UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1998
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-7667
SANTA FE ENERGY RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2722169
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1616 SOUTH VOSS, SUITE 1000, HOUSTON, TEXAS 77057
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 507-5000
NONE
(Former name or former address, 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 [ ]
Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date:
CLASS OUTSTANDING AS OF OCTOBER 31, 1998
Common stock, $.01 par value 102,220,505
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statement of Operations (unaudited) -
Three Months Ended September 30, 1998 and 1997,
and Nine Months Ended September 30, 1998 and 1997 ............... 3
Consolidated Balance Sheet -
September 30, 1998 (unaudited) and December 31, 1997 ............ 4
Consolidated Statement of Cash Flows (unaudited) -
Three Months Ended September 30, 1998 and 1997, and
Nine Months Ended September 30, 1998 and 1997 ................... 5
Notes to Consolidated Financial Statements ........................ 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 9
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K ................................. 17
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1998 1997 (1) 1998 1997 (1)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Sales of crude oil and liquids produced ........... $ 45.6 $ 68.8 $ 131.1 $ 305.2
Sales of natural gas produced ..................... 30.3 32.2 91.0 99.4
Sales of crude oil purchased ...................... -- 0.6 -- 20.5
Other ............................................. -- 0.2 0.4 0.4
------- ------- ------- -------
Total revenues ................................. 75.9 101.8 222.5 425.5
------- ------- ------- -------
Costs and expenses:
Production and operating .......................... 29.8 32.7 81.3 134.3
Cost of crude oil purchased ....................... -- 0.6 -- 22.0
Exploration, including dry hole costs ............. 23.7 9.6 43.2 29.0
Depletion, depreciation and amortization .......... 37.1 30.9 98.6 100.0
General and administrative ........................ 5.1 5.0 14.1 22.2
Taxes other than income ........................... 3.9 4.1 12.3 18.2
Loss (gain) on disposition of assets .............. 0.2 (1.9) 1.4 (4.0)
------- ------- ------- -------
Total costs and expenses ....................... 99.8 81.0 250.9 321.7
------- ------- ------- -------
Income (loss) from operations ......................... (23.9) 20.8 (28.4) 103.8
Interest income ................................... 0.4 0.4 3.6 2.2
Interest expense .................................. (6.1) (5.1) (15.2) (20.6)
Interest capitalized .............................. 2.0 1.6 5.6 5.1
Other income (expense) ............................ (0.1) (0.1) (0.2) (0.4)
------- ------- ------- -------
Income (loss) before income taxes and minority interest (27.7) 17.6 (34.6) 90.1
Current income tax (expense) benefit ............ (1.0) (1.2) 4.4 (6.3)
Deferred income tax (expense) benefit ........... 10.9 (5.3) 12.5 (28.0)
------- ------- ------- -------
Income (loss) before minority interest ................ (17.8) 11.1 (17.7) 55.8
Minority interest in Monterey Resources, Inc. ..... -- (0.4) -- (4.7)
------- ------- ------- -------
Net income (loss) ..................................... (17.8) 10.7 (17.7) 51.1
Preferred dividend requirement .................... -- -- -- (3.6)
Convertible preferred premium ..................... -- -- -- (8.5)
------- ------- ------- -------
Earnings (loss) attributable to common shares ......... $ (17.8) $ 10.7 $ (17.7) $ 39.0
======= ======= ======= =======
Earnings (loss) per common share,
basic and diluted ................................. $ (0.17) $ 0.10 $ (0.17) $ 0.40
======= ======= ======= =======
Weighted average number of shares outstanding
Basic ............................................. 102.6 102.9 102.7 97.1
======= ======= ======= =======
Diluted ........................................... 104.4 105.7 105.2 102.3
======= ======= ======= =======
</TABLE>
(1) Includes results of Monterey Resources, Inc. through July 1997.
The accompanying notes are integral part of these
consolidated financial statements.
3
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ......................................... $ 13.8 $ 5.6
Accounts receivable, net .......................................... 60.3 70.9
Inventories ....................................................... 22.6 14.5
Other current assets .............................................. 27.2 21.8
------------- -------------
Total Current Assets ............................................. 123.9 112.8
------------- -------------
Property and equipment, at cost:
Oil and gas (successful efforts method of accounting) ............. 1,882.9 1,682.4
Other ............................................................. 17.9 16.8
------------- -------------
1,900.8 1,699.2
Accumulated depletion, depreciation, amortization and impairment .. (1,135.1) (1,049.5)
------------- -------------
Net property and equipment ....................................... 765.7 649.7
------------- -------------
Other assets .......................................................... 11.9 26.4
============= =============
Total Assets .......................................................... $ 901.5 $ 788.9
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .................................................. $ 78.2 $ 106.7
Income taxes payable .............................................. 0.3 6.5
Interest payable .................................................. 4.6 1.4
Other current liabilities ......................................... 14.8 19.4
------------- -------------
Total Current Liabilities ........................................ 97.9 134.0
------------- -------------
Long-term debt ........................................................ 306.2 121.7
Deferred revenues ..................................................... 3.6 3.7
Other long-term obligations ........................................... 37.3 36.3
Deferred income taxes ................................................. 26.4 38.5
Commitments and contingencies (See Note 5) ............................ -- --
Shareholders' equity:
Preferred stock, $0.01 par value, 38.1 shares authorized,
none issued ...................................................... -- --
Common stock, $0.01 par value, 200.0 shares authorized,
102.4 shares and 103.0 shares issued and outstanding, respectively 1.0 1.0
Paid-in capital ................................................... 728.1 728.2
Accumulated deficit ............................................... (291.4) (273.2)
Treasury stock, at cost, 0.6 shares and 0.1 shares, respectively .. (5.6) (0.6)
Unamortized restricted stock awards ............................... (2.0) (0.7)
------------- -------------
Total Shareholders' Equity ............................................ 430.1 454.7
============= =============
Total Liabilities and Shareholders' Equity ............................ $ 901.5 $ 788.9
============= =============
</TABLE>
The accompanying notes are integral part of these
consolidated financial statements.
4
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ ------------------
1998 1997(1) 1998 1997(1)
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating activities:
Net income (loss) ........................................ $ (17.8) $ 10.7 $ (17.7) $ 51.1
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depletion, depreciation and amortization ............. 37.1 30.9 98.6 100.0
Deferred income taxes ................................ (10.9) 5.3 (12.5) 28.0
Loss (gain) on disposition of assets ................. 0.2 (1.9) 1.4 (4.0)
Exploratory dry hole costs ........................... 12.5 4.7 19.7 13.0
Minority interest in Monterey Resources, Inc. ........ -- 0.4 -- 4.7
Other ................................................ 0.8 1.8 2.7 4.2
Changes in operating assets and liabilities:
Decrease in accounts receivable ...................... 8.9 14.7 13.5 24.4
Increase in inventories .............................. (2.4) (0.5) (6.2) (2.4)
Increase (decrease) in accounts payable .............. (5.0) 3.0 (15.2) 1.7
Increase (decrease) in interest payable .............. 2.2 4.4 3.2 4.4
Increase (decrease) in income taxes payable .......... 0.2 (4.2) (6.2) (8.7)
Net change in other assets and liabilities ........... 1.4 (25.4) 9.0 3.9
------- ------- ------- -------
Net cash provided by operating activities .................... 27.2 43.9 90.3 220.3
------- ------- ------- -------
Investing activities:
Capital expenditures, including exploratory dry hole costs (41.6) (47.1) (159.7) (164.8)
Acquisition of producing properties ...................... 0.1 (163.5) (99.9) (198.2)
Net proceeds from disposition of assets .................. -- 29.6 1.8 32.5
Other .................................................... -- 8.3 -- 8.3
------- ------- ------- -------
Net cash used in investing activities ........................ (41.5) (172.7) (257.8) (322.2)
------- ------- ------- -------
Financing activities:
Net change in long-term lines of credit .................. 18.6 93.0 184.5 99.0
Issuance of Santa Fe Energy Resources, Inc. common stock . -- 0.6 -- 2.2
Treasury stock reissued .................................. 0.1 -- 1.6 --
Treasury stock purchased ................................. (4.4) -- (10.4) --
Cash dividends paid ...................................... -- (1.3) -- (8.5)
------- ------- ------- -------
Net cash provided by financing activities .................... 14.3 92.3 175.7 92.7
Net increase (decrease) in cash .............................. -- (36.5) 8.2 (9.2)
Cash and cash equivalents at beginning of period ............. 13.8 41.9 5.6 14.6
======= ======= ======= =======
Cash and cash equivalents at end of period ................... $ 13.8 $ 5.4 $ 13.8 $ 5.4
======= ======= ======= =======
Supplemental disclosure of cash flow information:
Interest paid ............................................ $ 3.8 $ 0.2 $ 11.6 $ 15.5
Income taxes paid ........................................ $ 1.3 $ 4.3 $ 4.6 $ 13.7
</TABLE>
(1) Includes results of Monterey Resources, Inc. through July 1997.
The accompanying notes are integral part of these
consolidated financial statements.
5
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements at September 30, 1998 and for the
three and nine months then ended are unaudited and reflect all adjustments
(consisting of only normal and recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the financial position and
operating results for the interim periods. The consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997. The results for the three and
nine months ended September 30, 1998 are not necessarily indicative of the
results which may be expected for any other interim period or for the year
ending December 31, 1998.
On July 25, 1997 the Company distributed pro rata to its common
shareholders all of the 82.8% of Monterey Resources, Inc. ("Monterey") common
stock that it owned by means of a tax-free distribution (the "Spin Off").
Consequently, the financial results of Monterey through July 1997 are included
in the period ended September 30, 1997 and excluded for the entire period ended
September 30, 1998. See Item 2. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a comparison of financial
results excluding Monterey.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"), and Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information" ("SFAS 131"). Both
Statements are effective for fiscal years beginning after December 15, 1997.
Neither Statement affects the Company's reported consolidated net income.
Currently the Company has no comprehensive income other than net income.
In February 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits" ("SFAS 132"). The Statement is
effective for fiscal years beginning after December 15, 1997. The Statement has
no effect on the Company's reported consolidated net income.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which is effective for all fiscal quarters
of all fiscal years beginning after June 15, 1999. The Company intends to
implement the provisions of the Statement beginning with the first quarter of
2000. SFAS 133 will require the Company to recognize all derivatives, as defined
in the Statement, on the balance sheet at their fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives either will be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or will be recognized
in other comprehensive income until the hedged item is recognized in earnings.
The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings.
The Company has not yet determined the impact that the adoption of SFAS
133 will have on its earnings and statement of financial position.
6
<PAGE>
NOTE 2. EARNINGS PER SHARE
The following tables set forth the components of the Company's basic and
diluted earnings per share calculations based on the computation requirements of
SFAS 128.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
1998 1997
----------------------------------- ------------------------------------
INCOME PER-SHARE INCOME PER-SHARE
(LOSS) SHARES AMOUNT (LOSS) SHARES AMOUNT
-------- -------------- -------- -------------- -------- ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss)............................ $(17.8) $ 10.7
Less: Preferred dividends ................... -- -
------ ------
Basic and diluted Earnings Per Share
Earnings (Loss) attributable to common shares $(17.8) 102.6 $(0.17) $ 10.7 102.9 $ 0.10
====== ============== ======== ====== ======== ==========
</TABLE>
The Company had 1.4 million and 2.6 million common shares which would be
issued upon the exercise of stock options which although dilutive in nature, did
not change earnings per share in the three months ended September 30, 1998 and
1997, respectively. In addition, there were 0.4 million and 0.3 million common
shares which would be issued upon vesting of Phantom Units in the three months
ended September 30, 1998 and 1997, respectively, which although dilutive in
nature did not change earnings per share. There were 2.4 million and 1.4 million
stock options outstanding at September 30, 1998 and 1997, respectively, which
were not included in the computation of diluted earnings per share because the
exercise price of these options was greater than the average market price of the
common shares. In the second quarter of 1997 the Company converted all of its
outstanding convertible preferred stock into common shares.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------
1998 1997
------------------------------------ ------------------------------------
INCOME PER-SHARE INCOME PER-SHARE
(LOSS) SHARES AMOUNT (LOSS) SHARES AMOUNT
-------- -------------- -------- -------------- -------- ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss)............................ $(17.7) $ 51.1
Less: Preferred dividends ................... -- (12.1)
------ ------
Basic and diluted Earnings Per Share
Earnings (Loss) attributable to common shares $(17.7) 102.7 $(0.17) $ 39.0 97.1 $ 0.40
====== ============== ======== ====== ======== ==========
</TABLE>
For the nine months ended September 30, 1998 and 1997, the Company had 2.1
million and 1.4 million common shares which would be issued upon the exercise of
stock options, respectively, which although dilutive in nature, did not change
earnings per share. In addition, there were 0.4 million and 0.2 million common
shares which would be issued upon vesting of Phantom Units in the nine months
ended September 30, 1998 and 1997, respectively, which although dilutive in
nature did not change earnings per share. There were 2.4 million and 1.4 million
stock options outstanding at September 30, 1998 and 1997, respectively, which
were not included in the computation of diluted earnings per share because the
exercise price of these options was greater than the average market price of the
common shares. In the second quarter of 1997 the Company converted all of its
outstanding convertible preferred stock into common shares.
