==============================================================================
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 JUNE 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 JULY 31, 1998
COMMON STOCK, $.01 PAR VALUE 102,670,659
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<PAGE>
TABLE OF CONTENTS
PAGE
PART I FINANCIAL INFORMATION (UNAUDITED)
Item 1. Consolidated Financial Statements
Consolidated Statement of Operations for the
Three and Six Months ended June 30, 1998 and 1997 3
Consolidated Balance Sheet at June 30, 1998 and
December 31, 1997 4
Consolidated Statement of Cash Flows for the
Three and Six Months ended June 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 10
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE 18
2
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- -------------------------
1998 1997(1) 1998 1997(1)
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues:
Sales of crude oil and liquids produced .......................... $ 45.7 $ 109.1 $ 85.5 $ 236.4
Sales of natural gas produced .................................... 31.9 30.5 60.7 67.2
Sales of crude oil purchased ..................................... -- 10.3 -- 19.9
Other ............................................................ 0.2 (0.1) 0.4 0.2
------- ------- ------- -------
Total revenues ................................................ 77.8 149.8 146.6 323.7
------- ------- ------- -------
Costs and expenses:
Production and operating ......................................... 26.2 49.4 51.5 101.6
Cost of crude oil purchased ...................................... -- 10.7 -- 21.4
Exploration, including dry hole costs ............................ 7.3 10.1 19.5 19.4
Depletion, depreciation and amortization ......................... 33.4 35.5 61.5 69.1
General and administrative ....................................... 4.6 10.1 9.0 17.2
Taxes (other than income) ........................................ 4.3 6.6 8.4 14.1
Loss (gain) on disposition of assets ............................. 1.2 0.2 1.2 (2.1)
------- ------- ------- -------
Total costs and expenses ...................................... 77.0 122.6 151.1 240.7
------- ------- ------- -------
Income (loss) from operations ........................................ 0.8 27.2 (4.5) 83.0
Interest income .................................................. 1.0 0.9 3.2 1.8
Interest expense ................................................. (5.3) (7.8) (9.1) (15.5)
Interest capitalized ............................................. 1.9 1.9 3.6 3.5
Other income (expense) ........................................... (0.1) (0.2) (0.1) (0.3)
------- ------- ------- -------
Income (loss) before income taxes and minority interest .............. (1.7) 22.0 (6.9) 72.5
Current income taxes ........................................... 2.8 (0.6) 5.4 (5.1)
Deferred income taxes .......................................... (0.7) (7.3) 1.6 (22.7)
------- ------- ------- -------
Income before minority interest ...................................... 0.4 14.1 0.1 44.7
Minority interest in Monterey Resources, Inc. .................... -- (1.6) -- (4.3)
------- ------- ------- -------
Net income ........................................................... 0.4 12.5 0.1 40.4
Preferred dividend requirement ................................... -- (1.2) -- (3.6)
Convertible preferred premium .................................... -- (8.5) -- (8.5)
------- ------- ------- -------
Earnings attributable to common shares ............................... $ 0.4 $ 2.8 $ 0.1 $ 28.3
======= ======= ======= =======
Basic and diluted earnings attributable to
common shares per share .......................................... $ -- $ 0.03 $ -- $ 0.30
======= ======= ======= =======
Weighted average number of shares outstanding
Basic ............................................................ 102.9 97.0 102.8 94.1
======= ======= ======= =======
Diluted .......................................................... 105.6 98.1 105.6 95.1
======= ======= ======= =======
</TABLE>
(1)Includes results of Monterey Resources, Inc.
See accompanying notes.
3
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT AS NOTED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------- ---------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .......................................... $ 13.8 $ 5.6
Accounts receivable ................................................ 69.2 70.9
Inventories ........................................................ 20.2 14.5
Other current assets ............................................... 27.9 21.8
-------- --------
131.1 112.8
-------- --------
Properties and equipment, at cost:
Oil and gas (successful efforts method of accounting) .............. 1,856.3 1,682.4
Other .............................................................. 17.5 16.8
-------- --------
1,873.8 1,699.2
Accumulated depletion, depreciation, amortization and impairment ... (1,099.9) (1,049.5)
-------- --------
773.9 649.7
-------- --------
Other assets ........................................................... 13.2 26.4
-------- --------
$ 918.2 $ 788.9
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................... $ 83.3 $ 106.7
Income taxes payable ............................................... 0.1 6.5
Interest payable ................................................... 2.4 1.4
Other current liabilities .......................................... 15.5 19.4
-------- --------
101.3 134.0
-------- --------
Long-term debt ......................................................... 287.6 121.7
Deferred revenues ...................................................... 3.7 3.7
Other long-term obligations ............................................ 36.6 36.3
Deferred income taxes .................................................. 37.3 38.5
Commitments and contingencies (See Note 5) ............................. -- --
Shareholders' equity:
Preferred stock, $0.01 par value, 38.1 million shares authorized,
none issued ....................................................... -- --
Common stock, $0.01 par value, 200.0 million shares authorized,
102.9 million shares issued and outstanding (103.0 million in 1997) 1.0 1.0
Paid-in capital .................................................... 728.2 728.2
Accumulated deficit ................................................ (273.5) (273.2)
Treasury stock, at cost, 0.2 million shares (0.1 million in 1997) .. (1.5) (0.6)
Unamortized restricted stock awards ................................ (2.5) (0.7)
-------- --------
451.7 454.7
-------- --------
$ 918.2 $ 788.9
======== ========
</TABLE>
See accompanying notes.
