
<NAME> Snyder Oil Corporation
<MULTIPLIER> 1,000
<CURRENCY> US dollars
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Jun-30-1997
<CASH> 44,102
<SECURITIES> 0
<RECEIVABLES> 37,822
<ALLOWANCES> 0
<INVENTORY> 4,862
<CURRENT-ASSETS> 89,837
<PP&E> 947,212
<DEPRECIATION> 312,250
<TOTAL-ASSETS> 859,908
<CURRENT-LIABILITIES> 89,318
<BONDS> 368,257
0
10
<COMMON> 316
<OTHER-SE> 276,772
<TOTAL-LIABILITY-AND-EQUITY> 859,908
<SALES> 123,041
<TOTAL-REVENUES> 163,171
<CGS> 70,865
<TOTAL-COSTS> 89,881
<OTHER-EXPENSES> 18,190
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,764
<INCOME-PRETAX> 41,336
<INCOME-TAX> 11,989
<INCOME-CONTINUING> 25,918
<DISCONTINUED> 0
<EXTRAORDINARY> 2,848
<CHANGES> 0
<NET-INCOME> 23,070
<EPS-PRIMARY> .66
<EPS-DILUTED> .64
</TABLE>