NOTE 3. TREASURY STOCK
The Company's Board of Directors has authorized the Company to buy back up
to $50 million of its common stock to meet the requirements of outstanding stock
options and to satisfy the stock requirements of employee benefit plans. During
the three and nine months ended September 30, 1998, the Company purchased 0.5
million and 1.1 million common shares for approximately $4.4 million and $10.2
million, respectively.
7
<PAGE>
NOTE 4. CASH FLOWS
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash.
The following balances represent noncash adjustments to the Company's
Consolidated Balance Sheet as of September 30, 1998, related to the acquisition
of an additional interest in the Tuban Production Sharing Contract on the island
of Java in Indonesia from Total S. A.
TOTAL S. A.
ACQUISITION
-----------
(IN MILLIONS)
Accounts receivable $ 2.9
Inventories 1.9
Other current assets 3.4
Accounts payable 3.4
Other long-term obligations 0.1
Deferred income taxes 0.4
NOTE 5. COMMITMENTS AND CONTINGENCIES
OIL AND GAS HEDGING. From time to time the Company hedges a portion of its
oil and gas sales to provide a certain minimum level of cash flow from its sales
of oil and gas. While the hedges are generally intended to reduce the Company's
exposure to declines in market price, the Company's gain from increases in
market price may be limited. The Company uses various financial instruments
whereby monthly settlements are based on differences between the prices
specified in the instruments and the settlement prices of certain futures
contracts quoted on the New York Mercantile Exchange ("NYMEX") or certain other
indices. Generally, in instances where the applicable settlement price is less
than the price specified in the contract, the Company receives a settlement
based on the difference; in instances where the applicable settlement price is
higher than the specified price, the Company pays an amount based on the
difference. The instruments utilized by the Company differ from futures
contracts in that there is no contractual obligation which requires or allows
for the future delivery of a product. Gains or losses on hedging activities are
recognized in oil and gas revenues in the period in which the hedged production
is sold.
Crude oil sales hedges resulted in an increase in revenues of $1.3 million
and $2.5 million for the three and nine months ended September 30, 1998,
respectively, compared with $0.4 million and $2.1 million for the same periods
of 1997. The Company had no open crude oil sales hedges at September 30, 1998
and no natural gas sales hedges in 1997 or 1998.
ENVIRONMENTAL MATTERS. The Company's oil and gas operations are subject to
stringent environmental regulation by government authorities. Such regulation
has increased the costs of planning, designing, drilling, installing, operating
and abandoning oil and gas wells and associated facilities. The Company has
expended significant financial and managerial resources to comply with such
regulations. Although the Company believes its operations and facilities are in
general compliance with applicable environmental regulations, the risk of
substantial costs and liabilities are inherent in oil and gas operations. It is
possible that other developments, such as increasingly strict environmental
laws, regulations and enforcement policies or claims for damages to property,
employees, other persons and the environment resulting from the Company's
operations, could result in significant costs and liabilities in the future. As
it has in the past, the Company intends to fund the future costs of
environmental compliance from operating cash flows.
There are other claims and actions pending against the Company. In the
opinion of management, the amounts, if any, which may be awarded in connection
with any of these claims and actions could be significant to the results of
operations of any period but would not be material to the Company's consolidated
financial position.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As described in Note 1 of the Notes to the Consolidated Financial
Statements, the Company completed the Spin Off of Monterey on July 25, 1997. As
a result of this transaction, management believes the 1997 consolidated results
are not representative of the Company's on-going operations. Consequently, in
order to provide more relevant information, the following discussions focus on
the results of the Company, excluding Monterey.
RESULTS OF OPERATIONS
The following unaudited financial and operating schedules for the three
and nine months ended September 30, 1997 were derived from the historical
financial statements of the Company and set forth the results of the Company,
excluding Monterey Resources, Inc. Income taxes for this period were computed on
a separate company basis as if the Company had filed returns excluding Monterey
and its predecessor operations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Sales of crude oil and liquids ................................ $ 45.6 $ 47.7 $ 131.1 $ 145.5
Sales of natural gas .......................................... 30.3 32.2 91.0 98.8
Other ......................................................... -- 0.2 0.4 --
------- ------- ------- -------
Total revenues ............................................. 75.9 80.1 222.5 244.3
------- ------- ------- -------
Costs and expenses:
Production and operating ...................................... 29.8 22.1 81.3 63.0
Exploration, including dry hole costs ......................... 23.7 9.5 43.2 28.1
Depletion, depreciation and amortization ...................... 37.1 27.6 98.6 77.7
General and administrative .................................... 5.1 3.9 14.1 14.6
Taxes other than income ....................................... 3.9 3.2 12.3 11.3
Loss (gain) on disposition of assets .......................... 0.2 (1.9) 1.4 (4.0)
------- ------- ------- -------
Total costs and expenses ................................... 99.8 64.4 250.9 190.7
------- ------- ------- -------
Income (loss) from operations ..................................... (23.9) 15.7 (28.4) 53.6
Interest income ............................................... 0.4 0.2 3.6 1.2
Interest expense .............................................. (6.1) (3.0) (15.2) (8.9)
Interest capitalized .......................................... 2.0 1.3 5.6 4.1
Other income (expense) ........................................ (0.1) (0.1) (0.2) (0.4)
------- ------- ------- -------
Income (loss) before income taxes ................................. (27.7) 14.1 (34.6) 49.6
Current income tax (expense) benefit......................... (1.0) -- 4.4 8.6
Deferred income tax (expense) benefit........................ 10.9 (5.1) 12.5 (26.6)
------- ------- ------- -------
Net income (loss).................................................. (17.8) 9.0 (17.7) 31.6
Preferred dividend requirement ................................ -- -- -- (3.6)
Convertible preferred premium ................................. -- -- -- (8.5)
------- ------- ------- -------
Earnings (loss) attributable to common shares ..................... $ (17.8) $ 9.0 $ (17.7) $ 19.5
======= ======= ======= =======
Basic and diluted earnings (loss) attributable to
common shares per share ....................................... $ (0.17) $ 0.09 $ (0.17) $ 0.20
======= ======= ======= =======
Weighted average number of shares outstanding
Basic ......................................................... 102.6 102.9 102.7 97.1
======= ======= ======= =======
Diluted ....................................................... 104.4 105.7 105.2 102.3
======= ======= ======= =======
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- --------------------------
1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
PRODUCTION
Crude oil and liquids (MBbls/day)
Domestic ....................................... 21.1 21.6 21.4 21.0
Argentina ...................................... 5.2 5.4 5.4 4.8
Indonesia ...................................... 13.9 4.2 11.3 3.8
Gabon .......................................... 1.9 -- 1.6 --
------- ------- ------- -------
Total .......................................... 42.1 31.2 39.7 29.6
Natural Gas (MMcf/day)
Domestic ....................................... 156.2 158.2 154.8 154.5
Argentina ...................................... 26.7 20.0 26.0 20.5
Indonesia ...................................... 0.2 0.3 0.3 0.3
------- ------- ------- -------
Total .......................................... 183.1 178.5 181.1 175.3
AVERAGE PRICES
Crude oil and liquids ($/Bbl)
Actual (unhedged) .............................. $ 11.54 $ 16.79 $ 12.04 $ 18.07
Realized (hedged) .............................. 11.89 16.90 12.27 18.32
Natural gas ($/Mcf) .............................. $ 1.87 $ 2.04 $ 1.92 $ 2.15
Costs and Expenses (In dollars per BOE)
Production and operating (a) ..................... $ 4.47 $ 4.01(d) $ 4.26 $ 3.94(d)
Exploration, including dry hole costs ............ 3.54 1.75(d)(e) 2.26 1.77(d)(e)
Depletion, depreciation and amortization ......... 5.56 4.92 5.17 4.84
General and administrative ....................... 0.75 0.85(d)(e) 0.74 0.89(d)(e)(f)
Taxes, other than income (b) ..................... 0.59 0.56 0.65 0.70
Interest expense, net (c) ........................ 0.55 0.23 0.45(g) 0.22
</TABLE>
a) Excludes related production, severance and ad valorem taxes.
b) Includes related production, severance and ad valorem taxes.
c) Reflects interest expense less amounts capitalized and interest income.
d) Excludes effect of $1.3 million general and administrative, $0.3 million
production and operating and $0.4 million exploration costs and expenses
($0.36 per BOE and $0.12 per BOE for the three and nine months ended
September 30, 1997, respectively) related to a pension curtailment benefit
from the Spin Off of Monterey.
e) Excludes effect of $0.5 million general and administrative and $0.1 million
exploration costs and expenses ($0.11 per BOE and $0.04 per BOE for the three
and nine months ended September 30, 1997, respectively) related to
compensation expenses resulting from the Spin Off of Monterey.
f) Excludes effect of $1.1 million in administrative costs related to the Spin
Off of Monterey ($0.07 per BOE for the nine months ended September 30, 1997).
g) Excludes effect of $2.6 million ($0.14 per BOE for the nine months ended
September 30, 1998) of interest income on an anticipated income tax refund.
GENERAL
As an independent oil and gas producer, the Company's results of
operations are dependent upon the difference between the prices received for oil
and gas and the costs of finding and producing such resources. Crude oil prices
are subject to significant changes in response to fluctuations in the domestic
and world supply and demand and other market conditions as well as the world
political situation as it affects OPEC, the Middle East and other producing
countries. For the twelve months ended September 30, 1998 the actual average
crude oil and liquids sales price (unhedged) received by the Company ranged from
a high of $17.15 per barrel in the fourth quarter of 1997 to a low of $11.54 per
barrel in the third quarter of 1998. The Company's average crude oil and liquids
sales price (unhedged) received in October 1998 was $11.76 per barrel. Based on
operating results for the first nine months of 1998, the Company estimates that
on an annualized basis a $1.00 per barrel increase or decrease in its average
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crude oil sales price would result in a corresponding $9.3 million change in net
income and a $10.7 million change in cash flow from operating activities. The
price of domestic natural gas fluctuates due to weather conditions, the level of
natural gas in storage, the relative balance between supply and demand and other
economic factors. With regard to the Company's Argentina operations, the Company
sells its natural gas production under long-term contracts at prices ranging
from $1.15 to $1.35 per MMbtu. The actual average sales price received by the
Company for the twelve months ended September 30, 1998 for its domestic natural
gas ranged from a high of $2.54 per Mcf in the fourth quarter of 1997 to a low
of $1.87 per Mcf in the third quarter of 1998. The Company's average natural gas
price received in October 1998 was $1.75 per Mcf. Based on operating results for
the first nine months of 1998, the Company estimates that on an annualized basis
a $0.10 per Mcf increase or decrease in its average natural gas sales price
would result in a corresponding $3.9 million change in net income and a $4.8
million change in cash flow from operating activities. The foregoing estimates
do not give effect to changes in any other factors, such as the effect of the
Company's oil hedging program, its debt levels and related interest expense or
the level of capital expenditures, that might result from a change in crude oil
and natural gas prices.
The Company continued its international expansion in July 1998 by signing
a Production Sharing Contract with Petroliam Nasional Berhad (Petronas), the
state oil company of Malaysia, for offshore Block PM 308 which is located along
the east coast of the Malaysian peninsula. The Company is the operator and has
an 80% working interest. In addition to the exploration opportunities on the
block, the Company and Petronas have the right to develop the Rhu Field, a
potentially commercial 1992 discovery on the block. The Rhu Field discovery
requires additional appraisal work to determine commerciality, and the Company
and Petronas will drill at least one additional well and utilize the latest
technology in an effort to bring the field on production.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1997
The Company reported a loss to common shares for the three months ended
September 30, 1998 of $17.8 million, or $0.17 per share, compared with earnings
to common shares of $9.0 million, or $0.09 per share, for the same period in
1997 on a pro forma basis excluding Monterey.