4
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1998 1997(1) 1998 1997(1)
-------- ------ ------- -------
<S> <C> <C> <C> <C>
Operating activities:
Net income .......................................................... $ 0.4 $ 12.5 $ 0.1 $ 40.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depletion, depreciation and amortization ......................... 33.4 35.5 61.5 69.1
Deferred income taxes ............................................ 0.7 7.3 (1.6) 22.7
Loss (gain) on disposition of assets ............................. 1.2 0.2 1.2 (2.1)
Exploratory dry hole costs ....................................... 3.6 3.2 7.2 8.3
Minority interest in Monterey Resources, Inc. .................... -- 1.6 -- 4.3
Other ............................................................ 1.0 1.4 1.9 2.4
Changes in operating assets and liabilities: ........................ --
Decrease (increase) in accounts receivable ....................... 6.6 17.0 4.6 9.7
Decrease (increase) in inventories ............................... (0.8) (2.1) (3.8) (1.9)
Increase (decrease) in accounts payable .......................... 2.1 (7.6) (10.2) (1.3)
Increase (decrease) in interest payable .......................... (2.0) 1.9 1.0 --
Increase (decrease) in income taxes payable ...................... (4.3) (8.4) (6.4) (4.5)
Net change in other assets and liabilities ....................... 6.7 (9.4) 7.6 29.3
-------- ------ ------- -------
Net cash provided by operating activities ............................... 48.6 53.1 63.1 176.4
-------- ------ ------- -------
Investing activities:
Capital expenditures, including exploratory dry hole costs .......... (59.4) (57.6) (118.1) (117.7)
Acquisition of producing properties ................................. (88.2) (3.2) (100.0) (34.7)
Net proceeds from disposition of assets ............................. 0.3 0.3 1.8 2.9
-------- ------ ------- -------
Net cash used in investing activities ................................... (147.3) (60.5) (216.3) (149.5)
-------- ------ ------- -------
Financing activities:
Net change in long-term lines of credit ............................. 108.8 10.0 165.9 6.0
Issuance of Santa Fe Energy Resources, Inc. common stock ............ -- 0.5 -- 1.6
Treasury stock reissued ............................................. 1.1 -- 1.5 --
Treasury stock purchased ............................................ (1.1) -- (6.0) --
Cash dividends paid ................................................. -- (4.8) -- (7.2)
-------- ------ ------- -------
Net cash provided by financing activities ............................... 108.8 5.7 161.4 0.4
-------- ------ ------- -------
Net increase (decrease) in cash ......................................... 10.1 (1.7) 8.2 27.3
Cash and cash equivalents at beginning of period ........................ 3.7 43.6 5.6 14.6
-------- ------ ------- -------
Cash and cash equivalents at end of period .............................. $ 13.8 $ 41.9 $ 13.8 $ 41.9
======== ====== ======= =======
Supplemental disclosure of cash flow information:
Interest paid ....................................................... $ 7.1 $ 5.9 $ 7.8 $ 15.3
Income taxes paid ................................................... $ 1.5 $ 8.6 $ 3.3 $ 9.4
</TABLE>
(1)Includes results of Monterey Resources, Inc.
See accompanying notes.
5
<PAGE>
SANTA FE ENERGY RESOURCES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. ACCOUNTING POLICIES
The consolidated financial statements at June 30, 1998 and for the three
and six 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
six months ended June 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 are included for the entire
period ended June 30, 1997 and excluded for the entire period ended June 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"). The Statement is effective for fiscal
years beginning after June 15, 1999. The Company intends to implement the
provisions of the Statement beginning with the first quarter of 2000. The
Company believes that its current hedging activity qualifies as a hedge of a
forecasted transaction under the new Statement, and therefore adoption will not
result in any change to reported net income. The Statement will, however, result
in unrealized hedging gains and losses being charged to other comprehensive
income after adoption.
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 JUNE 30,
1998 1997
----------------------------------- ------------------------------------
PER-SHARE PER-SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
-------- -------------- -------- -------------- -------- ------------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net Income .................................. $ 0.4 $ 12.5
Less: Preferred dividends ................... -- (9.7)
------ ------
Basic and diluted Earnings Per Share
Earnings attributable to common shares ...... $ 0.4 102.9 $ - $ 2.8 97.0 $ 0.03
====== ======== ====== ==========
</TABLE>
The Company had 2.3 million and 0.9 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 June 30, 1998 and 1997,
respectively. In addition, there were 0.4 million and 0.2 million common shares
which would be issued upon vesting of Phantom Units in the three months ended
June 30, 1998 and 1997, respectively, which although dilutive in nature did not
change earnings per share. There were 2.4 million and 0.4 million stock options
outstanding in the three months ended June 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 SIX MONTHS ENDED JUNE 30,
1998 1997
-------------------------------- ------------------------------------
PER-SHARE PER-SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT
-------- -------------- -------- -------------- -------- ------------
(in millions, except per share amounts)
<S> <C> <C>
Net Income .................................. $ 0.1 $ 40.4
Less: Preferred dividends ................... -- (12.1)
------ ------
Basic and diluted Earnings Per Share
Earnings attributable to common shares ...... $ 0.1 102.8 $ - $ 28.3 94.1 $ 0.30
====== ======== ====== ==========
</TABLE>
For the six months ended June 30, 1998 and 1997, the Company had 2.4
million and 0.9 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 0.1 million common
shares which would be issued upon vesting of Phantom Units in the six months
ended June 30, 1998 and 1997, respectively, which although dilutive in nature
did not change earnings per share. There were 2.4 million and 0.4 million stock
options outstanding in the six months ended June 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 six months ended June 30, 1998, the Company purchased 0.1 million
and 0.6 million common shares for approximately $1.1 million and $6.0 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 June 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 $0.9 million
during the second quarter of 1998 and $1.1 million during the first six months
of 1998, compared with $1.4 million during the second quarter of 1997 and $1.7
million during the first six months of 1997. The Company had no open natural gas
sales hedges in 1997 or 1998.