OIL AND GAS REVENUES. Revenues from crude oil and natural gas operations
were $75.9 million for the three months ended September 30, 1998 compared with
$80.1 million for the same period in 1997, as increased production was more than
offset by lower commodity prices. The Company's crude oil and liquids production
increased 35% in the third quarter of 1998 to 42.1 MBbls per day from 31.2 MBbls
per day for the same period in 1997. The increase in oil production was driven
primarily by new production from the Mudi, N. Geragai and Makmur fields in
Indonesia and the Tchatamba field in Gabon, augmented by the acquisition of an
additional working interest in the Tuban Production Sharing Contract in
Indonesia. Natural gas production increased in the third quarter of 1998 to
183.1 MMcf per day from 178.5 MMcf per day for the same period in 1997.
Gas production from new wells in the Gulf of Mexico and Argentina more than
offset the loss of production from property sales and weather-related
disruptions in the Gulf. The Company's realized crude oil prices for the three
months ended September 30, 1998 averaged $11.89 per barrel, including a $0.35
per barrel hedging benefit, a decrease of 30% from the average realized oil
price of $16.90 per barrel, including a $0.29 per barrel hedging benefit, for
the same period in 1997. Realized natural gas prices for the three months ended
September 30, 1998 averaged $1.87 per Mcf, compared with an average of $2.04 per
Mcf for the same period in 1997.
COSTS AND EXPENSES. Production and operating expense and depletion,
depreciation and amortization expense increased $7.7 million and $9.5 million,
respectively, for the three months ended September 30, 1998 compared with the
same period in 1997, primarily due to increased crude oil and natural gas
production as noted above. Exploration expense for the three months ended
September 30, 1998 increased to $23.7 million from $9.5 million for the same
period in 1997, due primarily to seismic programs in China and Gabon combined
with dry hole costs in Ecuador and China. General and administrative expense for
the third quarter of 1998 was $1.2 million higher compared to the same period in
1997 due to a $1.3 million pension curtailment benefit in the third quarter of
1997 related to the Spin Off.
Interest expense for the third quarter of 1998 increased by $3.1 million
to $6.1 million compared with the same period in 1997, reflecting an increase in
borrowings.
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NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997
The Company reported a loss to common shares for the nine months ended
September 30, 1998 of $17.7 million, $0.17 per share, compared with earnings to
common shares of $19.5 million, or $0.20 per share, for the same period in 1997
on a pro forma basis excluding Monterey.
OIL AND GAS REVENUES. Revenues from crude oil and natural gas operations
decreased to $222.5 million for the nine months ended September 30, 1998 from
$244.3 million for the same period in 1997, due to lower realized prices,
partially offset by increased production. The Company's crude oil and liquids
production increased by approximately 34% in the first nine months of 1998 to
39.7 MBbls per day from 29.6 MBbls per day for the same period in 1997, due to
new production from the Mudi, N. Geragai and Makmur fields in Indonesia and the
Tchatamba field in Gabon, augmented by the acquisition of an additional working
interest in the Tuban Production Sharing Contract in Indonesia and the purchase
of an interest in the Tupungato field in Argentina. Natural gas production
increased in the first nine months of 1998 to 181.1 MMcf per day compared with
175.3 MMcf per day for the same period in 1997. Gas production from new wells in
the Permian Basin, Gulf of Mexico and Argentina more than offset the loss of
production from property sales and weather-related disruptions in the Gulf of
Mexico. The Company's realized crude oil prices for the nine months ended
September 30, 1998 averaged $12.27 per barrel, including a $0.23 per barrel
hedging benefit, compared with the average realized oil price of $18.32 per
barrel, including a $0.25 per barrel hedging benefit, for the same period in
1997. Realized natural gas prices for the nine months ended September 30, 1998
averaged $1.92 per Mcf, compared with an average of $2.15 per Mcf for the same
period in 1997.
COSTS AND EXPENSES. Production and operating expense and depletion,
depreciation and amortization expense increased $18.3 million and $20.9 million,
respectively, for the nine months ended September 30, 1998 compared with the
same period in 1997, primarily due to increased crude oil and natural gas
production as noted above. Exploration expense for the nine months ended
September 30, 1998 increased to $43.2 million from $28.1 million for the same
period in 1997. This increase was due primarily to seismic programs in China and
Gabon combined with dry hole costs in Ecuador and China.
Interest income for the nine months ended September 30, 1998 included a
$2.6 million benefit related to an anticipated income tax refund. Interest
expense for the first nine months of 1998 increased by $6.3 million compared
with the same period in 1997, reflecting an increase in borrowings between the
comparative periods. Income taxes for the nine months ended September 30, 1998
included a $2.4 million benefit related to the previously discussed income tax
refund and a $1.7 million benefit due to the resolution of prior year tax
matters. The decrease in the Company's preferred dividend requirement in the
first nine months of 1998 is due to the May 1997 conversion of all of the
Company's outstanding preferred stock.
The decrease in other assets from $26.4 million at December 31, 1997 to
$11.9 million at September 30, 1998 reflects a $16.2 million decrease in
escrowed funds related to producing property acquisitions completed by the
Company in the first nine months of 1998. Accounts payable decreased $28.5
million at September 30, 1998 to $78.2 million, primarily due to the timing of
payments.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES. The Company's primary needs for cash are for
exploration, development and acquisitions of oil and gas properties. The Company
spent $259.6 million for capital expenditures in the nine months ended September
30, 1998, including $100.0 million for acquisitions, and expects to spend
approximately $300.0 million in 1998. Because the actual amounts expended in the
future for capital expenditures will be influenced by numerous factors some of
wich are beyond the Company's control, no assurances can be given as to the
amount that will actually be expended during the year. In addition, the Board of
Directors has authorized the Company to buy back from time to time up to $50
million of its common stock to meet the requirements of outstanding stock
options and to satisfy the stock requirements of employee benefit plans. During
the nine months ended September 30, 1998, the Company spent $10.2 million to
purchase 1.1 million shares of its common stock. The timing and amount of such
purchases in the future will depend upon a number of factors including the
covenants under the Company's debt agreement discussed below.
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CAPITAL RESOURCES. The Company's capital resources for the nine months
ended September 30, 1998 consisted of cash flow from operating activities of
$90.3 million, proceeds from property sales of $1.8 million and $184.5 million
in borrowings under its bank credit facilities. Effective October 19, 1998, the
Company amended its revolving credit agreement (the "Credit Agreement") which
matures May 15, 2003. Subject to the covenants described below, the agreement
permits the Company to obtain revolving credit loans and issue letters of credit
having a maximum aggregate amount of $335 million of which $30.0 million is
available for letters of credit. Borrowings under the agreement are unsecured
and interest rates are tied to the agent bank's prime rate or eurodollar
offering rate, at the Company's option. At September 30, 1998, the Company had
$195.0 million in borrowings outstanding under the Credit Agreement, which were
classified as long-term debt on the balance sheet since the Company has the
ability and intends to refinance such amount on a long-term basis. The Company
had two letters of credit outstanding under the Credit Agreement at September
30, 1998 for $22.4 million and one letter of credit outside the Credit Agreement
for $1.8 million.
The Credit Agreement and the indenture for the Debentures include
covenants that restrict the Company's ability to take certain actions, including
the ability to incur additional indebtedness and to pay dividends or repurchase
capital stock. Under the most restrictive of these covenants, at September 30,
1998 the Company could incur approximately $250 million of additional
indebtedness of which $80 million could be borrowings under the Credit Agreement
and other senior debt. As of September 30, 1998, these covenants also restrict
the payment of dividends or the repurchase of capital stock to an incremental
$31.5 million.
In addition to the Credit Agreement, the Company also has three short-term
uncommitted lines of credit totalling $60.0 million which are used to meet
short-term cash needs. As of September 30, 1998, the Credit Agreement limits the
amounts borrowed under the uncommitted lines to $50.0 million. Interest rates on
borrowings under these lines of credit are typically lower than rates paid under
the Credit Agreement. At September 30, 1998, the Company had $11.7 million in
borrowings outstanding under these facilities, which were classified as
long-term debt on the balance sheet since the Company has the ability and
intends to refinance such amount on a long-term basis.
The Company has historically funded its operations and capital spending
programs with cash flow from operations and borrowings under bank credit
facilities. The Company believes that cash flow from operations and the
borrowing availability under the Credit Agreement and from other capital markets
will be sufficient to meet its anticipated capital requirements for 1998.
INDONESIA. In the last quarter of 1997 and in 1998 many Asian countries
experienced significant devaluation in their currencies, which has resulted in
disruptions and uncertainties in financial markets. During the same period world
commodity prices have fallen, including the price of crude oil, in part due to
uncertainties about the strength of some Asian economies. The Company's Asian
producing operations are located in Indonesia, which has suffered substantial
devaluation of its currency and some civil unrest.
The effect of this currency devaluation has been to reduce certain
operating and administrative costs incurred by the Company in its Indonesian
operations, thus reducing the number of cost recovery barrels it retains in
reimbursement of such expenses, and to reduce the value of certain receivables
and payables which are denominated in the local currency, the rupiah. In
addition, the Company has experienced delays in collecting some receivables. As
of October 31, 1998 the Company's accounts receivable included $3.3 million of
past due receivables (net to the Company's interest) from the Indonesian state
oil agency. The Company has experienced disruptions in the delivery of some
services and goods, which has led to minor delays in certain operations and
associated production.
The Company sells its Indonesian production for U.S. dollars generally
outside of Indonesia. The Company currently sells its production from the Jabung
Block to the Indonesian state oil agency for U.S. dollars. For the nine months
ended September 30, 1998, the Jabung Block produced 2.4 MBbls per day net to the
Company. The Company has applied for a license to export crude oil from these
fields. The Company's Indonesian operations generated $8.7 million of income
from operations and $22.0 million in cash flow from operating activities for the
nine months ended September 30, 1998.
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While the financial uncertainties in Asia and civil unrest in Indonesia
have not had a significant effect on the Company's operations in Indonesia to
date, the Company cannot predict the future effects of disruptions, if any, on
its income from Indonesian operations and future development activity in
Indonesia.
CONSOLIDATED RESULTS, INCLUDING MONTEREY
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1997
On a consolidated basis the Company reported total revenues of $75.9
million, total costs and expenses of $99.8 million and a loss to common shares
of $17.8 million or $0.17 per share for the three months ended September 30,
1998 compared with total revenues of $101.8 million, total costs and expenses of
$81.0 million and earnings to common shares of $10.7 million or $0.10 per share
for the same period in 1997. Such 1997 results reflect the consolidation of
Monterey Resources for the first month of the third quarter.
OIL AND GAS REVENUES. Total revenues from crude oil and natural gas
produced decreased to $75.9 million in the three months ended September 30, 1998
from $101.0 million for the same period in 1997. The decrease is due to the
contribution of Monterey for the first month of the third quarter in 1997
combined with lower realized prices in the third quarter of 1998. Crude oil
prices realized for the three months ended September 30, 1998 averaged $11.89
per barrel, including a $0.35 per barrel hedging benefit, compared with the same
period in 1997 when the average realized oil price was $15.70 per barrel,
including a $0.12 per barrel hedging benefit. Natural gas prices realized for
the three months ended September 30, 1998 averaged $1.87 per Mcf, compared with
an average of $2.03 per Mcf in the 1997 period.
COSTS AND EXPENSES. Total costs and expenses increased to $99.8 million in
the third quarter of 1998 from $81.0 million for the same period in 1997. The
increase is due primarily to an increase in dry hole expense in the
International Division and higher depletion, depreciation and amortization
expense related to increased crude oil and natural gas production in the third
quarter of 1998 from properties not conveyed to Monterey.
Interest expense increased by $1.0 million due to increased borrowings in
the third quarter of 1998, partially offset by the elimination of Monterey's
debt for which interest expense was included for the first month of the third
quarter in 1997.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1997
On a consolidated basis the Company reported total revenues of $222.5
million, total costs and expenses of $250.9 million and a loss to common shares
of $17.7 million or $0.17 per share for the nine months ended September 30, 1998
compared with total revenues of $425.5 million, total costs and expenses of
$321.7 million and earnings to common shares of $39.0 million or $0.40 per share
for the same period in 1997. Such 1997 results reflect the consolidation of
Monterey Resources for the first seven months of the nine month period.
OIL AND GAS REVENUES. Total revenues from crude oil and natural gas
produced decreased to $222.1 million in the nine months ended September 30, 1998
from $404.6 million for the same period in 1997. The decrease is due to the
contribution of Monterey for the first seven months of the nine month period in
1997 combined with lower realized prices in the first nine months of 1998. Crude
oil prices realized for the nine months ended September 30, 1998 averaged $12.27
per barrel, including a $0.23 per barrel hedging benefit, compared with the same
period in 1997 when the average realized oil price was $16.47 per barrel,
including an $0.11 per barrel hedging benefit. Natural gas prices realized for
the nine months ended September 30, 1998 averaged $1.92 per Mcf, compared with
an average of $2.14 per Mcf in the 1997 period.
COSTS AND EXPENSES. Total costs and expenses decreased to $250.9 million
in the first nine months of 1998 from $321.7 million in 1997. The decrease is
due to the Spin Off of Monterey ($131.0 million), as discussed above, partially
offset by an increase in production and operating expense and depletion,
depreciation and amortization expense from the increase in production in the
first nine months of 1998 from properties not conveyed to Monterey.
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Interest income for the nine months ended September 30, 1998 included a
$2.6 million benefit related to an anticipated income tax refund. Interest
expense decreased by $5.4 million due to the elimination of Monterey's debt for
which interest expense was included for the first seven months of the nine month
period in 1997, which was partially offset by increased borrowings in the first
nine months of 1998. Income taxes for the nine month period in 1998 included a
$2.4 million benefit related to the previously discussed income tax refund and a
$1.7 million benefit due to the resolution of prior year tax matters. The
decrease in the Company's preferred dividend requirement in the first nine
months of 1998 is due to the 1997 conversion of all of the Company's outstanding
preferred stock.
YEAR 2000
The risks associated with the Year 2000 problem are the results of
computer technology utilizing two digits rather than four to define a specific
year. Absent corrective actions, a computer program or embedded chip that is
date sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in system failures or miscalculations causing
disruptions to various activities and operations.
The Company has developed a plan to identify those risks related to the
Year 2000 problem, to remediate systems and equipment where required and to test
for Year 2000 compliance. The Company has identified all critical computer
systems and determined the remediation that will be performed. The Company has
already made the required modifications to its domestic accounting system, will
complete the modifications to its Indonesian accounting system in the first
quarter of 1999 and is still analyzing its Argentina accounting system. The
Company has engaged an outside consulting firm to assist in reviewing field
equipment used in its oil and gas producing operations for Year 2000 issues. The
Company expects to complete all remediation of critical systems by June 30, 1999
and to test all of these systems in 1999. The Company recognizes that,
notwithstanding the efforts described above, the Company could experience
disruptions to its operations or administrative functions, including those
resulting from non-compliant systems utilized by unrelated third party
governmental and business entities. The Company is in the process of developing
a business contingency plan in order to mitigate potential disruption to
business operations. The Company expects to complete this contingency plan by
the second quarter of 1999 but also expects to refine this plan throughout 1999.
With regard to risks relating to third parties, the Company has implemented a
program to request Year 2000 certification or other assurance from its
significant customers, transporters, partners and suppliers.
The Company has reviewed and evaluated its most reasonably likely worst
case scenario with regard to the Year 2000. Management believes that it is
taking every reasonable precaution to detect, remediate and test all critical
computer systems and equipment. Management believes that the most reasonably
likely worst case scenario would involve failure of production equipment in the
field, which would result in disruption of those operations affected until the
problem is solved and possibly expose the Company to contractual penalties and
other liabilities.
Through September 30, 1998 the Company has spent $0.2 million for
identifying, remediating and testing systems for Year 2000 related problems. The
Company currently estimates that its Year 2000 related costs will be between
$1.0 million and $2.0 million, but this estimate may change as a result of the
review of the equipment used in its oil and gas producing operations.
FORWARD-LOOKING STATEMENTS
In its discussion and analysis of financial condition and results of
operations and elsewhere herein, the Company has included certain statements
(other than statements of historical fact) that constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. When used herein, the words
"budget," "budgeted," "anticipates," "expects," "believes," "seeks," "goals,"
"intends" or "projects" and similar expressions are intended to identify
forward-looking statements. It is important to note that the Company's actual
results could differ materially from those projected by such forward-looking
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable and such forward-looking
statements are based upon the best data available at the time
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this report is filed with the Securities and Exchange Commission, no assurance
can be given that such expectations will prove correct. Factors that could cause
the Company's results to differ materially from the results discussed in such
forward-looking statements include, but are not limited to, the following:
production variances from expectations, volatility of oil and gas prices,
hedging results, the need to develop and replace its reserves, the substantial
capital expenditures required to fund its operations, exploration and
development risks, environmental risks, uncertainties about estimates of
reserves, competition, government regulation and political and litigation risks,
uncertanties associated with the Year 2000 issue, and the ability of the Company
to implement its business strategy. All such forward-looking statements in this
document are expressly qualified in their entirety by the cautionary statements
in this paragraph.
16
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PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4 & 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
*3(a) Bylaws, as amended September 1, 1998.
*10(a) Agreement and Third Amendment to Credit Agreement dated as of
October 19, 1998 among Santa Fe Energy Resources, Inc., the banks
signatory thereto, and Chase Bank of Texas, N.A., as
Administrative Agent and ABN AMRO Bank, N.V., Bank of America
National Trust and Savings Association, NationsBank, N.A., Wells
Fargo Bank (Texas), N.A. and First National Bank of Chicago as
Co-Agents.
---------
* Filed herewith
(b) Reports on Form 8-K
None
17
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SIGNATURE
Pursuant to the requirements Section 13 or 15 (d) of the Securities Exchange Act
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on the 12th day of November, 1998.
SANTA FE ENERGY RESOURCES, INC.
(Registrant)
Date: NOVEMBER 12, 1998 /S/ JANET F. CLARK
Janet F. Clark, Senior Vice
President, Chief Financial
Officer and Treasurer
(Principal Financial Officer
and Duly Authorized Officer)
18
EXHIBIT 3(a)
As amended by the Board of Directors on
April 20, 1990, February 26, 1993, February 23, and September 1, 1998
SANTA FE ENERGY RESOURCES, INC.
BYLAWS
ARTICLE I
OFFICES
SECTION 1.1 PRINCIPAL OFFICE. The principal office of the
Corporation shall be in the City of Houston, Texas.
SECTION 1.2 REGISTERED OFFICE. The registered office and registered
agent of the Corporation required to be maintained in the State of Delaware by
the General Corporation Law of the State of Delaware shall be as designated from
time to time by the appropriate filing by the Corporation in the office of the
Secretary of State of the State of Delaware.
SECTION 1.3 OTHER OFFICES. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 2.1 ANNUAL MEETING. The annual meeting of the holders of
shares of each class or series of stock as are entitled to notice thereof and to
vote thereat pursuant to applicable law and the Certificate of Incorporation for
the purpose of electing directors and transacting such other proper business as
may come before it shall be held in each year, at such time, on such day and at
such place, within or without the State of Delaware, as may be designated by the
Board of Directors.
<PAGE>
SECTION 2.2 SPECIAL MEETINGS. In addition to such special meetings
as are provided by law or the Certificate of Incorporation, special meetings of
the holders of any class or series or of all classes or series of the
Corporation's stock for any purpose or purposes, may be called at any time by
the Board of Directors and may he held on such day, at such time and at such
place, within or without the State of Delaware, as shall be designated by the
Board of Directors. Stockholders of the Corporation may not call a special
meeting.
SECTION 2.3 NOTICE OF MEETINGS AND ADJOURNED MEETINGS. Except as
otherwise provided by law, written notice of any meeting of Stockholders shall
be given either by personal delivery or by mail to each Stockholder of record
entitled to vote thereat. Notice of each meeting shall be in such form as is
approved by the Board of Directors and shall state the date, place and hour of
the meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by law, such written
notice shall be given not less than 10 nor more than 60 days before the date of
the meeting. Except when a Stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or convened,
presence in person or by proxy of a Stockholder shall constitute a waiver of
notice of such meeting. Further, a written waiver of any notice required by law
or by these Bylaws, signed by the person entitled to notice, whether before or
after the time stated therein, shall be deemed equivalent to notice. Except as
otherwise provided by law, the business that may be transacted at any such
meeting shall be limited to and consist of the purpose or purposes stated in
such notice. If a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken; provided, however, that if the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each Stockholder of record entitled to vote at the meeting.
SECTION 2.4 VOTING LISTS. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least 10 days
before each meeting of the Stockholders, a complete list of Stockholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of each and the number of shares held by
each, which list, for a period of 10 days prior to such meeting, shall be kept
on file at a place
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within the city where the meeting is to he held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to he held, and such list shall be subject to inspection by any
Stockholders at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any Stockholder for the duration of the meeting. The
original stock transfer books shall he prima facie evidence as to who are the
Stockholders entitled to examine such list or transfer books or to vote at any
meeting of Stockholders.
SECTION 2.5 QUORUM. The holders of at least a majority of the shares
issued and outstanding and entitled to vote thereat, present at a meeting, shall
constitute a quorum at all meetings of stockholders for the transaction of
business, except as otherwise provided by law or by the Certificate of
Incorporation. If, however, such quorum shall not be present at any meeting of
the stockholders, the Chairman or the stockholders entitled to vote thereat and
present at the meeting, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting unless the
adjournment is for more than 30 days or if after the adjournment a new record
date is fixed for the adjourned meeting, until a quorum shall be present. A
holder of a share shall be treated as being present at a meeting if the holder
of such share is (i) present in person at the meeting or (ii) represented at the
meeting by a valid proxy, whether the instrument granting such proxy is marked
as casting a vote or abstaining, is left blank or does not empower such proxy to
vote with respect to some or all matters to he voted upon at the meeting.
SECTION 2.6 ORGANIZATION. Meetings of the Stockholders shall be
presided over by the Chairman of the Board of Directors, if one shall be
elected, or in his absence, by the Chief Executive Officer, the President or by
any Vice President, or in the absence of any of such officers, by a chairman to
be chosen by a majority of the Stockholders entitled to vote at the meeting who
are present in person or by proxy. The Secretary, or, in his absence, any
Assistant Secretary or any person appointed by the individual presiding over the
meeting, shall act as secretary at meetings of the Stockholders.
SECTION 2.7 VOTING. Each Stockholder of record, as determined
pursuant to Section 2.8, who is entitled to vote in accordance with the terms of
the Certificate of Incorporation and in accordance with the provisions of these
Bylaws, shall he entitled to one
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vote, in person or by proxy, for each share of stock registered in his name on
the books of the Corporation. Every Stockholder entitled to vote at any
Stockholders' meeting may authorize another person or persons to act for him by
proxy duly appointed by instrument in writing subscribed by such Stockholder and
executed not more than three years prior to the meeting, unless the proxy
provides for a longer period. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only so long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A Stockholder's
attendance at any meeting, when such Stockholder who may have theretofore given
a proxy, shall not have the effect of revoking such proxy unless such
Stockholder shall in writing so notify the Secretary of the meeting prior to the
voting of the proxy. Unless otherwise provided by law, no vote on the election
of directors or any question brought before the meeting need be by ballot unless
the chairman of the meeting shall determine that it shall be by ballot or the
holders of a majority of the shares of stock present in person or by proxy and
entitled to participate in such vote shall so demand. In a vote by ballot, each
ballot shall state the number of shares voted and the name of the Stockholder or
proxy voting. Action on a matter (other than the election of directors) shall be
approved if the votes cast in favor of the matter exceed the vote's cast
opposing the matter. Directors shall be elected by a plurality of the votes cast
by the shares entitled to vote in the election at a meeting at which a quorum is
present. In the election of directors, votes may not be cumulated. In
determining the number of votes cast, shares abstaining from voting or not voted
on a matter (including elections) will not he treated as votes cast. The
provisions of this paragraph will govern with respect to all votes of
stockholders except as otherwise provided for in these Bylaws or in the
Certificate of Incorporation or by some specific statutory provision superseding
the provisions contained in these Bylaws or the Certificate of Incorporation.
SECTION 2.8 STOCKHOLDERS ENTITLED TO VOTE. The Board of Directors
may fix a date not more than 60 days nor less than 10 days prior to the date of
any meeting of Stockholders as a record date for the determination of the
Stockholders entitled to notice of and to vote at such meeting and any
adjournment thereof, and in such case such Stockholders and only such
Stockholders as shall be Stockholders of record on the date so fixed shall be
entitled to notice of and to vote at, such meeting and any adjournment thereof
notwithstanding any transfer of any stock on the books of the Corporation after
such record date fixed as aforesaid.
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SECTION 2.9 ORDER OF BUSINESS. The order of business at all meetings
of Stockholders shall be as determined by the chairman of the meeting or as is
otherwise determined by the vote of the holders of a majority of the shares of
stock present in person or by proxy and entitled to vote without regard to class
or series at the meeting.