At June 30, 1998, the Company had open crude oil sales hedges on 8,000
barrels per day for the period July through September 1998. The instruments used
have a floor of $16.00 per barrel and ceilings ranging from $17.75 to $18.00 per
barrel. Under the terms of the instruments, if the aggregate average of the
applicable daily settlement prices is below the floor, the Company will receive
a settlement based on the difference, and if the aggregate average of the
applicable daily settlement prices is above the ceiling, the Company will be
required to pay an amount based on the difference. Based on the July 1998
settlement price of the applicable NYMEX futures contract, the Company would
recognize a $1.4 million gain with respect to such hedges at July 31, 1998. The
actual gains or losses realized by the Company from these hedges may vary
significantly due to the volatility of future markets.
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
8
<PAGE>
substantial costs and liabilities are inherent to 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.
9
<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 six months ended June 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------ ------------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in millions, except per share data)
<S> <C> <C> <C> <C>
Revenues:
Sales of crude oil and liquids ................................ $ 45.7 $ 45.2 $ 85.5 $ 97.9
Sales of natural gas .......................................... 31.9 30.2 60.7 66.5
Other ......................................................... 0.2 (0.3) 0.4 (0.2)
------- ------- ------- -------
Total revenues ............................................. 77.8 75.1 146.6 164.2
------- ------- ------- -------
Costs and expenses:
Production and operating ...................................... 26.2 19.8 51.5 40.9
Exploration, including dry hole costs ......................... 7.3 9.6 19.5 18.6
Depletion, depreciation and amortization ...................... 33.4 25.8 61.5 50.1
General and administrative .................................... 4.6 6.3 9.0 10.7
Taxes (other than income) ..................................... 4.3 3.2 8.4 8.1
Loss (gain) on disposition of assets .......................... 1.2 0.2 1.2 (2.1)
------- ------- ------- -------
Total costs and expenses ................................... 77.0 64.9 151.1 126.3
------- ------- ------- -------
Income (loss) from operations ..................................... 0.8 10.2 (4.5) 37.9
Interest income ............................................... 1.0 0.6 3.2 1.0
Interest expense .............................................. (5.3) (2.9) (9.1) (5.9)
Interest capitalized .......................................... 1.9 1.5 3.6 2.8
Other income (expense) ........................................ (0.1) (0.2) (0.1) (0.3)
------- ------- ------- -------
Income (loss) before income taxes ................................. (1.7) 9.2 (6.9) 35.5
Current income taxes ........................................ 2.8 4.6 5.4 8.6
Deferred income taxes ....................................... (0.7) (8.2) 1.6 (21.5)
------- ------- ------- -------
Net income ........................................................ 0.4 5.6 0.1 22.6
Preferred dividend requirement ................................ -- (1.2) -- (3.6)
Convertible preferred premium ................................. -- (8.5) -- (8.5)
------- ------- ------- -------
Earnings (loss) attributable to common shares ..................... $ 0.4 $ (4.1) $ 0.1 $ 10.5
======= ======= ======= =======
Basic and diluted earnings (loss) attributable to
common shares per share ....................................... $ -- $ (0.04) $ -- $ 0.11
======= ======= ======= =======
Weighted average number of shares outstanding
Basic ......................................................... 102.9 97.0 102.8 94.1
======= ======= ======= =======
Diluted ....................................................... 105.6 98.1 105.6 95.1
======= ======= ======= =======
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- --------------------------
1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
PRODUCTION
Crude oil and liquids (MBbls/day)
Domestic ............................................. 21.5 20.9 21.5 20.8
Argentina ............................................ 5.5 4.3 5.5 4.4
Indonesia ............................................ 13.0 3.6 10.0 3.7
Gabon ................................................ 1.9 -- 1.4 --
------- ------- ------- -------
Total ................................................ 41.9 28.8 38.4 28.9
Natural Gas (MMcf/day)
Domestic ............................................. 156.8 156.5 154.1 152.5
Argentina ............................................ 26.0 22.7 25.7 20.7
Indonesia ............................................ 0.4 0.3 0.3 0.4
------- ------- ------- -------
Total ................................................ 183.2 179.5 180.1 173.6
AVERAGE PRICES
Crude oil and liquids ($/Bbl)
Actual (unhedged) .................................... $ 11.90 $ 17.05 $ 12.32 $ 18.77
Realized (hedged) .................................... 12.12 17.59 12.48 19.10
Natural gas ($/Mcf) .................................... $ 1.99 $ 1.91 $ 1.96 $ 2.21
Costs and Expenses (In dollars per BOE)
Production and operating (a) ........................... $ 3.97 $ 3.70 $ 4.15 $ 3.90
Exploration, including dry hole costs .................. 1.11 1.80 1.58 1.78
Depletion, depreciation and amortization ............... 5.06 4.83 4.96 4.79
General and administrative ............................. 0.70 0.96(e) 0.73 0.91(e)
Taxes, other than income (b) ........................... 0.65 0.62 0.68 0.78
Interest expense, net (c) .............................. 0.47(d) 0.19 0.39(d) 0.21
</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 $0.7 million ($0.04 per BOE) for the three months ended
June 30, 1998 and $2.6 million ($0.05 per BOE) for the six months ended
June 30, 1998, of interest income on an anticipated income tax refund.
e) Excludes effect of $1.1 million ($0.21 and $0.11 per BOE for the three and
six months ended June 30, 1997, respectively) in general and administrative
costs related to the Spin Off of Monterey
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 June 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 $11.90 per
barrel in the second quarter of 1998. The Company's average crude oil and
liquids sales price (unhedged) received in July 1998 was $11.60 per barrel.