SECTION 2.10 ACTION BY WRITTEN CONSENT. No action required or
permitted to be taken by the Stockholders shall be taken except at an annual or
special meeting with prior notice and a vote. No action may be taken by the
Stockholders by written consent.
SECTION 2.11 NOTICE OF STOCKHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section 2.11 shall
be eligible for election as directors of the Corporation. Nominations of persons
for election to the Board of Directors of the Corporation may be made at a
meeting of the Corporation's stockholders (a) by or at the direction of the
Board of Directors or (b) by any stockholder of the Corporation entitled to vote
for the election of directors at such meeting who complies with the procedures
set forth in this Section 2.11. All nominations by stockholders shall be made
pursuant to timely notice in proper written form to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 90 days nor more than 120 days prior to the meeting; provided,
however, that if less than 100 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so received not later than the close of business on the
l0th day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. To be in proper written form, such
stockholder's notice to the Secretary shall set forth in writing (a) as to each
person whom such stockholder proposes to nominate for election or reelection as
a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended; including, without limitation, such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected; and (b) as to such stockholder (i) the name and address, as
they appear on the Corporation's books, of such stockholder and (ii) the class
and number of shares of the Corporation's capital stock that are beneficially
owned by such stockholder. At the request of the Board of Directors, any person
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nominated by the Board of Directors for election as a director shall furnish to
the Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director unless nominated in accordance with
the procedures set forth in these Bylaws of the Corporation. The chairman of the
stockholders' meeting shall, if the facts warrant, determine and declare to the
meeting that a nomination was not made in accordance with the procedures
prescribed by these Bylaws of the Corporation, and if he shall so determine, he
shall announce such determination to the meeting and the defective nomination
shall be disregarded.
SECTION 2.12 STOCKHOLDER PROPOSALS. At any special meeting of the
Corporation's stockholders, only such business shall be conducted as shall have
been brought before the meeting by or at the direction of the Board of
Directors. At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting (a) by or at the
direction of the Board of Directors or (b) by any stockholder who complies with
the procedures set forth in this Section 2.12. For business properly to be
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in proper written form to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
120 days from the date of the release of the Corporation's proxy statement
relating to the prior year's annual meeting of stockholders; provided, however,
in the event no annual meeting was held in the prior year or if the current
year's annual meeting shall be held more than 30 days prior to or after the date
of the previous year's annual meeting a stockholder's notice shall be timely if
received by the Corporation not later than the close of business on the 10th day
following the day on which such notice of the date of the Corporation's annual
meeting was mailed or public disclosure was made. To be in proper written form,
such stockholder's notice to the Secretary shall set forth in writing as to each
matter such stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of such stockholder, (c) the
class and number of shares of the Corporation's stock which are beneficially
owned by such stockholder and (d) any material interest of such stockholder in
such business. Notwithstanding anything in
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these Bylaws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 2.12.
The chairman of an annual stockholder's meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 2.12, and,
if he should so determine, he shall so announce such determination to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
SECTION 2.13. DISCRETIONARY VOTING AUTHORITY ON PROXIES. To the
extent permitted in accordance with the Delaware General Corporation Law and
applicable securities laws proxies solicited by the Corporation in connection
with any annual or special meeting of stockholders may confer discretionary
authority to vote on any matters not timely known by the Corporation prior to
such meeting or, if so timely known, provided that the Corporation otherwise
complies with the requirements of securities laws applicable to discretionary
voting on such matter. The Corporation shall be deemed to have received timely
notice of a stockholder proposal to be presented at a stockholders' meeting if
the stockholder shall have furnished notice to the Corporation in accordance
with the requirements of Section 2.12 of these Bylaws and such stockholder
complies with the other applicable requirements of the securities laws.
ARTICLE III
DIRECTORS
SECTION 3.1 MANAGEMENT. The property, affairs and business of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all powers of the Corporation and do all lawful acts and
things as are not by law, by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the Stockholders.
SECTION 3.2 NUMBER AND TERM. The number of directors may be fixed
from time to time by resolution of the Board of Directors adopted by the
affirmative vote of a majority of the members of the entire Board of Directors,
but shall consist of not less than three nor more than 15 members, one-third of
whom shall be elected each year by the Stockholders except as provided in
Section 3.4. Directors need not be Stockholders. No decrease in the number of
directors shall have the effect of shortening the term of office of any
incumbent director.
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SECTION 3.3 QUORUM AND MANNER OF ACTION. At all meetings of the
Board of Directors a majority of the total number of directors holding office
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law, by the Certificate of Incorporation or these
Bylaws. When the Board of Directors consists of one director, the one director
shall constitute a majority and a quorum. If at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting from time to time until a quorum is obtained, and no
further notice thereof need be given other than by announcement at such
adjourned meeting. Attendance by a director at a meeting shall constitute a
waiver of notice of such meeting except where a director attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened
SECTION 3.4 VACANCIES. Except as otherwise provided by law and the
Certificate of Incorporation, in the case of any increase in the authorized
number of directors or of any vacancy in the Board of Directors, however
created, the additional director or directors may be elected, or, as the case
may be, the vacancy or vacancies may he filled by majority vote of the directors
remaining on the whole Board of Directors although less than a quorum, or by a
sole remaining director. In the event one or more directors shall resign,
effective at a future date, such vacancy or vacancies shall be filled by a
majority of the directors who will remain on the whole Board of Directors,
although less than a quorum, or by a sole remaining director. Any director
elected or chosen as provided herein shall serve until the sooner of (i) the
unexpired term of the directorship to which be is appointed or (ii) until his
successor is elected and qualified; or (iii) until his earlier resignation or
removal.
SECTION 3.5 RESIGNATIONS. A director may resign at any time upon
written notice of resignation to the Corporation. Any resignation shall be
effective immediately unless a certain effective date is specified therein, in
which event it will be effective upon such date and acceptance of any
resignation shall not be necessary to make it effective.
SECTION 3.6 REMOVALS. Any director or the entire Board of Directors
may be removed only for cause, and another person or persons may be elected to
serve for the remainder
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of his or their term, by the holders of a majority of
the shares of the Corporation entitled to vote in the election of directors.
Stockholders may not remove any director without cause. In case any vacancy so
created shall not be filled by the Stockholders at such meeting, such vacancy
may be filled by the directors as provided in Section 3.4
SECTION 3.7 ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held, if a quorum be present, immediately following each
annual meeting of the Stockholders at the place such meeting of Stockholders
took place, for the purpose of organization and transaction of any other
business that might be transacted at a regular meeting thereof, and no notice of
such meeting shall be necessary. If a quorum is not present, such annual meeting
may be held at any other time or place that may be specified in a notice given
in the manner provided in Section 3.9 for special meetings of the Board of
Directors or in a waiver of notice thereof.
SECTION 3.8 REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held without notice at such places and times as shall be
determined from time to time by resolution of the Board of Directors. Except as
otherwise provided by law, any business may be transacted at any regular meeting
of the Board of Directors.
SECTION 3.9 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chief Executive Officer, the President or by the
Secretary on the written request of one-third of the members of the whole Board
of Directors stating the purpose or purposes of such meeting. Notices of special
meetings, if mailed, shall be mailed to each director not later than two days
before the day the meeting is to be held or if otherwise given in the manner
permitted by the Bylaws, not later than the day before such meeting. Neither the
business to be transacted at, nor the purpose of, any special meeting need be
specified in any notice or written waiver of notice unless so required by the
Certificate of Incorporation or by the Bylaws and, unless limited by law, the
Certificate of Incorporation or by these Bylaws, any and all business may be
transacted at a special meeting.
SECTION 3.10 ORGANIZATION OF MEETINGS. At any meeting of the Board
or Directors business shall be transacted in such order and manner as such Board
of Directors may from time to time determine, and all matters shall he
determined by the vote of a majority of the directors present at any meeting at
which there is a quorum, except as otherwise provided by
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these Bylaws or required by law
SECTION 3.11 PLACE OF MEETINGS. The Board of Directors may hold
their meetings and have one or more offices, and keep the books of the
Corporation, outside the State of Delaware, at any office or offices of the
Corporation, or at any other place as they may from time to time by resolution
determine.
SECTION 3.12 COMPENSATION OF DIRECTORS. Directors shall not receive
any stated salary for their services as directors, but by resolution of the
Board of Directors a fixed honorarium as well as fees and expenses, if any, of
attendance may be allowed for attendance at each meeting. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 3.13 ACTION BY UNANIMOUS WRITTEN CONSENT. Unless otherwise
restricted by law, the Certificate of Incorporation or these Bylaws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if prior to such action all
members of the Board of Directors or of such committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or the committee.
SECTION 3.14 PARTICIPATION IN MEETINGS BY TELEPHONE. Unless
otherwise restricted by the Certificate of Incorporation or these Bylaws,
members of the Board of Directors or of any committee thereof may participate in
a meeting of such Board of Directors or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and participation in a meeting
in such manner shall constitute presence in person at such meeting.
ARTICLE IV
COMMITTEES OF THE BOARD
SECTION 4.1 MEMBERSHIP AND AUTHORITIES. The Board of Directors may,
by resolution or resolutions passed by a majority of the whole Board of
Directors, designate one or more Directors to constitute an Executive Committee
and such other committees as the Board of
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Directors may determine, each of which committees to the extent provided in said
resolution or resolutions or in these Bylaws, shall have and may exercise all
the powers of the Board of Directors in the management of the business and
affairs of the Corporation, except in those cases where the authority of the
Board of Directors is specifically denied to the Executive Committee or such
other committee or committees by law, the Certificate of Incorporation or these
Bylaws, and may authorize the seal of the Corporation to be affixed to all
papers that may require it. The designation of an Executive Committee or other
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any members thereof, of any responsibility imposed
upon it or him by law.
SECTION 4.2 MINUTES. Each committee designated by the Board of
Directors shall keep regular minutes of its proceedings and report the same to
the Board of Directors when required.
SECTION 4.3 VACANCIES. The Board of Directors may designate one or
more of its members as alternate members of any committee who may replace any
absent or disqualified member at any meeting of such committee. If no alternate
members have been appointed, the committee member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any absent or disqualified
member. The Board of Directors shall have the power at any time to fill
vacancies in, to change the membership of, and to dissolve, any committee.
SECTION 4.4 TELEPHONE MEETINGS. Members of any committee designated
by the Board of Directors may participate in or hold a meeting by use of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this Section 4.4 shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
SECTION 4.5 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of any committee designated by the Board of Directors
may be taken without a meeting if a consent in writing, setting forth the action
so taken, is signed by all the members of
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the committee and filed with the minutes of the committee proceedings. Such
consent shall have the same force and effect as a unanimous vote at a meeting.
ARTICLE V
OFFICERS
SECTION 5.1 NUMBER AND TITLE. The elected officers of the
Corporation shall be chosen by the Board of Directors and shall be a Chief
Executive Officer, a President, a Vice President, a Secretary and a Treasurer.
The Board of Directors may also choose a Chairman of the Board, who must be a
Board member of the Board of Directors, and additional Vice Presidents,
Assistant Secretaries and/or Assistant Treasurers. One person may hold any two
or more of these offices.
SECTION 5.2 TERM OF OFFICE: VACANCIES. So far as is practicable, all
elected officers shall be elected by the Board of Directors at the annual
meeting of the Board of Directors in each year, and except as otherwise provided
in this Article V, shall hold office until the next such meeting of the Board of
Directors in the subsequent year and until their respective successors are
elected and qualified or until their earlier resignation or removal. All
appointed officers shall hold office at the pleasure of the Board of Directors.
If any vacancy shall occur in any office, the Board of Directors may elect or
appoint a successor to fill such vacancy for the remainder of the term.
SECTION 5.3 REMOVAL OF ELECTED OFFICERS. Any elected officer may be
removed at any time, with or without cause, by affirmative vote of a majority of
the whole Board of Directors, at any regular meeting or at any special meeting
called for such purpose.
SECTION 5.4 RESIGNATIONS. Any officer may resign at any time upon
written notice of resignation to the Chief Executive Officer, the President,
Secretary or Board of Directors of the Corporation. Any resignation shall be
effective immediately unless a date certain is specified for it to take effect,
in which event it shall be effective upon such date, and acceptance of any
resignation shall not be necessary to make it effective, irrespective of whether
the resignation is tendered subject to such acceptance.
SECTION 5.5 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if
one shall be elected, shall preside at all meetings of the Stockholders and
Board of Directors. In
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addition, the Chairman of the Board shall perform whatever duties and shall
exercise all powers that are given to him by the Board of Directors.