Based on operating results for the
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<PAGE>
first six months of 1998, the Company estimates that on an annualized basis a
$1.00 per barrel increase or decrease in its average crude oil sales price would
result in a corresponding $8.7 million change in net income and a $10.1 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 June 30, 1998 for its natural gas ranged from a high of $2.54 per
Mcf in the fourth quarter of 1997 to a low of $1.92 per Mcf in the first quarter
of 1998. Based on operating results for the first six 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.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997
The Company reported earnings to common shares for the three months ended
June 30, 1998 of $0.4 million, or break-even results per share, compared with a
loss to common shares of $4.1 million, or $0.04 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
increased to $77.8 million for the three months ended June 30, 1998 compared
with $75.1 million for the same period in 1997, due to increased production,
which more than offset the effect of lower oil prices. The Company's crude oil
and liquids production increased 45% in the second quarter of 1998 to 41.9 MBbls
per day from 28.8 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 and the purchase of an interest in the Tupungato field in
Argentina. Natural gas production increased in the second quarter of 1998 to
183.2 MMcf per day from 179.5 MMcf per day for the same period in 1997.
Production from new wells in the Permian Basin, Gulf of Mexico and Argentina
more than offset normal production declines and the loss of production from
property sales in the Gulf. The Company's realized crude oil prices for the
three months ended June 30, 1998 averaged $12.12 per barrel, including a $0.22
per barrel hedging benefit, a decrease of 31% from the average realized oil
price of $17.59 per barrel, including a $0.54 per barrel hedging benefit, for
the same period in 1997. Realized natural gas prices for the three months ended
June 30, 1998 averaged $1.99 per Mcf, compared with an average of $1.91 per Mcf
for the same period in 1997.
COSTS AND EXPENSES. Production and operating expense and depletion,
depreciation and amortization expense increased $6.4 million and $7.6 million,
respectively, for the three months ended June 30, 1998 compared with the same
period in 1997, due to increased crude oil and natural gas production, as noted
above. Exploration expense for the three months ended June 30, 1998 decreased to
$7.3 million from $9.6 million for the same period in 1997, due primarily to
lower seismic costs. General and administrative expense for the three months
ended June 30, 1997 included $1.1 million of costs associated with the Spin Off.
Excluding these spin related costs, general and administrative expense decreased
by $0.26 on a unit of production basis to $0.70 per BOE in the second quarter
1998 due to higher production levels and a slight decrease in general and
administrative costs. The loss on disposition of assets for the three months
ended June 30, 1998 includes a $1.2 million loss on the sale of certain offshore
properties in the Gulf of Mexico.
Interest income for the three months ended June 30, 1998 included a $0.7
million benefit related to an anticipated income tax refund. Interest expense
for the second quarter of 1998 increased by $2.4 million compared with the same
period in 1997, reflecting an increase in borrowings. Income taxes for the three
months ended June 30, 1998 included 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 second quarter of 1998 is due to the May 1997 purchase and
conversion of all of the Company's outstanding preferred stock.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997
The Company reported earnings to common shares for the six months ended
June 30, 1998 of $0.1 million, or break-even results per share, compared with
earnings to common shares of $10.5 million, or $0.11 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 $146.6 million for the six months ended June 30, 1998 compared with
$164.2 million for the same period in 1997, due to lower
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<PAGE>
realized prices, partially offset by increased production. The Company's crude
oil and liquids production increased by approximately 33% in the first six
months of 1998 to 38.4 MBbls per day from 28.9 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 six months of 1998 to 180.1 MMcf
per day compared with 173.6 MMcf per day for the same period in 1997. Normal
production declines and the loss of production from property sales in the Gulf
of Mexico were more than offset by production from new wells in the Permian
Basin, Gulf of Mexico and Argentina. The Company's realized crude oil prices for
the six months ended June 30, 1998 averaged $12.48 per barrel, including a $0.16
per barrel hedging benefit, compared with the average realized oil price of
$19.10 per barrel, including a $0.33 per barrel hedging benefit, for the same
period in 1997. Realized natural gas prices for the six months ended June 30,
1998 averaged $1.96 per Mcf, compared with an average of $2.21 per Mcf for the
same period in 1997.
COSTS AND EXPENSES. Production and operating expense and depletion,
depreciation and amortization expense increased $10.6 million and $11.4 million,
respectively, for the six months ended June 30, 1998 compared with the same
period in 1997, due to increased crude oil and natural gas production, as noted
above. General and administrative expense for the six months ended June 30, 1997
included $1.1 million of costs associated with the Spin Off. Excluding these
spin related costs, general and administrative expense decreased by $0.18 on a
unit of production basis to $0.73 per BOE in the first six months of 1998 due to
increased production levels and a slight decrease in general and administrative
costs. The loss on disposition of assets for the six months ended June 30, 1998
included a $1.2 million loss on certain offshore properties in the Gulf of
Mexico. The gain on dispositions of assets in the first six months of 1997
included a $2.4 million gain from the sale of properties in Eddy County, New
Mexico.
Interest income for the six months ended June 30, 1998 included a $2.6
million benefit related to an anticipated income tax refund. Interest expense
for the first six months of 1998 increased by $3.2 million compared with the
same period in 1997, reflecting an increase in borrowings between the
comparative periods. Income taxes for the six months ended June 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 six months of 1998 is due to the May 1997 purchase and conversion of all
of the Company's outstanding preferred stock.
The decrease in other assets from $26.4 million at December 31, 1997 to
$13.2 million at June 30, 1998 reflects a $16.0 million decrease in escrowed
funds related to producing property acquisitions completed by the Company in the
first six months of 1998. Accounts payable decreased $23.4 million at June 30,
1998 to $83.3 million, primarily due to decreased activity and 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 $218.0 million for capital expenditures in the six months ended June 30,
1998, including $100.0 million for acquisitions, and expects to spend
approximately $294.0 million in 1998. In addition to the expected capital
expenditures, the 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, and
during the six months ended June 30, 1998 the Company spent $6.0 million to
purchase 0.6 million shares of its common stock. Because the actual amounts
expended in the future for capital expenditures and to purchase stock will be
influenced by numerous factors, including many beyond the Company's control, no
assurances can be given as to the amount that will actually be expended during
the year.
CAPITAL RESOURCES. The Company's capital resources for the six months ended
June 30, 1998 consisted of cash flow from operating activities of $63.1 million,
proceeds from property sales of $1.8 million and $165.9 million in borrowings
under its bank credit facilities. Effective May 15, 1998, the Company amended
its revolving
13
<PAGE>
credit agreement (the "Credit Agreement") which matures May 15, 2003. The
agreement permits the Company to obtain revolving credit loans and issue letters
of credit with the maximum aggregate amounts outstanding limited to $250 million
and $30.0 million, respectively. 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 June 30, 1998, the Company had $185.0
million in borrowings outstanding under the Credit Agreement, which was
classified as long-term debt on the balance sheet. The Company had one letter of
credit outstanding under the Credit Agreement at June 30, 1998 for $1.7 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 June 30, 1998
the Company could incur up to $410.7 million of additional indebtedness and pay
dividends of or repurchase up to an incremental $44.9 million of its capital
stock.
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 June 30, 1998, the Credit Agreement limits the
amounts borrowed under the uncommitted lines of credit, together with all other
unsecured debt, to $50.0 million. Interest rates on borrowings under these lines
of credit are typically lower than rates paid under the Credit Agreement. At
June 30, 1998, the Company had $3.0 million in borrowings outstanding under
these facilities, which was classified as long-term debt on the balance sheet.
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, 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 August 10, 1998 the Company's accounts receivable included $5.2 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 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 six months
ended June 30, 1998, the Jabung Block produced 2.2 MBbls per day net to the
Company. The Company is currently in the process of applying for a license to
export crude oil from these fields.
The Company's Indonesian operations generated $5.4 million of income from
operations and $13.1 million in cash flow from operating activities for the six
months ended June 30, 1998. 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 with any certainty
the future effects of these disruptions, if any, on its income from Indonesian
operations and future development activity in Indonesia.
OTHER. The Company has initiated a project to ensure that all of its
computer software systems are year 2000 compliant. This project is expected
to be completed prior to mid-1999, and the Company estimates that the cost of
the project will be less than $1.0 million. The Company is also reviewing
year 2000 compliance by certain purchasers
14
<PAGE>
in order to determine any exposure to the Company for year 2000 issues. The
Company does not anticipate that there will be any significant exposure.
CONSOLIDATED RESULTS, INCLUDING MONTEREY
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE
30, 1997
On a consolidated basis the Company reported total revenues of $77.8
million, total costs and expenses of $77.0 million and earnings to common shares
of $0.4 million or break-even results per share for the three months ended June
30, 1998 compared with total revenues of $149.8 million, total costs and
expenses of $122.6 million and earnings to common shares of $2.8 million or
$0.03 per share for the same period in 1997. Such 1997 results reflect the
consolidation of Monterey Resources for the entire period.
OIL AND GAS REVENUES. Total revenues from crude oil and natural gas
produced decreased to $77.6 million in the three months ended June 30, 1998 from
$139.6 million for the same period in 1997. The decrease is due to the
contribution of Monterey for the full period in 1997 combined with lower
realized prices in the second quarter of 1998. Crude oil prices realized for the
three months ended June 30, 1998 averaged $12.12 per barrel, including a $0.22
per barrel hedging benefit, compared with the same period in 1997 when the
average realized oil price was $15.37 per barrel, including a $0.20 per barrel
hedging benefit. Natural gas prices realized for the three months ended June 30,
1998 averaged $1.99 per Mcf, compared with an average of $1.89 per Mcf in the
1997 period.
COSTS AND EXPENSES. Total costs and expenses decreased to $77.0 million in
the second quarter of 1998 from $122.6 million in 1997. The decrease is due to
the Spin Off of Monterey ($57.7 million), as discussed above, partially offset
by increases in production and operating expense and depletion, depreciation and
amortization expense of $6.4 million and $7.6 million, respectively, due to
increased crude oil and natural gas production in the second quarter of 1998
from properties not conveyed to Monterey.