SECTION 5.6 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of
the Corporation, shall (in the absence of the Chairman of the Board, if one be
elected) preside at meetings of the Stockholders and Board of Directors; shall
be EX OFFICIO a member of all standing committees, shall have general and active
management of business of the corporation; shall implement the general
directives, plans and policies formulated by the Board of Directors; and shall
further have such duties, responsibilities and authorities as may be assigned to
him by the Board of Directors. He may sign, with any other proper officer, any
deeds, bonds, mortgages, contracts and other documents which the Board of
Directors has authorized to be executed, except where required by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the Board of Directors or these Bylaws, to some
other officer or agent of the Corporation. In the absence of the Chief Executive
Officer, his duties shall be performed and his authority may be exercised by the
President or a Vice President of the Corporation as may have been designated by
the Chief Executive Officer with the right reserved to the Board of Directors to
designate or supersede any designation so made.
SECTION 5.7 PRESIDENT AND VICE PRESIDENTS. The President and the
several Vice Presidents shall have such powers and duties as may be assigned to
them by these Bylaws and as may from time to time be assigned to them by the
Board of Directors or the Chief Executive Officer and may sign, with any other
proper officer, certificates for shares of the Corporation.
SECTION 5.8 SECRETARY. The Secretary, if available, shall attend all
meetings of the Board of Directors and all meetings of the Stockholders and
record the proceedings of the meetings in a book to be kept for that purpose and
shall perform like duties for any committee of the Board of Directors as shall
designate him to serve. He shall give, or cause to be given, notice of all
meetings of the Stockholders and meetings of the Board of Directors and
committees thereof and shall perform such other duties incident to the office of
secretary or as may be prescribed by the Board of Directors or the Chief
Executive Officer, under whose supervision he shall be. He shall have custody of
the corporate seal of the Corporation and he, or any Assistant Secretary, or any
other person whom the Board of Directors may designate, shall have authority to
affix the same to any instrument requiring it, and when so affixed it may be
attested by his
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signature or by the signature of any Assistant Secretary or by the signature of
such other person so affixing such seal.
SECTION 5.9 ASSISTANT SECRETARIES. Each Assistant Secretary shall
have the usual powers and duties pertaining to his office, together with such
other powers and duties as may be assigned to him by the Board of Directors, the
Chief Executive Officer or the Secretary. The Assistant Secretary or such other
person as may be designated by the Chief Executive Officer shall exercise the
powers of the Secretary during that officer's absence or inability to act.
SECTION 5.10 TREASURER. The Treasurer shall have the custody of and
be responsible for the corporate funds and securities, shall keep full and
accurate accounts of receipts and disbursements in the books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation and he shall perform all other duties incident to the
position of Treasurer or as may be prescribed by the Board of Directors or the
Chief Executive Officer. If required by the Board of. Directors, he shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
SECTION 5.11 ASSISTANT TREASURERS. Each Assistant Treasurer shall
have the usual powers and duties pertaining to his office, together with such
other powers and duties as may be assigned to him by the Board of Directors, the
Chief Executive Officer or the Treasurer. The Assistant Treasurer or such other
person designated by the Chief Executive Officer shall exercise the power of the
Treasurer during that officer's absence or inability to act.
SECTION 5.12 SUBORDINATE OFFICERS. The Board of Directors may (a)
appoint such other subordinate officers and agents as it shall deem necessary
who shall hold their offices
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for such terms, have such authority and perform
such duties as the Board of Directors may from time to time determine, or (b)
delegate to any committee or officer the power to appoint any such subordinate
officers or agents.
SECTION 5.13 SALARIES AND COMPENSATION. The salary or other
compensation of officers shall be fixed from time to time by the Board of
Directors. The Board of Directors may delegate to any committee or officer the
power to fix from time to time the salary or other compensation of subordinate
officers and agents appointed in accordance with the provisions of Section 5.12.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that such
person is or was, at any time, prior to or during which this Article VI is in
effect, a director, officer, employee or agent of the Corporation, or is or was,
at any time prior to or during which this Article VI is in effect, serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, other enterprise or
employee benefit plan against reasonable expenses (including attorneys' fees),
judgments, fines, penalties, amounts paid in settlement and other liabilities
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that such person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
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(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was, at any
time prior to or during which this Article VI is in effect, a director, officer,
employee or agent of the Corporation, or is or was, at any time prior to or
during which this Article VI is in effect, serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees), actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation; provided, that no
indemnification shall be made under this sub-section (b) in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Delaware Court
of Chancery, or other court of appropriate jurisdiction, shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity of such expenses which the Delaware Court of Chancery, or other court
of appropriate jurisdiction, shall deem proper.
(c) Any indemnification under sub-sections (a) or (b) (unless
ordered by the Delaware Court of Chancery or other court of appropriate
jurisdiction) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of such person is proper
in the circumstances because he has met the applicable standard of conduct set
forth in sub-sections (a) and (b). Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors not
parties such action, suit or proceeding; or (2) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel, in written opinion, selected by the Board
of Directors; or (3) by the Stockholders. In the event a determination is made
under this sub-section (c) that the director, officer, employee or agent has met
the applicable standard of conduct as to some matters but not as to others,
amounts to be indemnified may be reasonably prorated.
(d) Expenses incurred by a person who is or was a director or
officer of the
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Corporation in appearing at, participating in or defending any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, shall be paid by the Corporation at
reasonable intervals in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized by this Article VI.
(e) It is the intention of the Corporation to indemnify the persons
referred to in this Article VI to the fullest extent permitted by law and with
respect to any action, suit or proceeding arising from events which occur at any
time prior to or during which this Article VI is in effect. The indemnification
and advancement of expenses provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be or become entitled under any law, the Certificate
of Incorporation, these Bylaws, agreement, the vote of Stockholders or
disinterested directors or otherwise, or under any policy or policies of
insurance purchased and maintained by the Corporation on behalf of any such
person, both as to action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such person.
(f) The indemnification provided by this Article VI shall be
subject to all valid and applicable laws, and in the event this Article VI or
any of the provisions hereof or the indemnification contemplated hereby are
found to be inconsistent with or contrary to any such valid laws, the latter
shall be deemed to control and this Article VI shall be regarded as modified
accordingly, and, as so modified, to continue in full force and effect.
ARTICLE VII
CAPITAL STOCK
SECTION 7.1 CERTIFICATES OF STOCK. Certificates of stock shall be
issued to each Stockholder certifying the number of shares owned by him in the
Corporation and shall be in a form not inconsistent with the Certificate of
Incorporation and as approved by the Board of Directors. The certificates shall
be signed by the Chairman of the Board, the President or a Vice
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President and by the Secretary or an Assistant Secretary, or the Treasurer or an
Assistant Treasurer and may be sealed with the seal of the Corporation or a
facsimile thereof. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
If the Corporation shall be authorized to issue more than one (1)
class of stock or more than one (1) series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class or stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided by statute, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each Stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
SECTION 7.2 LOST CERTIFICATES. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the owner of such certificate, or his legal
representative. When authorizing the issuance of a new certificate, the Board of
Directors may in its discretion, as a condition precedent to the issuance
thereof, require the owner, or his legal representative, to give a bond in such
form and substance with such surety as it may direct, to indemnify the
Corporation against any claim that may be made on account of the alleged loss,
theft or destruction of such certificate or the issuance of such new
certificate.
SECTION 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD
FOR CERTAIN PURPOSES. (a) In order that the Corporation may determine the
Stockholders entitled to
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receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of capital stock or for the purpose of any other lawful action, the
Board of Directors may fix, in advance, a record date, which shall not be more
than sixty (60) days prior to the date of payment of such dividend or other
distribution or allotment of such rights or the date when any such rights in
respect of any change, conversion or exchange of stock may be exercised or the
date of such other action. In such a case, only Stockholders of record on the
date so fixed shall be entitled to receive any such dividend or other
distribution or allotment of rights or to exercise such rights or for any other
purpose, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as aforesaid.
(b) If no record date is fixed, the record date for determining
Stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
SECTION 7.4 DIVIDENDS. Subject to the provisions of the Certificate
of Incorporation, if any, and except as otherwise provided by law, the directors
may declare dividends upon the capital stock of the Corporation as and when they
deem it to be expedient. Such dividends may be paid in cash, in property or in
shares of the Corporation's capital stock. Before declaring any dividend there
may be set apart out of the funds of the Corporation available for dividends,
such sum or sums as the directors from time to time in their discretion think
proper for working capital or as a reserve fund to meet contingencies or for
equalizing dividends, or for such other purposes as the directors shall think
conducive to the interests of the Corporation and the directors may modify or
abolish any such reserve in the manner in which it was created.
SECTION 7.5 REGISTERED STOCKHOLDERS. Except as expressly provided by
law, the Certificate of Incorporation and these Bylaws, the Corporation shall be
entitled to treat registered Stockholders as the only holders and owners in fact
of the shares standing in their respective names and the Corporation shall not
be bound to recognize any equitable or other claim to or interest in such shares
on the part of any other person, regardless of whether it shall have express or
other notice thereof.
SECTION 7.6 TRANSFER OF STOCK. Transfers of shares of the capital
stock of the
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Corporation shall be made only on the books of the Corporation by the registered
owners thereof, or by their legal representatives or their duly authorized
attorneys. Upon any such transfers the old certificates shall be surrendered to
the Corporation by the delivery thereof to the person in charge of the stock
transfer books and ledgers, by whom they shall be cancelled and new certificates
shall be issued.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 8.1 CORPORATE SEAL. If one be adopted, the corporate seal
shall have inscribed thereon the name of the Corporation and shall be in such
form as may be approved by the Board of Directors. Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any manner
reproduced.
SECTION 8.2 FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
SECTION 8.3 CHECKS, DRAFTS, NOTES. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation shall be signed by such officer or officers,
agent or agents of the Corporation, and in such manner as shall from time to
time be determined by resolution (whether general or special) of the Board of
Directors or may be prescribed by any officer or officers, or any officer and
agent jointly, thereunto duly authorized by the Board of Directors.
SECTION 8.4 NOTICE AND WAIVER OF NOTICE. Whenever notice is required
to be given to any director or Stockholder under the provisions of applicable
law, the Certificate of Incorporation or of these Bylaws it shall not be
construed to only mean personal notice, rather, such notice may also be given in
writing, by mail, addressed to such director or Stockholder at his address as it
appears on the records of the Corporation, with postage thereon prepaid (unless
prior to the mailing of such notice he shall have filed with the Secretary of
the Corporation a written request that notices intended for him be mailed to
some other address in which case, such notice shall be mailed to the address
designated in the request), and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram, cable or other form of recorded
communication, by personal delivery or by telephone. Whenever notice is required
to be given under any provision of law, the Certificate of Incorporation or
these Bylaws, a waiver thereof in writing, by telegraph, cable or other form of
recorded communication, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
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purpose of objecting at the beginning of the meeting, to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice unless so required
by the Certificate of Incorporation or these Bylaws.
SECTION 8.5 EXAMINATION OF BOOKS AND RECORDS. The Board of Directors
shall determine from time to time whether, and if allowed, when and under what
conditions and regulations the accounts and books of the Corporation (except
such as may by statute be specifically opened to inspection) or any of them
shall be open to inspection by the Stockholders, and the Stockholders rights in
this respect are and shall be restricted and limited accordingly.
SECTION 8.6 VOTING UPON SHARES HELD BY THE CORPORATION. Unless
otherwise provided by law or by the Board of Directors, the Chairman of the
Board of Directors, if one shall be elected, or the President, if a Chairman of
the Board of Directors shall not be elected, acting on behalf of the
Corporation, shall have full power and authority to attend and to act and to
vote at any meeting of Stockholders of any corporation in which the Corporation
may hold stock and, at any such meeting, shall possess and may exercise any and
all of the rights and powers incident to the ownership of such stock which, as
the owner thereof, the Corporation might have possessed and exercised, if
present. The Board of Directors by resolution from time to time may confer like
powers upon any person or persons.
ARTICLE IX
AMENDMENTS
SECTION 9.1 AMENDMENT. Except as otherwise expressly provided in the
Certificate of Incorporation, the directors, by the affirmative vote of a
majority of the entire Board of Directors and without the assent or vote of the
Stockholders, may at any meeting, provided the substance of the proposed
amendment shall have been stated in the notice of the meeting, make, repeal,
alter, amend or rescind any of these Bylaws. The Stockholders shall not make,
repeal, alter, amend or rescind any of the provisions of these Bylaws except by
the holders of not less than 80% of the total voting power of all shares of
stock of the Corporation entitled to vote in the election of directors,
considered for purposes of this Article IX as one class.