Interest income for the three months ended June 30, 1998 included a $0.7
million benefit related to an anticipated income tax refund. Interest expense
decreased by $2.5 million due to the elimination of Monterey's debt for which
interest expense was included for the entire 1997 period, which was partially
offset by increased borrowings in the second quarter of 1998. Income taxes for
the three months ended June 30, 1998 included 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 second quarter of 1998 is due to the 1997 purchase
and conversion of all of the Company's outstanding preferred stock.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30,
1997
On a consolidated basis the Company reported total revenues of $146.6
million, total costs and expenses of $151.1 million and earnings to common
shares of $0.1 million or break-even results per share for the six months ended
June 30, 1998 compared with total revenues of $323.7 million, total costs and
expenses of $240.7 million and earnings to common shares of $28.3 million or
$0.30 per share for the same period in 1997. Such 1997 results reflect the
consolidation of Monterey Resources for the entire period.
OIL AND GAS REVENUES. Total revenues from crude oil and natural gas
produced decreased to $146.2 million in the six months ended June 30, 1998 from
$303.6 million for the same period in 1997. The decrease is due to the
contribution of Monterey for the full period in 1997 combined with lower
realized prices in the first six months of 1998. Crude oil prices realized for
the six months ended June 30, 1998 averaged $12.48 per barrel, including a $0.16
per barrel hedging benefit, compared with the same period in 1997 when the
average realized oil price was $16.70 per barrel, including a $0.12 per barrel
hedging benefit. Natural gas prices realized for the six months ended June 30,
1998 averaged $1.96 per Mcf, compared with an average of $2.19 per Mcf in the
1997 period.
15
<PAGE>
COSTS AND EXPENSES. Total costs and expenses decreased to $151.1 million in
the first six months of 1998 from $240.7 million in 1997. The decrease is due to
the Spin Off of Monterey ($114.4 million), as discussed above, partially offset
by increases in production and operating expense and depletion, depreciation and
amortization expense of $10.6 million and $11.4 million, respectively, due to
increased crude oil and natural gas production in the first six months of 1998
from properties not conveyed to Monterey.
Interest income for the six months ended June 30, 1998 included a $2.6
million benefit related to an anticipated income tax refund. Interest expense
decreased by $6.4 million due to the elimination of Monterey's debt for which
interest expense was included for the entire 1997 period, which was partially
offset by increased borrowings in the first six months of 1998. Income taxes for
the six months ended June 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 six months of 1998 is due to the 1997 purchase
and conversion of all of the Company's outstanding preferred stock.
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 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,
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
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1, 2, 3 & 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders, held May 11, 1998, the
following individuals were elected to the Board of Directors:
Melvyn N. Klein - Term expires at annual meeting of stockholders in 2001
James L. Payne - Term expires at annual meeting of stockholders in 2001
The following members of the Board of Directors had terms which continued after
the meeting:
Allan V. Martini - Term expires at annual meeting of stockholders in
1999
Reuben F. Richards - Term expires at annual meeting of stockholders in
1999
Kathryn D. Wriston - Term expires at annual meeting of stockholders in
1999
Marc J. Shapiro - Term expires at annual meeting of stockholders in 2000
William E. Greehey - Term expires at annual meeting of stockholders in
2000
The following proposals were approved at the Company's Annual meeting:
Affirmative Negative Votes
Votes Votes Withheld
----- ----- --------
1. Election of two directors to
the Board of Directors:
Melvyn N. Klein 69,604,533 - 15,366,920
James L. Payne 83,676,828 - 1,294,625
2. Consider and ratify the 84,665,576 186,949 118,928
appointment of Price Waterhouse
LLP as the independent accountants
of the Company for the fiscal
year ending December 31, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
------ -----------
*10(a) Amended and Restated Credit Agreement dated as of May 15, 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. and Wells Fargo Bank
(Texas), N.A. as Co-Agents. _________ * Filed herewith
(b) Reports on Form 8-K
None
17
<PAGE>
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 14th day of August, 1998.
SANTA FE ENERGY RESOURCES, INC.
(Registrant)
Date: August 14, 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 10-A
AGREEMENT AND SECOND AMENDMENT
TO CREDIT AGREEMENT
(May 15, 1998)
THIS AGREEMENT AND SECOND AMENDMENT TO CREDIT AGREEMENT (this
"AGREEMENT"), dated as of May 15, 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, 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 Chase Manhattan Bank ("CHASE") as agent, and certain
of the Parties entered into a Credit Agreement dated as of November 13, 1996 and
entered into an Agreement and First Amendment to Credit Agreement dated as of
December 19, 1996. Such Credit Agreement, as so amended, is herein called the
"CREDIT AGREEMENT". Chase has resigned as agent in accordance with SECTION 11.8
of 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 extend the maturity
date, to provide for additional financial institutions to become Banks, to
enlarge the Commitments of the Banks, to permit additional Total Debt and
Guaranties, to appoint a new Agent, to change the governing law, 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.
<PAGE>
2. AMENDMENT OF DEFINITIONS. SECTION 1.1 of the Credit Agreement is
amended to amend the following definitions:
""BUSINESS DAY" shall mean any day other than a day on which
commercial banks are authorized or required to close in Houston, Texas,
and where such term is used in the definition of "QUARTERLY DATE" or, if
such day relates to a borrowing of, a payment or prepayment of principal
of or interest on, or an Interest Period for, a Eurodollar Loan or a
notice by the Company with respect to any such borrowing, payment,
prepayment or Interest Period, which is also a day on which dealings in
Dollar deposits are carried out in the relevant Eurodollar interbank
market.
""COMMITMENT" means, 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 Second 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 13 of the Second
Amendment.