21
EXHIBIT 10(a)
AGREEMENT AND THIRD AMENDMENT
TO CREDIT AGREEMENT
(October 19, 1998)
THIS AGREEMENT AND THIRD AMENDMENT TO CREDIT AGREEMENT (this "AGREEMENT"),
dated as of October 19, 1998, is made and entered into by and among SANTA FE
ENERGY RESOURCES, INC. (the "COMPANY"), a Delaware corporation; the financial
institutions listed on the signature pages hereto (collectively, the "BANKS");
and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("CHASE TEXAS"), acting in its
capacity as agent for the Banks (in such capacity, the "AGENT"). The Company,
the Banks and the Agent are herein sometimes called the "PARTIES".
RECITALS:
1. The Company, the Agent then acting, and certain of the Parties entered
into a Credit Agreement dated as of November 13, 1996, an Agreement and First
Amendment to Credit Agreement dated as of December 19, 1996, and an Agreement
and Second Amendment to Credit Agreement dated as of May 15, 1998. Such Credit
Agreement, as so amended, is herein called the "CREDIT AGREEMENT".
2. The Parties desire to adopt the Credit Agreement as their own agreement
and to amend the Credit Agreement in certain respects to increase the maximum
allowable Aggregate Commitment, to provide for additional financial institutions
to become Banks, to change the Commitments of the Banks, to revise the
definition of "Other Letters of Credit" to exclude up to $50,000,000 of letters
of credit which support performance obligations, to permit additional Total
Debt, and to make certain other changes thereto, all as more fully described
below; and to ratify, confirm and continue the Credit Agreement as so adopted
and amended.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
the Parties, the Parties agree as follows:
1. AMENDMENT AND ADOPTION OF THE CREDIT AGREEMENT. The Parties hereby
adopt and continue the Credit Agreement as their own agreement. By executing
this Agreement, each of the Parties agrees to be bound by the terms of the
Credit Agreement as hereby adopted and amended. Each of the financial
institutions executing this Agreement shall succeed to the rights of and be
obligated to perform the obligations of a Bank under the Credit Documents and
shall be considered a "Bank" for all purposes of the Credit Documents.
2. AMENDMENT OF DEFINITIONS. SECTION 1.1 of the Credit Agreement is
amended to amend the following definitions:
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"COMMITMENT" shall mean, as to any Bank, the obligation, if any, of
such Bank to extend credit to the Company in the form of Loans and Letter
of Credit Liabilities in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount set forth opposite such
Bank's name on the signature pages of the Third Amendment under the
caption "Commitment" or in its Assignment Agreement (as the same may be
reduced from time to time or terminated pursuant to SECTION 2.5, modified
pursuant to SECTION 12.6 or increased pursuant to SECTION 6 of the Third
Amendment).
"OTHER LIABILITIES" shall mean, at any time, the sum of (a) the
aggregate principal balance of the Total Debt of the Combined Group at
such time PLUS (without duplication) (b) all liabilities, contingent and
otherwise, in respect of Other Letters of Credit at such time; PROVIDED,
HOWEVER, that Other Liabilities shall never include (x) the Obligations,
(y) the Senior Subordinated Notes, or (z) an amount, not in excess of
$50,000,000 in the aggregate, of Other Letters of Credit which: (i)
support bond or surety obligations required by a Governmental Authority or
a state-owned Person in connection with obligations of the Company and its
Subsidiaries the majority of which are required to be fulfilled no earlier
than three years from the date each respective Other Letter of Credit was
issued, (ii) are approved in writing by the Agent in its sole discretion
on or before the date each respective Other Letter of Credit is issued,
and (iii) are identified as excluded Other Letters of Credit on a schedule
from time to time provided to the Agent by the Company.
"TOTAL DEBT" shall mean, as of any date and for any Person, without
duplication, (a) all obligations for borrowed money; (b) all obligations
evidenced by bonds, debentures, notes or other similar instruments; (c)
all obligations to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business; (d) all Capitalized Lease Obligations; (e) all obligations in
respect of production payments, proceeds production payments and similar
financing arrangements; (f) all reimbursement obligations with respect to
letters of credit issued for the account of such Person, including the
Letter of Credit Liabilities; (g) all instruments and agreements relating
to surety obligations to foreign Governmental Authorities or state-owned
Persons pursuant to which such Person must pay (or reimburse another
Person who pays) regardless of any available defense on the underlying
contract (but excluding such instruments and agreements in connection with
which such Person may avail itself of available defenses on the underlying
contract before having to pay); (h) all obligations of the types described
in CLAUSES (A) THROUGH (G) of this definition (collectively, "ORDINARY
DEBT") of another Person secured by a Lien on any property of the Person
as to which Total Debt is being determined, regardless of whether such
Ordinary Debt is assumed by such Person, and (h) all Ordinary Debt of
another Person guaranteed by such Person; PROVIDED, HOWEVER, that Total
Debt of the Combined Group shall not include (x) any obligation of the
Company owing to a wholly-owned Restricted Subsidiary which is
subordinated to the Obligations upon the terms set forth on SCHEDULE V, or
(y) any obligation of a Restricted Subsidiary owing to the Company or one
or more other Restricted Subsidiaries."
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3. ADDITIONAL DEFINITION. There is hereby added to SECTION 1.1 of the
Credit Agreement the following definition:
"THIRD AMENDMENT" shall mean the Agreement and Third Amendment to
Credit Agreement dated as of October 19, 1998."
4. AMENDMENT OF SECTION 9.7(B). SECTION 9.7(B) of the Credit Agreement is
hereby amended to provide in its entirety as follows:
"(b) INDEBTEDNESS. Create, incur, suffer or permit to exist, or
assume or enter into any Total Debt or any Guaranty, whether direct,
indirect, absolute, contingent or otherwise, EXCEPT: (a) Total Debt under
the Credit Documents; (b) Total Debt secured by Liens permitted by SECTION
9.7(A); (c) the Senior Subordinated Notes; (d) Total Debt in respect of
Other Letters of Credit; (e) Total Debt of the type described in CLAUSE
(G) of the definition of "Total Debt"; (f) Total Debt or Guaranties to and
among the Company and the Restricted Subsidiaries or Guaranties of Total
Debt of the Company and the Restricted Subsidiaries; (g) other Total Debt
having a weighted average life to maturity of not less than seven years
from the date of issuance thereof and subject to terms (including
representations, warranties, covenants and defaults and events of default)
no more restrictive (as determined by the Agent in its sole discretion)
with respect to the issuer thereof than the terms of the Credit Documents;
and (h) unsecured Total Debt or Guaranties constituting Total Debt in an
aggregate amount at any time outstanding not to exceed $50,000,000; and
(i) unsecured Guaranties, not constituting Total Debt, in an aggregate
amount at any one time outstanding not to exceed $25,000,000.
Notwithstanding anything to the contrary in this SECTION 9.7(B), no
member of the Combined Group shall create, incur or assume any Total Debt
or Guaranty if to do so would cause or enlarge a Borrowing Base Deficiency
or violate any other provision of this Agreement."
5. BORROWING BASE AND AVAILABLE BORROWING BASE. Until changed in
accordance with the Credit Agreement, the Borrowing Base and the Available
Borrowing Base shall each be $325,000,000.
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6. INCREASE OF COMMITMENTS. PROVIDED that no Default shall have occurred
and be continuing, the Company shall have the right, without the consent of the
Banks but subject to the approval of the Agent (which consent shall not be
unreasonably withheld), to effectuate from time to time an increase in the
Aggregate Commitment under the Credit Agreement by adding to the Credit
Agreement one or more commercial banks or other financial institutions (who
shall, upon completion of the requirements stated in this SECTION 6, constitute
Banks hereunder), or by allowing one or more Banks to increase their Commitments
hereunder, so that such added and increased Commitments shall equal the increase
in Commitments effectuated pursuant to this SECTION 6; PROVIDED that (a) no
increase in Commitments pursuant to this SECTION 6 shall result in the Aggregate
Commitment exceeding $350,000,000, (b) no Bank's Commitment amount shall be
increased without the consent of such Bank, and (c) on the effective date of any
such increase in Aggregate Commitment, there are no outstanding Eurodollar
Loans. The Company shall give the Agent three Business Days' notice of the
Company's intention to increase the Aggregate Commitment pursuant to this
SECTION 6. Such notice shall specify each new commercial bank or other financial
institution, if any, the changes in amounts of Commitments that will result, and
such other information as is reasonably requested by the Agent. Each new
commercial bank or other financial institution, and each Bank agreeing to
increase its Commitment, shall execute and deliver to the Agent a document
satisfactory to the Agent pursuant to which it becomes a party hereto or
increases its Commitment, as the case may be, which document, in the case of a
new commercial bank or other financial institution, shall (among other matters)
specify the domestic lending office and Eurodollar lending office of such new
commercial bank or other financial institution. In addition, the Company shall
execute and deliver a Note in the principal amount of the Commitment of each new
commercial bank or other financial institution, or, against delivery to it of
such Bank's existing Note, a replacement Note in the principal amount of the
increased Commitment of each Bank agreeing to increase its Commitment, as the
case may be. Such Notes and other documents of the nature referred to in this
SECTION 6 shall be furnished to the Agent in form and substance as may be
reasonably required by it. Upon the execution and delivery of such documents,
such new commercial bank or financial institution shall constitute a "Bank"
under the Credit Agreement with a Commitment as specified therein, or such
Bank's Commitment shall increase as specified therein, as the case may be.
7. CONDITIONS PRECEDENT. This Agreement shall become effective on the date
(the "EFFECTIVE DATE") that each of the following conditions shall have been
satisfied or waived in the discretion of the Agent:
(a) CORPORATE ACTION AND STATUS. The Agent shall have received
copies of the Organizational Documents of the Company certified by the
Secretary of the Company, and resolutions of the Board of Directors of the
Company, certified by the Secretary of the Company, for all corporate
action taken by the Company authorizing the execution, delivery and
performance of this Agreement and the Notes, together with such
certificates as may be appropriate to demonstrate the existence,
qualification and good standing of and payment of taxes by each member of
the Combined Group in each jurisdiction listed for such member on SCHEDULE
III to this Agreement.
(b) INCUMBENCY. The Company shall have delivered to the Agent a
certificate
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in respect of the name and signature of each officer who (i) is
authorized to sign on its behalf this Agreement and the Notes and (ii)
will, until replaced by another officer or officers duly authorized for
that purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection with
this Agreement and the other Credit Documents. The Agent and each Bank
may conclusively rely on such certificates until they receive notice in
writing from the Company to the contrary.
(c) NOTES. The Agent shall have received the appropriate Note of the
Company for each Bank, in the amount of each Bank's Commitment, duly
completed and executed.
(d) CREDIT DOCUMENTS; EXPENSES. The Company shall have duly executed
and delivered this Agreement and the other Credit Documents provided for
herein to which it is a party, and each such Credit Document shall be in
Proper Form. Each such Credit Document shall be in substantially the form
furnished to the Banks prior to their execution of this Agreement,
together with such changes therein as the Agent may approve in its
discretion. The Company shall have paid to the Agent all fees and expenses
in the amounts previously agreed upon in writing among the Company and the
Agent and all amounts due under SECTION 14.
(e) OPINION OF COUNSEL TO THE COMPANY. The Agent shall have received
the opinions of Andrews & Kurth L.L.P. and of David L. Hicks, counsel to
the Company, substantially in the forms of SCHEDULES I and II to this
Agreement, respectively.
(f) COUNTERPARTS. The Agent shall have received counterparts of this
Agreement duly executed and delivered by or on behalf of each of the
parties thereto (or, in the case of any Bank as to which the Agent shall
not have received such a counterpart, the Agent shall have received
evidence satisfactory to it of the execution and delivery by such Bank of
a counterpart hereof).
(g) CONSENTS. The Agent shall have received evidence satisfactory to
it in its discretion that all consents of each Governmental Authority and
of each other Person, if any, required in connection with the execution,
delivery and performance of this Agreement and the Notes have been
received and remain in full force and effect.
(h) OTHER DOCUMENTS. The Agent shall have received such other
documents consistent with the terms of this Agreement and relating to the
transactions contemplated hereby as the Agent may reasonably request.
(i) NO DEFAULT. No Default shall have occurred and be continuing.
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(j) NO LEGAL BAR. Such effectiveness shall not violate any Legal
Requirement applicable to the Agent or any Bank.
PROVIDED, HOWEVER, that this Agreement shall not become effective or be binding
on any Party unless all of the foregoing conditions are satisfied not later than
November 30, 1998. The Agent shall promptly notify the Company and the Banks of
the Effective Date, and such notice shall be conclusive and binding on all
Parties. All provisions and payments required by this SECTION 7 are subject to
the provisions of SECTION 12.8 of the Credit Agreement.
8. ACKNOWLEDGMENTS; APPOINTMENT AND AUTHORIZATION. Each of The First
National Bank of Chicago and Comerica Bank - Texas (collectively, the "NEW
BANKS") hereby (a) acknowledges receipt of copies of the Credit Agreement and
the most recent financial statements of the Company, and (b) acknowledges and
agrees that (1) it has, independently and without reliance upon the Agent or any
other Bank and based on the financial statements of the Company delivered to
such New Bank by the Company and such other documents and information as such
New Bank has deemed appropriate, made its own credit analysis and decision to
become a Bank and (2) it is a Bank for all purposes of the Credit Agreement,
with all of the liabilities and obligations of a Bank to the extent of its
Commitment. Each New Bank irrevocably appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Credit
Agreement and the Notes as are delegated to the Agent by the terms of the Credit
Agreement or the Notes, together with all such powers as are reasonably
incidental thereto.
9. COLLATERAL. Each of the Banks represents to the Agent and each of the
other Banks that it in good faith is not relying upon any "margin stock" (as
defined in Regulation U) as collateral in the extension or maintenance of the
credit provided for in the Credit Agreement.
10. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE AGENT AND THE BANKS
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THE CREDIT AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY.
11. REPRESENTATIONS TRUE; NO DEFAULT. The Company represents and warrants
to the Agent and each Bank that (a) the representations and warranties contained
in the Credit Agreement are true and correct on and as of the date hereof as
though made on and as of such date (except to the extent such representations
and warranties are expressly stated to be made solely as of an earlier date) and
(b) no event has occurred and is continuing which constitutes a Default under
the Credit Agreement or which upon the giving of notice or the lapse of time or
both would constitute such a Default.
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12. RATIFICATION. Except as expressly amended hereby, the Credit
Agreement, as hereby adopted and amended, is in all respects ratified, confirmed
and continued as the agreement of the Parties and is, and shall continue to be,
in full force and effect and binding upon the Parties. The Company hereby agrees
and acknowledges that all of its liabilities and obligations under the Credit
Agreement, as hereby adopted and amended, remain in full force and effect and
binding upon it as of the date of this Agreement.
13. DEFINITIONS AND REFERENCES. Unless otherwise defined herein, terms
used herein which are defined in the Credit Agreement shall have the meanings
therein ascribed to them. The term "Agreement" as used in the Credit Agreement
and the term "Credit Agreement" as used in this Agreement or in any other
instrument, document or writing furnished to the Agent or any Bank by or on
behalf of the Company shall mean the Credit Agreement as hereby amended.
14. EXPENSES; ADDITIONAL INFORMATION. The Company shall pay to the Agent
on demand (i) all out-of-pocket expenses (including fees and disbursements of
special counsel to the Agent and expenses of syndication) in connection with the
preparation and administration of this Agreement, any waiver or consent
hereunder and any amendment hereof, and (ii) if an Event of Default occurs, all
out-of-pocket expenses incurred by the Agent and each Bank, including fees and
disbursements of counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
15. SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstances shall, to any extent, be
deemed invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and this Agreement shall be valid and enforced to the fullest extent
permitted by applicable law. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions thereof or affecting the validity or
enforceability of such provision in any other jurisdiction and, to this end, the
provisions of this Agreement are severable.
16. MISCELLANEOUS. This Agreement (a) shall be binding upon and inure to
the benefit of the Company, the Agent and the Banks and their respective
successors and assigns (however, the Company may not assign its rights hereunder
without the express prior written consent of all Banks); (b) may be modified or
amended only in the manner prescribed for amendments to the Credit Agreement in
SECTION 12.5 of the Credit Agreement; (c) SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (TO THE EXTENT PERMITTED BY LAW,
OTHER THAN ITS CONFLICT OF LAW RULES) AND OF THE UNITED STATES OF AMERICA; (d)
may be executed in several counterparts, and by the Parties on separate
counterparts, and each counterpart, when so executed and delivered, shall
constitute an original agreement, and all such separate counterparts shall
constitute but one and the same agreement, and (e) together with the Credit
Agreement and the Notes, embodies the entire agreement and understanding among
the Parties with respect to the subject matter hereof and supersedes all prior
agreements, consents and understandings relating to such subject matter. The
headings herein shall be accorded no significance in interpreting this
Agreement.
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17. THIS AGREEMENT, TOGETHER WITH THE CREDIT AGREEMENT AND THE NOTES,
REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES AS TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
8
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized officers effective as of the date provided
herein.
SANTA FE ENERGY RESOURCES, INC.
By:_____________________________________
Janet F. Clark
Senior Vice President-Finance
Chief Financial Officer and Treasurer
<PAGE>
COMMITMENT: CHASE BANK OF TEXAS, NATIONAL
$50,000,000.00 ASSOCIATION, individually and as
Administrative Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address for Notices:
Domestic and Eurodollar
Lending Offices: Chase Bank of Texas, National Association
600 Travis, 20th Floor
Houston, Texas 77002-8086
Chase Bank of Texas, National Telephone: (713) 216-5733
Association Telecopy: (713) 216-4117
600 Travis Street, 20th Floor Attention: Debra Harris
Houston, Texas 77002-8086
Attention: June Brand
Telephone: (713) 216-5733
Telecopy: (713) 216-4117
<PAGE>
COMMITMENT: ABN AMRO BANK N.V.,
$40,000,000.00 Individually and as a Co-Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
ADDRESS FOR ALL REQUIRED FINANCIAL
INFORMATION:
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 2805
Chicago, Illinois 60603
Attention: Credit Administration
Telephone:(312) 904-8835
Fax: (312) 904-8840
WITH A COPY TO:
ABN AMRO Bank N.V.
Three Riverway, Suite 1700
Houston, Texas 77056
Attention: W. Bryan Chapman
Telephone:(713) 964-3361
Fax: (713) 621-5801
LOAN ADMINISTRATION CONTACTS
ABN AMRO Bank N.V.
135 South LaSalle Street, Suite 625
Chicago, Illinois 60603
Attention: Loan Administration
Telephone:(312) 904-8865
Fax: (312) 904-6893
LETTER OF CREDIT CONTACTS
<PAGE>
ABN AMRO Bank N.V.
200 West Monroe Street, Suite 1100
Chicago, Illinois 60606-5002
Attention: Trade Services Department
Telephone:(888) 226-5113
Fax: (888) 226-5119
<PAGE>
COMMITMENT: BANK OF AMERICA NATIONAL TRUST AND
$40,000,000.00 SAVINGS ASSOCIATION, Individually
and as a Co-Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address for Notices & Domestic and
Eurodollar
Lending Office:
Name:Claudette Strickland
Title: Account Administrator
Address: Bank of America
1850 Gateway Blvd., 4th Floor
Concord, California 94520
Telephone:(510) 675-7483
Facsimile:(510) 603-8208
cc: Phyllis Tennard
Bank of America
333 Clay Street
Houston, Texas 77002
Telephone:(713) 651-4819
(713) 651-4888
<PAGE>
COMMITMENT: THE FIRST NATIONAL BANK OF CHICAGO,
$40,000,000.00 Individually and as a Co-Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
Credit Contacts:
Domestic and Eurodollar The First National Bank of Chicago
Lending Offices: 1100 Louisiana, Suite 3200
Houston, Texas 77002
The First National Bank of Chicago Attention: Mr. Leo Loughead
One First National Plaza Phone No.:(713) 654-7347
0634, 1FNP, 10 Fax No.: (713) 654-7370
Chicago, Illinois 60670
Administrative Contacts - Borrowings,
Payments, Interest, Etc.:
Tax Withholding Information:
Tax ID No.: 36-0899825 The First National Bank of Chicago
One First National Plaza
0634, 1FNP, 10
Chicago, Illinois 60670
Attention: Ms. Hein Le
Phone No.:(312) 732-8573
Fax No.: (312) 732-4840
Remittance Instructions:
The First National Bank of Chicago
ABA Transmit No.: 07100013
Name of Account: DES Incoming Clearing A/C
Account No.: 75217653
Attn.: Hein Le
Re: Santa Fe Energy Resources
<PAGE>
COMMITMENT: NATIONSBANK, N.A. (successor by merger to
$40,000,000.00 NationsBank of Texas, N.A.), Individually
and as a Co-Agent
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address for Notices:
Domestic and Eurodollar 700 Louisiana, 8th Floor
Lending Offices: Houston, Texas 77002
Attention: Mr. James Allred
NationsBank, N.A. Telephone: 713/247-6327
ABA #111000025 Telecopy: 713/247-6568
For Credit to: Acct. #0180019828
Attention: Loan Funds Transfer
Reference: Santa Fe Energy Resources, Inc.
<PAGE>
COMMITMENT: WELLS FARGO BANK (TEXAS), N.A.,
$40,000,000.00 Individually and as a Co-Agent
By:______________________________
Ann M. Rhoads
Vice President
Address for Business Matters:
Domestic and Eurodollar 1000 Louisiana, 3rd Floor
Lending Offices: Houston, Texas 77002
Attention: Ann Rhoads
201 Third Street, 8th Floor Telephone: (713) 319-1367
San Francisco, California 94103 Telecopy: (713) 739-1087
Attention: Oscar Enriquez
Telephone: (415) 477-5425 Address for Administrative Matters:
Telecopy: (415) 979-0675
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Attention: Maria Valdivia
Telephone: (713) 319-1378
Telecopy: (713) 739-1087
<PAGE>
COMMITMENT: BANK OF MONTREAL
$32,500,000.00
By:__________________________________
Name:________________________________
Title:_______________________________
Address for Notices:
Domestic and Eurodollar 700 Louisiana, Suite 4400
Lending Offices: Houston, Texas 77002
Attention: Ms. Melissa Bauman
Harris Bank Telephone: 713/223-4400
ABA #071000288 Telecopy: 713/223-4007
For Credit To: Bank of Montreal,
Chicago Branch
Attention: E. Rios
Reference: Santa Fe Energy Resources, Inc.
<PAGE>
COMMITMENT: PNC BANK, NATIONAL ASSOCIATION
$32,500,000.00
By:____________________________________
John R. Way
Assistant Vice President
Address for Business Matters:
Domestic and Eurodollar 249 Fifth Avenue, Third Floor
Lending Offices: Pittsburgh, PA 15222-2707
Attention: John R. Way
620 Liberty Avenue Telephone: (412) 762-5290
Two PNC Plaza, Third Floor Telecopy: (412) 762-2571
Pittsburgh, PA 15222
Attention: Tina Lanuka Address for Administrative Matters:
Telephone: (412) 768-5876
Telecopy: (412) 768-4586 620 Liberty Avenue
Two PNC Plaza, Third Floor
Pittsburgh, PA 15222
Attention: Tina Lanuka
Telephone: (412) 768-5876
Telecopy: (412) 768-4586
<PAGE>
COMMITMENT: COMERICA BANK - TEXAS
$20,000,000.00
By:_________________________________
James Kimble, Vice President
Address for Business Matters:
Domestic and Eurodollar COMERICA BANK - TEXAS
Lending Offices: 910 Louisiana, Suite 410
Houston, Texas 77002
COMERICA BANK - TEXAS Attention: James Kimble
P. O. Box 75000 Telephone: (713) 220-5614
Detroit, Michigan 48275-7576 Telecopy: (713) 220-5650
Attention: Nancy Lee
Telephone: (734) 632-3063 Address for Administrative Matters:
Telecopy: (734) 632-7050
COMERICA BANK - TEXAS
P. O. Box 75000
Detroit, Michigan 48275-7576
Attention: Nancy Lee
Telephone: (734) 632-3063
Telecopy: (734) 632-7050
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF SEPTEMBER 30, 1998 AND THE INCOME STATEMENT FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 13,800
<SECURITIES> 0
<RECEIVABLES> 62,800
<ALLOWANCES> 2,500
<INVENTORY> 22,600
<CURRENT-ASSETS> 123,900
<PP&E> 1,900,800
<DEPRECIATION> 1,135,100
<TOTAL-ASSETS> 901,500
<CURRENT-LIABILITIES> 97,900
<BONDS> 0
<COMMON> 1,000
0
0
<OTHER-SE> 429,100
<TOTAL-LIABILITY-AND-EQUITY> 901,500
<SALES> 222,100
<TOTAL-REVENUES> 222,500
<CGS> 250,900
<TOTAL-COSTS> 250,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,600
<INCOME-PRETAX> (34,600)
<INCOME-TAX> (16,900)
<INCOME-CONTINUING> (17,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,700)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