""HIGHEST LAWFUL RATE" shall mean, on any day, the maximum
nonusurious rate of interest permitted for that day by whichever of
applicable federal or Texas law permits the higher interest rate, stated
as a rate per annum. On each day, if any, that applicable Texas law
establishes the Highest Lawful Rate, the Highest Lawful Rate shall be the
"weekly ceiling" (as defined in ss.303 of the Texas Finance Code and
Chapter 1D of Title 79, Texas Rev. Civ.
Stats. 1925, as amended, respectively) for that day.
""MATURITY DATE" shall mean the earlier of (a) the date the
principal amount then outstanding of and accrued interest on the Loans,
all Letter of Credit Liabilities, all fees and all other amounts payable
hereunder and under the Notes become due and payable pursuant to SECTION
10.1 or (b) May 15, 2003.
""PRIME RATE" shall mean, as of a particular date, the generally
applicable prime rate most recently determined by Chase Texas. Without
notice to the Company or any other Person, the Prime Rate shall change
automatically from time to time as and in the amount by which said prime
rate shall fluctuate. The prime rate is a reference rate and may not
necessarily represent the lowest or best rate actually charged to any
customer. Chase Texas may make commercial loans or other loans at rates of
interest at, above or below the prime rate.
""PRINCIPAL OFFICE" shall mean the principal banking office of the
Agent, presently located at 712 Main Street, Houston, Texas 77002.
2
<PAGE>
Additionally, the references to "Chase" in the definitions of
"Eurodollar Rate" and "Indemnified Person", in SECTION 12.6(G) of the Credit
Agreement, and in the addresses on each of the exhibits to the Credit Agreement,
are amended to refer instead to Chase Texas.
3. ADDITIONAL DEFINITIONS. There are hereby added to SECTION 1.1 of the
Credit Agreement the following definitions:
""CHASE TEXAS" shall mean Chase Bank of Texas, National Association,
in its individual capacity."
""SECOND AMENDMENT" shall mean the Agreement and Second Amendment to
Credit Agreement dated as of May 15, 1998."
4. AMENDMENT OF SECTION 1.2(I). SECTION 1.2(I) of the Credit Agreement is
hereby amended to provide in its entirety as follows:
"(i) All times of day used in the Credit Documents mean local time
in Houston, Texas."
5. AMENDMENT OF SECTION 2.1(A). SECTION 2.1(A) of the Credit Agreement is
amended by adding at the end of that section the following sentence:
"The Company and the Banks expressly agree, pursuant to Chapter 346
("CHAPTER 346") of the Texas Finance Code, that Chapter 346 (which relates
to open-end line of credit revolving loan accounts) shall not apply to any
extension of credit under this Agreement and that neither this Agreement
nor any such extension of credit shall be governed by Chapter 346 or
subject to its provisions."
6. AMENDMENT OF SECTION 9.7(B). SECTION 9.7(B) of the Credit Agreement is
amended to provide in its entirety as follows:
3
<PAGE>
"(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) bonds or surety obligations required by any
Governmental Authority in connection with the operation of the property of
the Company and its Subsidiaries; (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;
(h) unsecured Total Debt or Guaranties constituting Total Debt in an
aggregate amount at any one 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."
7. 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 $250,000,000.
8. DESIGNATION OF AGENT. The Banks hereby appoint Chase Texas as Agent
under the Credit Documents, and Chase Texas hereby accepts such appointment.
Chase Texas hereby succeeds to and becomes vested with all the rights, powers,
privileges and duties of the Agent, and Chase is hereby discharged from its
duties and obligations under the Credit Documents. Chase Texas hereby notifies
the Company and the Banks that the Principal Office is the Principal Office as
defined in this Agreement. The address of the Agent in each of the Credit
Documents and the exhibits thereto shall be the Principal Office (as defined in
the Credit Agreement).
With respect to its Commitment, Loans and Letter of Credit Liabilities,
Chase Texas in its capacity as a Bank hereunder shall have the same rights and
powers under the Credit Documents as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent may (without having to account therefor to any Bank) accept
deposits from, lend money to and generally engage in any kind of banking, trust,
letter of credit, agency or other business with the Company (and any of its
Affiliates) as if it were not acting as the Agent, and the Agent may accept fees
and other consideration from the Company and its Affiliates (in addition to the
fees heretofore agreed to between the Company and the Agent) for services in
connection with this Agreement or otherwise without having to account for the
same to the Banks. Without limiting the rights and remedies of the Banks
specifically set forth herein, no other Bank by virtue of being a Bank hereunder
shall have any interest in any such activities, any present or future guaranty
by or for the account of the Company, any present or future offset exercised by
the Agent in respect of any such other activities, or any present or future
property at any time taken as security for any such other activities; PROVIDED,
HOWEVER, that if any payment in respect of such guaranties or such property or
the proceeds thereof shall be applied to the Obligations, each Bank shall be
entitled to share in such application PRO RATA according to its portion of the
Obligations.
4
<PAGE>
9. PLACE OF PAYMENT. The place of payment of each of the Notes shall be
the Principal Office (as defined in the Credit Agreement).
10. AMENDMENT OF SECTION 12.11. SECTION 12.11 of the Credit Agreement is
hereby amended to provide in its entirety as follows:
"12.11. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(A) EXCEPT TO THE EXTENT OTHERWISE SPECIFIED IN THE CREDIT
DOCUMENTS, EACH CREDIT DOCUMENT 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 THE FEDERAL LAWS OF THE
UNITED STATES OF AMERICA. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS
OF THE STATE OF TEXAS OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF
TEXAS, HOUSTON DIVISION, AND THE COMPANY HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE COMPANY HEREBY
IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS DAVID L. HICKS, WITH OFFICES
ON THE DATE HEREOF AT 1616 SOUTH VOSS ROAD, HOUSTON, TEXAS 77057, AS ITS
DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND
ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL
LEGAL PROCESS, SUMMONSES, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY
SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND
AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH OR THE COMPANY DESIRES TO
DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT, THE COMPANY AGREES TO
DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN HOUSTON, TEXAS ON THE
TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE AGENT
UNDER THIS AGREEMENT. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH
OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS
AFTER SUCH MAILING. NOTHING IN THIS AGREEMENT SHALL AFFECT THE RIGHT OF
THE AGENT, ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO THE EXTENT PERMITTED BY LAW TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE TO PROCEED AGAINST THE COMPANY IN
ANY OTHER JURISDICTION.
5
<PAGE>
(B) TO THE EXTENT PERMITTED BY LAW, EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT BROUGHT IN THE TEXAS COURTS REFERRED TO IN CLAUSE
(A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(C) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED BY ANY CREDIT DOCUMENT."
11. AMENDMENT OF EXHIBIT A. EXHIBIT A to the Credit Agreement is amended
to be identical to EXHIBIT A to this Agreement.
12. PRICING SCHEDULE. On and after the Effective Date, the Pricing
Schedule shall be the Pricing Schedule attached to this Agreement.
13. 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 13, 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 13; PROVIDED that (a) no
increase in Commitments pursuant to this SECTION 13 shall result in the
Aggregate Commitment exceeding $300,000,000, (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 13. 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 13 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.
6
<PAGE>
14. 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 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, duly completed and executed.
(d) CREDIT DOCUMENTS. 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 21.
7
<PAGE>
(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.
(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
May 31, 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 13 are subject to the
provisions of SECTION 12.8 of the Credit Agreement.
15. ACKNOWLEDGMENTS; APPOINTMENT AND AUTHORIZATION. Each of Wells Fargo
Bank (Texas), N.A. and PNC Bank, National Association (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.
8
<PAGE>
16. 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.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. 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.
9
<PAGE>
23. 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.
24. 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.
10
<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 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
Chase Bank of Texas, National Houston, Texas 77002-8086
Association Telephone: (713) 216-5733
600 Travis Street, 20th Floor Telecopy: (713) 216-4117
Houston, Texas 77002-8086 Attention: Debra Harris
Attention: June Brand
Telephone: (713) 216-5733
Telecopy: (713) 216-4117
<PAGE>
COMMITMENT: ABN AMRO BANK N.V., HOUSTON
$40,000,000 AGENCY, Individually and as a
Co-Agent
By: ______________________________
Name: ____________________________
Title: ___________________________
By: ______________________________
Name: ____________________________
Title: ___________________________
Address for Notices:
Domestic and Eurodollar Three Riverway, Suite 1700
Lending Offices: Houston, TX 77056
Attention: Mr. Bryan Chapman
Three Riverway, Suite 1700 Telephone: 713/964-3361
Houston, Texas 77056 Telecopy: 713/621-5801
<PAGE>
COMMITMENT: BANK OF AMERICA NATIONAL TRUST AND
$40,000,000 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: NATIONSBANK, N.A.
$40,000,000 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: 13/247-6568
For Credit to: Acct. #0180019828
Attention: Loan Funds Transfer
Reference: Santa Fe Energy Resources, Inc.
<PAGE>
COMMITMENT: BANK OF MONTREAL
$32,500,000
By: _____________________________
Name: ___________________________
Title: __________________________
Address for Notices:
Domestic and Eurodollar 700 Louisiana, Suite 4400
Lending Offices: Houston, Texas 77002
Attention: Mr. Bobby Roberts
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: WELLS FARGO BANK (TEXAS), N.A.,
$40,000,000 Individually and as a Co-Agent
By: ______________________________
Jeffrey P. Rose
Vice President
Address for Business Matters:
Domestic and Eurodollar 1000 Louisiana, 3rd Floor
Lending Offices: Houston, Texas 77002
Attention: Ann Rhoads
1000 Louisiana, 3rd Floor Telephone: (713) 250-4035
Houston, Texas 77002 Telecopy: (713) 250-7912
Attention: Maria Valdivia
Telephone: (713) 250-7155 Address for Administrative Matters:
Telecopy: (713) 250-7912
1000 Louisiana, 3rd Floor
Houston, Texas 77002
Attention: Maria Valdivia
Telephone: (713) 250-7155
Telecopy: (713) 250-7912
<PAGE>
COMMITMENT: PNC BANK, NATIONAL ASSOCIATION
$32,500,000
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE BALANCE SHEET AS
OF JUNE 30, 1998 AND THE INCOME STATEMENT FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,800
<SECURITIES> 0
<RECEIVABLES> 71,700
<ALLOWANCES> 2,500
<INVENTORY> 20,200
<CURRENT-ASSETS> 131,100
<PP&E> 1,873,800
<DEPRECIATION> 1,099,900
<TOTAL-ASSETS> 918,200
<CURRENT-LIABILITIES> 101,300
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 450,700
<TOTAL-LIABILITY-AND-EQUITY> 918,200
<SALES> 146,200
<TOTAL-REVENUES> 146,600
<CGS> 151,100
<TOTAL-COSTS> 151,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,500
<INCOME-PRETAX> (6,900)
<INCOME-TAX> (7,000)
<INCOME-CONTINUING> 100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
